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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 11, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
AND POST-EFFECTIVE AMENDMENT
UNDER
THE SECURITIES ACT OF 1933
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CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP.
(DEPOSITOR)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN GOVERNING INSTRUMENTS)
11 MADISON AVENUE
NEW YORK, NEW YORK 10010
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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AGENT FOR SERVICE:
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LAWRENCE A. SHELLEY
CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP.
11 MADISON AVENUE
NEW YORK, NEW YORK 10010
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COPIES TO:
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REED D. AUERBACH, ESQ.
STROOCK & STROOCK & LAVAN LLP
180 MAIDEN LANE
NEW YORK, NEW YORK 10038
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ______________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM AMOUNT OF
MAXIMUM OFFERING AGGREGATE AMOUNT OF
TITLE OF SECURITIES AMOUNT BEING PRICE OFFERING REGISTRATION
BEING REGISTERED(1) REGISTERED(2) PER UNIT(3) PRICE(3) FEE
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<S> <C> <C> <C> <C>
ABS Mortgage and Manufactured
Housing Contract Asset-Backed
Certificates and ABS Mortgage and
Manufactured Housing Contract
Asset-Backed Notes.................... $1,000,000 100% $1,000,000 $295.00
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</TABLE>
(1) The securities are also being registered for the purpose of market making.
(2) $135,493,800 aggregate principal amount of ABS Mortgage and Manufactured
Housing Contract Asset-Backed Certificates and Asset-Backed Notes registered
by the Registrant under Registration Statement No. 333-29239 referred to
below and not previously sold are consolidated in this Registration
Statement as permitted by Rule 429. All registration fees in connection
with such unsold amount of ABS Mortgage and Manufactured Housing Contract
Asset-Backed Certificates and Asset-Backed Notes have been previously paid
by the Registrant under the foregoing Registration Statement. Accordingly,
the total amount registered under this Registration Statement as so
consolidated as of the date of this filing is $136,493,800.
(3) Estimated solely for the purposes of calculating the registration fee.
----------------
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS INCLUDED
IN THIS REGISTRATION STATEMENT IS A COMBINED PROSPECTUS AND RELATES TO
REGISTRATION STATEMENT NO. 333-29239 AS PREVIOUSLY FILED BY THE REGISTRANT ON
FORM S-3. SUCH REGISTRATION STATEMENT NO. 333-29239 WAS DECLARED EFFECTIVE ON
JULY 24, 1997. THIS REGISTRATION STATEMENT, WHICH IS A NEW REGISTRATION
STATEMENT, ALSO CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION
STATEMENT NO. 333-29239, AND SUCH POST-EFFECTIVE AMENDMENT SHALL HEREAFTER
BECOME EFFECTIVE CONCURRENTLY WITH THE EFFECTIVENESS OF THIS REGISTRATION
STATEMENT AND IN ACCORDANCE WITH SECTION 8(c) OF THE SECURITIES ACT OF 1933.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
PROSPECTUS
CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP.
Depositor
ABS Mortgage and Manufactured Housing Contract
Asset-Backed Certificates and Asset-Backed Notes (Issuable in Series)
------------------------------
Credit Suisse First Boston Mortgage Securities Corp. (the 'Depositor') may
offer from time to time the ABS Mortgage and Manufactured Housing Contract
Asset-Backed Certificates (the 'Certificates') and the ABS Mortgage and
Manufactured Housing Contract Asset-Backed Notes (the 'Notes' and, together with
the Certificates, the 'Securities') offered hereby and by the related Prospectus
Supplements which may be sold from time to time in one or more series (each, a
'Series') in amounts, at prices and on terms to be determined at the time of
sale and to be set forth in the related Prospectus Supplement. Each Series of
Securities may include one or more separate classes (each, a 'Class') of Notes
and/or Certificates, which may be divided into one or more subclasses (each, a
'Subclass'). The Certificates will be issued by a trust (the 'Trust') to be
formed by the Depositor with respect to such Series pursuant to either a Trust
Agreement (each, a 'Trust Agreement') to be entered into between the Depositor
and the trustee specified in the related Prospectus Supplement (the 'Trustee')
or a Pooling and Servicing Agreement (each, a 'Pooling and Servicing Agreement')
among the Depositor, the Master Servicer and the Trustee. If a Series of
Securities includes Notes, such Notes will be issued and secured pursuant to an
Indenture (each, an 'Indenture') to be entered into between any of (i) the Trust
or (ii) a partnership, corporation, limited liability company or other entity
formed by the Depositor solely for purpose of issuing Notes of a related Series
and matters incidental thereto, as issuer (the 'Issuer'), and the indenture
trustee specified in the related Prospectus Supplement (the 'Indenture
Trustee'). The related Trust Fund will be serviced by the Master Servicer
pursuant to a Sale and Servicing Agreement (the 'Sale and Servicing Agreement')
among the Depositor, the Master Servicer and the Indenture Trustee. The
Certificates represent interests in specified percentages of principal and
interest (a 'Percentage Interest') with respect to the related Mortgage Pool or
Contract Pool (each, as defined below), or have been assigned a Stated Principal
Balance and an Interest Rate (as such terms are defined herein), as more fully
set forth herein, and will evidence the undivided interest, beneficial interest
or notional amount specified in the related Prospectus Supplement in one of a
number of Trusts, each to be created by the Depositor from time to time. If a
Series of Securities includes Notes, the Notes will represent indebtedness of
the related Trust Fund. The trust property of each Trust (the 'Trust Fund') will
consist of a pool containing one- to four-family residential mortgage loans
(including revolving lines of credit), mortgage loans secured by multifamily
residential rental properties consisting of five or more dwelling units or
apartment buildings owned by cooperative housing corporations, loans made to
finance the purchase of certain rights relating to cooperatively owned
properties secured by a pledge of shares of a cooperative corporation and an
assignment of a proprietary lease or occupancy agreement on a cooperative
dwelling, mortgage participation certificates evidencing participation interests
in such loans that are acceptable to the nationally recognized statistical
rating agency or agencies rating the related Series of Securities (collectively,
the 'Rating Agency') for a rating in one of the four highest rating categories
of such Rating Agency (such loans and participation certificates being referred
to collectively hereinafter as the 'Mortgage Loans'), or certain conventional
mortgage pass-through certificates, collateralized mortgage bonds or other
indebtedness secured by mortgage loans or manufactured housing contracts (the
'Mortgage Certificates'), in each case together with certain and related
property (the 'Mortgage Pool') or a pool of manufactured housing installment or
conditional sales contracts and installment loan agreements (the 'Contracts') or
participation certificates representing participation interests in such
Contracts and related property (the 'Contract Pool') conveyed to such Trust by
the Depositor. The Mortgage Loans may be conventional mortgage loans,
conventional cooperative loans, mortgage loans insured by the Federal Housing
Administration (the 'FHA'), mortgage loans partially guaranteed by the Veterans
Administration (the 'VA'), or any combination of the foregoing, bearing fixed or
variable rates of interest. The Contracts may be conventional contracts,
contracts insured by the FHA or partially guaranteed by the VA, or any
combination of the foregoing, bearing fixed or variable rates of interest, as
specified in the related Prospectus Supplement. If so specified in the related
Prospectus Supplement, the rights of the holders of the Securities of one or
more Classes or Subclasses of Notes and/or Certificates of a Series to receive
distributions with respect to the related Mortgage Pool or Contract Pool may be
subordinated to such rights of the holders of the Securities of one or more
Classes or Subclasses of Notes and/or Certificates of such Series to the extent
described herein and in such Prospectus Supplement. As provided in the
applicable Prospectus Supplement, the timing of payments, whether of principal
or of interest, to any one or more of such Classes or Subclasses may be on a
sequential or a pro rata basis. The Prospectus Supplement with respect to each
Series will also set forth specific information relating to the Trust Fund with
respect to the Series in respect of which this Prospectus is being delivered,
together with specific information regarding the Securities of such Series.
The Securities do not represent an obligation of or interest in the
Depositor or any affiliate thereof. Neither the Securities, the Mortgage Loans,
the Contracts nor the Mortgage Certificates are insured or guaranteed by any
governmental agency or instrumentality, except to the extent provided herein.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE LIMITATIONS DISCUSSED UNDER 'ERISA
CONSIDERATIONS' HEREIN AND IN THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
SEE 'RISK FACTORS' BEGINNING ON PAGE 15 HEREIN FOR A DISCUSSION OF CERTAIN
FACTORS THAT POTENTIAL INVESTORS SHOULD CONSIDER IN DETERMINING WHETHER TO
INVEST IN THE SECURITIES OF A SERIES IN RESPECT OF WHICH THIS PROSPECTUS IS
BEING DELIVERED.
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There will have been no public market for the Securities of any Series prior
to the offering thereof. No assurance can be given that such a market will
develop as a result of such offering or, if it does develop, that it will
continue.
The Depositor, as specified in the applicable Prospectus Supplement, may
elect to treat the Trust Fund or certain assets of the Trust Fund with respect
to certain Series of Securities as one or more Real Estate Mortgage Investment
Conduits (each, a 'REMIC'). See 'Certain Federal Income Tax Consequences.'
If so specified in the Prospectus Supplement, one or more Classes of Notes
of a Series may be subject to optional redemption by the Issuer under the
circumstances described in the Prospectus Supplement. If so specified in the
Prospectus Supplement relating to a Series of Securities, the Certificates of
such Series may be subject to early termination and may receive Special
Distributions (as defined herein) in reduction of Stated Principal Balance (as
defined herein) under the circumstances described herein and in such Prospectus
Supplement.
This Prospectus may not be used to consummate sales of the Securities
offered hereby unless accompanied by a Prospectus Supplement.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
CREDIT SUISSE FIRST BOSTON
The date of this Prospectus is , 1998.
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PROSPECTUS SUPPLEMENT
The Prospectus Supplement with respect to each Series of Securities will,
among other things, set forth with respect to such Series of Securities: (i) the
identity of each Class or Subclass of Securities within such Series; (ii) the
undivided interest, Percentage Interest, Stated Principal Balance, principal
balance or notional amount of each Class or Subclass of Securities; (iii) the
Interest Rate borne (or manner in which interest is paid, if any) by each Class
or Subclass of Securities within such Series; (iv) certain information
concerning the Mortgage Loans, the Mortgage Certificates, the Contracts, if any,
and the other assets comprising the Trust Fund for such Series; (v) the final
Distribution Date of each Class or Subclass of Securities within such Series;
(vi) the identity of each Class or Subclass of Compound Interest Securities, if
any, within such Series; (vii) the method used to calculate the amount to be
distributed with respect to each Class or Subclass of Securities within such
Series; (viii) the order of application of distributions to each of the Classes
or Subclasses of Securities within such Series, whether sequential, pro rata or
otherwise; (ix) the Distribution Dates with respect to such Series; (x)
information with respect to the terms of the Residual Certificates or
Subordinated Securities offered hereby, if any, are offered; (xi) information
with respect to the method of credit support, if any, with respect to such
Series; and (xii) additional information with respect to the plan of
distribution of such Series of Certificates.
ADDITIONAL INFORMATION
This Prospectus contains, and the Prospectus Supplement for each Series of
Securities will contain, a summary of the material terms of the documents
referred to herein and therein, but neither contains nor will contain all of the
information set forth in the Registration Statement of which this Prospectus and
the related Prospectus Supplement is a part. For further information, reference
is made to such Registration Statement and the exhibits thereto which the
Depositor has filed with the Securities and Exchange Commission (the
'Commission') under the Securities Act of 1933, as amended. Statements contained
in this Prospectus and any Prospectus Supplement as to the contents of any
contract or other document referred to are summaries and in each instance
reference is made to the copy of the contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. Copies of the Registration Statement may be
obtained from the Commission, upon payment of the prescribed charges, or may be
examined free of charge at the Commission's offices. Reports and other
information filed with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Regional Offices of the Commission at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such information can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates.
The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
(http://www.sec.gov).
Copies of the Pooling and Servicing Agreement or of the Trust Agreement,
Indenture and Sale and Servicing Agreement pursuant to which a Series of
Securities is issued, as applicable, will be provided to each person to whom a
Prospectus and the related Prospectus Supplement are delivered, upon written or
oral request directed to: Treasurer, Credit Suisse First Boston Mortgage
Securities Corp., Eleven Madison Avenue, New York, New York 10010, (212)
325-2000.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of the offering of Securities offered hereby. The Depositor will provide or
cause to be provided without charge to each person to whom this Prospectus is
delivered in connection with the offering of one or more Classes or Subclasses
of Securities, upon request, a copy of any or all such documents or reports
incorporated herein by reference, in each case to the extent such documents or
reports relate to one or more of such Classes of such Securities, other than the
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). Requests to the Depositor should be directed
to: Credit Suisse First Boston Mortgage Securities Corp., Eleven Madison Avenue,
New York, New York 10010, (212) 325-2000.
IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATIONS, THIS
PROSPECTUS AND THE ATTACHED PROSPECTUS SUPPLEMENT WILL ALSO BE USED BY THE
UNDERWRITER AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND
SALES RELATED TO MARKET-MAKING TRANSACTIONS IN THE OFFERED SECURITIES IN WHICH
THE UNDERWRITER ACTS AS PRINCIPAL. SALES WILL BE MADE AT NEGOTIATED PRICES
DETERMINED AT THE TIME OF SALE.
2
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SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus, and by reference to
the information with respect to each Series of Securities contained in the
related Prospectus Supplement. Certain capitalized terms used and not otherwise
defined herein shall have the meanings given elsewhere in this Prospectus.
<TABLE>
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Securities Offered.................. ABS Mortgage and Manufactured Housing Contract Asset-Backed Certificates
(the 'Certificates') and ABS Mortgage and Manufactured Housing Contract
Asset-Backed Notes (the 'Notes' and, together with the Certificates, the
'Securities') issuable in series (each, a 'Series'). The Securities may be
issued in one or more classes (each, a 'Class') and such Classes may be
divided into one or more subclasses (each, a 'Subclass'). One or more of
such Classes or Subclasses of a Series may be subordinated to one or more
Classes or Subclasses of such Series, as specified in the related
Prospectus Supplement (any such Class or Subclass to which one or more
other Classes or Subclasses is subordinated being hereinafter referred to
as a 'Senior Class' or a 'Senior Subclass,' respectively, and any such
subordinated Class or Subclass being hereinafter referred to as a
'Subordinated Class' or 'Subordinated Subclass,' respectively). One of such
Classes or Subclasses of Certificates of a Series (the 'Residual
Certificates') may evidence a residual interest in the related Trust Fund
(as defined below). If so specified in the related Prospectus Supplement,
one or more Classes or Subclasses of Certificates within a Series (the
'Multi-Class Securities') may be assigned a principal balance (a 'Stated
Principal Balance' or a 'Certificate Principal Balance') based on the cash
flow from the Mortgage Loans (as hereinafter defined), Mortgage
Certificates (as hereinafter defined), the Contracts (as hereinafter
defined) and/or the other assets in the Trust Fund if specified as such in
the related Prospectus Supplement and a stated annual interest rate,
determined in the manner set forth in such Prospectus Supplement, which may
be fixed or variable (an 'Interest Rate'). If so specified in the related
Prospectus Supplement, one or more Classes or Subclasses of Notes and/or
Certificates may receive unequal amounts of the distributions of principal
of and interest on the Mortgage Loans, the Contracts and the Mortgage
Certificates included in the related Trust Fund, as specified in such
Prospectus Supplement (any such Class or Subclass receiving the higher
proportion of principal distributions being referred to hereinafter as a
'Principal Weighted Class' or 'Principal Weighted Subclass,' respectively,
and any such Class or Subclass receiving the higher proportion of interest
distributions being referred to hereinafter as an 'Interest Weighted Class'
or an 'Interest Weighted Subclass,' respectively). If so specified in the
related Prospectus Supplement, the allocation of the principal and interest
distributions may involve as much as 100% of each distribution of principal
or interest being allocated to one or more Classes or Subclasses and 0% to
another. If so specified in the related Prospectus Supplement, one or more
Classes or Subclasses may receive disproportionate amounts of certain
distributions of principal, which proportions may change over time subject
to certain conditions. Payments may be applied to any one or more Classes
or Subclasses on a sequential or pro rata basis, or otherwise, as specified
in the related Prospectus Supplement. Each Certificate will represent the
undivided interest, beneficial interest or percentage interest specified in
the related Prospectus Supplement in one of a number of
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trusts (each, a 'Trust'), each to be created by the Depositor from time to time
pursuant to either a Trust Agreement (each, a 'Trust Agreement') to be entered
into between the Depositor and the trustee specified in the related Prospectus
Supplement (the 'Trustee') or a Pooling and Servicing Agreement (each, a
'Pooling and Servicing Agreement') among the Depositor, the Master Servicer
and the Trustee. If a Series of Securities includes Notes, such Notes will
be issued and secured pursuant to an Indenture (each, an 'Indenture') to be
entered into between any of (i) the Trust or (ii) a partnership,
corporation, limited liability company or other entity formed by the
Depositor solely for purpose of issuing Notes of a related Series and
matters incidental thereto, as issuer (the 'Issuer'), and the indenture
trustee specified in the related Prospectus Supplement (the 'Indenture
Trustee'), and such Notes will represent indebtedness of the related Trust.
The trust property of each trust (the 'Trust Fund') will consist of (a) one
or more mortgage pools (each, a 'Mortgage Pool') containing (i)
conventional one- to four-family residential, mortgage loans, (ii)
closed-end loans (the 'Closed-End Loans') and/or revolving home equity
loans or certain balances thereof (the 'Revolving Credit Line Loans' and,
together with the Closed-End Loans, the 'Home Equity Loans') secured by
mortgages or deeds of trust on residential one- to four-family properties,
including townhouses and individual units in condominiums and planned unit
developments, (iii) loans (the 'Cooperative Loans') made to finance the
purchase of certain rights relating to cooperatively owned properties
secured by the pledge of shares issued by a cooperative corporation (the
'Cooperative') and the assignment of a proprietary lease or occupancy
agreement providing the exclusive right to occupy a particular dwelling
unit (a 'Cooperative Dwelling' and, together with one- to four-family
residential properties, 'Single Family Property'), (iv) mortgage loans
secured by multifamily residential rental properties consisting of five or
more dwelling units or apartment buildings owned by cooperative housing
corporations ('Multifamily Property'), purchased by the Depositor either
directly or through one or more affiliates from an affiliate or from
unaffiliated sellers, (v) mortgage participation certificates evidencing
participation interests in such loans that are acceptable to the nationally
recognized rating agency or agencies identified in the related Prospectus
Supplement (collectively, the 'Rating Agency') rating the Securities of
such Series for a rating in one of the four highest rating categories of
such Rating Agency (such loans and mortgage participation certificates
being referred to collectively hereinafter as the 'Mortgage Loans'), or
(vi) certain conventional mortgage pass- through certificates (the
'Mortgage Certificates') issued by one or more trusts established by one or
more private entities or (b) one or more contract pools (each, a 'Contract
Pool') containing manufactured housing installment or conditional sales
contracts and installment loan agreements (the 'Contracts') or
participation certificates representing participation interests in such
Contracts (such Contracts, together with the Mortgage Loans and the
Mortgage Certificates, being referred to collectively hereinafter as the
'Trust Assets') purchased by the Depositor either directly or through one
or more affiliates or Unaffiliated Sellers, and related property conveyed
to such trust by the Depositor. Unless otherwise specified in the related
Prospectus Supplement, each Series of Securities will be offered in fully
registered form only, in one or more Classes of Notes and/or Certificates,
which may be divided into one or
</TABLE>
4
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<TABLE>
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more Subclasses. If so specified in the related Prospectus Supplement,
Multi-Class Securities of a Series may be issued with the Stated
Principal Balances and the Interest Rates therein specified. At
the time of issuance, each Security offered by means of this
Prospectus and the related Prospectus Supplements will be rated in one of
the four highest rating categories by at least one Rating Agency. The
minimum undivided interest, percentage interest or beneficial interest in a
Mortgage Pool or Contract Pool, the minimum notional amount to be evidenced
by a Certificate of a Class or Subclass, or the minimum denomination in
which a Certificate of a Class or Subclass is to be issued will be set
forth in the related Prospectus Supplement.
Depositor........................... Credit Suisse First Boston Mortgage Securities Corp., a Delaware
corporation.
Master Servicer..................... The entity, if any, named as Master Servicer in the applicable Prospectus
Supplement, which may be an affiliate of the Depositor. See 'Description of
the Securities.'
Interest............................ Interest will be distributed on the days specified in the Prospectus
Supplement with respect to each Class or Subclass of Securities of a
Series, or if any such day is not a business day, the next succeeding
business day (the 'Distribution Date'), at the rate, or pursuant to the
method of determining such rate, specified in the related Prospectus
Supplement for each Class or Subclass of Securities within such Series,
commencing on the day specified in such Prospectus Supplement, in the
manner specified in such Prospectus Supplement. See 'Maturity, Prepayment
and Yield Considerations' and 'Description of the Securities -- Payments on
Mortgage Loans' and ' -- Payments on Contracts.'
Principal (Including
Prepayments)...................... Unless otherwise specified in the related Prospectus Supplement, principal
on each Trust Asset underlying a Series of Securities will be distributed
on each Distribution Date, commencing on the date and in the priority and
manner specified in the related Prospectus Supplement. If so specified in
the Prospectus Supplement with respect to a Series that includes
Multi-Class Securities, distributions on such Multi-Class Securities may be
made in reduction of the Stated Principal Balance, in an amount equal to
the Stated Principal Distribution Amount. Unless otherwise specified in the
related Prospectus Supplement, the Stated Principal Distribution Amount
will equal the amount by which the Stated Principal Balance of such Class
of Multi-Class Securities (before taking into account the amount of
interest accrued and added to the Stated Principal Balance of any Class or
of Compound Interest Securities) exceeds the Asset Value (as defined
herein) of the Trust Assets and other property in the related Trust Fund as
of the Business Day prior to the related Distribution Date. See 'Maturity,
Prepayment and Yield Considerations' and 'Description of the
Securities -- Payments on Mortgage Loans' and ' -- Payments on Contracts.'
If so specified in the Prospectus Supplement relating to a Series, the
Multi-Class Securities of such Series which have other than monthly
Distribution Dates may receive special distributions in reduction of Stated
Principal Balance ('Special Distributions') in any month, other than a
month in which a Distribution Date occurs, if, as a result of principal
prepayments on the Trust Assets included in the related Trust Fund and/or
low reinvestment yields, the Trustee determines, based on assumptions
specified in the related
</TABLE>
5
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Agreement (as defined herein), that the amount of cash anticipated to be on
deposit in the Certificate Account for such Series on the next Distribution
Date may be less than the sum of the interest distributions and the amount
of distributions in reduction of Stated Principal Balance to be made on
such Distribution Date. Unless otherwise specified in the related
Prospectus Supplement, Special Distributions will be made on such
Certificates in the same priority and manner as distributions in reduction
of Stated Principal Balance would be made on the next Distribution Date for
such Certificates. See 'Description of the Securities -- Special
Distributions.' In addition, if so specified in the related Prospectus
Supplement, one or more Classes of Notes may be subject to optional
redemption on the terms and conditions specified in the related Prospectus
supplement.
The Mortgage Pools.................. If so specified in the related Prospectus Supplement, the Securities of a
Series will represent the interest specified in such Prospectus Supplement
in, or be secured by, the Mortgage Pool or Pools included in the Trust Fund
for such Series. Unless otherwise specified in the applicable Prospectus
Supplement, the original principal amount of each Mortgage Loan in a
Mortgage Pool will not be more than 95% (such ratio, the 'Loan-to-Value
Ratio') of the value of the property securing such Mortgage Loan (the
'Mortgaged Property'), based upon an appraisal of the Mortgaged Property
considered acceptable to the originator of such Mortgage Loan or the sales
price, whichever is less (the 'Original Value'). Unless otherwise specified
in the applicable Prospectus Supplement, Mortgage Loans secured by Single
Family Property having an original principal amount exceeding 80% of the
Original Value will be covered by a policy of private mortgage insurance
until the outstanding principal amount is reduced to the percentage of the
Original Value set forth in the related Prospectus Supplement as a result
of principal payments by the borrower (the 'Mortgagor'). Unless otherwise
specified in the applicable Prospectus Supplement, the principal balance at
origination of each Mortgage Loan that is secured by Single Family Property
will not exceed $500,000. Mortgage Loans in a Mortgage Pool will all have
original maturities of 10 to 40 years, unless otherwise specified in the
applicable Prospectus Supplement. Mortgage Loans in a Mortgage Pool may
have interest rates (the 'Mortgage Rates') that are either fixed or
variable. Mortgage Pools may be formed from time to
time in varying sizes.
Mortgage Certificates............... If so specified in the related Prospectus Supplement, the Trust Fund for a
Series of Securities may include Mortgage Certificates issued by one or
more trusts established by one or more private entities, with the
respective aggregate principal balances and the characteristics described
in such Prospectus Supplement. Each Mortgage Certificate included in a
Trust Fund will evidence an interest of the type specified in the related
Prospectus Supplement in a pool of mortgage loans of the type described in
such Prospectus Supplement, secured principally by mortgages on one-to
four-family residences, mortgages on multi-family residential rental
properties or apartment buildings owned by cooperative housing corpora-
tions or by pledges of shares of cooperative corporations and assignments
of proprietary leases or occupancy agreements on cooperative dwellings,
unless otherwise specified in such Prospectus Supplement.
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The Contract Pools.................. If so specified in the related Prospectus Supplement, the Securities of a
Series will represent the interest specified in such Prospectus Supplement
in, or be secured by, the Contract Pool or Pools included in the Trust Fund
for such Series. Unless otherwise specified in the applicable Prospectus
Supplement, the Contracts will be fixed rate Contracts. Such Contracts, as
specified in the related Prospectus Supplement, will consist of
manufactured housing installment or conditional sales contracts and
installment loan agreements and will be conventional Contracts or Contracts
insured by the FHA or partially guaranteed by the VA. Each Contract may be
secured by a new or used unit of manufactured housing (a 'Manufactured
Home'). The related Prospectus Supplement will specify the range of terms
to maturity of the Contracts at origination and, to the extent specified in
such Prospectus Supplement, the maximum Loan-to-Value Ratio at origination
(the 'Contract Loan-to-Value Ratio'). Because manufactured homes, unlike
site-built homes, generally depreciate in value, the Loan-to-Value Ratios
of some of the Contracts may be higher at the Cut-off Date than at
origination and may increase over time. Unless otherwise specified in the
related Prospectus Supplement, Contracts that are conventional Contracts
will not be covered by primary mortgage insurance policies or primary
credit insurance policies. Each Manufactured Home which secures a Contract
will be covered by a standard hazard insurance policy (which may be a
blanket policy) to the extent described herein or in the related Prospectus
Supplement insuring against hazard losses due to various causes, including
fire, lightning and windstorm. A Manufactured Home located in a federally
designated flood area will be required to be covered by flood insurance.
Contract Pools may be formed from time to time in varying sizes. None of
the Contracts will have been originated by the Depositor or any of its
affiliates.
Yield Considerations................ If so specified in the applicable Prospectus Supplement, an assumed rate of
prepayment will be used to calculate the expected yield to maturity on each
Class of the Securities of a Series. The yield on any Class of Securities,
the purchase price of which is greater than the aggregate amount of the
Principal Distributions to be made to such Class (a 'Premium Security'), is
likely to be adversely affected by a higher than anticipated level of
principal prepayments on the Trust Assets included in the related Trust
Fund. This effect on yield will intensify with any increase in the amount
by which the purchase price of such Security exceeds the aggregate amount
of such Principal Distributions. If the differential is particularly wide
and a high level of prepayments occurs, it is possible for Holders of
Premium Securities not only to have a lower than anticipated yield but, in
extreme cases, to fail to recoup fully their initial investment.
Conversely, a lower than anticipated level of principal prepayments (which
can be anticipated to increase the expected yield to Holders of Securities
that are Premium Securities) will likely result in a lower than anticipated
yield to Holders of Securities of a Class the purchase price of which is
less than the aggregate amount of the Principal Distributions to be made to
such Class (a 'Discount Security'). The Prospectus Supplement for each
Series of Securities that includes an Interest Weighted or a Principal
Weighted Class will set forth certain yield calculations on each such Class
based upon a range of specified prepayment assumptions on the Trust Assets
included in the related Trust Fund. The yield to Securityholders will also
be adversely affected because
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interest will accrue on the Mortgage Loans, the Contracts or the mortgage
loans underlying the Mortgage Certificates included in a Trust Fund, from
the first day of the month preceding the month in which a Distribution Date
occurs, but the distribution of such interest will be made no earlier than
the 25th day of the succeeding month unless otherwise provided in the
applicable Prospectus Supplement. The adverse effect on yield of this delay
will intensify with any increase in the period of time by which the
Distribution Date for a Series of Certificates succeeds the date on which
distributions on the Mortgage Loans, the Contracts or the Mortgage
Certificates are received by the Master Servicer or the Trustee. See
'Maturity, Prepayment and Yield Considerations.'
Pre-Funding......................... If so specified in the related Prospectus Supplement, a portion of the
issuance proceeds of the Securities of a particular Series (such amount,
the 'Pre-Funded Amount') will be deposited in an account (the 'Pre-Funding
Account') to be established with the Trustee, which will be used to acquire
additional Mortgage Loans, Contracts or Mortgage Certificates from time to
time during the period specified in the related Prospectus Supplement (the
'Pre-Funding Period'). Prior to the investment of the Pre-Funded Amount in
additional Mortgage Loans, Contracts or Mortgage Certificates, such
Pre-Funded Amount may be invested in one or more Eligible Investments. Any
Eligible Investment must mature no later than the Business Day prior to the
next Distribution Date. See 'Description of the Securities -- Pre-Funding.'
During any Pre-Funding Period, the Depositor will be obligated (subject
only to the availability thereof) to transfer to the related Trust Fund
additional Mortgage Loans, Contracts or Mortgage Certificates from time to
time during such Pre-Funding Period. Such additional Mortgage Loans,
Contracts or Mortgage Certificates will be required to satisfy certain
eligibility criteria more fully set forth in the related Prospectus
Supplement, which eligibility criteria will be consistent with the
eligibility criteria of the Mortgage Loans, Contracts or Mortgage
Certificates included in the Trust Fund as of the Closing Date, subject to
such exceptions as are expressly stated in such Prospectus Supplement.
Although the specific parameters of the Pre-Funding Account with respect to
any issuance of Securities will be specified in the related Prospectus
Supplement, it is anticipated that: (a) the Pre-Funding Period will not
exceed 120 days from the related Closing Date, (b) that the additional
Mortgage Loans, Contracts or Mortgage Certificates to be acquired during
the Pre-Funding Period will be subject to the same representations and
warranties as the Mortgage Loans, Contracts or Mortgage Certificates
included in the related Trust Fund on the Closing Date (although additional
criteria may also be required to be satisfied, as described in the related
Prospectus Supplement) and (c) that the Pre-Funded Amount will not exceed
25% of the principal amount of the Securities issued pursuant to a
particular offering.
Credit Support...................... Neither the Securities nor the Trust Assets will be insured or guaranteed
by any governmental agency, except to the extent of any FHA insurance or VA
guarantee. Credit support will be provided on the Mortgage Pools or
Contract Pools by one or more irrevocable letters of credit (the 'Letter of
Credit'), a policy of mortgage pool insurance (the 'Pool Insurance
Policy'), a bond or similar form of insurance coverage against certain
losses in the event of the bankruptcy of a Mortgagor (the 'Mortgagor
Bankruptcy Bond') or any combination of the foregoing as specified in
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the applicable Prospectus Supplement. In lieu of or in addition to the
foregoing credit support arrangements if so specified in the related
Prospectus Supplement, the Securities of a Series may be issued in one or
more Classes or Subclasses. Payments on the Securities of one or more
Classes or Subclasses (the 'Senior Securities') may be supported by a prior
right to receive distributions attributable or otherwise payable to one or
more other Classes or Subclasses (the 'Subordinated Securities') to the
extent specified in the related Prospectus Supplement (the 'Subordinated
Amount'). In addition, if so specified in the related Prospectus
Supplement, one or more Classes or Subclasses of Subordinated Securities
may be subordinated to another Class or Subclass of Subordinated Securities
and may be entitled to receive disproportionate amounts of distributions of
principal. If so specified in the related Prospectus Supplement, if a
Series of Securities includes Notes, all Classes of Certificates will be
subordinated to the Classes of Notes and one more Classes or Subclasses of
Notes may be subordinated to one or more other Classes or Subclasses of
Notes and may be entitled to receive disproportionate amounts of
distributions of principal. If so specified in the related Prospectus
Supplement, a reserve (the 'Reserve Fund') and certain other accounts or
funds may be established to support payments on one or more Classes of
Securities. A Prospectus Supplement with respect to a Series may also
provide for additional or alternative forms of credit support, including a
guarantee or surety bond, acceptable to the Rating Agency ('Alternative
Credit Support').
A. Letter of Credit............... If so specified in the applicable Prospectus Supplement, the issuer of one
or more Letters of Credit (the 'L/C Bank') will deliver to the Trustee the
Letters of Credit for the Mortgage Pool or Contract Pool. Unless otherwise
specified in the related Prospectus Supplement, to the extent described
herein, the L/C Bank will honor the Trustee's demands with respect to such
Letter of Credit, to the extent of the amount available thereunder, to make
payments to the Certificate Account on each Distribution Date in an amount
equal to the amount sufficient to repurchase each Liquidating Loan that has
not been purchased by the related Servicer or the Master Servicer pursuant
to the terms of the applicable Servicing Agreement, Pooling and Servicing
Agreement or Sale and Servicing Agreement referred to herein. Unless
otherwise provided in the related Prospectus Supplement, the term
'Liquidating Loan' means: (a) each Mortgage Loan with respect to which
foreclosure proceedings have been commenced (and the Mortgagor's right of
reinstatement has expired), (b) each Mortgage Loan with respect to which
the Servicer or the Master Servicer has agreed to accept a deed to the
property in lieu of foreclosure, (c) each Cooperative Loan as to which the
shares of the related Cooperative and the related proprietary lease or
occupancy agreement have been sold or offered for sale or (d) each Contract
with respect to which repossession proceedings have been commenced. The
liability of the L/C Bank under the Letter of Credit will be reduced by the
amount of unreimbursed payments thereunder. In the event that at any time
there remains no amount available under the Letter of Credit for a specific
Mortgage Pool or Contract Pool, and coverage under another form of credit
support, if any, is exhausted, any losses will be borne by the holder of
Securities of the Series, as specified in the related Prospectus
Supplement. Unless otherwise specified in the related
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Prospectus Supplement, the maximum liability of the L/C Bank under the
Letter of Credit for a Mortgage Pool or Contract Pool will be an amount
equal to a percentage (not greater than 10% of the initial aggregate
principal balance of the Mortgage Loans in such Mortgage Pool or Contracts
in such Contract Pool) (the 'L/C Percentage'), set forth in the Prospectus
Supplement, relating to such Mortgage Pool or Contract Pool. The maximum
amount available at any time to be paid under the Letter of Credit will be
determined in accordance with the provisions of the applicable Agreement
referred to herein. The duration of coverage and the amount and frequency
of any reduction in coverage provided by the Letter of Credit with respect
to a Series of Securities will be in compliance with requirements
established by the Rating Agency rating such Series and will be set forth
in the related Prospectus Supplement. If so specified in the related
Prospectus Supplement, the Letter of Credit with respect to a Series of
Securities or one or more Classes of Series of Securities may, in addition
to or in lieu of the foregoing, provide coverage with respect to the unpaid
principal or notional amount of the Securities of a Class or Classes within
such Series. See 'Credit Support -- Letter of Credit.'
B. Pool Insurance................. If so specified in the applicable Prospectus Supplement, the Master
Servicer will obtain a Pool Insurance Policy to cover any loss (subject to
the limitations described below) by reason of default by the Mortgagors on
the related Mortgage Loans to the extent not covered by any policy of
primary mortgage insurance (a 'Primary Mortgage Insurance Policy'). The
amount of coverage provided by the Pool Insurance Policy for a Mortgage
Pool will be specified in the related Prospectus Supplement. A Pool
Insurance Policy for a Mortgage Pool, however, will not be a blanket policy
against loss, because claims thereunder may only be made for particular
defaulted Mortgage Loans and only upon satisfaction of certain conditions
precedent. See 'Description of Insurance -- Pool Insurance Policies.' The
Master Servicer, if any, or the Depositor or the applicable Servicer will
be required to use its best reasonable efforts to maintain the Pool
Insurance Policy for each related Mortgage Pool and to present claims
thereunder to the issuer of such Pool Insurance Policy (the 'Pool Insurer')
on behalf of the Trustee and the Securityholders. See 'Description of the
Securities -- Presentation of Claims.'
C. Mortgagor Bankruptcy
Bond........................... If so specified in the related Prospectus Supplement, the Master Servicer,
if any, the Depositor or the applicable Servicer will obtain and use its
best reasonable efforts to maintain a Mortgagor Bankruptcy Bond for one or
more Classes of Securities of such Series covering certain losses resulting
from action that may be taken by a bankruptcy court in connection with the
bankruptcy of a Mortgagor. The level of coverage provided by such Mortgagor
Bankruptcy Bond will be specified in the applicable Prospectus Supplement.
See 'Description of Insurance -- Mortgagor Bankruptcy Bond.'
D. Subordinated Securities........ If so specified in the related Prospectus Supplement, the rights of holders
of the Securities of one or more Subordinated Classes or Subclasses of a
Series to receive distributions with respect to the Mortgage Loans in the
Mortgage Pool or Contracts in the Contract Pool for such Series, or with
respect to a Subordinated Pool (as defined herein), will be subordinated to
the rights of the holders of the Securities of one or more Classes or
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Subclasses of such Series to receive such distributions to the extent
described in the related Prospectus Supplement, and may be limited to the
Subordinated Amount set forth in the related Prospectus Supplement. This
subordination will be intended to enhance the likelihood of regular receipt
by holders of the Senior Securities of the full amount of scheduled
payments of principal and interest due them and to reduce the likelihood
that the holders of such Senior Securities will experience losses. See
'Credit Support -- Subordinated Securities.'
E. Shifting Interest.............. If so specified in the applicable Prospectus Supplement, the protection
afforded to holders of Senior Securities of a Series by the subordination
of certain rights of holders of Subordinated Securities of such Series to
distributions on the related Mortgage Loans or Contracts may be effected by
the preferential right of the holders of the Senior Securities to receive,
prior to any distribution being made in respect of the holders of the
related Subordinated Securities, current distributions on the related
Mortgage Loans or Contracts of principal and interest due them on each
Distribution Date out of funds available for distribution on such date in
the related Certificate Account and by the distribution to the holders of
the Senior Securities on each Distribution Date of a greater than pro rata
percentage of certain principal prepayments or other recoveries of
principal specified in the related Prospectus Supplement on a Mortgage Loan
or Contract that are received in advance of their scheduled Due Dates and
are not accompanied by an amount as to interest representing scheduled
interest due on any date or dates in any month or months subsequent to the
month of prepayment (the 'Principal Prepayments'). The allocation of a
greater than pro rata share of such amounts to the Senior Securities will
have the effect of accelerating the amortization of the Senior Securities
while increasing the respective interest in the Trust Fund evidenced by the
Subordinated Securities. Increasing the respective interest of the
Subordinated Securities relative to that of the Senior Securities is
intended to preserve the availability of the benefits of the subordination
provided by the Subordinated Securities. See 'Description of the
Securities -- Distributions of Principal and Interest' and ' -- Distri-
butions on Securities' and 'Credit Support -- Shifting Interest.'
F. Reserve Fund................... If so specified in the related Prospectus Supplement, a Reserve Fund may be
established for a Series. Unless otherwise specified in such Prospectus
Supplement, such Reserve Fund will not be included in the corpus of the
Trust Fund for such Series. If so specified in the related Prospectus
Supplement, such Reserve Fund may be created by the deposit, in escrow, by
the Depositor, of a separate pool of mortgage loans, cooperative loans or
Contracts (the 'Subordinated Pool'), with the aggregate principal balance
specified in such Prospectus Supplement, or by the deposit of cash in the
amount specified in such Prospectus Supplement (the 'Initial Deposit'). The
Reserve Fund will be funded by the retention of specified distributions on
the Trust Assets of the related Mortgage Pool or Contract Pool, and/or on
the mortgage loans, cooperative loans or Contracts in the Subordinated
Pool, until the Reserve Fund (without taking into account the amount of any
Initial Deposit, except as otherwise provided in the related Prospectus
Supplement), reaches an amount (the 'Required Reserve') set forth in the
related Prospectus Supplement. Thereafter, specified distributions on the
Trust Assets of the related Mortgage Pool or Contract Pool, and/or on the
mortgage loans, cooperative loans or
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Contracts in the Subordinated Pool, will be retained to the extent
necessary to maintain such Reserve Fund (without, except as otherwise
provided in the related Prospectus Supplement, taking into account the
amount of any Initial Deposit) at the related Required Reserve. Except as
otherwise provided in the related Prospectus Supplement, in no event will
the Required Reserve for any Series ever be required to exceed the lesser
of the Subordinated Amount for such Series or the outstanding aggregate
principal amount of Securities of the Subordinated Classes or Subclasses of
such Series specified in the related Prospectus Supplement. If so specified
in the related Prospectus Supplement, the Reserve Fund with respect to a
Series may be funded at a lesser amount or in another manner acceptable to
the Rating Agency rating such Series. See 'Credit Support -- Subordinated
Securities' and ' -- Reserve Fund.'
G. Other Funds.................... Assets consisting of cash, certificates of deposit or letters of credit or
any combination thereof, in the aggregate amount specified in the related
Prospectus Supplement, will be deposited by the Depositor in one or more
accounts to be established with respect to a Series of Securities by the
Depositor with the Trustee on the related Delivery Date if such assets are
required to make timely distributions in respect of principal of, and
interest on, the Securities of such Series, are otherwise required as a
condition to the rating of such Securities in the rating category specified
in the Prospectus Supplement, or are required in order to provide for
certain contingencies or in order to make certain distributions regarding
Securities which represent interests in GPM Loans (a 'GPM Fund') or
Buy-Down Loans (a 'Buy-Down Fund'). Following each Distribution Date,
amounts may be withdrawn from any such fund and used and/or distributed in
accordance with the Agreement under the conditions and to the extent
specified in the related Prospectus Supplement.
H. Swap Agreement................. If so specified in the Prospectus Supplement relating to a Series of
Securities, the related Issuer will enter into or obtain an assignment of a
swap agreement or similar agreement pursuant to which such Issuer will have
the right to receive certain payments of interest (or other payments) as
set forth or determined as described therein. See 'Credit Support -- Swap
Agreement.'
I. Security Guarantee
Insurance...................... If so specified in the related Prospectus Supplement, credit enhancement
for a Series may be provided by an insurance policy (the 'Security
Guarantee Insurance') issued by one or more insurance companies. Such
Security Guarantee Insurance may guarantee timely distributions of interest
and full distributions of principal on the basis of a schedule of principal
distributions set forth in or determined in the manner specified in the
related Prospectus Supplement.
Hazard Issuance and Special Hazard
Insurance Policies................ Unless otherwise specified in the applicable Prospectus Supplement, all of
the Mortgage Loans (except for the Cooperative Loans) and the Contracts
will be covered by standard hazard insurance policies insuring against
losses due to various causes, including fire, lightning and windstorm. In
addition, the Depositor will, if so specified in the applicable Prospectus
Supplement, obtain an insurance policy (the 'Special Hazard Insurance
Policy') covering losses that result from certain other physical risks that
are not otherwise insured against (including earthquakes and mudflows). The
Special Hazard Insurance Policy will be limited in scope and will
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cover losses in an amount specified in the applicable Prospectus
Supplement. Any hazard losses not covered by either standard hazard
policies or the Special Hazard Insurance Policy will not be insured against
and to the extent that the amount available under any other method of
credit support available for such Series is exhausted, will be borne by
Securityholders of such Series. The hazard insurance policies and the
Special Hazard Insurance Policy will be subject to the limitations
described under 'Description of Insurance -- Standard Hazard Insurance
Policies on Mortgage Loans,' ' -- Standard Hazard Insurance Policies on the
Manufactured Homes' and ' -- Special Hazard Insurance Policies.'
Substitution of Trust Assets........ If so specified in the Prospectus Supplement relating to a Series of
Securities, within the period following the date of issuance of such
Securities specified in such Prospectus Supplement, the Depositor or one or
more Servicers will deliver to the Trustee with respect to such Series
Trust Assets in substitution for any one or more of the Trust Assets
included in the Trust Fund relating to such Series which do not conform in
one or more material respects to the representations and warranties in the
related Agreement. See 'Description of the Securities -- Assignment of
Mortgage Loans,' ' -- Assignment of Contracts' and ' -- Assignment of
Mortgage Certificates.'
Advances............................ Except as otherwise provided in the Prospectus Supplement with respect to a
Series, the Servicers of the Mortgage Loans and Contracts (and the Master
Servicer, if any, with respect to each Mortgage Loan and Contract that it
services directly, and otherwise to the extent the related Servicer does
not do so) will be obligated to advance delinquent installments of
principal of and interest on the Mortgage Loans and Contracts (the
'Advances') under certain circumstances. See 'Description of the
Securities -- Advances.'
Optional Termination................ If so specified in the Prospectus Supplement with respect to a Series, the
Depositor or such other persons as may be specified in such Prospectus
Supplement may purchase the Trust Assets in the related Trust Fund and any
property acquired in respect thereof at the time, in the manner and at the
price specified in such Prospectus Supplement. In the event that the
Depositor elects to treat the related Trust Fund as a Real Estate Mortgage
Investment Conduit (a 'REMIC') under the Internal Revenue Code of 1986, as
amended (the 'Code'), any such repurchase will be effected only in
compliance with the requirements of Section 860F(a)(4) of the Code, so as
to constitute a 'qualified liquidation' thereunder. The exercise of the
right of repurchase will effect early retirement of the Certificates of the
related Series. See 'Maturity, Prepayment and Yield Considerations' and
'Description of the Securities -- Termination.'
ERISA Considerations................ A fiduciary of any employee benefit plan or retirement arrangement subject
to the Employee Retirement Income Security Act of 1974, as amended
('ERISA'), or Section 4975 of the Code should carefully review with its own
legal advisers whether the purchase or holding of Securities could give
rise to a transaction prohibited or otherwise impermissible under ERISA or
Section 4975 of the Code. See 'ERISA Considerations.'
Tax Status.......................... See 'Certain Federal Income Tax Consequences.'
Legal Investment.................... If so specified in the related Prospectus Supplement relating to a Series
of Securities, a Class or Subclass of such Securities will constitute a
'mortgage related security' under the Secondary Mortgage Market Enhancement
Act of 1984 ('SMMEA') if and for so long as it is rated in
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one of the two highest rating categories by at least one nationally
recognized statistical rating organization. Such Classes or Subclasses, if
any, will be legal investments for certain types of institutional investors
to the extent provided in SMMEA, subject, in any case, to any other
regulations which may govern investments by such institutional investors.
See 'Legal Investment.'
Use of Proceeds..................... The Depositor will use the net proceeds from the sale of each Series for
one or more of the following purposes: (i) to purchase the related Trust
Assets, (ii) to repay indebtedness which has been incurred to obtain funds
to acquire such Trust Assets, (iii) to establish any reserve funds
described in the related Prospectus Supplement and (iv) to pay costs of
structuring, guaranteeing and issuing such Securities. If so specified in
the related Prospectus Supplement, the purchase of the Trust Assets for a
Series may be effected by an exchange of Securities by the Depositor with
the seller of such Trust Assets. See 'Use of Proceeds.'
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RISK FACTORS
In addition to the other information contained in this Prospectus and in
the applicable Prospectus Supplement to be prepared and delivered in connection
with the offering of any Series of Securities, prospective investors should
carefully consider the following risk factors before investing in any Class or
Subclass of Securities of any such Series.
LIMITED LIQUIDITY
There can be no assurance that a secondary market for the Securities of any
Series will develop or, if it does develop, that it will provide Securityholders
with liquidity of investment or that it will continue for the life of the
related Securities. The Prospectus Supplement for a Series of Securities may
indicate that an underwriter specified therein intends to establish a secondary
market in such Securities; however, no underwriter will be obligated to do so.
The Securities will not be listed on any securities exchange.
LIMITED OBLIGATIONS
Except for any related insurance policies or credit support described in
the applicable Prospectus Supplement, the Trust Assets included in the related
Trust Fund will be the sole source of payments on the Securities of a Series.
The Securities of any Series will not represent an interest in or obligation of
the Depositor, the Master Servicer, any Servicer, any Unaffiliated Seller, the
Trustee or any of their respective affiliates, except for the limited
obligations of the Depositor, the Master Servicer or any Unaffiliated Seller
with respect to certain breaches of representations and warranties and the
Master Servicer's obligations as Master Servicer. Neither the Securities of any
Series nor the related Trust Assets will be guaranteed or insured by any
governmental agency or instrumentality (except to the limited extent described
in the related Prospectus Supplement that certain Trust Assets may be insured or
guaranteed, in whole or in part, by the FHA or VA), the Depositor, the Master
Servicer, any Servicer, any Unaffiliated Seller, the Trustee, any of their
respective affiliates or any other person. Consequently, in the event that
payments on the Trust Assets are insufficient or otherwise unavailable to make
all payments required on the Securities, there will be no recourse to the
Depositor, the Master Servicer, any Servicer, any Unaffiliated Seller, the
Trustee or, except as specified in the applicable Prospectus Supplement, any
other entity.
LIMITATIONS, REDUCTION AND SUBSTITUTION OF CREDIT SUPPORT
With respect to each Series of Securities, credit support may be provided
in limited amounts to cover certain types of losses on the underlying Trust
Assets. Credit support may be provided in one or more of the forms referred to
herein, including, but not limited to: a Letter of Credit; a Pool Insurance
Policy; a Mortgagor Bankruptcy Bond; subordination of one or more Classes or
Subclasses of Securities of the same Series; a Reserve Fund; and any combination
thereof. See 'Credit Support.' Regardless of the form of credit support, if any,
provided, the amount of coverage will be limited in amount and in most cases
will be subject to periodic reduction in accordance with a schedule or formula.
Furthermore, such credit support may provide only very limited coverage as to
certain types of losses, and may provide no coverage as to certain other types
of losses. All or a portion of the credit support, if any, for any Series of
Securities will generally be permitted to be reduced, terminated or substituted
for, if each applicable Rating Agency indicates that the then-current rating
thereof will not be adversely affected. See 'Credit Support.'
RISKS OF THE TRUST ASSETS
An investment in securities such as the Securities of any Series which
generally represent interests in, or are secured by, mortgage loans or
manufactured housing installment or conditional sales contracts and installment
loan agreements, as the case may be, may be affected by, among other things, a
decline in real estate values and changes in the mortgagors' or obligors'
financial condition. No assurance can be given that the values of the Mortgaged
Properties securing the Mortgage Loans, the values of the mortgaged properties
securing the mortgage loans underlying the Mortgage Certificates or the values
of the Manufactured Homes securing the Contracts, as the case may be, underlying
any Series of Securities have remained or will remain at their levels on the
dates of origination of the related Mortgage Loans, mortgage loans, Mortgage
Certificates or Contracts. If the residential real estate market should
experience an overall decline in property values such that
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the outstanding balances of the Mortgage Loans and the mortgage loans underlying
the Mortgage Certificates comprising a particular Trust Fund, and any secondary
financing on the related Mortgaged Properties and mortgaged properties, become
equal to or greater than the value of the related Mortgaged Properties or
mortgaged properties, as applicable, the actual rates of delinquencies,
foreclosures and losses could be higher than those now generally experienced in
the mortgage lending industry and those experienced in the related Originator's
portfolio. In addition, adverse economic conditions generally, in particular
geographic areas or industries, or affecting particular segments of the
borrowing community (such as Mortgagors or Obligors relying on commission income
and self-employed Mortgagors or Obligors) and other factors, may affect the
timely payment by Mortgagors, Obligors or mortgagors of scheduled payments of
principal of and interest on the Mortgage Loans, Contracts or Mortgage
Certificates, as the case may be, and, accordingly, the actual rates of
delinquencies, foreclosures and losses with respect to any Trust Fund. See
'Maturity, Prepayment and Yield Considerations.' To the extent that such losses
are not covered by the applicable credit support, holders of Securities of the
Series evidencing interests in, or secured by, the related Trust Fund will bear
all risk of loss resulting from default by Mortgagors, Obligors or mortgagors
and will have to look primarily to the value of the Mortgaged Properties,
mortgaged properties or Manufactured Homes for recovery of the outstanding
principal of and unpaid interest on the defaulted Mortgage Loans or Contracts.
In addition to the foregoing, certain geographic regions in the United States
from time to time will experience weaker regional economic conditions and
housing markets and, consequently, will experience higher rates of loss and
delinquency on mortgage loans or contracts generally. The Mortgage Loans,
Contracts or mortgage loans underlying the Mortgage Certificates underlying
certain Series of Securities may be concentrated in these regions, and such
concentration may present risk considerations in addition to those generally
present for similar mortgage-backed or contract-backed securities without such
concentration. See 'The Trust Fund -- The Mortgage Pools,' ' -- Mortgage Loan
Program,' ' -- Underwriting Standards,' ' -- The Contract Pools' and
' -- Underwriting Policies.'
PREPAYMENT AND YIELD CONSIDERATIONS
The rate and timing of principal payments on the Securities of each Series
will depend, among other things, on the rate and timing of principal payments
(including prepayments, defaults and liquidations) on the related Mortgage
Loans, Mortgage Certificates or Contracts. As is the case with mortgage-backed
securities generally, each Series of Securities is subject to substantial
inherent cash-flow uncertainties because the Mortgage Loans and Contracts may be
prepaid at any time. Generally, when prevailing interest rates increase,
prepayment rates on mortgage loans tend to decrease, resulting in a slower
return of principal to investors at a time when reinvestment at such higher
prevailing rates would be desirable. Conversely, when prevailing interest rates
decline, prepayment rates on mortgage loans tend to increase, resulting in a
faster return of principal to investors at a time when reinvestment at
comparable yields may not be possible.
The yield to maturity on each Class of Securities of each Series will
depend, among other things, on the rate and timing of principal payments
(including prepayments, defaults and liquidations) on the Mortgage Loans,
Mortgage Certificates or Contracts, as applicable, and the allocation thereof to
reduce the Certificate Principal Balance of such Class. The yield to maturity on
each Class of Securities will also depend on the Mortgage Rates and the purchase
price for such Securities. The yield to investors on any Class of Securities
will be adversely affected by any allocation thereto of interest shortfalls on
the Mortgage Loans or Contracts, as applicable, which are expected to result
from the distribution of interest only to the date of prepayment (rather than a
full month's interest) in connection with prepayments in full and in part
(including for this purpose Insurance Proceeds and Liquidation Proceeds) to the
extent not covered by amounts otherwise payable to the Master Servicer as
servicing compensation.
In general, if a Class of Securities is purchased at a premium and
principal distributions thereon occur at a rate faster than anticipated at the
time of purchase, the investor's actual yield to maturity will be lower than
that assumed at the time of purchase. Conversely, if a Class of Securities is
purchased at a discount and principal distributions thereon occur at a rate
slower than that assumed at the time of purchase, the investor's actual yield to
maturity will be lower than that assumed at the time of purchase.
SUBORDINATION
To the extent specified in the applicable Prospectus Supplement,
distributions of interest on and principal of one or more Classes or Subclasses
of Securities of a Series may be subordinated in priority of payment to interest
and principal due on one or more other Classes or Subclasses of Securities of
such Series.
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LIMITATION ON EXERCISE OF RIGHTS DUE TO BOOK-ENTRY REGISTRATION
If so specified in the applicable Prospectus Supplement, one or more
Classes of Securities of a Series initially will be represented by one or more
certificates registered in the name of Cede & Co. ('Cede'), or any other nominee
of The Depository Trust Company ('DTC') set forth in such Prospectus Supplement,
and will not be registered in the names of the holders of the Securities of such
Series or their nominees. Because of this, unless and until Securities in fully
registered, certificated form ('Definitive Securities') for such Series are
issued, holders of such Securities will not be recognized by the applicable
Trustee as 'Securityholders' (as such terms are used herein or in the related
Agreement, as applicable). Hence, until Definitive Securities are issued,
holders of such Securities will be able to exercise the rights of
Securityholders only indirectly through DTC and its participating organizations.
THE TRUST FUND
Ownership of the Mortgage or Contract Pool or Pools included in the Trust
Fund for a Series of Securities may be evidenced by one or more Classes of
Certificates, which may consist of one or more Subclasses, as specified in the
Prospectus Supplement for such Series. Each Certificate will evidence the
undivided interest, beneficial interest or notional amount specified in the
related Prospectus Supplement in one or more Mortgage Pools containing one or
more Mortgage Loans or Mortgage Certificates or Contract Pools containing
Contracts, having an aggregate principal balance of not less than approximately
$50,000,000 as of the first day of the month of its creation (the 'Cut-off
Date'), unless otherwise specified in the applicable Prospectus Supplement. If
so specified in the related Prospectus Supplement, each Class or Subclass of the
Certificates of a Series will evidence the percentage interest specified in such
Prospectus Supplement in the payments of principal of and interest on the
Mortgage Loans or Mortgage Certificates in the related Mortgage Pool or Pools or
on the Contracts in the related Contract Pool or Pools (a 'Percentage
Interest'). To the extent specified in the related Prospectus Supplement, each
Mortgage Pool or Contract Pool with respect to a Series will be covered by a
Letter of Credit, a Pool Insurance Policy, a Special Hazard Insurance Policy, a
Mortgagor Bankruptcy Bond, by the subordination of the rights of the holders of
the Subordinated Securities of a Series to the rights of the holders of the
Senior Securities, which, if so specified in the related Prospectus Supplement,
may include Securities of a Subordinated Class or Subclass and the establishment
of a Reserve Fund, by the right of one or more Classes or Subclasses of
Securities to receive a disproportionate amount of certain distributions of
principal, by Security Guarantee Insurance or another form or forms of
Alternative Credit Support acceptable to the Rating Agency rating the Securities
of such Series or by any combination of the foregoing. See 'Description of
Insurance' and 'Credit Support.'
THE MORTGAGE POOLS
If so specified in the Prospectus Supplement with respect to a Series, the
Trust Fund for such Series may include (a) one or more Mortgage Pools containing
(i) conventional one-to four-family residential, first and/or second mortgage
loans, (ii) closed-end loans (the 'Closed-End Loans') and/or revolving home
equity loans or certain balances thereof (the 'Revolving Credit Line Loans' and,
together with the Closed-End Loans, the 'Home Equity Loans') secured by
mortgages or deeds of trust on residential one-to-four family properties,
including townhouses and individual units in condominiums and planned unit
developments, (iii) Cooperative Loans made to finance the purchase of certain
rights relating to cooperatively owned properties secured by the pledge of
shares issued by a Cooperative and the assignment of a proprietary lease or
occupancy agreement providing the exclusive right to occupy a particular
Cooperative Dwelling, (iv) mortgage loans secured by Multifamily Property, (v)
mortgage participation securities evidencing participation interests in such
loans that are acceptable to the nationally recognized Rating Agency rating the
Securities of such Series for a rating in one of the four highest rating
categories of such Rating Agency or (vi) certain conventional Mortgage
Certificates issued by one or more trusts established by one or more private
entities or (b) one or more Contract Pools containing Contracts or participation
Securities representing participation interests in such Contracts purchased by
the Depositor either directly or through one or more affiliates or Unaffiliated
Sellers, and related property conveyed to such trust by the Depositor.
A Mortgage Pool may include Mortgage Loans insured by the FHA ('FHA Loans')
and/or Mortgage Loans partially guaranteed by the Veterans Administration (the
'VA', and such mortgage loans are referred to herein as 'VA Loans'). All
Mortgage Loans will be evidenced by promissory notes or other evidence of
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indebtedness (the 'Mortgage Notes') secured by first mortgages or first or
second deeds of trust or other similar security instruments creating a first
lien or second lien, as applicable, on the Mortgaged Properties (as defined
below). Single Family Property and Multifamily Property will consist of single
family detached homes, attached homes (single family units having a common
wall), individual units located in condominiums, townhouses, planned unit
developments, multifamily residential rental properties, apartment buildings
owned by cooperative housing corporations and such other types of homes or units
as are set forth in the related Prospectus Supplement. Unless otherwise
specified in the applicable Prospectus Supplement, each such detached or
attached home or multifamily property will be constructed on land owned in fee
simple by the Mortgagor or on land leased by the Mortgagor for a term at least
two years greater than the term of the applicable Mortgage Loan. Attached homes
may consist of duplexes, triplexes and fourplexes (multifamily structures where
each Mortgagor owns the land upon which the unit is built with the remaining
adjacent land owned in common). Multifamily Property may include mixed
commercial and residential buildings. The Mortgaged Properties may include
investment properties and vacation and second homes. Mortgage Loans secured by
Multifamily Property may also be secured by an assignment of leases and rents
and operating or other cash flow guarantees relating to the Mortgaged Properties
to the extent specified in the related Prospectus Supplement.
Unless otherwise specified below or in the applicable Prospectus
Supplement, each Mortgage Loan in a Mortgage Pool will (i) have an individual
principal balance at origination of not less than $25,000 nor more than
$500,000, (ii) have monthly payments due on the first day of each month (the
'Due Date'), (iii) be secured by Mortgaged Properties or relate to Cooperative
Loans located in any of the 50 states or the District of Columbia, and (iv)
consist of fully-amortizing Mortgage Loans, each with a 10 to 40 year term at
origination, a fixed or variable rate of interest and level or variable monthly
payments over the term of the Mortgage Loan. Unless otherwise specified in the
related Prospectus Supplement, the Loan-to-Value Ratio of such Mortgage Loans at
origination will not exceed 95% on any Mortgage Loan with an original principal
balance of $150,000 or less, 90% on any Mortgage Loan with an original principal
balance of $150,001 through $200,000, 85% on any Mortgage Loan with an original
principal balance of $200,001 through $300,000 and 80% on any Mortgage Loan with
an original principal balance exceeding $300,000. If so specified in the related
Prospectus Supplement, a Mortgage Pool may also include fully amortizing,
adjustable rate Mortgage Loans ('ARM Loans') with (unless otherwise specified in
such Prospectus Supplement) 30-year terms at origination and mortgage interest
rates adjusted periodically (with corresponding adjustments in the amount of
monthly payments) to equal the sum (which may be rounded) of a fixed margin and
an index described in such Prospectus Supplement, subject to any applicable
restrictions on such adjustments. The Mortgage Pools may also include other
types of Mortgage Loans to the extent set forth in the applicable Prospectus
Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, no
Mortgage Loan will have a Loan-to-Value Ratio at origination in excess of 95%,
regardless of its original principal balance. Except as otherwise provided in
the related Prospectus Supplement, the Loan-to-Value Ratio will be the ratio,
expressed as a percentage, of the principal amount of the Mortgage Loan at the
date of determination to the lesser of (a) the appraised value determined in an
appraisal obtained by the originator and (b) the sales price for such property
(the 'Original Value'). Unless otherwise specified in the related Prospectus
Supplement, with respect to a Mortgage Loan secured by a mortgage on a vacation
or second home or an investment property (other than Multifamily Property), no
income derived from the property will be considered for underwriting purposes,
the Loan-to-Value Ratio (taking into account any secondary financing) may not
exceed 80% and the original principal balance may not exceed $250,000.
If so specified in the related Prospectus Supplement, a Mortgage Pool may
contain Mortgage Loans with fluctuating Mortgage Rates. Any such Mortgage Loan
may provide that on the day on which the Mortgage Rate adjusts, the amount of
the monthly payments on the Mortgage Loan will be adjusted to provide for the
payment of the remaining principal amount of the Mortgage Loan with level
monthly payments of principal and interest at the new Mortgage Rate to the
maturity date of the Mortgage Loan. Alternatively, the Mortgage Loan may provide
that the Mortgage Rate adjusts more frequently than the monthly payment. As a
result, a greater or lesser portion of the monthly payment will be applied to
the payment of principal of the Mortgage Loan, thus increasing or decreasing the
rate at which the Mortgage Loan is repaid. See 'Maturity, Prepayment and Yield
Considerations.' In the event that an adjustment to the Mortgage Rate causes the
amount of interest accrued in any month to exceed the amount of the monthly
payment on such Mortgage Loan, the excess (the 'Deferred Interest') will be
added to the principal balance of the Mortgage Loan (unless otherwise paid by
the Mortgagor), and will bear interest at the Mortgage Rate in effect from time
to time. The amount by which the
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Mortgage Rate or monthly payment may increase or decrease and the aggregate
amount of Deferred Interest on any Mortgage Loan may be subject to certain
limitations, as described in the related Prospectus Supplement.
If so specified in the Prospectus Supplement for the related Series, the
Mortgage Rate on certain ARM Loans will be convertible from an adjustable rate
to a fixed rate at the option of the Mortgagor under certain circumstances.
Unless otherwise specified in the related Prospectus Supplement, the Agreement
will provide that the Unaffiliated Seller from which such convertible ARM Loans
were acquired will be obligated to repurchase from the Trust Fund any such ARM
Loan as to which the conversion option has been exercised (a 'Converted Mortgage
Loan'), at a purchase price set forth in the related Prospectus Supplement. The
amount of such purchase price will be required to be deposited in the
Certificate Account and will be distributed to the Securityholders on the
Distribution Date in the month following the month of the exercise of the
conversion option. The obligation of the Unaffiliated Seller to repurchase
Converted Mortgage Loans may or may not be supported by cash, letters of credit,
third party guarantees or other similar arrangements.
If provided for in the applicable Prospectus Supplement, a Mortgage Pool
may contain Mortgage Loans pursuant to which the monthly payments made by the
Mortgagor during the early years of the Mortgage Loan will be less than the
scheduled monthly payments on the Mortgage Loan ('Buy-Down Loans'). The
resulting difference in payment shall be compensated for from an amount
contributed by the Depositor, the seller of the related Mortgaged Property, the
Servicer or another source and placed in a custodial account (the 'Buy-Down
Fund') by the Servicer, or if so specified in such Prospectus Supplement, with
the Trustee. In lieu of a cash deposit, if so specified in the related
Prospectus Supplement, a letter of credit or guaranteed investment contract may
be delivered to the Trustee to fund the Buy-Down Fund. See 'Description of the
Securities -- Payments on Mortgage Loans.' Buy-Down Loans included in a Mortgage
Pool will provide for a reduction in monthly interest payments by the Mortgagor
for a period of up to the first four years of the term of such Mortgage Loans.
If provided for in the applicable Prospectus Supplement, a Mortgage Pool
may contain Mortgage Loans pursuant to which the monthly payments by the
Mortgagor during the early years of the related Mortgage Note are less than the
amount of interest that would otherwise be payable thereon, with the interest
not so paid added to the outstanding principal balance of such Mortgage Loan
('GPM Loans'). If so specified in the related Prospectus Supplement, the
resulting difference in payment shall be compensated for from an amount
contributed by the Depositor or another source and delivered to the Trustee (the
'GPM Fund'). In lieu of a cash deposit, the Depositor may deliver to the Trustee
a letter of credit, guaranteed investment contract or another instrument
acceptable to the Rating Agency rating the related Series to fund the GPM Fund.
If provided for in the applicable Prospectus Supplement, a Mortgage Pool
may contain Mortgage Loans which are Home Equity Loans pursuant to which the
full principal amount of such Mortgage Loan is advanced at origination of the
loan and generally is repayable in equal (or substantially equal) installments
of an amount sufficient to fully amortize such loan at its stated maturity.
Interest on each Home Equity Loan may be calculated on the basis of the
outstanding principal balance of such loan multiplied by the Mortgage Rate
thereon and further multiplied by a fraction, the numerator of which is the
number of days in the period elapsed since the preceding payment of interest was
made and the denominator is the number of days in the annual period for which
interest accrues on such loan. Under certain circumstances, under a Home Equity
Loan, a borrower may choose an interest only payment option and is obligated to
pay only the amount of interest which accrues on the loan during the billing
cycle. Generally, an interest only payment option may be available for a
specified period before the borrower must begin paying at least the minimum
monthly payment of a specified percentage of the average outstanding balance of
the loan.
FHA Loans will be insured by the Federal Housing Administration (the 'FHA')
as authorized under the National Housing Act, as amended, and the United States
Housing Act of 1937, as amended. Such FHA loans will be insured under various
FHA programs including the standard FHA 203-b programs to finance the
acquisition of one- to four-family housing units, the FHA 245 graduated payment
mortgage program and the FHA 221 and 223 programs to finance certain multifamily
residential rental properties. FHA Loans generally require a minimum down
payment of approximately 5% of the original principal amount of the FHA Loan. No
FHA Loan may have an interest rate or original principal amount exceeding the
applicable FHA limits at the time of origination of such FHA Loan.
VA Loans will be partially guaranteed by the VA under the Servicemen's
Readjustment Act of 1944, as amended (the 'Servicemen's Readjustment Act'). The
Servicemen's Readjustment Act permits a veteran (or in
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certain instances the spouse of a veteran) to obtain a mortgage loan guarantee
by the VA covering mortgage financing of the purchase of a one- to four-family
dwelling unit at interest rates permitted by the VA. The program has no mortgage
loan limits, requires no down payment from the purchasers and permits the
guarantee of mortgage loans of up to 30 years' duration. However, no VA Loan
will have an original principal amount greater than five times the partial VA
guarantee for such VA Loan. The maximum guarantee that may be issued by VA under
this program is 50% of the principal amount of the Mortgage Loan if the
principal amount of the Mortgage Loan is $45,000 or less, the lesser of $36,000
and 40% of the principal amount of the Mortgage Loan if the principal amount of
the Mortgage Loan is greater than $45,000 but less than or equal to $144,000,
and the lesser of $46,000 and 25% of the principal amount of the Mortgage Loan
if the principal amount of the Mortgage Loan is greater than $144,000.
Unless otherwise specified in the related Prospectus Supplement, interest
on each Revolving Credit Line Loan, excluding introduction rates offered from
time to time during promotional periods, is computed and payable monthly on the
average daily outstanding principal balance of such Loan. Principal amounts on a
Revolving Credit Line Loan may be drawn down (up to a maximum amount as set
forth in the related Prospectus Supplement) or repaid under each Revolving
Credit Line Loan from time to time, but may be subject to a minimum periodic
payment. To the extent and accordingly under the terms provided in the related
Prospectus Supplement, the Trust Fund may include amounts borrowed under a
Revolving Credit Line Loan after the Cut-off Date. The full amount of a
Closed-End Loan is advanced at the inception of the Loan and generally is
repayable in equal (or substantially equal) installments of an amount to fully
amortize such Loan at its stated maturity. Except to the extent provided in the
related Prospectus Supplement, the original terms to stated maturity of
Closed-End Loans will not exceed 360 months. Under certain circumstances, under
either a Revolving Credit Line Loan or a Closed-End Loan, a borrower may choose
an interest only payment option and is obligated to pay only the amount of
interest which accrues on the Loan during the billing cycle. An interest only
payment option may be available for a specified period before the borrower must
begin paying at least the minimum monthly payment of a specified percentage of
the average outstanding balance of the Loan.
The Prospectus Supplement (or, if such information is not available in
advance of the date of such Prospectus Supplement, a Current Report on Form 8-K
to be filed with the Commission) for each Series of Securities the Trust Fund
with respect to which contains Mortgage Loans will contain information as to the
type of Mortgage Loans that will comprise the related Mortgage Pool or Pools and
information as to (i) the aggregate principal balance of the Mortgage Loans as
of the applicable Cut-off Date, (ii) the type of Mortgaged Properties securing
the Mortgage Loans, (iii) the original terms to maturity of the Mortgage Loans,
(iv) the largest in principal balance of the Mortgage Loans, (v) the earliest
origination date and latest maturity date of the Mortgage Loans, (vi) the
aggregate principal balance of Mortgage Loans having Loan-to-Value Ratios at
origination exceeding 80%, (vii) the interest rate or range of interest rates
borne by the Mortgage Loans, (viii) the average outstanding principal balance of
the Mortgage Loans, (ix) the geographical distribution of the Mortgage Loans,
(x) the number and aggregate principal balance of Buy-Down Loans or GPM Loans,
if applicable, (xi) with respect to ARM Loans, the adjustment dates, the
highest, lowest and weighted average margin, and the maximum Mortgage Rate
variation at the time of any periodic adjustment and over the life of such ARM
Loans, and (xii) with respect to Mortgage Loans secured by Multifamily Property
or such other Mortgage Loans as are specified in the Prospectus Supplement,
whether the Mortgage Loan provides for an interest only period and whether the
principal amount of such Mortgage Loan is amortized on the basis of a period of
time that extends beyond the maturity date of the Mortgage Loan.
No assurance can be given that values of the Mortgaged Properties in a
Mortgage Pool have remained or will remain at their levels on the dates of
origination of the related Mortgage Loans. If the real estate market should
experience an overall decline in property values such that the outstanding
balances of the Mortgage Loans and any secondary financing on the Mortgaged
Properties in a particular Mortgage Pool become equal to or greater than the
value of the Mortgaged Properties, the actual rates of delinquencies,
foreclosures and losses could be higher than those now generally experienced in
the mortgage lending industry. In addition, the value of property securing
Cooperative Loans and the delinquency rate with respect to Cooperative Loans
could be adversely affected if the current favorable tax treatment of
cooperative stockholders were to become less favorable. See 'Certain Legal
Aspects of the Mortgage Loans and Contracts -- The Mortgage Loans.' To the
extent that such losses are not covered by the methods of credit support or the
insurance policies described herein or by Alternative Credit Support, they will
be borne by holders of the Securities of the Series evidencing interests in, or
secured by, the Mortgage Pool.
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Multifamily lending is generally viewed as exposing the lender to a greater
risk of loss than one- to four-family residential lending. Multifamily lending
typically involves larger loans to single borrowers or groups of related
borrowers than residential one- to four-family mortgage loans. Furthermore, the
repayment of loans secured by income producing properties is typically dependent
upon the successful operation of the related real estate project. If the cash
flow from the project is reduced (for example, if leases are not obtained or
renewed), the borrower's ability to repay the loan may be impaired. Multifamily
real estate can be affected significantly by supply and demand in the market for
the type of property securing the loan and, therefore, may be subject to adverse
economic conditions. Market values may vary as a result of economic events or
governmental regulations outside the control of the borrower or lender, such as
rent control laws, which impact the future cash flow of the property.
Corresponding to the greater lending risk is a generally higher interest rate
applicable to multifamily mortgage loans.
The Depositor will cause the Mortgage Loans constituting each Mortgage Pool
to be assigned to the Trustee named in the applicable Prospectus Supplement, for
the benefit of the holders of the Certificates of such Series (the
'Certificateholders') and, if a Series of Securities includes Notes, the
Depositor will cause the Mortgage Loans constituting the Mortgage Pool to be
pledged to the Indenture Trustee, for the benefit of the holders of the Notes of
such Series (the 'Noteholders' and, together with the Certificateholders, the
'Securityholders'). The Master Servicer, if any, named in the related Prospectus
Supplement will service the Mortgage Loans, either by itself or through other
mortgage servicing institutions, if any (each, a 'Servicer'), pursuant to a
Pooling and Servicing Agreement or a Sale and Servicing Agreement, as described
herein, and will receive a fee for such services. See ' -- Mortgage Loan
Program' and 'Description of the Securities.' As used herein, 'Agreement' means,
with respect to a Series that only includes Certificates, the Pooling and
Servicing Agreement, and with respect to a Series that includes Notes, the
Indenture, the Trust Agreement and the Sale and Servicing Agreement, as the
context requires. Unless otherwise specified in the applicable Prospectus
Supplement, with respect to those Mortgage Loans serviced by a Servicer, such
Servicer will be required to service the related Mortgage Loans in accordance
with the Pooling and Servicing Agreement, Sale and Servicing Agreement or
Seller's Warranty and Servicing Agreement between the Servicer and the Depositor
(each, a 'Servicing Agreement'), as applicable, and will receive the fee for
such services specified in such Servicing Agreement; however, any Master
Servicer will remain liable for its servicing obligations under the applicable
Agreement as if the Master Servicer alone were servicing such Mortgage Loans.
The Depositor will make certain representations and warranties regarding
the Mortgage Loans, but its assignment of the Mortgage Loans to the Trustee will
be without recourse. See 'Description of the Securities -- Assignment of
Mortgage Loans.' The Master Servicer's obligations with respect to the Mortgage
Loans will consist principally of its contractual servicing obligations under
the Servicing Agreement (including its obligation to enforce certain purchase
and other obligations of Servicers and/or Unaffiliated Sellers, as more fully
described herein under ' -- Mortgage Loan Program' and ' -- Representations by
Unaffiliated Sellers; Repurchases' and 'Description of the
Securities -- Assignment of Mortgage Loans' and ' -- Servicing by Unaffiliated
Sellers') and its obligations to make Advances in the event of delinquencies in
payments on or with respect to the Mortgage Loans or in connection with
prepayments and liquidations of such Mortgage Loans, in amounts described herein
under 'Description of the Securities -- Advances.' Unless otherwise specified in
the related Prospectus Supplement, such Advances with respect to delinquencies
will be limited to amounts that the Master Servicer believes ultimately would be
reimbursable under any applicable Letter of Credit, Pool Insurance Policy,
Special Hazard Insurance Policy, Mortgagor Bankruptcy Bond or other policy of
insurance, from amounts in the Reserve Fund, under any Alternative Credit
Support or out of the proceeds of liquidation of the Mortgage Loans, cash in the
Certificate Account or otherwise. See 'Description of the
Securities -- Advances,' 'Credit Support' and 'Description of Insurance.'
MORTGAGE LOAN PROGRAM
The Mortgage Loans will have been purchased by the Depositor either
directly or through affiliates or by the Trust formed by the Depositor, from one
or more affiliates or from sellers unaffiliated with the Depositor
('Unaffiliated Sellers'). Mortgage Loans acquired by the Depositor will have
been originated in accordance with the underwriting criteria specified below
under 'Underwriting Standards' or as otherwise described in a related Prospectus
Supplement.
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UNDERWRITING STANDARDS
Except in the case of certain Mortgage Loans originated by Unaffiliated
Sellers in accordance with their own underwriting criteria ('Closed Loans') or
such other standards as may be described in the applicable Prospectus
Supplement, all prospective Mortgage Loans will be subject to the underwriting
standards adopted by the Depositor. See ' -- Closed Loan Program' below for a
description of underwriting standards applicable to Closed Loans. Unaffiliated
Sellers will represent and warrant that Mortgage Loans originated by them and
purchased by the Depositor have been originated in accordance with the
applicable underwriting standards established by the Depositor or such other
standards as may be described in the applicable Prospectus Supplement. The
following discussion describes the underwriting standards of the Depositor with
respect to any Mortgage Loan that it purchases.
The mortgage credit approval process for one- to four-family residential
loans follows a standard procedure that generally complies with FHLMC and FNMA
regulations and guidelines (except that certain Mortgage Loans may have higher
loan amount and qualifying ratios) and applicable federal and state laws and
regulations. The credit approval process for Cooperative Loans follows a
procedure that generally complies with applicable FNMA regulations and
guidelines (except for the loan amounts and qualifying ratios) and applicable
federal and state laws and regulations. The originator of a Mortgage Loan (the
'Originator') generally will review a detailed credit application by the
prospective mortgagor designed to provide pertinent credit information,
including a current balance sheet describing assets and liabilities and a
statement of income and expenses, as well as an authorization to apply for a
credit report that summarizes the prospective mortgagor's credit history with
local merchants and lenders and any record of bankruptcy. In addition, an
employment verification is obtained from the prospective mortgagor's employer
wherein the employer reports the length of employment with that organization,
the current salary, and gives an indication as to whether it is expected that
the prospective mortgagor will continue such employment in the future. If the
prospective mortgagor is self-employed, he or she is required to submit copies
of signed tax returns. The prospective mortgagor may also be required to
authorize verification of deposits at financial institutions. In certain
circumstances, other credit considerations may cause the Originator or Depositor
not to require some of the above documents, statements or proofs in connection
with the origination or purchase of certain Mortgage Loans.
Unless otherwise specified in the applicable Prospectus Supplement, an
appraisal generally will be required to be made on each residence to be
financed. Such appraisal generally will be made by an appraiser who meets FNMA
requirements as an appraiser of one- to four-family residential properties. The
appraiser is required to inspect the property and verify that it is in good
condition and that, if new, construction has been completed. The appraisal
generally will be based on the appraiser's judgment of value, giving appropriate
weight to both the market value of comparable homes and the cost of replacing
the residence. These underwriting standards also require a search of the public
records relating to a mortgaged property for liens and judgments against such
mortgaged property.
Based on the data provided, certain verifications and the appraisal, a
determination is made by the Originator as to whether the prospective mortgagor
has sufficient monthly income available to meet the prospective mortgagor's
monthly obligations on the proposed loan and other expenses related to the
residence (such as property taxes, hazard and primary mortgage insurance and, if
applicable, maintenance) and other financial obligations and monthly living
expenses. Each Originator's lending guidelines for conventional mortgage loans
generally will specify that mortgage payments plus taxes and insurance and all
monthly payments extending beyond one year (including those mentioned above and
other fixed obligations, such as car payments) would equal no more than
specified percentages of the prospective mortgagor's gross income. These
guidelines will be applied only to the payments to be made during the first year
of the loan. For FHA and VA Loans, the Originator's lending guidelines will
follow HUD and VA guidelines, respectively. Other credit considerations may
cause an Originator to depart from these guidelines. For example, when two
individuals co-sign the loan documents, the incomes and expenses of both
individuals may be included in the computation.
The Mortgaged Properties may be located in states where, in general, a
lender providing credit on a single-family property may not seek a deficiency
judgment against the Mortgagor but rather must look solely to the property for
repayment in the event of foreclosure. The Depositor's underwriting standards
applicable to all states (including anti-deficiency states) require that the
value of the property being financed, as indicated by the appraisal, currently
supports and is anticipated to support in the future the outstanding loan
balance.
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Certain of the types of Mortgage Loans that may be included in the Mortgage
Pools or Trust Funds may involve additional uncertainties not present in
traditional types of loans. For example, Buy-Down Loans and GPM Loans provide
for escalating or variable payments by the Mortgagor. These types of Mortgage
Loans are underwritten on the basis of a judgment that the Mortgagor will have
the ability to make larger monthly payments in subsequent years. In some
instances the Mortgagor's income may not be sufficient to enable it to continue
to make scheduled loan payments as such payments increase.
To the extent specified in the related Prospectus Supplement, the Depositor
may purchase or cause the Trust to purchase Mortgage Loans for inclusion in a
Trust Fund that are underwritten under standards and procedures which vary from
and are less stringent than those described herein. For instance, Mortgage Loans
may be underwritten under a 'limited documentation' program if so specified in
the related Prospectus Supplement. With respect to such Mortgage Loans, minimal
investigation into the borrowers' credit history and income profile is
undertaken by the originator and such Mortgage Loans may be underwritten
primarily on the basis of an appraisal of the Mortgaged Property or Cooperative
Dwelling and the Loan-to-Value Ratio at origination. Thus, if the Loan-to-Value
Ratio is less than a percentage specified in the related Prospectus Supplement,
the originator may forego certain aspects of the review relating to monthly
income, and traditional ratios of monthly or total expenses to gross income may
not be considered.
The underwriting standards for Mortgage Loans secured by Multifamily
Property will be described in the related Prospectus Supplement.
QUALIFICATIONS OF UNAFFILIATED SELLERS
Unless otherwise specified in the applicable Prospectus Supplement with
respect to an Unaffiliated Seller of Closed Loans secured by residential
properties, each Unaffiliated Seller must be an institution experienced in
originating conventional mortgage loans and/or FHA Loans or VA Loans in
accordance with accepted practices and prudent guidelines, and must maintain
satisfactory facilities to originate those loans. In addition, except as
otherwise specified, the Depositor requires adequate financial stability and
adequate servicing experience, where appropriate, as well as satisfaction of
certain other criteria.
REPRESENTATIONS BY UNAFFILIATED SELLERS; REPURCHASES
Unless otherwise specified in the related Prospectus Supplement, each
Unaffiliated Seller (or the Master Servicer, if the Unaffiliated Seller is also
the Master Servicer under the Agreement) will have made representations and
warranties in respect of the Mortgage Loans sold by such Unaffiliated Seller to
the Depositor. Such representations and warranties will generally include, among
other things: (i) with respect to each Mortgaged Property, that title insurance
(or in the case of Mortgaged Properties located in areas where such policies are
generally not available, an attorney's certificate of title) and any required
hazard and primary mortgage insurance was effective at the origination of each
Mortgage Loan, and that each policy (or certificate of title) remained in effect
on the date of purchase of the Mortgage Loan from the Unaffiliated Seller; (ii)
that the Unaffiliated Seller had good and marketable title to each such Mortgage
Loan; (iii) with respect to each Mortgaged Property, that each mortgage
constituted a valid first lien on the Mortgaged Property (subject only to
permissible title insurance exceptions); (iv) that there were no delinquent tax
or assessment liens against the Mortgaged Property; and (v) that each Mortgage
Loan was current as to all required payments (unless otherwise specified in the
related Prospectus Supplement). With respect to a Cooperative Loan, the
Unaffiliated Seller will represent and warrant that (a) the security interest
created by the cooperative security agreements constituted a valid first lien on
the collateral securing the Cooperative Loan (subject to the right of the
related Cooperative to cancel shares and terminate the proprietary lease for
unpaid assessments and to the lien of the related Cooperative for unpaid
assessments representing the Mortgagor's pro rata share of the Cooperative's
payments for its mortgage, current and future real property taxes, maintenance
charges and other assessments to which like collateral is commonly subject) and
(b) the related cooperative apartment was free from damage and was in good
repair.
All of the representations and warranties of an Unaffiliated Seller in
respect of a Mortgage Loan will have been made as of the date on which such
Unaffiliated Seller sold the Mortgage Loan to the Depositor or its affiliate. A
substantial period of time may have elapsed between such date and the date of
initial issuance of the Series of Securities evidencing an interest in, or
secured by, such Mortgage Loan. Since the representations and warranties of an
Unaffiliated Seller do not address events that may occur following the sale of a
Mortgage Loan
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by an Unaffiliated Seller, the repurchase obligation described below will not
arise if, during the period commencing on the date of sale of a Mortgage Loan by
the Unaffiliated Seller to or on behalf of the Depositor, the relevant event
occurs that would have given rise to such an obligation had the event occurred
prior to sale of the affected Mortgage Loan. However, the Depositor will not
include any Mortgage Loan in the Trust Fund for any Series of Securities if
anything has come to the Depositor's attention that would cause it to believe
that the representations and warranties of an Unaffiliated Seller will not be
accurate and complete in all material respects in respect of such Mortgage Loan
as of the related Cut-off Date.
The only representations and warranties to be made for the benefit of
holders of Securities of a Series in respect of any Mortgage Loan relating to
the period commencing on the date of sale of such Mortgage Loan to the Depositor
or its affiliates will be certain limited representations of the Depositor and
of the Master Servicer described below under 'Description of the
Securities -- Assignment of Mortgage Loans.' If the Master Servicer is also an
Unaffiliated Seller of Mortgage Loans with respect to a particular Series, such
representations will be in addition to the representations and warranties made
in its capacity as an Unaffiliated Seller.
Upon the discovery of the breach of any representation or warranty made by
an Unaffiliated Seller in respect of a Mortgage Loan that materially and
adversely affects the interests of the Securityholders of the related Series,
such Unaffiliated Seller or the Servicer of such Mortgage Loan will be obligated
to repurchase such Mortgage Loan at a purchase price equal to 100% of the unpaid
principal balance thereof at the date of repurchase or, in the case of a Series
of Securities as to which the Depositor has elected to treat the related Trust
Fund as a REMIC, at such other price as may be necessary to avoid a tax on a
prohibited transaction, as described in Section 860F(a) of the Code, in each
case together with accrued interest at the Mortgage Rate for the related
Mortgage Loan to the first day of the month following such repurchase and the
amount of any unreimbursed Advances made by the Master Servicer or the Servicer,
as applicable, in respect of such Mortgage Loan. The Master Servicer will be
required to enforce this obligation for the benefit of the Trustee and the
Securityholders, following the practices it would employ in its good faith
business judgment were it the owner of such Mortgage Loan. Unless otherwise
specified in the applicable Prospectus Supplement, and subject to the ability of
the Depositor, the Unaffiliated Seller or the Servicer to substitute for certain
Mortgage Loans as described below, this repurchase obligation constitutes the
sole remedy available to the Securityholders of such Series for a breach of
representation or warranty by an Unaffiliated Seller.
The obligation of the Master Servicer to purchase a Mortgage Loan if an
Unaffiliated Seller or a Servicer defaults on its obligation to do so is subject
to limitations, and no assurance can be given that Unaffiliated Sellers will
carry out their respective repurchase obligations with respect to Mortgage
Loans. However, to the extent that a breach of the representations and
warranties of an Unaffiliated Seller may also constitute a breach of the
representations and warranties made by the Depositor or by the Master Servicer
with respect to the insurability of the Mortgage Loans, the Depositor may have a
repurchase obligation, and the Master Servicer may have the limited purchase
obligation, in each case as described below under 'Description of the
Securities -- Assignment of Mortgage Loans.'
CLOSED LOAN PROGRAM
The Depositor may also acquire Closed Loans that have been originated by
Unaffiliated Sellers in accordance with underwriting standards acceptable to the
Depositor. Unless otherwise specified in the applicable Prospectus Supplement,
Closed Loans for which 11 or fewer monthly payments have been received will be
further subject to the Depositor's customary underwriting standards. Unless
otherwise specified in the applicable Prospectus Supplement, Closed Loans for
which 12 to 60 monthly payments have been received will be subject to a review
of payment history and will conform to the Depositor's guidelines for the
related mortgage program. In the event one or two payments were over 30 days
delinquent, a letter explaining the delinquencies will be required of the
Mortgagor. Unless otherwise specified in the applicable Prospectus Supplement,
the Depositor will not purchase for inclusion in a Mortgage Pool a Closed Loan
for which (i) more than two monthly payments were over 30 days delinquent, (ii)
one payment was over 60 days delinquent or (iii) more than 60 monthly payments
were received.
MORTGAGE CERTIFICATES
If so specified in the Prospectus Supplement with respect to a Series, the
Trust Fund for such Series may include certain conventional mortgage
pass-through certificates, collateralized mortgage bonds or other
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indebtedness secured by mortgage loans or manufactured housing contracts (the
'Mortgage Certificates') issued by one or more trusts established by one or more
private entities and evidencing, unless otherwise specified in such Prospectus
Supplement, the entire interest in a pool of mortgage loans. A description of
the mortgage loans and/or manufactured housing contracts underlying the Mortgage
Certificates, the related pooling and servicing arrangements and the insurance
arrangements in respect of such mortgage loans will be set forth in the
applicable Prospectus Supplement or in the Current Report on Form 8-K referred
to below. Such Prospectus Supplement (or, if such information is not available
in advance of the date of such Prospectus Supplement, a Current Report on Form
8-K to be filed by the Depositor with the Commission within 15 days of the
issuance of the Securities of such Series) will also set forth information with
respect to the entity or entities forming the related mortgage pool, the issuer
of any credit support with respect to such Mortgage Certificates and the
aggregate outstanding principal balance and the pass-through rate borne by each
Mortgage Certificate included in the Trust Fund, together with certain
additional information with respect to such Mortgage Certificates. The inclusion
of Mortgage Certificates in a Trust Fund with respect to a Series of Securities
is conditioned upon their characteristics being in form and substance
satisfactory to the Rating Agency rating the related Series of Securities.
Mortgage Certificates, together with the Mortgage Loans and Contracts, are
referred to herein as the 'Trust Assets.'
THE CONTRACT POOLS
If so specified in the Prospectus Supplement with respect to a Series, the
Trust Fund for such Series may include a Contract Pool evidencing interests in
manufactured housing installment or conditional sales contracts and installment
loan agreements originated by a manufactured housing dealer in the ordinary
course of business and purchased by the Depositor. The Contracts may be
conventional manufactured housing contracts or contracts insured by the FHA or
partially guaranteed by the VA. Each Contract will be secured by a Manufactured
Home, as defined below. Unless otherwise specified in the related Prospectus
Supplement, the Contracts will be fully amortizing and will bear interest at the
fixed annual percentage rates ('APRs') specified in such Prospectus Supplement.
The Manufactured Homes securing the Contracts consist of manufactured homes
within the meaning of 42 United States Code, Section 5402(6), which defines a
'manufactured home' as 'a structure, transportable in one or more sections,
which in the traveling mode, is eight body feet or more in width or forty body
feet or more in length, or, when erected on site, is three hundred twenty or
more square feet, and which is built on a permanent chassis and designed to be
used as a dwelling with or without a permanent foundation when connected to the
required utilities, and includes the plumbing, heating, air conditioning, and
electrical systems contained therein; except that such term shall include any
structure which meets all the requirements of [this] paragraph except the size
requirements and with respect to which the manufacturer voluntarily files a
certification required by the Secretary of Housing and Urban Development and
complies with the standards established under [this] chapter.'
The Depositor will cause the Contracts constituting each Contract Pool to
be assigned and/or pledged to the related Trustee named in the related
Prospectus Supplement for the benefit of the related Securityholders. The Master
Servicer specified in the related Prospectus Supplement will service the
Contracts, either by itself or through other Servicers, pursuant to the
Agreement. See 'Description of the Securities -- Servicing by Unaffiliated
Sellers.' With respect to those Contracts serviced by the Master Servicer
through a Servicer, the Master Servicer will remain liable for its servicing
obligations under the Agreement as if the Master Servicer alone were servicing
such Contracts. The Contract documents, if so specified in the related
Prospectus Supplement, may be held for the benefit of the Trustee by a Custodian
(the 'Custodian') appointed pursuant to the related Pooling and Servicing
Agreement or a Custodial Agreement (the 'Custodial Agreement') among the
Depositor, the Trustee and the Custodian.
Unless otherwise specified in the related Prospectus Supplement, each
registered holder of a Security will be entitled to receive periodic
distributions, which will be monthly unless otherwise specified in the related
Prospectus Supplement, of all or a portion of principal of the underlying
Contracts or interest on the principal balance of the Security at the Interest
Rate, or both. See 'Description of the Securities -- Payments on Contracts.'
Except as otherwise specified in the related Prospectus Supplement, the
related Prospectus Supplement (or, if such information is not available in
advance of the date of such Prospectus Supplement, a Current Report on Form 8-K
to be filed with the Commission) will specify, for the Contracts contained in
the related Contract
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Pool, among other things: (a) the dates of origination of the Contracts; (b) the
weighted average APR on the Contracts; (c) the range of outstanding principal
balances as of the Cut-off Date; (d) the average outstanding principal balance
of the Contracts as of the Cut-off Date; (e) the weighted average term to
maturity as of the Cut-off Date; and (f) the range of original maturities of the
Contracts.
With respect to the Contracts included in the Contract Pool, the Depositor,
the Master Servicer or such other party, as specified in the related Prospectus
Supplement, will make or cause to be made representations and warranties as to
the types and geographical distribution of such Contracts and as to the accuracy
in all material respects of certain information furnished to the Trustee in
respect of each such Contract. In addition, the Master Servicer or the
Unaffiliated Seller of the Contracts will represent and warrant that, as of the
Cut-off Date, unless otherwise specified in the related Prospectus Supplement,
no Contract was more than 30 days delinquent as to payment of principal and
interest. Upon a breach of any representation that materially and adversely
affects the interest of the related Securityholders in a Contract, the Master
Servicer, the Unaffiliated Seller or such other party, as appropriate, will be
obligated either to cure the breach in all material respects or to purchase the
Contract or, if so specified in the related Prospectus Supplement, to substitute
another Contract as described below. This repurchase or substitution obligation
constitutes the sole remedy available to the Securityholders or the Trustee for
a breach of a representation by the Master Servicer, the Unaffiliated Seller or
such other party.
If so specified in the related Prospectus Supplement, in addition to making
certain representations and warranties regarding its authority to enter into,
and its ability to perform its obligations under, the Agreement, the Master
Servicer will make certain other representations and warranties, except to the
extent that another party specified in the Prospectus Supplement makes any such
representations, to the Trustee with respect to the enforceability of coverage
under any applicable insurance policy or hazard insurance policy. See
'Description of Insurance' for information regarding the extent of coverage
under certain of such insurance policies. Upon a breach of the insurability
representation that materially and adversely affects the interests of the
Securityholders in a Contract, the Master Servicer, the Unaffiliated Seller or
such other party, as appropriate, will be obligated either to cure such breach
in all material respects or, unless otherwise specified in the related
Prospectus Supplement, to purchase such Contract at a price equal to the
principal balance thereof as of the date of purchase plus accrued interest at
the related Pass-Through Rate to the first day of the month following the month
of purchase. The Master Servicer, if required by the Rating Agency rating the
Securities, will procure a surety bond, guaranty, letter of credit or other
instrument (the 'Performance Bond') acceptable to such Rating Agency to support
this purchase obligation. See 'Credit Support -- Performance Bond.' The purchase
obligation will constitute the sole remedy available to the Securityholders or
the Trustee for a breach of the Master Servicer's or seller's insurability
representation.
If provided in the related Prospectus Supplement, if the Depositor
discovers or receives notice of any breach of its representations and warranties
relating to a Contract within two years or such other period as may be specified
in the related Prospectus Supplement of the date of the initial issuance of the
Securities, the Depositor may remove such Contract from the Trust Fund (each, a
'Deleted Contract'), rather than repurchase the Contract as provided above, and
substitute in its place another Contract (each, a 'Substitute Contract'). Any
Substitute Contract, on the date of substitution, will (i) have an outstanding
principal balance, after deduction of all scheduled payments due in the month of
substitution, not in excess of the outstanding principal balance of the Deleted
Contract (the amount of any shortfall to be distributed to Securityholders in
the month of substitution), (ii) have an APR not less than (and not more than 1%
greater than) the APR of the Deleted Contract, (iii) have a remaining term to
maturity not greater than (and not more than one year less than) that of the
Deleted Contract and (iv) comply with all the representations and warranties set
forth in the Agreement as of the date of substitution. This repurchase or
substitution obligation constitutes the sole remedy available to the
Securityholders or the Trustee for any such breach.
UNDERWRITING POLICIES
Conventional Contracts will comply with the underwriting policies of the
Originator or Unaffiliated Seller of the Contracts described in the related
Prospectus Supplement. Except as described below or in the related Prospectus
Supplement, the Depositor believes that these policies were consistent with
those utilized by mortgage lenders or manufactured home lenders generally during
the period of origination.
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With respect to a Contract made in connection with the Obligor's purchase
of a Manufactured Home, the 'appraised value' is the amount determined by a
professional appraiser. The appraiser must personally inspect the Manufactured
Home and prepare a report which includes market data based on recent sales of
comparable Manufactured Homes and, when deemed applicable, a replacement cost
analysis based on the current cost of a similar Manufactured Home. Unless
otherwise specified in the related Prospectus Supplement, the Contract
Loan-to-Value Ratio will be equal to the original principal amount of the
Contract divided by the lesser of the 'appraised value' or the sales price for
the Manufactured Home.
THE DEPOSITOR
The Depositor was incorporated in the State of Delaware on December 31,
1985, and is a wholly owned subsidiary of Credit Suisse First Boston Management
Corporation. Credit Suisse First Boston Mangement Corporation is a wholly owned
subsidiary of Credit Suisse First Boston, Inc. Credit Suisse First Boston
Corporation, which may act as an underwriter in offerings made hereby, as
described in 'Plan of Distribution' below, is also a wholly owned subsidiary of
Credit Suisse First Boston, Inc. The principal executive offices of the
Depositor are located at Eleven Madison Avenue, New York, NY 10010. Its
telephone number is (212) 325-2000.
The Depositor was organized, among other things, for the purposes of
establishing trusts, selling beneficial interests therein and acquiring and
selling mortgage assets to such trusts. Neither the Depositor, its parent nor
any of the Depositor's affiliates will ensure or guarantee distributions on the
Securities of any Series.
Trust Assets will be acquired by the Depositor directly or through one or
more affiliates.
USE OF PROCEEDS
Except as otherwise provided in the related Prospectus Supplement, the
Depositor will apply all or substantially all of the net proceeds from the sale
of each Series offered hereby and by the related Prospectus Supplement to
purchase the Trust Assets, to repay indebtedness which has been incurred to
obtain funds to acquire the Trust Assets, to establish the Reserve Funds or
Pre-Funding Accounts, if any, for the Series and to pay costs of structuring and
issuing the Securities. If so specified in the related Prospectus Supplement,
Securities may be exchanged by the Depositor for Trust Assets. Unless otherwise
specified in the related Prospectus Supplement, the Trust Assets for each Series
of Securities will be acquired by the Depositor either directly, or through one
or more affiliates which will have acquired such Trust Assets from time to time
either in the open market or in privately negotiated transactions.
MATURITY, PREPAYMENT AND YIELD CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement, the
scheduled maturities of all of the Mortgage Loans (or the mortgage loans
underlying the Mortgage Certificates) at origination will not be less than
approximately 10 years or exceed 40 years and all the Contracts will have
maturities at origination of not more than 20 years, but such Mortgage Loans (or
such underlying mortgage loans) or Contracts may be prepaid in full or in part
at any time. Unless otherwise specified in the applicable Prospectus Supplement,
no Mortgage Loan (or mortgage loan) or Contract will provide for a prepayment
penalty and each will contain (except in the case of FHA and VA Loans)
due-on-sale clauses permitting the mortgagee or obligee to accelerate the
maturity thereof upon conveyance of the related Mortgaged Property, Cooperative
Dwelling or Manufactured Home.
The FHA has compiled statistics relating to one- to four-family, level
payment mortgage loans insured by the FHA under the National Housing Act of
1934, as amended, at various interest rates, all of which permit assumption by
the new buyer if the home is sold. Such statistics indicate that while some of
such mortgage loans remain outstanding until their scheduled maturities, a
substantial number are paid prior to their respective stated maturities. The
Actuarial Division of HUD has prepared tables which, assuming full mortgage
prepayments at the rates experienced by FHA, set forth the percentages of the
original number of FHA Loans in pools of level payment mortgage loans of varying
maturities that will remain outstanding on each anniversary of the original date
of such mortgage loans (assuming they all have the same origination date) ('FHA
Experience'). Published information with respect to conventional residential
mortgage loans indicates that such mortgage loans have historically been prepaid
at higher rates than government-insured loans because, unlike government insured
mortgage loans, conventional mortgage loans may contain due-on-sale clauses that
allow the
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holder thereof to demand payment in full of the remaining principal balance of
such mortgage loans upon sales or certain transfers of the mortgaged property.
There are no similar statistics with respect to the prepayment rates of
cooperative loans or loans secured by multifamily properties.
It is customary in the residential mortgage industry in quoting yields on a
pool of (a) 30-year fixed-rate, level payment mortgages, to compute the yield as
if the pool were a single loan that is amortized according to a 30-year schedule
and is then prepaid in full at the end of the twelfth year and (b) 15-year
fixed-rate, level payment mortgages, to compute the yield as if the pool were a
single loan that is amortized according to a 15-year schedule and then is
prepaid in full at the end of the seventh year.
Prepayments on residential mortgage loans are also commonly measured
relative to a prepayment standard or model. If so specified in the Prospectus
Supplement relating to a Series of Securities, the model used in a Prospectus
Supplement will be the Standard Prepayment Assumption ('SPA'). SPA represents an
assumed rate of prepayment relative to the then outstanding principal balance of
a pool of mortgages. A prepayment assumption of 100% of SPA assumes prepayment
rates of 0.2% per annum of the then outstanding principal balance of such
mortgages in the first month of the life of the mortgages and an additional 0.2%
per annum in each month thereafter until the thirtieth month and in each month
thereafter during the life of the mortgages, 100% of SPA assumes a constant
prepayment rate of 6% per annum each month.
Information regarding FHA Experience, other published information, SPA or
any other rate of assumed prepayments, as applicable, will be set forth in the
Prospectus Supplement with respect to a Series of Securities. There is, however,
no assurance that prepayment of the Mortgage Loans underlying a Series of
Securities will conform to FHA Experience, mortgage industry custom, any level
of SPA, or any other rate specified in the related Prospectus Supplement. A
number of factors, including homeowner mobility, economic conditions,
enforceability of due-on-sale clauses, mortgage market interest rates, mortgage
recording taxes and the availability of mortgage funds, may affect prepayment
experience on residential mortgage loans.
The terms of the Servicing Agreement will require the Servicer or the
Master Servicer to enforce any due-on-sale clause to the extent it has knowledge
of the conveyance or the proposed conveyance of the underlying Mortgaged
Property or Cooperative Dwelling; provided, however, that any enforcement action
that would impair or threaten to impair any recovery under any related Insurance
Policy will not be required or permitted. See 'Description of the
Securities -- Enforcement of `Due-On-Sale' Clauses; Realization Upon Defaulted
Mortgage Loans' and 'Certain Legal Aspects of the Mortgage Loans and
Contracts -- The Mortgage Loans -- `Due-On-Sale' Clauses' for a description of
certain provisions of each Agreement and certain legal developments that may
affect the prepayment experience on the Mortgage Loans.
At the request of the Mortgagor, the Servicer may refinance the Mortgage
Loans in any Mortgage Pool by accepting prepayments thereon and making new loans
secured by a mortgage on the same property. Upon such refinancing, the new loans
will not be included in the Mortgage Pool and the related Servicer will be
required to repurchase the affected Mortgage Loan. A Mortgagor may be legally
entitled to require the Servicer to allow such a refinancing. Any such
repurchase will have the same effect as a prepayment in full of the related
Mortgage Loan.
There are no uniform statistics compiled for prepayments of contracts
relating to Manufactured Homes. Prepayments on the Contracts may be influenced
by a variety of economic, geographic, social and other factors, including
repossessions, aging, seasonality and interest rate fluctuations. Other factors
affecting prepayment of mortgage loans or Contracts include changes in housing
needs, job transfers, unemployment and servicing decisions. An investment in
Securities evidencing interests in, or secured by, Contracts may be affected by,
among other things, a downturn in regional or local economic conditions. These
regional or local economic conditions are often volatile, and historically have
affected the delinquency, loan loss and repossession experience of the
Contracts. To the extent that losses on the Contracts are not covered by the
Subordinated Amount, if any, Letters of Credit, applicable Insurance Policies,
if any, or by any Alternative Credit Support, holders of the Securities of a
Series evidencing interests in, or secured by, such Contracts will bear all risk
of loss resulting from default by Obligors and will have to look primarily to
the value of the Manufactured Homes, which generally depreciate in value, for
recovery of the outstanding principal of and unpaid interest on the defaulted
Contracts. See 'The Trust Fund -- The Contract Pools.'
While most Contracts will contain 'due-on-sale' provisions permitting the
holder of the Contract to accelerate the maturity of the Contract upon
conveyance by the borrower, to the extent provided in the related
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Prospectus Supplement, the Master Servicer may permit proposed assumptions of
Contracts where the proposed buyer meets the underwriting standards described
above. Such assumption would have the effect of extending the average life of
the Contracts. FHA Mortgage Loans and Contracts and VA Mortgage Loans and
Contracts are not permitted to contain 'due-on-sale' clauses, and are freely
assumable.
Mortgage Loans made with respect to Multifamily Property may have
provisions that prevent prepayment for a number of years and may provide for
payments of interest only during a certain period followed by amortization of
principal on the basis of a schedule extending beyond the maturity of the
related Mortgage Loans. Prepayments of Mortgage Loans secured by Multifamily
Property may be affected by these and other factors, including changes in
interest rates and the relative tax benefits associated with ownership of
Multifamily Property.
If set forth in the applicable Prospectus Supplement, the Depositor or
other specified entity will have the option to repurchase the Trust Assets
included in the related Trust Fund under the conditions stated in such
Prospectus Supplement. For any Series of Securities for which the Depositor has
elected to treat the Trust Fund or certain assets of the Trust Fund as a REMIC
pursuant to the provisions or the Code, any such repurchase will be effected in
compliance with the requirements of Section 860F(a)(4) of the Code so as to
constitute a 'qualifying liquidation' thereunder. In addition, the Depositor
will be obligated, under certain circumstances, to repurchase certain of the
Trust Assets. The Master Servicer and Unaffiliated Sellers will also have
certain repurchase obligations, as more fully described herein and in the
related Prospectus Supplement. In addition, the mortgage loans underlying the
Mortgage Certificates may be subject to repurchase under circumstances similar
to those described above. Such repurchases will have the same effect as
prepayments in full. See 'The Trust Fund -- Mortgage Loan Program' and
' -- Representations by Unaffiliated Sellers; Repurchases,' 'Description of the
Securities -- Assignment of Mortgage Loans,' ' -- Assignment of Mortgage
Certificates,' ' -- Assignment of Contracts' and ' -- Termination.'
If so specified in the related Prospectus Supplement, a Mortgage Pool may
contain Mortgage Loans with fluctuating Mortgage Rates that adjust more
frequently than the monthly payment with respect to such Mortgage Loans. As a
result, the portion of each monthly payment allocated to principal may vary from
month to month. Negative amortization with respect to a Mortgage Loan will occur
if an adjustment to the Mortgage Rate causes the amount of interest accrued in
any month, calculated at the new Mortgage Rate for such period, to exceed the
amount of the monthly payment or if the allowable increase in any monthly
payment is limited to an amount that is less than the amount of interest accrued
in any month. The amount of any resulting Deferred Interest will be added to the
principal balance of the Mortgage Loan and will bear interest at the Mortgage
Rate in effect from time to time. To the extent that, as a result of the
addition of any Deferred Interest, the Mortgage Loan negatively amortizes over
its term, the weighted average life of the Securities of the related Series will
be greater than would otherwise be the case. As a result, the yield on any such
Mortgage Loan at any time may be less than the yields on similar adjustable rate
mortgage loans, and the rate of prepayment may be lower or higher than would
otherwise be anticipated.
Generally, when a full prepayment is made on a Mortgage Loan or Contract,
the Mortgagor or the borrower under a Contract (the 'Obligor'), is charged
interest for the number of days actually elapsed from the due date of the
preceding monthly payment up to the date of such prepayment, at a daily interest
rate determined by dividing the Mortgage Rate or APR by 365. Full prepayments
will reduce the amount of interest paid by the Mortgagor or the Obligor because
interest on the principal amount of any Mortgage Loan or Contract so prepaid
will be paid only to the date of prepayment instead of for a full month;
however, unless otherwise provided in the applicable Prospectus Supplement, the
Master Servicer with respect to a Series will be required to advance from its
own funds the portion of any interest at the related Mortgage Rate that is not
so received. Partial prepayments generally are applied on the first day of the
month following receipt, with no resulting reduction in interest payable for the
period in which the partial prepayment is made. Unless otherwise specified in
the related Prospectus Supplement, full and partial prepayments, together with
interest on such full and partial prepayments at the Mortgage Rate or APR for
the related Mortgage Loan or Contract to the last day of the month in which such
prepayments occur, will be deposited in the Certificate Account and will be
available for distribution to Securityholders on the next succeeding
Distribution Date in the manner specified in the related Prospectus Supplement.
Generally, the effective yield to holders of Securities having a monthly
Distribution Date will be lower than the yield otherwise produced because, while
interest will accrue on each Mortgage Loan or Contract, or
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mortgage loan underlying a Mortgage Certificate, to the first day of the month,
the distribution of such interest to holders of such Securities will be made no
earlier than the 25th day of the month following the month of the accrual
(unless otherwise provided in the applicable Prospectus Supplement). The adverse
effect on yield will intensify with any increase in the period of time by which
the Distribution Date with respect to a Series of Securities succeeds such 25th
day. With respect to the Multi-Class Securities of a Series having other than
monthly Distribution Dates, the yield to holders of such Certificates will also
be adversely affected by any increase in the period of time from the date to
which interest accrues on such Certificate to the Distribution Date on which
such interest is distributed.
In the event that the Securities of a Series are divided into two or more
Classes or Subclasses and that a Class or Subclass is an Interest Weighted
Class, in the event that such Series includes a Class of Residual Certificates,
or as otherwise may be appropriate, the Prospectus Supplement for such Series
will indicate the manner in which the yield to Securityholders will be affected
by different rates of prepayments on the Mortgage Loans, on the Contracts or on
the mortgage loans underlying the Mortgage Certificates. In general, the yield
on Securities that are offered at a premium to their principal or notional
amount ('Premium Securities') is likely to be adversely affected by a higher
than anticipated level of principal prepayments on the Mortgage Loans, on the
Contracts or on the mortgage loans underlying the Mortgage Certificates. This
relationship will become more sensitive as the amount by which the Percentage
Interest of such Class in each Interest Distribution is greater than the
corresponding Percentage Interest of such Class in each Principal Distribution.
If the differential is particularly wide (e.g., the Interest Distribution is
allocated primarily or exclusively to one Class or Subclass and the Principal
Distribution primarily or exclusively to another) and a high level of
prepayments occurs, there is a possibility that Securityholders of Premium
Securities will not only suffer a lower than anticipated yield but, in extreme
cases, will fail to recoup fully their initial investment. Conversely, a lower
than anticipated level of principal prepayments (which can be anticipated to
increase the expected yield to holders of Securities that are Premium
Securities) will likely result in a lower than anticipated yield to holders of
Securities that are offered at a discount to their principal amount ('Discount
Securities'). If so specified in the applicable Prospectus Supplement, a
disproportionately large amount of Principal Prepayments may be distributed to
the holders of the Senior Securities at the times and under the circumstances
described therein.
In the event that the Securities of a Series include one or more Classes or
Subclasses of Multi-Class Securities, the Prospectus Supplement for such Series
will set forth information, measured relative to a prepayment standard or model
specified in such Prospectus Supplement, with respect to the projected weighted
average life of each such Class or Subclass and the percentage of the initial
Stated Principal Balance of each such Subclass that would be outstanding on
special Distribution Dates for such Series based on the assumptions stated in
such Prospectus Supplement, including assumptions that prepayments on the
Mortgage Loans or Contracts or on the mortgage loans underlying the Mortgage
Certificates in the related Trust Fund are made at rates corresponding to the
various percentages of such prepayment standard or model.
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DESCRIPTION OF THE SECURITIES
Each Series of Securities will be issued pursuant to either (a) an
agreement consisting of either (i) a Pooling and Servicing Agreement or (ii) a
Reference Agreement (the 'Reference Agreement') and the Standard Terms and
Provisions of Pooling and Servicing Agreement (such Standard Terms, the
'Standard Terms'), (either the Standard Terms together with the Reference
Agreement or the Pooling and Servicing Agreement referred to herein as the
'Pooling and Servicing Agreement') among the Depositor, the Master Servicer, if
any, and the Trustee named in the applicable Prospectus Supplement or (b) if a
Series of Securities includes Notes, a deposit trust agreement or trust
agreement between the Depositor and the Trustee. Forms of the Pooling and
Servicing Agreement and the Trust Agreement have been filed as exhibits to the
Registration Statement of which this Prospectus is a part. If a Series of
Securities includes Notes, such Notes will be issued and secured pursuant to an
Indenture (each, an 'Indenture') to be entered into between the related Issuer
and the indenture trustee specified in the related Prospectus Supplement (the
'Indenture Trustee'), and the related Trust Fund will be serviced by the Master
Servicer pursuant to a Sale and Servicing Agreement (the 'Sale and Servicing
Agreement') among the Depositor, the Master Servicer or Servicer and the
Indenture Trustee. Forms of the Indenture and the Sale and Servicing Agreement
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part. In addition, a Series of Securities may include a Warranty
and Servicing Agreement between the Master Servicer and the Servicer (the
'Warranty and Servicing Agreement'). As used herein, 'Agreement' means, with
respect to a Series that only includes Certificates, the Pooling and Servicing
Agreement and, if applicable, the Warranty and Servicing Agreement, and with
respect to a Series that includes Notes, the Indenture, the Trust Agreement and
the Sale and Servicing Agreement and, if applicable, the Warranty and Servicing
Agreement, as the context requires.
The following summaries describe certain provisions common to each
Agreement. The summaries do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all of the provisions of the
Agreement for the applicable Series and the related Prospectus Supplement.
Wherever defined terms of the Agreement are referred to, such defined terms are
thereby incorporated herein by reference.
GENERAL
Unless otherwise specified in the Prospectus Supplement with respect to a
Series, each Security offered hereby and by means of the related Prospectus
Supplement will be issued in fully registered form. Securities will represent
the undivided interest or beneficial interest attributable to such Class or
Subclass in, and Notes will be secured by, the Trust Fund. The Trust Fund with
respect to a Series will consist of: (i) such Mortgage Loans, Contracts and
Mortgage Certificates and distributions thereon as from time to time are subject
to the applicable Agreement; (ii) such assets as from time to time are
identified as deposited in the Certificate Account referred to below; (iii)
property acquired by foreclosure of Mortgage Loans or deed in lieu of
foreclosure, or Manufactured Homes acquired by repossession; (iv) the Letter of
Credit, if any, with respect to such Series; (v) the Pool Insurance Policy, if
any, with respect to such Series (described below under 'Description of
Insurance'); (vi) the Special Hazard Insurance Policy, if any, with respect to
such Series (described below under 'Description of Insurance'); (vii) the
Mortgagor Bankruptcy Bond and proceeds thereof, if any, with respect to such
Series (as described below under 'Description of Insurance'); (viii) the
Performance Bond and proceeds thereof, if any, with respect to such Series; (ix)
the Primary Mortgage Insurance Policies, if any, with respect to such Series (as
described below under 'Description of Insurance'); (x) the Security Guarantee
Insurance, if any, with respect to such Series; (xi) the Depositor's rights
under the Servicing Agreement with respect to the Mortgage Loans or Contracts,
if any, with respect to such Series; and (xii) the GPM and Buy-Down Funds, if
any, with respect to such Series; or, in lieu of some or all of the foregoing,
such Alternative Credit Support as shall be described in the applicable
Prospectus Supplement. Upon the original issuance of a Series of Securities,
Certificates representing the minimum undivided interest or beneficial ownership
interest in the related Trust Fund or the minimum notional amount allocable to
each Class will evidence the undivided interest, beneficial ownership interest
or percentage ownership interest specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, one or more Servicers
or the Depositor may directly perform some or all of the duties of a Master
Servicer with respect to a Series.
If so specified in the Prospectus Supplement for a Series with respect to
which the Depositor has elected to treat the Trust Fund as a REMIC under the
Code, ownership of the Trust Fund for such Series may be evidenced by
Multi-Class Certificates and/or Notes and Residual Certificates. Distributions
of principal and interest with
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respect to Multi-Class Securities may be made on a sequential or concurrent
basis, as specified in the related Prospectus Supplement. If so specified in the
related Prospectus Supplement, one or more of such Classes or Subclasses may be
Compound Interest Securities.
The Residual Certificates, if any, included in a Series will be designated
by the Depositor as the 'residual interest' in the related REMIC for purposes of
Section 860G(a)(2) of the Code, and will represent the right to receive
distributions as specified in the Prospectus Supplement for such Series. All
other Classes of Securities of such Series will constitute 'regular interests'
in the related REMIC. If so specified in the related Prospectus Supplement, such
Residual Certificates may be offered hereby and by means of such Prospectus
Supplement. See 'Certain Federal Income Tax Consequences.'
If so specified in the Prospectus Supplement for a Series which includes
Multi-Class Securities, each Trust Asset in the related Trust Fund will be
assigned an initial 'Asset Value.' Unless otherwise specified in the related
Prospectus Supplement, the Asset Value of each Trust Asset in the related Trust
Fund will be the Stated Principal Balance of each Class or Classes of Securities
of such Series that, based upon certain assumptions, can be supported by
distributions on such Trust Assets allocable to such Class or Subclass, together
with reinvestment income thereon, to the extent specified in the related
Prospectus Supplement, and amounts available to be withdrawn from any Buy-Down,
GPM Fund or Reserve Fund for such Series. The method of determining the Asset
Value of the Trust Assets in the Trust Fund for such a Series that includes
Multi-Class Securities will be specified in the related Prospectus Supplement.
If so specified in the Prospectus Supplement with respect to a Series,
ownership of the Trust Fund for such Series may be evidenced by one or more
Classes or Subclasses of Certificates that are Senior Certificates and one or
more Classes or Subclasses of Certificates that are Subordinated Certificates,
each representing the undivided interests in the Trust Fund specified in such
Prospectus Supplement. If so specified in the related Prospectus Supplement, one
or more Classes or Subclasses or Subordinated Securities of a Series may be
subordinated to the right of the holders of Securities of one or more Classes or
Subclasses within such Series to receive distributions with respect to the
Mortgage Loans, Mortgage Certificates or Contracts in the related Trust Fund, in
the manner and to the extent specified in such Prospectus Supplement. If so
specified in the related Prospectus Supplement, the holders of each Subclass of
Senior Securities will be entitled to the Percentage Interests in the principal
and/or interest payments on the underlying Mortgage Loans or Contracts specified
in such Prospectus Supplement. If so specified in the related Prospectus
Supplement, the Subordinated Securities of a Series will evidence the right to
receive distributions with respect to a specific pool of Mortgage Loans,
Mortgage Certificates or Contracts, which right will be subordinated to the
right of the holders of the Senior Securities of such Series to receive
distributions with respect to such specific pool of Mortgage Loans, Mortgage
Certificates or Contracts, as more fully set forth in such Prospectus
Supplement. If so specified in the related Prospectus Supplement, the holders of
the Senior Securities may have the right to receive a greater than pro rata
percentage of Principal Prepayments in the manner and under the circumstances
described in the Prospectus Supplement. If so specified in the related
Prospectus Supplement, if a Series of Securities includes Notes, one more
Classes or Subclasses of Notes may be subordinated to another Class or
Subclasses of Notes in the manner and under the circumstances described in the
Prospectus Supplement.
If so specified in the related Prospectus Supplement, the Depositor may
sell certain Classes or Subclasses of the Securities of a Series, including one
or more Classes or Subclasses of Subordinated or Residual Certificates, in
privately negotiated transactions exempt from registration under the Securities
Act of 1933, as amended (the 'Securities Act'). Such Securities will be
transferable only pursuant to an effective registration statement or an
applicable exemption under the Securities Act and pursuant to any applicable
state law. Alternatively, if so specified in the related Prospectus Supplement,
the Depositor may offer one or more Classes or Subclasses of the Subordinated or
Residual Certificates of a Series by means of this Prospectus and such
Prospectus Supplement.
The Securities of a Series offered hereby and by means of the related
Prospectus Supplements will be transferable and exchangeable at the office or
agency maintained by the Trustee for such purpose set forth in the related
Prospectus Supplement, unless such Prospectus Supplement provides otherwise. No
service charge will be made for any transfer or exchange of Securities, but the
Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge in connection with such transfer or exchange.
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DISTRIBUTIONS OF PRINCIPAL AND INTEREST
Beginning on the date specified in the related Prospectus Supplement,
distributions of principal of and interest on the Securities of a Series will be
made by the Master Servicer or Trustee, if so specified in the Prospectus
Supplement, on each Distribution Date to persons in whose name the Securities
are registered at the close of business on the day specified in such Prospectus
Supplement (the 'Record Date'). Such distributions of interest will be made
periodically at the intervals, in the manner and at the per annum rate specified
in the related Prospectus Supplement, which rate may be fixed or variable.
Interest on the Securities will be calculated on the basis of a 360-day year
consisting of twelve 30-day months, unless otherwise specified in the related
Prospectus Supplement. Distributions of principal of the Securities will be made
in the priority and manner and in the amounts specified in the related
Prospectus Supplement.
If so specified in the Prospectus Supplement with respect to a Series of
Securities, distributions of interest and principal to a Certificateholder will
be equal to the product of the undivided interest evidenced by such Certificate
and the payments of principal and interest (adjusted as set forth in the
Prospectus Supplement) on or with respect to the Mortgage Loans or Contracts
(including any Advances thereof) or the Mortgage Certificates included in the
Trust Fund with respect to such Series.
If so specified in the related Prospectus Supplement, distributions on a
Class or Subclass of Securities of a Series may be based on the Percentage
Interest evidenced by a Security of such Class or Subclass in the distributions
(including any Advances thereof) of principal (the 'Principal Distribution') and
interest (adjusted as set forth in the Prospectus Supplement) (the 'Interest
Distribution') on or with respect to the Mortgage Loans, the Contracts or the
Mortgage Certificates in the related Trust Fund. Unless otherwise specified in
the related Prospectus Supplement, on each Distribution Date, the Trustee will
distribute to each holder of a Security of such Class or Subclass an amount
equal to the product of the Percentage Interest evidenced by such Security and
the interest of such Class or Subclass in the Principal Distribution and the
Interest Distribution. A Security of such a Class or Subclass may represent a
right to receive a percentage of both the Principal Distribution and the
Interest Distribution or a percentage of either the Principal Distribution or
the Interest Distribution, as specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, the holders of the
Senior Securities may have the right to receive a percentage of Principal
Prepayments that is greater than the percentage of regularly scheduled payments
of principal such holder is entitled to receive. Such percentages may vary from
time to time, subject to the terms and conditions specified in the Prospectus
Supplement.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Securities that includes Multi-Class Securities, distributions of
interest on each such Class or Subclass will be made on the Distribution Dates,
and at the Interest Rates, specified in such Prospectus Supplement. Unless
otherwise specified in the Prospectus Supplement relating to such a Series of
Securities, distributions of interest on each Class or Subclass of Compound
Interest Securities of such Series will be made on each Distribution Date after
the Stated Principal Balance of all Certificates and/or Notes of such Series
having a Final Scheduled Distribution Date prior to that of such Class or
Subclass of Compound Interest Securities has been reduced to zero. Prior to such
time, interest on such Class or Subclass of Compound Interest Securities will be
added to the Stated Principal Balance thereof on each Distribution Date for such
Series.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Securities that includes Multi-Class Securities, distributions in
reduction of the Stated Principal Balance of such Securities will be made as
described herein. Distributions in reduction of the Stated Principal Balance of
such Securities will be made on each Distribution Date for such Series to the
holders of the Securities of the Class or Subclass then entitled to receive such
distributions until the aggregate amount of such distributions have reduced the
Stated Principal Balance of such Securities to zero. Allocation of distributions
in reduction of Stated Principal Balance will be made to each Class or Subclass
of such Securities in the order specified in the related Prospectus Supplement,
which, if so specified in such Prospectus Supplement, may be concurrently.
Unless otherwise specified in the related Prospectus Supplement, distributions
in reduction of the Stated Principal Balance of each Security of a Class or
Subclass then entitled to receive such distributions will be made pro rata among
the Securities of such Class or Subclass.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Securities that includes Multi-Class Securities, the maximum amount
which will be distributed in reduction of Stated Principal Balance
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to holders of Securities of a Class or Subclass then entitled thereto on any
Distribution Date will equal, to the extent funds are available in the
Certificate Account, the sum of (i) the amount of the interest, if any, that has
accrued but is not yet payable on the Compound Interest Securities of such
Series since the prior Distribution Date (or since the date specified in the
related Prospectus Supplement in the case of the first Distribution Date) (the
'Accrual Distribution Amount'); (ii) the Stated Principal Distribution Amount;
and (iii) to the extent specified in the related Prospectus Supplement, the
applicable percentage of the Excess Cash Flow specified in such Prospectus
Supplement.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Securities that includes Multi-Class Securities, the 'Stated Principal
Distribution Amount' with respect to a Distribution Date will equal the sum of
the Accrual Distribution Amount, if any, and the amount, if any, by which the
then outstanding Stated Principal Balance of the Multi-Class Securities of such
Series (before taking into account the amount of interest accrued on any Class
of Compound Interest Securities of such Series to be added to the Stated
Principal Balance thereof on such Distribution Date) exceeds the Asset Value of
the Trust Assets in the Trust Fund underlying such Series as of the end of a
period (a 'Due Period') specified in the related Prospectus Supplement. For
purposes of determining the Stated Principal Distribution Amount with respect to
a Distribution Date, the Asset Value of the Trust Assets will be reduced to take
into account the interest evidenced by such Classes or Subclasses of Securities
in the principal distributions on or with respect of such Trust Assets received
by the Trustee during the preceding Due Period.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Securities that includes Multi-Class Securities, Excess Cash Flow
represents the excess of (i) the interest evidenced by such Multi-Class
Securities in the distributions received on the Mortgage Loans or Contracts
underlying such Series in the Due Period preceding a Distribution Date for such
Series (and, in the case of the first Due Period, the amount deposited in the
Certificate Account on the closing day for the sale of such Securities),
together with income from the reinvestment thereof, and, to the extent specified
in such Prospectus Supplement, the amount of cash withdrawn from any Reserve,
GPM or Buy-Down Fund for such Series in the Due Period preceding such
Distribution Date, over (ii) the sum of all interest accrued, whether or not
then distributable, on the Multi-Class Securities since the preceding
Distribution Date (or since the date specified in the related Prospectus
Supplement in the case of the first Distribution Date), the Stated Principal
Distribution Amount for the then current Distribution Date and, if applicable,
any payments made on any Securities of such Class or Subclass pursuant to any
special distributions in reduction of Stated Principal Balance during such Due
Period.
The Stated Principal Balance of a Multi-Class Certificate of a Series at
any time represents the maximum specified dollar amount (exclusive of interest
at the related Interest Rate) to which the holder thereof is entitled from the
cash flow on the Trust Assets in the Trust Fund for such Series, and will
decline to the extent distributions in reduction of Stated Principal Balance are
received by such holder. The Initial Stated Principal Balance of each Class or
Subclass within a Series that has been assigned a Stated Principal Balance will
be specified in the related Prospectus Supplement.
Distributions (other than the final distribution in retirement of the
Securities) will be made by check mailed to the address of the person entitled
thereto as it appears on the registers maintained for holders of Notes (the
'Note Register') or holders of Certificates (the 'Certificate Register'), as
applicable, except that, with respect to any holder of a Security meeting the
requirements specified in the applicable Prospectus Supplement, except as
otherwise provided in the related Prospectus Supplement, distributions shall be
made by wire transfer in immediately available funds, provided that the Trustee
shall have been furnished with appropriate wiring instructions not less than two
Business Days prior to the related Distribution Date. The final distribution in
retirement of Securities will be made only upon presentation and surrender of
the Securities at the office or agency designated by the Master Servicer for
such purpose, as specified in the final distribution notice to Securityholders.
ASSIGNMENT OF MORTGAGE CERTIFICATES
Pursuant to the applicable Agreement for a Series of Securities that
includes Mortgage Certificates in the related Trust Fund, the Depositor will
cause such Mortgage Certificates to be transferred to the Trustee together with
all principal and interest distributed on such Mortgage Certificates after the
Cut-off Date. Each Mortgage Certificate included in a Trust Fund will be
identified in a schedule appearing as an exhibit to the applicable Agreement.
Such schedule will include information as to the principal balance of each
Mortgage Certificate as
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of the date of issuance of the Securities and its coupon rate, maturity and
original principal balance. In addition, such steps will be taken by the
Depositor as are necessary to cause the Trustee to become the registered owner
of each Mortgage Certificate which is included in a Trust Fund and to provide
for all distributions on each such Mortgage Certificate to be made directly to
the Trustee.
In connection with such assignment, the Depositor will make certain
representations and warranties in the Agreement as to, among other things, its
ownership of the Mortgage Certificates. In the event that these representations
and warranties are breached, and such breach or breaches adversely affect the
interests of the Securityholders in the Mortgage Certificates, the Depositor
will be required to repurchase the affected Mortgage Certificates at a price
equal to the principal balance thereof as of the date of purchase together with
accrued and unpaid interest thereon at the related pass-through rate to the
distribution date for such Mortgage Certificates or, in the case of a Series in
which an election has been made to treat the related Trust Fund as a REMIC, at
the lesser of the price set forth above, or the adjusted tax basis, as defined
in the Code, of such Mortgage Certificates. The Mortgage Certificates with
respect to a Series may also be subject to repurchase, in whole but not in part,
under the circumstances and in the manner described in the related Prospectus
Supplement. Any amounts received in respect of such repurchases will be
distributed to Securityholders on the immediately succeeding Distribution Date.
If so specified in the related Prospectus Supplement, within the specified
period following the date of issuance of a Series of Securities, the Depositor
may, in lieu of the repurchase obligation set forth above, and in certain other
circumstances, deliver to the Trustee Mortgage Certificates ('Substitute
Mortgage Certificates') in substitution for any one or more of the Mortgage
Certificates ('Deleted Mortgage Certificates') initially included in the Trust
Fund. The required characteristics or any such Substitute Mortgage Certificates
and any additional restrictions relating to the substitution of Mortgage
Certificates will be set forth in the related Prospectus Supplement.
ASSIGNMENT OF MORTGAGE LOANS
The Depositor will cause the Mortgage Loans constituting a Mortgage Pool to
be assigned to the Trustee, together with all principal and interest received on
or with respect to such Mortgage Loans after the Cut-off Date, but not including
principal and interest due on or before the Cut-off Date. The Trustee will,
concurrently with such assignment, either deliver the Securities to the
Depositor in exchange for the Mortgage Loans or apply the proceeds from the sale
of such Securities to the purchase price for the Mortgage Loans. If a Series of
Securities includes Notes, the Trust Fund will be pledged by the Issuer to the
Indenture Trustee as security for the Notes. Each Mortgage Loan will be
identified in a schedule appearing as an exhibit to the related Agreement. Such
schedule will include information as to the adjusted principal balance of each
Mortgage Loan as of the Cut-off Date, as well as information respecting the
Mortgage Rate, the currently scheduled monthly payment of principal and
interest, the maturity of the Mortgage Note and the Loan-to-Value Ratio at
origination.
In addition, the Depositor will, as to each Mortgage Loan that is not a
Cooperative Loan, deliver or cause to be delivered to the Trustee (or to the
custodian hereinafter referred to) the Mortgage Note endorsed to the order of
the Trustee, the Mortgage with evidence of recording indicated thereon (except
for any Mortgage not returned from the public recording office, in which case
the Depositor will deliver a copy of such Mortgage together with its certificate
that the original of such Mortgage was delivered to such recording office) and,
unless otherwise specified in the related Prospectus Supplement, an assignment
of the Mortgage in recordable form. Assignments of the Mortgage Loans to the
Trustee will be recorded in the appropriate public office for real property
records, except in states where, in the opinion of counsel acceptable to the
Trustee, such recording is not required to protect the Trustee's interest in the
Mortgage Loan against the claim of any subsequent transferee or any successor to
or creditor of the Depositor or the Originator of such Mortgage Loan.
The Depositor will cause to be delivered to the Trustee, its agent, or a
custodian, with respect to any Cooperative Loan, the related original security
agreement, the proprietary lease or occupancy agreement, the recognition
agreement, an executed financing statement and the relevant stock certificate
and related blank stock powers. The Master Servicer will file in the appropriate
office a financing statement evidencing the Trustee's security interest in each
Cooperative Loan.
The Trustee (or the custodian hereinafter referred to) will, generally
within 60 days after receipt thereof, review and hold such documents in trust
for the benefit of the Securityholders. Unless otherwise specified in the
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applicable Prospectus Supplement, if any such document is found to be defective
in any material respect, the Trustee will promptly notify the Master Servicer
and the Depositor, and the Master Servicer will notify the related Servicer. If
the Servicer cannot cure the defect within 60 days after notice is given to the
Master Servicer, the Servicer will be obligated either to substitute for the
related Mortgage Loan a Replacement Mortgage Loan or Loans, or to purchase
within 90 days of such notice the related Mortgage Loan from the Trustee at a
price equal to the principal balance thereof as of the date of purchase or, in
the case of a Series as to which an election has been made to treat the related
Trust Fund as a REMIC, at such other price as may be necessary to avoid a tax on
a prohibited transaction, as described in Section 860F(a) of the Code, in each
case together with accrued interest at the applicable Mortgage Rate to the first
day of the month following such repurchase, plus the amount of any unreimbursed
Advances made by the Master Servicer or the Servicer, as applicable, in respect
of such Mortgage Loan. The Master Servicer is obligated to enforce the
repurchase obligation of the Servicer, to the extent described above under 'The
Trust Fund -- Mortgage Loan Program' and ' -- Representations by Unaffiliated
Sellers; Repurchases.' Unless otherwise specified in the applicable Prospectus
Supplement, this purchase obligation constitutes the sole remedy available to
the Securityholders or the Trustee for a material defect in a constituent
document.
Unless otherwise specified in the applicable Prospectus Supplement, with
respect to the Mortgage Loans in a Mortgage Pool, the Depositor will make
representations and warranties as to the types and geographical distribution of
such Mortgage Loans and as to the accuracy in all material respects of certain
information furnished to the Trustee in respect of each such Mortgage Loan. In
addition, unless otherwise specified in the related Prospectus Supplement, the
Depositor will represent and warrant that, as of the Cut-off Date for the
related Series of Securities, no Mortgage Loan is more than 30 days delinquent
as to payment of principal and interest. Upon a breach of any representation or
warranty by the Depositor that materially and adversely affects the interest of
the Securityholders, the Depositor will be obligated either to cure the breach
in all material respects or to purchase the Mortgage Loan at the purchase price
set forth above. Unless otherwise specified in the applicable Prospectus
Supplement and subject to the ability of the Depositor, if so specified in the
applicable Prospectus Supplement, to substitute for certain Mortgage Loans as
described below, this repurchase obligation constitutes the sole remedy
available to the Securityholders or the Trustee for a breach of a representation
or warranty by the Depositor.
Within the period specified in the related Prospectus Supplement, following
the date of issuance of a Series of Securities, the Depositor, the Master
Servicer or the related Servicer, as the case may be, may deliver to the Trustee
Mortgage Loans ('Substitute Mortgage Loans') in substitution for any one or more
of the Mortgage Loans ('Deleted Mortgage Loans') initially included in the Trust
Fund but which do not conform in one or more respects to the description thereof
contained in the related Prospectus Supplement, or as to which a breach of a
representation or warranty is discovered, which breach materially and adversely
affects the interests of the Securityholders. The required characteristics of
any such Substitute Mortgage Loan and any additional restrictions relating to
the substitution of Mortgage Loans will generally be as described under 'The
Trust Fund -- The Contract Pools' with respect to the substitution of Contracts.
In addition to making certain representations and warranties regarding its
authority to enter into, and its ability to perform its obligations under the
Agreement relating to a Series of Securities, the Master Servicer may make
certain representations and warranties to the Trustee in such Agreement with
respect to the enforceability of coverage under any applicable Primary Insurance
Policy, Pool Insurance Policy, Special Hazard Insurance Policy or Mortgagor
Bankruptcy Bond. See 'Description of Insurance' for information regarding the
extent of coverage under certain of the aforementioned insurance policies.
Unless otherwise specified in the applicable Prospectus Supplement, upon a
breach of any such representation or warranty that materially and adversely
affects the interests of the Securityholders of such Series in a Mortgage Loan,
the Master Servicer will be obligated either to cure the breach in all material
respects or to purchase such Mortgage Loan at the price calculated as set forth
above.
To the extent described in the related Prospectus Supplement, the Master
Servicer will procure a surety bond, corporate guaranty or another similar form
of insurance coverage acceptable to the Rating Agency rating the related Series
of Securities to support, among other things, this purchase obligation. Unless
otherwise stated in the applicable Prospectus Supplement, the aforementioned
purchase obligation constitutes the sole remedy available to the Securityholders
or the Trustee for a breach of the Master Servicer's insurability
representation. The Master Servicer's obligation to purchase Mortgage Loans upon
such a breach is subject to limitations.
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The Trustee will be authorized, with the consent of the Depositor and the
Master Servicer, to appoint a custodian pursuant to a custodial agreement to
maintain possession of documents relating to the Mortgage Loans as the agent of
the Trustee.
Pursuant to each Agreement, the Master Servicer, either directly or through
Servicers, will service and administer the Mortgage Loans assigned to the
Trustee as more fully set forth below.
ASSIGNMENT OF CONTRACTS
The Depositor will cause the Contracts constituting the Contract Pool to be
assigned to the Trustee, together with principal and interest due on or with
respect to the Contracts after the Cut-off Date, but not including principal and
interest due on or before the Cut-off Date. If the Depositor is unable to obtain
a perfected security interest in a Contract prior to transfer and assignment to
the Trustee, the Unaffiliated Seller will be obligated to repurchase such
Contract. The Trustee, concurrently with such assignment, will authenticate and
deliver the Securities. If a Series of Securities includes Notes, the Trust fund
will be pledged by the Issuer to the Indenture Trustee as security for the
Notes. Each Contract will be identified in a schedule appearing as an exhibit to
the Agreement (the 'Contract Schedule'). The Contract Schedule will specify,
with respect to each Contract, among other things: the original principal amount
and the adjusted principal balance as of the close of business on the Cut-off
Date, the APR, the current scheduled monthly level payment of principal and
interest and the maturity of the Contract.
In addition, the Depositor, as to each Contract, will deliver or cause to
be delivered to the Trustee, or, as specified in the related Prospectus
Supplement, the Custodian, the original Contract and copies of documents and
instruments related to each Contract and the security interest in the
Manufactured Home securing each Contract. In order to give notice of the right,
title and interest of the Certificateholders to the Contracts, the Depositor
will cause a UCC-1 financing statement to be executed by the Depositor
identifying the Trustee as the secured party and identifying all Contracts as
collateral. Unless otherwise specified in the related Prospectus Supplement, the
Contracts will not be stamped or otherwise marked to reflect their assignment
from the Depositor to the Trust Fund. Therefore, if a subsequent purchaser were
able to take physical possession of the Contracts without notice of such
assignment, the interest of the Certificateholders in the Contracts could be
defeated. See 'Certain Legal Aspects of Mortgage Loans and Contracts -- The
Contracts.'
The Trustee (or the Custodian) will review and hold such documents in trust
for the benefit of the Securityholders. Unless otherwise provided in the related
Prospectus Supplement, if any such document is found to be defective in any
material respect, the Unaffiliated Seller must cure such defect within 60 days,
or within such other period specified in the related Prospectus Supplement, the
Unaffiliated Seller, not later than 90 days or within such other period
specified in the related Prospectus Supplement, after the Trustee's notice to
the Unaffiliated Seller of the defect. If the defect is not cured, the
Unaffiliated Seller will repurchase the related Contract or any property
acquired in respect thereof from the Trustee at a price equal to the remaining
unpaid principal balance of such Contract (or, in the case of a repossessed
Manufactured Home, the unpaid principal balance of such Contract immediately
prior to the repossession) or, in the case of a Series as to which an election
has been made to treat the related Trust Fund as a REMIC, at such other price as
may be necessary to avoid a tax on a prohibited transaction, as described in
Section 860F(a) of the Code, in each case together with accrued but unpaid
interest to the first day of the month following repurchase at the related APR,
plus any unreimbursed Advances respecting such Contract. Unless otherwise
specified in the related Prospectus Supplement, the repurchase obligation will
constitute the sole remedy available to the Securityholders or the Trustee for a
material defect in a Contract document.
Unless otherwise specified in the related Prospectus Supplement, each
Unaffiliated Seller of Contracts will have represented, among other things, that
(i) immediately prior to the transfer and assignment of the Contracts, the
Unaffiliated Seller had good title to, and was the sole owner of each Contract
and there had been no other sale or assignment thereof, (ii) as of the date of
such transfer, the Contracts are subject to no offsets, defenses or
counterclaims, (iii) each Contract at the time it was made complied in all
material respects with applicable state and federal laws, including usury, equal
credit opportunity and disclosure laws, (iv) as of the date of such transfer,
each Contract is a valid first lien on the related Manufactured Home and such
Manufactured Home is free of material damage and is in good repair, (v) as of
the date of such transfer, no Contract is more than 30 days delinquent in
payment and there are no delinquent tax or assessment liens against the related
Manufactured Home and (vi) with respect to each Contract, the Manufactured Home
securing the Contract is
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covered by a Standard Hazard Insurance Policy in the amount required in the
Agreement and that all premiums now due on such insurance have been paid in
full.
All of the representations and warranties of an Unaffiliated Seller in
respect of a Contract will have been made as of the date on which such
Unaffiliated Seller sold the Contract to the Depositor or its affiliate; the
date such representations and warranties were made may be a date prior to the
date of initial issuance of the related series of Securities. A substantial
period of time may have elapsed between the date as of which the representations
and warranties were made and the date of initial issuance of the related Series
of Securities. Since the representations and warranties referred to in the
preceding paragraph are the only representations and warranties that will be
made by an Unaffiliated Seller, the Unaffiliated Seller's repurchase obligation
described below will not arise if, during the period commencing on the date of
sale of a Contract by the Unaffiliated Seller to the Depositor or its affiliate,
the relevant event occurs that would have given rise to such an obligation had
the event occurred prior to sale of the affected Contract. Nothing, however, has
come to the Depositor's attention that would cause it to believe that the
representations and warranties referred to in the preceding paragraph will not
be accurate and complete in all material respects in respect of Contracts as of
the date of initial issuance of the related Series of Securities.
The only representations and warranties to be made for the benefit of
Securityholders in respect of any Contract relating to the period commencing on
the date of sale of such Contract to the Depositor or its affiliate will be
certain limited representations of the Depositor and of the Master Servicer
described above under 'The Trust Fund -- The Contract Pools.'
If an Unaffiliated Seller cannot cure a breach of any representation or
warranty made by it in respect of a Contract that materially and adversely
affects the interest of the Securityholders in such Contract within 90 days (or
such other period specified in the related Prospectus Supplement) after notice
from the Master Servicer, such Unaffiliated Seller will be obligated to
repurchase such Contract at a price equal to, unless otherwise specified in the
related Prospectus Supplement, the principal balance thereof as of the date of
the repurchase or, in the case of a Series as to which an election has been made
to treat the related Trust Fund as a REMIC, at such other price as may be
necessary to avoid a tax on a prohibited transaction, as described in Section
860F(a) of the Code, in each case together with accrued and unpaid interest to
the first day of the month following repurchase at the related APR, plus the
amount of any unreimbursed Advances in respect of such Contract (the 'Purchase
Price'). The Master Servicer will be required under the applicable Agreement to
enforce this obligation for the benefit of the Trustee and the Securityholders,
following the practices it would employ in its good faith business judgment were
it the owner of such Contract. Except as otherwise set forth in the related
Prospectus Supplement, this repurchase obligation will constitute the sole
remedy available to Securityholders or the Trustee for a breach of
representation by an Unaffiliated Seller.
Neither the Depositor nor the Master Servicer will be obligated to purchase
a Contract if an Unaffiliated Seller defaults on its obligation to do so, and no
assurance can be given that sellers will carry out their respective repurchase
obligations with respect to Contracts. However, to the extent that a breach of
the representations and warranties of an Unaffiliated Seller may also constitute
a breach of a representation made by the Depositor or the Master Servicer, the
Depositor or the Master Servicer may have a purchase obligation as described
above under 'The Trust Fund -- The Contract Pools.'
PRE-FUNDING
If so specified in the related Prospectus Supplement, a portion of the
issuance proceeds of the Securities of a particular Series (such amount, the
'Pre-Funded Amount') will be deposited in an account (the 'Pre-Funding Account')
to be established with the Trustee, which will be used to acquire additional
Mortgage Loans, Contracts or Mortgage Certificates from time to time during the
time period specified in the related Prospectus Supplement (the 'Pre-Funding
Period'). Prior to the investment of the Pre-Funded Amount in additional
Mortgage Loans, Contracts or Mortgage Certificates, such Pre-Funded Amount may
be invested in one or more Eligible Investments. Except as otherwise provided in
the applicable Agreement, an 'Eligible Investment' will be any of the following,
in each case as determined at the time of the investment or contractual
commitment to invest therein (to the extent such investments would not require
registration of the Trust Fund as an investment company pursuant to the
Investment Company Act of 1940): (a) negotiable instruments or securities
represented by instruments in bearer or registered or book-entry form which
evidence: (i) obligations which have the benefit of the full faith and credit of
the United States of America, including depository receipts issued by a bank as
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custodian with respect to any such instrument or security held by the custodian
for the benefit of the holder of such depository receipt, (ii) demand deposits
or time deposits in, or bankers' acceptances issued by, any depositary
institution or trust company incorporated under the laws of the United States of
America or any state thereof and subject to supervision and examination by
Federal or state banking or depositary institution authorities; provided that at
the time of the Trustee's investment or contractual commitment to invest
therein, the certificates of deposit or short-term deposits (if any) or
long-term unsecured debt obligations (other than such obligations the rating of
which is based on collateral or on the credit of a Person other than such
institution or trust company) of such depositary institution or trust company
has a credit rating in the highest rating category from the Rating Agency rating
the Securities, (iii) certificates of deposit having a rating in the highest
rating category from the Rating Agency, or (iv) investments in money market
funds which are (or which are composed of instruments or other investments which
are) rated in the highest category from the Rating Agency; (b) demand deposits
in the name of the Trustee in any depositary institution or trust company
referred to in clause (a)(ii) above; (c) commercial paper (having original or
remaining maturities of no more than 270 days) having a credit rating in the
highest rating category from the Rating Agency; (d) Eurodollar time deposits
that are obligations of institutions the time deposits of which carry a credit
rating in the highest rating category from the Rating Agency; (e) repurchase
agreements involving any Eligible Investment described in any of clauses (a)(i),
(a)(iii) or (d) above, so long as the other party to the repurchase agreement
has its long-term unsecured debt obligations rated in the highest rating
category from the Rating Agency; and (f) any other investment with respect to
which the Rating Agency indicates will not result in the reduction or withdrawal
of its then existing rating of the Securities. Except as otherwise provided in
the applicable Agreement, any Eligible Investment must mature no later than the
Business Day prior to the next Distribution Date.
During any Pre-Funding Period, the Depositor will be obligated (subject
only to the availability thereof) to transfer to the related Trust Fund
additional Mortgage Loans, Contracts and/or Mortgage Certificates from time to
time during such Pre-Funding Period. Such additional Mortgage Loans or Contracts
will be required to satisfy certain eligibility criteria more fully set forth in
the related Prospectus Supplement which eligibility criteria will be consistent
with the eligibility criteria of the Mortgage Loans or Contracts included in the
Trust Fund as of the Closing Date subject to such exceptions as are expressly
stated in such Prospectus Supplement.
Although the specific parameters of the Pre-Funding Account with respect to
any issuance of Securities will be specified in the related Prospectus
Supplement, it is anticipated that: (a) the Pre-Funding Period will not exceed
120 days from the related Closing Date, (b) that the additional loans to be
acquired during the Pre-Funding Period will be subject to the same
representations and warranties as the Mortgage Loans, Contracts and/or Mortgage
Certificates included in the related Trust Fund on the Closing Date (although
additional criteria may also be required to be satisfied, as described in the
related Prospectus Supplement) and (c) that the Pre-Funded Amount will not
exceed 25% of the principal amount of Securities issued pursuant to a particular
offering.
SERVICING BY UNAFFILIATED SELLERS
Each Unaffiliated Seller of a Mortgage Loan or a Contract may have the
option to act as the Servicer (or Master Servicer) for such Mortgage Loan or
Contract pursuant to a Servicing Agreement. A representative form of Servicing
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The following description does not purport to be
complete and is qualified in its entirety by reference to the form of Servicing
Agreement and by the discretion of the Master Servicer or Depositor to modify
the Servicing Agreement and to enter into different Servicing Agreements. The
Agreement provides that, if for any reason the Master Servicer for such Series
of Securities is no longer the Master Servicer of the related Mortgage Loans or
Contracts, the Trustee or any successor master servicer must recognize the
Servicer's rights and obligations under such Servicing Agreement.
A Servicer may delegate its servicing obligations to third-party servicers,
but continue to act as Servicer under the related Servicing Agreement. The
Servicer will be required to perform the customary functions of a servicer,
including collection of payments from Mortgagors and Obligors and remittance of
such collections to the Master Servicer, maintenance of primary mortgage, hazard
insurance, FHA insurance and VA guarantees and filing and settlement of claims
thereunder, subject in certain cases to (a) the right of the Master Servicer to
approve in advance any such settlement; (b) maintenance of escrow accounts of
Mortgagors and Obligors for payment of taxes, insurance and other items required
to be paid by the Mortgagor pursuant to the terms of the
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related Mortgage Loan or the Obligor pursuant to the related Contract; (c)
processing of assumptions or substitutions; (d) attempting to cure
delinquencies; (e) supervising foreclosures or repossessions; (f) inspection and
management of Mortgaged Properties, Cooperative Dwellings or Manufactured Homes
under certain circumstances; and (g) maintaining accounting records relating to
the Mortgage Loans and Contracts. Except as otherwise provided in the related
Prospectus Supplement, the Servicer will also be obligated to make Advances in
respect of delinquent installments of principal and interest on Mortgage Loans
and Contracts (as described more fully below under ' -- Payments on Mortgage
Loans' and ' -- Payments on Contracts'), and in respect of certain taxes and
insurance premiums not paid on a timely basis by Mortgagors and Obligors.
As compensation for its servicing duties, a Servicer will be entitled to
amounts from payments with respect to the Mortgage Loans and Contracts serviced
by it. The Servicer will also be entitled to collect and retain, as part of its
servicing compensation, certain fees and late charges provided in the Mortgage
Notes or related instruments. The Servicer will be reimbursed by the Master
Servicer for certain expenditures that it makes, generally to the same extent
that the Master Servicer would be reimbursed under the applicable Agreement.
Each Servicer will be required to agree to indemnify the Master Servicer
for any liability or obligation sustained by the Master Servicer in connection
with any act or failure to act by the Servicer in its servicing capacity.
Each Servicer will be required to service each Mortgage Loan or Contract
pursuant to the terms of the Servicing Agreement for the entire term of such
Mortgage Loan or Contract, unless the Servicing Agreement is earlier terminated
by the Master Servicer or unless servicing is released to the Master Servicer.
Unless otherwise set forth in the Prospectus Supplement, the Master Servicer may
terminate a Servicing Agreement upon 30 days' written notice to the Servicer,
without cause, upon payment of an amount equal to the fair market value of the
right to service the Mortgage Loans or Contracts serviced by any such Servicer
under such Servicing Agreement, or if such fair market value cannot be
determined, a specified percentage of the aggregate outstanding principal
balance of all such Mortgage Loans or Contracts, or immediately upon the giving
of notice upon certain stated events, including the violation of such Servicing
Agreement by the Servicer.
The Master Servicer may agree with a Servicer to amend a Servicing
Agreement. The Master Servicer may also, at any time and from time to time,
release servicing to third-party servicers, but continue to act as Master
Servicer under the related Agreement. Upon termination of a Servicing Agreement,
the Master Servicer or Trustee may act as servicer of the related Mortgage Loans
or Contracts or the Master Servicer may enter into one or more new Servicing
Agreements. If the Master Servicer acts as servicer, it will not assume
liability for the representations and warranties of the Servicer that it
replaces. If the Master Servicer enters into a new Servicing Agreement, each new
Servicer must be an Unaffiliated Seller or meet the standards for becoming an
Unaffiliated Seller or have such servicing experience that is otherwise
satisfactory to the Master Servicer. The Master Servicer will make reasonable
efforts to have the new Servicer assume liability for the representations and
warranties of the terminated Servicer, but no assurance can be given that such
an assumption will occur. In the event of such an assumption, the Master
Servicer may, in the exercise of its business judgment, release the terminated
Servicer from liability in respect of such representations and warranties. Any
amendments to a Servicing Agreement or new Servicing Agreements may contain
provisions different from those described above that are in effect in the
original Servicing Agreements. However, the related Agreement will provide that
any such amendment or new agreement may not be inconsistent with or violate such
Agreement.
PAYMENTS ON MORTGAGE LOANS
The Master Servicer will, unless otherwise specified in the Prospectus
Supplement with respect to a Series of Securities, establish and maintain a
separate account or accounts in the name of the applicable Trustee (the
'Certificate Account'), which must be maintained with a depository institution
and in a manner acceptable to the Rating Agency rating the Securities of a
Series. If a Series of Securities includes Notes, the Master Servicer may
establish and maintain a separate account or accounts in the name of the
applicable Trustee (the 'Collection Account') into which amounts received in
respect of the Trust Assets are required to be deposited and a separate account
or accounts in the name of the applicable Trustee from which distributions in
respect of the Notes (the 'Note Distribution Account') and/or the Certificates
(the 'Certificate Distribution Account') may be made. The Collection Account,
Note Distribution Account and Certificate Distribution Account must be
established with a depositary institution and in a manner acceptable to the
Rating Agencies rating the Securities
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of such Series. For ease of reference, references in this Prospectus to the
Certificate Account shall be deemed to refer to the Collection Account, Note
Distribution Account and Certificate Distribution Account, as applicable.
If so specified in the applicable Prospectus Supplement, the Master
Servicer, in lieu of establishing a Certificate Account, may establish a
separate account or accounts in the name of the Trustee (the 'Custodial
Account') meeting the requirements set forth herein for the Certificate Account.
In such a case, amounts in such Custodial Account, after making the required
deposits and withdrawals specified below, shall be remitted to the Certificate
Account maintained by the Trustee for distribution to Securityholders in the
manner set forth herein and in such Prospectus Supplement.
In those cases where a Servicer is servicing a Mortgage Loan pursuant to a
Servicing Agreement, the Servicer will establish and maintain an account (the
'Servicing Account') that will comply with either the standards set forth above
or, subject to the conditions set forth in the Servicing Agreement, be
maintained with a depository, meeting the requirements of the Rating Agency
rating the Securities of the related Series, and that is otherwise acceptable to
the Master Servicer. Unless otherwise specified in the related Prospectus
Supplement, the Servicer will be required to deposit into the Servicing Account
on a daily basis all amounts enumerated in the following paragraph in respect of
the Mortgage Loans received by the Servicer, less its servicing compensation. On
the date specified in the Servicing Agreement, the Servicer shall remit to the
Master Servicer all funds held in the Servicing Account with respect to each
Mortgage Loan. Except as otherwise provided in the related Prospectus
Supplement, the Servicer will also be required to advance any monthly
installment of principal and interest that was not timely received, less its
servicing fee, provided that, unless otherwise specified in the related
Prospectus Supplement, such requirement shall only apply to the extent such
Servicer determines in good faith any such advance will be recoverable out of
Insurance Proceeds, proceeds of the liquidation of the related Mortgage Loans or
otherwise.
The Certificate Account may be maintained with a depository institution
that is an affiliate of the Master Servicer. Unless otherwise specified in the
related Prospectus Supplement, the Master Servicer will deposit in the
Certificate Account for each Series of Securities on a daily basis the following
payments and collections received or made by it subsequent to the Cut-off Date
(other than payments due on or before the Cut-off Date) in the manner set forth
in the related Prospectus Supplement:
(i) all payments on account of principal, including principal
prepayments, of the Mortgage Loans, net of any portion of such payments
that represent unreimbursed or unrecoverable Advances made by the related
Servicer;
(ii) all payments on account of interest on the Mortgage Loans, net of
any portion thereof retained by the Servicer, if any, as its servicing fee;
(iii) all proceeds of (A) any Special Hazard Insurance Policy, Primary
Mortgage Insurance Policy, FHA Insurance, VA Guarantee, Mortgagor
Bankruptcy Bond or Pool Insurance Policy with respect to such Series of
Securities and any title, hazard or other insurance policy covering any of
the Mortgage Loans included in the related Mortgage Pool (to the extent
such proceeds are not applied to the restoration of the related property or
released to the Mortgagor in accordance with customary servicing
procedures) (collectively, 'Insurance Proceeds') or any Alternative Credit
Support established in lieu of any such insurance and described in the
applicable Prospectus Supplement; and (B) all other cash amounts received
and retained in connection with the liquidation of defaulted Mortgage
Loans, by foreclosure or otherwise, other than Insurance Proceeds, payments
under the Letter of Credit or proceeds of any Alternative Credit Support,
if any, with respect to such Series ('Liquidation Proceeds'), net of
expenses of liquidation, unpaid servicing compensation with respect to such
Mortgage Loans and unreimbursed or unrecoverable Advances made by the
Servicers of the related Mortgage Loans;
(iv) all payments under the Letter of Credit, if any, with respect to
such Series;
(v) all amounts required to be deposited therein from the Reserve
Fund, if any, for such Series;
(vi) any Advances made by a Servicer or the Master Servicer (as
described herein under ' -- Advances');
(vii) any Buy-Down Funds (and, if applicable, investment earnings
thereon) required to be deposited in the Certificate Account, as described
below; and
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(viii) all proceeds of any Mortgage Loan repurchased by the Master
Servicer, the Depositor, any Servicer or any Unaffiliated Seller (as
described under 'The Trust Fund -- Mortgage Loan Program,'
' -- Representations by Unaffiliated Sellers; Repurchases' or
' -- Assignment of Mortgage Loans' above) or repurchased by the Depositor
(as described under ' -- Termination' below).
With respect to each Buy-Down Loan, if so specified in the related
Prospectus Supplement, the Master Servicer or the related Servicer will deposit
the Buy-Down Funds with respect thereto in a custodial account complying with
the requirements set forth above for the Certificate Account, which, unless
otherwise specified in the related Prospectus Supplement, may be an
interest-bearing account. The amount of such required deposits, together with
investment earnings thereon at the rate specified in the applicable Prospectus
Supplement, will provide sufficient funds to support the full monthly payments
due on such Buy-Down Loan on a level debt service basis. Neither the Master
Servicer nor the Depositor will be obligated to add to the Buy-Down Fund should
investment earnings prove insufficient to maintain the scheduled level of
payments on the Buy-Down Loans. To the extent that any such insufficiency is not
recoverable from the Mortgagor under the terms of the related Mortgage Note,
distributions to Securityholders will be affected. With respect to each Buy-Down
Loan, the Master Servicer will withdraw from the Buy-Down Fund and deposit in
the Certificate Account on or before each Distribution Date the amount, if any,
for each Buy-Down Loan that, when added to the amount due on that date from the
Mortgagor on such Buy-Down Loan, equals the full monthly payment that would be
due on the Buy-Down Loan if it were not subject to the buy-down plan.
If the Mortgagor on a Buy-Down Loan prepays such loan in its entirety, or
defaults on such loan and the Mortgaged Property is sold in liquidation thereof,
during the period when the Mortgagor is not obligated, on account of the
buy-down plan, to pay the full monthly payment otherwise due on such loan, the
related Servicer will withdraw from the Buy-Down Fund and deposit in the
Certificate Account the amounts remaining in the Buy-Down Fund with respect to
such Buy-Down Loan. In the event of a default with respect to which a claim,
including accrued interest supplemented by amounts in the Buy-Down Fund with
respect to the related Buy-Down Loan, has been made, the Master Servicer or the
related Servicer will pay an amount equal to the remaining amounts in the
Buy-Down Fund with respect to the related Buy-Down Loan, to the extent the claim
includes accrued interest supplemented by amounts in the Buy-Down Fund, to the
related Pool Insurer or the insurer under the related Primary Insurance Policy
(the 'Primary Insurer') if the Mortgaged Property is transferred to the Pool
Insurer or the Primary Insurer, as the case may be, which pays 100% of the
related claim (including accrued interest and expenses) in respect of such
default, to the L/C Bank in consideration of such payment under the related
Letter of Credit, or to the guarantor or other person which pays the same
pursuant to Alternative Credit Support described in the applicable Prospectus
Supplement. In the case of any such prepaid or defaulted Buy-Down Loan the
amounts in the Buy-Down Fund in respect of which were supplemented by investment
earnings, the Master Servicer will withdraw from the Buy-Down Fund and remit to
the Depositor or the Mortgagor, depending on the terms of the related buy-down
plan, any investment earnings remaining in the related Buy-Down Fund.
If so specified in the Prospectus Supplement with respect to a Series, in
lieu of, or in addition to the foregoing, the Depositor may deliver cash, a
letter of credit or a guaranteed investment contract to the Trustee to fund the
Buy-Down Fund for such Series, which shall be drawn upon by the Trustee in the
manner and at the times specified in such Prospectus Supplement.
PAYMENTS ON CONTRACTS
A Certificate Account meeting the requirements set forth under
' -- Description of the Securities -- Payments on Mortgage Loans' will be
established in the name of the Trustee.
Except as otherwise provided in the related Prospectus Supplement, there
will be deposited in the Certificate Account on a daily basis the following
payments and collections received or made by it on or after the Cut-off Date:
(i) all Obligor payments on account of principal, including principal
prepayments, of the Contracts;
(ii) all Obligor payments on account of interest on the Contracts;
(iii) all Liquidation Proceeds received with respect to Contracts or
property acquired in respect thereof by foreclosure or otherwise;
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(iv) all Insurance Proceeds received with respect to any Contract,
other than proceeds to be applied to the restoration or repair of the
Manufactured Home or released to the Obligor;
(v) any Advances made as described under ' -- Advances' and certain
other amounts required under the related Agreement to be deposited in the
Certificate Account;
(vi) all amounts received from Credit Support provided with respect to
a Series of Securities;
(vii) all proceeds of any Contract or property acquired in respect
thereof repurchased by the Master Servicer, the Depositor or otherwise as
described above or under ' -- Termination' below; and
(viii) all amounts, if any, required to be transferred to the
Certificate Account from the Reserve Fund.
COLLECTION OF PAYMENTS ON MORTGAGE CERTIFICATES
The Mortgage Certificates included in the Trust Fund with respect to a
Series of Securities will be registered in the name of the Trustee so that all
distributions thereon will be made directly to the Trustee. The related
Agreement will require the Trustee, if it has not received a distribution with
respect to any Mortgage Certificate by the second business day after the date on
which such distribution was due and payable pursuant to the terms of such
Mortgage Certificate, to request the issuer or guarantor, if any, of such
Mortgage Certificate to make such payment as promptly as possible and legally
permitted and to take such legal action against such issuer or guarantor as the
Trustee deems appropriate under the circumstances, including the prosecution of
any claims in connection therewith. The reasonable legal fees and expenses
incurred by the Trustee in connection with the prosecution of any such legal
action will be reimbursable to the Trustee out of the proceeds of any such
action and will be retained by the Trustee prior to the deposit of any remaining
proceeds in the Certificate Account pending distribution thereof to
Securityholders of the affected Series. In the event that the Trustee has reason
to believe that the proceeds of any such legal action may be insufficient to
reimburse it for its projected legal fees and expenses, the Trustee will notify
such Securityholders that it is not obligated to pursue any such available
remedies unless adequate indemnity for its legal fees and expenses is provided
by such Securityholders.
DISTRIBUTIONS ON SECURITIES
On each Distribution Date with respect to a Series of Securities as to
which credit support is provided by means other than the creation of a
Subordinated Class or Subclasses and the establishment of a Reserve Fund, the
Master Servicer will withdraw from the applicable Certificate Account funds on
deposit therein and distribute, or, if so specified in the applicable Prospectus
Supplement, will withdraw from the Custodial Account, funds on deposit therein
and remit to the Trustee, who will distribute such funds to Securityholders of
record on the applicable Record Date. Such distributions shall occur in the
manner described herein under ' -- Description of the
Securities -- Distributions of Principal and Interest' and in the related
Prospectus Supplement. If so specified in the applicable Prospectus Supplement,
the Master Servicer will withdraw from the applicable Certificate Account funds
on deposit therein and distribute them to the Trustee. Such funds shall consist
of the aggregate of all previously undistributed payments on account of
principal (including principal prepayments, if any) and interest received after
the Cut-off Date and on or prior to the 20th day (or if such day is not a
business day, the next preceding business day) of the month of such distribution
or such other day as may be specified in the related Prospectus Supplement (in
either case, the 'Determination Date'), except:
(i) all payments that were due on or before the Cut-off Date;
(ii) all principal prepayments received during the month of
distribution and all payments of interest representing interest for the
month of distribution or any portion thereof;
(iii) all payments which represent early receipt (other than
prepayments) of scheduled payments of principal and interest due on a date
or dates subsequent to the first day of the month of distribution;
(iv) amounts received on particular Mortgage Loans or Contracts as
late payments of principal or interest and respecting which the Master
Servicer has made an unreimbursed Advance;
(v) amounts representing reimbursement for other Advances which the
Master Servicer has determined to be otherwise nonrecoverable and amounts
representing reimbursement for certain losses and expenses incurred or
Advances made by the Master Servicer and discussed below; and
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(vi) that portion of each collection of interest on a particular
Mortgage Loan in such Mortgage Pool or on a particular Contract in such
Contract Pool that represents (A) servicing compensation to the Master
Servicer, (B) amounts payable to the entity or entities specified in the
applicable Prospectus Supplement or permitted withdrawals from the
Certificate Account out of payments under the Letter of Credit, if any,
with respect to the Series, (C) related Insurance Proceeds or Liquidation
Proceeds, (D) amounts in the Reserve Fund, if any, with respect to the
Series or (E) proceeds of any Alternative Credit Support, each deposited in
the Certificate Account to the extent described under 'Description of the
Securities -- Maintenance of Insurance Policies,' ' -- Presentation of
Claims,' ' -- Enforcement of `Due-on-Sale' Clauses; Realization Upon
Defaulted Mortgage Loans' and ' -- Enforcement of `Due-on-Sale' Clauses;
Realization Upon Defaulted Contracts' or in the applicable Prospectus
Supplement.
Except as otherwise specified in the related Prospectus Supplement, no
later than the Business Day immediately preceding the Distribution Date for a
Series of Securities, the Master Servicer will furnish a statement to the
Trustee setting forth the amount to be distributed on the next succeeding
Distribution Date on account of principal of and interest on the Mortgage Loans
or Contracts, stated separately or the information enabling the Trustee to
determine the amount of distribution to be made on the Securities and a
statement setting forth certain information with respect to the Mortgage Loans
or Contracts.
If so specified in the applicable Prospectus Supplement, the Trustee will
establish and maintain the Certificate Account for the benefit of the holders of
the Securities of the related Series in which the Trustee shall deposit, as soon
as practicable after receipt, each distribution made to the Trustee by the
Master Servicer, as set forth above, with respect to the Mortgage Loans or
Contracts, any distribution received by the Trustee with respect to the Mortgage
Certificates, if any, included in the Trust Fund and deposits from any Reserve
Fund or GPM Fund. If so specified in the applicable Prospectus Supplement, prior
to making any distributions to Securityholders, any portion of the distribution
on the Mortgage Certificates that represents servicing compensation, if any,
payable to the Trustee shall be deducted and paid to the Trustee.
Funds on deposit in the Certificate Account may be invested in Eligible
Investments maturing in general not later than the Business Day preceding the
next Distribution Date. Unless otherwise provided in the Prospectus Supplement,
all income and gain realized from any such investment will be for the benefit of
the Master Servicer. The Master Servicer will be required to deposit the amount
of any losses incurred with respect to such investments out of its own funds,
when realized. Unless otherwise provided in the Prospectus Supplement, the
Certificate Account established pursuant to the Trust Agreement shall be a
non-interest bearing account or accounts.
The timing and method of distribution of funds in the Certificate Account
to Classes or Subclasses of Securities having differing terms, whether
subordinated or not, to the extent not described herein, shall be set forth in
the related Prospectus Supplement.
SPECIAL DISTRIBUTIONS
To the extent specified in the Prospectus Supplement relating to a Series
of Securities, one or more Classes of Multi-Class Securities that do not provide
for monthly Distribution Dates may receive Special Distributions in reduction of
Stated Principal Balance ('Special Distributions') in any month, other than a
month in which a Distribution Date occurs, if, as a result of principal
prepayments on the Trust Assets in the related Trust Fund and/or low
reinvestment yields, the Trustee determines, based on assumptions specified in
the related Agreement, that the amount of cash anticipated to be on deposit in
the Certificate Account on the next Distribution Date for such Series and
available to be distributed to the holders of the Securities of such Classes or
Subclasses may be less than the sum of (i) the interest scheduled to be
distributed to holders of the Securities of such Classes or Subclasses and (ii)
the amount to be distributed in reduction of Stated Principal Balance or such
Securities on such Distribution Date. Any such Special Distributions will be
made in the same priority and manner as distributions in reduction of Stated
Principal Balance would be made on the next Distribution Date.
REPORTS TO SECURITYHOLDERS
Unless otherwise specified or modified in the related Prospectus Supplement
for each Series, the Master Servicer or the Trustee will include with each
distribution to Securityholders of record of such Series, or within
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a reasonable time thereafter, a statement generally setting forth, among other
things, the following information, if applicable (per each Security, as to (i)
through (iii) or (iv) through (vi) below, as applicable):
(i) to each holder of a Security, other than a Multi-Class Certificate
or Residual Certificate, the amount of such distribution allocable to
principal of the Trust Assets, separately identifying the aggregate amount
of any Principal Prepayments included therein, and the portion, if any,
advanced by a Servicer or the Master Servicer;
(ii) to each holder of a Security, other than a Multi-Class
Certificate or Residual Certificate, the amount of such distribution
allocable to interest on the related Trust Assets and the portion, if any,
advanced by a Servicer or the Master Servicer;
(iii) to each holder of a Security, the amount of servicing
compensation with respect to the related Trust Assets and such other
customary information as the Master Servicer deems necessary or desirable
to enable Securityholders to prepare their tax returns;
(iv) to each holder of a Multi-Class Certificate on which an interest
distribution and a distribution in reduction of Stated Principal Balance
are then being made, the amount of such interest distribution and
distribution in reduction of Stated Principal Balance, and the Stated
Principal Balance of each Class after giving effect to the distribution in
reduction of Stated Principal Balance made on such Distribution Date or on
any Special Distribution Date occurring subsequent to the last report;
(v) to each holder of a Multi-Class Certificate on which a
distribution of interest only is then being made, the aggregate Stated
Principal Balance of Securities outstanding of each Class or Subclass after
giving effect to the distribution in reduction of Stated Principal Balance
made on such Distribution Date and on any Special Distribution Date
occurring subsequent to the last such report and after including in the
aggregate Stated Principal Balance the Stated Principal Balance of the
Compound Interest Securities, if any, outstanding and the amount of any
accrued interest added to the Compound Value of such Compound Interest
Securities on such Distribution Date;
(vi) to each holder of a Compound Interest Security (but only if such
holder shall not have received a distribution of interest on such
Distribution Date equal to the entire amount of interest accrued on such
Certificate with respect to such Distribution Date):
(a) the information contained in the report delivered pursuant to
clause (v) above;
(b) the interest accrued on such Class or Subclass of Compound
Interest Securities with respect to such Distribution Date and added to
the Compound Value of such Compound Interest Security; and
(c) the Stated Principal Balance of such Class or Subclass of
Compound Interest Securities after giving effect to the addition thereto
of all interest accrued thereon;
(vii) in the case of a series of Securities with a variable Interest
Rate, the Interest Rate applicable to the distribution in question;
(viii) the amount or the remaining obligations of an L/C Bank with
respect to a Letter of Credit, after giving effect to the declining amount
available and any payments thereunder and other amounts charged thereto on
the applicable Distribution Date, expressed as a percentage of the amount
reported pursuant to (x) below, and the amount of coverage remaining under
the Pool Insurance Policy, Special Hazard Insurance Policy, Mortgagor
Bankruptcy Bond or Reserve Fund, as applicable, in each case as of the
applicable Determination Date, after giving effect to any amounts with
respect thereto to be distributed to Securityholders on the Distribution
Date;
(ix) in the case of a Series of Securities benefiting from the
Alternative Credit Support described in the related Prospectus Supplement,
the amount of coverage under such Alternative Credit Support as of the
close of business on the applicable Determination Date, after giving effect
to any amounts with respect thereto distributed to Securityholders on the
Distribution Date;
(x) the aggregate scheduled principal balance of the Trust Assets as
of a date not earlier than such Distribution Date after giving effect to
payments of principal distributed to Securityholders on the Distribution
Date;
(xi) the book value of any collateral acquired by the Mortgage Pool or
Contract Pool through foreclosure, repossession or otherwise; and
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(xii) the number and aggregate principal amount of Mortgage Loans or
Contracts one month and two months delinquent.
In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer, or the Trustee, if specified in the
applicable Prospectus Supplement, will cause to be furnished to each
Securityholder of record at any time during such calendar year a report as to
the aggregate of amounts reported pursuant to (i) through (iii) or (iv) through
(vi) above and such other information as in the judgment of the Master Servicer
or the Trustee, as the case may be, is needed for the Securityholder to prepare
its tax return, as applicable, for such calendar year or, in the event such
person was a Securityholder of record during a portion of such calendar year,
for the applicable portion of such year.
ADVANCES
Unless otherwise stated in the related Prospectus Supplement, each Servicer
and the Master Servicer (with respect to Mortgage Loans or Contracts serviced by
it and with respect to Advances required to be made by the Servicers that were
not so made) will be obligated to advance funds in an amount equal to the
aggregate scheduled installments of payments of principal and interest that were
due on the Due Date with respect to a Mortgage Loan or Contract and that were
delinquent (including any payments that have been deferred by the Servicer or
the Master Servicer) as of the close of business on the date specified in the
related Servicing Agreement, to be remitted no later than the close of business
on the business day immediately preceding the Distribution Date, subject to
(unless otherwise provided in the applicable Prospectus Supplement) their
respective determinations that such advances are reimbursable under any Letter
of Credit, Pool Insurance Policy, Primary Mortgage Insurance Policy, Mortgagor
Bankruptcy Bond, from the proceeds of Alternative Credit Support, from cash in
the Reserve Fund, the Servicing or Certificate Accounts or otherwise. In making
such Advances, the Servicers and Master Servicer will endeavor to maintain a
regular flow of scheduled interest and principal payments to the
Securityholders, rather than to guarantee or insure against losses. Any such
Advances are reimbursable to the Servicer or Master Servicer out of related
recoveries on the Mortgage Loans respecting which such amounts were advanced. In
addition, such Advances are reimbursable from cash in the Reserve Fund, the
Servicing or Certificate Accounts to the extent that the Servicer or the Master
Servicer, as the case may be, shall determine that any such Advances previously
made are not ultimately recoverable. The Servicers and the Master Servicer
generally will also be obligated to make advances in respect of certain taxes
and insurance premiums not paid by Mortgagors or Obligors on a timely basis and,
to the extent deemed recoverable, foreclosure costs, including reasonable
attorney's fees. Funds so advanced are reimbursable out of recoveries on the
related Mortgage Loans. This right of reimbursement for any Advance will be
prior to the rights of the Securityholders to receive any amounts recovered with
respect to such Mortgage Loans or Contracts. Unless otherwise provided in the
applicable Prospectus Supplement, the Servicers and the Master Servicer will
also be required to advance an amount necessary to provide a full month's
interest in connection with full or partial prepayments, liquidations, defaults
and repurchases of the Mortgage Loans or Contracts. Any such Advances will not
be reimbursable to the Servicers or the Master Servicer.
COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer, directly or through the Servicers, as the case may be,
will make reasonable efforts to collect all payments called for under the
Mortgage Loans or Contracts and will, consistent with the applicable Servicing
Agreement and any applicable Letter of Credit, Pool Insurance Policy, Special
Hazard Insurance Policy, Primary Mortgage Insurance Policy, Mortgagor Bankruptcy
Bond or Alternative Credit Support, follow such collection procedures as it
follows with respect to mortgage loans or contracts serviced by it that are
comparable to the Mortgage Loans or Contracts, except when, in the case of FHA
or VA Loans, applicable regulations require otherwise. Consistent with the
above, if so provided in the related Prospectus Supplement, the Master Servicer
may, in its discretion, waive any late payment charge or any prepayment charge
or penalty interest in connection with the prepayment of a Mortgage Loan or
Contract or extend the due dates for payments due on a Mortgage Note or Contract
for a period of not greater than 270 days, provided that the insurance coverage
for such Mortgage Loan or Contract or the coverage provided by any Letter of
Credit or any Alternative Credit Support, will not be adversely affected.
If specified in the related Prospectus Supplement, under the applicable
Servicing Agreement, the Master Servicer, either directly or through Servicers,
to the extent permitted by law, may establish and maintain an
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escrow account (the 'Escrow Account') in which Mortgages or Obligors will be
required to deposit amounts sufficient to pay taxes, assessments, mortgage and
hazard insurance premiums and other comparable items. This obligation may be
satisfied by the provision of insurance coverage against loss occasioned by the
failure to escrow insurance premiums rather than causing such escrows to be
made. Withdrawals from the Escrow Account may be made to effect timely payment
of taxes, assessments, mortgage and hazard insurance, to refund to Mortgagors or
Obligors amounts determined to be overages, to pay interest to Mortgagors or
Obligors on balances in the Escrow Account, if required, and to clear and
terminate such account. The Master Servicer will be responsible for the
administration of each Escrow Account and will be obliged to make advances to
such accounts when a deficiency exists therein. Alternatively, in lieu of
establishing an Escrow Account, the Servicer may procure a performance bond or
other form of insurance coverage, in an amount acceptable to the Rating Agency
rating the related Series of Securities, covering loss occasioned by the failure
to escrow such amounts.
MAINTENANCE OF INSURANCE POLICIES
To the extent that the applicable Prospectus Supplement does not expressly
provide for a method of credit support described below under 'Credit Support' or
for Alternative Credit Support in lieu of some or all of the insurance coverage
set forth below, the following paragraphs on insurance shall apply.
STANDARD HAZARD INSURANCE
To the extent specified in a related Prospectus Supplement, the terms of
each Servicing Agreement will require the Servicer to cause to be maintained for
each Mortgage Loan or Contract that it services (and the Master Servicer will be
required to maintain for each Mortgage Loan or Contract serviced by it directly)
a policy of standard hazard insurance (a 'Standard Hazard Insurance Policy')
covering the Mortgaged Property underlying such Mortgage Loan or Manufactured
Home underlying such Contract in an amount equal to the lesser of the maximum
insurable value of the improvements securing such Mortgage Loan or Contract or
the principal balance of such Mortgage Loan or Contract. Each Servicer or the
Master Servicer, as the case may be, shall also maintain on property acquired
upon foreclosure, or deed in lieu of foreclosure, of any Mortgage Loan or
Contract, a Standard Hazard Insurance Policy in an amount that is at least equal
to the maximum insurable value of the improvements that are a part of the
Mortgaged Property or Manufactured Home. Any amounts collected by the Servicer
or the Master Servicer under any such policies (other than amounts to be applied
to the restoration or repair of the Mortgaged Property or Manufactured Home or
released to the borrower in accordance with normal servicing procedures) shall
be deposited in the related Servicing Account for deposit in the Certificate
Account or, in the case of the Master Servicer, shall be deposited directly into
the Certificate Account. Any cost incurred in maintaining any such insurance
shall not, for the purpose of calculating monthly distributions to
Securityholders, be added to the amount owing under the Mortgage Loan or
Contract, notwithstanding that the terms of the Mortgage Loan or Contract may so
permit. Such cost shall be recoverable by the Servicer only by withdrawal of
funds from the Servicing Account or by the Master Servicer only by withdrawal
from the Certificate Account, as described in the applicable Servicing
Agreement. No earthquake or other additional insurance is to be required of any
borrower or maintained on property acquired in respect of a Mortgage Loan or
Contract, other than pursuant to such applicable laws and regulations as shall
at any time be in force and as shall require such additional insurance. When the
Mortgaged Property or Manufactured Home is located at the time of origination of
the Mortgage Loan or Contract in a federally designated flood area, the related
Servicer (or the Master Servicer, in the case of each Mortgage Loan or Contract
serviced by it directly) will cause flood insurance to be maintained, to the
extent available, in those areas where flood insurance is required under the
National Flood Insurance Act of 1968, as amended.
The Depositor will not require that a standard hazard or flood insurance
policy be maintained on the Cooperative Dwelling relating to any Cooperative
Loan. Generally, the cooperative corporation itself is responsible for
maintenance of hazard insurance for the property owned by the cooperative and
the tenant-stockholders of that cooperative do not maintain individual hazard
insurance policies. To the extent, however, that a Cooperative and the related
borrower on a Cooperative Loan do not maintain such insurance or do not maintain
adequate coverage or any insurance proceeds are not applied to the restoration
of damaged property, any damage to such borrower's Cooperative Dwelling or such
Cooperative's building could significantly reduce the value of the collateral
securing such Cooperative Loan to the extent not covered by other credit
support.
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The applicable Servicing Agreement will require the Master Servicer to
perform the aforementioned obligations of the Servicer in the event the Servicer
fails to do so. In the event that the Master Servicer obtains and maintains a
blanket policy insuring against hazard losses on all of the related Mortgage
Loans or Contracts, it will conclusively be deemed to have satisfied its
obligations to cause to be maintained a Standard Hazard Insurance Policy for
each Mortgage Loan or Contract that it services. This blanket policy may contain
a deductible clause, in which case the Master Servicer will, in the event that
there has been a loss that would have been covered by such policy absent such
deductible, deposit in the Certificate Account the amount not otherwise payable
under the blanket policy because of the application of such deductible clause.
Since the amount of hazard insurance to be maintained on the improvements
securing the Mortgage Loans or Contracts may decline as the principal balances
owing thereon decrease, and since residential properties have historically
appreciated in value over time, in the event of partial loss, hazard insurance
proceeds may be insufficient to fully restore the damaged Mortgaged Property or
Manufactured Home. See 'Description of Insurance -- Special Hazard Insurance
Policies' for a description of the limited protection afforded by a Special
Hazard Insurance Policy against losses occasioned by certain hazards that are
otherwise uninsured against as well as against losses caused by the application
of the coinsurance provisions contained in the Standard Hazard Insurance
Policies.
SPECIAL HAZARD INSURANCE
If so specified in the related Prospectus Supplement, the Master Servicer
will be required to exercise its best reasonable efforts to maintain the Special
Hazard Insurance Policy, if any, with respect to a Series of Securities in full
force and effect, unless coverage thereunder has been exhausted through payment
of claims, and will pay the premium for the Special Hazard Insurance Policy on a
timely basis; provided, however, that the Master Servicer shall be under no such
obligation if coverage under the Pool Insurance Policy with respect to such
Series has been exhausted. In the event that the Special Hazard Insurance Policy
is cancelled or terminated for any reason (other than the exhaustion of total
policy coverage), the Master Servicer will exercise its best reasonable efforts
to obtain from another insurer a replacement policy comparable to the Special
Hazard Insurance Policy with a total coverage that is equal to the then existing
coverage of the Special Hazard Insurance Policy; provided that if the cost of
any such replacement policy is greater than the cost of the terminated Special
Hazard Insurance Policy, the amount of coverage under the replacement Special
Hazard Insurance Policy may be reduced to a level such that the applicable
premium will not exceed the cost of the Special Hazard Insurance Policy that was
replaced. Certain characteristics of the Special Hazard Insurance Policy are
described under 'Description of Insurance -- Special Hazard Insurance Policies.'
POOL INSURANCE
To the extent specified in a related Prospectus Supplement, the Master
Servicer will exercise its best reasonable efforts to maintain a Pool Insurance
Policy with respect to a Series of Securities in effect throughout the term of
the applicable Agreement, unless coverage thereunder has been exhausted through
payment of claims, and will pay the premiums for such Pool Insurance Policy on a
timely basis. In the event that the Pool Insurer ceases to be a qualified
insurer because it is not qualified to transact a mortgage guaranty insurance
business under the laws of the state of its principal place of business or any
other state which has jurisdiction over the Pool Insurer in connection with the
Pool Insurance Policy, or if the Pool Insurance Policy is cancelled or
terminated for any reason (other than the exhaustion of total policy coverage),
the Master Servicer will exercise its best reasonable efforts to obtain a
replacement policy of pool insurance comparable to the Pool Insurance Policy and
may obtain, under the circumstances described above with respect to the Special
Hazard Insurance Policy, a replacement policy with reduced coverage. In the
event the Pool Insurer ceases to be a qualified insurer because it is not
approved as an insurer by FHLMC, FNMA or any successors thereto, the Master
Servicer will agree to review, not less often than monthly, the financial
condition of the Pool Insurer with a view towards determining whether recoveries
under the Pool Insurance Policy are jeopardized and, if so, will exercise its
best reasonable efforts to obtain from another qualified insurer a replacement
insurance policy under the above-stated limitations. Certain characteristics of
the Pool Insurance Policy are described under 'Description of Insurance -- Pool
Insurance Policies.'
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PRIMARY MORTGAGE INSURANCE
To the extent specified in the related Prospectus Supplement, the Master
Servicer will be required to keep in force and effect for each Mortgage Loan
secured by Single Family Property serviced by it directly, and each Servicer of
a Mortgage Loan secured by Single Family Property will be required to keep in
full force and effect with respect to each such Mortgage Loan serviced by it, in
each case to the extent required by the underwriting standards of the Depositor,
a Primary Mortgage Insurance Policy issued by a qualified insurer (the 'Primary
Mortgage Insurer') with regard to each Mortgage Loan for which such coverage is
required pursuant to the applicable Servicing Agreement and Agreement and to act
on behalf of the Trustee (the 'Insured') under each such Primary Mortgage
Insurance Policy. Neither the Servicer nor the Master Servicer will cancel or
refuse to renew any such Primary Mortgage Insurance Policy in effect at the date
of the initial issuance of a Series of Securities that is required to be kept in
force under the applicable Agreement or Servicing Agreement unless the
replacement Primary Mortgage Insurance Policy for such cancelled or non-renewed
policy is maintained with an insurer whose claims-paying ability is acceptable
to the Rating Agency rating the Securities. See 'Description of
Insurance -- Primary Mortgage Insurance Policies.'
MORTGAGOR BANKRUPTCY BOND
If so specified in the related Prospectus Supplement, the Master Servicer
will exercise its best reasonable efforts to maintain a Mortgagor Bankruptcy
Bond for a Series of Securities in full force and effect throughout the term of
the applicable Agreement, unless coverage thereunder has been exhausted through
payment of claims, and will pay the premiums for such Mortgagor Bankruptcy Bond
on a timely basis. At the request of the Depositor, coverage under a Mortgagor
Bankruptcy Bond will be cancelled or reduced by the Master Servicer to the
extent permitted by the Rating Agency rating the related Series of Securities,
provided that such cancellation or reduction does not adversely affect the then
current rating of such Series. See 'Description of Insurance -- Mortgagor
Bankruptcy Bond.'
PRESENTATION OF CLAIMS
The Master Servicer, on behalf of itself, the Trustee and the
Securityholders, will present claims to HUD, the VA, the Pool Insurer, the
Special Hazard Insurer, the issuer of the Mortgagor Bankruptcy Bond, and each
Primary Mortgage Insurer, as applicable, and take such reasonable steps as are
necessary to permit recovery under such insurance policies or Mortgagor
Bankruptcy Bond, if any, with respect to a Series concerning defaulted Mortgage
Loans or Contracts or Mortgage Loans or Contracts that are the subject of a
bankruptcy proceeding. All collections by the Master Servicer under any FHA
insurance or VA guarantee, any Pool Insurance Policy, any Primary Mortgage
Insurance Policy or any Mortgagor Bankruptcy Bond and, where the related
property has not been restored, any Special Hazard Insurance Policy, are to be
deposited in the Certificate Account, subject to withdrawal as heretofore
described. In those cases in which a Mortgage Loan or Contract is serviced by a
Servicer, the Servicer, on behalf of itself, the Trustee and the
Securityholders, will present claims to the applicable Primary Mortgage Insurer
and to the FHA and the VA, as applicable, and all collections thereunder shall
be deposited in the Servicing Account, subject to withdrawal, as set forth
above, for deposit in the Certificate Account.
If any property securing a defaulted Mortgage Loan or Contract is damaged
and proceeds, if any, from the related Standard Hazard Insurance Policy or the
applicable Special Hazard Insurance Policy are insufficient to restore the
damaged property to a condition sufficient to permit recovery under any Pool
Insurance Policy or any Primary Mortgage Insurance Policy, neither the related
Servicer nor the Master Servicer, as the case may be, will be required to expend
its own funds to restore the damaged property unless it determines, and, in the
case of a determination by a Servicer, the Master Servicer agrees, (i) that such
restoration will increase the proceeds to Securityholders on liquidation of the
Mortgage Loan or Contract after reimbursement of the expenses incurred by the
Servicer or the Master Servicer, as the case may be, and (ii) that such expenses
will be recoverable through proceeds of the sale of the Mortgaged Property or
proceeds of any related Pool Insurance Policy, any related Primary Mortgage
Insurance Policy or otherwise.
If recovery under a Pool Insurance Policy or any related Primary Mortgage
Insurance Policy is not available because the related Servicer or the Master
Servicer has been unable to make the above determinations or otherwise, the
Servicer or the Master Servicer is nevertheless obligated to follow such normal
practices and
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procedures as are deemed necessary or advisable to realize upon the defaulted
Mortgage Loan. If the proceeds of any liquidation of the Mortgaged Property or
Manufactured Home are less than the principal balance of the defaulted Mortgage
Loan or Contract, respectively, plus interest accrued thereon at the Mortgage
Rate, and if coverage under any other method of credit support with respect to
such Series is exhausted, the related Trust Fund will realize a loss in the
amount of such difference plus the aggregate of expenses incurred by the
Servicer or the Master Servicer in connection with such proceedings and which
are reimbursable under the related Servicing Agreement or Agreement. In the
event that any such proceedings result in a total recovery that is, after
reimbursement to the Servicer or the Master Servicer of its expenses, in excess
of the principal balance of the related Mortgage Loan or Contract, together with
accrued and unpaid interest thereon at the applicable Mortgage Rate or APR, as
the case may be, the Servicer and the Master Servicer will be entitled to
withdraw amounts representing normal servicing compensation on such Mortgage
Loan or Contract from the Servicing Account or the Certificate Account, as the
case may be.
ENFORCEMENT OF 'DUE-ON-SALE' CLAUSES; REALIZATION UPON DEFAULTED MORTGAGE LOANS
Each Servicing Agreement and the applicable Agreement with respect to
Securities representing interests in or secured by a Mortgage Pool will provide
that, when any Mortgaged Property has been conveyed by the borrower, such
Servicer or the Master Servicer, as the case may be, will, to the extent it has
knowledge of such conveyance, exercise its rights to accelerate the maturity of
such Mortgage Loan under any 'due-on-sale' clause applicable thereto, if any,
unless it reasonably believes that such enforcement is not exercisable under
applicable law or regulations or if such exercise would result in loss of
insurance coverage with respect to such Mortgage Loan. In either case, where the
due-on-sale clause will not be exercised, the Servicer or the Master Servicer is
authorized to take or enter into an assumption and modification agreement from
or with the person to whom such Mortgaged Property has been or is about to be
conveyed, pursuant to which such person becomes liable under the Mortgage Note
and, unless prohibited by applicable state law, the Mortgagor remains liable
thereon, provided that the Mortgage Loan will continue to be covered by any Pool
Insurance Policy and any related Primary Mortgage Insurance Policy. In the case
of an FHA Loan, such an assumption can occur only with HUD approval of the
substitute Mortgagor. Each Servicer and the Master Servicer will also be
authorized, with the prior approval of the Insurer under any required insurance
policies, to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as Mortgagor and becomes liable under the Mortgage Note.
Under the Servicing Agreements and the applicable Agreement, the Servicer
or the Master Servicer, as the case may be, will foreclose upon or otherwise
comparably convert the ownership of properties securing such of the related
Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Servicer or the Master
Servicer will follow such practices and procedures as are deemed necessary or
advisable and as shall be normal and usual in its general mortgage servicing
activities and in accordance with FNMA guidelines, except when, in the case of
FHA or VA Loans, applicable regulations require otherwise. However, neither the
Servicer nor the Master Servicer will be required to expend its own funds in
connection with any foreclosure or towards the restoration of any property
unless it determines and, in the case of a determination by a Servicer, the
Master Servicer agrees (i) that such restoration and/or foreclosure will
increase the proceeds of liquidation of the related Mortgage Loan to
Securityholders after reimbursement to itself for such expenses and (ii) that
such expenses will be recoverable to it either through Liquidation Proceeds,
Insurance Proceeds, payments under the Letter of Credit, or amounts in the
Reserve Fund, if any, with respect to the related Series, or otherwise.
Any prospective purchaser of a Cooperative Dwelling will generally be
required to obtain the approval of the board of directors of the related
Cooperative before purchasing the shares and acquiring rights under the
proprietary lease or occupancy agreement securing the Cooperative Loan. See
'Certain Legal Aspects of the Mortgage Loans and Contracts -- The Mortgage
Loans -- Foreclosure' herein. This approval is usually based on the purchaser's
income and net worth and numerous other factors. Although the Cooperative's
approval is unlikely to be unreasonably withheld or delayed, the necessity of
acquiring such approval could limit the number of potential purchasers for those
shares and otherwise limit the Trust Fund's ability to sell and realize the
value of those shares.
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The market value of any Multifamily Property obtained in foreclosure or by
deed in lieu of foreclosure will be based substantially on the operating income
obtained from renting the dwelling units. Since a default on a Mortgage Loan
secured by Multifamily Property is likely to have occurred because operating
income, net of expenses, is insufficient to make debt service payments on the
related Mortgage Loan, it can be anticipated that the market value of such
property will be less than was anticipated when such Mortgage Loan was
originated. To the extent that the equity in the property does not absorb the
loss in market value and such loss is not covered by other credit support, a
loss may be experienced by the related Trust Fund. With respect to Multifamily
Property consisting of an apartment building owned by a Cooperative, the
Cooperative's ability to meet debt service obligations on the Mortgage Loan, as
well as all other operating expenses, will be dependent in large part on the
receipt of maintenance payments from the tenant-stockholders, as well as any
rental income from units or commercial areas the Cooperative might control.
Unanticipated expenditures may in some cases have to be paid by special
assessments of the tenant-stockholders. The Cooperative's ability to pay the
principal amount of the Mortgage Loan at maturity may depend on its ability to
refinance the Mortgage Loan. The Depositor, the Unaffiliated Seller and the
Master Servicer will have no obligation to provide refinancing for any such
Mortgage Loan.
ENFORCEMENT OF `DUE-ON-SALE' CLAUSES; REALIZATION UPON DEFAULTED CONTRACTS
Each applicable Agreement and Servicing Agreement with respect to
Securities representing interests in or secured by a Contract Pool will provide
that, when any Manufactured Home securing a Contract is about to be conveyed by
the Obligor, the Master Servicer, to the extent it has knowledge of such
prospective conveyance and prior to the time of the consummation of such
conveyance, may exercise its rights to accelerate the maturity of such Contract
under the applicable 'due-on-sale' clause, if any, unless it is not exercisable
under applicable law. In such case, the Master Servicer is authorized to take or
enter into an assumption agreement from or with the person to whom such
Manufactured Home has been or is about to be conveyed, pursuant to which such
person becomes liable under the Contract and, unless determined to be materially
adverse to the interests of Securityholders, with the prior approval of the Pool
Insurer, if any, to enter into a substitution of liability agreement with such
person, pursuant to which the original Obligor is released from liability and
such person is substituted as Obligor and becomes liable under the Contract.
Where authorized by the Contract, the APR may be increased, upon assumption, to
the then-prevailing market rate, but shall not be decreased.
Under the Servicing Agreement or the applicable Agreement, the Master
Servicer will repossess or otherwise comparably convert the ownership of
properties securing such of the related Manufactured Homes as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments. In connection with such repossession or other
conversion, the Servicer or Master Servicer will follow such practices and
procedures as it shall deem necessary or advisable and as shall be normal and
usual in its general Contract servicing activities. The Servicer or Master
Servicer, however, will not be required to expend its own funds in connection
with any repossession or towards the restoration of any property unless it
determines (i) that such restoration or repossession will increase the proceeds
of liquidation of the related Contract to the Certificateholders after
reimbursement to itself for such expenses and (ii) that such expenses will be
recoverable to it either through liquidation proceeds or through insurance
proceeds.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Under the applicable Agreement for a Series of Securities, the Depositor or
the person or entity specified in the related Prospectus Supplement and any
Master Servicer will be entitled to receive an amount described in such
Prospectus Supplement. As compensation for its servicing duties, a Servicer will
be entitled to receive a monthly servicing fee in the amount specified in the
related Servicing Agreement. Such servicing compensation shall be payable by
withdrawal from the related Servicing Account prior to deposit in the
Certificate Account. Each Servicer (with respect to the Mortgage Loans or
Contracts serviced by it) and the Master Servicer will be entitled to servicing
compensation out of Insurance Proceeds, Liquidation Proceeds, or Letter of
Credit payments. Additional servicing compensation in the form of prepayment
charges, assumption fees, late payment charges or otherwise shall be retained by
the Servicers and the Master Servicer to the extent not required to be deposited
in the Certificate Account.
The Servicers and the Master Servicer, unless otherwise specified in the
related Prospectus Supplement, will pay from their servicing compensation
certain expenses incurred in connection with the servicing of the
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Mortgage Loans or Contracts, including, without limitation, payment of the
Insurance Policy premiums and, in the case of the Master Servicer, fees or other
amounts payable for any Alternative Credit Support, payment of the fees and
disbursements of the Trustee (and any custodian selected by the Trustee), the
Note Register, the Certificate Register and independent accountants and payment
of expenses incurred in enforcing the obligations of Servicers and Unaffiliated
Sellers. Certain of these expenses may be reimbursable by the Depositor pursuant
to the terms of the applicable Agreement. In addition, the Master Servicer will
be entitled to reimbursement of expenses incurred in enforcing the obligations
of Servicers and Unaffiliated Sellers under certain limited circumstances.
As set forth in the preceding section, the Servicers and the Master
Servicer will be entitled to reimbursement for certain expenses incurred by them
in connection with the liquidation of defaulted Mortgage Loans or Contracts. The
related Trust Fund will suffer no loss by reason of such expenses to the extent
claims are fully paid under the Letter of Credit, if any, the related insurance
policies, from amounts in the Reserve Fund or under any applicable Alternative
Credit Support described in a Prospectus Supplement. In the event, however, that
claims are either not made or fully paid under such Letter of Credit, Insurance
Policies or Alternative Credit Support, or if coverage thereunder has ceased, or
if amounts in the Reserve Fund are not sufficient to fully pay such losses, the
related Trust Fund will suffer a loss to the extent that the proceeds of the
liquidation proceedings, after reimbursement of the expenses of the Servicers or
the Master Servicer, as the case may be, are less than the principal balance of
the related Mortgage Loan or Contract. In addition, the Servicers and the Master
Servicer will be entitled to reimbursement of expenditures incurred by them in
connection with the restoration of a Mortgaged Property, Cooperative Dwelling or
Manufactured Home, such right of reimbursement being prior to the rights of the
Securityholders to receive any payments under the Letter of Credit, or from any
related Insurance Proceeds, Liquidation Proceeds, amounts in the Reserve Fund or
any proceeds of Alternative Credit Support.
Under the Trust Agreement, the Trustee will be entitled to deduct, from
distributions of interest with respect to the Mortgage Certificates, a specified
percentage of the unpaid principal balance of each Mortgage Certificate as
servicing compensation. The Trustee shall be required to pay all expenses,
except as expressly provided in the Trust Agreement, subject to limited
reimbursement as provided therein.
EVIDENCE AS TO COMPLIANCE
The Master Servicer will deliver to the Depositor and the Trustee, on or
before the date specified in the applicable Agreement or Servicing Agreement, an
Officer's Certificate stating that (i) a review of the activities of the Master
Servicer and the Servicers during the preceding calendar year and of its
performance under such Agreement or Servicing Agreement has been made under the
supervision of such officer, and (ii) to the best of such officer's knowledge,
based on such review, the Master Servicer and each Servicer has fulfilled all
its obligations under such Agreement or Servicing Agreement and the applicable
Servicing Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof. Such Officer's Certificate shall be
accompanied by a statement of a firm of independent public accountants to the
effect that, on the basis of an examination of certain documents and records
relating to servicing of the Mortgage Loans or Contract, conducted in accordance
with generally accepted accounting principles in the mortgage banking industry,
the servicing of the Mortgage Loans or Contract was conducted in compliance with
the provisions of the Agreement and/or the Servicing Agreements, except for such
exceptions as such firm believes it is required to report.
CERTAIN MATTERS REGARDING THE MASTER SERVICER, THE DEPOSITOR AND THE TRUSTEE AND
THE INDENTURE TRUSTEE
The Master Servicer under each Agreement will be named in the applicable
Prospectus Supplement. The entity acting as Master Servicer may be an
Unaffiliated Seller and have other normal business relationships with the
Depositor and/or affiliates of the Depositor and may be an affiliate of the
Depositor. In the event there is no Master Servicer under an Agreement, all
servicing of Mortgage Loans or Contracts will be performed by a Servicer
pursuant to a Servicing Agreement.
The Master Servicer may not resign from its obligations and duties under
the applicable Agreement except upon a determination that its duties thereunder
are no longer permissible under applicable law. No such
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resignation will become effective until the Trustee or a successor servicer has
assumed the Master Servicer's obligations and duties under such Agreement.
The Trustee under each Pooling and Servicing Agreement or Trust Agreement
will be named in the applicable Prospectus Supplement. The commercial bank or
trust company serving as Trustee may have normal banking relationships with the
Depositor and/or its affiliates and with the Master Servicer and/or its
affiliates.
The Trustee may resign from its obligations under the Pooling and Servicing
Agreement at any time, in which event a successor trustee will be appointed. In
addition, the Depositor may remove the Trustee if the Trustee ceases to be
eligible to act as Trustee under the Pooling and Servicing Agreement or if the
Trustee becomes insolvent, at which time the Depositor will become obligated to
appoint a successor Trustee. The Trustee may also be removed at any time by the
holders of Certificates evidencing voting rights aggregating not less than 50%
of the voting rights evidenced by the Certificates of such Series. Any
resignation and removal of the Trustee, and the appointment of a successor
trustee, will not become effective until acceptance of such appointment by the
successor Trustee.
The Trustee may resign at any time from its obligations and duties under
the Trust Agreement by executing an instrument in writing resigning as Trustee,
filing the same with the Depositor, mailing a copy of a notice of resignation to
all Certificateholders then of record, and appointing a qualified successor
trustee. No such resignation will become effective until the successor trustee
has assumed the Trustee's obligations and duties under the Trust Agreement.
The Indenture Trustee under the Indenture will be named in the applicable
Prospectus Supplement. The commercial bank or trust company serving as Indenture
Trustee may have normal banking relationships with the Depositor and/or its
affiliates and with the Master Servicer and/or its affiliates.
The Indenture Trustee may resign from its obligations under the Indenture
at any time, in which event a successor trustee will be appointed. In addition,
the Depositor may remove the Indenture Trustee if the Indenture Trustee ceases
to be eligible to act as Indenture Trustee under the Indenture or if the
Indenture Trustee becomes insolvent, at which time the Depositor will become
obligated to appoint a successor Indenture Trustee. Unless otherwise specified
in the related Prospectus Supplement, the Indenture Trustee may also be removed
at any time by the holders of Notes evidencing voting rights aggregating not
less than 50% of the voting rights evidenced by the Notes of such Series. Any
resignation and removal of the Trustee, and the appointment of a successor
trustee, will not become effective until acceptance of such appointment by the
successor Trustee.
Each Pooling and Servicing Agreement and Trust Agreement will also provide
that neither the Depositor nor any director, officer, employee or agent of the
Depositor or the Trustee, or any responsible officers of the Trustee will be
under any liability to the Certificateholders, for the taking of any action or
for refraining from the taking of any action in good faith pursuant to the
Pooling and Servicing Agreement, or for errors in judgment; provided, however,
that none of the Depositor or the Trustee nor any such person will be protected
against, in the case of the Depositor, any breach of representations or
warranties made by them, and in the case of the Depositor and the Trustee,
against any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance of its duties or by
reason of reckless disregard of its obligations and duties thereunder. Each
Pooling and Servicing Agreement and Trust Agreement will further provide that
the Depositor and the Trustee and any director, officer and employee or agent of
the Depositor or the Trustee shall be entitled to indemnification, by the Trust
Fund in the case of the Depositor and by the Master Servicer in the case of the
Trustee and will be held harmless against any loss, liability or expense
incurred in connection with any legal action relating to the applicable
Agreement or the Certificates and in the case of the Trustee, resulting from any
error in any tax or information return prepared by the Master Servicer or from
the exercise of any power of attorney granted pursuant to the Pooling and
Servicing Agreement, other than any loss, liability or expense related to any
specific Mortgage Loan, Contract or Mortgage Certificate (except any such loss,
liability or expense otherwise reimbursable pursuant to the applicable
Agreement) and any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of their duties
thereunder or by reason of reckless disregard of their obligations and duties
thereunder. In addition, each Agreement will provide that neither the Depositor
nor the Master Servicer, as the case may be, will be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to its
duties under the Agreement and that in its opinion may involve it in any expense
or liability. The Depositor or the Master Servicer may, however, in their
discretion, undertake any such action deemed by them necessary or desirable with
respect to the applicable Agreement and the rights and duties of the parties
thereto and the interests of the
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Securityholders thereunder. In such event, the legal expenses and costs of such
action and any liability resulting therefrom will be expenses, costs and
liabilities of the Trust Fund, and the Master Servicer or the Depositor, as the
case may be, will be entitled to be reimbursed therefor out of the Certificate
Account.
DEFICIENCY EVENT
To the extent a deficiency event is specified in the Prospectus Supplement,
a deficiency event (a 'Deficiency Event') with respect to the Securities of each
Series may be defined in the applicable Agreement as being the inability of the
Trustee to distribute to holders of one or more Classes of Securities of such
Series, in accordance with the terms thereof and the Agreement, any distribution
of principal or interest thereon when and as distributable, in each case because
of the insufficiency for such purpose of the funds then held in the related
Trust Fund.
Except as otherwise provided in the related Prospectus Supplement, to the
extent a deficiency event is specified in such Prospectus Supplement, upon the
occurrence of a Deficiency Event, the Trustee is required to determine whether
or not the application on a monthly basis (regardless of the frequency of
regular Distribution Dates) of all future scheduled payments on the Mortgage
Loans, Contracts and Mortgage Certificates included in the related Trust Fund
and other amount receivable with respect to such Trust Fund towards payments on
such Securities in accordance with the priorities as to distributions of
principal and interest set forth in such Securities will be sufficient to make
distributions of interest at the applicable Interest Rates and to distribute in
full the principal balance of each such Security on or before the latest Final
Distribution Date of any outstanding Securities of such Series.
Except as otherwise provided in the related Prospectus Supplement, to the
extent a deficiency event is specified in such Prospectus Supplement, the
Trustee will obtain and rely upon an opinion or report of a firm of independent
accountants of recognized national reputation as to the sufficiency of the
amounts receivable with respect to such Trust Fund to make such distributions on
the Securities, which opinion or report will be conclusive evidence as to such
sufficiency. Pending the making of any such determination, distributions on the
Securities shall continue to be made in accordance with their terms.
Except as otherwise provided in the related Prospectus Supplement, to the
extent a deficiency event is specified in such Prospectus Supplement, in the
event that the Trustee makes a positive determination, the Trustee will apply
all amounts received in respect of the related Trust Fund (after payment of fees
and expenses of the Trustee and accountants for the Trust Fund) to distributions
on the Securities of such Series in accordance with their terms, except that
such distributions shall be made on each Distribution Date or such other more
frequent dates specified in the related Prospectus Supplement and without regard
to the amount of principal that would otherwise be distributable on the related
Distribution Date. Under certain circumstances following such positive
determination, the Trustee may resume making distributions on such Securities
expressly in accordance with their terms.
Except as otherwise provided in the related Prospectus Supplement, to the
extent a deficiency event is specified in such Prospectus Supplement, if the
Trustee is unable to make the positive determination described above, the
applicable Trustee will apply all amounts received in respect of the related
Trust Fund (after payment of Trustee and accountants' fees and expenses) to
monthly distributions on Securities of such Series or on all Senior Securities
of such Series pro rata, without regard to the priorities as to distribution of
principal set forth in such Securities, and such Securities will, to the extent
permitted by applicable law and specified in the related Prospectus Statement,
accrue interest at the highest Interest Rate borne by any Security or Securities
with the same credit rating by the Rating Agencies of such Series, or in the
event any Class of such Series shall accrue interest at a floating rate, at the
weighted average Interest Rate, calculated on the basis of the maximum interest
rate applicable to the Class having such floating interest rate and on the
original principal amount of the Securities of that Class. In such event, the
holders of a majority in outstanding principal balance of such Securities may
direct the Trustee to sell the related Trust Fund, any such direction being
irrevocable and binding upon the holders of all Securities of such Series and
upon the owners of the residual interests in such Trust Fund. In the absence of
such a direction, the Trustee may not sell all or any portion of such Trust
Fund.
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EVENTS OF DEFAULT
Except as otherwise provided in the related Prospectus Supplement, Events
of Default under the related Pooling and Servicing Agreement or Sale and
Servicing will consist of: (i) any failure to make a specified payment which
continues unremedied, in most cases, for five business days after the giving of
written notice; (ii) any failure by the Trustee, the Servicer or the Master
Servicer, as applicable, duly to observe or perform in any material respect any
other of its covenants or agreements in the applicable Agreement which failure
shall continue for the number of days specified in the related Prospectus
Supplement or any breach of any representation and warranty made by the Master
Servicer or the Servicer, if applicable, which continues unremedied for the
number of days specified in the related Prospectus Supplement after the giving
of written notice of such failure or breach; (iii) certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings regarding the Master Servicer or a Servicer, as applicable; and (iv)
any lowering, withdrawal or notice of an intended or potential lowering, of the
outstanding rating of the Securities by the Rating Agency rating such Securities
because the existing or prospective financial condition or mortgage loan
servicing capability of the Master Servicer is insufficient to maintain such
rating.
Unless otherwise specified in the related Prospectus Supplement, Events of
Default under the Indenture for each Series of Notes include: (i) a default of
five days or more in the payment of any principal of or interest on any Note of
such Series; (ii) failure to perform any other covenant of the Depositor or the
Trust Fund in the Indenture which continues for a period of thirty days after
notice thereof is given in accordance with the procedures described in the
related Prospectus Supplement; (iii) any representation or warranty made by the
Depositor or the Trust Fund in the Indenture or in any certificate or other
writing delivered pursuant thereto or in connection therewith with respect to or
affecting such Series having been incorrect in a material respect as of the time
made, and such breach is not cured within thirty days after notice thereof is
given in accordance with the procedures described in the related Prospectus
Supplement; (iv) certain events of bankruptcy, insolvency, receivership or
liquidation of the Depositor or the Trust Fund; or (v) any other Event of
Default provided with respect to Notes of that Series.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default with respect to the Notes of any Series at the time
outstanding occurs and is continuing, either the Indenture Trustee or the
Noteholders of a majority of the then aggregate outstanding amount of the Notes
of such Series may declare the principal amount of all the Notes of such Series
to be due and payable immediately. Such declaration may, under certain
circumstances, be rescinded and annulled by the Noteholders of a majority in
aggregate outstanding amount of the Notes of such Series.
If, following an Event of Default with respect to any Series of Notes, the
Notes of such Series have been declared to be due and payable, the Indenture
Trustee may, in its discretion, notwithstanding such acceleration, elect to
maintain possession of the collateral securing the Notes of such Series and to
continue to apply distributions on such collateral as if there had been no
declaration of acceleration if such collateral continues to provide sufficient
funds for the payment of principal of and interest on the Notes of such Series
as they would have become due if there had not been such a declaration. In
addition, the Indenture Trustee may not sell or otherwise liquidate the
collateral securing the Notes of a Series following an Event of Default other
than a default in the payment of any principal of or interest on any Note of
such Series for thirty days or more, unless (a) the Noteholders of 100% of the
then aggregate outstanding amount of the Notes of such Series consent to such
sale, (b) the proceeds of such sale or liquidation are sufficient to pay in full
the principal of and accrued interest due and unpaid on the outstanding Notes of
such Series at the date of such sale or (c) the Indenture Trustee determines
that such collateral would not be sufficient on an ongoing basis to make all
payments on such Notes as such payments would have become due if such Notes had
not been declared due and payable, and the Indenture Trustee obtains the consent
of the Holders of 66 2/3% of the then aggregate outstanding amount of the Notes
of such Series.
In the event that the Indenture Trustee liquidates the collateral in
connection with an Event of Default involving a default for thirty days or more
in the payment of principal of or interest on the Notes of a Series, the
Indenture provides that the Indenture Trustee will have a prior lien on the
proceeds of any such liquidation for unpaid fees and expenses. As a result, upon
the occurrence of such an Event of Default, the amount available for
distribution to the Noteholders may be less than would otherwise be the case.
However, the Indenture Trustee may not institute a proceeding for the
enforcement of its lien except in connection with a proceeding for the
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enforcement of the lien of the Indenture for the benefit of the Noteholders
after the occurrence of such an Event of Default.
Unless otherwise specified in the related Prospectus Supplement, in the
event the principal of the Notes of a Series is declared due and payable, as
described above, the Noteholders of any such Notes issued at a discount from par
may be entitled to receive no more than an amount equal to the unpaid principal
amount thereof less the amount of such discount which is unamortized.
Except as otherwise provided in the related Prospectus Supplement, so long
as an Event of Default with respect to a Series of Securities remains
unremedied, the Depositor, the Trustee or the holders of Notes of such Series
(or, if no Notes are issued as part of such Series, Certificate) evidencing not
less than 25% of the principal amount of such Securities of such Series may
terminate all of the rights and obligations of the Master Servicer under the
applicable Agreement and/or Servicing Agreement and in and to the Mortgage Loans
and Contracts and the proceeds thereof, whereupon (subject to applicable law
regarding the Trustee's ability to make advances) the Trustee or, if the
Depositor so notifies the Trustee and the Master Servicer, the Depositor or its
designee, will succeed to all the responsibilities, duties and liabilities of
the Master Servicer under such Agreement and will be entitled to similar
compensation arrangements. In the event that the Trustee would be obligated to
succeed the Master Servicer but is unwilling or unable so to act, it may
appoint, or petition to a court of competent jurisdiction for the appointment
of, a successor master servicer. Pending such appointment, the Trustee (unless
prohibited by law from so acting) shall be obligated to act in such capacity.
The Trustee and such successor master servicer may agree upon the servicing
compensation to be paid to such successor, which in no event may be greater than
the compensation to the Master Servicer under the applicable Agreement.
AMENDMENT
Except as otherwise provided in the related Prospectus Supplement, the
Pooling and Servicing Agreement or Sale and Servicing Agreement, as applicable,
for each Series of Securities may be amended by the Depositor, the Master
Servicer and the Trustee, without the consent of the Securityholders, (i) to
cure any ambiguity, (ii) to correct or supplement any provision therein that may
be inconsistent with any other provision therein or (iii) to make any other
provisions with respect to matters or questions arising under such Agreement
that are not inconsistent with the provisions thereof, provided that such action
will not adversely affect in any material respect the interests of any
Securityholder of the related Series. Except as otherwise provided in the
related Prospectus Supplement, the Pooling and Servicing Agreement or Sale and
Servicing Agreement, as applicable, for each Series of Securities may also be
amended by the Depositor, the Master Servicer and the Trustee with the consent
of holders of Securities evidencing not less than 66 2/3% of the aggregate
outstanding principal amount of the Securities of such Series, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of such Agreement or of modifying in any manner the rights of the
Securityholders; provided, however, that no such amendment may (i) reduce in any
manner the amount of, delay the timing of or change the manner in which payments
received on or with respect to Mortgage Loans and Contracts are required to be
distributed with respect to any Security without the consent of the holder of
such Security, (ii) adversely affect in any material respect the interests of
the holders of a Class or Subclass of the Senior Securities, if any, of a Series
in a manner other than that set forth in (i) above without the consent of the
holders of the Senior Securities of such Subclass evidencing not less than
66 2/3% of such Class or Subclass, (iii) adversely affect in any material
respect the interests of the holders of the Subordinated Securities of a Series
in a manner other than that set forth in (i) above without the consent of the
holders of Subordinated Securities evidencing not less than 66 2/3% of such
Class or Subclass or (iv) reduce the aforesaid percentage of the Securities, the
holders of which are required to consent to such amendment, without the consent
of the holders of the Class affected thereby.
The Trust Agreement for a Series may be amended by the Trustee and the
Depositor without Certificateholder consent, to cure any ambiguity, to correct
or supplement any provision therein that may be inconsistent with any other
provision therein, or to make any other provisions with respect to matters or
questions arising thereunder that are not inconsistent with any other provisions
thereof, provided that such action will not, as evidenced by an opinion of
counsel, adversely affect the interests of any Certificateholders of that Series
in any material respect. The Trust Agreement for each Series may also be amended
by the Trustee and the Depositor with the consent of the Holders of Securities
evidencing Percentage Interests aggregating not less than 66 2/3% of each Class
of the Securities of such Series affected thereby for the purpose of adding any
provisions to
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or changing in any manner or eliminating any of the provisions of such Agreement
or modifying in any manner the rights of Certificateholders of that Series;
provided, however, that no such amendment may (i) reduce in any manner the
amount of, or delay the timing of, or change the manner in which payments
received on Mortgage Certificates are required to be distributed in respect of
any Certificate, without the consent of the Holder of such Certificate or (ii)
reduce the aforesaid percentage of Securities the Holders of which are required
to consent to any such amendment, without the consent of the Holders of all
Securities of such Series then outstanding.
TERMINATION
Except as otherwise provided in the related Prospectus Supplement, the
obligations created by the Pooling and Servicing Agreement or Sale and Servicing
Agreement, as applicable, for a Series of Securities will terminate upon the
earlier of (a) the repurchase of all Mortgage Loans or Contracts and all
property acquired by foreclosure of any such Mortgage Loan or Contract and (b)
the later of (i) the maturity or other liquidation of the last Mortgage Loan or
Contract subject thereto and the disposition of all property acquired upon
foreclosure of any such Mortgage Loan or Contract and (ii) the payment to the
Securityholders of all amounts held by the Master Servicer and required to be
paid to them pursuant to the applicable Agreement. The obligations created by
the Trust Agreement for a Series of Certificates will terminate upon the
distribution to Certificateholders of all amounts required to be distributed to
them pursuant to such Trust Agreement. In no event, however, will the Trust
created by either such Agreement continue beyond the expiration of 21 years from
the death of the last survivor of certain persons identified therein. For each
Series of Securities, the Master Servicer will give written notice of
termination of the applicable Agreement of each Securityholder, and the final
distribution will be made only upon surrender and cancellation of the Securities
at an office or agency specified in the notice of termination.
If so provided in the related Prospectus Supplement, the Pooling and
Servicing Agreement or Sale and Servicing Agreement for each Series of
Securities will permit, but not require, the Depositor or such other person as
may be specified in the Prospectus Supplement to repurchase from the Trust Fund
for such Series all remaining Mortgage Loans or Contracts subject to the
applicable Agreement at a price specified in such Prospectus Supplement. In the
event that the Depositor elects to treat the related Trust Fund as a REMIC under
the Code, any such repurchase will be effected in compliance with the
requirements of Section 860F(a)(4) of the Code, in order to constitute a
'qualifying liquidation' thereunder. The exercise of any such right will effect
early retirement of the Securities of that Series, but the right so to
repurchase may be effected only on or after the aggregate principal balance of
the Mortgage Loans or Contracts for such Series at the time of repurchase is
less than a specified percentage of the aggregate principal balance at the
Cut-off Date for the Series, or on or after the date set forth in the related
Prospectus Supplement.
The Indenture will be discharged with respect to a Series of Notes (except
with respect to certain continuing rights specified in the Indenture) upon the
delivery to the Indenture Trustee for cancellation of all the Notes of such
Series or, with certain limitations, upon deposit with the Indenture Trustee of
funds sufficient for the payment in full of all the Notes of such Series.
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CREDIT SUPPORT
Credit support for a Series of Securities may be provided by one or more
Letters of Credit, the issuance of Subordinated Classes or Subclasses of
Securities (which may, if so specified in the related Prospectus Supplement, be
issued in notional amounts), the issuance of subordinated Classes or Subclasses
of Notes, the provision for shifting interest credit enhancement, the
establishment of a Reserve Fund, the method of Alternative Credit Support
specified in the applicable Prospectus Supplement, or any combination of the
foregoing, in addition to, or in lieu of, the insurance arrangements set forth
below under 'Description of Insurance.' The amount and method of credit support
will be set forth in the Prospectus Supplement with respect to a Series of
Securities.
LETTERS OF CREDIT
The Letters of Credit, if any, with respect to a Series of Securities will
be issued by the bank or financial institution specified in the related
Prospectus Supplement (the 'L/C Bank'). The maximum obligation of the L/C Bank
under the Letter of Credit will be to honor requests for payment thereunder in
an aggregate fixed dollar amount, net of unreimbursed payments thereunder, equal
to the percentage of the aggregate principal balance on the related Cut-off Date
of the Mortgage Loans or Contracts evidenced by each Series (the 'L/C
Percentage') specified in the Prospectus Supplement for such Series. The
duration of coverage and the amount and frequency of any reduction in coverage
provided by the Letter of Credit with respect to a Series of Securities will be
in compliance with the requirements established by the Rating Agency rating such
Series and will be set forth in the Prospectus Supplement relating to such
Series of Securities. The amount available under the Letter of Credit in all
cases shall be reduced to the extent of the unreimbursed payments thereunder.
The obligations of the L/C Bank under the Letter of Credit for each Series of
Securities will expire a specified number of days after the latest of the
scheduled final maturity dates of the Mortgage Loans or Contracts in the related
Mortgage Pool or Contract Pool or the repurchase of all Mortgage Loans or
Contracts in the Mortgage Pool or Contract Pool in the circumstances specified
above. See 'Description of the Securities -- Termination.'
Unless otherwise specified in the applicable Prospectus Supplement, under
the applicable Agreement and/or Servicing Agreement, the Master Servicer will be
required not later than three business days prior to each Distribution Date to
determine whether a payment under the Letter of Credit will be necessary on the
Distribution Date and will, no later than the third business day prior to such
Distribution Date, advise the L/C Bank and the Trustee of its determination,
setting forth the amount of any required payment. On the Distribution Date, the
L/C Bank will be required to honor the Trustee's request for payment thereunder
in an amount equal to the lesser of (A) the remaining amount available under the
Letter of Credit and (B) the outstanding principal balances of any Liquidating
Loans to be assigned on such Distribution Date (together with accrued and unpaid
interest thereon at the related Mortgage Rate or APR to the related Due Date).
The proceeds of such payments under the Letter of Credit will be deposited into
the Certificate Account and will be distributed to Securityholders, in the
manner specified in the related Prospectus Supplement, on such Distribution
Date, except to the extent of any unreimbursed Advances, servicing compensation
due to the Servicers and the Master Servicer and other amounts payable to the
Depositor or the person or entity named in the applicable Prospectus Supplement
therefrom.
If at any time the L/C Bank makes a payment in the amount of the full
outstanding principal balance and accrued interest on a Liquidating Loan, it
will be entitled to receive an assignment by the Trustee of such Liquidating
Loan, and the L/C Bank will thereafter own such Liquidating Loan free of any
further obligation to the Trustee or the Securityholders with respect thereto.
Payments made to the Certificate Account by the L/C Bank under the Letter of
Credit with respect to such a Liquidating Loan will be reimbursed to the L/C
Bank only from the proceeds (net of liquidation costs) of such Liquidating Loan.
The amount available under the Letter of Credit will be increased to the extent
it is reimbursed for such payments.
To the extent the proceeds of liquidation of a Liquidating Loan acquired by
the L/C Bank in the manner described in the preceding paragraph exceed the
amount of payments made with respect thereto, the L/C Bank will be entitled to
retain such proceeds as additional compensation for issuance of the Letter of
Credit.
Prospective purchasers of Securities of a Series with respect to which
credit support is provided by a Letter of Credit must look to the credit of the
L/C Bank, to the extent of its obligations under the Letter of Credit, in the
event of default by Mortgagors or Obligors. If the amount available under the
Letter of Credit is exhausted,
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or the L/C Bank becomes insolvent, and amounts in the Reserve Fund, if any, with
respect to such Series are insufficient to pay the entire amount of the loss and
still be maintained at the level specified in the related Prospectus Supplement
(the 'Required Reserve'), the Securityholders (in the priority specified in the
related Prospectus Supplement) will thereafter bear all risks of loss resulting
from default by Mortgagors or Obligors (including losses not covered by
insurance or Alternative Credit Support), and must look primarily to the value
of the properties securing defaulted Mortgage Loans or Contracts for recovery of
the outstanding principal and unpaid interest.
In the event that a Subordinated Class or Subclass of a Series of
Securities is issued with a notional amount, the coverage provided by the Letter
of Credit with respect to such Series, and the terms and conditions of such
coverage, will be set forth in the related Prospectus Supplement.
SUBORDINATED SECURITIES
To the extent specified in the Prospectus Supplement with respect to a
Series of Securities, credit support may be provided by the subordination of the
rights of the holders of one or more Classes or Subclasses of Securities to
receive distributions with respect to the Mortgage Loans or Mortgage
Certificates in the Mortgage Pool or Contracts in the Contract Pool underlying
such Series, or with respect to a Subordinated Pool of mortgage loans or
contracts, to the rights of the Senior Securityholders or holders of one or more
Classes or Subclasses of Subordinated Securities of such Series to receive such
distributions, to the extent of the applicable Subordinated Amount or as
otherwise specified in the related Prospectus Supplement. In such a case, credit
support may also be provided by the establishment of a Reserve Fund, as
described below. Except as otherwise provided in the related Prospectus
Supplement, the Subordinated Amount, as described below, will be reduced by an
amount equal to Aggregate Losses. Aggregate Losses will be defined in the
related Agreement for any given period as the aggregate amount of delinquencies,
losses and other deficiencies in the amounts due to the holders of the
Securities of one or more Classes or Subclasses of such Series paid or borne by
the holders of one or more Classes or Subclasses of Subordinated Securities of
such Series ('payment deficiencies'), but excluding any payments of interest on
any amounts originally due to the holders of the Securities of a Class or
Subclass to which the applicable Class or Subclass of Subordinated Securities
are subordinated on a previous Distribution Date, but not paid as due, whether
by way of withdrawal from the Reserve Fund (including, prior to the time that
the Subordinated Amount is reduced to zero, any such withdrawal of amounts
attributable to the Initial Deposit, if any), reduction in amounts otherwise
distributable to the Subordinated Securityholders on any Distribution Date or
otherwise, less the aggregate amount of previous payment deficiencies recovered
by the related Trust Fund during such period in respect of the Mortgage Loans or
Contracts giving rise to such previous payment deficiencies, including, without
limitation, such recoveries resulting from the receipt of delinquent principal
and/or interest payments, Liquidation Proceeds or Insurance Proceeds (net, in
each case, of servicing compensation, foreclosure costs and other servicing
costs, expenses and unreimbursed Advances relating to such Mortgage Loans or
Contracts). The Prospectus Supplement for each Series of Securities with respect
to which credit support will be provided by one or more Classes or Subclasses of
Subordinated Securities will set forth the Subordinated Amount for such Series
and/or the manner by which one or more Classes or Subclasses of Securities may
be subordinated to other Classes or Subclasses or Securities. If specified in
the related Prospectus Supplement, the Subordinated Amount will decline over
time in accordance with a schedule which will also be set forth in the related
Prospectus Supplement.
In addition, if so specified in the related Prospectus Supplement, if a
Series of Securities includes Notes, one more Classes or Subclasses of Notes may
be subordinated to another Class or Subclasses of Notes and may be entitled to
receive disproportionate amounts of distributions in respect of principal and
all the Certificates of such Series will be subordinated to all the Notes.
SHIFTING INTEREST
If specified in the Prospectus Supplement for a Series of Securities for
which credit enhancement is provided by shifting interest as described herein,
the rights of the holders of the Subordinated Securities of a Series to receive
distributions with respect to the Mortgage Loans, Mortgage Certificates or
Contracts in the related Trust Fund or Subsidiary Trust will be subordinated to
such right of the holders of the Senior Securities of the same Series to the
extent described in such Prospectus Supplement. This subordination feature is
intended to enhance the likelihood of regular receipt by holders of Senior
Securities of the full amount of scheduled
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monthly payments of principal and interest due them and to provide limited
protection to the holders of the Senior Securities against losses due to
mortgagor defaults.
The protection afforded to the holders of Senior Securities of a Series by
the shifting interest subordination feature will be effected by distributing to
the holders of the Senior Securities a disproportionately greater percentage
(the 'Senior Prepayment Percentage') of Principal Prepayments. The initial
Senior Prepayment Percentage will be the percentage specified in the related
Prospectus Supplement and will decrease in accordance with the schedule and
subject to the conditions set forth in the Prospectus Supplement. This
disproportionate distribution of Principal Prepayments will have the effect of
accelerating the amortization of the Senior Securities while increasing the
respective interest of the Subordinated Securities in the Mortgage Pool or
Contract Pool. Increasing the respective interest of the Subordinated Securities
relative to that of the Senior Securities is intended to preserve the
availability of the benefits of the subordination provided by the Subordinated
Securities.
SWAP AGREEMENT
If so specified in the Prospectus Supplement relating to a Series of
Securities, the related Trust will enter into or obtain an assignment of a swap
agreement or other similar agreement pursuant to which the trust will have the
right to receive certain payments of interest (or other payments) as set forth
or determined as described therein. The Prospectus Supplement relating to a
Series of Securities having the benefit of an interest rate or currency rate
swap, cap or floor agreement will describe the material terms of such agreement
and the particular risks associated with the interest rate swap feature,
including market and credit risk, the effect of counterparty defaults and other
risks, if any, addressed by the rating. The Prospectus Supplement relating to
such Series of Securities also will set forth certain information relating to
the corporate status, ownership and credit quality of the counterparty or
counterparties to such swap agreement in accordance with applicable rules and
regulations of the Commission.
RESERVE FUND
If so specified in the related Prospectus Supplement, credit support with
respect to one or more Classes or Subclasses of Securities of a Series may be
provided by the establishment and maintenance with the Trustee for such Series
of Securities, in trust, of a Reserve Fund for such Series. Unless otherwise
specified in the applicable Prospectus Supplement, the Reserve Fund for a Series
will not be included in the Trust Fund for such Series. The Reserve Fund for
each Series will be created by the Depositor and shall be funded by the
retention by the Master Servicer of certain payments on the Mortgage Loans or
Contracts, by the deposit with the Trustee, in escrow, by the Depositor of a
Subordinated Pool of mortgage loans or Contracts with the aggregate principal
balance, as of the related Cut-off Date, set forth in the related Prospectus
Supplement, by any combination of the foregoing, or in another manner specified
in the related Prospectus Supplement. Except as otherwise provided in the
related Prospectus Supplement, following the initial issuance of the Securities
of a Series and until the balance of the Reserve Fund first equals or exceeds
the Required Reserve, the Master Servicer will retain specified distributions on
the related Mortgage Loans or Contracts and/or on the Contracts in the
Subordinated Pool otherwise distributable to the holders of the applicable Class
or Subclasses of Subordinated Securities and deposit such amounts in the Reserve
Fund. After the amounts in the Reserve Fund for a Series first equal or exceed
the applicable Required Reserve, the Master Servicer will retain such
distributions and deposit so much of such amounts in the Reserve Fund as may be
necessary, after the application of such distributions to amounts due and unpaid
on the Securities or on the Securities of such Series to which the applicable
Class or Subclass of Subordinated Securities are subordinated and the
reimbursement of unreimbursed Advances and liquidation expenses, to maintain the
Reserve Fund at the Required Reserve. Except as otherwise provided in the
related Prospectus Supplement, the balance in the Reserve Fund in excess of the
Required Reserve shall be paid to the applicable Class or Subclass of
Subordinated Securities, or to another specified person or entity, as set forth
in the related Prospectus Supplement, and shall be unavailable thereafter for
future distribution to Certificateholders of either Class. The Prospectus
Supplement for each Series will set forth the amount of the Required Reserve
applicable from time to time. The Required Reserve may decline over time in
accordance with a schedule which will also be set forth in the related
Prospectus Supplement.
Except as otherwise provided in the related Prospectus Supplement, amounts
held in the Reserve Fund for a Series from time to time will continue to be the
property of the Subordinated Securityholders of the Classes or
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Subclasses specified in the related Prospectus Supplement until withdrawn from
the Reserve Fund and transferred to the Certificate Account as described below.
Except as otherwise provided in the related Prospectus Supplement, if on any
Distribution Date the amount in the Certificate Account available to be applied
to distributions on the applicable Senior Securities of such Series, after
giving effect to any Advances made by the Servicers or the Master Servicer on
such Distribution Date, is less than the amount required to be distributed to
such Senior Securityholders (the 'Required Distribution') on such Distribution
Date, the Master Servicer will withdraw from the Reserve Fund and deposit into
the Certificate Account the lesser of (i) the entire amount on deposit in the
Reserve Fund available for distribution to such Senior Securityholders (which
amount will not in any event exceed the Required Reserve) or (ii) the amount
necessary to increase the funds in the Certificate Account eligible for
distribution to the Senior Securityholders on such Distribution Date to the
Required Distribution; provided, however, that unless specified in the related
Prospectus Supplement no amount representing investment earnings on amounts held
in the Reserve Fund be transferred into the Certificate Account or otherwise
used in any manner for the benefit of the Senior Securityholders. If so
specified in the applicable Prospectus Supplement, the balance, if any, in the
Reserve Fund in excess of the Required Reserve shall be released to the
applicable Subordinated Securityholders. Unless otherwise specified in the
related Prospectus Supplement, whenever the Reserve Fund is less than the
Required Reserve, holders of the Subordinated Securities of the applicable Class
or Subclass will not receive any distributions with respect to the Mortgage
Loans, Mortgage Certificates or Contracts other than amounts attributable to
interest on the Mortgage Loans, Mortgage Certificates or Contracts after the
initial Required Reserve has been attained and amounts attributable to any
income resulting from investment of the Reserve Fund as described below. Except
as otherwise provided in the related Prospectus Supplement, whether or not the
amount of the Reserve Fund exceeds the Required Reserve on any Distribution
Date, the holders of the Subordinated Securities of the applicable Class or
Subclass are entitled to receive from the Certificate Account their share of the
proceeds of any Mortgage Loan, Mortgage Certificates or Contract, or any
property acquired in respect thereof, repurchased by reason of defective
documentation or the breach of a representation or warranty pursuant to the
Pooling and Servicing Agreement. Except as otherwise provided in the related
Prospectus Supplement, amounts in the Reserve Fund shall be applied in the
following order:
(i) to the reimbursement of Advances determined by the Master Servicer
and the Servicers to be otherwise unrecoverable, other than Advances of
interest in connection with prepayments in full, repurchases and
liquidations, and the reimbursement of liquidation expenses incurred by the
Servicers and the Master Servicer if sufficient funds for such
reimbursement are not otherwise available in the related Servicing Accounts
and Certificate Account;
(ii) to the payment to the holders of the applicable Senior Securities
of such Series of amounts distributable to them on the related Distribution
Date in respect of scheduled payments of principal and interest due on the
related Due Date to the extent that sufficient funds in the Certificate
Account are not available therefor; and
(iii) to the payment to the holders of the Senior Securities of such
Series of the principal balance or purchase price, as applicable, of
Mortgage Loans or Contracts repurchased, liquidated or foreclosed during
the period ending on the day prior to the Due Date to which such
distribution relates and interest thereon at the related Mortgage Rate or
APR, as applicable, to the extent that sufficient funds in the Certificate
Account are not available therefor.
Except as otherwise provided in the related Prospectus Supplement, amounts
in the Reserve Fund in excess of the Required Reserve, including any investment
income on amounts therein, as set forth below, shall then be released to the
holders of the Subordinated Securities, or to such other person as is specified
in the applicable Prospectus Supplement, as set forth above.
Funds in the Reserve Fund for a Series shall be invested as provided in the
related Agreement and/or Indenture in certain types of eligible investments. The
earnings on such investments will be withdrawn and paid to the holders of the
applicable Class or Subclass of Subordinated Securities in accordance with their
respective interests in the Reserve Fund in the priority specified in the
related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, investment income in the Reserve Fund is not available
for distribution to the holders of the Senior Securities of such Series or
otherwise subject to any claims or rights of the holders of the applicable Class
or Subclass of Senior Securities. Eligible investments for monies deposited in
the Reserve Fund will be specified in the applicable Agreement and/or Indenture
for a Series of Securities for
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which a Reserve Fund is established and in some instances will be limited to
investments acceptable to the Rating Agency rating the Securities of such Series
from time to time as being consistent with its outstanding rating of such
Securities. Such eligible investments will be limited, however, to obligations
or securities that mature at various time periods up to 30 days according to a
schedule in the applicable Agreement based on the current balance of the Reserve
Fund at the time of such investment or the contractual commitment providing for
such investment.
The time necessary for the Reserve Fund of a Series to reach and maintain
the applicable Required Reserve at any time after the initial issuance of the
Securities of such Series and the availability of amounts in the Reserve Fund
for distributions on such Securities will be affected by the delinquency,
foreclosure and prepayment experience of the Mortgage Loans or Contracts in the
related Trust Fund and/or in the Subordinated Pool and therefore cannot be
accurately predicted.
SECURITY GUARANTEE INSURANCE
If so specified in the related Prospectus Supplement, Security Guarantee
Insurance, if any, with respect to a Series of Securities may be provided by one
or more insurance companies. Such Security Guarantee Insurance will guarantee,
with respect to one or more Classes of Securities of the related Series, timely
distributions of interest and full distributions of principal on the basis of a
schedule of principal distributions set forth in or determined in the manner
specified in the related Prospectus Supplement. If so specified, in the related
Prospectus Supplement, the Security Guarantee Insurance will also guarantee
against any payment made to a Series of Securities which is subsequently
recovered as a 'voidable preference' payment under the Bankruptcy Code. A copy
of the Security Guarantee Insurance for a Series, if any, will be filed with the
Commission as an exhibit to a Current Report on Form 8-K to be filed with the
Commission within 15 days of issuance of the Securities of the related Series.
PERFORMANCE BOND
If so specified in the related Prospectus Supplement, the Master Servicer
may be required to obtain a Performance Bond that would provide a guarantee of
the performance by the Master Servicer of one or more of its obligations under
the applicable Agreement and/or Servicing Agreement, including its obligation to
make Advances and its obligation to repurchase Mortgage Loans or Contracts in
the event of a breach by the Master Servicer of a representation or warranty
contained in the applicable Agreement. In the event that the outstanding credit
rating of the obligor of the Performance Bond is lowered by the Rating Agency,
with the result that the outstanding rating on any Class or Subclass of
Securities would be reduced by such Rating Agency, the Master Servicer will be
required to secure a substitute Performance Bond issued by an entity with a
rating sufficient to maintain the outstanding rating on such Securities or to
deposit and maintain with the Trustee cash in the amount specified in the
applicable Prospectus Supplement.
DESCRIPTION OF INSURANCE
To the extent that the applicable Prospectus Supplement does not expressly
provide for a form of credit support specified above or for Alternative Credit
Support in lieu of some or all of the insurance mentioned below, the following
paragraphs on insurance shall apply with respect to the Mortgage Loans included
in the related Trust Fund. To the extent specified in the related Prospectus
Supplement, each Manufactured Home that secures a Contract will be covered by a
standard hazard insurance policy and other insurance policies to the extent
described in the related Prospectus Supplement. Any material changes in such
insurance from the description that follows or the description of any
Alternative Credit Support will be set forth in the applicable Prospectus
Supplement.
PRIMARY MORTGAGE INSURANCE POLICIES
To the extent specified in the related Prospectus Supplement, each
Servicing Agreement will require the Servicer to cause a Primary Mortgage
Insurance Policy to be maintained in full force and effect with respect to each
Mortgage Loan that is secured by a Single Family Property covered by the
Servicing Agreement requiring such insurance and to act on behalf of the Insured
with respect to all actions required to be taken by the Insured under each such
Primary Mortgage Insurance Policy. Any primary mortgage insurance or primary
credit
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insurance policies relating to the Contracts underlying a Series of Securities
will be described in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the amount
of a claim for benefits under a Primary Mortgage Insurance Policy covering a
Mortgage Loan in the related Mortgage Pool (herein referred to as the 'Loss')
will consist of the insured portion of the unpaid principal amount of the
covered Mortgage Loan (as described herein) and accrued and unpaid interest
thereon and reimbursement of certain expenses, less (i) all rents or other
payments collected or received by the Insured (other than the proceeds of hazard
insurance) that are derived from or in any way related to such Mortgaged
Property, (ii) hazard insurance proceeds in excess of the amount required to
restore such Mortgaged Property and which have not been applied to the payment
of such Mortgage Loan, (iii) amounts expended but not approved by the Primary
Mortgage Insurer, (iv) claim payments previously made by the Primary Mortgage
Insurer, and (v) unpaid premiums.
Unless otherwise specified in the related Prospectus Supplement, as
conditions precedent to the filing of or payment of a claim under a Primary
Mortgage Insurance Policy covering a Mortgage Loan in the related Mortgage Pool,
the Insured will be required to, in the event of default by the Mortgagor: (i)
advance or discharge (A) all hazard insurance premiums and (B) as necessary and
approved in advance by the Primary Mortgage Insurer, (1) real estate property
taxes, (2) all expenses required to preserve, repair and prevent waste to the
Mortgaged Property so as to maintain such Mortgaged Property in at least as good
a condition as existed at the effective date of such Primary Mortgage Insurance
Policy, ordinary wear and tear excepted, (3) property sales expenses, (4) any
outstanding liens (as defined in such Primary Mortgage Insurance Policy) on the
Mortgaged Property and (5) foreclosure costs, including court costs and
reasonable attorneys' fees; (ii) in the event of a physical loss or damage to
the Mortgaged Property, have restored and repaired the Mortgaged Property to at
least as good a condition as existed at the effective date of such Primary
Mortgage Insurance Policy, ordinary wear and tear excepted; and (iii) tender to
the Primary Mortgage Insurer good and merchantable title to and possession of
the mortgaged property.
Unless otherwise specified in the related Prospectus Supplement, other
provisions and conditions of each Primary Mortgage Insurance Policy covering a
Mortgage Loan in the related Mortgage Pool generally will provide that: (a) no
change may be made in the terms of such Mortgage Loan without the consent of the
Primary Mortgage Insurer; (b) written notice must be given to the Primary
Mortgage Insurer within 10 days after the Insured becomes aware that a Mortgagor
is delinquent in the payment of a sum equal to the aggregate of two scheduled
monthly payments due under such Mortgage Loan or that any proceedings affecting
the Mortgagor's interest in the Mortgaged Property securing such Mortgage Loan
have commenced, and thereafter the Insured must report monthly to the Primary
Mortgage Insurer the status of any such Mortgage Loan until such Mortgage Loan
is brought current, such proceedings are terminated or a claim is filed; (c) the
Primary Mortgage Insurer will have the right to purchase such Mortgage Loan, at
any time subsequent to the 10 days' notice described in (b) above and prior to
the commencement of foreclosure proceedings, at a price equal to the unpaid
principal amount of the Mortgage Loan, plus accrued and unpaid interest thereon
and reimbursable amounts expended by the Insured for the real estate taxes and
fire and extended coverage insurance on the Mortgaged Property for a period not
exceeding 12 months, and less the sum of any claim previously paid under the
Primary Mortgage Insurance Policy and any due and unpaid premiums with respect
to such policy; (d) the Insured must commence proceedings at certain times
specified in the Primary Mortgage Insurance Policy and diligently proceed to
obtain good and merchantable title to and possession of the Mortgaged Property;
(e) the Insured must notify the Primary Mortgage Insurer of the price specified
in (c) above at least 15 days prior to the sale of the Mortgaged Property by
foreclosure, and bid such amount unless the Mortgage Insurer specifies a lower
or higher amount; and (f) the Insured may accept a conveyance of the Mortgaged
Property in lieu of foreclosure with written approval of the Mortgage Insurer
provided the ability of the Insured to assign specified rights to the Primary
Mortgage Insurer are not thereby impaired or the specified rights of the Primary
Mortgage Insurer are not thereby adversely affected.
Unless otherwise specified in the related Prospectus Supplement, the
Primary Mortgage Insurer will be required to pay to the Insured either: (1) the
insured percentage of the Loss; or (2) at its option under certain of the
Primary Mortgage Insurance Policies, the sum of the delinquent monthly payments
plus any advances made by the Insured, both to the date of the claim payment,
and thereafter, monthly payments in the amount that would have become due under
the Mortgage Loan if it had not been discharged plus any advances made by the
Insured until the earlier of (A) the date the Mortgage Loan would have been
discharged in full if the default had
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not occurred or (B) an approved sale. Any rents or other payments collected or
received by the Insured which are derived from or are in any way related to the
Mortgaged Property will be deducted from any claim payment.
FHA INSURANCE AND VA GUARANTEES
The FHA is responsible for administering various federal programs,
including mortgage insurance, authorized under the National Housing Act, as
amended, and the United States Housing Act of 1937, as amended. Any FHA
Insurance or VA Guarantees relating to Contracts underlying a Series of
Securities will be described in the related Prospectus Supplement.
The insurance premiums for FHA Loans are collected by HUD approved lenders
or by the Servicers of such FHA Loans and are paid to the FHA. The regulations
governing FHA single-family mortgage insurance programs provide that insurance
benefits are payable either upon foreclosure (or other acquisition of
possession) and conveyance of the mortgaged premises to HUD or upon assignment
of the defaulted FHA Loan to HUD. With respect to a defaulted FHA Loan, the
Servicer of such FHA Loan will be limited in its ability to initiate foreclosure
proceedings. When it is determined, either by the Servicer or HUD, that default
was caused by circumstances beyond the Mortgagor's control, the Servicer will be
expected to make an effort to avoid foreclosure by entering, if feasible, into
one of a number of available forms of forbearance plans with the Mortgagor. Such
plans may involve the reduction or suspension of scheduled mortgage payments for
a specified period, with such payments to be made upon or before the maturity
date of the mortgage, or the recasting of payments due under the mortgage up to
or beyond the scheduled maturity date. In addition, when a default caused by
such circumstances is accompanied by certain other criteria, HUD may provide
relief by making payments to the Servicer of such Mortgage Loan in partial or
full satisfaction of amounts due thereunder (which payments are to be repaid by
the Mortgagor to HUD) or by accepting assignment of the Mortgage Loan from the
Servicer. With certain exceptions, at least three full monthly installments must
be due and unpaid under the Mortgage Loan, and HUD must have rejected any
request for relief from the Mortgagor before the Servicer may initiate
foreclosure proceedings.
HUD has the option, in most cases, to pay insurance claims in cash or in
debentures issued by HUD. Presently, claims are being paid in cash, and claims
have not been paid in debentures since 1965. HUD debentures issued in
satisfaction of FHA insurance claims bear interest at the applicable HUD
debenture interest rate. The Servicer of each FHA Loan in a Mortgage Pool will
be obligated to purchase any such debenture issued in satisfaction of a
defaulted FHA Loan serviced by it for an amount equal to the principal amount of
the FHA Loan.
The amount of insurance benefits generally paid by the FHA is equal to the
entire unpaid principal balance of the defaulted FHA Loan, adjusted to reimburse
the Servicer of such FHA Loan for certain costs and expenses and to deduct
certain amounts received or retained by such Servicer after default. When
entitlement to insurance benefits results from foreclosure (or other acquisition
of possession) and conveyance to HUD, the Servicer is compensated for no more
than two-thirds of its foreclosure costs, and is compensated for interest
accrued and unpaid prior to such date in general only to the extent it was
allowed pursuant to a forbearance plan approved by HUD. When entitlement to
insurance benefits results from assignment of the FHA Loan to HUD, the insurance
payment includes full compensation for interest accrued and unpaid to the
assignment date. The insurance payment itself, upon foreclosure of an FHA Loan,
bears interest from a date 30 days after the mortgagor's first uncorrected
failure to perform any obligation or make any payment due under the Mortgage
Loan and, upon assignment, from the date of assignment, to the date of payment
of the claim, in each case at the same interest rate as the applicable HUD
debenture interest rate as described above.
The maximum guarantee that may be issued by the VA under a VA Loan is 50%
of the principal amount of the VA Loan if the principal amount of the Mortgage
Loan is $45,000 or less, the lesser of $36,000 and 40% if the principal amount
of the VA Loan if the principal amount of such VA Loan is greater than $45,000
but less than or equal to $144,000, and the lesser of $46,000 and 25% of the
principal amount of the Mortgage Loan if the principal amount of the Mortgage
Loan is greater than $144,000. The liability on the guarantee is reduced or
increased pro rata with any reduction or increase in the amount of indebtedness,
but in no event will the amount payable on the guarantee exceed the amount of
the original guarantee. The VA may, at its option and without regard to the
guarantee, make full payment to a mortgage holder of unsatisfied indebtedness on
a Mortgage upon its assignment to the VA.
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With respect to a defaulted VA Loan, the Servicer is, absent exceptional
circumstances, authorized to announce its intention to foreclose only when the
default has continued for three months. Generally, a claim for the guarantee is
submitted after liquidation of the Mortgaged Property.
The amount payable under the guarantee will be the percentage of the VA
Loan originally guaranteed applied to indebtedness outstanding as of the
applicable date of computation specified in the VA regulations. Payments under
the guarantee will be equal to the unpaid principal amount of the VA Loan,
interest accrued on the unpaid balance of the VA Loan to the appropriate date of
computation and limited expenses of the mortgagee, but in each case only to the
extent that such amounts have not been recovered through liquidation of the
Mortgaged Property. The amount payable under the guarantee may in no event
exceed the amount of the original guarantee.
STANDARD HAZARD INSURANCE POLICIES ON MORTGAGE LOANS
Unless otherwise specified in the related Prospectus Supplement, any
Standard Hazard Insurance Policies covering the Mortgage Loans in a Mortgage
Pool will provide for coverage at least equal to the applicable state standard
form of fire insurance policy with extended coverage. In general, the standard
form of fire and extended coverage policy will cover physical damage to, or
destruction of, the improvements on the Mortgaged Property caused by fire,
lightning, explosion, smoke, windstorm, hail, riot, strike and civil commotion,
subject to the conditions and exclusions particularized in each policy. Because
the Standard Hazard Insurance Policies relating to such Mortgage Loans will be
underwritten by different insurers and will cover Mortgaged Properties located
in various states, such policies will not contain identical terms and
conditions. The most significant terms thereof, however, generally will be
determined by state law and generally will be similar. Most such policies
typically will not cover any physical damage resulting from the following: war,
revolution, governmental actions, floods and other water-related causes, earth
movement (including earthquakes, landslides and mudflows), nuclear reaction, wet
or dry rot, vermin, rodents, insects or domestic animals, theft and, in certain
cases, vandalism. The foregoing list is merely indicative of certain kinds of
uninsured risks and is not intended to be all-inclusive.
The Standard Hazard Insurance Policies covering Mortgaged Properties
securing Mortgage Loans typically will contain a 'coinsurance' clause which, in
effect, will require the insured at all times to carry insurance of a specified
percentage (generally 80% to 90%) of the full replacement value of the
dwellings, structures and other improvements on the Mortgaged Property in order
to recover the full amount of any partial loss. If the insured's coverage falls
below this specified percentage, such clause will provide that the insurer's
liability in the event of partial loss will not exceed the greater of (i) the
actual cash value (the replacement cost less physical depreciation) of the
dwellings, structures and other improvements damaged or destroyed or (ii) such
proportion of the loss, without deduction for depreciation, as the amount of
insurance carried bears to the specified percentage of the full replacement cost
of such dwellings, structures and other improvements.
The Depositor will not require that a standard hazard or flood insurance
policy be maintained on the Cooperative Dwelling relating to any Cooperative
Loan. Generally, the cooperative corporation itself is responsible for
maintenance of hazard insurance for the property owned by the cooperative and
the tenant-stockholders of that cooperative do not maintain individual hazard
insurance policies. To the extent, however, that a Cooperative and the related
borrower on a Cooperative Loan do not maintain such insurance or do not maintain
adequate coverage or any insurance proceeds are not applied to the restoration
of damaged property, any damage to such borrower's Cooperative Dwelling or such
Cooperative's building could significantly reduce the value of the collateral
securing such Cooperative Loan to the extent not covered by other credit
support.
Any losses incurred with respect to Mortgage Loans due to uninsured risks
(including earthquakes, mudflows and, with respect to Mortgaged Properties
located other than in HUD designated flood areas, floods) or insufficient hazard
insurance proceeds and any hazard losses incurred with respect to Cooperative
Loans could affect distributions to the Certificateholders.
With respect to Mortgage Loans secured by Multifamily Property, certain
additional insurance policies may be required with respect to the Multifamily
Property; for example, general liability insurance for bodily injury and
property damage, steam boiler coverage where a steam boiler or other pressure
vessel is in operation, and rent loss insurance to cover income losses following
damage or destruction of the Mortgaged Property. The related Prospectus
Supplement will specify the required types and amounts of additional insurance
that may be
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required in connection with Mortgage Loans secured by Multifamily Property and
will describe the general terms of such insurance and conditions to payment
thereunder.
STANDARD HAZARD INSURANCE POLICIES ON THE MANUFACTURED HOMES
The applicable Pooling and Servicing Agreement or Sale and Servicing
Agreement for each Series will require the Master Servicer to cause to be
maintained with respect to each Contract one or more Standard Hazard Insurance
Policies which provide, at a minimum, the same coverage as a standard form file
and extended coverage insurance policy that is customary for manufactured
housing, issued by a company authorized to issue such policies in the state in
which the Manufactured Home is located, and in an amount which is not less than
the lesser of the maximum insurable value of such Manufactured Home or the
principal balance due from the Obligor on the related Contract; provided,
however, that the amount of coverage provided by each Standard Hazard Insurance
Policy shall be sufficient to avoid the application of any co-insurance clause
contained therein. When a Manufactured Home's location was, at the time of
origination of the related Contract, within a federally designated flood area,
the Master Servicer also shall cause such flood insurance to be maintained,
which coverage shall be at least equal to the minimum amount specified in the
preceding sentence or such lesser amount as may be available under the federal
flood insurance program. Each Standard Hazard Insurance Policy caused to be
maintained by the Master Servicer shall contain a standard loss payee clause in
favor of the Master Servicer and its successors and assigns. If any Obligor is
in default in the payment of premiums on its Standard Hazard Insurance Policy or
Policies, the Master Servicer shall pay such premiums out of its own funds, and
may add separately such premium to the Obligor's obligation as provided by the
Contract, but may not add such premium to the remaining principal balance of the
Contract.
The Master Servicer may maintain, in lieu of causing individual Standard
Hazard Insurance Policies to be maintained with respect to each Manufactured
Home, and shall maintain, to the extent that the related Contract does not
require the Obligor to maintain a Standard Hazard Insurance Policy with respect
to the related Manufactured Home, one or more blanket insurance policies
covering losses on the Obligor's interest in the Contracts resulting from the
absence or insufficiency of individual Standard Hazard Insurance Policies. Any
such blanket policy shall be substantially in the form and in the amount carried
by the Master Servicer as of the date of the Pooling and Servicing Agreement.
The Master Servicer shall pay the premium for such policy on the basis described
therein and shall pay any deductible amount with respect to claims under such
policy relating to the Contracts. If the insurer thereunder shall cease to be
acceptable to the Master Servicer, the Master Servicer shall use its best
reasonable efforts to obtain from another insurer a replacement policy
comparable to such policy.
If the Master Servicer shall have repossessed a Manufactured Home on behalf
of the Trustee, the Master Servicer shall either (i) maintain at its expense
hazard insurance with respect to such Manufactured Home or (ii) indemnify the
Trustee against any damage to such Manufactured Home prior to resale or other
disposition.
POOL INSURANCE POLICIES
If so specified in the related Prospectus Supplement, the Master Servicer
will obtain a Pool Insurance Policy for a Mortgage Pool underlying Securities of
such Series. Such Pool Insurance Policy will be issued by the Pool Insurer named
in the applicable Prospectus Supplement. Any Pool Insurance Policy for a
Contract Pool underlying a Series of Securities will be described in the related
Prospectus Supplement. Each Pool Insurance Policy will cover any loss (subject
to the limitations described below) by reason of default to the extent the
related Mortgage Loan is not covered by any Primary Mortgage Insurance Policy,
FHA insurance or VA guarantee. The amount of the Pool Insurance Policy, if any,
with respect to a Series will be specified in the related Prospectus Supplement.
A Pool Insurance Policy, however, will not be a blanket policy against loss,
because claims thereunder may only be made for particular defaulted Mortgage
Loans and only upon satisfaction of certain conditions precedent described
below. The Prospectus Supplement will contain such financial information
regarding the Pool Insurer as may be required by the rules and regulations of
the Commission.
Unless otherwise specified in the related Prospectus Supplement, the Pool
Insurance Policy will provide that as a condition precedent to the payment of
any claim the Insured will be required (i) to advance hazard insurance premiums
on the Mortgaged Property securing the defaulted Mortgage Loan; (ii) to advance,
as
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necessary and approved in advance by the Pool Insurer, (a) real estate property
taxes, (b) all expenses required to preserve and repair the Mortgaged Property,
to protect the Mortgaged Property from waste, so that the Mortgaged Property is
in at least as good a condition as existed on the date upon which coverage under
the Pool Insurance Policy with respect to such Mortgaged Property first became
effective (ordinary wear and tear excepted), (c) property sales expenses, (d)
any outstanding liens on the Mortgaged Property and (e) foreclosure costs
including court costs and reasonable attorneys' fees; and (iii) if there has
been physical loss or damage to the Mortgaged Property, to restore the Mortgaged
Property to its condition (reasonable wear and tear excepted) as of the issue
date of the Pool Insurance Policy. It also will be a condition precedent to the
payment of any claim under the Pool Insurance Policy that the Insured maintain a
Primary Mortgage Insurance Policy that is acceptable to the Pool Insurer on all
Mortgage Loans that have Loan-to-Value Ratios at the time of origination in
excess of 80%. FHA insurance and VA guarantees will be deemed to be an
acceptable Primary Mortgage Insurance Policy under the Pool Insurance Policy.
Assuming satisfaction of these conditions, the Pool Insurer will pay to the
Insured the amount of loss, determined as follows: (i) the amount of the unpaid
principal balance of the Mortgage Loan immediately prior to the Approved Sale
(as described below) of the Mortgaged Property, (ii) the amount of the
accumulated unpaid interest on such Mortgage Loan to the date of claim
settlement at the applicable Mortgage Rate and (iii) advances as described
above, less (a) all rents or other payments (excluding proceeds of fire and
extended coverage insurance) collected or received by the Insured, which are
derived from or in any way related to the Mortgaged Property, (b) amounts paid
under applicable fire and extended coverage policies which are in excess of the
cost of restoring and repairing the Mortgaged Property and which have not been
applied to the payment of the Mortgage Loan, (c) any claims payments previously
made by the Pool Insurer on the Mortgage Loan, (d) due and unpaid premiums
payable with respect to the Pool Insurance Policy and (e) all claim payments
received by the Insured pursuant to any Primary Mortgage Insurance Policy. An
'Approved Sale' is (1) a sale of the Mortgaged Property acquired because of a
default by the Mortgagor to which the Pool Insurer has given prior approval, (2)
a foreclosure or trustee's sale of the Mortgaged Property at a price exceeding
the maximum amount specified by the Pool Insurer, (3) the acquisition of the
Mortgaged Property under the Primary Insurance Policy by the Primary Mortgage
Insurer or (4) the acquisition of the Mortgaged Property by the Pool Insurer.
The Pool Insurer must be provided with good and merchantable title to the
Mortgaged Property as a condition precedent to the payment of any Loss. If any
Mortgaged Property securing a defaulted Mortgage Loan is damaged and the
proceeds, if any, from the related Standard Hazard Insurance Policy or the
applicable Special Hazard Insurance Policy are insufficient to restore the
Mortgaged Property to a condition sufficient to permit recovery under the Pool
Insurance Policy, the Master Servicer or the Servicer of the related Mortgage
Loan will not be required to expend its own funds to restore the damaged
Mortgaged Property unless it is determined (A) that such restoration will
increase the proceeds to the Securityholders of the related Series on
liquidation of the Mortgage Loan, after reimbursement of the expenses of the
Master Servicer or the Servicer, as the case may be, and (B) that such expenses
will be recoverable by it through payments under the Letter of Credit, if any,
with respect to such Series, Liquidation Proceeds, Insurance Proceeds, amounts
in the Reserve Fund, if any, or payments under any Alternative Credit Support,
if any, with respect to such Series.
No Pool Insurance Policy will insure (and many Primary Mortgage Insurance
Policies may not insure) against loss sustained by reason of a default arising
from, among other things, (i) fraud or negligence in the origination or
servicing of a Mortgage Loan, including misrepresentation by the Mortgagor, the
Unaffiliated Seller, the Originator or other persons involved in the origination
thereof, (ii) the exercise by the Insured of its right to call the Mortgage
Loan, or the term of the Mortgage Loan is shorter than the amortization period
and the defaulted payment is for an amount more than twice the regular periodic
payments of principal and interest for such Mortgage Loan, or (iii) the exercise
by the Insured of a 'due-on-sale' clause or other similar provision in the
Mortgage Loan; provided, in either case of clause (ii) or (iii), such exclusion
shall not apply if the Insured offers a renewal or extension of the Mortgage
Loan or a new Mortgage Loan at the market rate in an amount not less than the
then outstanding principal balance with no decrease in the amortization period.
A failure of coverage attributable to one of the foregoing events might result
in a breach of the Master Servicer's insurability representation described under
'Description of the Securities -- Assignment of Mortgage Loans,' and in such
event, subject to the limitations described therein, might give rise to an
obligation on the part of the Master Servicer to purchase the defaulted Mortgage
Loan if the breach materially and adversely affects the interests of the
Securityholders of the related Series and cannot be cured by the Master
Servicer. Depending upon the nature of the event, a breach of representation
made by the Depositor or an Unaffiliated Seller may also have occurred.
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Such a breach, if it materially and adversely affects the interests of the
Securityholders of such Series and cannot be cured, would give rise to a
repurchase obligation on the part of the Unaffiliated Seller as more fully
described under 'The Trust Fund -- Mortgage Loan Program' and
' -- Representations by Unaffiliated Sellers; Repurchases' and 'Description of
the Securities -- Assignment of Mortgage Loans.'
The original amount of coverage under the Pool Insurance Policy will be
reduced over the life of the Securities of the related Series by the aggregate
dollar amount of claims paid less the aggregate of the net amounts realized by
the Pool Insurer upon disposition of all foreclosed Mortgaged Properties covered
thereby. The amount of claims paid will include certain expenses incurred by the
Master Servicer or by the Servicer of the defaulted Mortgage Loan as well as
accrued interest on delinquent Mortgage Loans to the date of payment of the
claim. Accordingly, if aggregate net claims paid under a Pool Insurance Policy
reach the original policy limit, coverage under the Pool Insurance Policy will
lapse and any further losses will be borne by the holders of the Securities of
such Series. In addition, unless the Master Servicer or the related Servicer
could determine that an Advance in respect of a delinquent Mortgage Loan would
be recoverable to it from the proceeds of the liquidation of such Mortgage Loan
or otherwise, neither such Servicer nor the Master Servicer would be obligated
to make an Advance respecting any such delinquency, since the Advance would not
be ultimately recoverable to it from either the Pool Insurance Policy or from
any other related source. See 'Description of the Securities -- Advances.'
SPECIAL HAZARD INSURANCE POLICIES
If so specified in the related Prospectus Supplement, the Master Servicer
shall obtain a Special Hazard Insurance Policy for the Mortgage Pool underlying
a Series of Securities. Any Special Hazard Insurance Policies for a Contract
Pool underlying a Series of Securities will be described in the related
Prospectus Supplement. The Special Hazard Insurance Policy for the Mortgage Pool
underlying the Securities of a Series will be issued by the Special Hazard
Insurer named in the applicable Prospectus Supplement. Each Special Hazard
Insurance Policy will, subject to the limitations described below, protect
against loss by reason of damage to Mortgaged Properties caused by certain
hazards (including vandalism and earthquakes and, except where the Mortgagor is
required to obtain flood insurance, floods and mudflows) not insured against
under the standard form of hazard insurance policy for the respective states in
which the Mortgaged Properties are located. See 'Description of the
Securities -- Maintenance of Insurance Policies' and ' -- Standard Hazard
Insurance.' The Special Hazard Insurance Policy will not cover losses occasioned
by war, certain governmental actions, nuclear reaction and certain other perils.
Coverage under a Special Hazard Insurance Policy will be at least equal to the
amount set forth in the related Prospectus Supplement.
Subject to the foregoing limitations, each Special Hazard Insurance Policy
will provide that, when there has been damage to the Mortgaged Property securing
a defaulted Mortgage Loan and to the extent such damage is not covered by the
Standard Hazard Insurance Policy, if any, maintained by the Mortgagor, the
Master Servicer or the Servicer, the Special Hazard Insurer will pay the lesser
of (i) the cost of repair or replacement of such Mortgaged Property or (ii) upon
transfer of such Mortgaged Property to the Special Hazard Insurer, the unpaid
balance of such Mortgage Loan at the time of acquisition of such Mortgaged
Property by foreclosure or deed in lieu of foreclosure, plus accrued interest to
the date of claim settlement (excluding late charges and penalty interest) and
certain expenses incurred in respect of such Mortgaged Property. No claim may be
validly presented under a Special Hazard Insurance Policy unless (i) hazard
insurance on the Mortgaged Property has been kept in force and other
reimbursable protection, preservation and foreclosure expenses have been paid
(all of which must be approved in advance as necessary by the insurer) and (ii)
the insured has acquired title to the Mortgaged Property as a result of default
by the Mortgagor. If the sum of the unpaid principal balance plus accrued
interest and certain expenses is paid by the Special Hazard Insurer, the amount
of further coverage under the related Special Hazard Insurance Policy will be
reduced by such amount less any net proceeds from the sale of the Mortgaged
Property. Any amount paid as the cost of repair of the Mortgaged Property will
further reduce coverage by such amount.
The terms of the applicable Agreement and/or Servicing Agreement will
require the Master Servicer to maintain the Special Hazard Insurance Policy in
full force and effect throughout the term of the Agreement. If a Pool Insurance
Policy is required to be maintained pursuant to the Agreement, the Special
Hazard Insurance Policy will be designed to permit full recoveries under the
Pool Insurance Policy in circumstances where such recoveries would otherwise be
unavailable because Mortgaged Property has been damaged by a cause not
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insured against by a Standard Hazard Insurance Policy. In such event the
Agreement and/or Servicing Agreement will provide that, if the related Pool
Insurance Policy shall have terminated or been exhausted through payment of
claims, the Master Servicer will be under no further obligation to maintain such
Special Hazard Insurance Policy.
MORTGAGOR BANKRUPTCY BOND
In the event of a personal bankruptcy of a Mortgagor, a bankruptcy court
may establish the value of the related Mortgaged Property or Cooperative
Dwelling at an amount less than the then outstanding principal balance of the
related Mortgage Loan. The amount of the secured debt could be reduced to such
value, and the holder of such Mortgage Loan thus would become an unsecured
creditor to the extent the outstanding principal balance of such Mortgage Loan
exceeds the value so assigned to the Mortgaged Property or Cooperative Dwelling
by the bankruptcy court. In addition, certain other modifications of the terms
of a Mortgage Loan can result from a bankruptcy proceeding. If so specified in
the related Prospectus Supplement, losses resulting from a bankruptcy proceeding
affecting the Mortgage Loans in a Mortgage Pool with respect to a Series of
Securities will be covered under a Mortgagor Bankruptcy Bond (or any other
instrument that will not result in a downgrading of the rating of the Securities
of a Series by the Rating Agency that rated such Series). Any Mortgagor
Bankruptcy Bond will provide for coverage in an amount acceptable to the Rating
Agency rating the Securities of the related Series, which will be set forth in
the related Prospectus Supplement. Subject to the terms of the Mortgagor
Bankruptcy Bond, the issuer thereof may have the right to purchase any Mortgage
Loan with respect to which a payment or drawing has been made or may be made for
an amount equal to the outstanding principal amount of such Mortgage Loan plus
accrued and unpaid interest thereon. The coverage of the Mortgagor Bankruptcy
Bond with respect to a Series of Securities may be reduced as long as any such
reduction will not result in a reduction of the outstanding rating of the
Securities of such Series by the Rating Agency rating such Series.
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CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND CONTRACTS
The following discussion contains summaries of certain legal aspects of
mortgage loans and manufactured housing installment or conditional sales
contracts and installment loan agreements which are general in nature. Because
such legal aspects are governed by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete nor to reflect the
laws of any particular state, nor to encompass the laws of all states in which
the security for the Mortgage Loans or Contracts is situated. The summaries are
qualified in their entirety by reference to the applicable federal and state
laws governing the Mortgage Loans and Contracts.
THE MORTGAGE LOANS
GENERAL
The Mortgage Loans (other than the Cooperative Loans) comprising or
underlying the Trust Assets for a Series will be secured by either first
mortgages or deeds of trust, depending upon the prevailing practice in the state
in which the underlying property is located. The filing of a mortgage, deed of
trust or deed to secure debt creates a lien or title interest upon the real
property covered by such instrument and represents the security for the
repayment of an obligation that is customarily evidenced by a promissory note.
It is not prior to the lien for real estate taxes and assessments or other
charges imposed under governmental police powers. Priority with respect to such
instruments depends on their terms, the knowledge of the parties to the mortgage
and generally on the order of recording with the applicable state, county or
municipal office. There are two parties to a mortgage: the mortgagor, who is the
borrower and homeowner, and the mortgagee, who is the lender. In a mortgage
state, the mortgagor delivers to the mortgagee a note or bond evidencing the
loan and the mortgage. Although a deed of trust is similar to a mortgage, a deed
of trust has three parties: the borrower-homeowner called the trustor (similar
to a mortgagor) a lender called the beneficiary (similar to a mortgagee) and a
third-party grantee called the trustee. Under a deed of trust, the borrower
grants the property, irrevocably until the debt is paid, in trust, generally
with a power of sale, to the trustee to secure payment of the loan. The
trustee's authority under a deed of trust and the mortgagee's authority under a
mortgage are governed by the express provisions of the deed of trust or
mortgage, applicable law and, in some cases, with respect to the deed of trust,
the directions of the beneficiary.
FORECLOSURE
Foreclosure of a mortgage is generally accomplished by judicial action.
Generally, the action is initiated by the service of legal pleadings upon all
parties having an interest of record in the real property. Delays in completion
of the foreclosure occasionally may result from difficulties in locating
necessary parties defendant. When the mortgagee's right to foreclosure is
contested, the legal proceedings necessary to resolve the issue can be
time-consuming. After the completion of a judicial foreclosure proceeding, the
court may issue a judgment of foreclosure and appoint a receiver or other
officer to conduct the sale of the property. In some states, mortgages may also
be foreclosed by advertisement, pursuant to a power of sale provided in the
mortgage. Foreclosure of a mortgage by advertisement is essentially similar to
foreclosure of a deed of trust by non-judicial power of sale.
Though a deed of trust may also be foreclosed by judicial action,
foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale under a specific provision in the deed of trust that authorizes
the trustee to sell the property upon a default by the borrower under the terms
of the note or deed of trust. In some states, the trustee must record a notice
of default and send a copy to the borrower-trustor and to any person who has
recorded a request for a copy of a notice of default and notice of sale. In
addition, the trustee must provide notice in some states to any other individual
having an interest in the real property, including any junior lienholders. If
the loan is not reinstated within any applicable cure period, a notice of sale
must be posted in a public place and, in most states, published for a specified
period of time in one or more newspapers. In addition, some state laws require
that a copy of the notice of sale be posted on the property and sent to all
parties having an interest of record in the property.
In some states, the borrower-trustor has the right to reinstate the loan at
any time following default until shortly before the trustee's sale. In general,
the borrower, or any other person having a junior encumbrance on the real
estate, may, during a reinstatement period, cure the default by paying the
entire amount in arrears plus
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the costs and expenses incurred in enforcing the obligation. Certain state laws
control the amount of foreclosure expenses and costs, including attorneys' fees,
which may be recovered by a lender.
In case of foreclosure under either a mortgage or a deed of trust, the sale
by the receiver or other designated officer, or by the trustee, is a public
sale. However, because of a number of factors, including the difficulty a
potential buyer at the sale would have in determining the exact status of title
and the fact that the physical condition of the property may have deteriorated
during the foreclosure proceedings, it is uncommon for a third party to purchase
the property at the foreclosure sale. Rather, it is common for the lender to
purchase the property from the trustee or receiver for a credit bid less than or
equal to the unpaid principal amount of the note, accrued and unpaid interest
and the expenses of foreclosure. Thereafter, subject to the right of the
borrower in some states to remain in possession during the redemption period,
the lender will assume the burdens of ownership, including obtaining hazard
insurance and making such repairs at its own expense as are necessary to render
the property suitable for sale. The lender commonly will obtain the services of
a real estate broker and pay the broker a commission in connection with the sale
of the property. Depending upon market conditions, the ultimate proceeds of the
sale of the property may not equal the lender's investment in the property. Any
loss may be reduced by the receipt of mortgage insurance proceeds.
COOPERATIVE LOANS
If specified in the Prospectus Supplement relating to a Series of
Securities, the Mortgage Loans may also contain Cooperative Loans evidenced by
promissory notes secured by security interests in shares issued by private
corporations which are entitled to be treated as housing cooperatives under the
Code and in the related proprietary leases or occupancy agreements granting
exclusive rights to occupy specific dwelling units in the corporations'
buildings. The security agreement will create a lien upon, or grant a title
interest in, the property that it covers, the priority of which will depend on
the terms of the particular security agreement as well as the order of
recordation of the agreement in the appropriate recording office. Such a lien or
title interest is not prior to the lien for real estate taxes and assessments
and other charges imposed under governmental police powers.
A corporation that is entitled to be treated as a housing cooperative under
the Code owns all the real property or some interest therein sufficient to
permit it to own the building and all separate dwelling units therein. The
cooperative is directly responsible for property management and, in most cases,
payment of real estate taxes and hazard and liability insurance. If there is a
blanket mortgage or mortgages on the cooperative apartment building and/or
underlying land, as is generally the case, or an underlying lease of the land,
as is the case in some instances, the cooperative, as property mortgagor, is
also responsible for meeting these mortgage or rental obligations. The interest
of the occupancy under proprietary leases or occupancy agreements as to which
that cooperative is the landlord are generally subordinate to the interest of
the holder of a blanket mortgage and to the interest of the holder of a land
lease. If the cooperative is unable to meet the payment obligations (i) arising
under a blanket mortgage, the mortgagee holding a blanket mortgage could
foreclose on that mortgage and terminate all subordinate proprietary leases and
occupancy agreements or (ii) arising under its land lease, the holder of the
land lease could terminate it and all subordinate proprietary leases and
occupancy agreements. Also, a blanket mortgage on a cooperative may provide
financing in the form of a mortgage that does not fully amortize, with a
significant portion of principal being due in one final payment at maturity. The
inability of the cooperative to refinance a mortgage and its consequent
inability to make such final payment could lead to foreclosure by the mortgagee.
Similarly, a land lease has an expiration date and the inability of the
cooperative to extend its term or, in the alternative, to purchase the land
could lead to termination of the cooperative's interest in the property and
termination of all proprietary leases and occupancy agreements. A foreclosure by
the holder of a blanket mortgage could eliminate or significantly diminish the
value of any collateral held by the lender who financed an individual
tenant-stockholder of cooperative shares including, in the case of the
Cooperative Loans, the collateral securing the Cooperative Loans. Similarly, the
termination of the land lease by its holder could eliminate or significantly
diminish the value of any collateral held by the lender who financed an
individual tenant-stockholder of the cooperative shares or, in the case of the
Cooperative Loans, the collateral securing the Cooperative Loans.
Each cooperative is owned by tenant-stockholders who, through ownership of
stock or shares in the corporation, receive proprietary leases or occupancy
agreements which confer exclusive rights to occupy specific units. Generally, a
tenant-stockholder of a cooperative must make a monthly payment to the
cooperative representing such tenant-stockholder's pro rata share of the
cooperative's payments for its blanket mortgage, real
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property taxes, maintenance expenses and other capital or ordinary expenses. An
ownership interest in a cooperative and accompanying occupancy rights are
financed through a cooperative share loan evidenced by a promissory note and
secured by a security interest in the occupancy agreement or proprietary lease
and in the related cooperative shares. The lender takes possession of the share
certificate and a counterpart of the proprietary lease or occupancy agreement,
and a financing statement covering the proprietary lease or occupancy agreement
and the cooperative shares is filed in the appropriate state and local offices
to perfect the lender's interest in its collateral. Subject to the limitations
discussed below, upon default of the tenant-stockholder, the lender may sue for
judgment on the promissory note, dispose of the collateral at a public or
private sale or otherwise proceed against the collateral or tenant-stockholder
as an individual as provided in the security agreement covering the assignment
of the proprietary lease or occupancy agreement and the pledge of cooperative
shares. See ' -- Realizing upon Cooperative Loan Security' below.
TAX ASPECTS OF COOPERATIVE LOANS
In general, a 'tenant-stockholder' (as defined in Section 216(b)(2) of the
Code) of a corporation that qualifies as a 'cooperative housing corporation'
within the meaning of Section 216(b)(1) of the Code is allowed a deduction for
amounts paid or accrued within his taxable year to the corporation representing
his proportionate share of certain interest expenses and certain real estate
taxes allowable as a deduction under Section 216(a) of the Code to the
corporation under Sections 163 and 164 of the Code. In order for a corporation
to qualify under Section 216(b)(1) of the Code for its taxable year in which
such items are allowable as a deduction to the corporation, such section
requires, among other things, that at least 80% of the gross income of the
corporation be derived from its tenant-stockholder. By virtue of this
requirement the status of a corporation for purposes of Section 216(b)(1) of the
Code must be determined on a year-to-year basis. Consequently, there can be no
assurance that cooperatives relating to the Cooperative Loans will qualify under
such section for any particular year. In the event that such a cooperative fails
to qualify for one or more years, the value of the collateral securing any
related Cooperative Loans could be significantly impaired because no deduction
would be allowable to tenant-stockholders under Section 216(a) of the Code with
respect to those years. In view of the significance of the tax benefits accorded
tenant-stockholders of a corporation that qualifies under Section 216(b)(1) of
the Code, the likelihood that such a failure would be permitted to continue over
a period of years appears remote.
REALIZING UPON COOPERATIVE LOAN SECURITY
The cooperative shares and proprietary lease or occupancy agreement owned
by the tenant-stockholder and pledged to the lender are, in almost all cases,
subject to restrictions on transfer as set forth in the cooperative's
certificate of incorporation and by-laws, as well as in the proprietary lease or
occupancy agreement. The proprietary lease or occupancy agreement, even while
pledged, may be cancelled by the cooperative for failure by the
tenant-stockholder to pay rent or other obligations or charges owed by such
tenant-stockholder, including mechanics' liens against the cooperative apartment
building incurred by such tenant-stockholder. Commonly, rent and other
obligations and charges arising under a proprietary lease or occupancy agreement
which are owed to the cooperative are made liens upon the shares to which the
proprietary lease or occupancy agreement relates. In addition, the proprietary
lease or occupancy agreement generally permits the cooperative to terminate such
lease or agreement in the event the borrower defaults in the performance of
covenants thereunder. The lender and the cooperative will typically enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder on its obligations
under the proprietary lease or occupancy agreement. A default by the
tenant-stockholder under the proprietary lease or occupancy agreement will
usually constitute a default under the security agreement between the lender and
the tenant-stockholder.
The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the cooperative will take no action to terminate such lease or
agreement until the lender has been provided with an opportunity to cure the
default. The recognition agreement typically provides that if the proprietary
lease or occupancy agreement is terminated, the cooperative will recognize the
lender's lien against proceeds from a sale of the cooperative apartment subject,
however, to the cooperative's right to sums due under such proprietary lease or
occupancy agreement or that have become liens on the shares relating to the
proprietary lease or occupancy agreement. The total amount owed to the
cooperative by the tenant-stockholder, which the lender generally cannot
restrict and does not monitor, could
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reduce the value of the collateral below the outstanding principal balance of
the cooperative loan and accrued and unpaid interest thereon.
Recognition agreements also provide that in the event the lender succeeds
to the tenant-shareholder's shares and proprietary lease or occupancy agreement
as the result of realizing upon the collateral for a cooperative loan, the
lender must obtain the approval or consent of the cooperative as required by the
proprietary lease before transferring the cooperative shares or assigning the
proprietary lease. Such approval or consent is usually based on the prospective
purchaser's income and net worth, among other factors, and may significantly
reduce the number of potential purchasers, which could limit the ability of the
lender to sell and realize upon the value of the collateral. Generally, the
lender is not limited in any rights it may have to dispossess the tenant-
shareholders.
The terms of the Cooperative Loans do not require either the Mortgagor or
the Cooperative to obtain title insurance of any type. Consequently, the
existence of any prior liens or other imperfections of title also may adversely
affect the marketability of the Cooperative Dwelling in the event of
foreclosure.
In New York, lenders generally realize upon the pledged shares and
proprietary lease or occupancy agreement given to secure a cooperative loan by
public sale in accordance with the provisions of Article 9 of the Uniform
Commercial Code (the 'UCC') and the security agreement relating to those shares.
Article 9 of the UCC requires that a sale be conducted in a 'commercially
reasonable' manner. Whether a sale has been conducted in a 'commercially
reasonable' manner will depend on the facts in each case. In determining
commercial reasonableness, a court will look to the notice given the debtor and
the method, manner, time, place and terms of the sale. Generally, a sale
conducted according to the usual practice of banks selling similar collateral
will be considered reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be applied
first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to reimbursement
is subject to the right of the cooperative corporation to receive sums due under
the proprietary lease or occupancy agreement. If there are proceeds remaining,
the lender must account to the tenant-stockholder for the surplus. Conversely,
if a portion of the indebtedness remains unpaid, the tenant-stockholder is
generally responsible for the deficiency. See ' -- Anti-Deficiency Legislation
and Other Limitations on Lenders' below.
In the case of foreclosure on a Multifamily Property that was converted
from a rental building to a building owned by a cooperative housing corporation
under a non-eviction plan, some states require that a purchaser at a foreclosure
sale take the property subject to rent control and rent stabilization laws which
apply to certain tenants who elected to remain in the building but not to
purchase shares in the cooperative when the building was so converted. Any such
restrictions could adversely affect the number of potential purchasers for and
the value of such property.
RIGHTS OF REDEMPTION
In some states, after a sale pursuant to a deed of trust or foreclosure of
a mortgage, the borrower and certain foreclosed junior lienors are given a
statutory period in which to redeem the property from the foreclosure sale. In
certain other states, this right of redemption applies only to a sale following
judicial foreclosure, and not a sale pursuant to a non-judicial power of sale.
In most states where the right of redemption is available, statutory redemption
may occur upon payment of the foreclosure purchase price, accrued interest and
taxes. In some states, the right to redeem is an equitable right. The effect of
a statutory right of redemption is to diminish the ability of the lender to sell
the foreclosed property. The exercise of a right of redemption would defeat the
title of any purchaser from the lender subsequent to foreclosure or sale under a
deed of trust. Consequently, the practical effect of the redemption right is to
force the lender to retain the property and pay the expenses of ownership until
the redemption period has run.
ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS
Certain states have imposed statutory restrictions that limit the remedies
of a beneficiary under a deed of trust or a mortgagee under a mortgage. In some
states, statutes limit the right of the beneficiary or mortgagee to obtain a
deficiency judgment against the borrower following foreclosure or a non-judicial
sale under a deed of trust. A deficiency judgment is a personal judgment against
the former borrower equal in most cases to the
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difference between the amount due to the lender and the net amount realized upon
the foreclosure sale. Other statutes prohibit a deficiency judgment where the
loan proceeds were used to purchase a dwelling occupied by the borrower.
Some state statutes may require the beneficiary or mortgagee to exhaust the
security afforded under a deed of trust or mortgage by foreclosure in an attempt
to satisfy the full debt before bringing a personal action against the borrower.
In certain other states, the lender has the option of bringing a personal action
against the borrower on the debt without first exhausting such security;
however, in some of these states, the lender, following judgment on such
personal action, may be deemed to have elected a remedy and may be precluded
from exercising remedies with respect to the security. Consequently, the
practical effect of the election requirement, when applicable, is that lenders
will usually proceed first against the security rather than bringing a personal
action against the borrower.
Other statutory provisions may limit any deficiency judgment against the
former borrower following a foreclosure sale to the excess of the outstanding
debt over the fair market value of the property at the time of such sale. The
purpose of these statutes is to prevent a beneficiary or a mortgagee from
obtaining a large deficiency judgment against the former borrower as a result of
low or no bids at the foreclosure sale.
In some states, exceptions to the anti-deficiency statutes are provided for
in certain instances where the value of the lender's security has been impaired
by acts or omissions of the borrower, for example, in the event of waste of the
property.
In the case of cooperative loans, lenders generally realize on cooperative
shares and the accompanying proprietary lease or occupancy agreement given to
secure a cooperative loan under Article 9 of the UCC. Some courts have
interpreted Section 9-504 of the UCC to prohibit a deficiency award unless the
creditor establishes that the sale of the collateral (which, in the case of a
Cooperative Loan, would be the shares of the Cooperative and the related
proprietary lease or occupancy agreement) was conducted in a commercially
reasonable manner.
In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the federal bankruptcy laws,
the federal Soldiers' and Sailors' Civil Relief Act of 1940 and state laws
affording relief to debtors, may interfere with or affect the ability of a
secured mortgage lender to realize upon its security. For example, in a Chapter
13 proceeding under the federal Bankruptcy Code, when a court determines that
the value of a home is less than the principal balance of the loan, the court
may prevent a lender from foreclosing on the home, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the value
of the home as it exists at the time of the proceeding, leaving the lender as a
general unsecured creditor for the difference between that value and the amount
of outstanding indebtedness. A bankruptcy court may grant the debtor a
reasonable time to cure a payment default, and in the case of a mortgage loan
not secured by the debtor's principal residence, also may reduce the monthly
payments due under such mortgage loan, change the rate of interest and alter the
mortgage loan repayment schedule. Certain court decisions have applied such
relief to claims secured by the debtor's principal residence.
The Code provides priority to certain tax liens over the lien of the
mortgage or deed of trust. The laws of some states provide priority to certain
tax liens over the lien of the mortgage or deed of trust. Numerous federal and
some state consumer protection laws impose substantive requirements upon
mortgage lenders in connection with the origination, servicing and the
enforcement of mortgage loans. These laws include the federal Truth in Lending
Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair
Credit Billing Act, Fair Credit Reporting Act, and related statutes and
regulations. These federal laws and state laws impose specific statutory
liabilities upon lenders who originate or service mortgage loans and who fail to
comply with the provisions of the law. In some cases, this liability may affect
assignees of the mortgage loans.
Unless otherwise specified in the related Prospectus Supplement, each
Mortgage Loan secured by Multifamily Property will be a non-recourse loan to the
Mortgagor. As a result, the Mortgagor's obligation to repay the Mortgage Loan
can be enforced only against the Mortgaged Property regardless of whether the
Mortgagor has other assets from which it could repay the loan.
Unless otherwise specified in the related Prospectus Supplement, the
mortgage securing each Mortgage Loan relating to Multifamily Property will
contain an assignment of rents and an assignment of leases, pursuant to which
the borrower assigns its right, title and interest as landlord under each lease
and the income derived therefrom to the Depositor, while retaining a license to
collect the rents so long as there is no default. In the event the borrower
defaults, the license terminates and the Trustee (as the assignee of such
assignment) is
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entitled to collect the rents. The Trustee may enforce its right to such rents
by seeking the appointment of a receiver to collect the rents immediately after
giving notice to the borrower of the default.
'DUE-ON-SALE' CLAUSES
The forms of note, mortgage and deed of trust relating to conventional
Mortgage Loans may contain a 'due-on-sale' clause permitting acceleration of the
maturity of a loan if the borrower transfers its interest in the property. The
enforceability of these clauses has been subject of legislation or litigation in
many states, and in some cases the enforceability of these clauses was limited
or denied. However, the Garn-St Germain Depository Institutions Act of 1982 (the
'Garn-St Germain Act') preempts state constitutional, statutory and case law
that prohibits the enforcement of due-on-sale clauses and permits lenders to
enforce these clauses in accordance with their terms, subject to certain limited
exceptions. The Garn-St Germain Act does 'encourage' lenders to permit
assumption of loans at the original rate of interest or at some other rate less
than the average of the original rate and the market rate.
The Garn-St Germain Act also sets forth nine specific instances in which a
mortgage lender covered by the Garn-St Germain Act may not exercise a
due-on-sale clause, notwithstanding the fact that a transfer of the property may
have occurred. These include intra-family transfers, certain transfers by
operation of law, leases of fewer than three years and the creation of a junior
encumbrance. Regulations promulgated under the Garn-St Germain Act also prohibit
the imposition of prepayment penalty upon the acceleration of a loan pursuant to
a due-on-sale clause.
The inability to enforce a due-on-sale clause may result in a mortgage loan
bearing an interest rate below the current market rate being assumed by a new
home buyer rather than being paid off, which may have an impact upon the average
life of the Mortgage Loans and the number of Mortgage Loans which may be
outstanding until maturity.
ENFORCEABILITY OF CERTAIN PROVISIONS
Standard forms of note, mortgage and deed of trust generally contain
provisions obligating the borrower to pay a late charge if payments are not
timely made and in some circumstances may provide for prepayment fees or
penalties if the obligation is paid prior to maturity. In certain states, there
are or may be specific limitations upon late charges which a lender may collect
from a borrower for delinquent payments. State and federal statutes or
regulations may also limit a lender's right to collect a prepayment penalty when
the prepayment is caused by the lender's acceleration of the loan pursuant to a
due-on-sale clause. Certain states also limit the amounts that a lender may
collect from a borrower as an additional charge if the loan is prepaid. Under
the Servicing Agreements and the applicable Agreement, late charges and
prepayment fees (to the extent permitted by law and not waived by the Servicers)
will be retained by the Servicers or Master Servicer as additional servicing
compensation.
Courts have imposed general equitable principles upon foreclosure. These
equitable principles are generally designed to relieve the borrower from the
legal effect of defaults under the loan documents. Examples of judicial remedies
that may be fashioned include judicial requirements that the lender undertake
affirmative and sometimes expensive actions to determine the causes for the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's judgment and have required lenders to reinstate loans or recast
payment schedules to accommodate borrowers who are suffering from temporary
financial disability. In some cases, courts have limited the right of lenders to
foreclose if the default under the mortgage instrument is not monetary, such as
the borrower failing to adequately maintain or insure the property or the
borrower executing a second mortgage or deed of trust affecting the property. In
other cases, some courts have been faced with the issue whether federal or state
constitutional provisions reflecting due process concerns for adequate notice
require that borrowers under the deeds of trust receive notices in addition to
the statutorily-prescribed minimum requirements. For the most part, these cases
have upheld the notice provisions as being reasonable or have found that the
sale by a trustee under a deed of trust or under a mortgage having a power of
sale does not involve sufficient state action to afford constitutional
protections to the borrower.
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ENVIRONMENTAL CONSIDERATIONS
Under the federal Comprehensive Environmental Response Compensation and
Liability Act, as amended, a secured party which takes a deed in lieu of
foreclosure or purchases a mortgaged property at a foreclosure sale may become
liable in certain circumstances for the costs of remedial action ('Cleanup
Costs') if hazardous wastes or hazardous substances have been released or
disposed of on the property. Such Cleanup Costs may be substantial. It is
possible that such costs could become a liability of the Trust Fund and reduce
the amounts otherwise distributable to the Securityholders if a Mortgaged
Property securing a Mortgage Loan became the property of the Trust Fund in
certain circumstances and if such Cleanup Costs were incurred.
Except as otherwise specified in the related Prospectus Supplement, each
Unaffiliated Seller will represent, as of the date of delivery of the related
Series of Securities, that to the best of its knowledge no Mortgaged Property
secured by Multifamily Property is subject to an environmental hazard that would
have to be eliminated under applicable law before the sale of, or which could
otherwise affect the marketability of, such Mortgaged Property or which would
subject the owner or operator of such Mortgaged Property or a lender secured by
such Mortgaged Property to liability under law, and that there are no liens
which relate to the existence of any clean-up of a hazardous substance (and to
the best of its knowledge no circumstances are existing that under law would
give rise to any such lien) affecting the Mortgaged Property which are or may be
liens prior to or on a parity with the lien of the related mortgage. The
applicable Agreement and/or Servicing Agreement will further provide that the
Master Servicer, acting on behalf of the Trust Fund, may not acquire title to a
Mortgaged Property or take over its operation unless the Master Servicer has
received a report from a qualified independent person selected by the Master
Servicer setting forth whether such Mortgaged Property is subject to or presents
any toxic wastes or environmental hazards and an estimate of the cost of curing
or cleaning up such hazard.
THE CONTRACTS
GENERAL
As a result of the Depositor's assignment of the Contract to the Trustee,
the Certificateholders will succeed collectively to all of the rights (including
the right to receive payment on the Contracts) and will assume certain
obligations of the Depositor. Each Contract evidences both (a) the obligation of
the Obligor to repay the loan evidenced thereby and (b) the grant of a security
interest in the Manufactured Home to secure repayment of such loan. Certain
aspects of both features of the Contracts are described more fully below.
The Contracts generally are 'chattel paper' as defined in the Uniform
Commercial Code in effect in the states in which the Manufactured Homes
initially were registered. Pursuant to the UCC, the sale of chattel paper is
treated in a manner similar to perfection of a security interest in chattel
paper. Under the applicable Agreement and/or Servicing Agreement, the Master
Servicer or the Depositor, as the case may be, will transfer physical possession
of the Contracts to the Trustee or Indenture Trustee, or their respective
custodian, as the case may be. In addition, the Master Servicer will make an
appropriate filing of a UCC-1 financing statement in the appropriate states to
give notice of the Trustee's ownership of the Contracts or the Indenture
Trustee's security interest in the Contracts, as the case may be. Unless
otherwise specified in the related Prospectus Supplement, the Contracts will not
be stamped or marked otherwise to reflect their assignment from the Depositor to
the Trustee or their pledge to the Indenture Trustee. Therefore, if a subsequent
purchaser were able to take physical possession of the Contracts without notice
of such assignment or pledge, the respective Trustees' interest in the Contracts
could be defeated.
SECURITY INTERESTS IN THE MANUFACTURED HOMES
The law governing perfection of a security interest in a Manufactured Home
varies from state to state. Security interests in manufactured homes may be
perfected either by notation of the secured party's lien on the certificate of
title or by delivery of the required documents and payment of a fee to the state
motor vehicle authority, depending on state law. In some nontitle states,
perfection pursuant to the provisions of the UCC is required. The lender or
Master Servicer may effect such notation or delivery of the required documents
and fees, and obtain possession of the certificate of title, as appropriate
under the laws of the state in which any manufactured home securing a
manufactured housing conditional sales contract is registered. In the event the
Master Servicer or the lender fails, due to clerical errors, to effect such
notation or delivery, or files the security
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interest under the wrong law (for example, under a motor vehicle title statute
rather than under the UCC, in a few states), the Securityholders may not have a
first priority security interest in the Manufactured Home securing a Contract.
As manufactured homes have become larger and often have been attached their
sites without any apparent intention to move them, courts in many states have
held that manufactured homes, under certain circumstances, may become subject to
real estate title and recording laws. As a result, a security interest in a
manufactured home could be rendered subordinate to the interests of other
parties claiming an interest in the home under applicable state real estate law.
In order to perfect a security interest in a manufactured home under real estate
laws, the holder of the security interest must file either a 'fixture filing'
under the provisions of the UCC or a real estate mortgage under the real estate
laws of the state where the manufactured home is located. These filings must be
made in the real estate records office of the county where the manufactured home
is located. Substantially all of the Contracts will contain provisions
prohibiting the borrower from permanently attaching the Manufactured Home to its
site. So long as the Obligor does not violate this agreement, a security
interest in the Manufactured Home will be governed by the certificate of title
laws or the UCC, and the notation of the security interest on the certificate of
title or the filing of a UCC financing statement will be effective to maintain
the priority of the seller's security interest in the Manufactured Home. If,
however, a Manufactured Home is permanently attached to its site, other parties
could obtain an interest in the Manufactured Home which is prior to the security
interest originally retained by the Unaffiliated Seller and transferred to the
Depositor. With respect to a Series of Securities and as described in the
related Prospectus Supplement, the Master Servicer may be required to perfect a
security interest in the Manufactured Home under applicable real estate laws. If
such real estate filings are not required and if any of the foregoing events
were to occur, the only recourse of the Securityholders would be against the
Unaffiliated Seller pursuant to its repurchase obligation for breach of
warranties. Based on the representations of the Unaffiliated Seller, the
Depositor, however, believes that it has obtained a perfected first priority
security interest by proper notation or delivery of the required documents and
fees with respect to substantially all of the Manufactured Homes securing the
Contracts.
The Depositor will assign its security interests in the Manufactured Homes
to the Trustee on behalf of the Certificateholders and, if a Series of
Securities includes Notes, such security interest will be pledged to the
Indenture Trustee on behalf of the Noteholders. Unless otherwise specified in
the related Prospectus Supplement, neither the Depositor nor the Trustee or
Indenture Trustee will amend the certificates of title to identify the Trustee
or the Indenture Trustee, as applicable, as the new secured party. Accordingly,
the Depositor or such other entity as may be specified in the Prospectus
Supplement will continue to be named as the secured party on the certificates of
title relating to the Manufactured Homes. In most states, such assignment is an
effective conveyance of such security interest without amendment of any lien
noted on the related certificate of title and the new secured party succeeds to
the assignor's rights as the secured party. However, in some states there exists
a risk that, in the absence of an amendment to the certificate of title, such
assignment of the security interest might not be held effective against
creditors of the assignor.
In the absence of fraud, forgery or permanent affixation of the
Manufactured Home to its site by the Manufactured Home owner, or administrative
error by state recording officials, the notation of the lien of the Depositor on
the certificate of title or delivery of the required documents and fees will be
sufficient to protect the Securityholders against the rights of subsequent
purchasers of a Manufactured Home or subsequent lenders who take a security
interest in the Manufactured Home. If there are any Manufactured Homes as to
which the security interest assigned to the Depositor and the Certificateholders
and pledged to the Noteholders, if any, is not perfected, such security interest
would be subordinate to, among others, subsequent purchasers for value of
Manufactured Homes and holders of perfected security interests. There also
exists a risk in not identifying the applicable Securityholders as the new
secured party on the certificate of title that, through fraud or negligence, the
security interest of the Securityholders could be released.
In the event that the owner of a Manufactured Home moves it to a state
other than the state in which such Manufactured Home initially is registered,
under the laws of most states the perfected security interest in the
Manufactured Home would continue for four months after such relocation and
thereafter only if and after the owner re-registers the Manufactured Home in
such state. If the owner were to relocate a Manufactured Home to another state
and not re-register the Manufactured Home in such state, and if steps are not
taken to re-perfect the Trustee's security interest in such state, the security
interest in the Manufactured Home would cease to be perfected. A majority of
states generally require surrender of a certificate of title to re-register a
Manufactured Home; accordingly, the Trustee or the Indenture Trustee, or the
Master Servicer as custodian for the Trustee and/or Indenture Trustee, must
surrender possession if it holds the certificate of title to such Manufactured
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Home or, in the case of Manufactured Homes registered in states which provide
for notation of lien on the certificate of title, the applicable Trustee would
receive notice of surrender if the security interest in the Manufactured Home is
noted on the certificate of title. Accordingly, the Trustee and Indenture
Trustee would have the opportunity to re-perfect its security interest in the
Manufactured Home in the state of relocation. In states which do not require a
certificate of title for registration of a Manufactured Home, re-registration
could defeat perfection. In the ordinary course of servicing manufactured
housing installment or conditional sales contracts and installment loan
agreements, the Master Servicer takes steps to effect such re-perfection upon
receipt of notice of re-registration or information from the Obligor as to
relocation. Similarly, when an Obligor under a Contract sells a Manufactured
Home, the Trustee or the Indenture Trustee, or the Master Servicer as custodian
for the Trustee or Indenture Trustee, must surrender possession of the
certificate of title or will receive notice as a result of its lien noted
thereon and accordingly will have an opportunity to require satisfaction of the
related Contract before release of the lien. Under the applicable Agreement, the
Master Servicer, on behalf of the Depositor, will be obligated to take such
steps, at the Master Servicer's expense, as are necessary to maintain perfection
of security interests in the Manufactured Homes.
Under the laws of most states, liens for repairs performed on a
Manufactured Home take priority even over a perfected security interest. The
Depositor will represent in the applicable Agreement that it has no knowledge of
any such liens with respect to any Manufactured Home securing payment on any
Contract. However, such liens could arise at any time during the term of a
Contract. No notice will be given to the Trustee, Indenture Trustee or
Securityholders in the event such a lien arises and such lien would not give
rise to a repurchase obligation on the part of the party specified in the
applicable Agreement.
ENFORCEMENT OF SECURITY INTERESTS IN MANUFACTURED HOMES
The Master Servicer on behalf of the Trustee or the Indenture Trustee, to
the extent required by the related Agreement and/or Indenture, may take action
to enforce the applicable Trustee's security interest with respect to Contracts
in default by repossession and resale of the Manufactured Homes securing such
Defaulted Contracts. Except in Louisiana, so long as the Manufactured Home has
not become subject to the real estate law, a creditor can repossess a
Manufactured Home securing a Contract by voluntary surrender, by 'self-help'
repossession that is 'peaceful' (i.e., without breach of the peace) or, in the
absence of voluntary surrender and the ability to repossess without breach of
the peace, by judicial process. The holder of a Contract must give the debtor a
number of days notice, which varies from 10 to 30 days depending on the state,
prior to commencement of any repossession. The UCC and consumer protection laws
in most states place restrictions on repossession sales, including requiring
prior notice to the debtor and commercial reasonableness in effecting such a
sale. The law in most states also requires that the debtor be given notice of
any sale prior to resale of the unit so that the debtor may redeem at or before
such resale. In the event of such repossession and resale of a Manufactured
Home, the Trustee and/or Indenture Trustee would be entitled to be paid out of
the sale proceeds before such proceeds could be applied to the payment of the
claims of unsecured creditors or the holders of subsequently perfected security
interests or, thereafter, to the debtor.
Under the laws applicable in most states, a creditor is entitled to obtain
a deficiency judgment from a debtor for any deficiency on repossession and
resale of the Manufactured Home securing such debtor's loan. However, some
states impose prohibitions or limitations on deficiency judgments.
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws and general equitable principles, may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
CONSUMER PROTECTION LAWS
The so-called 'Holder-in-Due-Course' rule of the Federal Trade Commission
is intended to defeat the ability of the transferor of a consumer credit
contract which is the seller of goods which gave rise to the transaction (and
certain related lenders and assignees) to transfer such contract free of notice
of claims by the debtor thereunder. The effect of this rule is to subject the
assignee of such a contract to all claims and defenses which the debtor could
assert against the seller of goods. Liability under this rule is limited to
amounts paid under a Contract; however, the Obligor also may be able to assert
the rule to set off remaining amounts due as a defense against a claim brought
against such Obligor. Numerous other federal and state consumer protection
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laws impose requirements applicable to the origination and lending pursuant to
the Contracts, including the Truth in Lending Act, the Federal Trade Commission
Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, the Fair Debt Collection Practices Act and the Uniform
Consumer Credit Code. In the case of some of these laws, the failure to comply
with their provisions may affect the enforceability of the related Contract.
TRANSFERS OF MANUFACTURED HOMES; ENFORCEABILITY OF 'DUE-ON-SALE' CLAUSES
The Contracts, in general, prohibit the sale or transfer of the related
Manufactured Homes without the consent of the Depositor or the Master Servicer
and permit the acceleration of the maturity of the Contracts by the Depositor or
the Master Servicer upon any such sale or transfer that is not consented to.
Unless otherwise specified in the related Prospectus Supplement, the Depositor
or the Master Servicer expects that it will permit most transfers of
Manufactured Homes and not accelerate the maturity of the related Contracts. In
certain cases, the transfer may be made by a delinquent Obligor in order to
avoid a repossession proceeding with respect to a Manufactured Home.
In the case of a transfer of a Manufactured Home after which the Depositor
desires to accelerate the maturity of the related Contract, the Depositor's
ability to do so will depend on the enforceability under state law of the
'due-on-sale' clause. The Garn-St Germain Act preempts, subject to certain
exceptions and conditions, state laws prohibiting enforcement of 'due-on-sale'
clauses applicable to the Manufactured Homes. In some states the Depositor or
the Master Servicer may be prohibited from enforcing a 'due-on-sale' clause in
respect of certain Manufactured Homes.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, as amended ('Title V'), provides that, subject to the following
conditions, state usury limitations shall not apply to any loan that is secured
by a first lien on certain kinds of manufactured housing. The Contracts would be
covered if they satisfy certain conditions, among other things, governing the
terms of any prepayments, late charges and deferral fees and requiring a 30-day
notice period prior to instituting any action leading to repossession of or
foreclosure with respect to the related unit.
Title V authorized any state to reimpose limitations on interest rates and
finance charges by adopting before April 1, 1983 a law or constitutional
provision that expressly rejects application of the federal law. Fifteen states
adopted such a law prior to the April 1, 1983 deadline. In addition, even where
Title V was not so rejected, any state is authorized by the law to adopt a
provision limiting discount points or other charges on loans covered by Title V.
In any state in which application of Title V was expressly rejected or a
provision limiting discount points or other charges has been adopted, no
Contract which imposes finance charges or provides for discount points or
charges in excess of permitted levels has been included in the Trust Assets or
Fund. The Depositor, or the party specified in the related Agreement will
represent that all of the Contracts comply with applicable usury laws.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
I. GENERAL
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of
Securities. Stroock & Stroock & Lavan LLP, New York, New York, Brown & Wood LLP,
San Francisco, California, or other counsel to the Depositor specified in the
related Prospectus Supplement (each, 'Special Tax Counsel'), is delivering its
opinion regarding certain federal income tax matters discussed below. The
opinion addresses only those issues specifically identified below as being
covered by such opinion; however, such opinion also states that the additional
discussion set forth below accurately sets forth Special Tax Counsel's advice
with respect to material federal income tax issues. As used hereinafter in
'Certain Federal Income Tax Consequences,' 'Mortgage Loans' shall include
Mortgage Certificates and Contracts and 'Mortgage Pool' shall include 'Contract
Pool.' The following discussion does not purport to discuss all federal income
tax consequences that may be applicable to particular categories of investors,
some of which may be subject to special rules. Further, the authorities on which
this discussion are
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based are subject to change or differing interpretation, which change or
differing interpretation could apply retroactively. This discussion does not
address the state or local tax consequences of the purchase, ownership and
disposition of such Securities. Investors should consult their own tax advisers
in determining the federal, state, local or other tax consequences to them of
the purchase, ownership and disposition of the Securities offered hereunder.
The following discussion addresses securities of two general types: (i)
certificates and/or notes ('REMIC Certificates') representing interests in a
Mortgage Pool ('REMIC Mortgage Pool') which the Master Servicer elects to have
treated as a real estate mortgage investment conduit ('REMIC') under Code
Sections 860A through 860G ('REMIC Provisions') and (ii) certificates and/or
notes ('Trust Certificates') representing certain interests in a Trust Fund
which the Master Servicer does not elect to have treated as a REMIC. REMIC
Certificates and Trust Certificates will be referred to collectively as
'Certificates.'
Under the REMIC Provisions, REMICs may issue one or more classes of
'regular' interests and must issue one and only one class of 'residual'
interests. A REMIC Certificate representing a regular interest in a REMIC
Mortgage Pool will be referred to as a 'REMIC Regular Certificate' and a REMIC
Certificate representing a residual interest in a REMIC Mortgage Pool will be
referred to as a 'REMIC Residual Certificate.'
A Trust Certificate representing an undivided equitable ownership interest
in the principal of the Mortgage Loans constituting the related Trust Fund,
together with interest thereon at a remittance rate (which may be less than,
greater than or equal to the related pass-through or interest rate), will be
referred to as a 'Trust Fractional Certificate' and a Trust Certificate
representing an equitable ownership of all or a portion of the interest paid on
each Mortgage Loan constituting the related Trust Fund (net of normal servicing
fees) will be referred to as a 'Trust Interest Certificate.'
The following discussion is based in part upon the rules governing original
issue discount that are set forth in Code Sections 1271 through 1275 and in
Treasury regulations issued under the original issue discount provisions of the
Code (the 'OID Regulations'), and the Treasury regulations issued under the
provisions of the Code relating to REMICs (the 'REMIC Regulations').
II. REMIC TRUST FUNDS
A. CLASSIFICATION OF REMIC TRUST FUNDS
With respect to each Series of REMIC Certificates relating to a REMIC
Mortgage Pool, Special Tax Counsel will deliver its opinion generally to the
effect that, assuming that (i) a REMIC election is made timely in the required
form, (ii) there is ongoing compliance with all provisions of the related
Pooling and Servicing Agreement, (iii) certain representations set forth in the
Pooling and Servicing Agreement are true and (iv) there is continued compliance
with applicable provisions of the Code and applicable Treasury regulations
issued thereunder, such REMIC Mortgage Pool will qualify as a REMIC and the
classes of interests offered will be considered to be 'regular interests' or
'residual interests' in that REMIC Mortgage Pool within the meaning of the REMIC
Provisions.
Holders of REMIC Certificates ('REMIC Certificateholders') should be aware
that, if an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for REMIC status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In such event, an entity electing to be treated as a REMIC
may be taxable as a separate corporation under Treasury regulations, and the
REMIC Certificates issued by such entity may not be accorded the status
described below under ' -- Characterization of Investments in REMIC
Certificates.' In the case of an inadvertent termination of REMIC status, the
Code provides the Treasury Department with authority to issue regulations
providing relief. Any such relief, however, may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the REMIC's
income for the period of time in which the requirements for REMIC status are not
satisfied.
Among the ongoing requirements in order to qualify for REMIC treatment is
that substantially all of the assets of the Trust Fund (as of the close of the
third calendar month beginning after the creation of the REMIC and continually
thereafter) must consist of only 'qualified mortgages' and 'permitted
investments.' In order to be a 'qualified mortgage' or to support treatment of a
certificate of participation therein as a 'qualified mortgage,' an obligation
must be principally secured by an interest in real property. The REMIC
Regulations
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treat an obligation secured by manufactured housing qualifying as a single
family residence under Code Section 25(e)(10) as an obligation secured by real
property, without regard to the treatment of the obligation or the property
under state law. Under Code Section 25(e)(10), a single family residence
includes any manufactured home that has a minimum of 400 square feet of living
space and a minimum width in excess of 102 inches and that is of a kind
customarily used at a fixed location.
B. CHARACTERIZATION OF INVESTMENTS IN REMIC CERTIFICATES
In general, REMIC Certificates are not treated for federal income tax
purposes as ownership interests in the assets of a REMIC Mortgage Pool. However,
(i) REMIC Certificates held by a domestic building and loan association will
constitute a 'regular or residual interest in a REMIC' within the meaning of
Code Section 7701(a)(19)(C)(xi) in the same proportion that the assets of the
REMIC Mortgage Pool underlying such Certificates ('Assets') would be treated as
'loans secured by an interest in real property' within the meaning of Code
Section 7701(a)(19)(C)(v) or as other assets described in Code Section
7701(a)(19)(C)(i) through (x); and (ii) REMIC Certificates held by a real estate
investment trust ('REIT') will constitute 'real estate assets' within the
meaning of Code Section 856(c)(4)(A), and any amount includible in gross income
on the REMIC Certificates will be considered 'interest on obligations secured by
mortgages on real property or on interests in real property' within the meaning
of Code Section 856(c)(3)(B) in the same proportion that, for both purposes, the
Assets and income of the REMIC would be treated as 'interests in real property'
as defined in Code Section 856(c)(6)(C) (or, as provided in the Committee
Report, as 'real estate assets' as defined in Code Section 856(c)(6)(B)) and as
'interest on obligations secured by mortgages on real property or on interests
in real property', respectively. See ' -- Non-REMIC Trust
Funds -- Characterization of Investments in Trust Certificates -- Buydown
Mortgage Loans.' Moreover, if 95% or more of the Assets qualify for any of the
foregoing treatments, the REMIC Certificates (and income thereon) will qualify
for the corresponding status in their entirety. Investors should be aware that
the investment of amounts in any Reserve Fund or GPM Fund in non-qualifying
assets would, and holding property acquired by foreclosure pending sale might,
reduce the amount of the REMIC Certificates that would qualify for the foregoing
treatment. The REMIC Regulations provide that payments on Mortgage Loans held
pending distribution are considered part of the Mortgage Loans for purposes of
Code Section 856(c)(4)(A); it is unclear whether such collected payments would
be so treated for purposes of Code Section 7701(a)(19)(C)(v), but there appears
to be no reason why analogous treatment should not be given to such collected
payments under that provision. The determination as to the percentage of the
REMIC's assets (or income) that will constitute assets (or income) described in
the foregoing Sections of the Code will be made with respect to each calendar
quarter based on the average adjusted basis (or average amount of income) of
each category of the assets held (or income accrued) by the REMIC during such
calendar quarter. The REMIC will report those determinations to
Certificateholders in the manner and at the times required by applicable
Treasury regulations. The Prospectus Supplement or the related Current Report on
Form 8-K for each Series of REMIC Certificates will describe the Assets as of
the Cut-off Date. REMIC Certificates held by certain financial institutions will
constitute an 'evidence of indebtedness' within the meaning of Code Section
582(c)(1); in addition, regular interests in any other REMIC acquired by a REMIC
in accordance with the requirements of Code Section 860G(a)(3) or Section
860G(a)(4) will be treated as 'qualified mortgages' within the meaning of Code
Section 860D(a)(4).
For purposes of characterizing an investment in REMIC Certificates, a
Contract secured by a Manufactured Home qualifying as a 'single family
residence' under Code Section 25(e)(10) will constitute (i) a 'real estate
asset' within the meaning of Code Section 856 and (ii) an asset described in
Code Section 7701(a)(19)(C). With respect to the Contracts included in a Trust
Fund that makes an election to be treated as a REMIC, each Unaffiliated Seller
will represent and warrant that each of the Manufactured Homes securing such
Contracts meets the definition of a 'single family residence.'
C. TIERED REMIC STRUCTURES
For certain Series of Certificates, two or more separate elections may be
made to treat designated portions of the related Trust Fund as REMICs ('Tiered
REMICs') for federal income tax purposes. Upon the issuance of any such series
of Certificates, Special Tax Counsel will deliver its opinion generally to the
effect that, assuming compliance with all provisions of the related Pooling and
Servicing Agreement, the Tiered REMICs will each qualify as a REMIC and the
REMIC Certificates issued by the Tiered REMICs will be considered to evidence
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ownership of REMIC Regular Certificates or REMIC Residual Certificates in the
related REMIC within the meaning of the REMIC Provisions.
Solely for purposes of determining whether the REMIC Certificates will be
'real estate assets' within the meaning of Code Section 856(c)(4)(A), and assets
described in Code Section 7701(a)(19)(C), and whether the income on such
Certificates is interest described in Code Section 856(c)(3)(B), the Tiered
REMICs will be treated as one REMIC.
D. TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES
Except as otherwise stated in this discussion, the REMIC Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC Mortgage Pool and not as ownership interests in the REMIC
Mortgage Pool or its Assets. In general, interest, original issue discount and
market discount paid or accrued on a REMIC Regular Certificate will be treated
as ordinary income to the holder of such REMIC Regular Certificate.
Distributions in reduction of the stated redemption price at maturity of the
REMIC Regular Certificate will be treated as a return of capital to the extent
of such holder's basis in such REMIC Regular Certificate. Holders of REMIC
Regular Certificates that otherwise report income under a cash method of
accounting will be required to report income with respect to REMIC Regular
Certificates under an accrual method.
1. Original Issue Discount
Certain REMIC Regular Certificates may be issued with 'original issue
discount' within the meaning of Code Section 1273(a). Any holders of REMIC
Regular Certificates issued with original issue discount generally will be
required to include original issue discount in income as it accrues, in
accordance with a constant yield method that takes into account the compounding
of interest, in advance of the receipt of the cash attributable to such income.
The Master Servicer will report annually (or more frequently if required) to the
Internal Revenue Service (the 'IRS') and to Certificateholders such information
with respect to the original issue discount accruing on the REMIC Regular
Certificates as may be required under Code Section 6049 and the regulations
thereunder. See ' -- Reporting and Other Administrative Matters of REMICs'
below.
Rules governing original issue discount are set forth in Code Sections 1271
through 1275 and in the OID Regulations. Code Section 1272(a)(6) provides
special original issue discount rules applicable to REMIC Regular Certificates.
Code Section 1272(a)(6) requires that a mortgage prepayment assumption
('Prepayment Assumption') be used in computing the accrual of original issue
discount on REMIC Regular Certificates, and for certain other federal income tax
purposes. The Prepayment Assumption is to be determined in the manner prescribed
in Treasury regulations. To date, no such regulations have been promulgated. The
Committee Report indicates that the regulations will provide that the Prepayment
Assumption, if any, used with respect to a particular transaction must be the
same as that used by the parties in pricing the transaction. The Master Servicer
will use a Prepayment Assumption in reporting original issue discount that is
consistent with this standard. However, neither the Depositor nor the Master
Servicer makes any representation that the Mortgage Loans will in fact prepay at
the rate reflected in the Prepayment Assumption or at any other rate. Each
investor must make its own decision as to the appropriate prepayment assumption
to be used in deciding whether or not to purchase any of the REMIC Regular
Certificates. The Prospectus Supplement with respect to a Series of REMIC
Certificates will disclose the Prepayment Assumption to be used in reporting
original issue discount, if any, and for certain other federal income tax
purposes.
The total amount of original issue discount on a REMIC Regular Certificate
is the excess of the 'stated redemption price at maturity' of the REMIC Regular
Certificate over its 'issue price.' Except as discussed in the following two
paragraphs, in general, the issue price of a particular class of REMIC Regular
Certificates offered hereunder will be the price at which a substantial amount
of REMIC Regular Certificates of that class are first sold to the public
(excluding bond houses and brokers), and the stated redemption price at maturity
of a REMIC Regular Certificate will be its Stated Principal Balance.
If a REMIC Regular Certificate is sold with accrued interest that relates
to a period prior to the issue date of such REMIC Regular Certificate, the
amount paid for the accrued interest will be treated instead as increasing the
issue price of the REMIC Regular Certificate. In addition, that portion of the
first interest payment in excess
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of interest accrued from the date of initial issuance of the REMIC Regular
Certificates (the 'Closing Date') to the first Distribution Date will be treated
for federal income tax reporting purposes as includible in the stated redemption
price at maturity of the REMIC Regular Certificates, and as excludible from
income when received as a payment of interest on the first Distribution Date
(except to the extent of any accrued market discount as of that date). The OID
Regulations suggest, however, that some or all of this pre-issuance accrued
interest 'may' be treated as a separate asset (and hence not includible in a
REMIC Regular Certificate's issue price or stated redemption price at maturity),
whose cost is recovered entirely out of interest paid on the first Distribution
Date.
The stated redemption price at maturity of a REMIC Regular Certificate is
equal to the total of all payments to be made on such Certificate other than
'qualified stated interest.' Under the OID Regulations, 'qualified stated
interest' is interest that is unconditionally payable at least annually during
the entire term of the Certificate at either (i) a single fixed rate that
appropriately takes into account the length of the interval between payments or
(ii) a current value of a single 'qualified floating rate' or 'objective rate'
(each, a 'Single Variable Rate'). A 'current value' is the value of a variable
rate on any day that is no earlier than three months prior to the first day on
which that value is in effect and no later than one year following that day. A
'qualified floating rate' is a rate whose variations can reasonably be expected
to measure contemporaneous variations in the cost of newly borrowed funds in the
currency in which the Certificate is denominated. Such a rate remains qualified
even though it is multiplied by a fixed, positive multiple greater than 0.65 but
not exceeding 1.35, increased or decreased by a fixed rate, or both. Certain
combinations of rates constitute a single qualified floating rate, including (i)
interest stated at a fixed rate for an initial period of less than one year
followed by a qualified floating rate if the value of the floating rate at the
Closing Date is intended to approximate the fixed rate, and (ii) two or more
qualified floating rates that can reasonably be expected to have approximately
the same values throughout the term of the Certificate. A combination of such
rates is conclusively presumed to be a single floating rate if the values of all
rates on the Closing Date are within 0.25 percentage points of each other. A
variable rate that is subject to an interest rate cap, floor, governor or
similar restriction on rate adjustment may be a qualified floating rate only if
such restriction is fixed throughout the term of the instrument, or is not
reasonably expected as of the Closing Date to cause the yield on the debt
instrument to differ significantly from the expected yield absent the
restriction. Final regulations issued on June 11, 1996 define an 'objective
rate' as a rate determined using a single fixed formula and based on objective
financial information or economic information. However, an objective rate does
not include a rate based on information that is in the control of the issuer or
that is unique to the circumstances of a related party. A combination of
interest stated at a fixed rate for an initial period of less than one year
followed by an objective rate is treated as a single objective rate if the value
of the objective rate at the Closing Date is intended to approximate the fixed
rate; such a combination of rates is conclusively presumed to be a single
objective rate if the objective rate on the Closing Date does not differ from
the fixed rate by more than 0.25 percentage points. The qualified stated
interest payable with respect to certain variable rate debt instruments not
bearing stated interest at a Single Variable Rate is discussed below under
' -- Variable Rate Certificates.' Under the foregoing rules, some of the
payments of interest on a Certificate bearing a fixed rate of interest for an
initial period followed by a qualified floating rate of interest in subsequent
periods could be treated as included in the stated redemption price at maturity
if the initial fixed rate were to differ sufficiently from the rate that would
have been set using the formula applicable to subsequent periods. See
' -- Variable Rate Certificates.' REMIC Regular Certificates offered hereby
other than such REMIC Regular Certificates providing for variable rates of
interest are not anticipated to have stated interest other than 'qualified
stated interest,' but if any such REMIC Regular Certificates are so offered,
appropriate disclosures will be made in the Prospectus Supplement. Some or all
of the payments on REMIC Regular Certificates providing for the accretion of
interest will be included in the stated redemption price at maturity of such
Certificates.
Under a de minimis rule in the Code, as interpreted in the OID Regulations,
original issue discount on a REMIC Regular Certificate will be considered to be
zero if such original issue discount is less than 0.25% of the stated redemption
price at maturity of the REMIC Regular Certificate multiplied by the weighted
average life of the REMIC Regular Certificate. For this purpose, the weighted
average life of the REMIC Regular Certificate is computed as the sum of the
amounts determined by multiplying the amount of each payment under the
instrument (other than a payment of qualified stated interest) by a fraction,
whose numerator is the number of complete years from the issue date until such
payment is made and whose denominator is the stated redemption price at maturity
of such REMIC Regular Certificate. The IRS may take the position that this rule
should be applied taking into account the Prepayment Assumption and the effect
of any anticipated investment income.
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Under the OID Regulations, REMIC Regular Certificates bearing only qualified
stated interest except for any 'teaser' rate, interest holiday or similar
provision are treated as subject to the de minimis rule if the greater of the
foregone interest or any excess of the Certificates' stated principal amount
over their issue price is less than such de minimis amount.
The OID Regulations generally treat de minimis original issue discount as
includible in income as each principal payment is made, based on the product of
the total amount of such de minimis original issue discount and a fraction,
whose numerator is the amount of such principal payment and whose denominator is
the outstanding principal balance of the REMIC Regular Certificate. The OID
Regulations also permit a Certificateholder to elect to accrue de minimis
original issue discount (together with stated interest, market discount and
original issue discount) into income currently based on a constant yield method.
See ' -- Market Discount and Premium.'
Each holder of a REMIC Regular Certificate must include in gross income the
sum of the 'daily portions' of original issue discount on its REMIC Regular
Certificate for each day during its taxable year on which it held such REMIC
Regular Certificate. For this purpose, in the case of an original holder of a
REMIC Regular Certificate, the daily portions of original issue discount will be
determined as follows. A calculation will first be made of the portion of the
original issue discount that accrued during each accrual period, that is
generally each period that ends on a date that corresponds to a Distribution
Date on the REMIC Regular Certificate and begins on the first day following the
immediately preceding accrual period (or in the case of the first such period,
begins on the Closing Date). For any accrual period such portion will equal the
excess, if any, of (i) the sum of (a) the present value of all of the
distributions remaining to be made on the REMIC Regular Certificate, if any, as
of the end of the accrual period and (b) distributions made on such REMIC
Regular Certificate during the accrual period of amounts included in the stated
redemption price at maturity, over (ii) the adjusted issue price of such REMIC
Regular Certificate at the beginning of the accrual period. The present value of
the remaining payments referred to in the preceding sentence will be calculated
based on (i) the yield to maturity of the REMIC Regular Certificate, calculated
as of the settlement date, giving effect to the Prepayment Assumption, (ii)
events (including actual prepayments) that have occurred prior to the end of the
accrual period and (iii) the Prepayment Assumption. The adjusted issue price of
a REMIC Regular Certificate at the beginning of any accrual period will equal
the issue price of such Certificate, increased by the aggregate amount of
original issue discount with respect to such REMIC Regular Certificate that
accrued in prior accrual periods, and reduced by the amount of any distributions
made on such REMIC Regular Certificate in prior accrual periods of amounts
included in the stated redemption price at maturity. The original issue discount
accruing during any accrual period will then be allocated ratably to each day
during the period to determine the daily portion of original issue discount for
each day. With respect to an accrual period between the settlement date and the
first Distribution Date on a REMIC Regular Certificate that is shorter than a
full accrual period, the OID Regulations permit the daily portions of original
issue discount to be determined according to any reasonable method.
A subsequent purchaser of a REMIC Regular Certificate that purchases such
REMIC Regular Certificate at a cost (not including payment for accrued qualified
stated interest) less than its remaining stated redemption price at maturity
will also be required to include in gross income, for each day on which it holds
such REMIC Regular Certificate, the daily portions of original issue discount
with respect to such REMIC Regular Certificate, but reduced, if such cost
exceeds the 'adjusted issue price,' by an amount equal to the product of (i)
such daily portions and (ii) a constant fraction, whose numerator is such excess
and whose denominator is the sum of the daily portions of original issue
discount on such REMIC Regular Certificate for all days on or after the day of
purchase. The adjusted issued price of a REMIC Regular Certificate on any given
day is equal to the sum of the adjusted issue price (or, in the case of the
first accrual period, the issue price) of the REMIC Regular Certificate at the
beginning of the accrual period during which such day occurs and the daily
portions of original issue discount for all days during such accrual period
prior to such day, reduced by the aggregate amount of distributions made during
such accrual period prior to such day other than distributions of qualified
stated interest.
Variable Rate Certificates. REMIC Regular Certificates bearing interest at
one or more variable rates are subject to certain special rules. The qualified
stated interest payable with respect to certain variable rate debt instruments
not bearing interest at a Single Variable Rate generally is determined under the
OID Regulations by converting such instruments into fixed rate debt instruments.
Instruments qualifying for such treatment generally include those providing for
stated interest at (i) more than one qualified floating rate or (ii) a single
fixed rate
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and (a) one or more qualified floating rates or (b) a single 'qualified inverse
floating rate' (each, a 'Multiple Variable Rate'). A qualified inverse floating
rate is an objective rate equal to a fixed rate reduced by a qualified floating
rate, the variations in which can reasonably be expected to inversely reflect
contemporaneous variations in the qualified floating rate (disregarding
permissible rate caps, floors, governors and similar restrictions such as are
described above).
Purchasers of REMIC Regular Certificates bearing a variable rate of
interest should be aware that there is uncertainty concerning the application of
Code Section 1272(a)(6) and the OID Regulations to such Certificates. In the
absence of other authority, the Master Servicer intends to be guided by the
provisions of the OID Regulations governing variable rate debt instruments in
adapting the provisions of Code Section 1272(a)(6) to such Certificates for the
purpose of preparing reports furnished to Certificateholders. The effect of the
application of such provisions generally will be to cause Certificateholders
holding Certificates bearing interest at a Single Variable Rate to take into
account for each period an amount corresponding approximately to the sum of (i)
the qualified stated interest accruing on the outstanding face amount of the
REMIC Regular Certificate as the stated interest rate for that Certificate
varies from time to time and (ii) the amount of original issue discount that
would have been attributable to that period on the basis of a constant yield to
maturity for a bond issued at the same time and issue price as the REMIC Regular
Certificate, having the same face amount and schedule of payments of principal
as such Certificate, subject to the same Prepayment Assumption, and bearing
interest at a fixed rate equal to the value of the applicable qualified floating
rate or qualified inverse floating rate in the case of a Certificate providing
for either such rate, or equal to the fixed rate that reflects the reasonably
expected yield on the Certificate in the case of a Certificate providing for an
objective rate other than an inverse floating rate, in each case as of the issue
date. Certificateholders holding REMIC Regular Certificates bearing interest at
a Multiple Variable Rate generally will take into account interest and original
issue discount under a similar methodology, except that the amounts of qualified
stated interest and original issue discount attributable to such a Certificate
first will be determined for an 'equivalent' debt instrument bearing fixed
rates, the assumed fixed rates for which are (a) for each qualified floating
rate, the value of each such rate as of the Closing Date (with appropriate
adjustment for any differences in intervals between interest adjustment dates),
(b) for a qualified inverse floating rate, the value of the rate as of the
Closing Date and (c) for any other objective rate, the fixed rate that reflects
the yield that is reasonably expected for the Certificate. If the interest paid
or accrued with respect to a Multiple Variable Rate Certificate during an
accrual period differs from the assumed fixed interest rate, such difference
will be an adjustment (to interest or original issue discount, as applicable) to
the Certificateholder's taxable income for the taxable period or periods to
which such difference relates.
In the case of a Certificate that provides for stated interest at a fixed
rate in one or more accrual periods and either one or more qualified floating
rates or a qualified inverse floating rate in other accrual periods, the fixed
rate is first converted into an assumed variable rate. The assumed variable rate
will be a qualified floating rate or a qualified inverse floating rate according
to the type of actual variable rates provided by the Certificate, and must be
such that the fair market value of the REMIC Regular Certificate as of issuance
is approximately the same as the fair market value of an otherwise identical
debt instrument that provides for the assumed variable rate in lieu of the fixed
rate. The REMIC Regular Certificate is then subject to the determination of the
amount and accrual of original issue discount as described above, by reference
to the hypothetical variable rate instrument.
Purchasers of variable rate REMIC Regular Certificates further should be
aware that the provisions of the OID Regulations applicable to variable rate
debt instruments have been limited and may not apply to some REMIC Regular
Certificates having variable rates. Since the Treasury regulations, issued in
final form on June 11, 1996, applicable to instruments having contingent
payments (the '1996 Contingent Debt Regulations') are not applicable to
instruments that are subject to Code Section 1272(a)(6), prospective purchasers
of variable rate REMIC Regular Certificates are advised to consult their tax
advisers concerning the tax treatment of such Certificates.
2. Market Discount and Premium
A Certificateholder that purchases a REMIC Regular Certificate at a market
discount, that is, at a purchase price less than the REMIC Regular Certificate's
stated redemption price at maturity, or, in the case of a REMIC Regular
Certificate issued with original issue discount, the REMIC Regular Certificate's
adjusted issue price (as
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defined under ' -- Original Issue Discount'), will recognize market discount
upon receipt of each payment of principal. In particular, such a holder will
generally be required to allocate each payment of principal on a REMIC Regular
Certificate first to accrued market discount, and to recognize ordinary income
to the extent such principal payment does not exceed the aggregate amount of
accrued market discount on such REMIC Regular Certificate not previously
included in income. Such market discount must be included in income in addition
to any original issue discount includible in income with respect to such REMIC
Regular Certificate.
A Certificateholder may elect to include market discount in income
currently as it accrues, rather than including it on a deferred basis in
accordance with the foregoing. If made, such election will apply to all market
discount bonds acquired by such Certificateholder on or after the first day of
the first taxable year to which such election applies. In addition, the OID
Regulations permit a Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount), reduced by any
premium, in income as interest, based on a constant yield method. If such an
election were made for a REMIC Regular Certificate with market discount, the
Certificateholder is deemed to have made an election to currently include market
discount in income with respect to all other debt instruments having market
discount that such Certificateholder acquires during the year of the election or
thereafter. Similarly, a Certificateholder that makes this election for a
Certificate that is acquired at a premium is deemed to have made an election to
amortize bond premium, as described below, with respect to all debt instruments
having amortizable bond premium that such Certificateholder owns or acquires.
The election to accrue interest, discount and premium on a constant yield method
with respect to a Certificate is irrevocable, unless the IRS consents of the
revocation.
Under a statutory de minimis exception, market discount with respect to a
REMIC Regular Certificate will be considered to be zero for purposes of Code
Sections 1276 through 1278 if such market discount is less than 0.25% of the
stated redemption price at maturity of such REMIC Regular Certificate multiplied
by the number of complete years to maturity remaining after the date of its
purchase. In interpreting a similar de minimis rule with respect to original
issue discount on obligations payable in installments, the OID Regulations refer
to the weighted average maturity of obligations, and it is likely that the same
rule will be applied in determining whether market discount is de minimis. It
appears that de minimis market discount on a REMIC Regular Certificate would be
treated in a manner similar to original issue discount of a de minimis amount.
See 'Taxation of Holders of REMIC Regular Certificates -- Original Issue
Discount.' Such treatment would result in discount being included in income at a
slower rate than discount would be required to be included using the method
described above. However, Treasury regulations implementing the market discount
de minimis exception have not been issued in proposed, temporary or final form,
and the precise treatment of de minimis market discount on obligations payable
in more than one installment therefore remains uncertain.
The Tax Reform Act of 1986 (the '1986 Act') grants authority to the
Treasury Department to issue regulations providing for the method for accruing
market discount of more than a de minimis amount on debt instruments, the
principal of which is payable in more than one installment. Until such time as
regulations are issued by the Treasury Department, certain rules described in
the Committee Report might apply. Under those rules, the holder of a bond
purchased with more than de minimis market discount may elect to accrue such
market discount either on the basis of a constant yield method or on the basis
of the appropriate proportionate method described below. Under the proportionate
method for obligations issued with original issue discount, the amount of market
discount that accrues during a period is equal to the product of (i) the total
remaining market discount, multiplied by (ii) a fraction, the numerator of which
is the original issue discount accruing during the period and the denominator of
which is the total remaining original issue discount at the beginning of the
period. Under the proportionate method for obligations issued without original
issue discount, the amount of market discount that accrues during a period is
equal to the product of (i) the total remaining market discount, multiplied by
(ii) a fraction, the numerator of which is the amount of stated interest paid
during the accrual period and the denominator of which is the total amount of
stated interest remaining to be paid at the beginning of the period. The
Prepayment Assumption, if any, used in calculating the accrual of original issue
discount is to be used in calculating the accrual of market discount under any
of the above methods. Because the regulations referred to in this paragraph have
not been issued, it is not possible to predict what effect such regulations
might have on the tax treatment of a REMIC Regular Certificate purchased at a
discount in the secondary market.
Further, a purchaser generally will be required to treat a portion of any
gain on sale or exchange of a REMIC Regular Certificate as ordinary income to
the extent of the market discount accrued to the date of disposition under one
of the foregoing methods, less any accrued market discount previously reported
as
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ordinary income. Such purchaser also may be required to defer a portion of its
interest deductions for the taxable year attributable to any indebtedness
incurred or continued to purchase or carry such REMIC Regular Certificate. Any
such deferred interest expense is, in general, allowed as a deduction not later
than the year in which the related market discount income is recognized. If such
holder elects to include market discount in income currently as it accrues on
all market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
A REMIC Regular Certificate purchased at a cost (not including payment for
accrued qualified stated interest) greater than its remaining stated redemption
price at maturity will be considered to be purchased at a premium. The holder of
such a REMIC Regular Certificate may elect to amortize such premium under the
constant yield method. The OID Regulations also permit Certificateholders to
elect to include all interest, discount and premium in income based on a
constant yield method, further treating the Certificateholder as having made the
election to amortize premium generally, as described above. The Committee Report
indicates a Congressional intent that the same rules that will apply to accrual
of market discount on installment obligations will also apply in amortizing bond
premium under Code Section 171 on installment obligations such as the REMIC
Regular Certificates.
Treasury regulations under Code Section 171 were issued on December 30,
1997 ('Bond Premium Amortization Regulations') which generally provide that
amortizable bond premium is amortized over the term of a note by offsetting the
qualified stated interest allocable to an accrual period with the amortizable
bond premium allocable to such period using a specified constant yield method.
To the extent that the amortizable bond premium allocated to an accrual period
exceeds the qualified stated interest allocable to such period, the excess is
deductible under Code Section 171 to the extent such excess does not exceed the
difference between (i) prior interest inclusions over (ii) prior amortizable
bond premium deductions on the bond ('Bond Premium Amortization Limit'), with
the excess over the Bond Premium Amortization Limit carried forward to the next
accrual period and treated as amortizable bond premium allocable to that period.
The Bond Premium Amortization Regulations are effective for notes acquired on or
after March 2, 1998. However, if a holder makes the election to amortize bond
premium for the taxable year containing March 2, 1998, or any subsequent taxable
year, the Treasury regulations would apply to debt instruments held on or after
the first day for the taxable year in which the election is made.
3. Treatment of Subordinated Securities
As described above under 'Credit Support -- Subordinated Certificates,'
certain Series of Securities may contain one or more Classes or Subclasses of
Subordinated Securities. Holders of Subordinated Securities will be required to
report income with respect to such Securities on the accrual method without
giving effect to delays and reductions in distributions attributable to defaults
or delinquencies on any Mortgage Loans or Contracts, except possibly, in the
case of income that constitutes qualified stated interest, to the extent that it
can be established that such amounts are uncollectible. As a result, the amount
of income reported by a Securityholder of a Subordinated Security in any period
could significantly exceed the amount of cash distributed to such Securityholder
in that period.
Although not entirely clear, it appears that a corporate holder or a holder
who holds a Regular Certificate in the course of a trade or business generally
should be allowed to deduct as an ordinary loss any loss sustained on account of
partial or complete worthlessness of a Subordinated Security. Although similarly
unclear, a noncorporate holder who does not hold such Regular Certificate in the
course of a trade or business generally should be allowed to deduct as a
short-term capital loss any loss sustained on account of complete worthlessness
of a Subordinated Security. Special rules are applicable to banks and thrift
institutions, including rules regarding reserves for bad debts. Holders of
Subordinated Securities should consult their own tax advisers regarding the
appropriate timing, character and amount of any loss sustained with respect to
Subordinated Securities.
E. TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES
1. General
An owner of a REMIC Residual Certificate ('Residual Owner') generally will
be required to report its daily portion of the taxable income or, subject to the
limitation described below in ' -- Basis Rules and Distributions,' the net loss
of the REMIC Mortgage Pool for each day during a calendar quarter that the
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Residual Owner owned such REMIC Residual Certificate. For this purpose, the
daily portion will be determined by allocating to each day in the calendar
quarter, using a 30 days per month/90 days per quarter/360 days per year
counting convention, its ratable portion of the taxable income or net loss of
the REMIC Mortgage Pool for such quarter, and by allocating the daily portions
among the Residual Owners (on such day) in accordance with their percentage of
ownership interests on such day. Any amount included in the gross income of, or
allowed as a loss to, any Residual Owner by virtue of the rule referred to in
this paragraph will be treated as ordinary income or loss. Purchasers of REMIC
Residual Certificates should be aware that taxable income from such Certificates
may exceed cash distributions with respect thereto in any taxable year. For
example, if the Mortgage Loans are acquired by a REMIC at a discount, then the
holder of a residual interest may recognize income without corresponding cash
distributions. This result could occur because a payment produces recognition by
the REMIC of discount on the Mortgage Loan while all or a portion of such
payment could be used in whole or in part to make principal payments on REMIC
Regular Certificates issued without substantial discount. Taxable income may
also be greater in earlier years as a result of the fact that interest expense
deductions, expressed as a percentage of the outstanding principal amount of the
REMIC Regular Certificates, will increase over time as the lower yielding
sequences of Certificates are paid, whereas interest income with respect to any
given Mortgage Loan will remain constant over time as a percentage of the
outstanding principal amount of that loan.
Any payments received by a holder of a REMIC Residual Certificate in
connection with the acquisition of such Certificate will be taken into account
in determining the income of such holder for federal income tax purposes.
Although it appears likely that any such payment would be includible in income
immediately upon its receipt, the IRS might assert that such payment should be
included in income over time according to an amortization schedule or according
to some other method. Because of the uncertainty concerning the treatment of
such payments, holders of REMIC Residual Certificates should consult their tax
advisers concerning the treatment of such payments for income tax purposes.
2. Taxable Income or Net Loss of the REMIC Trust Fund
The taxable income or net loss of the REMIC Mortgage Pool will reflect a
netting of income from the Mortgage Loans, any cancellation of indebtedness
income due to the allocation of Realized Losses to REMIC Regular Certificates,
and the deductions and losses allowed to the REMIC Mortgage Pool. Such taxable
income or net loss for a given calendar quarter will be determined in the same
manner as for an individual having the calendar year as his taxable year and
using the accrual method of accounting, with certain modifications. The first
modification is that a deduction will be allowed for accruals of interest
(including original issue discount) on the REMIC Regular Certificates. Second,
market discount equal to the excess of any Mortgage Loan's adjusted issue price
(as determined above under ' -- Taxation of Owners of REMIC Regular
Certificates -- Market Discount and Premium') over its fair market value at the
time of its transfer to the REMIC Mortgage Pool generally will be included in
income as it accrues, based on a constant yield method and on the Prepayment
Assumption. For this purpose, the Master Servicer intends to treat the fair
market value of the Mortgage Loans as being equal to the aggregate issue prices
of the REMIC Regular Certificates and REMIC Residual Certificates; if one or
more classes of REMIC Regular Certificates or REMIC Residual Certificates are
retained by the Depositor, the Master Servicer will estimate the value of such
retained interests in order to determine the fair market value of the Mortgage
Loans for this purpose. Third, no item of income, gain, loss or deduction
allocable to a prohibited transaction (see ' -- Prohibited Transactions and
Other Possible REMIC Taxes' below) will be taken into account. Fourth, the REMIC
Mortgage Pool generally may not deduct any item that would not be allowed in
calculating the taxable income of a partnership by virtue of Code Section
703(a)(2). Fifth, the REMIC Regulations provide that the limitation on
miscellaneous itemized deductions imposed on individuals by Code Section 67 will
not be applied at the Mortgage Pool level to the servicing fees paid to the
Master Servicer or sub-servicers if any. See, however, ' -- Pass-Through of
Servicing Fees' below. Sixth, net income from foreclosure property is reduced by
the amount of tax on net income from foreclosure property. If the deductions
allowed to the REMIC Mortgage Pool exceed its gross income for a calendar
quarter, such excess will be the net loss for the REMIC Mortgage Pool for that
calendar quarter.
3. Basis Rules and Distributions
Any distribution by a REMIC Mortgage Pool to a Residual Owner will not be
included in the gross income of such Residual Owner to the extent it does not
exceed the adjusted basis of such Residual Owner's interest in
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a REMIC Residual Certificate. Such distribution will reduce the adjusted basis
of such interest, but not below zero. To the extent a distribution exceeds the
adjusted basis of the REMIC Residual Certificate, it will be treated as gain
from the sale of the REMIC Residual Certificate. See ' -- Sales of REMIC
Certificates' below. The adjusted basis of a REMIC Residual Certificate is equal
to the amount paid for such REMIC Residual Certificate, increased by amounts
included in the income of the Residual Owner and decreased by distributions and
by net losses taken into account with respect to such interest.
A Residual Owner is not allowed to take into account any net loss for any
calendar quarter to the extent such net loss exceeds such Residual Owner's
adjusted basis in its REMIC Residual Certificate as of the close of such
calendar quarter (determined without regard to such net loss). Any loss
disallowed by reason of this limitation may be carried forward indefinitely to
future calendar quarters and, subject to the same limitation, may be used only
to offset income from the REMIC Residual Certificate.
The effect of these basis and distribution rules is that a Residual Owner
may not amortize its basis in a REMIC Residual Certificate, but may only recover
its basis through distributions, through the deduction of any net losses of the
REMIC Mortgage Pool or upon the sale of its REMIC Residual Certificate. See
' -- Sales of REMIC Certificates' below. The Residual Owner does, however,
receive reduced taxable income over the life of the REMIC because the REMIC's
basis in the underlying REMIC Mortgage Pool includes the fair market value of
the REMIC Regular Certificates and REMIC Residual Certificates.
4. Excess Inclusions
Any 'excess inclusions' with respect to a REMIC Residual Certificate are
subject to certain special tax rules. With respect to a Residual Owner, the
excess inclusion for any calendar quarter is defined as the excess (if any) of
the daily portions of taxable income over the sum of the 'daily accruals' for
each day during such quarter that such REMIC Residual Certificate was held by
such Residual Owner. The daily accruals are determined by allocating to each day
during a calendar quarter its ratable portion of the product of the 'adjusted
issue price' of the REMIC Residual Certificate at the beginning of the calendar
quarter and 120% of the long-term 'applicable federal rate' (generally, an
average of current yields on Treasury securities of comparable maturity, and
hereafter the 'AFR') in effect at the time of issuance of the REMIC Residual
Certificate. For this purpose, the adjusted issue price of a REMIC Residual
Certificate as of the beginning of any calendar quarter is the issue price of
the REMIC Residual Certificate, increased by the amount of daily accruals for
all prior quarters and decreased by any distributions made with respect to such
REMIC Residual Certificate before the beginning of such quarter. The issue price
of a REMIC Residual Certificate is the initial offering price to the public
(excluding bond houses and brokers) at which a substantial amount of the REMIC
Residual Certificates were sold.
For Residual Owners, an excess inclusion cannot be offset by deductions,
losses or loss carryovers from other activities. However, net operating loss
carryovers are determined without regard to excess inclusion income. For
Residual Owners that are subject to tax on unrelated business taxable income (as
defined in Code Section 511), an excess inclusion is treated as unrelated
business taxable income. For Residual Owners that are nonresident alien
individuals or foreign corporations generally subject to United States 30%
withholding tax, even if interest paid to such Residual Owners is generally
eligible for exemptions from such tax, an excess inclusion will be subject to
such tax and no tax treaty rate reduction or exemption may be claimed with
respect thereto. See ' -- Foreign Investors in REMIC Certificates' below. The
Small Business Job Protection Act of 1996 ('SBJPA of 1996') has eliminated the
special rule permitting Section 593 institutions ('thrift institutions') to use
net operating losses and other allowable deductions to offset their excess
inclusion income from REMIC Residual Certificates that have 'significant value'
within the meaning of the REMIC Regulations, effective for taxable years
beginning after December 31, 1995, except with respect to REMIC Residual
Certificates continuously held by thrift institutions since November 1, 1995.
In addition, the SBJPA of 1996 provides three rules for determining the
effect of excess inclusions on the alternative minimum taxable income of a
Residual Owner. First, alternative minimum taxable income for a Residual Owner
is determined without regard to the special rule, discussed above, that taxable
income cannot be less than excess inclusions. Second, a Residual Owner's
alternative minimum taxable income for a taxable year cannot be less than the
excess inclusions for the year. Third, the amount of any alternative minimum tax
net operating loss deduction must be computed without regard to any excess
inclusions. These rules are effective for
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taxable years beginning after December 31, 1986, unless a Residual Owner elects
to have such rules apply only to taxable years beginning after August 20, 1996.
In the case of any REMIC Residual Certificates held by a REIT, the
aggregate excess inclusions with respect to such REMIC Residual Certificates,
reduced (but not below zero) by the real estate investment trust taxable income
(within the meaning of Code Section 857(b)(2), excluding any net capital gain),
will be allocated among the shareholders of such trust in proportion to the
dividends received by such shareholders from such trust, and any amount so
allocated will be treated as an excess inclusion with respect to a REMIC
Residual Certificate as if held directly by such shareholder.
5. Noneconomic REMIC Residual Certificates
Under the REMIC Regulations, transfers of 'noneconomic' REMIC Residual
Certificates will be disregarded for all federal income tax purposes if 'a
significant purpose of the transfer was to enable the transferor to impede the
assessment or collection of tax.' If such transfer is disregarded, the purported
transferor will continue to remain liable for any taxes due with respect to the
income on such 'noneconomic' REMIC Residual Certificate. The REMIC Regulations
provide that a REMIC Residual Certificate is noneconomic unless, at the time of
its transfer and based on the Prepayment Assumption and any required or
permitted clean up calls or required liquidation provided for in the REMIC's
organizational documents, (i) the present value of the expected future
distributions (discounted using the AFR) on the REMIC Residual Certificate
equals at least the product of the present value of the anticipated excess
inclusions and the highest tax rate applicable to corporations for the year of
the transfer and (ii) the transferor reasonably expects that the transferee will
receive distributions with respect to the REMIC Residual Certificate at or after
the time the taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. Accordingly, all transfers of REMIC
Residual Certificates that may constitute noneconomic residual interests will be
subject to certain restrictions under the terms of the related Pooling and
Servicing Agreement that are intended to reduce the possibility of any such
transfer being disregarded. Such restrictions will require each party to a
transfer to provide an affidavit that no purpose of such transfer is to impede
the assessment or collection of tax, including certain representations as to the
financial condition of the prospective transferee. Prior to purchasing a REMIC
Residual Certificate, prospective purchasers should consider the possibility
that a purported transfer of such REMIC Residual Certificate by such a purchaser
to another purchaser at some future date may be disregarded in accordance with
the above-described rules, which would result in the retention of tax liability
by such purchaser. The applicable Prospectus Supplement will disclose whether
offered REMIC Residual Certificates may be considered 'noneconomic' residual
interests under the REMIC Regulations; provided, however, that any disclosure
that a REMIC Residual Certificate will or will not be considered 'noneconomic'
will be based upon certain assumptions, and the Depositor will make no
representation that a REMIC Residual Certificate will not be considered
'noneconomic' for purposes of the above-described rules or that a REMIC Residual
Owner will receive distributions calculated pursuant to such assumptions. See
' -- Foreign Investors in REMIC Certificates' below for additional restrictions
applicable to transfers of certain REMIC Residual Certificates to foreign
persons.
6. Tax-Exempt Investors
Tax-exempt organizations (including employee benefit plans) that are
subject to tax on unrelated business taxable income (as defined in Code Section
511) will be subject to tax on any excess inclusions attributed to them as
owners of Residual Certificates. Excess inclusion income associated with a
Residual Certificate may significantly exceed cash distributions with respect
thereto. See ' -- Excess Inclusions' above.
Generally, tax-exempt organizations that are not subject to federal income
taxation on 'unrelated business taxable income' pursuant to Code Section 511 are
treated as 'disqualified organizations' under provisions of the 'Technical and
Miscellaneous Revenue Act of 1988' (the '1988 Act'). Under provisions of the
applicable Agreement, such organizations generally are prohibited from owning
Residual Certificates. See ' -- Sales of REMIC Certificates' below.
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7. Real Estate Investment Trusts
If the applicable Prospectus Supplement so provides, a Mortgage Pool may
hold Mortgage Loans bearing interest based wholly or partially on Mortgagor
profits, Mortgaged Property appreciation, or similar contingencies. Such
interest, if earned directly by a REIT, would be subject to the limitations of
Code Sections 856(f) and 856(j). Treasury regulations treat a REIT holding a
REMIC Residual Certificate for a principal purpose of avoiding such Code
provisions as receiving directly the income of the REMIC Mortgage Pool, hence
potentially jeopardizing its qualification for taxation as a REIT and exposing
such income to taxation as a prohibited transaction at a 100% rate.
8. Mark-to-Market Rules
Code Section 475 generally requires that securities dealers include
securities in inventory at their fair market value, recognizing gain or loss as
if the securities were sold at the end of each tax year. Treasury regulations
provide that, for purposes of this mark-to-market requirement, a REMIC Residual
Certificate acquired on or after January 4, 1995 is not treated as a security
and thus may not be marked to market.
9. Partnership Holders
Special rules for electing partnerships with at least 100 members were
adopted in the Taxpayer Relief Act of 1997 (the '1997 Act'). There are special
rules relating to such electing partnerships that hold REMIC Residual
Certificates. Large partnerships which have or are considering making this
election should consult with their tax advisors concerning the consequences of
holding a REMIC Residual Certificate.
F. SALES OF REMIC CERTIFICATES
If a REMIC Certificate is sold, the seller will recognize gain or loss
equal to the difference between the amount realized on the sale and its adjusted
basis in the REMIC Certificate. The adjusted basis of a REMIC Regular
Certificate generally will equal the cost of such REMIC Regular Certificate to
the seller, increased by any original issue discount or market discount included
in the seller's gross income with respect to such REMIC Regular Certificate and
reduced by premium amortization deductions and distributions previously received
by the seller of amounts included in the stated redemption price at maturity of
such REMIC Regular Certificate. The adjusted basis of a REMIC Residual
Certificate will be determined as described under ' -- Taxation of Owners of
REMIC Residual Certificates -- Basis Rules and Distributions.' Gain from the
disposition of a REMIC Regular Certificate that might otherwise be treated as a
capital gain will be treated as ordinary income to the extent that such gain
does not exceed the excess, if any, of (i) the amount that would have been
includible in such holder's income had income accrued at a rate equal to 110% of
the AFR as of the date of purchase over (ii) the amount actually includible in
such holder's income. Except as otherwise provided under ' -- Taxation of Owners
of REMIC Regular Certificates -- Market Discount and Premium' and under Code
Section 582(c), any additional gain or any loss on the sale or exchange of a
REMIC Certificate will be capital gain or loss, provided such REMIC Certificate
is held as a capital asset (generally, property held for investment) within the
meaning of Code Section 1221.
All or a portion of any gain from the sale of a REMIC Certificate that
might otherwise be capital gain may be treated as ordinary income (i) if such
Certificate is held as part of a 'conversion transaction' as defined in Code
Section 1258(c), up to the amount of interest that would have accrued on the
holder's net investment in the conversion transaction at 120% of the appropriate
applicable Federal rate under Code Section 1274(d) in effect at the time the
taxpayer entered into the transaction reduced by any amount treated as ordinary
income with respect to any prior disposition or other termination of a position
that was held as part of such transaction, or (ii) in the case of a noncorporate
taxpayer that has made an election under Code Section 163(d)(4) to have net
capital gains taxed as investment income at ordinary income rates.
If a Residual Owner sells a REMIC Residual Certificate at a loss, the loss
will not be recognized if, within six months before or after the sale of the
REMIC Residual Certificate, such Residual Owner purchases another residual in
any REMIC or any interest in a taxable mortgage pool (as defined in Code Section
7701(i)) comparable to a residual interest in a REMIC. Such disallowed loss will
be allowed upon the sale of the other residual interest (or comparable interest)
if the rule referred to in the preceding sentence does not apply to that sale.
While the Committee Report states that this rule may be modified by Treasury
regulations, the REMIC
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Regulations do not address this issue and it is not clear whether any such
modification will in fact be implemented or, if implemented, what its precise
nature or effective date would be.
The 1988 Act makes transfers of a REMIC Residual Certificate to certain
'disqualified organizations' subject to an additional tax on the transferor in
an amount equal to the maximum corporate tax rate applied to the present value
(using a discount rate equal to the AFR) of the total anticipated excess
inclusions with respect to such residual interest for the periods after the
transfer. For this purpose, 'disqualified organizations' includes (i) the United
States, any state or political subdivision of a state, any foreign government or
international organization or any agency or instrumentality of any of the
foregoing, (ii) any tax-exempt entity (other than a Code Section 521
cooperative) which is not subject to the tax on unrelated business income and
(iii) any rural electrical or telephone cooperative. The anticipated excess
inclusions must be determined as of the date that the REMIC Residual Certificate
is transferred and must be based on events that have occurred up to the time of
such transfer, the Prepayment Assumption and any required or permitted clean up
calls or required liquidation provided for in the REMIC's organizational
documents. The tax generally is imposed on the transferor of the REMIC Residual
Certificate, except that it is imposed on an agent for a disqualified
organization if the transfer occurs through such agent. The applicable Agreement
requires, as a prerequisite to any transfer of a Residual Certificate, the
delivery to the Trustee of an affidavit of the transferee to the effect that it
is not a disqualified organization and contains other provisions designed to
render any attempted transfer of a Residual Certificate to a disqualified
organization void.
In addition, if a 'pass-through entity' includes in income excess
inclusions with respect to a REMIC Residual Certificate, and a disqualified
organization is the record holder of an interest in such entity at any time
during any taxable year of such entity, then a tax will be imposed on such
entity equal to the product of (i) the amount of excess inclusions on the REMIC
Residual Certificate for such taxable year that are allocable to the interest in
the pass-through entity held by such disqualified organization and (ii) the
highest marginal federal income tax rate imposed on corporations. A pass-through
entity will not be subject to this tax for any period, however, if the record
holder of an interest in such entity furnishes to such entity (i) such holder's
social security number and a statement under penalty of perjury that such social
security number is that of the record holder or (ii) a statement under penalty
of perjury that such record holder is not a disqualified organization. For these
purposes, a 'pass-through entity' means any regulated investment company, REIT,
trust, partnership or certain other entities described in Code Section
860E(e)(6). In addition, a person holding an interest in a pass-through entity
as a nominee for another person shall, with respect to such interest, be treated
as a pass-through entity.
The 1997 Act provides that for taxable years beginning after December 31,
1997, all partners of certain electing partnerships having 100 or more partners
('electing large partnerships') will be treated as disqualified organizations
for purposes of the tax imposed on pass-through entities if such electing large
partnerships hold residual interests in a REMIC. However, the electing large
partnership would be entitled to exclude the excess inclusion income from gross
income for purposes of determining the taxable income of the partners. When
applicable, the provisions would also disallow 70% of an electing large
partnership's miscellaneous itemized deductions, including deductions for
servicing and guaranty fees and any expenses of the REMIC, although the
remaining deductions would generally be allowed at the partnership level and
would not be subject to the 2% floor applicable to individual partners. See 'G.
Pass-Through of Servicing Fees' below.
G. PASS-THROUGH OF SERVICING FEES
The general rule is that Residual Owners take into account taxable income
or net loss of the related REMIC Mortgage Pool. Under that rule, servicing
compensation of the Master Servicer and the subservicers (if any) will be
allocated to the holders of the REMIC Residual Certificates, and therefore will
not affect the income or deductions of holders of REMIC Regular Certificates.
However, in the case of a 'single-class REMIC,' such expenses and an equivalent
amount of additional gross income will be allocated among all holders of REMIC
Regular Certificates and REMIC Residual Certificates for purposes of the
limitations on the deductibility of certain miscellaneous itemized deductions by
individuals contained in Code Sections 56(b)(1) and 67. Generally, any holder of
a REMIC Residual Certificate and any holder of a REMIC Residual Certificate
issued by a 'single-class REMIC' who is an individual, estate or trust
(including such a person that holds an interest in a pass-through entity holding
such a REMIC Certificate) will be able to deduct such expenses in determining
regular taxable income only to the extent that such expenses together with
certain other miscellaneous itemized deductions of such individual, estate or
trust exceed 2% of adjusted gross income; such a holder may not deduct
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such expenses to any extent in determining liability for alternative minimum
tax. Accordingly, REMIC Residual Certificates, and REMIC Regular Certificates
receiving an allocation of servicing compensation, may not be appropriate
investments for individuals, estates or trusts, and such persons should
carefully consult with their own tax advisers regarding the advisability of an
investment in such Certificates.
A 'single-class REMIC' is a REMIC that either (i) would be treated as an
investment trust under the provisions of Treasury Regulation Section
301.7701-4(c) in the absence of a REMIC election, or (ii) is substantially
similar to such an investment trust and is structured with the principal purpose
of avoiding the allocation of investment expenses to holders of REMIC Regular
Certificates. The Depositor intends (subject to certain exceptions which, if
applicable, will be stated in the applicable Prospectus Supplement) to treat
each REMIC Mortgage Pool as other than a 'single-class REMIC,' consequently
allocating servicing compensation expenses and related income amounts entirely
to REMIC Residual Certificates and in no part to REMIC Regular Certificates.
H. PROHIBITED TRANSACTIONS AND OTHER POSSIBLE REMIC TAXES
The Code imposes a tax on REMIC Mortgage Pools equal to 100% of the net
income derived from 'prohibited transactions.' In general, a prohibited
transaction means the disposition of a Mortgage Loan other than pursuant to
certain specified exceptions, the receipt of income from a source other than a
Mortgage Loan or certain other permitted investments, the receipt of
compensation for services, or gain from the disposition of an asset purchased
with the payments on the Mortgage Loans for temporary investment pending
distribution on the REMIC Certificates. The Code also imposes a 100% tax on the
value of any contribution of assets to the REMIC after the 'startup day' (the
day on which the regular and residual interests are issued), other than pursuant
to specified exceptions, and subjects 'net income from foreclosure property' to
tax at the highest corporate rate. It is not anticipated that a REMIC Mortgage
Pool will engage in any such transactions or receive any such income.
I. TERMINATION OF A REMIC TRUST FUND
In general, no special tax consequences will apply to a holder of a REMIC
Regular Certificate upon the termination of the REMIC Mortgage Pool by virtue of
the final payment or liquidation of the last Mortgage Loan remaining in the
REMIC Mortgage Pool. If a Residual Owner's adjusted basis in its REMIC Residual
Certificate at the time such termination occurs exceeds the amount of cash
distributed to such Residual Owner in liquidation of its interest, then,
although the matter is not entirely free from doubt, it appears that the
Residual Owner would be entitled to a loss (which could be a capital loss) equal
to the amount of such excess.
J. REPORTING AND OTHER ADMINISTRATIVE MATTERS OF REMICS
Reporting of interest income, including any original issue discount, with
respect to REMIC Regular Certificates is required annually, and may be required
more frequently under Treasury regulations. Certain holders of REMIC Regular
Certificates who are generally exempt from information reporting on debt
instruments, such as corporations, banks, registered securities or commodities
brokers, real estate investment trusts, registered investment companies, common
trust funds, charitable remainder annuity trusts and unitrusts, will be provided
interest and original issue discount income information and the information set
forth in the following paragraph upon request in accordance with the
requirements of the Treasury regulations. The information must be provided by
the later of 30 days after the end of the quarter for which the information was
requested, or two weeks after the receipt of the request. The REMIC Mortgage
Pool must also comply with rules requiring the face of a REMIC Certificate
issued at more than a de minimis discount to disclose the amount of original
issue discount and the issue date and requiring such information to be reported
to the Treasury Department.
The REMIC Regular Certificate information reports must include a statement
of the 'adjusted issue price' of the REMIC Regular Certificate at the beginning
of each accrual period. In addition, the reports must include information
necessary to compute the accrual of any market discount that may arise upon
secondary trading of REMIC Regular Certificates. Because exact computation of
the accrual of market discount on a constant yield method would require
information relating to the holder's purchase price which the REMIC Mortgage
Pool may
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not have, it appears that this provision will only require information
pertaining to the appropriate proportionate method of accruing market discount.
The responsibility for complying with the foregoing reporting rules will be
borne by the Master Servicer.
For purposes of the administrative provisions of the Code, REMIC Pools will
be treated as partnerships and the holders of Residual Certificates will be
treated as partners. The Master Servicer will file federal income tax
information returns on behalf of the related REMIC Pool, and will be designated
as agent for and will act on behalf of the 'tax matters person' with respect to
the REMIC Pool in all respects.
As agent for the tax matters person, the Master Servicer will, subject to
certain notice requirements and various restrictions and limitations, generally
have the authority to act on behalf of the REMIC and the Residual Owners in
connection with the administrative and judicial review of items of income,
deduction, gain or loss of the REMIC Mortgage Pool, as well as the REMIC
Mortgage Pool's classification. Residual Owners will generally be required to
report such REMIC Mortgage Pool items consistently with their treatment on the
REMIC Mortgage Pool's federal income tax information return and may in some
circumstances be bound by a settlement agreement between the Master Servicer, as
agent for the tax matters person, and the IRS concerning any such REMIC Mortgage
Pool item. Adjustments made to the REMIC Mortgage Pool tax return may require a
Residual Owner to make corresponding adjustments on its return, and an audit of
the REMIC Mortgage Pool's tax return, or the adjustments resulting from such an
audit, could result in an audit of a Residual Owner's return.
K. BACKUP WITHHOLDING WITH RESPECT TO REMIC CERTIFICATES
Payments of interest and principal on REMIC Regular Certificates, as well
as payment of proceeds from the sale of REMIC Certificates, may be subject to
the 'backup withholding tax' under Code Section 3406 at a rate of 31% if
recipients of such payments fail to furnish to the payor certain information,
including their taxpayer identification numbers, or otherwise fail to establish
an exemption from such tax. Any amounts deducted and withheld from a
distribution to a recipient would be allowed as a credit against such
recipient's federal income tax. Furthermore, certain penalties may be imposed by
the IRS on a recipient of payments that is required to supply information but
that does not do so in the manner required.
L. FOREIGN INVESTORS IN REMIC CERTIFICATES
1. REMIC Regular Certificates
Except as qualified below, payments made on a REMIC Regular Certificate to
a REMIC Regular Certificateholder that is not a U.S. Person, as hereinafter
defined (a 'non-U.S. Person'), or to a person acting on behalf of such a
Certificateholder, generally will be exempt from U.S. federal income and
withholding taxes, provided that (i) the holder of the Certificate is not
subject to U.S. tax as a result of a connection to the United States other than
ownership of such Certificate, (ii) the holder of such Certificate signs a
statement under penalty of perjury that certifies that such holder is a non-U.S.
Person, and provides the name and address of such holder and (iii) the last U.S.
Person in the chain of payment to the holder receives such statement from such
holder or a financial institution holding on its behalf and does not have actual
knowledge that such statement is false. If the holder does not qualify for
exemption, distributions of interest, including distributions in respect of
accrued original issue discount, to such holder may be subject to a withholding
tax rate of 30%, subject to reduction under an applicable tax treaty.
'U.S. Person' means a citizen or resident of the United States, a
corporation, partnership or other entity treated as a corporation or partnership
for United States federal income tax purposes, created or organized in or under
the laws of the United States or any political subdivision thereof (unless, in
the case of a partnership, future Treasury regulations provide otherwise) an
estate that is subject to U.S. federal income tax regardless of the source of
its income, or a trust other than a 'foreign trust,' as defined in Code Section
7701(a)(31).
Holders of REMIC Regular Certificates should be aware that the IRS may take
the position that exemption from U.S. withholding taxes does not apply to such a
holder that also directly or indirectly owns 10% or more of the REMIC Residual
Certificates. Further, the foregoing rules will not apply to exempt a 'United
States shareholder' (as such term is defined in Code Section 951) of a
controlled foreign corporation from taxation on such United States shareholder's
allocable portion of the interest or original issue discount income earned by
such controlled foreign corporation.
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2. REMIC Residual Certificates
Amounts paid to a Residual Owner that is a non-U.S. Person generally will
be treated as interest for purposes of applying the withholding tax on non-U.S.
Persons with respect to income on its REMIC Residual Certificate. However, it is
unclear whether distributions on REMIC Residual Certificates will be eligible
for the general exemption from withholding tax that applies to REMIC Regular
Certificates as described above. Treasury regulations provide that, for purposes
of the portfolio interest exception, payments to the foreign owner of a REMIC
Residual Certificate are to be considered paid on the obligations held by the
REMIC, rather than on the Certificate itself. Such payments will thus only
qualify for the portfolio interest exception if the underlying obligations held
by the REMIC would so qualify. Such withholding tax generally is imposed at a
rate of 30% but is subject to reduction under any tax treaty applicable to the
Residual Owner. However, there is no exemption from withholding tax nor may the
rate of such tax be reduced, under a tax treaty or otherwise, with respect to
any distribution of income that is an excess inclusion. Although no regulations
have been proposed or adopted addressing withholding on residual interests held
by non-U.S. Persons, the provisions of the REMIC Regulations, described below,
relating to the transfer of residual interests to non-U.S. Persons can be read
as implying that withholding with respect to excess inclusion income is to be
determined by reference to the amount of the accrued excess inclusion income
rather than to the amount of cash distributions. If the IRS were successfully to
assert such a position, cash distributions on Residual Certificates held by
non-U.S. Persons could be subject to withholding at rates as high as 100%,
depending on the relationship of accrued excess inclusion income to cash
distributions with respect to such Residual Certificates. See ' -- Taxation of
Owners of REMIC Residual Certificates -- Excess Inclusions.'
Certain restrictions relating to transfers of REMIC Residual Certificates
to and by investors who are non-U.S. Persons are also imposed by the REMIC
Regulations. First, transfers of REMIC Residual Certificates to a non-U.S.
Person that have 'tax avoidance potential' are disregarded for all federal
income tax purposes. If such transfer is disregarded, the purported transferor
of such a REMIC Residual Certificate to a non-U.S. Person continues to remain
liable for any taxes due with respect to the income on such REMIC Residual
Certificate. A transfer of a REMIC Residual Certificate has tax avoidance
potential unless, at the time of the transfer, the transferor reasonably expects
(i) that the REMIC will distribute to the transferee Residual Certificateholder
amounts that will equal at least 30% of each excess inclusion and (ii) that such
amounts will be distributed at or after the time at which the excess inclusion
accrues and not later than the close of the calendar year following the calendar
year of accrual. This rule does not apply to transfers if the income from the
REMIC Residual Certificate is taxed in the hands of the transferee as income
effectively connected with the conduct of a U.S. trade or business. Second, if a
non-U.S. Person transfers a REMIC Residual Certificate to a U.S. Person (or to a
non-U.S. Person in whose hands income from the REMIC Residual Certificate would
be effectively connected), and the transfer has the effect of allowing the
transferor to avoid tax on accrued excess inclusions, that transfer is
disregarded for all federal income tax purposes and the purported non-U.S.
Person transferor continues to be treated as the owner of the REMIC Residual
Certificate. Thus, the REMIC's liability to withhold 30% of the accrued excess
inclusions is not terminated even though the REMIC Residual Certificate is no
longer held by a non-U.S. Person.
Recently issued Treasury regulations (the 'Final Withholding Regulations'),
which are generally effective with respect to payments made after December 31,
1998, consolidate and modify the current certification requirements and means by
which a holder may claim exemption from United States federal income tax
withholding and provide certain presumptions regarding the status of holders
when payments to the holders cannot be reliably associated with appropriate
documentation provided to the payor. All holders of REMIC Regular Certificates
and REMIC Residual Certificates should consult their tax advisers regarding the
application of the Final Withholding Regulations.
M. STATE AND LOCAL TAXATION
Many states do not automatically conform to changes in the federal income
tax laws. Consequently, a REMIC Mortgage Pool that would not qualify as a fixed
investment trust for federal income tax purposes may be characterized as a
corporation, a partnership or some other entity for purposes of state income tax
law. Such characterization could result in entity level income or franchise
taxation of the REMIC Mortgage Pool formed in, owning mortgages or property in,
or having servicing activity performed in a state without conforming REMIC
provisions in its income or franchise tax law. Further, REMIC Regular
Certificateholders resident in
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non-conforming states may have their ownership of REMIC Regular Certificates
characterized as an interest other than debt of the REMIC such as stock or a
partnership interest. Investors are advised to consult their tax advisers
concerning the state and local income tax consequences of their purchase and
ownership of REMIC Regular Certificates.
III. NON-REMIC TRUST FUNDS
The discussion that follows relates only to Non-REMIC Trust Funds that have
not issued Trust Certificates structured as debt for federal income tax purposes
and that are not intended to be treated as partnerships for federal income tax
purposes. For a discussion of Trust Certificates in a Non-REMIC Trust Fund which
have been structured as debt for federal income tax purposes, see 'IV.
Characterization of the Trust Certificates as Indebtedness.' For a discussion of
Trust Certificates and Notes in a Non-REMIC Trust Fund which is intended to be
treated as a partnership for federal income tax purposes, see 'V. Tax
Characterization as a Partnership.'
A. CLASSIFICATION OF TRUST FUNDS
With respect to each series of Trust Certificates, Special Tax Counsel will
deliver their opinion to the effect that the arrangements pursuant to which such
Trust Fund will be administered and such Trust Certificates will be issued will
not be classified as an association taxable as a corporation and that each such
Trust Fund will be classified as a trust whose taxation will be governed by the
provisions of subpart E, Part I of subchapter J of the Code.
B. CHARACTERIZATION OF INVESTMENTS IN TRUST CERTIFICATES
1. Trust Fractional Certificates
In the case of Trust Fractional Certificates, counsel to the Depositor will
deliver an opinion that, in general (and subject to the discussion below of
Contracts and under ' -- Buydown Mortgage Loans'), (i) Trust Fractional
Certificates held by a thrift institution taxed as a 'domestic building and loan
association' will represent 'loans . . . secured by an interest in real
property' within the meaning of Code Section 7701 (a)(19)(C)(v), (ii) Trust
Fractional Certificates held by a REIT will represent 'real estate assets'
within the meaning of Code Section 856(c)(4)(A) and interest on Trust Fractional
Certificates will be considered 'interest on obligations secured by mortgages on
real property or on interests in real property' within the meaning of Code
Section 856(c)(3)(B) and (iii) Trust Fractional Certificates acquired by a REMIC
in accordance with the requirements of Code Section 860G(a)(3)(A)(i) and (ii) or
Section 860G(a)(4)(B) will be treated as 'qualified mortgages' within the
meaning of Code Section 860D(a)(4). In the case of a Trust Fractional
Certificate evidencing interests in Contracts, such Certificates will qualify
for the treatment described in (i) through (iii) of the preceding sentence only
to the extent of the fraction of such Certificate corresponding to the fraction
of the Contract Pool that consists of Contracts that would receive such
treatment if held directly by the Trust Fractional Certificateholder.
2. Trust Interest Certificates
With respect to each Series of Certificates, Special Tax Counsel will
advise the Depositor that in their opinion, based on the legislative history, a
REMIC that acquires a Trust Interest Certificate in accordance with the
requirements of Code Section 860G(a)(3) or Section 860G(a)(4) will be treated as
owning a 'Qualified Mortgage' within the meaning of Code Section 860(G)(a)(3).
Although there appears to be no policy reason not to accord to Trust
Interest Certificates the treatment described above for Trust Fractional
Certificates, there is no authority addressing such characterization for
instruments similar to Trust Interest Certificates. Consequently, it is unclear
to what extent, if any, (i) a Trust Interest Certificate owned by a 'domestic
building and loan association' within the meaning of Code Section 7701(a)(19)
will be considered to represent 'loans . . . secured by an interest in real
property' within the meaning of Code Section 7701(a)(19)(C)(v) or (ii) a REIT
which owns a Trust Interest Certificate will be considered to own 'real estate
assets' within the meaning of Code Section 856(c)(4)(A), and interest income
thereon will be considered 'interest on obligations secured by mortgages on real
property' within the meaning of Code Section 856(c)(3)(B). Prospective
purchasers to which such characterization of an investment in Trust
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Interest Certificates is material should consult their own tax advisers
regarding whether the Trust Interest Certificates, and the income therefrom,
will be so characterized.
3. Buydown Mortgage Loans
It is contemplated that the assets of certain Trust Funds may include
Buydown Mortgage Loans. The characterization of an investment in Buydown
Mortgage Loans will depend upon the precise terms of the related Buydown
Agreement. There are no directly applicable precedents with respect to the
federal income tax treatment or the characterization of investments in Buydown
Mortgage Loans. Accordingly, holders of Trust Certificates should consult their
own tax advisers with respect to characterization of investments in Trust Funds
that include Buydown Mortgage Loans.
Although the matter is not entirely free from doubt, the portion of a Trust
Certificate representing an interest in Buydown Mortgage Loans may be considered
to represent an investment in 'loans . . . secured by an interest in real
property' within the meaning of Code Section 7701(a)(19)(C)(v) to the extent the
outstanding principal balance of the Buydown Mortgage Loans exceeds the amount
held from time to time in the Buydown Fund. It is also possible that the entire
interest in Buydown Mortgage Loans may be so considered, because the fair market
value of the real property securing each Buydown Mortgage Loan will exceed the
amount of such loan at the time it is made.
For similar reasons, the portion of such Trust Certificate representing an
interest in Buydown Mortgage Loans may be considered to represent 'real estate
assets' within the meaning of Code Section 856(c)(4)(A). Purchasers and their
tax advisers are advised to review Section 1.856-5(c)(1)(i) of the Treasury
regulations, which specifies that if a mortgage loan is secured by both real
property and by other property and the value of the real property alone equals
or exceeds the amount of the loan, then all interest income will be treated as
'interest on obligations secured by mortgages on real property' within the
meaning of Code Section 856(c)(3)(B).
C. TAXATION OF OWNERS OF TRUST FRACTIONAL CERTIFICATES
Each holder of a Trust Fractional Certificate (a 'Trust Fractional
Certificateholder') will be treated as the owner of an undivided percentage
interest in the principal of, and possibly a different undivided percentage
interest in the interest portion of, each of the Trust Funds included in a
Mortgage Pool. Accordingly, each Trust Fractional Certificateholder must report
on its federal income tax return its allocable share of income from its
interests, as described below, at the same time and in the same manner as if it
had held directly interests in the Mortgage Loans and received directly its
share of the payments on such Mortgage Loans. Because those fractional interests
having differing undivided percentage interests in principal and interest
represent interests in 'stripped bonds' or 'stripped coupons' within the meaning
of Code Section 1286, such interests would be considered to be newly issued debt
instruments, and thus to have no market discount or premium, and the amount of
original issue discount may differ from the amount of original issue discount on
the Mortgage Loans and the amount includible in income on account of a Trust
Fractional Certificate may differ significantly from the amount payable thereon
from payments of interest on the Mortgage Loans. Each Trust Fractional
Certificateholder may report and deduct its allocable share of the servicing and
related fees and expenses paid to or retained by the Depositor at the same time,
to the same extent, and in the same manner as such items would have been
reported and deducted had it held directly interests in the Mortgage Loans and
paid directly its share of the servicing and related fees and expenses. A holder
of a Trust Fractional Certificate who is an individual, estate or trust will be
allowed a deduction for servicing fees in determining its regular tax liability
only to the extent that the aggregate of such holder's miscellaneous itemized
deductions exceeds two percent of such holder's adjusted gross income, and will
be allowed no deduction for such fees in determining its liability for
alternative minimum tax. Amounts received by Trust Fractional Certificateholders
in lieu of amounts due with respect to any Mortgage Loan but not received by the
Depositor from the Mortgagor will be treated for federal income tax purposes as
having the same character as the payments which they replace.
Purchasers of Trust Fractional Certificates identified in the applicable
Prospectus Supplement as representing interests in Stripped Mortgage Loans
should read the material under the headings ' -- Application of Stripped Bond
Rules,' ' -- Market Discount and Premium' and ' -- Allocation of Purchase Price'
for a discussion of particular rules applicable to their Certificates. A
'Stripped Mortgage Loan' means a Mortgage
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Loan having a Retained Yield (as that term is defined below) or a Mortgage Loan
included in a Trust Fund having either Trust Interest Certificates or more than
one class of Trust Fractional Certificates or identified in the Prospectus
Supplement as related to a Class of Trust Certificates identified as
representing interests in Stripped Mortgage Loans.
Purchasers of Trust Fractional Certificates identified in the applicable
Prospectus Supplement as representing interests in Unstripped Mortgage Loans
should read the material under the headings ' -- Treatment of Unstripped
Certificates,' ' -- Market Discount and Premium,' and ' -- Allocation of
Purchase Price' for a discussion of particular rules applicable to their
Certificates. However, the IRS has indicated that under some circumstances it
will view a portion of servicing and related fees and expenses paid to or
retained by the Master Servicer or sub-servicers as an interest in the Mortgage
Loans, essentially equivalent to that portion of interest payable with respect
to each Mortgage Loan that is retained by the Depositor ('Retained Yield'). If
such a view were sustained with respect to a particular Trust Fund, such
purchasers would be subject to the rules set forth under ' -- Application of
Stripped Bond Rules' rather than those under ' -- Treatment of Unstripped
Certificates.' The Depositor does not expect any servicing compensation payable
to the Master Servicer, as described under 'Description of the
Securities -- Servicing Compensation and Payment of Expenses,' to constitute a
retained interest in the Mortgage Loans; nevertheless, any such expectation
generally will be a matter of uncertainty, and prospective purchasers are
advised to consult their own tax advisers with respect to the existence of a
retained interest and any effects on investment in Trust Fractional
Certificates.
1. Application of Stripped Bond Rules
Each Trust Fund will consist of an interest in each of the Mortgage Loans
relating thereto, exclusive of the Depositor's Retained Yield, if any. With
respect to each Series of Certificates, Special Tax Counsel will advise the
Depositor that, in their opinion, any Retained Yield will be treated for federal
income tax purposes as an ownership interest retained by the Depositor in a
portion of each interest payment on the underlying Mortgage Loans. The sale of
the Trust Certificates associated with any Trust Fund for which there is a class
of Trust Interest Certificates or two or more Classes of Trust Fractional
Certificates bearing different interest rates or of Trust Certificates
identified in the Prospectus Supplement as representing interests in Stripped
Mortgage Loans (subject to certain exceptions which, if applicable, will be
stated in the applicable Prospectus Supplement) will be treated for federal
income tax purposes as having effected a separation in ownership between the
principal of each Mortgage Loan and some or all of the interest payable thereon.
As a consequence, each Stripped Mortgage Loan will become subject to the
'stripped bond' rules of the Code (the 'Stripped Bond Rules'). The effect of
applying those rules will generally be to require each Trust Fractional
Certificateholder to accrue and report income attributable to its share of the
principal and interest on each of the Stripped Mortgage Loans as original issue
discount on the basis of the yield to maturity of such Stripped Mortgage Loans,
as determined in accordance with the provisions of the Code dealing with
original issue discount. For a description of the general method of calculating
original issue discount, see ' -- REMIC Trust Funds -- Taxation of Owners of
REMIC Regular Certificates -- Original Issue Discount.' The yield to maturity of
a Trust Fractional Certificateholder's interest in the Stripped Mortgage Loans
will be calculated taking account of the price at which the holder purchased the
Certificate and the holder's share of the payments of principal and interest to
be made thereon. Although the provisions of the Code and the OID Regulations do
not directly address the treatment of instruments similar to Trust Fractional
Certificates, in reporting to Trust Fractional Certificateholders the Trustee
intends to treat such Certificates as a single obligation with payments
corresponding to the aggregate of the payments allocable thereto from each of
the Mortgage Loans, and to determine the amount of original issue discount on
such Certificates accordingly. See ' -- Aggregate Reporting.'
Under Treasury regulations, original issue discount so determined with
respect to a particular Stripped Mortgage Loan may be considered to be zero
under the de minimis rule described above, in which case it is treated as market
discount. See ' -- REMIC Trust Funds -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount.' Those regulations also provide that
original issue discount so determined with respect to a particular Stripped
Mortgage Loan will be treated as market discount if the rate of interest on the
Stripped Mortgage Loan, including a reasonable Servicing Fee, is no more than
one percentage point less than the unstripped rate of interest. See ' -- Market
Discount and Premium.' The Trustee intends to apply the foregoing de minimis and
market discount rules on an aggregate poolwide basis, although it is possible
that investors may
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be required to apply them on a loan by loan basis. The loan by loan information
required for such application of those rules may not be available. See
' -- Aggregate Reporting.'
Subsequent purchasers of the Certificates may be required to include
'original issue discount' in an amount computed using the price at which such
subsequent purchaser purchased the Certificates. Further, such purchasers may be
required to determine if the above described de minimis and market discount
rules apply at the time a Trust Fractional Certificate is acquired, based on the
characteristics of the Mortgage Loans at that time.
Variable Rate Certificates. Purchasers of Trust Fractional Certificates
bearing a variable rate of interest should be aware that there is considerable
uncertainty concerning the application of the OID Regulations to Mortgage Loans
bearing a variable rate of interest. Although such regulations are subject to a
different interpretation, as discussed below, in the absence of other contrary
authority in preparing reports furnished to Certificateholders the Trustee
intends to treat Stripped Mortgage Loans bearing a variable rate of interest
(other than those treated as having market discount pursuant to the regulations
described above) as subject to the provisions therein governing variable rate
debt instruments. The effect of the application of such provisions generally
will be to cause Certificateholders holding Trust Fractional Certificates
bearing interest at a Single Variable Rate or at a Multiple Variable Rate (as
defined above under ' -- REMIC Trust Funds -- Taxation of Owners of REMIC
Regular Certificates -- Original Issue Discount') to accrue original issue
discount and interest as though the value of each variable rate were a fixed
rate, which is (a) for each qualified floating rate, the value of each such rate
as of the Closing Date (with appropriate adjustment for any differences in
intervals between interest adjustment dates), (b) for a qualified inverse
floating rate, the value of the rate as of Closing Date and (c) for any other
objective rate, the fixed rate that reflects the yield that is reasonably
expected for the Trust Fractional Certificate. If the interest paid or accrued
with respect to such Variable Rate Trust Fractional Certificate during an
accrual period differs from the assumed fixed interest rate, such difference
will be an adjustment (to interest or original issue discount, as applicable) to
the Certificateholder's taxable income for the taxable period or periods to
which such difference relates.
Prospective purchasers of Trust Fractional Certificates bearing a variable
rate of interest should be aware that the provisions in the OID Regulations
applicable to variable rate debt instruments may not apply to certain adjustable
and variable rate mortgage loans, possibly including the Mortgage Loans, or to
Stripped Certificates representing interests in such Mortgage Loans. If variable
rate Trust Fractional Certificates are not governed by the provisions of the OID
Regulations applicable to variable rate debt instruments, such Certificates may
be subject to the provisions of the 1996 Contingent Debt Regulations. The
application of those provisions to instruments such as the Trust Fractional
Certificates is subject to differing interpretations. Prospective purchasers of
variable rate Trust Fractional Certificates are advised to consult their tax
advisers concerning the tax treatment of such Certificates.
Aggregate Reporting. The Trustee intends in reporting information relating
to original issue discount to Certificateholders to provide such information on
an aggregate poolwide basis. Applicable law is unclear, however, and it is
possible that investors may be required to compute original issue discount on a
Mortgage Loan by Mortgage Loan basis (or on the basis of the rights to
individual payments) taking account of an allocation of their basis in the
Certificates among the interests in the various Mortgage Loans represented by
such Certificates according to their respective fair market values. Investors
should be aware that it may not be possible to reconstruct after the fact
sufficient mortgage by mortgage information should a computation on that basis
be required by the IRS.
Because the treatment of the Certificates under the OID Regulations is both
complicated and uncertain, Certificateholders should consult their tax advisers
to determine the proper method of reporting amounts received or accrued on
Certificates.
2. Treatment of Unstripped Certificates
Mortgage Loans in a Trust Fund for which there is neither any Class of
Trust Interest Certificates, nor more than one Class of Trust Fractional
Certificates, nor any Retained Yield otherwise identified in the Prospectus
Supplement as being stripped mortgage loans ('Unstripped Mortgage Loans') will
be treated as wholly owned by the Trust Fractional Certificateholders of a Trust
Fund. Trust Fractional Certificateholders using the cash method of accounting
must take into account their pro rata shares of original issue discount as it
accrues and
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qualified stated interest (as described in ' -- REMIC Trust Funds -- Taxation of
Owners of REMIC Regular Certificates -- Original Issue Discount') from
Unstripped Mortgage Loans as and when collected by the Trustee. Trust Fractional
Certificateholders using an accrual method of accounting must take into account
their pro rata shares of qualified stated interest from Unstripped Mortgage
Loans as it accrues or is received by the Trustee, whichever is earlier. Under
the 1997 Act, gain or loss from the termination of a mortgage will be treated as
capital gain or loss.
Code Sections 1272 through 1275 provide rules for the current inclusion in
income of original issue discount on obligations issued by natural persons on or
after March 2, 1984. Generally those sections provide that original issue
discount should be included in income on the basis of a constant yield to
maturity. However, the application of the original issue discount rules to
mortgages is unclear in certain respects. The Treasury Department has issued the
OID Regulations relating to original issue discount, which generally address the
treatment of mortgages issued on or after April 4, 1994. The OID Regulations
would provide a new de minimis rule for determining whether certain
self-amortizing installment obligations, such as the Mortgage Loans, are to be
treated as having original issue discount. Such obligations would have original
issue discount if the points charged at origination (or other loan discount)
exceeded the greater of approximately one-sixth of one percent times the number
of full years to final maturity or one-fourth of one percent times weighted
average maturity. The OID Regulations treat certain variable rate mortgage loans
as having original issue discount because of an initial rate of interest that
differs from that determined by the mechanism for setting the interest rate
during the remainder of the loan, or because of the use of an index that does
not vary in a manner approved by the OID Regulations. For a description of the
general method of calculating the amount of original issue discount see
' -- REMIC Trust Funds -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount' and ' -- Application of Stripped Bond
Rules -- Variable Rate Certificates.'
A subsequent purchaser of a Trust Fractional Certificate that purchases
such Certificate at a cost (not including payment for accrued qualified stated
interest) less than its allocable portion of the aggregate of the remaining
stated redemption prices at maturity of the Unstripped Mortgage Loans will also
be required to include in gross income, for each day on which it holds such
Trust Fractional Certificate, its allocable share of the daily portion of
original issue discount with respect to each Unstripped Mortgage Loan, but
reduced, if the cost of such subsequent purchaser's interest in such Unstripped
Mortgage Loan exceeds its 'adjusted issue price,' by an amount equal to the
product of (i) such daily portion and (ii) a constant fraction, whose numerator
is such excess and whose denominator is the sum of the daily portions of
original issue discount allocable to such subsequent purchaser's interest for
all days on or after the day of purchase. The adjusted issue price of an
Unstripped Mortgage Loan on any given day is equal to the sum of the adjusted
issue price (or, in the case of the first accrual period, the issue price) of
such Unstripped Mortgage Loan at the beginning of the accrual period during
which such day occurs and the daily portions of original issue discount for all
days during such accrual period prior to such day, reduced by the aggregate
amount of payments made during such accrual period prior to such day other than
payments of qualified stated interest.
3. Market Discount and Premium
In general, if the Stripped Bond Rules do not apply to a Trust Fractional
Certificate, a purchaser of a Trust Fractional Certificate will be treated as
acquiring market discount bonds to the extent that the share of such purchaser's
purchase price allocable to any Unstripped Mortgage Loan is less than its
allocable share of the 'adjusted issue price' of such Mortgage Loan. See
' -- Treatment of Unstripped Certificates' and ' -- Application of Stripped Bond
Rules.' Thus, with respect to such Mortgage Loans, a holder will be required,
under Code Section 1276, to include as ordinary income the previously
unrecognized accrued market discount in an amount not exceeding each principal
payment on any such Mortgage Loans at the time each principal payment is
received or due, in accordance with the purchaser's method of accounting, or
upon a sale or other disposition of the Certificate. In general, the amount of
market discount that has accrued is determined on a ratable basis. A Trust
Fractional Certificateholder may, however, elect to determine the amount of
accrued market discount on a constant yield to maturity basis. This election is
made on a bond-by-bond basis and is irrevocable. In addition, the description of
the market discount rules in ' -- REMIC Trust Funds -- Taxation of Owners of
REMIC Regular Certificates -- Market Discount and Premium' with respect to (i)
conversion to ordinary income of a portion of any gain recognized on sale or
exchange of a market discount bond, (ii) deferral of interest expense
deductions, (iii) the de minimis exception from the market discount rules and
(iv) the
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elections to include in income either market discount or all interest, discount
and premium as they accrue, is also generally applicable to Trust Fractional
Certificates. Treasury regulations implementing the market discount rules,
including the 1986 Act amendments thereto, have not yet been issued and
investors therefore should consult their own tax advisers regarding the
application of these rules.
If a Trust Fractional Certificate is purchased at a premium, under existing
law such premium must be allocated among each of the Mortgage Loans (on the
basis of their relative fair market values). The portion of any premium
allocated to Unstripped Mortgage Loans originated after September 27, 1985 can
be amortized and deducted under the provisions of the Code relating to
amortizable bond premium. The portion of such premium allocated to Unstripped
Mortgage Loans originated on or before September 27, 1985 may only be deducted
upon the sale or final distribution in respect of any such Mortgage Loan, as the
special rules of the Code that permit the amortization of such premium apply in
the case of debt instruments other than corporate and governmental obligations,
only to obligations issued after that date. Upon such a sale or final
distribution in respect of such a Mortgage Loan, the premium, if any, allocable
thereto would be recognized as a short-term or long-term capital loss by a
Certificateholder holding the interests in Mortgage Loans represented by such
Certificate as capital assets, depending on how long the Certificate had been
held.
The application of the Stripped Bond Rules to Stripped Mortgage Loans will
generally cause any premium allocable to Stripped Mortgage Loans to be amortized
automatically by adjusting the rate of accrual of interest and discount to take
account of the allocable portion of the actual purchase price of the
Certificate. In that event, no additional deduction for the amortization of
premium would be allowed. It is possible that the IRS may take the position that
the application of the Stripped Bond Rules to the Stripped Mortgage Loans should
be adjusted so as not to take account of any premium allocable to a Stripped
Mortgage Loan originated on or before September 27, 1985. Any such premium would
then be subject to the provisions of the Code relating to the amortization of
bond premium, including the limitations described in the preceding paragraph on
the amortization of premium allocable to Mortgage Loans originated on or before
September 27, 1985.
The Bond Premium Amortization Regulations generally provide that
amortizable bond premium is amortized over the term of a note by offsetting the
qualified stated interest allocable to an accrual period with the amortizable
bond premium allocable to such period using a specified constant yield method.
To the extent that the amortizable bond premium allocated to an accrual period
exceeds the qualified stated interest allocable to such period, the excess is
deductible under Code Section 171 to the extent such excess does not exceed the
difference between (i) prior interest inclusions over (ii) the Bond Premium
Amortization Limit, with the excess over the Bond Premium Amortization Limit
carried forward to the next accrual period and treated as amortizable bond
premium allocable to that period. The Bond Premium Amoritzation Regulations are
effective for notes acquired on or after March 2, 1998. However, if a holder
makes the election to amortize bond premium for the taxable year containing
March 2, 1998, or any subsequent taxable year, the Treasury regulations would
apply to debt instruments held on or after the first day for the taxable year in
which the election is made.
4. Allocation of Purchase Price
As noted above, a purchaser of a Trust Fractional Certificate relating to
Unstripped Mortgage Loans will be required to allocate the purchase price
thereof to the undivided interest it acquires in each of the Mortgage Loans, in
proportion to the respective fair market values of the portions of such Mortgage
Loans included in the Trust Fund at the time the Certificate is purchased. The
Depositor believes that it may be reasonable to make such allocation in
proportion to the respective principal balances of the Mortgage Loans, where the
interests in the Mortgage Loans represented by a Trust Fractional Certificate
have a common remittance rate and other common characteristics, and otherwise so
as to produce a common yield for each interest in a Mortgage Loan, provided the
Mortgage Loans are not so diverse as to evoke differing prepayment expectations.
However, if there is any significant variation in interest rates among the
Mortgage Loans, a disproportionate allocation of the purchase price taking
account of prepayment expectations may be required.
D. TAXATION OF OWNERS OF TRUST INTEREST CERTIFICATES
With respect to each Series of Certificates, Special Tax Counsel will
advise the Depositor that, in their opinion, each holder of a Trust Interest
Certificate (a 'Trust Interest Certificateholder') will be treated as the owner
of an undivided interest in the interest portion ('Interest Coupon') of each of
the Mortgage Loans.
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Accordingly, and subject to the discussion under 'Application of Stripped Bond
Rules,' each Trust Interest Certificateholder is treated as owning its allocable
share of the entire Interest Coupon from the Mortgage Loans, will report income
as described below, and may deduct its allocable share of the servicing and
related fees and expenses paid to or retained by the Depositor at the same time
and in the same manner as such items would have been reported under the Trust
Interest Certificateholder's tax accounting method had it held directly an
interest in the Interest Coupon from the Mortgage Loans, received directly its
share of the amounts received with respect to the Mortgage Loans and paid
directly its share of the servicing and related fees and expenses. An
individual, estate or trust holder of a Trust Interest Certificate will be
allowed a deduction for servicing fees in determining its regular tax liability
only to the extent that the aggregate of such holder's miscellaneous itemized
deductions exceeds two percent of such holder's adjusted gross income, and will
be allowed no deduction for such fees in determining its liability for
alternative minimum tax. Amounts, if any, received by Trust Interest
Certificateholders in lieu of amounts due with respect to any Mortgage Loan but
not received by the Master Servicer from the Mortgagor will be treated for
federal income tax purposes as having the same character as the payment which
they replace.
1. Application of Stripped Bond Rules
A Trust Interest Certificate will consist of an undivided interest in the
Interest Coupon of each of the Mortgage Loans. With respect to each Series of
Certificates, Special Tax Counsel will advise the Depositor that, in their
opinion a Trust Interest Certificate will be treated for federal income tax
purposes as comprised of an ownership interest in a portion of the Interest
Coupon of each of the Mortgage Loans (a 'Stripped Interest') separated by the
Depositor from the right to receive principal payments and the remainder, if
any, of each interest payment on the underlying Mortgage Loan. As a consequence,
the Trust Interest Certificates will become subject to the Stripped Bond Rules.
Each Trust Interest Certificateholder will be required to apply the Stripped
Bond Rules to its interest in the Interest Coupon under the method prescribed by
the Code, taking account of the price at which the holder purchased the Trust
Interest Certificate and the Trust Interest Certificateholder's share of the
scheduled payment to be made thereon. The Stripped Bond Rules generally require
a holder of Stripped Coupons to accrue and report income from such Stripped
Coupons daily on the basis of the yield to maturity of such stripped bonds or
coupons, as determined in accordance with the provisions of the Code dealing
with original issue discount. For a discussion of the general method of
calculating original issue discount, see 'REMIC Trust Funds -- Taxation of
Owners of REMIC Regular Certificates -- Original Issue Discount.' The provisions
of the Code and the OID Regulations do not directly address the treatment of
instruments similar to Trust Interest Certificates. In reporting to Trust
Interest Certificateholders such Certificates will be treated as a single
obligation with payment corresponding to the aggregate of the payments allocable
thereto from each of the Mortgage Loans. See 'Aggregate Reporting.'
Alternatively, Trust Interest Certificateholders may be required by the IRS
to treat each scheduled payment on each Stripped Interest (or their interests in
all scheduled payments from each of the Stripped Interests) as a separate
obligation for purposes of allocating purchase price and computing original
issue discount.
The tax treatment of the Trust Interest Certificates with respect to the
application of the original issue discount provisions of the Code is currently
unclear. However, the Trustee intends to treat each Trust Interest Certificate
as a single debt instrument issued on the day it is purchased for purposes of
calculating any original issue discount. Original issue discount with respect to
a Trust Interest Certificate must be included in ordinary gross income for
federal income tax purposes as it accrues in accordance with a constant yield
method that takes into account the compounding of interest and such accrual of
income may be in advance of the receipt of any cash attributable to such income.
In general, the rules for accruing original issue discount set forth under
' -- REMIC Trust Funds -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount' apply; however there is no authority
permitting Trust Interest Certificateholders to take into account the Prepayment
Assumption in computing original issue discount accruals. See ' -- Prepayments'
below. For purposes of applying the original issue discount provisions of the
Code, the issue price used in reporting original issue discount with respect to
a Trust Interest Certificate will be the purchase price paid by each holder
thereof and the stated redemption price at maturity may include the aggregate
amount of all payments to be made with respect to the Trust Interest Certificate
whether or not denominated as interest. The amount of original issue discount
with respect to a Trust Interest Certificate may be treated as zero under the
original issue discount de minimis rules described above.
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Aggregate Reporting. The Trustee intends in reporting information relating
to original issue discount to Certificateholders to provide such information on
an aggregate poolwide basis. Applicable law is unclear, however, and it is
possible that investors may be required to compute original issue discount
either on a Mortgage Loan by Mortgage Loan basis or on a payment by payment
basis taking account of an allocation of their basis in the Certificates among
the interests in the various Mortgage Loans represented by such Certificates
according to their respective fair market values. The effect of an aggregate
computation for the inclusion of original issue discount in income may be to
defer the recognition of losses due to early prepayments relative to a
computation on a Mortgage by Mortgage basis. Investors should be aware that it
may not be possible to reconstruct after the fact sufficient mortgage by
mortgage information should a computation on that basis be required by the IRS.
Because the treatment of the Trust Interest Certificates under current law
and the potential application of the 1996 Contingent Debt Regulations are both
complicated and uncertain, Trust Interest Certificateholders should consult
their tax advisers to determine the proper method of reporting amounts received
or accrued on Trust Interest Certificates.
E. PREPAYMENTS
The 1986 Act contains a provision requiring original issue discount on
certain obligations issued after December 31, 1986 to be calculated taking into
account a prepayment assumption and requiring such discount to be taken into
income on the basis of a constant yield to assumed maturity taking account of
actual prepayments. The 1997 Act provides that the prepayment rules of Code
Section 1272(a)(6), discussed above, will also apply to pools of debt
instruments the yield on which may be affected by reason of prepayments. Trust
Fractional Certificateholders and Trust Interest Certificateholders should
consult their tax advisers as to the proper reporting of income from Trust
Fractional Certificates and Trust Interest Certificates, as the case may be, in
the light of the possibility of prepayment and, with respect to the Trust
Interest Certificates, as to the possible application of the 1996 Contingent
Debt Regulations.
F. SALES OF TRUST CERTIFICATES
If a Certificate is sold, gain or loss will be recognized by the holder
thereof in an amount equal to the difference between the amount realized on the
sale and the Certificateholder's adjusted tax basis in the Certificate. Such tax
basis will equal the Certificateholder's cost for the Certificate, increased by
any original issue or market discount with respect to the interest in the
Mortgage Loans represented by such Certificate previously included in income,
and decreased by any deduction previously allowed for premium and by the amount
of payments, other than payments of qualified stated interest, previously
received with respect to such Certificate. The portion of any such gain
attributable to accrued market discount not previously included in income will
be ordinary income, as will gain attributable to a Certificate which is part of
a 'conversion transaction' or which the holder elects to treat as ordinary. See
' -- REMIC Trust Funds -- Sales of REMIC Certificates' above. Any remaining gain
or any loss will be capital gain or loss if the Certificate was held as a
capital asset except to the extent that code Section 582(c) applies to such gain
or loss.
G. TRUST REPORTING
The Master Servicer will furnish to each holder of a Trust Fractional
Certificate with each distribution a statement setting forth the amount of such
distribution allocable to principal on the underlying Mortgage Loans and to
interest thereon at the Interest Rate. In addition, the Master Servicer will
furnish, within a reasonable time after the end of each calendar year, to each
holder of a Trust Certificate who was such a holder at any time during such
year, information regarding the amount of servicing compensation received by the
Master Servicer and sub-servicer (if any) and such other customary factual
information as the Master Servicer deems necessary or desirable to enable
holders of Trust Certificates to prepare their tax returns.
H. BACK-UP WITHHOLDING
In general, the rules described in 'REMIC Trust Funds -- Back-up
Withholding with respect to REMIC Certificates' will also apply to Trust
Certificates.
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I. FOREIGN CERTIFICATEHOLDERS
Payments in respect of interest or original issue discount (including
amounts attributable to servicing fees) on the Mortgage Loans to a
Certificateholder who is not a citizen or resident of the United States, a
corporation or other entity organized in or under the laws of the United States
or of any State thereof (unless, in the case of a partnership, future Treasury
regulations provide otherwise), or a United States estate or trust, will not
generally be subject to 30% United States withholding tax, provided that such
Certificateholder (i) does not own, directly or indirectly, 10% or more of, and
is not a controlled foreign corporation (within the meaning of Code Section 957)
related to, each of the issuers of the Mortgage Loans and (ii) provides required
certification as to its non-United States status under penalty of perjury and
then will be free of such tax only to the extent that the underlying Mortgage
Loans were issued after July 18, 1984. This withholding tax may be reduced or
eliminated by an applicable tax treaty. Notwithstanding the foregoing, if any
such payments are effectively connected with a United States trade or business
conducted by the Certificateholder, they will be subject to regular United
States income tax and, in the case of a corporation, to a possible branch
profits tax, but will ordinarily be exempt from United States withholding tax
provided that applicable documentation requirements are met.
Recently issued Treasury regulations (the 'Final Withholding Regulations'),
which are generally effective with respect to payments made after December 31,
1998, consolidate and modify the current certification requirements and means by
which a holder may claim exemption from United States federal income tax
withholding and provide certain presumptions regarding the status of holders
when payments to the holders cannot be reliably associated with appropriate
documentation provided to the payor. All holders of REMIC Regular Certificates
and REMIC Residual Certificates should consult their tax advisers regarding the
application of the Final Withholding Regulations.
J. STATE AND LOCAL TAXATION
In addition to the federal income tax consequences described above,
potential investors should consider the state income tax consequences of the
acquisition, ownership, and disposition of the Securities. State income tax law
may differ substantially from the corresponding federal law, and this discussion
does not purport to describe any aspect of the income tax laws of any state.
Therefore, potential investors should consult their own tax advisers with
respect to the various state tax consequences of an investment in the
Securities.
IV. CHARACTERIZATION OF THE TRUST CERTIFICATES AS INDEBTEDNESS
A. CHARACTERIZATION OF INVESTMENTS IN TRUST CERTIFICATES
With respect to each Series of Trust Certificates that have been structured
as debt for federal income tax purposes, Special Tax Counsel will deliver their
opinion to the effect that the Trust Certificates will be treated as debt
instruments for federal income tax purposes as of such date rather than as
ownership interests in the Trust Fund.
The Depositor, each Unaffiliated Seller and the Certificateholders will
express in the Agreement their intent that, for applicable tax purposes, the
Trust Certificates will be indebtedness secured by the Mortgage Loans. The
Depositor, each Unaffiliated Seller and each Certificateholder, by its
acceptance and acquisition of a beneficial interest in a Trust Certificate, will
have agreed to treat the Trust Certificates as indebtedness for federal income
tax purposes. However, because different criteria are used to determine the
non-tax accounting characterization of a securitization transaction, the
transaction will be treated as a sale of an interest in the Mortgage Loans for
financial accounting purposes.
In general, whether for federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured by
property, is a question of fact, the resolution of which is based upon the
economic substance of the transaction rather than its form or the manner in
which it is labeled. While the IRS and the courts have set forth several factors
to be taken into account in determining whether the substance of a transaction
is a sale of property or a secured loan, the primary factor in making this
determination is whether the transferee has assumed the risk of loss or other
economic burdens relating to the property and has obtained the benefits of
ownership thereof. Special Tax Counsel has analyzed and relied on several
factors in reaching its opinion that the weight of the benefits and burdens of
ownership of the Mortgage Loans has been retained by the Depositor or an
Unaffiliated Seller and has not been transferred to the Certificateholders.
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In some instances, courts have held that a taxpayer is bound by the
particular form it has chosen for a transaction, even if the substance of the
transaction does not accord with its form. Special Tax Counsel has advised that
the rationale of those cases will not apply to this transaction, because the
form of the transaction as reflected in the operative provisions of the
documents either accords with the characterization of the Trust Certificates as
debt or otherwise makes the rationale of those cases inapplicable to this
situation.
B. TAXATION OF INTEREST INCOME OF CERTIFICATEHOLDERS
Assuming that the Certificateholders are holders of debt obligations for
federal income tax purposes, the Trust Certificates generally will be taxable as
debt. The stated interest thereon will be taxable to a Certificateholder as
ordinary interest income when received or accrued in accordance with such
Certificateholder's method of tax accounting. Under the OID Regulations, a
holder of a debt instrument issued with a de minimis amount of original issue
discount must include such original issue discount in income, on a pro rata
basis, as principal payments are made on the debt instrument. A subsequent
purchaser who buys a Trust Certificate for more or less than its principal
amount will generally be subject, respectively, to the premium amortization or
market discount rules of the Code.
A holder of a Trust Certificate that has a fixed maturity date of not more
than one year from the issue date of such Trust Certificate (a 'Short-Term
Certificate') may be subject to special rules. An accrual basis holder of a
Short-Term Certificate (and certain cash method holders, including regulated
investment companies, as set forth in Code Section 1281) generally would be
required to report interest income as interest accrues on a straight-line basis
over the term of each interest period. Other cash basis holders of a Short-Term
Certificate would, in general, be required to report interest income as interest
is paid (or, if earlier, upon the taxable disposition of the Short-Term
Certificate). However, a cash basis holder of a Short-Term Certificate reporting
interest income as it is paid may be required to defer a portion of any interest
expense otherwise deductible on indebtedness incurred to purchase or carry the
Short-Term Certificate until the taxable disposition of the Short-Term
Certificate. A cash basis taxpayer may elect under Code Section 1281 to accrue
interest income on all nongovernment debt obligations with a term of one year or
less, in which case the taxpayer would include interest on a Short-Term
Certificate in income as it accrues, but would not be subject to the interest
expense deferral rule referred to in the preceding sentence. Certain special
rules apply if a Short-Term Certificate is purchased for more or less than its
principal amount.
While it is not anticipated that the Trust Certificates will be issued at a
greater than de minimis discount, it is possible that the Trust Certificates
could nevertheless be deemed to have been issued with original issue discount if
interest with respect to the Trust Certificates were not treated as
'unconditionally payable' under the OID Regulations. In such event, all of the
taxable income to be recognized with respect to the Trust Certificates would be
includible in income of Certificateholders as original issue discount, but would
not be includible again when the interest is actually received.
C. POSSIBLE CLASSIFICATION AS A PARTNERSHIP OR ASSOCIATION TAXABLE AS A
CORPORATION
The opinion of Special Tax Counsel is not binding on the courts or the IRS.
It is possible that the IRS could assert that, for federal income tax purposes,
the transaction contemplated with respect to the Certificates constitutes a sale
of the Mortgage Loans (or an interest therein) to the Certificateholders and
that the proper classification of the legal relationship between the Depositor,
any Unaffiliated Seller and the Certificateholders resulting from this
transaction is that of a partnership, a publicly traded partnership taxable as a
corporation, or an association taxable as a corporation. Since Special Tax
Counsel has advised that the Trust Certificates will be treated as indebtedness
in the hands of the Certificateholders for federal income tax purposes, neither
the Depositor nor any Unaffiliated Seller will attempt to comply with federal
income tax reporting requirements applicable to partnerships or corporations.
If it were determined that this transaction created an entity classified as
a corporation (including a publicly traded partnership taxable as a
corporation), the Trust Fund would be subject to federal income tax at corporate
income tax rates on the income it derives from the Mortgage Loans, which would
reduce the amounts available for distribution to the Certificateholders. Cash
distributions to the Certificateholders generally would be treated as dividends
for federal income tax purposes to the extent of such corporation's earnings and
profits.
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If the transaction were treated as creating a partnership, the partnership
itself would not be subject to federal income tax (unless it were to be
characterized as a publicly traded partnership taxable as a corporation);
rather, each partner (including each Certificateholder) would be taxed
individually on their respective distributive shares of the partnership's
income, gain, loss, deductions and credits. The amount and timing of items of
income and deductions of the Certificateholders could differ if the Certificates
were held to constitute partnership interests rather than indebtedness. Assuming
that all of the provisions of the Agreement, as in effect on the date of the
issuance, are complied with, it is the opinion of Special Tax Counsel that the
Trust Fund will not be treated as either an association taxable as a corporation
or a partnership taxable as a corporation.
D. POSSIBLE CLASSIFICATION AS A TAXABLE MORTGAGE POOL
In relevant part, Section 7701(i) of the Code provides that any entity (or
a portion of an entity) that is a 'taxable mortgage pool' will be classified as
a taxable corporation and will not be permitted to file a consolidated federal
income tax return with another corporation. Any entity (or a portion of any
entity) will be a taxable mortgage pool if (i) it is not a REMIC (or, after
September 1, 1997, a FASIT), (ii) substantially all of its assets consist of
debt instruments, more than 50% of which are real estate mortgages, (iii) the
entity is the obligor under debt obligations with two or more maturities, and
(iv) under the terms of the entity's debt obligations (or an underlying
arrangement), payments on such debt obligations bear a relationship to the debt
instruments held by the entity.
Assuming that all of the provisions of the Agreement, as in effect on the
date of issuance, are complied with, Special Tax Counsel is of the opinion that
the arrangement created by the Agreement will not be a taxable mortgage pool
under Section 7701(i) of the Code because only one class of indebtedness secured
by the Mortgage Loans is being issued.
The opinion of Special Tax Counsel is not binding on the courts or the IRS.
If the IRS were to contend successfully (or future regulations were to provide)
that the arrangement created by the Agreement is a taxable mortgage pool, such
arrangement would be subject to federal corporate income tax on its taxable
income generated by ownership of the Mortgage Loans. Such a tax might reduce
amounts available for distributions to Certificateholders. The amount of such a
tax would depend upon whether distributions to Certificateholders would be
deductible as interest expense in computing the taxable income of such an
arrangement as a taxable mortgage pool.
E. FOREIGN INVESTORS
In general, subject to certain exceptions, interest (including original
issue discount) paid on a Trust Certificate to a nonresident alien individual,
foreign corporation or other non-United States person is not subject to United
States federal income tax, provided that such interest is not effectively
connected with a trade or business of the recipient in the United States and the
Certificateholder provides the required certification of foreign status.
If the interests of the Certificateholders were deemed to be partnership
interests, the partnership would be required, on a quarterly basis, to pay
withholding tax equal to the product, for each foreign partner, of such foreign
partner's distributive share of 'effectively connected' income of the
partnership multiplied by the highest United States rate of tax applicable to
that foreign partner. In addition, such foreign partner, if a corporation or
association taxable as a corporation, could be subject to branch profits tax.
Each non-foreign partner would be required to certify to the partnership that it
is not a foreign person. The tax withheld from each foreign partner would be
credited against such foreign partner's United States federal income tax
liability.
If the Trust Fund were taxable as a corporation, distributions to foreign
persons, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30%, unless such rate were reduced by an applicable
tax treaty.
F. BACKUP WITHHOLDING
Certain Certificateholders may be subject to backup withholding at the rate
of 31% with respect to interest paid on the Trust Certificates if the
Certificateholder, upon issuance, fails to supply the Trustee or his broker with
his taxpayer identification number, furnishes an incorrect taxpayer
identification number, fails to report
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interest, dividends, or other 'reportable payments' (as defined in the Code)
properly, or, under certain circumstances, fails to provide the Trustee or his
broker with a certificate statement, under penalties of perjury, that he is not
subject to backup withholding.
The Trustee will be required to report annually to the IRS, and to each
Certificateholder of record, the amount of interest paid (and original issue
discount accrued, if any) on the Trust Certificates (and the amount of interest
withheld for federal income taxes, if any) for each calendar year, except as to
exempt holders (generally, holders that are corporations, certain tax-exempt
organizations or nonresident aliens who provide certification as to their status
as nonresidents). As long as the only 'Certificateholder' of record is Cede, as
nominee for DTC, Certificateholders and the IRS will receive tax and other
information including the amount of interest paid on the Trust Certificates from
other persons holding Trust Certificates directly or indirectly through DTC,
rather than from the Trustee. (The Trustee, however, will respond to requests
for necessary information to enable such other persons to complete their
reports.) Each non-exempt Certificateholder will be required to provide, under
penalties of perjury, a certificate on IRS Form W-9 containing his or her name,
address, correct federal taxpayer identification number and a statement that he
or she is not subject to backup withholding. Should a non-exempt
Certificateholder fail to provide the required certification, 31% of the
interest (and principal) otherwise payable to the Certificateholder will be
required to be withheld and remitted to the IRS as a credit against the
Certificateholder's federal income tax liability.
G. SALE OR OTHER DISPOSITION
If a Certificateholder sells a Trust Certificate, the holder will recognize
gain or loss in an amount equal to the difference between the amount realized on
the sale and the Certificateholder's adjusted tax basis in the Trust
Certificate. The adjusted tax basis of a Trust Certificate to a particular
Certificateholder will equal the holder's cost for the Trust Certificate,
increased by any market discount, acquisition discount, original issue discount
and gain previously included by such Certificateholder in income with respect to
the Trust Certificate and decreased by the amount of bond premium (if any)
previously amortized and by the amount of principal payments previously received
by such Certificateholder with respect to such Trust Certificate. Any such gain
or loss will generally be capital gain or loss if the Trust Certificate was held
as a capital asset, except for gain representing accrued interest and accrued
market discount not previously included in income. Capital losses generally may
be used only to offset capital gains.
H. STATE AND LOCAL TAXATION
In addition to the federal income tax consequences described above,
potential investors should consider the state income tax consequences of the
acquisition. ownership, and disposition of the Trust Certificates. State income
tax law may differ substantially from the corresponding federal law and this
discussion does not purport to describe any aspect of the income tax laws of any
state. Therefore, potential investors should consult their own tax advisers with
respect to the various state tax consequences of an investment in the Trust
Certificates.
V. TAX CHARACTERIZATION AS A PARTNERSHIP
Special Tax Counsel will deliver its opinion for an Issuer which is
intended to be a partnership for federal income tax purposes, as specified in
the related Prospectus Supplement, generally to the effect that the Issuer will
not be an association (or publicly traded partnership) taxable as a corporation
for federal income tax purposes. This opinion will be based on the assumption
that the terms of the Trust Agreement and related documents will be complied
with, and on counsel's conclusion that the nature of the income of the Issuer
will exempt it from the rule that certain publicly traded partnerships are
taxable as corporations or such rule is otherwise inapplicable to the Issuer, so
that the Issuer will not be characterized as a publicly traded partnership
taxable as a corporation.
Certain entities classified as 'taxable mortgage pools' are subject to
corporate level tax on their net income. A 'taxable mortgage pool' is generally
defined as an entity that meets the following requirements: (i) the entity is
not a REMIC (or, after September 1, 1997, a FASIT), (ii) substantially all of
the assets of the entity are debt obligations, and more than 50 percent of such
debt obligations consists of real estate mortgages (or interests therein), (iii)
the entity is the obligor under debt obligations with two or more maturities,
and (iv) payments on the debt obligations on which the entity is the obligor
bear a relationship to the payments on
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the debt obligations which the entity holds as assets. With respect to
requirement (iii), the Code authorizes the Internal Revenue Service to provide
by regulations that equity interests may be treated as debt for purposes of
determining whether there are two or more maturities. If the Issuer were treated
as a taxable mortgage pool, it would be ineligible to file consolidated returns
with any other corporation and could be liable for corporate tax. Treasury
regulations do not provide for the recharacterization of equity as debt for
purposes of determining whether an entity has issued debt with two maturities,
except in the case of transactions structured to avoid the taxable mortgage pool
rules. Special Tax Counsel will deliver its opinion for an Issuer which is
intended to be a partnership for federal income tax purposes, as specified in
the related Prospectus Supplement, generally to the effect that the Issuer will
not be a taxable mortgage pool. This opinion will be based on the assumption
that the terms of the Trust Agreement and related documents will be complied
with, and on counsel's conclusion that either the number of classes of debt
obligations issued be the Issuer, or the nature of the assets held by the
Issuer, will exempt the Issuer from treatment as a taxable mortgage pool.
If the Issuer were taxable as a corporation for federal income tax
purposes, the Issuer would be subject to corporate income tax on its taxable
income. The Issuer's taxable income would include all its income, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificateholders could be liable for
any such tax that is unpaid by the Issuer. In additions, all distributions to
the Certificateholders would be taxable as dividends.
A. TAX CONSEQUENCES TO HOLDERS OF THE NOTES ISSUED BY A PARTNERSHIP
1. Treatment of the Notes as Indebtedness
The Issuer will agree, and the Noteholders will agree by their purchase of
Notes, to treat the Notes as debt for federal income tax purposes. Except as
otherwise provided in the related Prospectus Supplement, Special Tax Counsel
will advise the Depositor that in its opinion the Notes will be classified as
debt for federal income tax purposes.
2. Possible Alternative Treatments of the Notes
If, contrary to the opinion of counsel, the IRS successfully asserted that
one or more of the Notes did not represent debt for federal income tax purposes,
the Notes might be treated as equity interests in the Issuer. If so treated, the
Issuer might be taxable as a corporation with the adverse consequences described
above (and the taxable corporation would not be able to reduce its taxable
income by deductions for interest expense on Notes recharacterized as equity).
Alternatively, the Issuer might be treated as a publicly traded partnership that
would not be taxable as a corporation because it would meet certain qualifying
income tests. Nonetheless, treatment of the Notes as equity interests in such a
publicly traded partnership could have adverse tax consequences to certain
holders. For example, income to foreign holders generally would be subject to
United States federal income tax and United States federal income tax return
filing and withholding requirements, and individual holders might be subject to
certain limitations on their ability to deduct their share of the Issuer's
expenses.
3. Interest Income on the Notes
The stated interest on the Notes will be taxable to a Noteholder as
ordinary income when received or accrued in accordance with such Noteholder's
method of tax accounting. It is not anticipated that the Notes will be issued
with original issue discount within the meaning of Section 1273 of the Code. A
subsequent holder who purchases a Note at a discount that exceeds a statutorily
defined de minimis amount will be subject to the 'market discount' rules of the
Code, and a holder who purchases a Note at a premium will be subject to the
premium amortization rules of the Code.
4. Sale or Other Disposition
If a Noteholder sells a Note, the holder will recognize gain or loss in an
amount equal to the difference between the amount realized on the sale and the
holder's adjusted tax basis in the Note. The adjusted tax basis of a Note to a
particular Noteholder will equal the holder's cost for the Note, increased by
any original issue discount (if any), market discount and gain previously
included by such Noteholder in income with respect to
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the Note and decreased by the amount of bond premium (if any) previously
amortized and by the amount of principal payments previously received by such
Noteholder with respect to such Note. Subject to the rules of the Code
concerning market discount on the Notes, any such gain or loss generally will be
capital gain or loss if the Note was held as a capital asset. Capital losses
generally may be deducted only to the extent the Noteholder has capital gains
for the taxable year, although under certain circumstances non-corporate
Noteholders can deduct losses in excess of available capital gains.
5. Foreign Holders
If interest paid (or accrued) to a Noteholder who is a nonresident alien,
foreign corporation or other non-United States person (a 'foreign person') is
not effectively connected with the conduct of a trade or business within the
United States by the foreign person, the interest generally will be considered
'portfolio interest,' and generally will not be subject to United States Federal
income tax and withholding tax, if the foreign person (i) is not actually or
constructively a '10 percent shareholder' of the Trust or the Depositor
(including a holder of 10% of the outstanding Certificates) or a 'controlled
foreign corporation' with respect to which the Trust or the Depositor is a
'related person' within the meaning of the Code and (ii) provides the person
otherwise required to withhold United States tax with an appropriate statement,
signed under penalties of perjury, certifying that the beneficial owner of the
Note is a foreign person and providing the foreign person's name and address. If
the information provided in the statement changes, the foreign person must so
inform the person otherwise required to withhold United States tax within 30
days of such change. The statement generally must be provided in the year a
payment occurs (prior to such payment) or in either of the two preceding years.
If a Note is held through a securities clearing organization or certain other
financial institutions, the organization or institution may provide a signed
statement to the withholding agent. However, in that case, the signed statement
must be accompanies by a Form W-8 or substitute form provided by the foreign
person that owns the Note. If such interest in not portfolio interest, then it
will be subject to United States federal income and withholding tax at a rate of
30%, unless reduced or eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) the gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign individual is not present in the United States for 183 days
or more in the taxable year.
If the interest, gain or income on a Note held by a foreign person is
effectively connected with the conduct of a trade or business in the United
States by the foreign person (although exempt from the withholding tax
previously discussed if the holder provides an appropriate statement), the
holder generally will be subject to United States federal income tax on the
interest, gain or income at regular federal income tax rates. In addition, if
the foreign person is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its 'effectively connected earnings and profits'
within the meaning of the Code for the taxable year, as adjusted for certain
items, unless it qualifies for a lower rate under an applicable tax treaty (as
modified by the branch profits tax rules).
Proposed Treasury regulations, which would be effective with respect to
payments made after December 31, 1997 if adopted in their current form, would
provide alternative certification requirements and means for obtaining the
exemption from federal income and withholding tax.
6. Information Reporting and Backup Withholding
The Trust will be required to report annually to the IRS, and to each
Noteholder of record, the amount of interest paid on the Notes (and the amount
of interest withheld for federal income taxes, if any) for each calendar year,
except as to exempt holders (generally, holders that are corporations,
tax-exempt organizations, qualified pension and profit-sharing trusts,
individual retirement accounts, or nonresident aliens who provide certification
as to their status as nonresidents). Accordingly, each holder (other than exempt
holders who are not subject to the reporting requirements) will be required to
provide, under penalties of perjury, a certificate containing the holder's name,
address, correct federal taxpayer identification number and a statement that the
holder is not subject to backup withholding. Should a nonexempt Noteholder fail
to provide the required
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certification, the Trust will be required to withhold 31% of the amount
otherwise payable to the holder, and remit the withheld amount to the IRS, as a
credit against the holder's federal income tax liability.
B. TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES ISSUED BY A PARTNERSHIP
1. Treatment of the Issuer as a Partnership
In the case of an Issuer intended to qualify as a partnership for federal
income tax purposes, the Issuer and the Depositor will agree, and the
Certificateholders will agree by their purchase of Certificates, to treat the
Issuer as a partnership for purposes of United States federal and state income
tax, franchise tax and any other tax measured in whole or in part by income,
with the assets of the partnership being the assets held by the Issuer, the
partners of the partnership being the Certificateholders, and the Notes, if any,
being debt of the partnership. However, the proper characterization of the
arrangement involving the Issuer, the Certificates, the Notes, the Issuer and
the Servicer is not clear because there is no authority on transactions closely
comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Issuer. Generally, provided the
Certificates are issued at or close to face value, any such characterization
would not result in materially adverse tax consequences to Certificateholders as
compared to the consequences from treatment of the Certificates as equity in a
partnership, described below. The following discussion assumes that the
Certificates represent equity interests in a partnership.
2. Partnership Taxation
As a partnership, the Issuer will not be subject to federal income tax.
Rather, each Certificateholder will be required to separately take into account
such holder's allocated share of income, gains, losses, deductions and credits
of the Issuer. The Issuer's income will consist primarily of interest and
finance charges earned on the Mortgage Loans (including appropriate adjustments
for market discount, original issue discount and bond premium) and any gain upon
collection or disposition of Mortgage Loans. The Issuer's deductions will
consist primarily of interest and original issue discount accruing with respect
to the Notes, servicing and other fees, and losses or deductions upon collection
or disposition of Mortgage Loans.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Issuer for each month equal to the sum of (i) the interest that accrues on the
Certificates in accordance with their terms for such month, including interest
accruing at the Interest Rate for such month and interest on amounts previously
due on the Certificates but not yet distributed; (ii) any Issuer income
attributable to discount on the Mortgage Loans that corresponds to any excess of
the principal amount of the Certificates over their initial issue price; (iii)
prepayment premium payable to the Certificateholders for such month; and (iv)
any other amounts of income payable to the Certificateholders for such month.
Such allocation will be reduced by any amortization by the Issuer of premium on
Mortgage Loans that corresponds to any excess of the issue price of Certificates
over their principal amount. All remaining taxable income of the Issuer will be
allocated to the Depositor. Based on the economic arrangement of the parties,
this approach for allocating Issuer income should be permissible under
applicable Treasury regulations, although no assurance can be given that the IRS
would not require a greater amount of income to be allocated to
Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire Interest Rate
plus the other items described above even though the Issuer might not have
sufficient cash to make current cash distributions of such amount. Thus, cash
basis holders will in effect be required to report income from the Certificates
on the accrual basis and Certificateholders may become liable for taxes on
Issuer income even if they have not received cash from the Issuer to pay such
taxes. In addition, because tax allocations and tax reporting will be done on a
uniform basis for all Certificateholders but Certificateholders may be
purchasing Certificates at different times and at different prices,
Certificateholders may be required to report on their tax returns taxable income
that is greater or less than the amount reported to them by the Issuer.
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If Notes are also issued, some or all of the taxable income allocated to a
Certificateholder that is a pension, profit sharing or employee benefit plan or
other tax-exempt entity (including an individual retirement account) will
constitute 'unrelated business taxable income' generally taxable to such a
holder under the Code.
An individual taxpayer's share of expenses of the Issuer (including fees to
the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Issuer.
The Issuer intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Mortgage Loan, the
Issuer might be required to incur additional expense but it is believed that
there would not be a material adverse effect on Certificateholders.
3. Discount and Premium
It is believed that the Mortgage Loans were not issued with original issue
discount and, therefore, the Trust should not have original issue discount
income. However, the purchase price paid by the Issuer for the Mortgage Loans
may be greater or less than the remaining principal balance of the Mortgage
Loans at the time of purchase. If so, the Mortgage Loan will have been acquired
at a premium or discount, as the case may be. (As indicated above, the Issuer
will make this calculation on an aggregate basis, but might be required to
recompute it on a Mortgage Loan by Mortgage Loan basis.)
If the Issuer acquires the Mortgage Loans at a market discount or premium,
the Issuer will elect to include any such discount in income currently as it
accrues over the life of the Mortgage Loans or to offset any such premium
against interest income on the Mortgage Loans. As indicated above, a portion of
such market discount income or premium deduction may be allocated to
Certificateholders.
4. Section 708 Termination
Under Section 708 of the Code, the Issuer will be deemed to terminate for
federal income tax purposes if 50% or more of the capital and profits interests
in the Issuer are sold or exchanged within a 12-month period. If such a
termination occurs, the partnership will be considered to transfer its assets
and liabilities to a new partnership in exchange for interests in that new
partnership, which it would then be treated as transferring to its partners. The
Issuer will not comply with certain technical requirements that might apply when
such a constructive termination occurs. As a result, the Issuer may be subject
to certain tax penalties and may incur additional expenses if it is required to
comply with those requirements. Furthermore, the Issuer might not be able to
comply due to lack of data.
5. Disposition of Certificates
Generally, capital gain or loss will be recognized on a sale of
Certificates in an amount equal to the difference between the amount realized
and the seller's tax basis in the Certificates sold. A Certificateholder's tax
basis in a Certificate will generally equal the holder's cost increased by the
holder's share of Issuer income (includible in income) and decreased by any
distributions received with respect to such Certificate. In addition, both the
tax basis in the Certificates and the amount realized on a sale of a Certificate
would include the holder's share of the Notes and other liabilities of the
Issuer. A holder acquiring Certificates at different prices may be required to
maintain a single aggregate adjusted tax basis in such Certificates, and, upon
sale or other disposition of some of the Certificates, allocate a portion of
such aggregate tax basis to the Certificates sold (rather than maintaining a
separate tax basis in each Certificate for purposes of computing gain or loss on
a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Mortgage Loans would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Issuer does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Issuer will elect to include market discount
in income as it accrues.
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If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
6. Allocations Between Depositors and Transferees
In general, the Issuer's taxable income and losses will be determined
monthly and the tax items for a particular calendar month will be apportioned
among the Certificateholders in proportion to the principal amount of
Certificates owned by them as of the close of the last day of such month. As a
result, a holder purchasing Certificates may be allocated tax items (which will
affect its tax liability and tax basis) attributable to periods before the
actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations and federal tax counsel is unable to opine on the matter. If a
monthly convention is not allowed (or only applies to transfers of less than all
of the partner's interest), taxable income or losses of the Issuer might be
reallocated among the Certificateholders. The Issuer's method of allocation
between transferors and transferees may be revised to conform to a method
permitted by future regulations.
7. Section 754 Election
In the event that a Certificateholder sells its Certificates at a profit
(loss), the purchasing Certificateholder will have a higher (lower) basis in the
Certificates than the selling Certificateholder had. The tax basis of the
Issuer's assets will not be adjusted to reflect that higher (or lower) basis
unless the Issuer were to file an election under Section 754 of the Code. In
order to avoid the administrative complexities that would be involved in keeping
accurate accounting records, as well as potentially onerous information
reporting requirements, the Issuer currently does not intend to make such
election. As a result, Certificateholders might be allocated a greater or lesser
amount of Issuer income than would be appropriate based on their own purchase
price for Certificates.
8. Administrative Matters
The Trustee is required to keep or have kept complete and accurate books of
the Issuer. Such books will be maintained for financial reporting and tax
purposes on an accrual basis and the fiscal year of the Issuer will be the
calendar year. The Trustee will file a partnership information return (IRS Form
1065) with the IRS for each taxable year of the Issuer and will report each
Certificateholder's allocable share of items of Issuer income and expense to
holders and the IRS on Schedule K-1. The Issuer will provide the Schedule K-1
information to nominees that fail to provide the Issuer with the information
statement described below and such nominees will be required to forward such
information to the beneficial owners of the Certificates. Generally, holders
must file tax returns that are consistent with the information return filed by
the Issuer or be subject to penalties unless the holder notifies the IRS of all
such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Issuer
with a statement containing certain information on the nominee, the beneficial
owners and the Certificates so held. Such information includes (i) the name,
address and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (x) the name, address and identification number of such person,
(y) whether such person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Issuer information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Issuer. The information referred to above for any
calendar year must be furnished to the Issuer on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Issuer
with the information described above may be subject to penalties.
The Depositor will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
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administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Issuer by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificateholders, and, under
certain circumstances, a Certificateholder may be precluded from separately
litigating a proposed adjustment to the items of the Issuer. An adjustment could
also result in an audit of a Certificateholder's returns and adjustments of
items not related to the income and losses of the Issuer.
9. Tax Consequences to Foreign Certificateholders
It is not clear and federal tax counsel is unable to opine whether the
Issuer would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-United
States persons because there is no clear authority dealing with that issue under
facts substantially similar to those described herein. Although it is not
expected that the Issuer would be engaged in a trade or business in the United
States for such purposes, the Issuer will withhold as if it were so engaged in
order to protect the Issuer from possible adverse consequences of a failure to
withhold. The Issuer expects to withhold on the portion of its taxable income
that is allocable to foreign Certificateholders pursuant to Section 1446 of the
Code, as if such income were effectively connected to a United States trade or
business, at a rate of 35% for foreign holders that are taxable as corporations
and 39.6% for all other foreign holders. Subsequent adoption of Treasury
regulations or the issuance of other administrative pronouncements may require
the Issuer to change its withholding procedures.
If the trust is engaged in a United States trade or business, each foreign
holder might be required to file a United States individual or corporate income
tax return (including, in the case of a corporation, the branch profits tax) on
its share of the Issuer's income. A foreign holder generally would be entitled
to file with the IRS a claim for refund with respect to taxes withheld by the
Issuer taking the position that no taxes were due because the Issuer was not
engaged in a United States trade or business. However, interest payments made
(or accrued) to a Certificateholder who is a foreign person generally will be
considered guaranteed payments to the extent such payments are determined
without regard to the income of the Issuer, and for that reason or because of
the nature of the assets of the Issuer probably will not be considered
'portfolio interest.' As a result, even if the Issuer was not considered to be
engaged in a United States trade or business, Certificateholders will be subject
to United States federal income tax which must be withheld at a rate of 30%,
unless reduced or eliminated pursuant to an applicable treaty. A foreign holder
would be entitled to claim a refund for such withheld tax, taking the position
that the interest was portfolio interest and therefore not subject to United
States tax. However, the IRS may disagree and no assurance can be given as to
the appropriate amount of tax liability. As a result, each potential foreign
Certificateholder should consult its tax advisor as to whether an interest in a
Certificate is an unsuitable investment.
10. Backup Withholding
Distributions made on the Certificates and proceeds from the sale of the
Certificates will be subject to a 'backup' withholding tax of 31% if, in
general, the Certificateholder fails to comply with certain identification
procedures, unless the holder is an exempt recipient under applicable provisions
of the Code.
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ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ('ERISA'),
imposes certain restrictions on employee benefit plans subject to ERISA ('ERISA
Plans') and on those persons who are ERISA fiduciaries with respect to the
assets of such ERISA Plans. In accordance with the general fiduciary standards
of ERISA, an ERISA Plan fiduciary should consider whether an investment in the
Securities is permitted by the documents and instruments governing the Plan,
consistent with the Plan's overall investment policy and appropriate in view of
the composition of its investment portfolio. Fiduciaries should also consider
ERISA's prohibition on improper delegation of control over, or responsibility
for, plan assets.
Employee benefit plans which are governmental plans and certain church
plans (if no election has been made under Section 410(d) of the Code) are not
subject to ERISA requirements. Accordingly, assets of such plans may be invested
in the Securities subject to the provisions of applicable federal and state law
and, in the case of any such plan which is qualified under Section 401(a) of the
Code and exempt from taxation under Section 501(a) of the Code, the restrictions
imposed under Section 503 of the Code.
In addition to imposing general fiduciary standards, ERISA and Section 4975
of the Code prohibit a broad range of transactions involving assets of ERISA
Plans and other plans subject to Section 4975 of the Code or any entity whose
underlying assets include plan assets by reason of a plan or account investing
in such entity, including an insurance company general account (together with
ERISA Plans, 'Plans') and certain persons ('Parties in Interest') who have
certain specified relationships to the Plans and taxes and/or imposes other
penalties on any such transaction under ERISA and/or Section 4975 of the Code,
unless an exemption applies. If the assets of a Trust Fund are treated for ERISA
purposes as the assets of the Plans that purchase or hold Securities of the
applicable Series, an investment in Securities of that Series by or with 'plan
assets' of a Plan might constitute or give rise to a prohibited transaction
under ERISA or Section 4975 of the Code, unless a statutory or administrative
exemption applies. Violation of the prohibited transaction rules could result in
the imposition of excise taxes and/or other penalties under ERISA and/or Section
4975 of the Code.
FINAL PLAN ASSETS REGULATION
The United States Department of Labor ('DOL') has issued a final regulation
(the 'Plan Assets Regulation') under which assets of an entity in which a Plan
makes an equity investment will be treated as assets of the investing Plan in
certain circumstances. Unless the Plan Assets Regulation provides an exemption
from this 'plan asset' treatment, and if such an exemption is not otherwise
available under ERISA, an undivided portion of the assets of a Trust Fund will
be treated, for purposes of applying the fiduciary standards and prohibited
transaction rules of ERISA and Section 4975 of the Code, as an asset of each
Plan which becomes a Securityholder of the applicable Series.
The Plan Assets Regulation provides an exemption from 'plan asset'
treatment for securities issued by an entity if, immediately after the most
recent acquisition of any equity interest in the entity, less than 25% of the
value of each class of equity interests in the entity, excluding interests held
by a person who has discretionary authority or control with respect to the
assets of the entity (or any affiliate of such a person), are held by 'benefit
plan investors' (e.g., Plans, governmental and other benefit plans not subject
to ERISA and entities holding assets deemed to be 'plan assets'). Because the
availability of this exemption to any Trust Fund depends upon the identity of
the Securityholders of the applicable Series at any time, there can be no
assurance that any Series or Class of Securities will qualify for this
exemption.
PROHIBITED TRANSACTION CLASS EXEMPTION APPLICABLE TO CERTIFICATES
Prohibited Transaction Class Exemption 83-1 (Class Exemption for Certain
Transactions Involving Mortgage Pool Investment Trusts) ('PTCE 83-1') permits,
subject to certain conditions, certain transactions involving the creation,
maintenance and termination of certain residential mortgage pools and the
acquisition and holding of certain residential mortgage pool pass-through
Certificates by Plans, regardless of whether (a) the mortgage pool is exempt
from 'plan asset' treatment or (b) the transactions would otherwise be
prohibited under ERISA or Section 4975 of the Code. A Series of Certificates
will be an 'Exempt Series' if the general conditions (described below) of PTCE
83-1 are satisfied, and if the applicable Series of Certificates evidences
ownership interests in Trust Assets which do not include Mortgage Certificates,
Cooperative Loans, Mortgage Loans secured by cooperative buildings, Mortgage
Loans secured by Multifamily Property, or Contracts
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(collectively 'Nonexempt Assets'). An investment by a Plan in Certificates of an
Exempt Series (1) will be exempt from the prohibitions of Section 406(a) of
ERISA (relating generally to Plan transactions involving Parties in Interest who
are not fiduciaries) if the Plan purchases the Certificates at no more than fair
market value, and (2) will be exempt from the prohibitions of Sections 406(b)
(1) and (2) of ERISA (relating generally to Plan transactions with fiduciaries)
if, in addition, (i) the purchase is approved by an independent fiduciary, (ii)
no sales commission is paid to the Depositor as Mortgage Pool sponsor, (iii) the
Plan does not purchase more than 25% of the Certificates of that Series and (iv)
at least 50% of the Certificates of that Series is purchased by persons
independent of the Depositor, the Trustee and the Insurer, as applicable. It
does not appear that PTCE 83-1 applies to a Series of Securities with respect to
which the Trust Assets include Nonexempt Assets (a 'Nonexempt Series'). See 'The
Trust Fund -- The Mortgage Pools' and ' -- The Contract Pools.' Accordingly, it
appears that PTCE 83-1 will not exempt Plans that acquire Certificates of a
Nonexempt Series from the prohibited transaction rules of ERISA and Section 4975
of the Code.
PTCE 83-1 sets forth three general conditions that must be satisfied for
any transaction to be eligible for exemption: (1) the existence of a pool
trustee who is not an affiliate of the pool sponsor; (2) the maintenance of a
system of insurance or other protection for the pooled mortgage loans and
property securing such loans, and for indemnifying certificateholders against
reductions in pass-through payment due to property damage or defaults in loan
payments; and (3) a limitation on the amount of the payment retained by the pool
sponsor, together with other benefits inuring to it, to not more than adequate
consideration for selling the mortgage loans and reasonable compensation for
services provided by the pool sponsor to the mortgage pool.
The Trustee for all Series will be unaffiliated with the Depositor, and,
accordingly, the first general condition will be satisfied. With respect to the
second general condition of PTCE 83-1, the credit support method represented by
the issuance of a Subordinated Class or Subclasses of Certificates and/or the
establishment of a Reserve Fund, with respect to any Exempt Series for which
such a method of Credit Support is provided (see 'Credit Support -- Subordinated
Securities' and ' -- Reserve Fund'), is substantially similar to a system for
protecting Certificateholders against reductions in pass-through payments which
has been reviewed and accepted by the DOL as an alternative to pool insurance or
a letter of credit indemnification system. This may support a Plan fiduciary's
conclusion that the second general condition is satisfied with respect to any
such Exempt Series although, in the absence of a ruling to this effect, there
can be no assurance that these features will be so viewed by the DOL. In
addition, the Depositor intends to use its best efforts to establish, for each
Exempt Series for which credit support is provided by a Letter of Credit (see
'Credit Support -- Letters of Credit') and/or the insurance arrangements set
forth above under 'Description of Insurance' (an 'Insured Series'), a system
that will adequately protect the Mortgage Pools and indemnify Certificateholders
of the applicable Series against pass-through payment reductions resulting from
property damage or defaults in loan payments. With respect to the third general
condition of PTCE 83-1, the Depositor intends to use its best efforts to
establish a compensation system which will produce for the Depositor total
compensation that will not exceed adequate consideration for forming the
Mortgage Pool and selling the Certificates. However, the Depositor does not
guarantee that its systems will be sufficient to meet the second and third
general conditions (described above) with respect to any Exempt Series.
If an Exempt Series of Certificates is subdivided into two or more Classes
or Subclasses which are entitled to disproportionate allocations of the
principal and interest payments on the Mortgage Loans held by the applicable
Trust Fund, the availability of the exemption afforded by PTCE 83-1 may be
adversely affected, as described in the applicable Prospectus Supplement.
Moreover, if the Certificateholders of any Class or Subclass of Certificates are
entitled to pass-through payment of principal (but no or only nominal interest)
or interest (but no or only nominal principal), it appears that PTCE 83-1 will
not exempt Plans which acquire Certificates of that Class or Subclass from the
prohibited transaction rules of ERISA and Section 4975 of the Code.
If an Exempt Series of Certificates includes a Class of Subordinated
Certificates, PTCE 83-1 will not provide an exemption from the prohibited
transaction rules of ERISA for Plans that acquire such Subordinated
Certificates.
UNDERWRITER'S PROHIBITED TRANSACTION EXEMPTION APPLICABLE TO CERTIFICATES
Credit Suisse First Boston Corporation ('First Boston') is the recipient of
a final prohibited transaction exemption, 54 Fed. Reg. 42597 (Oct. 17, 1989)
(the 'Underwriter's PTE' or 'Credit Suisse First Boston Corporation's PTE' if
specified in the applicable Prospectus Supplement), which may accord protection
from
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violations under Sections 406 and 407 of ERISA and Section 4975 of the Code for
Plans that acquire Certificates. The Underwriter's PTE applies to Certificates
(a) which represent (1) a beneficial ownership interest in the assets of a trust
and entitle the holder to pass-through payments of principal, interest and/or
other payments made with respect to the assets of the trust, or (2) an interest
in a REMIC if the Certificates are issued by and are obligations of a trust; and
(b) with respect to which First Boston or any of its affiliates is either the
sole underwriter, the manager or co-manager of the underwriting syndicate or a
selling or placement agent. The corpus of a trust to which the Underwriter's PTE
applies include (i) obligations which bear interest or are purchased at a
discount and which are secured by (A) single-family residential, multifamily
residential or commercial real property (including obligations secured by
leasehold interests on commercial real property) or (B) shares issued by a
cooperative housing association; (ii) 'guaranteed governmental mortgage pool
certificates' (as defined in the Plan Assets Regulation) and (iii) undivided
fractional interests in the above.
Plans acquiring Certificates may be eligible for protection under the
Underwriter's PTE if:
(a) assets of the type included as Trust Assets have been included in
other investment pools ('Other Pools');
(b) Certificates evidencing interests in Other Pools have been both
(1) rated in one of the three highest generic rating categories by Standard
& Poor's, a division of The McGraw-Hill Companies, Inc., Moody's Investors
Service, Inc., Duff & Phelps Credit Rating Co. or Fitch IBCA, Inc. and (2)
purchased by investors, other than Plans, for at least one year prior to a
Plan's acquisition of Certificates in reliance upon the Underwriter's PTE;
(c) at the time of such acquisition, the Class of Certificates
acquired by the Plan has received a rating in one of the rating categories
referred to in condition (b) above;
(d) the Trustee is not an affiliate of any member of the Restricted
Group (as defined below);
(e) the Class of Certificates acquired by the Plan are not
subordinated to other Classes of Certificates of that Series with respect
to the right to receive payment in the event of defaults or delinquencies
on the underlying Trust Assets;
(f) the Plan is an 'accredited investor' (as defined in Rule 501(a)(1)
of Regulation D under the Securities Act);
(g) the acquisition of the Certificates by a Plan is on terms
(including the price for the Securities) that are at least as favorable to
the Plan as they would be in an arm's length transaction with an unrelated
party; and
(h) the sum of all payments made to and retained by the Underwriter or
members of any underwriting syndicate in connection with the distribution
of the Certificates represents not more than reasonable compensation for
underwriting the Certificates; the sum of all payments made to and retained
by the Seller pursuant to the sale of the Trust Assets to the Trust
represents not more than the fair market value of such Trust Assets; and
the sum of all payments made to and retained by the Master Servicer and all
Servicers represents not more than reasonable compensation for such
Servicers' services under the Pooling and Servicing Agreement and
reimbursement of such Servicers' reasonable expenses in connection
herewith.
In addition, the Underwriter's PTE will not apply to a Plan's investment in
Certificates if the Plan fiduciary responsible for the decision to invest in a
Class of Certificates is a Mortgagor or Obligor with respect to more than 5% of
the fair market value of the obligations constituting the Trust Assets or an
affiliate of such person and will not apply, unless:
(1) in the case of an acquisition in connection with the initial
issuance of any Series of Certificates, at least 50% of each Class of
Certificates in which Plans have invested is acquired by persons
independent of the Restricted Group and at least 50% of the aggregate
interest in the Trust is acquired by persons independent of the Restricted
Group;
(2) the Plan's investment in any Class of Certificates does not exceed
25% of the outstanding Certificates of that Class at the time of
acquisition;
(3) immediately after such acquisition, no more than 25% of the Plan
assets with respect to which the investing fiduciary has discretionary
authority or renders investment advice are invested in Certificates
evidencing interest in trusts sponsored or containing assets sold or
serviced by the same entity; and
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(4) the Plan is not sponsored by the Depositor, any Underwriter, the
Trustee, any Servicer, any Pool, Special Hazard or Primary Mortgage Insurer
or the obligor under any other credit support mechanism, a Mortgagor or
Obligor with respect to obligations constituting more than 5% of the
aggregate unamortized principal balance of the Trust Assets on the date of
the initial issuance of Certificates, or any of their affiliates (the
'Restricted Group').
On July 21, 1997, the DOL published in the Federal Register a final
amendment to the Underwriter's PTE which extends exemptive relief to certain
mortgage-backed and asset-backed securities transactions using pre-funding
accounts for trusts issuing pass-through certificates. With respect to the
Certificates, the amendment generally allows a portion of the mortgages or
receivables ('Loans') supporting payments to Certificateholders and having a
principal amount equal to no more than 25% of the total principal amount of the
Certificates to be transferred to the Trust within a 90-day or three-month
period following the Closing Date ('Pre-Funding Period'), instead of requiring
that all such Loans be either identified or transferred on or before the Closing
Date. The relief, when granted as a final exemption, will be effective for
transactions occurring on or after May 23, 1997, provided that the following
conditions are met:
(1) the ratio of the amount allocated to the Pre-Funding Account to
the total principal amount of the Certificates being offered ('Pre-Funding
Limit') must not exceed 25%;
(2) all Loans transferred after the Closing Date ('Additional Loans')
must meet the same terms and conditions for eligibility as the original
Loans used to create the Trust, which terms and conditions have been
approved by the Rating Agency;
(3) the transfer of such Additional Loans to the Trust during the
Pre-Funding Period must not result in the Certificates receiving a lower
credit rating from the Rating Agency upon termination of the Pre-Funding
Period than the rating that was obtained at the time of the initial
issuance of the Certificates by the Trust;
(4) solely as a result of the use of pre-funding, the weighted average
annual percentage interest rate (the 'average interest rate') for all of
the Loans in the Trust at the end of the Pre-Funding Period must not be
more than 100 basis points lower than the average interest rate for the
Loans which were transferred to the Trust on the Closing Date;
(5) in order to ensure that the characteristics of the Additional
Loans are substantially similar to the original obligations which were
transferred to the Trust, either: (i) the characteristics of the Additional
Loans must be monitored by an insurer or other credit support provider
which is independent of the Depositor or (ii) an independent accountant
retained by the Depositor must provide the Depositor with a letter (with
copies provided to the Rating Agency, the Underwriter and the Trustee)
stating whether or not the characteristics of the Additional Loans conform
to the characteristics described in the Prospectus, Prospectus Supplement,
Private Placement Memorandum ('Offering Documents') and/or Pooling and
Servicing Agreement ('Pooling Agreement'); in preparing such letter, the
independent accountant must use the same type of procedures as were
applicable to the Loans which were transferred as of the Closing Date;
(6) the Pre-Funding Period must end no later than three months or 90
days after the Closing Date or earlier, in certain circumstances, if the
amount on deposit in the Pre-Funding Account is reduced below the minimum
level specified in the Pooling Agreement or an event of default occurs
under the Pooling Agreement;
(7) amounts transferred to any Pre-Funding Account and/or Capitalized
Interest Account used in connection with the pre-funding may be invested
only in certain permitted investments;
(8) the Offering Documents must describe: (i) any Pre-Funding Account
and/or Capitalized Interest Account used in connection with a Pre-Funding
Account; (ii) the duration of the Pre-Funding Period; (iii) the percentage
and/or dollar amount of the Pre-Funding Limit for the Trust; and (iv) that
the amounts remaining in the Pre-Funding Account at the end of the
Pre-Funding Period will be remitted to Certificateholders as repayments of
principal; and
(9) the Pooling and Servicing Agreement must describe the permitted
investments for the Pre-Funding Account and Capitalized Interest Account
and, if not disclosed in the Offering Documents, the terms and conditions
for eligibility of the Additional Loans.
Whether the conditions in the Underwriter's PTE (in addition to, and
including those, relating to pre-funding) will be satisfied as to Certificates
or any particular Class will depend upon the relevant facts and
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circumstances existing at the time the Plan acquires Certificates of that Class.
Any Plan investor who proposes to use 'plan assets' of a Plan to acquire
Certificates in reliance upon the Underwriter's PTE should determine whether the
Plan satisfies all of the applicable conditions and consult with its counsel
regarding other factors that may affect the applicability of the Underwriter's
PTE.
GENERAL ERISA CONSIDERATIONS RELATING TO CERTIFICATES
Any member of the Restricted Group, a Mortgagor or Obligor, or any of their
affiliates might be considered or might become a Party in Interest with respect
to a Plan. In that event, the acquisition or holding of Certificates of the
applicable Series or Class by, on behalf of or with 'plan assets' of such Plan
might be viewed as giving rise to a prohibited transaction under ERISA and
Section 4975 of the Code, unless PTCE 83-1, the Underwriter's PTE or another
exemption is available. Accordingly, before a Plan investor makes the investment
decision to purchase, to commit to purchase or to hold Certificates of any
Series or Class, the Plan investor should determine (a) whether the conditions
(described briefly above) of PTCE 83-1 have been satisfied; (b) whether the
Underwriter's PTE is applicable; (c) whether any other prohibited transaction
exemption (if required) is available under ERISA and Section 4975 of the Code;
or (d) whether an exemption from 'plan asset' treatment is available to the
applicable Trust Fund. The Plan investor should also consult the ERISA
discussion, if any, in the applicable Prospectus Supplement for further
information regarding the application of ERISA to any Series or Class of
Certificates.
If for any reason neither PTCE 83-1 nor the Underwriter's PTE provides an
exemption for a particular Plan investor, one of five other prohibited
transaction class exemptions issued by the DOL might apply, i.e., PTCE 91-38
(Class Exemption for Certain Transactions Involving Bank Collective Investment
Funds), PTCE 90-1 (Class Exemption for Certain Transactions Involving Insurance
Company Pooled Separate Accounts), PTCE 84-14 (Class Exemption for Plan Asset
Transactions Determined by Independent Qualified Professional Asset Managers),
PTCE 95-60 (Class Exemption for Certain Transactions Involving Insurance Company
General Accounts) or PTCE 96-23 (Class Exemption for Plan Asset Transactions
Performed by In-house Asset Managers) (collectively, the 'Investor Based
Exemptions'). There can be no assurance that any of these Investor Based
Exemptions will apply with respect to any particular Plan investor or, even if
it were to apply, that such exemption would apply to all transactions involving
the applicable Trust Fund. Any person who is a fiduciary by reason of his or her
authority to invest 'plan assets' of any Plan and who is considering the use of
'plan assets' of any Plan to purchase the offered Certificates should consult
with its counsel with respect to the potential applicability of ERISA and the
Code to such investments, and should determine on its own whether PTCE 83-1, the
Underwriter's PTE or another exemption would be applicable (and whether all
conditions have been satisfied with respect to any such exemptions), and whether
the offered Certificates are an appropriate investment for a Plan. Moreover,
each Plan fiduciary should determine whether, under the general fiduciary
standards of investment prudence and diversification, an investment in the
offered Certificates is appropriate for the Plan, taking into account the
overall investment policy of the Plan and the composition of the Plan's
investment portfolio.
ERISA CONSIDERATIONS RELATING TO THE NOTES
Under the Plan Assets Regulation, the assets of the Trust would be treated
as plan assets of a Plan for the purposes of ERISA and the Code only if the Plan
acquires an 'Equity Interest' in the Trust and none of the exceptions contained
in the Plan Assets Regulation is applicable. An equity interest is defined under
the Plan Assets Regulation as an interest other than an instrument which is
treated as indebtedness under applicable local law and which has no substantial
equity features. Assuming that a Class of Notes is treated as indebtedness
without substantial equity features for purposes of the Plan Assets Regulation,
then such Class of Notes will be eligible for purchase by Plans. However,
without regard to whether a Class of Notes is treated as an 'equity interest'
for such purposes, the acquisition or holding of Notes by or on behalf of a Plan
could be considered to give rise to a prohibited transaction if the Trust or any
of its affiliates is or becomes a party in interest or disqualified person with
respect to such Plan, or in the event that a Note is purchased in the secondary
market and such purchase constitutes a sale or exchange between a Plan and a
party in interest or disqualified person with respect to such Plan. There can be
no assurance that the Trust or any of its affiliates will not be or become a
party in interest or a disqualified person with respect to a Plan that acquires
Notes. However, one or more of
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the Investor Based Exemptions described above may apply to any potential
prohibited transactions arising as a consequence of the acquisition, holding and
transfer of the Notes.
ANY PLAN INVESTOR WHO PROPOSES TO USE 'PLAN ASSETS' OF ANY PLAN TO PURCHASE
SECURITIES OF ANY SERIES OR CLASS SHOULD CONSULT WITH ITS COUNSEL WITH RESPECT
TO THE POTENTIAL CONSEQUENCES UNDER ERISA AND SECTION 4975 OF THE CODE OF THE
ACQUISITION AND OWNERSHIP OF SUCH SECURITIES.
LEGAL INVESTMENT
The applicable Prospectus Supplement for a Series of Securities will
specify whether a Class or Subclass of such Securities, as long as it is rated
in one of the two highest rating categories by one or more nationally recognized
statistical rating organizations, will constitute a 'mortgage related security'
for purposes of the Secondary Mortgage Market Enhancement Act of 1984 ('SMMEA').
Such Class or Subclass, if any, constituting a 'mortgage related security' will
be a legal investment for persons, trusts, corporations, partnerships,
associations, business trusts and business entities (including depository
institutions, insurance companies, trustees and state government employee
retirement systems) created pursuant to or existing under the laws of the United
States or of any state (including the District of Columbia and Puerto Rico)
whose authorized investments are subject to state regulation to the same extent
that, under applicable law, obligations issued by or guaranteed as to principal
and interest by the United States or any agency or instrumentality thereof
constitute legal investments for such entities.
Pursuant to SMMEA, a number of states enacted legislation, on or prior to
the October 3, 1991 cutoff for such enactments, limiting to varying extents the
ability of certain entities (in particular, insurance companies) to invest in
'mortgage related securities,' in most cases by requiring the affected investors
to rely solely upon existing state law, and not SMMEA. Accordingly, the
investors affected by such legislation will be authorized to invest in
Securities qualifying as 'mortgage related securities' only to the extent
provided in such legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in mortgage related
securities without limitation as to the percentage of their assets represented
thereby, federal credit unions may invest in such securities, and national banks
may purchase such securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
24 (Seventh), subject in each case to such regulations as the applicable federal
regulatory authority may prescribe. In this connection, federal credit unions
should review NCUA Letter to Credit Unions No. 96, as modified by Letter to
Credit Unions No. 108, which includes guidelines to assist federal credit unions
in making investment decisions for mortgage related securities. The NCUA has
adopted rules, codified as 12 C.F.R. Section 703.5(f)-(k), which prohibit
federal credit unions from investing in certain mortgage related securities
(including securities such as certain Series, Classes or Subclasses of
Securities), except under limited circumstances.
All depository institutions considering an investment in the Securities
should review the 'Supervisory Policy Statement on Securities Activities' dated
January 28, 1992, as revised April 15, 1994 (the 'Policy Statement') of the
Federal Financial Institutions Examination Council.
The Policy Statement which has been adopted by the Board of Governors of
the Federal Reserve System, the Office of the Comptroller of the Currency, the
FDIC and the Office of Thrift Supervision and by the NCUA (with certain
modifications), prohibits depository institutions from investing in certain
'high-risk Mortgage Certificates' (including securities such as certain Series,
Classes or Subclasses of the Securities), except under limited circumstances,
and sets forth certain investment practices deemed to be unsuitable for
regulated institutions.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any Securities,
as certain Series, Classes or Subclasses may be deemed unsuitable investments,
or may otherwise be restricted, under such rules, policies or guidelines (in
certain instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, 'prudent investor' provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not 'interest
bearing' or 'income paying,' and, with regard to any Securities
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issued in book-entry form, provisions which may restrict or prohibit investments
in securities which are issued in book-entry form.
Except as to the status of certain Classes of Securities as 'mortgage
related securities,' no representation is made as to the proper characterization
of the Securities for legal investment purposes, financial institution
regulatory purposes, or other purposes, or as to the ability of particular
investors to purchase Securities under applicable legal investment restrictions.
The uncertainties described above (and any unfavorable future determinations
concerning legal investment or financial institution regulatory characteristics
of the Securities) may adversely affect the liquidity of the Securities.
Investors should consult their own legal advisers in determining whether
and to what extent such Securities constitute legal investments for such
investors.
PLAN OF DISTRIBUTION
Each Series of Securities offered hereby and by means of the related
Prospectus Supplements may be sold directly by the Depositor or may be offered
through Credit Suisse First Boston Corporation, an affiliate of the Depositor,
or underwriting syndicates represented by Credit Suisse First Boston Corporation
(the 'Underwriters'). The Prospectus Supplement with respect to each such Series
of Securities will set forth the terms of the offering of such Series or Class
of Securities and each Subclass within such Series, including the name or names
of the Underwriters, the proceeds to the Depositor, and either the initial
public offering price, the discounts and commissions to the Underwriters and any
discounts or concessions allowed or reallowed to certain dealers, or the method
by which the price at which the Underwriters will sell such Securities will be
determined.
Unless otherwise specified in the Prospectus Supplement, the Underwriters
will be obligated to purchase all of the Securities of a Series described in the
Prospectus Supplement with respect to such Series if any such Securities are
purchased. The Securities may be acquired by the Underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale.
If so indicated in the Prospectus Supplement, the Depositor will authorize
the Underwriters or other persons acting as the Depositor's agents to solicit
offers by certain institutions to purchase the Securities from the Depositor
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Depositor. The obligation of any purchaser
under any such contract will be subject to the condition that the purchase of
the offered Securities shall not at the time of delivery be prohibited under the
laws of the jurisdiction to which such purchaser is subject. The Underwriters
and such other agents will not have any responsibility in respect of the
validity or performance of such contracts.
The Depositor may also sell the Securities offered hereby and by means of
the related Prospectus Supplements from time to time in negotiated transactions
or otherwise, at prices determined at the time of sale. The Depositor may effect
such transactions by selling Securities to or through dealers, and such dealers
may receive compensation in the form of underwriting discounts, concessions or
commissions from the Depositor and any purchasers of Securities for whom they
may act as agents.
The place and time of delivery for each Series of Securities offered hereby
and by means of the related Prospectus Supplement will be set forth in the
Prospectus Supplement with respect to such Series.
If and to the extent required by applicable law or regulation, this
Prospectus and the attached Prospectus Supplement will also be used by the
Underwriters after the completion of the offering in connection with offers and
sales related to market-making transactions in the offered Securities in which
the Underwriters act as principal. Sales will be made at negotiated prices
determined at the time of sales.
LEGAL MATTERS
Certain legal matters in connection with the Securities offered hereby,
including material federal income tax consequences, will be passed upon for the
Depositor and for the Underwriters by Stroock & Stroock & Lavan LLP, New York,
New York, Brown & Wood LLP, San Francisco, California or such other counsel
specified in the related Prospectus Supplement.
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INDEX OF TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ----------------------------------------------- ----
<S> <C>
Accrual Distribution Amount.................... 34
Advances....................................... 13
AFR............................................ 89
Agreement...................................... 21
Alternative Credit Support..................... 9
Approved Sale.................................. 67
APR............................................ 25
ARM Loans...................................... 18
Asset Value.................................... 32
Assets......................................... 81
Bond Premium Amortization Limit................ 87
Bond Premium Amortization Regulations.......... 87
Buy-Down Fund.................................. 12
Buy-Down Loans................................. 19
Cede........................................... 17
Certificate Account............................ 40
Certificate Principal Balance.................. 3
Certificateholders............................. 21
Class.......................................... 1
Cleanup Costs.................................. 76
Closed-End Loans............................... 4
Closed Loans................................... 22
Closing Date................................... 83
Code........................................... 14
Collection Account............................. 40
Contract Loan-to-Value Ratio................... 7
Contract Pool.................................. 1
Contract Schedule.............................. 36
Contracts...................................... 1
Converted Mortgage Loan........................ 19
Cooperative.................................... 4
Cooperative Dwelling........................... 5
Cooperative Loans.............................. 4
Credit Suisse First Boston Corporation's PTE... 116
Custodial Account.............................. 40
Custodial Agreement............................ 25
Custodian...................................... 25
Cut-off Date................................... 17
Deferred Interest.............................. 19
Definitive Securities.......................... 17
Deficiency Event............................... 54
Deleted Contract............................... 26
Deleted Mortgage Certificates.................. 35
Deleted Mortgage Loans......................... 36
Depositor...................................... 1
Determination Date............................. 43
Discount Security.............................. 8
Distribution Date.............................. 5
DOL............................................ 117
DTC -- Depository Trust Company................ 17
Due Date....................................... 18
Due Period..................................... 34
<PAGE>
<CAPTION>
TERM PAGE
- ----------------------------------------------- ----
<S> <C>
Escrow Account................................. 46
ERISA.......................................... 114
ERISA Plans.................................... 114
Exempt Series.................................. 115
FHA............................................ 1
FHA Experience................................. 27
FHA Loans...................................... 18
First Boston................................... 116
Garn-St Germain Act............................ 75
GPM Fund....................................... 12
GPM Loans...................................... 19
Home Equity Loans.............................. 4
Indenture...................................... 31
Indenture Trustee.............................. 31
Initial Deposit................................ 11
Insurance Proceeds............................. 41
Insured........................................ 49
Insured Series................................. 116
Interest Coupon................................ 102
Interest Distribution.......................... 33
Interest Rate.................................. 3
Interest Weighted Class........................ 3
Interest Weighted Subclass..................... 3
IRS............................................ 83
L/C Bank....................................... 9
L/C Percentage................................. 9
Letter of Credit............................... 8
Liquidating Loan............................... 9
Liquidation Proceeds........................... 41
Loan-to-Value Ratio............................ 18
Loss........................................... 63
Manufactured Home.............................. 7
Master Servicer................................ 1
Mortgage Certificates.......................... 1
Mortgage Loans................................. 5
Mortgage Notes................................. 18
Mortgage Pool.................................. 80
Mortgage Rates................................. 6
Mortgaged Property............................. 6
Mortgagor...................................... 6
Mortgagor Bankruptcy Bond...................... 8
Multi-Class Securities......................... 3
Multifamily Property........................... 5
Multiple Variable Rate......................... 85
1988 Act....................................... 91
1986 Act....................................... 87
1996 Contingent Debt Regulations............... 86
1996 Proposed Regulations...................... 97
Nonexempt Assets............................... 115
Nonexempt Series............................... 115
non-U.S. Person................................ 94
Notes.......................................... 1
Noteholders.................................... 21
Obligor........................................ 29
</TABLE>
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<TABLE>
<CAPTION>
TERM PAGE
- ----------------------------------------------- ----
<S> <C>
OID Regulations................................ 80
Original Value................................. 6
Originator..................................... 22
Other Pools.................................... 116
Parties in Interest............................ 114
Percentage Interest............................ 1
Performance Bond............................... 26
Plan Assets Regulation......................... 115
Plans.......................................... 114
Policy Statement............................... 121
Pool Insurance Policy.......................... 8
Pool Insurer................................... 10
Pooling and Servicing Agreement................ 30
Pre-Funded Amount.............................. 38
Pre-Funding Account............................ 38
Pre-Funding Period............................. 118
Premium Security............................... 7
Prepayment Assumption.......................... 83
Primary Insurer................................ 42
Primary Mortgage Insurance Policy.............. 10
Primary Mortgage Insurer....................... 49
Principal Distribution......................... 33
Principal Prepayments.......................... 11
Principal Weighted Class....................... 4
Principal Weighted Subclass.................... 4
Proposed Premium Regulations................... 88
PTCE 83-1...................................... 115
Purchase Price................................. 38
Rating Agency.................................. 1
Record Date.................................... 33
Reference Agreement............................ 31
REIT........................................... 81
REMIC.......................................... 1
REMIC Certificateholders....................... 81
REMIC Certificates............................. 80
REMIC Mortgage Pool............................ 80
REMIC Provisions............................... 80
REMIC Regulations.............................. 80
REMIC Regular Certificate...................... 80
REMIC Residual Certificate..................... 80
Required Reserve............................... 12
Reserve Fund................................... 8
Residual Certificates.......................... 3
Residual Owner................................. 87
Restricted Group............................... 118
Retained Yield................................. 98
Revolving Credit Line Loans.................... 4
Sale and Servicing Agreement................... 1
Securities..................................... 3
Securities Act................................. 32
Security Guarantee Insurance................... 13
Securityholder................................. 17
Senior Securities.............................. 8
<PAGE>
<CAPTION>
TERM PAGE
- ----------------------------------------------- ----
<S> <C>
Senior Class................................... 3
Senior Prepayment Percentage................... 80
Senior Subclass................................ 3
Series......................................... 1
Servicemen's Readjustment Act.................. 20
Servicer....................................... 21
Servicing Account.............................. 40
Servicing Agreement............................ 21
Single-Class REMIC............................. 94
Single Family Property......................... 5
Single Variable Rate........................... 83
SMMEA.......................................... 120
SBJPA -- of 1996............................... 89
SPA............................................ 28
Special Distributions.......................... 5
Special Hazard Insurance Policy................ 13
Special Tax Counsel............................ 79
Standard Hazard Insurance Policy............... 46
Standard Terms................................. 30
Stated Principal Balance....................... 3
Stated Principal Distribution Amount........... 34
Stripped Bond Rules............................ 100
Stripped Interest.............................. 102
Stripped Mortgage Loan......................... 99
Subclass....................................... 1
Subordinated Amount............................ 8
Subordinated Securities........................ 8
Subordinated Class............................. 3
Subordinated Pool.............................. 11
Subordinated Subclass.......................... 3
Substitute Contract............................ 26
Substitute Mortgage Certificates............... 35
Substitute Mortgage Loans...................... 36
Thrift Institutions............................ 89
Tiered REMICS.................................. 82
Title V........................................ 79
Trust.......................................... 1
Trust Assets................................... 5
Trust Agreement................................ 1
Trust Certificates............................. 80
Trustee........................................ 1
Trust Fractional Certificateholder............. 99
Trust Fractional Certificate................... 80
Trust Fund..................................... 4
Trust Interest Certificate..................... 80
Trust Interest Certificateholder............... 102
Unaffiliated Sellers........................... 22
Underwriters................................... 121
UCC............................................ 73
Unstripped Mortgage Loans...................... 101
U. S. Person................................... 96
VA............................................. 1
VA Loans....................................... 18
</TABLE>
122
<PAGE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER +
+TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF +
+THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD +
+BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 19
- --------------------------------------------------------------------------------
P R O S P E C T U S S U P P L E M E N T
(To Prospectus dated , 19 )
- --------------------------------------------------------------------------------
[Version A]
$ (Approximate)
Credit Suisse First Boston Mortgage Securities Corp.
Depositor
ABS Mortgage Pass-Through Certificates, Series
% Pass-Through Rate
Principal and interest payable on the 25th day
of each month, beginning , 19
-----------
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF CREDIT
SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP. OR ANY AFFILIATE THEREOF. NEITHER
THE CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR GUARANTEED BY
ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
The ABS Mortgage Pass-Through Certificate, Series (the "Certificates") offered
hereby evidence undivided fractional interests in a trust to be created by
Credit Suisse First Boston Mortgage Securities Corp. (the "Depositor") on or
about , 199 (the "Trust"). The Trust property will consist of a pool of
[conventional] [fixed-rate] [mortgage loans and] [mortgage participation
certificates evidencing participation interests in such mortgage loans and
meeting the requirements of the nationally recognized rating agency or agencies
rating the Certificates (collectively, the "Rating Agency") for a rating in one
of the two highest rating categories of such Rating Agency] (the "Mortgage
Loans") and certain related property to be conveyed to the Trust by the
Depositor (the "Trust Fund"). The Mortgage Loans will be transferred to the
Trust, pursuant to a Pooling and Servicing Agreement (as defined herein), dated
as of , 19 , by the Depositor in exchange for the Certificates and are more
fully described in this Prospectus Supplement and in the accompanying
Prospectus. The Certificates offered by this Prospectus Supplement constitute a
separate series of the Certificates being offered by the Depositor from time to
time pursuant to its Prospectus dated , 199 , which accompanies this Prospectus
Supplement and of which this Prospectus Supplement forms a part. The Prospectus
contains important information regarding this offering that is not contained
herein, and prospective investors are urged to read the Prospectus and this
Prospectus Supplement in full.
The Underwriter[s] [do[es] not] intend[s] to make a secondary market for the
Certificates [but [is] [are] under no obligation to do so]. There can be no
assurance that a secondary market will develop, or if it does develop, that it
will continue.
[The Depositor has elected to treat the Trust Fund as a Real Estate Mortgage
Investment Conduit (a "REMIC"). See "Certain Federal Income Tax Consequences"
in the Prospectus.]
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospective investors should consider the factors set forth under Risk Factors
on page S-6 of this Prospectus Supplement.
Prospective investors should condisider the limitations discussed under ERISA
Considerations herein and in the accompanying Prospectus.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to the
Public (1) Discount Depositor (1)(2)
- ---------------------------------------------------------
<S> <C> <C> <C>
Per Certificate % % %
- ---------------------------------------------------------
Total $ $ $
- ---------------------------------------------------------
- ---------------------------------------------------------
</TABLE>
(1)Plus accrued interest, if any, at the applicable rate from , 19 .
(2)Before deduction of expenses payable by the Depositor estimated at $ .
-----------
The Certificates are offered by the [several] Underwriter[s] when, as and if
issued and accepted by the Underwriter[s] and subject to [their] [its] right to
reject orders in whole or in part. It is expected that the Certificates, in
definitive fully registered form, will be ready for delivery on or about
, 19 .
Credit Suisse First Boston
- --------------------------------------------------------------------------------
The date of this Prospectus Supplement is , 19 .
<PAGE>
<PAGE>
This Prospectus Supplement does not contain complete information about the
Certificates offered hereby. Additional information is contained in the
Prospectus, and purchasers are urged to read both this Prospectus Supplement
and the Prospectus in full. Sales of the Certificates may not be consummated
unless the purchaser has received both this Prospectus Supplement and the
Prospectus.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CERTIFICATES
AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
[IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATION, THIS
PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS WILL ALSO BE USED BY THE
UNDERWRITER AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND
SALES RELATED TO MARKET-MAKING TRANSACTIONS IN THE OFFERED SECURITIES IN WHICH
THE UNDERWRITER ACTS AS PRINCIPAL. SALES WILL BE MADE AT NEGOTIATED PRICES
DETERMINED AT THE TIME OF SALE.]
Until , 19 , all dealers effecting transactions in the Certificates,
whether or not participating in this distribution, may be required to deliver
a Prospectus Supplement and a Prospectus. This is in addition to the
obligation of dealers to deliver a Prospectus Supplement and Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
----------------
AVAILABLE INFORMATION
The Trust will be subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith will file reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports and other information filed
by the Trust can be inspected and copied at the Public Reference Room of the
Commission at 450 Fifth Street, N.W., Washington, D.C., and at the Commission's
regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New
York 10048. Copies of such information can be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
(http://www.sec.gov).
S-2
<PAGE>
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the Prospectus. Capitalized terms used in this Prospectus Supplement and not
defined shall have the meanings given in the Prospectus.
<TABLE>
<S> <C>
SECURITIES OFFERED........ ABS Mortgage Pass-Through Certificates, Series
, % Pass-Through Rate (the "Certificates").
AMOUNT.................... $ (Approximate: subject to a permitted
variance of up to 5%).
DEPOSITOR................. Credit Suisse First Boston Mortgage Securities
Corp. (the "Depositor").
MASTER SERVICER...........
DENOMINATIONS............. The minimum denomination of a Certificate (a
"Single Certificate") will initially represent
approximately $ aggregate principal amount
of Mortgage Loans.
CUT-OFF DATE.............. , 19 .
DELIVERY DATE............. On or about , 19 .
INTEREST.................. Passed through monthly at the rate of % per annum
(the "Pass-Through Rate"), on the day of each
month (each, a "Distribution Date") commencing
, 19 .
PRINCIPAL (INCLUDING Passed through monthly on the Distribution Date,
PREPAYMENTS).............. commencing , 19 .
MORTGAGE POOL............. The Mortgage Pool will consist of [fixed rate],
fully-amortizing, [level-payment] mortgage loans
[and mortgage participation certificates
evidencing participation interests in such
mortgage loans that meet the requirements of the
nationally recognized rating agency or agencies
rating the Certificates (collectively the "Rating
Agency") for a rating in one of the two highest
rating categories of such Rating Agency] secured
by mortgages on one- to four-family residential
properties [located in the states of , and
(the "Mortgage Loans").] All Mortgage Loans
will have original maturities of at least [15 but
no more than 30] years. See "Description of the
Mortgage Pool and the Underlying Properties"
herein.
RISK FACTORS.............. For discussion of risk factors that should be
considered with respect to an investment in the
Certificates, see "Risk Factors" herein and in the
related Prospectus.
[LETTER OF CREDIT......... The maximum liability of [ ] under an
irrevocable standby letter of credit for the
Mortgage Pool (the "Letter of Credit"), net of
unreimbursed payments thereunder, will be no more
than [10%] of the initial aggregate principal
balance of the Mortgage Pool (the "Letter of
Credit Percentage"). The maximum amount available
to be paid under the Letter of Credit will be
determined in accordance with the Pooling and
Servicing Agreement referred to herein. The
duration of coverage and the amount of frequency
of any reduction in coverage will be in compliance
with the requirements established by the Rating
Agency, in order to obtain a rating in one of the
two highest rating categories of such Rating
Agency. The amount available under the Letter of
Credit shall be reduced by the amount of
unreimbursed payments thereunder. See "Description
of the Certificates--Credit Support--The Letter of
Credit" in the Prospectus.]
</TABLE>
S-3
<PAGE>
<PAGE>
<TABLE>
<S> <C>
[POOL INSURANCE POLICY.... [Neither the Certificates nor the Mortgage Loans
will be insured or guaranteed by any governmental
agency.] Subject to the limitations described
herein, a pool insurance policy for certain of the
Mortgage Loans (the "Pool Insurance Policy") will
cover losses due to default on such Mortgage Loans
in an initial amount of not less than [5%] of the
aggregate principal balance as of the Cut-off Date
of all Mortgage Loans that are not covered as to
their entire outstanding principal balance by
primary policies of mortgage guaranty insurance.
The Pool Insurance Policy will be subject to the
limitations described under "Description of
Insurance--the Pool Insurance Policy" in the
Prospectus.]
HAZARD INSURANCE (AND
SPECIAL HAZARD INSURANCE All of the Mortgage Loans will be covered by
POLICY.................... standard hazard insurance policies insuring
against losses due to various causes, including
fire, lightning and windstorm. [An insurance
policy (the "Special Hazard Insurance Policy")
will cover losses with respect to the Mortgage
Loans that result from certain other physical
risks that are not otherwise insured against
(including earthquakes and mudflows). The Special
Hazard Insurance Policy will be limited in scope
and will cover losses in an initial amount equal
to the greater of % of the aggregate principal
balance of the Mortgage Loans or times the unpaid
principal balance of the largest Mortgage Loan.]
Any hazard losses not covered by [either] standard
hazard insurance policies [or the Special Hazard
Insurance Policy] will not be insured against and
[, to the extent that the amount available under
the Letter of Credit or any alternative method of
credit support is exhausted,] will be borne by
holders of the Certificates (the
"Certificateholders"). The hazard insurance
policies [and the Special Hazard Insurance Policy]
will be subject to the limitations described under
"Description of Insurance--Hazard Insurance" [and
"--Special Hazard Insurance Policies"] in the
Prospectus.
[MORTGAGOR BANKRUPTCY The Depositor will obtain a bond or similar form of
BOND...................... insurance coverage (the "Mortgagor Bankruptcy
Bond"), providing coverage against losses that
result from proceedings with respect to obligors
under the Mortgage Loans (the "Mortgagors") under
the federal Bankruptcy Code. See "Description of
the Certificates--Mortgagor Bankruptcy Bond"
herein and "Description of Insurance--The
Mortgagor Bankruptcy Bond" in the Prospectus.]
[OPTIONAL TERMINATION..... The Depositor may, at its option, repurchase from
the Trust all Mortgage Loans remaining outstanding
at such time as the aggregate unpaid principal
balance of such Mortgage Loans is less than [10%]
of the aggregate principal balance of the Mortgage
Loans on the Cut-off Date. The repurchase price
will equal the aggregate unpaid principal balance
of such Mortgage Loans together with accrued
interest thereon at the Pass-Through Rate through
the last day of the month during which such
repurchase occurs, plus the appraised value of any
property acquired in respect thereof. [Any such
repurchase
</TABLE>
S-4
<PAGE>
<PAGE>
<TABLE>
<S> <C>
will be effected in compliance with the
requirements of Section 860F(a)(iv) of the
Internal Revenue Code of 1986 (the "Code") so as
to constitute a "qualifying liquidation"
thereunder.]. See "Description of the
Certificates--Termination; Repurchase of
Certificates in the Prospectus."]
ADVANCES..................
The Servicers of the Mortgage Loans (and the Master
Servicer, with respect to each Mortgage Loan that
it services directly and otherwise, to the extent
the related Servicer does not do so) will be
obligated to advance delinquent installments of
principal and interest on the Mortgage Loans under
certain circumstances. See "Description of the
Certificates--Advances" in the Prospectus.
TRUSTEE................... . See
"Description of the Certificates--Trustee" herein.
CERTIFICATE RATING........ It is a condition of issuance that the Certificates
be rated in one of the two highest rating
categories of the Rating Agency.
ERISA CONSIDERATIONS......
See "ERISA Considerations" in the Prospectus [and
herein].
LEGAL INVESTMENT.......... The Certificates constitute "mortgage related
securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984 (the "Enhancement
Act"), and, as such, are legal investments for
certain entities to the extent provided in the
Enhancement Act. See "Legal Investment" in the
Prospectus.
TAX ASPECTS............... [Because an amount not treated as servicing
compensation will be paid to , the "stripped-bond"
rules of the Internal Revenue Code of 1986 should
apply.]
The Depositor [intends] [does not intend] to make
an election to treat the Trust as a Real Estate
Mortgage Investment Conduit (a "REMIC"), pursuant
to the Internal Revenue Code of 1986. See "Certain
Federal Income Tax Consequences--General";
["-- REMIC Trust Funds"] ["--Non-REMIC Trust
Funds"] in the Prospectus. Purchasers of
Certificates should see "Certain Federal Income Tax
Consequences ["--REMIC Trust Funds--Taxation of
Owners of REMIC Regular Certificates"]
["--Non-REMIC Trust Funds"--Taxation of Owners of
Trust Fractional Certificates" and "--Taxation of
Owners of Trust Fractional Certificates
["--Application of Stripped Bond Rules"]
[--Treatment of Unstripped Certificates"]] in the
Prospectus for discussions of certain tax
considerations particular to the Certificates.*
</TABLE>
- --------
* If the Prospectus Supplement for a Series of Certificates provides that
Stroock & Stroock & Lavan LLP will pass upon the material federal income tax
consequences of the Certificates for the Depositor, then such Prospectus
Supplement will contain tax disclosure substantially similar to the disclosure
set forth in Version E under "Summary of Terms--Tax Aspects" and "Certain
Federal Income Tax Consequences."
S-5
<PAGE>
<PAGE>
[RISK FACTORS]
[Description of Risk Factors to be added as appropriate]
DESCRIPTION OF THE MORTGAGE POOL AND THE UNDERLYING PROPERTIES
The Mortgage Pool will consist of Mortgage Loans evidenced by mortgage notes
with aggregate unpaid principal balances outstanding as of the Cut-off Date,
after deducting payments of principal due on such date, of approximately
$ . This amount is subject to a permitted upward and downward variance of
up to %. The Mortgage Pool will consist of -year, [fixed-rate], fully-
amortizing, [level-payment] Mortgage Loans, as more fully described in the
Prospectus.
The weighted average interest rate (individually, a "Mortgage Rate") of the
Mortgage Loans as of the Cut-off Date will be at least % but no more than
%. All Mortgage Loans will have Mortgage Rates of at least % but no more
than %. The weighted average maturity of the Mortgage Loans, as of the Cut-
off Date, will be at least years but no more than years. All Mortgage
Loans will have original maturities of at least but no more than
years. None of the Mortgage Loans will have been originated prior to or after
, 19 . None of the Mortgage Loans will have a scheduled maturity later
than .
The Mortgage Loans will have the following characteristics as of the Cut-off
Date (expressed as a percentage of the outstanding aggregate principal
balances of the Mortgage Loans having such characteristics relative to the
outstanding aggregate principal balances of all Mortgage Loans):
No more than % of the Mortgage Loans will have been originated before
, 19 , and no more than % of the Mortgage Loans will have been
originated before , 19 . See "Certain Federal Income Tax
Consequences--Mortgage Pools," "--Taxation of Owners of Trust Fractional
Certificates" and "--Market Discount and Premium" in the Prospectus for
information regarding such Mortgage Loans.
At least % of the Mortgage Loans will be Mortgage Loans each having
outstanding principal balances of less than $ .
No more than % of the Mortgage Loans will be Mortgage Loans each having
outstanding principal balances of more than $ .
No more than % of the Mortgage Loans will have had loan-to-value ratios
at origination in excess of 80%, and no Mortgage Loan will have had a loan-
to-value ratio at origination in excess of 95%.
All the Mortgage Loans with loan-to-value ratios at origination in excess
of 80% will be covered by a policy of private mortgage insurance until the
outstanding principal balance is reduced to 75% of the Original Value.
At least % of the Mortgage Loans will be secured by Mortgages on
single-family dwellings.
No more than % of the Mortgage Loans will be secured by Mortgages on
condominiums and row houses.
No more than %, by aggregate principal balance, of the Mortgage Loans
will be Mortgage Loans for which Buy-Down Funds have been provided, and no
more than % of the outstanding principal balance of any such Mortgage
Loan will be represented by Buy-Down Funds.
No more than %, by aggregate principal balance, of the Mortgage Loans
will be GPM Loans.
At least % of the Mortgage Loans will be secured by an owner-occupied
Mortgaged Property. Such determination will have been made on the basis of
a representation by the Mortgagor at the time of origination of the
Mortgage Loan that such Mortgagor then intended to occupy the underlying
property or, in the absence of such a representation, various factors
indicating that the underlying property is owner-occupied.
S-6
<PAGE>
<PAGE>
No more than [5%] of the Mortgage Loans will be secured by Mortgages on
properties located in any one zip code or project.
The Mortgage Loans will be secured by Mortgages on properties located in
the states of .
Specific information with respect to the Mortgage Loans will be available to
purchasers of the Certificates offered hereby at or before the time of
issuance of such Certificates. Such specific information will include the
precise amount of the aggregate principal balances of the Mortgage Loans
outstanding as of the Cut-off Date, and will also set forth tables reflecting
the following information regarding the Mortgage Loans: years of origination,
types of dwellings on the underlying properties, the sizes of Mortgage Loans
and distribution of Mortgage Loans by Mortgage Rate, and will be set forth in
a Current Report on Form 8-K that will be filed with the Securities and
Exchange Commission by the Depositor within 15 days after the issuance of the
Certificates.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Standard Terms and
Provisions of Pooling and Servicing (the "Standard Terms"), as amended and
supplemented by a Reference Agreement to be dated as of the Cut-off Date (the
"Reference Agreement" and, together with the Standard Terms, the "Pooling and
Servicing Agreement") among the Depositor, , as master servicer (the
"Master Servicer"), and , as trustee (the
"Trustee"), a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement forms a part. Reference is made
to the accompanying Prospectus for important additional information regarding
the terms and conditions of the Pooling and Servicing Agreement and the
Certificates. Each of the Certificates at the time of issuance will qualify as
a "mortgage related security" within the meaning of the Secondary Mortgage
Market Enhancement Act of 1984.
Distributions of principal and interest as set forth above will be made by
the Master Servicer by check mailed to each Certificateholder entitled thereto
at the address appearing in the Certificate Register to be maintained with the
Trustee or, if eligible for wire transfer as provided in the Pooling and
Servicing Agreement, by wire transfer to the account of such
Certificateholder; provided, however, that the final distribution in
retirement of the Certificates will be made only upon presentation and
surrender of the Certificates at the office specified in the notice to
Certificateholders of such final distribution.
The Certificates will be transferable and exchangeable on a Certificate
Register to be maintained by the Trustee at the office or agency of the Master
Servicer maintained for that purpose in New York, New York. Certificates
surrendered to the Trustee for registration of transfer or exchange must be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee. No service charge will be made for any registration of transfer or
exchange of Certificates, but payment of a sum sufficient to cover any tax or
other governmental charge may be required. Such office or agency is currently
located at .
TRUSTEE
The Trustee for the Certificates will be
, a bank organized and existing under the laws of the
with its principal office located at ,
.
THE MASTER SERVICER
The Master Servicer is a corporation that commenced operation in
. The Master Servicer is a FNMA/FHLMC approved seller-servicer based in
. As of , the Master Servicer serviced, for other investors and
for its own account, approximately mortgage loans
S-7
<PAGE>
<PAGE>
with an aggregate principal balance in excess of $ . The Master Servicer
conducts operations through FHA approved branch offices in .
The Master Servicer originated approximately $ in mortgage loans in
19 . The Master Servicer's consolidated stockholders' equity as of was
approximately $ .
The information set forth above has been provided by the Master Servicer.
The Depositor makes no representation as to the accuracy or completeness of
such information.
The Master Servicer shall obtain and maintain in effect a bond, corporate
guaranty or similar form of insurance coverage (the "Performance Bond"),
insuring against loss occasioned by the errors and omissions of the Master
Servicer's officers, employees and any other person acting on behalf of the
Master Servicer in its capacity as Master Servicer and guaranteeing the
performance, among other things, of the obligations of the Master Servicer to
purchase certain Mortgage Loans and to make advances, as described in the
Prospectus under "Description of the Certificates--Assignment of Mortgage
Loans" and "--Advances," in an amount acceptable to the nationally recognized
statistical rating organization or organizations rating the Certificates
(collectively, the "Rating Agency").
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicing compensation payable to the Master Servicer will be equal to
an amount, payable out of each interest payment on a Mortgage Loan, equal to
the excess of each interest payment on a Mortgage Loan over the Pass-Through
Rate, less [(a)] any servicing compensation payable to the Servicer of such
Mortgage Loan under the terms of the agreement with the Master Servicer
pursuant to which such Mortgage Loan is serviced (the "Servicing Agreement")
(including such compensation paid to the Master Servicer as the direct
servicer of a Mortgage Loan for which there is no Servicer) [.] [, and (b) the
amount payable to the Depositor, as described below.] [Pursuant to the Pooling
and Servicing Agreement, on each Distribution Date, the Master Servicer will
remit to [the Depositor] in respect of each interest payment on a Mortgage
Loan an amount equal to % of the outstanding principal balance of such
Mortgage Loan before giving effect to any payments due on the preceding Due
Date.] The Master Servicer will be permitted to withdraw from the Certificate
Account, in respect of each interest payment on a Mortgage Loan, an amount
equal to % of the outstanding principal balance of such Mortgage Loan,
before giving effect to any payments due on the preceding Due Date. See
"Description of the Certificates--Servicing and Other Compensation and Payment
of Expenses" in the Prospectus for information regarding other possible
compensation to the Master Servicer and the Servicers. The Servicers and the
Master Servicer will pay all expenses incurred in connection with their
responsibilities under the Servicing Agreements and the Pooling and Servicing
Agreement (subject to limited reimbursement as described in the Prospectus),
including, without limitation, the various items of expense enumerated in the
Prospectus.
Investors are advised to consult with their own tax advisors regarding the
likelihood that a portion of such servicing compensation might be
characterized as an ownership interest in the interest payments on the
Mortgage Loans ("Retained Yield") for federal income tax purposes, by reason
of the extent to which either the weighted average Mortgage Rate, or the
stated interest rates on the Mortgage Loans exceeds the Pass-Through Rate, and
the tax consequences to them of such a characterization. In this regard, there
are no authoritative guidelines for federal income tax purposes as to either
the maximum amount of servicing compensation that may be considered reasonable
in the context of this or similar transactions or whether the reasonableness
of servicing compensation should be determined on a weighted average or loan-
by-loan basis. [The Depositor intends to treat % of such servicing
compensation and % of the amount payable to it described above as Retained
Yield for federal income tax purposes in reports to the Certificateholders and
to the Internal Revenue Service.] See "Certain Federal Income Tax
Consequences--Mortgage Pools" and "--Taxation of Owners of Trust Fractional
Certificates" in the Prospectus for information regarding the characterization
of servicing compensation [and the amounts payable to the Depositor].
S-8
<PAGE>
<PAGE>
[TERMINATION; REPURCHASE OF MORTGAGE LOANS
The Pooling and Servicing Agreement provides that the Depositor may purchase
from the Trust all Mortgage Loans remaining in the Mortgage Pool and thereby
effect early retirement of the Certificates, provided that the aggregate
unpaid balances of the Mortgage Loans at the time of such repurchase is less
than [10%] of the aggregate principal balance of the Mortgage Loans on the
Cut-off Date. The purchase price for any such optional repurchases shall be
equal to the outstanding principal balance of such Mortgage Loans, together
with accrued interest at the Pass-Through Rate to the first day of the month
following such repurchase plus the appraised value of any acquired property
with respect to the Mortgage Loans. [Any such repurchase will be effected in
compliance with the requirements of Section 86OF(a)(iv) of the Code in order
to constitute a "qualifying liquidation" thereunder.] In no event will the
Trust continue beyond the expiration of 21 years from the death of the last
survivor of the persons named in the Pooling and Servicing Agreement.]
[LETTER OF CREDIT
The maximum liability of [ ] under the Letter of Credit, net of
unreimbursed payments thereunder, for the Certificates will be no more than
[10%] of the aggregate principal balance of the Mortgage Loans on the Cut-off
Date. The duration of coverage and the amount and frequency of any reduction
in coverage will be in compliance with the requirements established by the
Rating Agency rating the Certificates, in order to obtain a rating in one of
the two highest rating categories of the Rating Agency. The precise amount of
coverage under the Letter of Credit and the duration and frequency of
reduction of such coverage will be set forth in the Current Report on Form 8-K
referred to above. See "Description of the Certificates--Credit Support--The
Letter of Credit" in the Prospectus.]
[THE POOL INSURANCE POLICY
Subject to the limitations described under "Description of Insurance--Pool
Insurance Policy" in the Prospectus, the Pool Insurance Policy will cover
losses by reason of default on the Mortgage Loans that are not covered as to
their entire outstanding principal balances by primary mortgage insurance, in
an amount equal to % of the aggregate principal balance of such Mortgage
Loans on the Cut-off Date.
The Pool Insurance Policy will be issued by , a corporation (the
"Pool Insurer"), which is engaged principally in the business of insuring
mortgage loans on residential properties against default in payment by the
Mortgagor. At , 19 , the Pool Insurer had insurance in force in the form
of primary policies covering approximately $ billion of residential
mortgages. At such date, the Pool Insurer had total assets of approximately
$ million, capital and surplus aggregating $ million and statutory
contingency reserves of $ million, resulting in total policyholders'
reserves of $ million.
The information set forth above has been provided by the Pool Insurer. The
Depositor makes no representation as to the accuracy or completeness of such
information.]
[THE SPECIAL HAZARD INSURANCE POLICY
The Special Hazard Insurance Policy will cover certain risks not otherwise
insured against under hazard insurance policies, subject to the limitations
described in the Prospectus, and will be issued by , a corporation
(the "Special Hazard Insurer"). Claims under such policy will be limited to
% of the aggregate principal balance of the Mortgage Loans or times the
principal balance of the Mortgage Loan with the highest outstanding principal
balance at the Cut-off Date, whichever is greater. At , 19 , the Special
Hazard Insurer had total assets of approximately $ million and total
policyholders' surplus of $ million. The claims-paying ability of the
Special Hazard Insurer is presently rated by the Rating Agency. In accordance
with standard rating agency practice, the Rating Agency may, at any time,
revise or withdraw such rating.
S-9
<PAGE>
<PAGE>
The information set forth above has been provided by the Special Hazard
Insurer. The Depositor makes no representation as to the accuracy or
completeness of such information.]
[MORTGAGOR BANKRUPTCY BOND
The Depositor will obtain a bond or similar form of insurance coverage (the
"Mortgage Bankruptcy Bond") for proceedings with respect to Mortgagors under
the federal Bankruptcy Code. The Mortgagor Bankruptcy Bond will cover certain
losses resulting from a reduction by a bankruptcy court of scheduled payments
of principal and interest on a Mortgage Loan or a reduction by such court of
the principal amount of a Mortgage Loan and will cover certain unpaid interest
on the amount of such a principal reduction from the date of the filing of a
bankruptcy petition.
The initial amount of coverage provided by the Mortgagor Bankruptcy Bond
will be $ plus the greater of (i) % of the aggregate principal balances
of the Mortgage Loans secured by second residences and investor-owned
residences or (ii) times the largest principal balance of any such
Mortgage Loan. The coverage provided by the Mortgagor Bankruptcy Bond will be
reduced by payments thereunder.
The Mortgagor Bankruptcy Bond will be issued by , a
corporation. At December 31, 19 , had admitted assets of approximately
$ and total policyholders' surplus of approximately $ .
The information set forth above concerning has been provided by it.
The Depositor makes no representation as to the accuracy or completeness of
such information.]
CERTIFICATE RATING
It is a condition to the issuance of the Certificates that they be rated in
one of the two highest categories of the Rating Agency prior to issuance.
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.
[ERISA CONSIDERATIONS]
[Describe whether any exemption from "plan asset" treatment is available
with respect to the Series.]
[State whether the Series is an Exempt or a Nonexempt Series (see "ERISA
Considerations--Prohibited Transaction Class Exemption" in the Prospectus).]
UNDERWRITING
The Depositor has entered into an Underwriting Agreement with [several
Underwriters, for whom] Credit Suisse First Boston Corporation, an affiliate of
the Depositor[, is acting as Representative]. The Underwriter[s] [named below]
[has] [have severally] agreed to purchase from the Depositor [all] [the
following respective principal amounts] of the Certificates:
[UNDERWRITER
<TABLE>
<S> <C>
Credit Suisse First Boston Corporation...... ................ $
-----------
Total.................................................... $ ]
===========
</TABLE>
S-10
<PAGE>
<PAGE>
The Underwriting Agreement provides that the obligations of the
Underwriter[s] [is] [are] subject to certain conditions precedent, and that
the Underwriter[s] will be obligated to purchase the entire principal amount
of the Certificates if any are purchased.
The Depositor has been advised [by the Representative] that the
Underwriter[s] propose[s] to offer the Certificates to the public initially at
the public offering prices set forth on the cover page of this Prospectus
Supplement, and [through the Representative,] to certain dealers at such
prices less the following concessions and that the Underwriter[s] and such
dealers may allow the following discounts on sales to certain other dealers:
<TABLE>
<CAPTION>
CONCESSION (PERCENT DISCOUNT (PERCENT OF
OF PRINCIPAL AMOUNT) PRINCIPAL AMOUNT)
-------------------- --------------------
<S> <C> <C>
% %
</TABLE>
After the initial public offering, the public offering prices and the
concessions and discounts to dealers may be changed by [the Underwriter] [the
Representative].
The Depositor has agreed to indemnify the Underwriter[s] against certain
liabilities, including liabilities under the Securities Act of 1933.
LEGAL MATTERS
The legality of the Certificates will be passed upon for the Depositor and for
the Underwriter[s] by _________________________________________________________.
The material federal income tax consequences of the Certificates will be passed
upon for the Depositor by _____________________________________________________.
USE OF PROCEEDS
The Depositor will apply all of the net proceeds of the offering of the
Certificates towards the simultaneous purchase of the Mortgage Loans
underlying the Certificates. Certain of the Mortgage Loans will be acquired in
privately negotiated transactions by the Depositor from one or more affiliates
of the Depositor, which will have acquired such Mortgage Loans from time to
time in privately negotiated transactions.
S-11
<PAGE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED ,
- --------------------------------------------------------------------------------
P R O S P E C T U S S U P P L E M E N T
(To Prospectus dated , 19 )
- --------------------------------------------------------------------------------
[Version B]
$ (Approximate)
Credit Suisse First Boston Mortgage Securities Corp.
Depositor
ABS Mortgage Pass-Through Certificates, Class A, Series
Principal and interest payable on the 25th day
of each month, beginning , 19
-----------
Class A-1 % of principal payments on the Mortgage Loans; % of interest
payments at an % pass-through rate on the Mortgage Loans (the "Pass-Through
Rate") (Interest at an % annual rate on unpaid Class A-1 principal amount)
Class A-2 No principal payments on the Mortgage Loans; % of interest
payments at an % Pass-Through Rate on the Mortgage Loans (Interest at an %
annual rate on unpaid Class A-2 notional amount)
The ABS Mortgage Pass-Through Certificates (the "Certificates") will be
composed of two classes (each, a "Class"), entitled Conduit Mortgage Pass-
Through Certificates, Class A (the "Class A Certificates"), and Conduit Mortgage
Pass-Through Certificates, Class B (the "Class B Certificates"). The Class A
Certificates offered hereby will be divided into two subclasses (each, a
"Subclass") entitled Class A-1 (the "Class A-1 Certificates") and Class A-2 (the
"Class A-2 Certificates") and will evidence undivided percentage ownership
interests in a trust (the "Trust") composed of [conventional] [fixed-rate] [one-
to four-family residential mortgage loans,] [mortgage loans secured by
multifamily residential rental properties consisting of five or more dwelling
units or apartment buildings owned by cooperative housing corporations,] [loans
made to finance the purchase of certain rights relating to cooperatively owned
properties secured by a pledge of shares of a cooperative corporation and an
assignment of a proprietary lease or occupancy agreement on a cooperative
dwelling ("Cooperative Loans"),] [and mortgage participation certificates
evidencing participation interests in such loans and meeting the requirements of
the nationally recognized rating agency or agencies rating the certificates
(collectively, the "Rating Agency") for a rating in one of the two highest
rating categories of such Rating Agency] (the "Mortgage Loans") and certain
related property to be conveyed to the Trust by the Depositor (the "Trust
Fund"). The Mortgage Loans will be transferred to the Trust, pursuant to a
Pooling and Servicing Agreement (as defined herein) dated as of , 199 , by
Credit Suisse First Boston Mortgage Securities Corp. ( the "Depositor") in
exchange for the Certificates and are more fully described in this Prospectus
Supplement and in the accompanying Prospectus.
The Class A-1 Certificates evidence ownership of % of each principal
payment on the Mortgage Loans and % of each interest payment on the Mortgage
Loans (representing interest at a rate of % per annum on the unpaid principal
amount of the Class A-1 Certificates). The Class A-2 Certificates evidence
ownership of % of each interest payment at the Pass-Through Rate on the
Mortgage Loans (representing interest at a rate of % per annum on the unpaid
notional amount of the Class A-2 Certificates). The rights of the Class B
Certificateholders to receive distributions with respect to the Mortgage Loans
will be subordinated to the rights of the Class A Certificateholders to the
extent described herein and in the Prospectus.
[The Depositor intends to offer the Class B Certificates to sophisticated
institutional investors from time to time in transactions not requiring
registration under the Securities Act of 1933. The rights of the Class B
Certificateholders to receive distributions with respect to the Mortgage Loans
will be subordinated to the rights of the Class A Certificateholders to the
extent described herein and in the Prospectus.]
The Certificates do not represent an obligation of or interest in Credit
Suisse First Boston Mortgage Securities Corp. or any affiliate thereof. Neither
the Certificates nor the underlying mortgage loans are insured or guaranteed by
any governmental agency or instrumentality.
The Mortgage Loans may be prepaid at any time without penalty. [A lower rate
of principal prepayments than anticipated would negatively affect the total
return to investors in Class A-1 Certificates, which are being offered at a
discount to their principal amount.] Yields on the Class A-2 Certificates will
be extremely sensitive to the prepayment experience on the Mortgage Loans, and
prospective investors in such Certificates should fully consider the associated
risks, including the risk that such investors, in circumstances of higher than
anticipated prepayment, could fail to fully recoup their initial investment.
See "The Mortgage Pool," "Yield Considerations" and "Maturity and Prepayment
Considerations" in this Prospectus Supplement.
The Underwriter[s] [do[es] not] intend[s] to make a secondary market for the
Class A Certificates [but [is] [are] under no obligation to do so]. There can
be no assurance that a secondary market will develop or, if it does develop,
that it will continue.
[The Depositor has elected to treat the Trust Fund as a Real Estate Mortgage
Investment Conduit (a "REMIC"). See "Certain Federal Income Tax Consequences"
in the Prospectus.]
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER RISK
FACTORS ON PAGE S-7 OF THIS PROSPECTUS SUPPLEMENT.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE LIMITATIONS DISCUSSED UNDER ERISA
CONSIDERATIONS HEREIN AND IN THE ACCOMPANYING PROSPECTUS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to the
Public (1) Discount Depositor (1)(2)
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Certificate % % %
- ----------------------------------------------------------------------
Per Class A-2 Certificate % % %
- ----------------------------------------------------------------------
Total $ $ $
- ----------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, at the applicable rate from , 19 .
(2) Before deducting expenses payable by the Depositor estimated at $ .
-----------
The Class A Certificates are offered by the [several] Underwriter[s] when, as
and if issued and accepted by the Underwriter[s] and subject to [its] [their]
right to reject orders in whole or in part. It is expected that the Class A
Certificates, in definitive fully registered form, will be ready for delivery
on or about , 19 .
Credit Suisse First Boston
- --------------------------------------------------------------------------------
The date of this Prospectus Supplement is , 19 .
<PAGE>
<PAGE>
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE CERTIFICATES OFFERED HEREBY. ADDITIONAL INFORMATION IS
CONTAINED IN THE PROSPECTUS, AND PURCHASERS ARE URGED TO READ BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES
OFFERED HEREBY MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CERTIFICATES
OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
[IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATIONS, THIS
PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS WILL ALSO BE USED BY THE
UNDERWRITER AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND
SALES RELATED TO MARKET-MAKING TRANSACTIONS IN THE OFFERED SECURITIES IN WHICH
THE UNDERWRITER ACTS AS PRINCIPAL. SALES WILL BE MADE AT NEGOTIATED PRICES
DETERMINED AT THE TIME OF SALE.]
----------------
UNTIL , 19 , ALL DEALERS AFFECTING TRANSACTIONS IN THE CERTIFICATES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS SUPPLEMENT AND A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
----------------
ADDITIONAL INFORMATION
The Trust will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information filed by the Trust can be inspected and copied at the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C.,
and at the Commission's regional offices at Citicorp Center, 500 West Madison
Street,, Suite 1400, Illinois 60661, and Seven World Trade Center, Suite 1300,
New York, New York 10048. Copies of such information can be obtained from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
(http://www.sec.gov).
S-2
<PAGE>
<PAGE>
SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
Prospectus. Capitalized terms used in this Prospectus Supplement and not
otherwise defined shall have the meanings given in the Prospectus.
<TABLE>
<S> <C>
SECURITIES OFFERED........ ABS Mortgage Pass-Through Certificates, Class
A, Series (the "Class A Certificates").
$ Original Principal Amount Class A-1
Certificates (approximate).
No Original Principal Amount A-2 Certificates.
The Class A-1 Certificates represent undivided
percentage interests in approximately % of each
principal payment on the Mortgage Loans (the
"Principal Distribution") and undivided percentage
interests in approximately % of each interest
payment at the Pass- Through Rate on the Mortgage
Loans (the "Interest Distribution") (representing
interest at a rate of % per annum on the unpaid
principal amount of the Class A-1 Certificates).
The individual percentage interest (the
"Percentage Interest") of any Class A-1
Certificate will be equal to the percentage
obtained by dividing the original principal amount
of such Class A-1 Certificate by the aggregate
original principal amount of all Class A-1
Certificates ($ ).
The Class A-2 Certificates represent Percentage
Interests in approximately % of the Interest
Distribution (representing interest at a rate of
% per annum on the unpaid notional amount of the
Class A-2 Certificates). The Class A Certificates
will not receive distributions of principal with
respect to the Mortgage Loans. The Percentage
Interest of any Class A-2 Certificate will be
equal to the percentage obtained by dividing the
original notional amount of such Class A-2
Certificate by the aggregate original notional
amount of all Class A-2 Certificates
(approximately $ ). The notional amount of
the Class A-2 Certificates is equal to the
aggregate unpaid principal amount of the Class A
Certificates, but is used solely for purposes of
determining interest payments and certain other
rights of holders of the Class A-2 Certificates
and does not represent any interest in such
principal payments.
The Class A Certificates represent in the aggregate
an approximate % undivided interest in the Trust
Fund. The remaining approximate % undivided
interest in the Trust Fund is evidenced by the
Class B Certificates, which are subordinated in
certain respects to the Class A Certificates, as
more fully described herein and in the Prospectus.
[The Class B Certificates are not being offered
hereby, and may be retained by the Depositor or
sold by the Depositor at any time to one or more
sophisticated institutional investors in privately
negotiated transactions not requiring registration
under the Securities Act of 1933.]
</TABLE>
S-3
<PAGE>
<PAGE>
<TABLE>
<S> <C>
DEPOSITOR................. Credit Suisse First Boston Mortgage Securities Corp.
(the "Depositor").
MASTER SERVICER...........
CUT-OFF DATE..............
, 19 .
DELIVERY DATE............. On or about , 19 .
DENOMINATIONS............. The minimum denomination of a Class A-1 Certificate
will represent approximately $ aggregate
principal balance of the Mortgage Loans on the
Cut-off Date. The minimum denomination of a Class
A-2 Certificate will represent approximately
$ notional amount.
INTEREST.................. Passed through monthly, on the day of each
month (each, a "Distribution Date") commencing
, 19 . The Pass-Through Rate on the
Mortgage Loans is % per annum. See "Description
of the Certificates" in the Prospectus.
PRINCIPAL (INCLUDING
PREPAYMENTS)............. Passed through monthly on the Distribution Date,
commencing on , 19 . See "Description of the
Certificates" in the Prospectus.
MORTGAGE POOL............. The Mortgage Pool will consist of [fixed rate,]
[fully-amortizing,] [level-payment] mortgage loans
secured by Mortgages on [one- to four-family
residential properties, loans (the "Cooperative
Loans") made to finance the purchase of certain
rights relating to cooperatively owned properties
secured by a pledge of shares of a cooperative
corporation (the "Cooperative") and an assignment
of a proprietary lease or occupancy agreement on a
cooperative dwelling (a "Cooperative Dwelling"
and, together with one- to four-family residential
properties, "Single Family Property"), or mortgage
loans secured by multifamily residential rental
properties consisting of five or more dwelling
units or apartment buildings owned by cooperative
housing corporations ("Multifamily Property")]
[located in the states of , and ] [and
mortgage participation certificates evidencing
participation interests in such loans that meet
the requirements of the nationally recognized
rated agency or agencies rating the certificates
(collectively, the "Rating Agency") for a rating
in one of the two highest rating categories of
such Rating Agency] (the "Mortgage Loans"). All
Mortgage Loans will have original maturities of at
least but not more than years. See "Description
of the Mortgage Pool and the Underlying
Properties" herein.*
</TABLE>
- --------
* If the Series of Certificates offered pursuant to this Version B Prospectus
Supplement evidences interests in manufactured housing conditional sales
contracts and installment loan agreements ("Contracts"), the disclosure to be
set forth will be substantially similar to the disclosure set forth in
Version E under "Summary of Terms--Contract Pool."
S-4
<PAGE>
<PAGE>
<TABLE>
<S> <C>
CLASS B CERTIFICATES...... The rights of the Class B Certificateholders to
receive distributions with respect to the Mortgage
Loans are subordinated to the rights of the Class
A Certificateholders to receive such distributions
to the extent of the Subordinated Amount described
below. This subordination is intended to enhance
the likelihood of regular receipt by Class A
Certificateholders of the full amount of scheduled
payments of principal and interest and to decrease
the likelihood that the Class A Certificateholders
will experience losses. The extent of such
subordination (the "Subordinated Amount") will be
determined as follows: on the Cut-off Date and on
each anniversary of the Cut-off Date until ,
the Subordinated Amount will equal [ ]% of the
original aggregate principal balance of the
Mortgage Loans less the amount of "Aggregate
Losses" (as defined in the Prospectus) since the
Cut-off Date through the last day of the month
preceding such anniversary date; from the
anniversary of the Cut-off Date, the Subordinated
Amount will gradually decline in accordance with a
schedule set forth in the Pooling and Servicing
Agreement.
RISK FACTORS.............. For discussion of risk factors that should be
considered with respect to an investment in the
Certificates, see "Risk Factors" herein and in the
related Prospectus.
RESERVE FUND..............
The protection afforded to the Class A
Certificateholders from the subordination feature
described above will be effected both by the
preferential right of the Class A
Certificateholders to receive current
distributions with respect to the Mortgage Loans
(to the extent of the Subordinated Amount) and by
the establishment of a reserve (the "Reserve
Fund"). The Reserve Fund is not included in the
Trust Fund. The Reserve Fund will be created by
the Depositor and shall be funded by the retention
of all of the scheduled distributions of principal
otherwise distributable to the Class B
Certificateholders on each Distribution Date until
the Reserve Fund reaches an amount (the "Required
Reserve") that will equal [; thereafter, the
Reserve Fund must be maintained at the following
levels: ]. See "Description of the
Certificates--Subordinated Certificates" and "--
Reserve Fund" in the Prospectus.
[OPTIONAL TERMINATION..... The Depositor may, at its opinion, repurchase from
the Trust all Mortgage Loans remaining outstanding
[at such time as the aggregate unpaid principal
balance of such Mortgage Loans is less than 10% of
the aggregate principal balance of the Mortgage
Loans on the Cut-off Date]. The repurchase price
will equal [the aggregate unpaid principal balance
of such Mortgage Loans, together with accrued
interest thereon at the Pass-Through Rate through
the last day of the month during which such
repurchase occurs plus the appraised value of any
property with respect thereof]. [Any such
termination will be effected in compliance with
the requirements of Section 860F(a)(iv) of the
Internal Revenue Code of 1986, so as to constitute
a "qualifying liquidation" thereunder.] See
"Description of the Certificates--Termination;
Repurchase of Certificates" in the Prospectus.]
</TABLE>
S-5
<PAGE>
<PAGE>
<TABLE>
<S> <C>
ADVANCES.................. The Servicers of the Mortgage Loans (and the Master
Servicer, with respect to each Mortgage Loan that
it services directly and otherwise, to the extent
the related Servicer does not do so) will be
obligated to advance delinquent installments of
principal and interest on the Mortgage Loans under
certain circumstances. See "Description of
Certificates-- Advances" in the Prospectus.
TRUSTEE...................
. See "Description of the Certificates--
Trustee" herein.
CERTIFICATE RATING........ It is a condition of issuance of the Class A
Certificates that they be rated in one of the two
highest rating categories of the Rating Agency
prior to issuance. See "Rating" herein.
LEGAL INVESTMENT.......... The Class A Certificates constitute "mortgage
related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984 (the
"Enhancement Act"), and, as such, are legal
investments for certain entities to the extent
provided in the Enhancement Act. See "Legal
Investment" in the Prospectus.
ERISA CONSIDERATIONS...... See "ERISA Considerations" in the Prospectus [and
herein].
TAX ASPECTS............... See "Certain Federal Income Tax Consequences--
General"; ["--REMIC Trust Funds"] ["--Non-REMIC
Trust Funds"] in the prospectus. Purchasers
of Class A-1 Certificates should see "Certain
Federal Income Tax Consequences ["--REMIC Trust
Funds--Taxation of Owners of REMIC Regular
Certificates"] ["--Non-REMIC Trust Funds--Taxation
of Owners of Trust Fractional Certificates" and
"-- Taxation of Owners of Trust Fractional
Certificates ["--Application of Stripped Bond
Rules"]] in the Prospectus for discussions of
certain tax considerations particular to the Class
A-1 Certificates. Purchasers of Class A-2
Certificates should see "Certain Federal Income Tax
Consequences ["--REMIC Trust Funds--Taxation of
Owners of REMIC Residual Certificates"]["--Non
REMIC Trust Funds--Taxation of Owners of Trust
Interest Certificates"] in the Prospectus for
discussions of certain tax considerations
particular to the Class A-2 Certificate.*
</TABLE>
- --------
* If the Prospectus Supplement for a Series of Certificates provides that
Stroock & Stroock & Lavan LLP will pass upon the material federal income tax
consequences of the Certificates for the Depositor, then such Prospectus
Supplement will contain tax disclosure substantially similar to the disclosure
set forth in Version E under "Summary of Terms--Tax Aspects" and "Certain
Federal Income Tax Consequences."
S-6
<PAGE>
<PAGE>
[RISK FACTOR]
[Description of Risk Factors to be added as appropriate)
DESCRIPTION OF THE MORTGAGE POOL
AND THE UNDERLYING PROPERTIES*
The Mortgage Pool will consist of Mortgage Loans evidenced by notes with
aggregate unpaid principal balances outstanding as of the Cut-off Date, after
deducting payments of principal due on such date, of approximately $ . The
amount is subject to a permitted upward and downward variance of up to %.
The Mortgage Pool will consist of -year, [fixed-] rate, fully-amortizing,
[level-payment] Mortgage Loans, as more fully described in the Prospectus.
The weighted average interest rate of the Mortgage Loans as of the Cut-off
Date will be at least % but no more than %. All Mortgage Loans will have
interest rates of at least % but no more than %. The weighted average
maturity of the Mortgage Loans, as of the Cut-off Date, will be at least
years but no more than years. All Mortgage Loans will have original
maturities of at least but no more than years. None of the Mortgage
Loans will have been originated prior to or after 19 . None of
the Mortgage Loans will have a scheduled maturity later than .
The Mortgage Loans will have the following characteristics as of the Cut-off
Date (expressed as a percentage of the outstanding aggregate principal
balances of the Mortgage Loans having such characteristics relative to the
outstanding aggregate principal balances of all Mortgage Loans):
No more than % of the Mortgage Loans will have been originated before
, 19 . See "Certain Federal Income Tax Consequences--Mortgage
Pools." "--Taxation of Owners of Trust Fractional Certificates" and "--
Market Discount and Premium" in the Prospectus for information regarding
such Mortgage Loans.
At least % of the Mortgage Loans will be Mortgage Loans each having
outstanding principal balances of less than $ .
No more than % of the Mortgage Loans will be Mortgage Loans each having
outstanding principal balances of more than $ .
No more than % of the Mortgage Loans will have had loan-to-value ratios
at origination in excess of 80%, and no Mortgage Loan will have had a loan-
to-value ratio at origination in excess of [95%].
All of the Mortgage Loans with loan-to-value ratios at origination in
excess of 80% will be covered by a policy of private mortgage insurance
until the outstanding principal balance is reduced to 75% of the Original
Value.
[ % of the Mortgage Loans will be secured by Mortgages on single-family
dwellings] [ % of the Mortgage Loans will be secured by Multifamily
Property][ % of the Mortgage Loans will be secured by a pledge of shares
of a Cooperative and an assignment of a proprietary lease or occupancy
agreement on a Cooperative Dwelling.]
No more than % of the Mortgage Loans will be secured by Mortgages on
condominiums and row houses.
No more than %, by aggregate principal balance, of the Mortgage Loans
will be Mortgage Loans for which Buy-Down Funds have been provided and no
more than % of the principal balance of any such Mortgage Loan will be
represented by Buy-Down Funds.
- --------
* If the Series of Certificates offered pursuant to this Version B Prospectus
Supplement evidences interests in Contracts, the disclosure to be set forth
will be substantially similar to the disclosure set forth in Version E under
"Description of the Contract Pool."
S-7
<PAGE>
<PAGE>
No more than %, by aggregate principal balance, of the Mortgage Loans
will be GPM Loans.
At least % of the Mortgage Loans will be secured by an owner-occupied
Mortgaged Property. Such determination will have been made on the basis of
a representation by the Mortgagor at the time of origination of the
Mortgage Loan that he then intended to occupy the underlying property or,
in the absence of such a representation, various factors indicating that
such underlying property is owner-occupied.
No more than [ ]% of the Mortgage Loans will be secured by Mortgages on
properties located in any one zip code or project.
The Mortgage Loans will be secured by Mortgages on properties located in the
states of .
Specific information with respect to the Mortgage Loans will be available to
purchasers of the Certificates offered hereby at or before the time of
issuance of such Certificates. Such specific information will include the
precise amount of the aggregate principal balances of the Mortgage Loans
outstanding as of the Cut-off Date, and will also set forth tables reflecting
the following information regarding the Mortgage Loans: years of origination,
types of dwellings on the underlying properties, the sizes of Mortgage Loans
and distribution of Mortgage Loans by Mortgage Rate, and will be set forth in
a Current Report on Form 8-K that will be filed with the Securities and
Exchange Commission by the Depositor within 15 days after the issuance of the
Certificates.
YIELD CONSIDERATIONS
PREPAYMENT EXPERIENCE ON THE MORTGAGE LOANS
The rate of principal payments on the Class A Certificate, the aggregate
amount of each interest payment on the Class A-1 Certificates and Class A-2
Certificates and the yield to maturity of the Class A-1 and Class A-2
Certificates will correspond directly to the rate of payments of principal on
the Mortgage Loans (including, for this purpose, scheduled amortization,
payments resulting from liquidation due to default, casualty, condemnation and
the like and repurchases by the Servicers under the circumstances described
herein and in the Prospectus). The rate of principal payments on pools of
mortgages or loans are influenced by a variety of economic, geographic, social
and other factors. In general, however, if prevailing interest rates fall
significantly below the interest rates on the Mortgage Loans, the Mortgage
Loans are likely to be subject to higher prepayment rates than if prevailing
rates remain at or above the interest rates on the Mortgage Loans. The rate of
payment of principal may also be affected by any repurchase of the Mortgage
Loans by the Servicers. See "Termination; Repurchase of Mortgage Loans" herein
and "Description of the Certificates--Assignment of Mortgage Loans" in the
Prospectus. In any such event, the repurchase price would be passed through to
Certificateholders as a prepayment of principal. See "Maturity and Prepayment
Considerations" in the Prospectus.
[[All] [ %] of the Mortgage Loans contain "due-on-sale" provisions.
Consequently, acceleration of mortgage payments as a result of transfers of
the related mortgaged property will affect the level of prepayments on the
Mortgage Loans. In addition, Mortgagors may prepay the Mortgage Loans at any
time without penalty.]
[As the Class A-1 Certificates are being offered at discounts from their
original principal amounts, if the purchaser of a Class A-1 Certificate
calculates its anticipated yield to maturity based on an assumed rate of
payment of principal that is faster than that actually received on the
Mortgage Loans, its actual yield to maturity will be lower than that so
calculated.] Conversely, since the Class A-2 Certificates are being offered
without any original principal amount, if the purchaser of a Class A-2
Certificate calculates its anticipated yield to maturity based on an assumed
rate of payment of principal that is slower than that actually received on the
Mortgage Loans, its actual yield to maturity will be lower than that so
calculated. In either case, the converse would be true.
S-8
<PAGE>
<PAGE>
The timing of changes in the rate of prepayments of the Mortgage Loans may
significantly affect an investor's actual yield to maturity, even if the
average rate of principal payments is consistent with an investor's
expectation. In general, the earlier a prepayment of principal on the Mortgage
Loans the greater the effect on an investor's yield to maturity. As a result,
the effect on an investor's yield of principal 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 may not be offset by a
subsequent like reduction (or increase) in the rate of principal payments.
[BECAUSE THE CLASS A-1 CERTIFICATES ARE BEING OFFERED AT A DISCOUNT FROM
THEIR ORIGINAL PRINCIPAL AMOUNT, THE YIELD TO MATURITY ON SUCH CERTIFICATES
WILL BE SENSITIVE TO THE RATE OF PRINCIPAL PAYMENTS ON THE MORTGAGE LOANS.]
BECAUSE THE CLASS A-2 CERTIFICATES ARE BEING OFFERED WITHOUT ANY PRINCIPAL
AMOUNT, THE YIELD TO MATURITY ON THE CLASS A-2 CERTIFICATES WILL BE EXTREMELY
SENSITIVE TO PREPAYMENT EXPERIENCE ON THE MORTGAGE LOANS AND MAY FLUCTUATE
SIGNIFICANTLY FROM TIME TO TIME. PROSPECTIVE INVESTORS IN THE CLASS A-2
CERTIFICATES SHOULD FULLY CONSIDER THE ASSOCIATED RISKS, INCLUDING THE RISK
THAT IF THE RATE OF PAYMENT IS RAPID SUCH INVESTORS MAY NOT FULLY RECOUP THEIR
INITIAL INVESTMENT.
Prepayments on mortgage loans are commonly measured relative to a prepayment
standard or model. The model used in this Prospectus Supplement, the Standard
Prepayment Assumption ("SPA"), represents an assumed rate of prepayment each
month relative to the then outstanding principal balance of a pool of new
mortgage loans. SPA assumes prepayment rates of 0.2% per annum of the then
outstanding principal balance of such mortgage loans in the first month of
life of the mortgage loans and an additional 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, SPA assumes a
constant prepayment rate of 6% per annum. SPA does not purport to be either a
historical description of the prepayment experience of any pool of mortgage
loans, or of the Mortgage Loans in the Mortgage Pool.
The following table illustrates, in general, the effect of prepayment rates
on the timing and amount of distributions on the Class A Certificates and
their resulting weighted average lives. The table does not purport to
represent the anticipated rate of prepayment on the Mortgage Loans or the
resulting anticipated rate of distributions on the Class A Certificates.
The table sets for the projected annual aggregate distributions that would
be made on the Class A-1 and Class A-2 Certificates, and their resulting
weighted average lives, based on various assumed percentages of SPA. The
column headed "0%" assumes that no Mortgage Loans are prepaid before maturity.
The columns headed " %", " %" and " %" assume that prepayments are made at
the specified percentages of SPA. It has been assumed in preparing the table
that (i) all of the Mortgage Loans have identical payment provisions, (ii) the
original term to maturity of each Mortgage Loan was [ ] years, (iii) all
Mortgage Loans are prepaid at the indicated percentage of SPA for the life of
the Certificates, (iv) the weighted average remaining term to maturity of the
Mortgage Loan is years, (v) the interest rate on each Mortgage Loan is
0. % in excess of the Pass-Through Rate, and (vi) the Mortgage Loans are not
repurchased at the option of the Depositor.
S-9
<PAGE>
<PAGE>
PROJECTED ANNUAL AGGREGATE DISTRIBUTIONS ON THE CLASS A CERTIFICATES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
CLASS A-1 CERTIFICATES CLASS A-2 CERTIFICATES
------------------------------- -------------------------------
YEAR ENDING 0% SPA % SPA % SPA % SPA 0% SPA % SPA % SPA % SPA
----------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ $ $ $ $ $ $ $
------- ------- ------- ------- ------- ------- ------- -------
Total distributions..... $ $ $ $ $ $ $ $
Weighted average life
(years)(1).............
</TABLE>
- --------
(1) The weighted average life of the Class A-2 Certificates, which is assumed
to be equal to the weighted average life of the Class A-1 Certificates, is
determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distributions on the
Certificates.
The characteristics of the Mortgage Loans will not correspond exactly to
those assumed in preparing the statistics above. The annual cash flows on the
Class A Certificates will therefore differ from those set forth above even if
all the Mortgage Loans prepay monthly at the related assumed percentage of
SPA. In addition, it is not likely that any Mortgage Loan will prepay at a
constant rate until maturity or that all of the Mortgage Loans will prepay at
the same rate and the timing of changes in the rate of prepayments may
significantly affect the total cash flow received by a holder of a Class A
Certificate.
The Depositor makes no representation that the Mortgage Loans will prepay in
the manner or at any of the rates assumed in the table set forth above. Each
prospective investor must make its own decision as to the appropriate
prepayment assumption to be used in deciding whether or not to purchase the
Class A Certificates.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Standard Terms and
Provisions of Pooling and Servicing (the "Standard Terms") as amended and
supplemented by a Reference Agreement to be dated as of the Cut-off Date (the
"Reference Agreement" and, together with the Standard Terms, the "Pooling and
Servicing Agreement") among the Depository, , as master servicer (the
"Master Servicer"), and , as trustee (the "Trustee"), a form of which has
been filed as an exhibit to the Registration Statement of which this
Prospectus Supplement forms a part. Reference is made to the accompanying
Prospectus for important additional information regarding the terms and
conditions of the Pooling and Servicing Agreement and the Certificates. The
Percentage Interest evidenced by each Class A-1 Certificate will be determined
by dividing the original principal amount of such Class A-1 Certificate by the
aggregate original principal amount of all Class A-1 Certificates. The
Percentage Interest evidenced by each Class A-2 Certificate will be determined
by dividing the original notional amount of such Class A-2 Certificate by the
aggregate original notional amount of all Class A-2 Certificates. The Class A
Certificates will be issued only in fully registered form in denominations of
$ and integral multiples thereof.
The Master Servicer will allocate each month's distributions of principal
and interest on the Mortgage Loans at the Pass-Through Rate as follows: % of
the monthly Principal Distribution and % of the Interest Distribution will
be allocated to the Holders of the Class A-1 Certificates (such sum being the
"Class
S-10
<PAGE>
<PAGE>
A-1 Distribution Amount"); % of the Interest Distribution will be allocated
to the Holders of the Class A-2 Certificates (such sum being the "Class A-2
Distribution Amount"). Holders of Class A-2 Certificates will not receive
distributions of principal with respect to the Mortgage Loans. On each
Distribution Date, the Master Servicer will distribute to each Holder of a
Class A Certificate an amount equal to the Certificateholder's Percentage
Interest evidenced by the Class A Certificate in the Class A-1 or the Class A-
2 Distribution Amount, as the case may be. The remaining distribution will be
made to the Holders of the Class B Certificates, as more fully set forth
below. Such distributions will be made to Certificateholders of record on the
Record Date for such Distribution Date.
On each Distribution Date, the Master Servicer will distribute to the Class
A Certificateholders, in the manner set forth above, an amount (the "Required
Distribution") equal to the sum of:
(i) the aggregate undivided interest evidenced by all Class A
Certificates (such aggregate undivided interest being the sum of the
aggregate interests evidenced by the Class A Certificates in the Principal
Distribution and the Interest Distribution) (the "Senior Interest") in: (a)
until such time as the Subordinated Amount is reduced to zero, all
scheduled payments of principal and interest (including any advances
thereof), adjusted to the applicable Pass-Through Rate, which payments
became due on the due date to which such Distribution Date relates (the
"Due Date"), whether or not such payments are actually received; and (b)
after the Subordinated Amount is reduced to zero, all payments of principal
and interest, adjusted to the applicable Pass-Through Rate due on such Due
Date or due, but not previously received, since the time the Subordinated
Amount was reduced to zero, but only to the extent such payments are
actually received or advanced prior to the Determination Date;
(ii) the Senior Interest in all principal prepayments received during the
month prior to the month of distribution and, interest at the Pass-Through
Rate to the end of the month in which such principal prepayments occur;
(iii) the Senior Interest in the sum of (a) the outstanding principal
balance of each Mortgage Loan or property acquired in respect thereof that
was repurchased pursuant to the Pooling and Servicing Agreement or
liquidated or foreclosed during the monthly period ending on the day prior
to the Due Date to which such distribution relates, calculated as of the
date each such Mortgage Loan was repurchased, liquidated or foreclosed, and
(b) accrued but unpaid interest on such principal balance, adjusted to the
Pass-Through Rate, to the first day of the month following the month of
such repurchase, liquidation or foreclosure.
The Required Distribution will be distributed to the Class A
Certificateholders to the extent that there are sufficient eligible funds
available for distribution to such Class A Certificateholders on a
Distribution Date. Funds eligible for such purpose with respect to each
Distribution Date shall be as set forth in the Prospectus under "Payments on
Mortgage Loans."
If the funds in the Certificate Account eligible for distribution to the
Class A Certificateholders (including all funds required to be deposited
therein from the Reserve Fund and any Advances by the Servicers or the Master
Servicer) are not sufficient to make the full distribution of the Required
Distribution on any Distribution Date, the Master Servicer shall distribute on
such Distribution Date to the Class A Certificateholders the amount of funds
eligible for distribution to such Class A Certificateholders. If, on any
Distribution Date, prior to the time the Subordinated Amount has been reduced
to zero, the Class A Certificateholders do not receive the Required
Distribution, the Holders of the Class B Certificates will not receive any
distributions on such Distribution Date. Any amounts in the Certificate
Account after the Required Distribution is made to the Class A
Certificateholders will be paid to the holders of the Class B Certificates.
Holders of the Class B Certificates will not be required to refund any amounts
that have previously been properly distributed to them directly from the
Certificate Account, regardless of whether there are sufficient funds on such
Distribution Date to make a full distribution to the Class A
Certificateholders. The subordination of distributions allocable to Holders of
the Class B Certificates is limited to the Subordinated Amount, which will
decrease over time as more fully set forth in the Pooling and Servicing
Agreement, and such subordination will apply on any Distribution Date only to
then current distributions allocable to the Class B Certificateholders.
S-11
<PAGE>
<PAGE>
Distributions to Holders of Class A and Class B Certificates will be made on
a pro rata basis, in accordance with the aggregate Percentage Interests of
each Class held by each Certificateholder of the related Class.
Distributions of principal and interest as set forth above will be made by
the Master Servicer by check mailed to each Certificateholder entitled thereto
at the address appearing in the Certificate Register to be maintained with the
Trustee or, if eligible for wire transfer as provided in the Pooling and
Servicing Agreement, by wire transfer to the account of such
Certificateholder, provided, however, that the final distribution in
retirement of the Class A Certificates will be made only upon presentation and
surrender of the Class A Certificates at the office or agency specified in the
notice of Certificateholders of such final distribution.
The Class A Certificates will be transferable and exchangeable on a
Certificate Register to be maintained at the office or agency of the Master
Servicer maintained for the purpose in New York, New York. Class A
Certificates surrendered to the Trustee for registration of transfer or
exchange must be accompanied by a written instrument of transfer in form
satisfactory to the Trustee. No service charge will be made for any
registration of transfer or exchange of Class A Certificates, but payment of a
sum sufficient to cover any tax or other governmental charge may be required.
Such office or agency is currently located at .
TRUSTEE
The Trustee for the Certificates will be , a bank organized and
existing under the laws of the with its
principal office located at .
THE MASTER SERVICER
The Master Servicer is a corporation that commenced operations in
. The Master Servicer is a FNMA/FHLMC approved seller-servicer based in
. As of , the Master Servicer serviced, for other investors and
for its own account, approximately mortgage loans with an aggregate principal
balance in excess of $ . The Master Servicer conducts operations through
FHA approved branch offices in . The Master Servicer originated
approximately $ in mortgage loans in 19 . The Master Servicer's
consolidated stockholder's equity as of was approximately $ .
The information set forth above has been provided by the Master Servicer.
The Depositor makes no representation as to the accuracy or completeness of
such information.
The Master Servicer will obtain and maintain in effect a bond, corporate
guaranty or similar form of insurance coverage (the "Performance Bond")
insuring against loss occasioned by the errors and omissions of the Master
Servicer's officers, employees and any other person acting on behalf of the
Master Servicer in its capacity as Master Servicer and guaranteeing the
performance, among other things, of the obligations of the Master Servicer to
purchase certain Mortgage Loans and to make advances, as described in the
Prospectus under "Description of the Certificates--Assignment of Mortgage
Loans" and "--Advances" in an amount and form acceptable to the nationally
recognized statistical rating organization or organizations rating the Class A
Certificates (collectively, the "Rating Agency").
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicing compensation payable to the Master Servicer will be equal to
an amount, payable out of each interest payment on a Mortgage Loan, equal to
the excess of each interest payment on a Mortgage Loan over the Pass-Through
Rate, less [(a)] any servicing compensation payable to the Servicer of such
Mortgage Loan under the terms of the agreement with the Master Servicer
pursuant to which such Mortgage Loan is serviced (the "Servicing Agreement")
(including such compensation paid to the Master Servicer as the direct
servicer of a Mortgage Loan for which there is no Servicer)[.] [, and (b) the
amount payable to the Depositor, as directed below.] [Pursuant to the Pooling
and Servicing Agreement, on each Distribution Date, the Master Servicer will
remit to [the Depositor] in respect of each interest payment on a Mortgage
Loan an amount equal to % of the
S-12
<PAGE>
<PAGE>
outstanding principal balance of such Mortgage Loan, before giving effect to
any payments due on the preceding Due Date.] The Master Servicer will be
permitted to withdraw from the Certificate Account, in respect of each
interest payment on a Mortgage Loan, an amount equal to % of the outstanding
principal balance of such Mortgage Loan, before giving effect to any payments
due on the preceding Due Date. See "Description of the Certificates--Servicing
and Other Compensation and Payment of Expenses" in the Prospectus for
information regarding other possible compensation to the Master Service and
the Servicers. The Servicers and the Master Servicer will pay all expenses
incurred in connection with their responsibilities under the Servicing
Agreements and the Pooling and Servicing Agreement (subject to limited
reimbursement as described in the Prospectus), including, without limitation,
the various items of expense enumerated in the Prospectus.
Investors are advised to consult with their own tax advisors regarding the
likelihood that a portion of such servicing compensation and amounts payable
to Depositor might be characterized as an ownership interest in the interest
payments on the Mortgage Loans ("Retained Yield") for federal income tax
purposes, by reason of the extent to which either the weighted average
Mortgage Rate, or the stated interest rates on the Mortgage Loans exceeds the
Pass-Through Rate, and the tax consequences to them of such a
characterization. In this regard, there are no authoritative guidelines for
federal income tax purposes as to either the maximum amount of servicing
compensation that may be considered reasonable in the context of this or
similar transactions or whether the reasonableness of servicing compensation
should be determined on a weighted averaged or loan-by-loan basis. [The
Depositor intends to treat % of such servicing compensation and % of the
amount payable to it described above as Retained Yield for federal income tax
purposes in reports to the Certificateholders and to the Internal Revenue
Service.] See "Certain Federal Income Tax Consequences--Mortgage Pools" and
"--Taxation of Owners of Trust Fractional Certificates" in the Prospectus for
information regarding the characterization of servicing compensation [and the
amounts payable to the Depositor].
[TERMINATION; REPURCHASE OF MORTGAGE LOANS
The Pooling and Servicing Agreement provides that the Depositor may purchase
from the Trust all Mortgage Loans remaining in the Mortgage Pool and thereby
effect early retirement of the Certificates, provided that [the aggregate
unpaid balances of the Mortgage Loans at the time of such repurchase is less
than [10]% of the aggregate principal balance of the Mortgage Loans on the
Cut-off Date]. The purchase price for any such repurchase [will be the
outstanding principal balance of such Mortgage Loans together with accrued and
unpaid interest at the Pass-Through Rate to the last day of the month of such
repurchase, plus the appraiser value of any property acquired in respect
thereof.] [Any such repurchase will be effected in compliance with the
requirements of Section 860F(a)(iv) of the Code in order to constitute a
"qualifying liquidation" thereunder.] In no event will the Trust continue
beyond the expiration of 21 years from the death of the last survivor of the
persons named in the Pooling and Servicing Agreement.]
RATING
It is a condition to the issuance of the Class A Certificates that they be
rated " " by the Rating Agency. Such rating addresses the likelihood that
the holders of the Class A Certificates will receive payments required under
the Pooling and Servicing Agreement. In assigning such a rating, to mortgage
pass-through certificates, the Rating Agency takes into consideration the
credit quality of mortgage pool, including any credit support providers,
structural and legal aspects associated with such certificates, and the extent
to which the payment stream on such mortgage pool is adequate to make required
payments on such certificates. Such rating does not, however, represent an
assessment of the likelihood that principal prepayments will be made by
mortgagors or the degree to which such payments might differ from that
originally anticipated. As a result, holders of the Class A Certificates might
suffer a lower than anticipated yield, and holders of the Class A-2
Certificates might fail, in circumstances of extreme prepayment, to recoup
their original investment.
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.
S-13
<PAGE>
<PAGE>
[ERISA CONSIDERATIONS]*
[Describe whether any exemption from "plan asset" treatment is available
with respect to the Series.]
[State whether the Series is an Exempt or a Nonexempt Series (see "ERISA
Considerations--Prohibited Transaction Class Exemption" in the Prospectus).]
To qualify for exemption under PTCE 83-1 (see "ERISA Considerations--
Prohibited Transaction Class Exemption" in the Prospectus), a Class A
Certificate of an Exempt Series must entitle its holder to pass-through
payments of both principal and interest on the Mortgage Loans. Because holders
of Class A-2 Certificates are only entitled to pass-through payments of
interest (but not principal). PTCE 83-1 will not exempt Plans which acquire
the Class A-2 Certificates from the prohibited transaction rules of ERISA. Any
Plan fiduciary who proposes to cause a Plan to purchase Class A Certificates
should consult with its counsel with respect to the potential consequences
under ERISA and the Code of the Plan's acquisition and ownership of Class A
Certificates. However, the other PTCE's or the Underwriter's PTE may be
applicable. See "ERISA Considerations--Prohibited Transaction Class Exemption"
in the Prospectus.
UNDERWRITING
The Depositor has entered into an Underwriting Agreement with [several
Underwriters, for whom] Credit Suisse First Boston Corporation, an affiliate of
the Depositor [, is acting as Representative.] The [Underwriter[s] named below]
[has] [have severally] agreed to purchase from the Depositor the [entire]
[following respective] principal amount[s] of the Class A Certificates:
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2
[UNDERWRITER CERTIFICATES CERTIFICATES TOTAL
------------ ------------ ------------ -----------
<S> <C> <C> <C>
Credit Suisse First Boston Corporation........ $ $ $
Total.......................... $ $ $ ]
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriter[s] [is] [are] subject to certain conditions precedent, and that
the Underwriter[s] will be obligated to purchase the entire principal amount
of the Class A Certificates if any are purchased.
The Depositor has been advised [by the Representative] that the
Underwriter[s] propose[s] to offer the Class A Certificates to the public
initially at the public offering prices set forth on the cover page of this
Prospectus Supplement [, and through the Representative,] to certain dealers
at such prices less the following concessions and that the Underwriter[s] and
such dealers may allow the following discounts on sales to certain other
dealers:
<TABLE>
<CAPTION>
CONCESSION (PERCENT DISCOUNT (PERCENT OF
OF PRINCIPAL AMOUNT) PRINCIPAL AMOUNT)
-------------------- --------------------
<S> <C> <C>
Class A-1....................... % %
Class A-2....................... % %
</TABLE>
After the initial public offering, the public offering prices and
concessions and discounts to dealers may be changed by the [Representative]
[Underwriter].
The Depositor has agreed to indemnify the Underwriter[s] against certain
liabilities, including liabilities under the Securities Act of 1933.
[If and to the extent required by applicable law or regulations, this
Prospectus Supplement and the attached Prospectus will also be used by the
Underwriter after the completion of the offering in connection with offers and
sales related to market-making transactions in the offered Securities in which
the Underwriter acts as principal. Sales will be made at negotiated prices
determined at the time of sale.]
- --------
* If the Series of Certificates offered pursuant to this Version B Prospectus
Supplement evidences interests in Contracts, the disclosure to be set forth
will be substantially similar to the disclosure set forth in Version E under
"ERISA Considerations" or in the Prospectus under "ERISA Considerations."
S-14
<PAGE>
<PAGE>
LEGAL MATTERS
The legality of the Certificates will be passed upon for the Depositor and for
the Underwriter[s] by _________________________________________________________.
The material federal income tax consequences of the Class A Certificates
will be passed upon for the Depositor by _______________________________.*
USE OF PROCEEDS
The Depositor will apply the net proceeds of the offering of the Class A
Certificates towards the simultaneous purchase of the Mortgage Loans
underlying the Certificates. Certain of the Mortgage Loans will be acquired in
privately negotiated transactions by the Depositor from one or more affiliates
of the Depositor, which will have acquired such Mortgage Loans from time to
time in the open market or in privately negotiated transactions.
- --------
* If the Series of Certificates offered pursuant to this Version B Prospectus
Supplement evidences interests in Contracts, the disclosure to be set forth
will be substantially similar to the disclosure set forth in Version E under
"Legal Matters."
S-15
<PAGE>
<PAGE>
UNDERWRITING
The Depositor has entered into an Underwriting Agreement with [several
Underwriters, for whom] Credit Suisse First Boston Corporation, an affiliate of
the Depositor [, is acting as Representative.] The [Underwriter[s] named below]
[has] [have severally] agreed to purchase from the Depositor the [entire]
[following respective] principal amount[s] of the Class A Certificates:
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2
[UNDERWRITER CERTIFICATES CERTIFICATES TOTAL
- -------------------------------- ---------------- ---------------- ------------
<S> <C> <C> <C>
Credit Suisse First Boston
Corporation ................... $ $ $
Total ....................... $ $ $ ]
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriter[s] [is] [are] subject to certain conditions precedent, and that
the Underwriter[s] will be obligated to purchase the entire principal amount
of the Class A Certificates if any are purchased.
The Depositor has been advised [by the Representative] that the
Underwriter[s] propose[s] to offer the Class A Certificates to the public
initially at the public offering prices set forth on the cover page of this
Prospectus Supplement [, and through the Representative,] to certain dealers
at such prices less the following concessions and that the Underwriter[s] and
such dealers may allow the following discounts on sales to certain other
dealers:
<TABLE>
<CAPTION>
CONCESSION (PERCENT DISCOUNT (PERCENT OF
OF PRINCIPAL AMOUNT) PRINCIPAL AMOUNT)
-------------------- --------------------
<S> <C> <C>
Class A-1 .... % %
Class A-2 .... % %
</TABLE>
After the initial public offering, the public offering prices and
concessions and discounts to dealers may be changed by the [Representative]
[Underwriter].
The Depositor has agreed to indemnify the Underwriter[s] against certain
liabilities, including liabilities under the Securities Act of 1933.
LEGAL MATTERS
The legality of the Certificates will be passed upon for the Depositor
and for the Underwriter[s] by [Cadwalader, Wickersham & Taft,] [Stroock &
Stroock & Lavan LLP,] New York, New York. The material federal income tax
consequences of the Class A Certificates will be passed upon for the Depositor
by [Cadwalader, Wickersham & Taft] [Stroock & Stroock & Lavan LLP].*
USE OF PROCEEDS
The Depositor will apply the net proceeds of the offering of the Class A
Certificates towards the simultaneous purchase of the Mortgage Loans
underlying the Certificates. Certain of the Mortgage Loans will be acquired
in privately negotiated transactions by the Depositor from one or more
affiliates of the Depositor, which will have acquired such Mortgage Loans
from time to time in the open market or in privately negotiated transactions.
- ------------
* If the Series of Certificates offered pursuant to this Version B
Prospectus Supplement evidences interests in Contracts, the
disclosure to be set forth will be substantially similar to the
disclosure set forth in Version E under "Legal Matters."
S-16
VERSION B
<PAGE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER +
+TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF +
+THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD +
+BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 19
- --------------------------------------------------------------------------------
P R O S P E C T U S S U P P L E M E N T
(To Prospectus dated , 19 )
- --------------------------------------------------------------------------------
[Version C]
$ (Approximate)
Credit Suisse First Boston Mortgage Securities Corp.
Depositor
ABS Mortgage Pass-Through Certificates, [Class A], Series
$[Variable Rate] [ %] Class A-1 Certificates $ % Class A-3 Certificates
$[Variable Rate] [ %] Class A-2 Certificates $ % Class A-4 Certificates
-----------
The [Class A] Certificates (the "Certificates") offered hereby evidence
ownership interests in a trust to be created by Credit Suisse First Boston
Mortgage Securities Corp. (the "Depositor") on or about , 199 (the "Trust").
The Trust property will consist of a pool of [conventional] [fixed rate]
[mortgage loans and] [mortgage participation certificates, evidencing
participation interests in such mortgage loans and meeting the requirements of
the nationally recognized rating agency or agencies rating the [Class A]
Certificates (collectively, the "Rating Agency") for a rating in one of the two
highest rating categories of such Rating Agency] (the "Mortgage Loans") and
certain related property to be conveyed to the Trust by the Depositor (the
"Trust Fund"). The Mortgage Loans will be transferred to the Trust, pursuant to
a Pooling and Servicing Agreement (as defined herein), dated as of ,
199 , by the Depositor in exchange for the Certificates and are more fully
described in the Prospectus Supplement and in the accompanying Prospectus.
Interest on the Class A-1, Class A-2 and Class A-3 Certificates, at the rate
of interest set forth above for each such Class, will be distributed [monthly]
on each Distribution Date, commencing , 199 . Distributions of interest on
the Class A-4 Certificates will commence after distributions in reduction of
Stated Principal Balance (as defined herein) of the Class A-3 Certificates have
reduced Stated Principal Balance of such Class to zero. Prior to that time,
interest will accrue on the Class A-4 Certificates and the amount so accrued
will be added to the Stated Principal Balance thereof on each Distribution
Date. Distributions in reduction of Stated Principal Balance of the
Certificates of each Class will be made on a pro rata basis among the
Certificates of such Class, in the order of their respective Final Scheduled
Distribution Dates (as defined herein), so that no distribution in reduction of
Stated Principal Balance of any Certificate will be made until the Stated
Principal Balance of each Class of Certificates having a prior Final Scheduled
Distribution Date has been reduced to zero.
Scheduled distributions on the Mortgage Loans included in the Mortgage Pool,
together with certain other funds, as set forth more fully herein, will be
sufficient to make timely distributions of interest and distributions in
reduction of Stated Principal Balance on the [Class A] Certificates and to
reduce the Stated Principal Balance thereof to zero not later than the Final
Scheduled Distribution Dates set forth herein. However, the actual final
distribution on the [Class A] Certificates could occur significantly earlier
than the Final Scheduled Distribution Dates set forth herein. The [Class A]
Certificates will be subject to Special Distributions under the circumstances
specified herein. [The Depositor intends to offer the Class B Certificates (as
defined herein) to sophisticated institutional investors in transactions not
requiring registration under the Securities Act of 1933. The rights of the
Class B Certificateholders to receive distributions with respect to the
Mortgage Loans will be subordinated to the rights of the Class A
Certificateholders to the extent described herein and in the Prospectus.]
The Underwriter[s] [do[es] not] intend to make a secondary market for the
[Class A] Certificates [but [is] [are] under no obligation to do so]. There can
be no assurance that a secondary market for the Class A Certificates will
develop or, if it does develop, that it will continue.
The Depositor has elected to treat the Trust Fund as a Real Estate Mortgage
Investment Conduit (a "REMIC"). See "Certain Federal Income Tax Consequences"
in the Prospectus.
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF FIRST
BOSTON MORTGAGE SECURITIES CORP. OR ANY AFFILIATE THEREOF. NEITHER THE
CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospective investors should consider the factors set forth under Risk Factors
on page S-12 of this Prospectus Supplement.
Prospective investors should consider the limitations discussed under ERISA
Considerations herein and in the accompanying Prospectus.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Final
Scheduled Proceeds to the
Distribution Price to Underwriting Depositor
Interest Rate Date (1) Public (2) Discount (2)(3)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Class A-1
Certificate (4) % % %
- ---------------------------------------------------------------------------------
Per Class A-2
Certificate (4) % % %
- ---------------------------------------------------------------------------------
Per Class A-3
Certificate % % %
- ---------------------------------------------------------------------------------
Per Class A-4
Certificate % % %
- ---------------------------------------------------------------------------------
Total % % %
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
(1) These dates are calculated assuming, among other things, that there are no
prepayments on the Mortgage Loans in the Mortgage Pool and that the
characteristics of such Mortgage Loans are as described under "Description
of the Trust Fund--The Mortgage Pool" herein.
(2) Plus accrued interest, if any, at the applicable rate from , 199 .
(3) Before deduction of expenses payable by the Depositor estimated at $ .
(4) The Class A-1 Certificates will bear interest at the per annum rate of %
through , 19 , and thereafter at a variable per annum rate of % above
the arithmetic mean of the London interbank offered rates for [ ] month
Eurodollar deposits ("LIBOR"), determined as set forth herein, subject to a
maximum interest rate of %.
(5) The Class A-2 Certificates will bear interest at the per annum rate of %
through , 19 , and thereafter at a variable per annum rate equal to [ % -
( X LIBOR), determined as set forth herein, subject to a minimum interest
rate of %.]
-----------
The Certificates are offered by the [several] Underwriter[s] when, as and if
issued and accepted by the Underwriter[s] and subject to [its] [their] right to
reject orders in whole or in part. It is expected that the Certificates, in
definitive fully registered form, will be ready for delivery on or about
199 .
Credit Suisse First Boston
- --------------------------------------------------------------------------------
The date of this Prospectus Supplement is , 19 .
<PAGE>
<PAGE>
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
CERTIFICATES OFFERED HEREBY. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS AND PURCHASERS ARE URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES OFFERED HEREBY MAY NOT
BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER[S] MAY OVERALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CERTIFICATES
AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
[IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATION, THIS
PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS WILL ALSO BE USED BY THE
UNDERWRITER AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND
SALES RELATED TO MARKET-MAKING TRANSACTIONS IN THE OFFERED SECURITIES IN WHICH
THE UNDERWRITER ACTS AS PRINCIPAL. SALES WILL BE MADE AT NEGOTIATED PRICES
DETERMINED AT THE TIME OF SALE.]
UNTIL , 19 , ALL DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS SUPPLEMENT AND A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
----------------
AVAILABLE INFORMATION
The Trust will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information filed by the Trust can be inspected and copied at the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C.,
and at the Commission's regional offices at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite
1300, New York, New York 10048. Copies of such information can be obtained from
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
(http://www.sec.gov).
S-2
<PAGE>
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the Prospectus. Capitalized terms used in this Prospectus Supplement and not
defined shall have the meanings given in the Prospectus.
<TABLE>
<S> <C>
SECURITIES OFFERED........ ABS Mortgage Pass-Through Certificates, [Class
A] Series (the "[Class A] Certificates").
$[Variable] [%] Class A-1 Certificates.
$[Variable] [%] Class A-2 Certificates.
$ % Class A-3 Certificates.
$ % Class A-4 Certificates.
[The Class A-1 and Class A-2 Certificates are
Variable Rate Certificates. The Class A-3 and
Class A-4 Certificates are Fixed Interest Rate
Certificates, as described herein.]
[The Class A-4 Certificates are Compound Interest
Certificates for the purposes of this Prospectus
Supplement.]
[The Class A Certificates represent in the
aggregate an approximate % undivided interest in
the Trust Fund. The remaining approximate %
undivided interest in the Trust Fund is
represented by the Class B Certificates, which are
subordinated in certain respects to the Class A
Certificates, as more fully described herein and
in the Prospectus. [The Class B Certificates are
not being offered hereby, and may be retained by
the Depositor or sold by the Depositor at any time
to one or more sophisticated institutional
investors in privately negotiated transactions not
requiring registration under the Securities Act of
1933.]]
DENOMINATIONS AND RECORD
DATES.................... The [Class A] Certificates will be issued in fully
registered form in minimum denominations of $
and integral multiples of $ in excess of such
amount. [The Record Date for each regular
distribution on the [Class A] Certificates is the
close of business on the [last] day [of the
[second] month] immediately preceding the
applicable Distribution Date.] [The Record Date
for each regular distribution on the Variable Rate
certificates is the close of business on the th
day of the month in which the applicable
Distribution Date occurs. The Record Date for each
regular distribution on the Fixed Rate
Certificates is the close of business on the th
day of the month immediately preceding the month
in which the applicable Distribution Date occurs.]
DEPOSITOR................. Credit Suisse First Boston Mortgage Securities Corp.
(the "Depositor").
MASTER SERVICER...........
CUT-OFF DATE.............. , 19 .
DELIVERY DATE............. On or about , 19 .
INTEREST DISTRIBUTIONS....
[Interest will be distributed on [the th day of
each month] [each , , and ] (each, a
"Distribution Date") on the Stated Principal
</TABLE>
S-3
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Balance (as defined herein) of the Certificates at
the applicable rate of interest specified on the
cover page hereof (the "Interest Rate") for the
Class A-1, Class A-2 and Class A-3 Certificates,
commencing , 19 .] [Interest will be
distributed on the Class A-1 Certificates at the
per annum rate of % through , 19 , and
thereafter at a variable per annum rate of %
above LIBOR, determined as set forth herein,
subject to a maximum interest rate of %.
Interest will be distributed on the Class A-2
Certificates at the per annum rate of % through
, 19 , and thereafter at a variable per
annum rate equal to % - ( x LIBOR),
determined as set forth herein, subject to a
minimum interest rate of %. Interest will be
distributed on the Class A-3 and Class A-4
Certificates (the "Fixed Rate Certificates") at
the respective per annum rates specified on the
cover page hereof.] [Interest distributable on the
Certificates will accrue from the [first day of
the month preceding the] prior Distribution Date
(or from , 19 in the case of the First
Distribution Date) through the last day of the
[second] month preceding the then current
Distribution Date.] [Interest will accrue on the
Variable Rate Certificates from the preceding
Distribution Date (or from , 19 in the case of
the first Distribution Date) through the day
preceding each Distribution Date. Interest will
accrue on the Fixed Rate Certificates from the
th day of the month preceding the month in which
the prior Distribution Date occurred (or from ,
19 in the case of the first Distribution Date)
through the th day of the month preceding the
month in which the current Distribution Date
occurs.] Distributions of interest on the Class A-
4 Certificates will commence after distributions
in reduction of Stated Principal Balance of the
Class A-3 Certificates have reduced the Stated
Principal Balance of such Class to zero. Prior to
that time, interest will accrue on the Class A-4
Certificates and the amount so accrued will be
added to the Stated Principal Balance thereof on
each Distribution Date. See "Description of the
Certificates--Distributions of Interest" herein.
[The distribution of interest on the Class A-3
Certificates (and the addition of accrued interest
to the Stated Principal Balance of the Class A-4
Certificates prior to the reduction of the Stated
Principal Balance of the Class A-3 Certificates to
zero) one month after the date to which interest
accrues thereon and the calculation of accrued
interest on such Certificates based on the
assumption that distributions in reduction of
Stated Principal Balance are made one month prior
to the date on which such distributions actually
are made will reduce the effective yield to the
holders of the Class A-3 Certificates from that
which would be the case if interest distributable
on such Certificates on a Distribution Date were
to accrue to such Distribution Date. See
"Description of the [Class A] Certificates--
Distributions of Interest [on the Class A
Certificates]" herein.]
</TABLE>
S-4
<PAGE>
<PAGE>
<TABLE>
<S> <C>
DISTRIBUTIONS IN
REDUCTION OF STATED The Stated Principal Balance of a [Class A]
PRINCIPAL BALANCE........ Certificate at any time represents the maximum
specified dollar amount (exclusive of interest at
the related Interest Rate) to which the holder
thereof is entitled from the cash flow on the
Mortgage Loans comprising the Mortgage Pool and
will decline to the extent distributions in
reduction of Stated Principal Balance are received
by such holder. The Initial Stated Principal
Balance of each Class of Certificates is set forth
on the cover of this Prospectus Supplement.
Allocation of distributions in reduction of Stated
Principal Balance will be made to the [Subc]
[C]lasses of the [Class A] Certificates in the
order of their respective Final Scheduled
Distribution Dates, so that no distribution in
reduction of Stated Principal Balance will be made
to any [Subc] [C]lass of [Class A] Certificates
until distributions in reduction of Stated
Principal Balance made to each [Subc] [C]lass of
[Class A] Certificates having a prior Final
Scheduled Distribution Date have reduced the
Stated Principal Balance of such [Subc] [C]lass to
zero.
Distributions in reduction of Stated Principal
Balance on the [Class A] Certificates will be made
on each Distribution Date on which such
distributions are due in an aggregate amount equal
to the sum of (i) the amount of interest accrued
on the Class A-4 Certificates from the [first day
of the month preceding the prior] Distribution
Date (or from , 19 in the case of the first
Distribution Date) through the last day of the
[second] month preceding the then current
Distribution Date but not then distributable (the
"Accrual Distribution Amount"), (ii) the [Class A]
Stated Principal Distribution Amount (as described
below) [and (iii) % of Excess Cash Flow (as
defined herein)]. The [Class A] Stated Principal
Distribution Amount with respect to a Distribution
Date equals the amount, if any, by which the
aggregate Stated Principal Balance of the [Class
A] Certificates (before taking into account the
amount of interest accrued on the Class A-4
Certificates to be added to the Stated Principal
Balance thereof on such Distribution Date) exceeds
the Asset Value, as defined herein, of the
Mortgage Loans comprising the Mortgage Pool as of
the Business Day prior to such Distribution Date.
For purposes of determining the Stated Principal
Distribution Amount, the Asset Value of the
Mortgage Loans comprising the Mortgage Pool will
be reduced by taking into account [the Senior
Interest (as defined herein) in] all distributions
of principal thereof (including prepayments)
received or due to be received by the Trustee or
its nominee during the period (a "Due Period")
ending on the Business Day prior to such
Distribution Date. See "Description of the [Class
A] Certificates--Distributions in Reduction of
Stated Principal Balance" herein.
FINAL SCHEDULED
DISTRIBUTION DATE........ Class A-1 Certificates .
Class A-2 Certificates .
</TABLE>
S-5
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Class A-3 Certificates .
Class A-4 Certificates .
The Final Scheduled Distribution Date for each
[Subc][C]lass of [Class A] Certificates is the
latest date on which the Stated Principal Balance
of all the Certificates of such [Subc] [C]lass
will have been reduced to zero, and is calculated
by assuming, among other things, that (i)
scheduled interest and principal payments (with no
prepayments) on the Mortgage Loans comprising the
Mortgage Pool are timely received and (ii) such
amounts are reinvested at an assumed reinvestment
rate of % per annum to , 19 , % per annum
from , 19 to , 19 and % per annum
thereafter (the "Assumed Reinvestment Rate").
Since the rate of distributions in reduction of
Stated Principal Balance of each [Subc] [C]lass of
[Class A] Certificates will depend on the rate of
payment (including prepayments) on the principal
of the Mortgage Loans, the actual final
distribution of any [Subc] [C]lass of [Class A]
Certificates could occur significantly earlier
than its Final Scheduled Distribution Date. The
rate of payments on the Mortgage Loans will depend
on their particular characteristics, as well as on
prevailing interest rates from time to time and
other economic factors, and no assurance can be
given as to the actual payment experience of the
Mortgage Loans. See "Yield Considerations" herein.
[SPECIAL DISTRIBUTIONS....
The [Class A] Certificates may receive special
distributions in reduction of Stated Principal
Balance ("Special Distributions") on the first day
of any month, other than a month in which a
Distribution Date occurs, if, as a result of
principal prepayments on the Mortgage Loans
comprising the Mortgage Pool and/or low
reinvestment yields, the Trustee determines, based
on assumptions specified in the Pooling and
Servicing Agreement, that interest requirements on
any portion of the [Class A] Certificates would
not be met. The amount of any such Special
Distribution would not exceed the amount of
distributions in reduction of Stated Principal
Balance of the [Class A] Certificates that would
otherwise be required to be made on the next
Distribution Date. As a result, a Special
Distribution on the [Class A] Certificates would
not result in a distribution to [Class A]
Certificateholders more than two months earlier
than the Distribution Date on which such
distribution would otherwise have been received.
The [Class A] Certificates will be redeemable in
the same priority and manner as distributions in
reduction of Stated Principal Balance are made on
a Distribution Date. See "Description of the
[Class A] Certificates--Special Distributions"
herein.]
[OPTIONAL TERMINATION..... On any Distribution Date on or after the [later] of
or the date on which the Stated Principal Balance
of the [Class A-3] Certificates has been reduced
to zero, the Depositor will have the right to
repurchase, in whole, but not in part, the
Mortgage Loans comprising the Mortgage Pool.
Additionally, on any Distribution Date on which
the aggregate principal amount of the Mortgage
Loans comprising the Mortgage
</TABLE>
S-6
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Pool is less than [10%] of the initial aggregate
principal amount of such Mortgage Loans, the
Depositor will have the right to repurchase, in
whole, but not in part, such Mortgage Loans. Any
such repurchase will be made at a purchase price
equal to [the aggregate principal amount of such
Mortgage Loans plus accrued interest thereon to
the last day of the month of such repurchase,
together with the appraised value of any property
acquired in respect of such Mortgage Loans]. Any
such termination will be effected in compliance
with the requirements of Section 860F(a) (iv) of
the Internal Revenue Code of 1986 (the "Code") so
as to constitute a "qualifying liquidation"
thereunder. The proceeds of any such repurchase
will be treated as a distribution on the Mortgage
Loans for purposes of distributions to the
Certificateholders. In no event will the Trust
continue beyond the expiration of 21 years from
the death of the last survivor of the person named
in the Pooling and Servicing Agreement. See
"Description of the [Class A] Certificates--
Optional Termination" herein.]
TRUST FUND................ The Certificates evidence ownership interest in the
Trust Fund, the assets of which will consist of
the following:
A. MORTGAGE POOL......... The Mortgage Pool will consist of [fixed-rate,]
fully amortizing, [level-payment] mortgage loans
[and mortgage participation certificates
evidencing participation interests in such
mortgage loans that meet the requirements of the
nationally recognized rating agency or agencies
rating the Certificates (collectively, the "Rating
Agency") for a rating in one of the two highest
rating categories of such Rating Agency] secured
by mortgages on one- to four-family residential
properties located in the states of , and
(the "Mortgage Loans"). All Mortgage
Loans will have original maturities of at least
[15] but no more than [40] years. See "Description
of the Trust Fund--The Mortgage Pool" herein.*
B. CERTIFICATE ACCOUNT... There will be deposited in an account (the
"Certificate Account") to be established with the
Trustee all distributions on or with respect to
the Mortgage Loans comprising the Mortgage Pool,
together with reinvestment income thereon [, the
amount of cash initially deposited therein by the
Depositor, and any amounts withdrawn from any
Reserve Fund, GPM Fund or Buy-Down Fund (as
described below)]. Funds on deposit in the
Certificate Account will be available to make
distributions in reduction of Stated Principal
Balance and distributions of interest on the
[Class A] Certificates on each Distribution Date.
See "Description of the Trust Fund--Certificate
Account" herein.
</TABLE>
- --------
* If the Series of Certificates offered pursuant to the Version C Prospectus
Supplement evidences interest in manufactured housing conditional sales
contracts and installment loan agreements ("Contracts"), the disclosure to be
set forth will be substantially similar to the disclosure set forth in
Version E under "Summary of Terms--Contract Pool."
S-7
<PAGE>
<PAGE>
<TABLE>
<S> <C>
[C. BUY-DOWN FUND........ The Depositor will deliver to the Trustee cash, a
letter of credit or a guaranteed investment
contract to fund the Buy-Down Fund for the [Class
A] Certificates. The Assumed Reinvestment Rate for
the Buy-Down Fund will be the same as that of the
Certificate Account. The Trustee may withdraw
excess funds in the Buy-Down Fund on any
Distribution Date. See "Description of the Trust
Fund--Buy-Down Fund" herein.]
[D. GPM FUND............. The Depositor will deliver to the Trustee cash, a
letter of credit or a guaranteed investment
contract to fund the GPM Fund for the [Class A]
Certificates. The Assumed Reinvestment Rate for
the GPM Fund will be the same as that of the
Certificate Account. The Trustee may withdraw
excess funds in the GPM on any Distribution Date.
See "Description of the Trust Fund--GPM Fund"
herein.
[E. REINVESTMENT All amounts on deposit in the Certificate Account
AGREEMENT................ [and the GPM and Buy-Down Funds] will be
reinvested with by the Trustee pursuant
to a guaranteed investment contract (the
"Reinvestment Agreement") at a rate of % per
annum. See "Description of the Trust Fund--
Reinvestment Agreement" herein.]
[F. LETTER OF CREDIT..... The maximum liability of [ ] under an irrevocable
standby letter of credit, for the Mortgage Pool
(the "Letter of Credit"), net of unreimbursed
payments thereunder, will be no more than [10%] of
the initial aggregate principal balance of the
Mortgage Pool (the "Letter of Credit Percentage").
The maximum amount available to be paid under the
Letter of Credit will be determined in accordance
with the Pooling and Servicing Agreement referred
to herein. The duration of coverage and the amount
and frequency of any reduction in coverage will be
in compliance with the requirements for a rating
in one of the two highest rating categories of the
Rating Agency. The amount available under the
Letter of Credit shall be reduced by the amount of
unreimbursed payments thereunder. See "Description
of the Certificates--Credit Support--The Letter of
Credit" in the Prospectus.]
[G. [POOL INSURANCE [Neither the Certificates nor the Mortgage Loans
POLICY................... will be insured or guaranteed by any governmental
agency.] Subject to the limitations described
herein, a pool insurance policy for certain of the
Mortgage Loans (the "Pool Insurance Policy"), will
cover losses due to default on such Mortgage Loans
in an initial amount of not less than [5%] of the
aggregate principal balance as of the first day of
the month of the creation of the Trust (the "Cut-
off Date") of all Mortgage Loans that are not
covered as to their entire outstanding principal
balance by primary policies of mortgage guaranty
insurance. See "Description of the Trust Fund--The
Pool Insurance Policy" herein. The Pool Insurance
Policy will be subject to the limitations
described under "Description of Insurance--the
Pool Insurance Policy" in the Prospectus.]
</TABLE>
S-8
<PAGE>
<PAGE>
<TABLE>
<S> <C>
[H. HAZARD INSURANCE
[AND SPECIAL HAZARD
INSURANCE POLICY]........
All of the Mortgage Loans will be covered by
standard hazard insurance policies insuring
against losses due to various causes, including
fire, lightning and windstorm. [An insurance
policy (the "Special Hazard Insurance Policy")
will cover losses with respect to the Mortgage
Loans that result from certain other physical
risks that are not otherwise insured against
(including earthquakes and mudflows). The Special
Hazard Insurance Policy will be limited in scope
and will cover losses in an initial amount equal
to the greater of % of the aggregate principal
balance of the Mortgage Loans or times the unpaid
principal balance of the largest Mortgage Loan.]
Any hazard losses not covered by [either] standard
hazard insurance policies [or the Special Hazard
Insurance Policy] will not be insured against and
[, to the extent that the amount available under
the Letter of Credit or any alternative method of
credit support is exhausted,] will be borne by the
Certificateholders. See "Description of the Trust
Fund--The Special Hazard Insurance Policy" herein.
The hazard insurance policies [and the Special
Hazard Insurance Policy] will be subject to the
limitations described under "Description of
Insurance--Hazard Insurance" and "--Special Hazard
Insurance Policies"] in the Prospectus.
[I. MORTGAGOR BANKRUPTCY
BOND.................... The Depositor will obtain a bond or similar form of
insurance coverage (the "Mortgagor Bankruptcy
Bond"), providing coverage against losses that
result from proceedings with respect to obligors
under the Mortgage Loans (the "Mortgagor") under
the federal Bankruptcy Code. See "Description of
the Trust Fund--Mortgagor Bankruptcy Bond" herein
and "Description of Insurance--The Mortgagor
Bankruptcy Bond" in the Prospectus.]
RISK FACTORS.............. For discussion of risk factors that should be
considered with respect to an investment in the
Certificates, see "Risk Factors" herein and in the
related Prospectus.
[CLASS B CERTIFICATES..... The rights of the Class B Certificateholders to
receive distributions with respect to the Mortgage
Loans are subordinated to the right of the Class A
Certificateholders to receive such distributions
to the extent of the Subordinated Amount described
below. This subordination is intended to enhance
the likelihood of regular receipt by Class A
Certificateholders of the full amount of scheduled
distributions of interest and distributions in
reduction of Stated Principal Balance and to
decrease the likelihood that the Class A
Certificateholders will experience losses. The
extent of such subordination (the "Subordinated
Amount") will be determined as follows: on the
Cut-off Date and on each anniversary of the Cut-
off Date until , the Subordinated Amount
will equal % of the original aggregate principal
balance of the Mortgage Loans less the amount of
"Aggregate Losses" (as defined in the Prospectus)
since the Cut-off Date through the last day of the
month preceding such anniversary date; from the
th anniversary of the Cut-off Date onward, the
Subordinated Amount will gradually decline in
accordance with a schedule set forth in the
Pooling and Servicing Agreement.]
</TABLE>
S-9
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<TABLE>
<S> <C>
The protection afforded to the Class A
[RESERVE FUND............. Certificateholders from the subordination feature
described above will be effected both by the
preferential right of the Class A
Certificateholders to receive current
distributions with respect to the Mortgage Loans
(to the extent of the Subordinated Amount) and by
the establishment of a reserve (the "Reserve
Fund"). The Reserve Fund is not included in the
Trust Fund. The Reserve Fund will be created by
the Depositor and shall be funded by the retention
of all of the scheduled distributions of principal
of the Mortgage Loans otherwise distributable to
the Class B Certificateholders on each
Distribution Date until the Reserve Fund reaches
an amount (the "Required Reserve") that will equal
[; thereafter, the Reserve Fund must be
maintained at the following levels: ]. See
"Description of the Certificates--Subordinated
Certificates" and "--Reserve Fund" in the
Prospectus.]
MASTER SERVICING AND
SERVICING AGREEMENTS..... The Depositor will enter into a Master Servicing
Agreement with , which will have entered into
Servicing Agreements with various entities (each a
"Servicer") with respect to the servicing of the
Mortgage Loans. Among other things, the Servicers
and the Master Servicer are obligated under
certain circumstances to make advances with
respect to the Mortgage Loans, to purchase any
Mortgage Loans for which mortgage insurance
coverage is denied on the grounds of fraud or
misrepresentation and to purchase certain Mortgage
Loans with respect to which a breach of a
representation or warranty has occurred. The
Depositor will assign to the Trustee its rights
under the Master Servicing Agreement and the
Servicing Agreements with respect to the
Certificates.
ADVANCES.................. Any Servicer of the Mortgage Loans (and the Master
Servicer, with respect to each Mortgage Loan that
it services directly and otherwise, to the extent
the applicable Servicer does not do so) will be
obligated to advance delinquent installments of
principal and interest on the Mortgage Loans under
certain circumstances. See "Description of the
Certificates--Advances" in the Prospectus.
SUBSTITUTION OF MORTGAGE
LOANS..................... Within three months following the date of the
issuance of the Certificates, the Depositor may
deliver to the Trustee Mortgage Loans in
substitution for any one or more of the Mortgage
Loans initially included in the Trust Fund but
which do not conform in one or more respects to
the description thereof contained in this
Prospectus Supplement or in the Current Report on
Form 8-K referred to herein. See "The Mortgage
Pool--Substitution of Mortgage Loans" in the
Prospectus.
RESIDUAL CERTIFICATES..... Upon the issuance of the Certificates, [the
Depositor will retain] an interest in the Mortgage
Pool [that] will be represented by a class of
certificates (the "Residual Certificates") that
the Depositor will designate as "residual
interests" under Section 860G(a)(2) of the
Internal Revenue Code of 1986 (the "Code"). The
Residual Certificates will represent the right to
receive distributions
</TABLE>
S-10
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<TABLE>
<S> <C>
equal to % of the Excess Cash Flow, if any, with
respect to each Distribution Date. In addition, at
such time as the Stated Principal Balance of the
Class A-4 Certificates has been reduced to zero
[and all amounts distributable to the Class B
Certificateholders have been paid], the holder or
holders of the Residual Certificates will be the
sole owners of the Mortgage Pool and will have
sole rights with respect to the Mortgage Loans and
the Mortgage Pool. The Residual Certificates are
not being offered hereby. [The Depositor may, but
need not, sell some or all of such Residual
Certificates after the date of issuance of the
Certificates to sophisticated institutional
investors in transactions not requiring
registration under the Securities Act of 1933.]
TRUSTEE................... . See
"Description of the [Class A] Certificates--
Trustee" herein.
LEGAL INVESTMENT.......... The [Class A] Certificates constitute "mortgage
related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984 (the
"Enhancement Act"), and, as such, are legal
investments for certain entities to the extent
provided in the Enhancement Act. See "Legal
Investment" in the Prospectus.
CERTIFICATE RATING........ It is a condition of issuance that the [Class A]
Certificates be rated in one of the two highest
rating categories of the Rating Agency prior to
issuance.
ERISA LIMITATIONS.........
See "ERISA Considerations" in the Prospectus.
TAX ASPECTS............... See "Certain Federal Income Tax Consequences--
General"; "--REMIC Trust Funds" in the prospectus.
Purchasers of Certificates of Classes A-1, A-2, A-
3, A-4, and B should see "Certain Federal Income
Tax Consequences--REMIC Trust Funds--Taxation of
Owners of REMIC Regular Certificates" in the
prospectus for discussions of certain tax
considerations particular to such Certificates.*
</TABLE>
- --------
* If the Prospectus Supplement for a Series of Certificates provides that
Stroock & Stroock & Lavan LLP will pass upon the material federal income tax
consequences of the Certificates for the Depositor, then such Prospectus
Supplement will contain tax disclosure substantially similar to the disclosure
set forth in Version E under "Summary of Terms--Tax Aspects" and "Certain
Federal Income Tax Consequences."
S-11
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<PAGE>
[RISK FACTORS]
[Description of Risk Factors to be added as appropriate]
DESCRIPTION OF THE TRUST FUND
THE MORTGAGE POOL*
The Mortgage Pool will consist of Mortgage Loans evidenced by mortgage notes
with aggregate unpaid principal balances outstanding as of the first day of
the month of the creation of the Trust (the "Cut-off Date"), after deducting
payments of principal due on such date, of approximately $ . This amount is
subject to a permitted upward and downward variance of up to %. [The Mortgage
Pool will consist of -year, [fixed-rate], fully-amortizing, [level-payment]
Mortgage Loans, as more fully described in the Prospectus.]
The weighted average interest rate (individually, a "Mortgage Rate") of the
Mortgage Loans as of the Cut-off Date will be at least % but no more than %.
All Mortgage Loans will have Mortgage Rates of at least % but no more than
%. The weighted average maturity of the Mortgage Loans, as of the Cut-off
Date, will be at least years but no more than years. All Mortgage Loans
will have original maturities of at least but no more than years. None
of the Mortgage Loans will have been originated prior to or after
, 19 . None of the Mortgage Loans will have a scheduled maturity later
than .
The Mortgage Loans will have the following characteristics as of the Cut-off
Date (expressed as a percentage of the outstanding aggregate principal
balances of the Mortgage Loans having such characteristics relative to the
outstanding aggregate principal balances of all Mortgage Loans):
No more than % of the Mortgage Loans will have been originated before
July 18, 1984, and no more than % of the Mortgage Loans will have been
originated before September 27, 1985. See "Certain Federal Income Tax
Consequences--Mortgage Pools," "--Taxation of Owners of Trust Fractional
Certificates," and "--Market Discount and Premium" in the Prospectus for
information regarding such Mortgage Loans.
At least % of the Mortgage Loans will be Mortgage Loans each having
outstanding principal balances of less than $ .
No more than % of the Mortgage Loans will be Mortgage Loans each having
outstanding principal balances of more than $ .
No more than % of the Mortgage Loans will have had loan-to-value ratios
at origination in excess of [80]%, and no Mortgage Loan will have had a
loan-to-value ratio at origination in excess of 95%.
All of the Mortgage Loans with loan-to-value ratios at origination in
excess of 80% will be covered by a policy of primary mortgage insurance
until the outstanding principal balance is reduced to 75% of the Original
Value.
At least % of the Mortgage Loans will be secured by mortgages on one-
family dwellings.
No more than % of the Mortgage Loans will be secured by Mortgages on
condominiums and row houses.
No more than %, by aggregate principal balance, of the Mortgage Loans
will be Mortgage Loans for which Buy-Down Funds have been provided, and no
more than % of the principal balance of any such Mortgage Loan will be
represented by Buy-Down Funds.
No more than %, by aggregate principal balance, of the Mortgage Loans
will be GPM Loans.
- --------
* If the Series of Certificates offered pursuant to this Version C Prospectus
Supplement evidences interests in Contracts, the disclosure to be set forth
will be substantially similar to the disclosure set forth in Version E under
"Description of the Contract Pool."
S-12
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<PAGE>
At least % of the Mortgage Loans will be secured by a Mortgage on an
owner-occupied Mortgaged Property. Such determination will have been made
on the basis of a representation by the Mortgagor at the time of
origination of the Mortgage Loan that such Mortgagor then intended to
occupy the underlying property or, in the absence of such a representation,
on the basis of various factors indicating that the underlying property is
owner-occupied.
No more than [5%] of the Mortgage Loans will be secured by Mortgages on
properties located in any one zip code or project.
The Mortgage Loans will be secured by Mortgages on properties located in
the states of .
Specific information with respect to the Mortgage Loans will be available to
purchasers of the Certificates offered hereby at or before the time of
issuance of such Certificates. Such specific information will include the
precise amount of the aggregate principal balances of the Mortgage Loans
outstanding as of the Cut-off Date, and will also set forth tables reflecting
the following information regarding the Mortgage Loans: years of origination,
types of dwellings on the underlying properties, the sizes of Mortgage Loans
and distribution of Mortgage Loans by Mortgage Rate, and will be set forth in
a Current Report on Form 8-K that will be filed with the Securities and
Exchange Commission by the Depositor within 15 days after the issuance of the
Certificates.
CERTIFICATE ACCOUNT
There will be deposited in an account (the "Certificate Account") to be
established with the Trustee all distributions on or with respect to the
Mortgage Loans comprising the Mortgage Pool, together with reinvestment income
thereon. [Until such time as the Subordinated Amount is reduced to zero,][f]
[F]unds on deposit in the Certificate Account will be available to make
distributions in reduction of Stated Principal Balance and distributions of
interest on the Certificates on each Distribution Date, as more fully set
forth herein. [Any funds remaining in the Certificate Account after making
required distributions to holders of the Class A Certificates will be
distributed [to the holders of the Class B Certificates.] Any amounts
remaining in the Certificate Account [after making required distributions on
the Class B Certificates] will be distributed to the holders of the Residual
Certificates.
[BUY-DOWN FUND
The Depositor will deliver cash, a letter of credit or a guaranteed
investment contract to the Trustee to fund the Buy-Down Fund for the [Class A]
Certificates. [The Senior Interest in] Buy-Down Mortgage Loans not valued
solely on the basis of the scheduled monthly payments required of the
Mortgagor will be valued by taking into account funds available from the Buy-
Down Fund and reinvestment income thereon at the same Assumed Reinvestment
Rate as that of the Certificate Account.
The Trustee may withdraw excess funds from the Buy-Down Fund on any
Distribution Date. Any amounts so withdrawn shall be distributed [first, to
restore the amount in the Reserve Fund to the Required Reserve, and then to
the holders of the Class B Certificates to the extent of any deficiency in
scheduled distributions on such Class B Certificates on such Distribution
Date. Any amounts remaining will be distributed] to the holders of the
Residual Certificates.]
[GPM FUND
To the extent that [the Senior Interest in] a Mortgage Loan providing for
payments during a portion of its term that are less than the actual amounts of
principal and interest payable thereon (a "GPM Loan") is valued on the basis
of its maximum principal balance, rather than on the basis of scheduled
payments by the Mortgagor, the Depositor will deliver cash, a letter of credit
or a guaranteed investment contract to fund the GPM Fund for the [Class A]
Certificates. The Assumed Reinvestment Rate for the GPM Fund is the same as
that of the Certificate Account.
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<PAGE>
The Trustee may withdraw excess funds from the GPM Fund on any Distribution
Date. Any amounts so withdrawn shall be distributed [first, to restore the
amount in the Reserve Fund to the Required Reserve, and then to the holders of
the Class B Certificates to the extent of any deficiency in scheduled
distributions on such Class B Certificates on such Distribution Date. Any
amounts remaining will be distributed] to the holders of the Residual
Certificates.]
[REINVESTMENT AGREEMENT
All amounts on deposit in the Certificate Account [, the Buy-Down Fund and
the GPM Fund] will be reinvested with by the Trustee pursuant to a
guaranteed investment contract (the "Reinvestment Agreement") at a rate of %
per annum.]
[LETTER OF CREDIT
The maximum liability of [ ] under the Letter of Credit, net of unreimbursed
payments thereunder, for the Certificates will be no more than % of the
aggregate principal balance of the Mortgage Loans on the Cut-off Date. The
duration of coverage and the amount and frequency of any reduction in coverage
will be in compliance with the requirements established by the Rating Agency
rating the Certificates in order to obtain a rating in one of the two highest
ratings categories of the Rating Agency. The precise amount of coverage under
the Letter of Credit and the duration and frequency of reduction of such
coverage will be set forth in the Current Report on Form 8-K referred to
above. See "Description of the Certificates--Credit Support--The Letter of
Credit" in the Prospectus.]
[THE POOL INSURANCE POLICY
Subject to the limitations described under "Description of Insurance--Pool
Insurance Policy" in the Prospectus, the Pool Insurance Policy will cover
losses by reason of default on the Mortgage Loans that are not covered as to
their entire outstanding principal balances by primary mortgage insurance, in
an amount equal to % of the aggregate principal balance of such Mortgage
Loans on the Cut-off Date.
The Pool Insurance Policy will be issued by , a corporation (the
"Pool Insurer"), which is engaged principally in the business of insuring
mortgage loans on residential properties against default in payment by the
Mortgagor. At , 19 , the Pool Insurer had insurance in force in the form of
primary policies covering approximately $ billion of residential mortgages.
At such date, the Pool Insurer had total assets of approximately $ million,
capital and surplus aggregating $ million and statutory contingency reserves
of $ million, resulting in total policyholders' reserves of $ million. The
claims-paying ability of the Pool Insurer is currently rated by . In
accordance with standard rating agency practice, may, at any time,
revise or withdraw such rating.
The information set forth above has been provided by the Pool Insurer. The
Depositor makes no representation as to the accuracy or completeness of such
information.]
[THE SPECIAL HAZARD INSURANCE POLICY
The Special Hazard Insurance Policy will cover certain risks not otherwise
insured against under hazard insurance policies, subject to the limitations
described in the Prospectus, and will be issued by a corporation (the
"Special Hazard Insurer"). Claims under such policy will be limited to % of
the aggregate principal balance of the Mortgage Loans or twice the principal
balance of the Mortgage Loan with the highest outstanding principal balance at
the Cut-off Date, whichever is greater. At , 19 , the Special Hazard
Insurer had total assets of approximately $ million and total policyholders'
surplus of $ . The claims-paying ability of the Special Hazard Insurer is
presently rated by . In accordance with standard rating agency
practice, may, at any time, revise or withdraw such rating.
The information set forth above has been provided by the Special Hazard
Insurer. The Depositor makes no representation as to the accuracy or
completeness of such information.]
S-14
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<PAGE>
[MORTGAGOR BANKRUPTCY BOND
The Depositor will obtain a bond or similar form of insurance coverage (the
"Mortgagor Bankruptcy Bond") for proceedings with respect to Mortgagors under
the federal Bankruptcy Code. The Mortgagor Bankruptcy Bond will cover certain
losses resulting from a reduction by a bankruptcy court of scheduled
payments of principal and interest on a Mortgage Loan or a reduction by such
court of the principal amount of a Mortgage Loan and will cover certain unpaid
interest on the amount of such a principal reduction from the date of the
filing of a bankruptcy petition.
The initial amount of coverage provided by the Mortgagor Bankruptcy Bond
will be $ plus the greater of (i) % of the aggregate principal balances of
the Mortgage Loans secured by second residences and investor-owned residences
or (ii) times the largest principal balance of any such Mortgage Loan. The
coverage provided by the Mortgagor Bankruptcy Bond will be reduced by
payments thereunder.
The Mortgagor Bankruptcy Bond will be issued by , a corporation. At
December 31, 19 , had admitted assets of approximately $ and total
policyholders' surplus of approximately $ .
The information set forth above concerning has been provided by it. The
Depositor makes no representation as to the accuracy or completeness of such
information.]
YIELD CONSIDERATIONS
Principal payments on mortgage loans may be in the form of scheduled
amortization payments or prepayments (for this purpose, the term "prepayment"
includes prepayments and liquidation due to default or other dispositions of
the loans). Prepayments on the Mortgage Loans comprising the Mortgage Pool
will be passed through to the Trustee, as the assignee of the Mortgage Loans,
and such prepayments will be [available to be] applied to distributions in
reduction of States Principal Balance on the [Class A] Certificates [, as more
fully set forth herein]. Prepayments on mortgage loans are commonly measured
by a prepayment standard or model. The model used in this Prospectus
Supplement, the Standard Prepayment Assumption ("SPA"), represents an assumed
rate of prepayment each month relative to the outstanding principal balance of
a pool of mortgage loans. A prepayment assumption of 100% SPA 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 an additional 0.2% per annum in each month thereafter until the 30th
month. Beginning in the 30th month and in each month thereafter during the
life of the mortgage loans. 100% SPA assumes a constant prepayment rate of 6%
per annum each month. As used in the table set forth below " % SPA" assumes
prepayment rates equal to % of 100% SPA; " % SPA" assumes prepayment rates
equal to % of 100% SPA; and " % SPA" assumes prepayment rates equal to % of
100% SPA. SPA does not purport to be a historical description of prepayment
experience or a prediction of the anticipated rate of prepayment of any pool
of mortgage loans.
The rate of principal prepayments on pools of mortgage loans is influenced
by a variety of economic, geographic, social and other factors, including the
level of mortgage interest rates and the rate at which homeowners sell their
homes or default on their mortgages. In general, however, if prevailing
interest rates fall significantly below the interest rates on the Mortgage
Loans comprising the Mortgage Pool, the Certificates are likely to be subject
to higher prepayment rates than if prevailing rates remain at or above the
interest rates on the Mortgage Loans comprising the Mortgage Pool. In
addition, as homeowners move or default on their mortgages, their houses are
generally sold and the mortgages prepaid. As the rate of distributions in
reduction of Stated Principal Balance of each [Subc] [C]lass of [Class A]
Certificates will depend on the rate of payment (including prepayments) of the
Mortgage Loans comprising the Mortgage Pool, the actual final distribution
made on any [Subc] [C]lass of [Class A] Certificates is likely to occur
earlier than its Final Scheduled Distribution Date.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar in reduction of the principal of such
security will be distributed to the investor. The weighted average life of a
[Class A] Certificate is determined by (i) multiplying the amount of each
distribution in reduction of
S-15
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Stated Principal Balance by the number of years from the date of issuance of
the [Class A] Certificate to the related Distribution Date, (ii) summing the
results and (iii) dividing the sum by the total distributions in reduction of
Stated Principal Balance made on the Class A Certificate [, including, in the
case of a Class A-4 Certificate, any interest accrued and added to the Stated
Principal Balance of such Certificate].
The table set forth below has been prepared on the basis of the
characteristics of the Mortgage Loans that are expected to be included in the
Mortgage Pool. The table assumes, among other things, that each Mortgage Loan
comprising the Mortgage Pool has a remaining term to maturity of years,
bears interest at a rate of % per annum and has payments of principal that
are timely received. There may be discrepancies between the characteristics of
the Mortgage Loans actually included in the Mortgage Pool and the
characteristics of the Mortgage Loans expected to be so included. Any such
discrepancy may have an effect on the percentages of Initial Stated Principal
Balance outstanding set forth in the table (and the weighted average lives of
each Class [Subclass] of the [Class A] Certificates. In addition, to the
extent that the Mortgage Loans that actually are included in the Mortgage Pool
have characteristics that differ from those assumed in the following table,
the Stated Principal Balance of any Class [Subclass] of the [Class A]
Certificates will be reduced to zero earlier or later than indicated by the
table.
Variations in actual prepayment experience and the balance of mortgage loans
that prepay may increase or decrease the percentages of initial Stated
Principal Balance and the weighted average lives shown in the following table.
Such variation may occur even if the average prepayment experience of all such
Mortgage Loans equals the indicated levels of SPA.
Based on the foregoing assumptions, [including an assumed interest rate of
% on the Class A-1 Certificates and an assumed interest rate of % on the
Class A-2 Certificates,] the following table indicates the projected weighted
average life of each [Subc] [C]lass of [Class A] Certificates and sets forth
the percentages of the initial Stated Principal Balance of each [Subc] [C]lass
of [Class A] Certificates that would be outstanding after each of the dates
shown at various percentages of SPA.
PERCENTAGE OF INITIAL STATED PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
AT THE FOLLOWING AT THE FOLLOWING AT THE FOLLOWING AT THE FOLLOWING
PERCENTAGES OF PERCENTAGES OF PERCENTAGES OF PERCENTAGES OF
SPA 1 SPA 1 SPA 1 SPA 1
------------------- ------------------- ------------------- -------------------
PAYMENT DATE 0% % % % 0% % % % 0% % % % 0% % % %
------------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Original Balance
, 1996................
, 1997................
, 1998................
, 1999................
, 2000................
, 2001................
</TABLE>
S-16
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<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
AT THE FOLLOWING AT THE FOLLOWING AT THE FOLLOWING AT THE FOLLOWING
PERCENTAGES OF PERCENTAGES OF PERCENTAGES OF PERCENTAGES OF
SPA 1 SPA 1 SPA 1 SPA 1
------------------- ------------------- ------------------- -------------------
PAYMENT DATE 0% % % % 0% % % % 0% % % % 0% % % %
------------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
, 2002................
, 2003................
, 2004................
, 2005................
, 2006................
, 2007................
, 2008................
, 2009................
, 2010................
, 2011................
, 2012................
, 2013................
, 2014................
, 2015................
, 2016................
Weighted average life
(years)................
</TABLE>
- --------
(1) The table assumes, among other things, [at each level of SPA,] prepayment
of Mortgage Loans comprising the Mortgage Pool at the indicated rate and
Reinvestment Income at the Assumed Reinvestment Rate of % per annum [and
annual estimated administrative fees and expenses of approximately $ .]
DESCRIPTION OF THE [CLASS A] CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Standard Terms and
Provisions of Pooling and Servicing (the "Standard Terms") as amended and
supplemented by a Reference Agreement to be dated as of the Cut-off Date (the
"Reference Agreement" and, together with the Standard Terms, the "Pooling and
Servicing Agreement") among the Depositor, , as master servicer (the
"Master Servicer"), and , as trustee (the "Trustee"), a form of which has
been filed as an exhibit to the Registration Statement of which this
Prospectus Supplement forms a part. Reference is made to the accompanying
Prospectus for important additional information regarding the terms and
conditions of the Pooling and Servicing Agreement and the Certificates. Each
of the [Class A] Certificates at the time of issuance will qualify as a
"mortgage related security" within the meaning of the Secondary Mortgage
Market Enhancement Act of 1984.
Distribution of principal and interest as set forth above will be made by
the Trustee by check mailed to each Certificateholder entitled thereto at the
address appearing in the Certificate Register to be maintained with the
Trustee or, if eligible for wire transfer as provided in the Pooling and
Servicing Agreement, by wire transfer to the account of such
Certificateholder; provided, however, that the final distribution in
retirement of the Certificates will be made only upon presentation and
surrender of the Certificates at the office or agency specified in the notice
to Certificateholders of such final distribution.
The [Class A] Certificates will be transferable and exchangeable on a
Certificate Register to be maintained by the Trustee at the office or agency
of the Master Servicer maintained for that purpose in New York, New York.
[Class A] Certificates surrendered to the Trustee for registration of transfer
or exchange must be accompanied by a written instrument of transfer in form
satisfactory to the Trustee. No service charge will be
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<PAGE>
made for any registration of transfer or exchange of [Class A] Certificates,
but payment of a sum sufficient to cover any tax or other governmental charge
may be required. Such office or agency of the Master Servicer is currently
located at . The Corporate Trust Office of the Trustee is currently
located at .
[DISTRIBUTIONS GENERALLY]
[On each Distribution Date, the Trustee will distribute to the Class A
Certificateholders, in the manner set forth below, an amount (the "Required
Distribution") equal to the sum of:
(i) the aggregate fractional undivided interest evidenced by all Class A
Certificates (the "Senior Interest") in: (a) until such time as the
Subordinated Amount is reduced to zero, all scheduled payments of principal
and interest (including any advances thereof), net of servicing fees and
other compensation payable to the Servicers and the Master Servicer, which
payments became due on the due date to which such Distribution Date relates
(the "Due Date"), whether or not such payments are actually received; and
(b) after the Subordinated Amount is reduced to zero, all payments of
principal and interest, net of servicing fees and other compensation
payable to the Servicers and the Master Servicer, but not previously
received, since the time the Subordinated Amount was reduced to zero, but
only to the extent such payments are actually received or advanced prior to
the Determination Date;
(ii) the Senior Interest in all principal prepayments received during the
month prior to the month of distribution and, interest to the last day of
the month in which such principal prepayments occur, net of servicing fees
and other compensation payable to the Servicers and the Master Servicer;
and
(iii) the Senior Interest in the sum of (a) the outstanding principal
balance of each Mortgage Loan or property acquired in respect thereof that
was repurchased pursuant to the Pooling and Servicing Agreement or
liquidated or foreclosed during the monthly period ending on the day prior
to the Due Date to which such distribution relates, calculated as of the
date of each such Mortgage Loan as repurchased, liquidated or foreclosed,
and (b) accrued but unpaid interest on such principal balance, net of
servicing fees and other compensation payable to the Servicers and the
Master Servicer, to the first day of the month following the month of such
repurchase, liquidation or foreclosure.
The Required Distribution will be distributed to the Class A
Certificateholders, in the manner set forth below, to the extent that there
are sufficient eligible funds available for distribution to such Class A
Certificateholders on a Distribution Date. Funds eligible for such purpose
with respect to each Distribution Date shall be as set forth in the Prospectus
under "Payments on Mortgage Loans."
If the funds in the Certificate Account eligible for distribution to the
Class A Certificateholders (including all funds required to be deposited
therein from the Reserve Funds and any Advances by the Servicers or the Master
Servicer) are not sufficient to make the Required Distribution on any
Distribution Date, the Trustee shall distribute on such Distribution Date to
the Class A Certificateholders the amount of funds eligible for distribution
to such Class A Certificateholders, in the manner set forth below. If, on any
Distribution Date, prior to the time the Subordinated Amount has been reduced
to zero, the Class A Certificateholders do not receive the Required
Distribution, the holders of the Class B Certificates will not receive any
distributions on such Distribution Date. Any amounts in the Certificate
Account after the Required Distribution is made to the Class A
Certificateholders will be distributed [first, to restore the amount in the
Reserve Fund to the Required Reserve, and then to the holders of the Class B
Certificates to the extent of any deficiency in the scheduled distribution to
such Certificateholders. Any excess will then be distributed to the holders of
the Residual Certificates, as set forth more fully below]. Holders of the
Class B Certificates [or the Residual Certificates] will not be required to
refund any amounts that have previously been properly distributed to them
directly from the Certificate Account, regardless of whether there are
sufficient funds on such Distribution Date to make a full distribution to the
Class A Certificateholders. The subordination of distributions allocable to
holders of the Class B Certificates is limited to the Subordinated Amount,
which will decrease over time as more fully set forth in the Pooling and
Servicing
S-18
<PAGE>
<PAGE>
Agreement, and such subordination applies on any Distribution Date only to
then current distributions allocable to the Class B Certificateholders.
DISTRIBUTIONS OF INTEREST [ON THE CLASS CERTIFICATES]
The [Certificates of each Class] [Class A-3 Certificates and Class A-4
Certificates] will bear interest at the Interest Rates specified on the cover
page hereof. Interest on the Stated Principal Balance of the Class A-1 and
Class A-2 Certificates will accrue at the rates calculated as set forth
below.] Interest on the Class A-1 Certificates, Class A-2 Certificates and
Class A-3 Certificates will be distributable [monthly] on each Distribution
Date, commencing , 19 . [Interest distributable on the Certificates on a
Distribution Date will accrue from the [first day of the month preceding the]
prior Distribution Date (or from , 19 (the "Accrual Date") in the case of
the first Distribution Date) through the [last] day [of the [second] month]
preceding the then current Distribution Date. [Interest will accrue on the
Variable Rate Certificates from the preceding Distribution Date (or from ,
19 , in the case of the first Distribution Date) through the th day of the
month preceding each Distribution Date. Interest will accrue on the Fixed Rate
Certificates from the th day of the month [preceding the month] in which the
prior Distribution Date occurs (or from , 19 , in the case of the first
Distribution Date) through the th day of the month [preceding the month] in
which the current Distribution Date occurs.] Distributions of interest on the
Class A-4 Certificates will commence after distributions in reduction of
Stated Principal Balance of the Class A-3 Certificates have reduced the Stated
Principal Balance of such Class to zero. Prior to that time, interest will
accrue on the Class A-4 Certificates and the amount so accrued will be added
to the Stated Principal Balance thereof on each Distribution Date. [Interest
accrued on the [Subc] [C]lass of [Class A] Certificates currently receiving
distributions in reduction of Stated Principal Balance (and on the Class A-4
Certificates) during any period described above will be calculated on the
assumption that such distributions are made (and accrued interest added to the
Stated Principal Balance of the Class A-4 Certificates) on the [[first] day of
the month preceding] the next Distribution Date, and not on the Distribution
Date when actually made or added.
[Interest will accrue on the Class A-1 and Class A-2 Certificates through
, 19 at the rates of % and %, respectively. Commencing , 19 ,
interest will accrue on the Variable Rate Certificates at rates determined as
set forth below. For each interest accrual period other than the first
interest accrual period
--Interest will accrue on the Class A-1 Certificates at a per annum rate
of % above LIBOR, subject to a maximum interest rate of %.
--Interest will accrue on the Class A-2 Certificates at a per annum rate
equal to % - ( x LIBOR), subject to a minimum interest rate of %.
The rate at which interest will accrue on the Class A-2 Certificates will
thus vary inversely with changes in LIBOR. Interest will accrue on the Class
A-2 Certificates at the minimum rate of % whenever LIBOR is % or above, and
the maximum rate at which interest will accrue on the Class A-2 Certificates
will be % per annum, which would be the rate in effect if LIBOR were
determined to be %.
The following table illustrates the relationship between LIBOR rates and the
rate at which interest will accrue on the Class A-1 and Class A-2
Certificates.
<TABLE>
<CAPTION>
LIBOR CLASS A-1 CLASS A-2
----- ---------- ----------
<S> <C> <C>
% % %
% % %
% % %
</TABLE>
The [Trustee] will determine LIBOR for a given interest accrual period on
the second business day prior to the Distribution Date on which such interest
accrual period commences (an "Interest Rate Determination Date").
S-19
<PAGE>
<PAGE>
For this purpose, a "business day" is any day on which banks in London and New
York City are open for the transaction of international business. Promptly
after each Interest Rate Determination Date, the Trustee will cause the
Interest Rates, the Stated Principal Balances of the Variable Rate
Certificates for the interest accrual period following such Determination
Date, and the amounts of interest payable on the Distribution Date following
such interest accrual period in respect of each $1,000 of such Stated
Principal Balance, to be published in an English language newspaper of general
circulation published each business day in New York City. The Stated Principal
Balances and the Interest Rates on the Variable Rate Certificates applicable
to the then current and the immediately preceding interest accrual periods may
be obtained by telephoning the Trustee at its Corporate Trust Office at.
The determination of the rates at which interest will accrue on the Variable
Rate Certificates after , 19 will be made in accordance with the following
provisions:
(i) On each Interest Rate Determination Date, the Trustee will
determine LIBOR on the basis of quotations [provided by [four]
Reference Banks as of 11:00 A.M. (London time) as such quotations
appear on the Reuters Screen LIBOR Page (as defined in the
International Swap Dealers Association, Inc. Code of Standard Wording,
Assumptions and Provisions for SWAPS, 1986 edition).] LIBOR as
determined by the Trustee is the arithmetic mean of such quotations
(rounded upward, if necessary, to the nearest multiple of of 1%).
(ii) If, on any Interest Rate Determination Date, at least two but
fewer than all of the Reference Banks provide quotations, LIBOR will be
determined in accordance with (i) above on the basis of the offered
quotations of those Reference Banks providing such quotations.
(iii) If, on any Interest Rate Determination Date, only one or none
of the Reference Banks provides such offered quotations, LIBOR will be
the higher of:
(a) LIBOR as determined on the previous Interest Rate
Determination Date; and
(b) the Reserve Interest Rate. The "Reserve Interest Rate" will be
the rate per annum (rounded upward as aforesaid) that the Trustee
determines to be either (x) the arithmetic mean of the offered
quotations that leading banks in New York City selected by the
Trustee (after consultation with the Depositor) are quoting on the
relevant Interest Rate Determination Date for [ ] month United
States dollar deposits to the principal London office of each of the
Reference Banks or those of them (being at least two in number) to
which such offered quotations are, in the opinion of the Trustee,
being so made or (y) in the event that the Trustee can determine no
such arithmetic mean, the arithmetic mean of the offered quotations
that leading banks in New York City selected by the Trustee (after
consultation with the Depositor) are quoting on such Interest Rate
Determination Date to leading European banks for [ ] month United
States dollar deposits; provided, however, that if the banks
selected as aforesaid by the Trustee are not quoting as mentioned
above, LIBOR for the next accrual period will be LIBOR as specified
in (a) above.
The rate at which interest will accrue on the Class A-1 Certificates will in
no event exceed % per annum, and the rate at which interest will accrue on
the Class A-2 Certificates will in no event be less than % per annum.
Each Reference Bank shall be a leading bank engaged in transactions in
Eurodollar deposits in the international Eurocurrency market, shall not
control, be controlled by, or be under common control with, the Depositor and
shall have an established place of business in London.
[The distribution of interest on the [Class A] Certificates (and the
addition of accrued interest to the Stated Principal Balance of the Class A-4
Certificates prior to the reduction of the Stated Principal Balance of the
Class A-3 Certificates to zero) [30] days after the date to which interest
accrues thereon and the calculation of accrued
S-20
<PAGE>
<PAGE>
interest on the Certificates based on the assumption that distributions in
reduction of Stated Principal Balance of the [Class A] Certificates are made
[one month] prior to the actual Distribution Date will reduce the effective
yield to holders of the [Class A] Certificates from that which would otherwise
be the case if interest distributable on the [Class A] Certificates (or added
to the Stated Principal Balance of the Class A-4 Certificates) on a
Distribution Date were to accrue to such Distribution Date.]
[The effective yield to the Class A-3 and Class A-4 Certificateholders will
be less than the yield that would otherwise be produced if interest
distributable on the Certificates (or to be added to the Stated Principal
Balance of the Class A-4 Certificates) on a Distribution Date were to accrue
to such Distribution Date because (i) on the first Distribution Date, [ ]
months' interest is distributable on the Certificates (or to be added to the
Stated Principal Balance of the Class A-4 Certificates) even though [ ]
months will have elapsed from the date on which interest begins to accrue on
the Certificates and (ii) on each succeeding Distribution Date, the interest
distributable on the Certificates (or to be added to the Stated Principal
Balance of the Class A-4 Certificates) is the interest accrued during the
period described above even though this accrual period ends [30] days prior to
such Distribution Date. In addition, during the first month of each interest
accrual period (other than the first such period) for the Class of
Certificates on which distributions in reduction of Stated Principal Balance
are being distributed, interest accrues on a principal balance that is less
than the Stated Principal Balance of such Class of Certificates, because
interest due on such Class on a Distribution Date is calculated on the Stated
Principal Balance of such Class since the preceding Distribution Date.]
DISTRIBUTIONS IN REDUCTION OF STATED PRINCIPAL BALANCE
Distributions in reduction of Stated Principal Balance on the [Class A]
Certificates will be made on each Distribution Date on which distributions are
due in an aggregate amount equal to the sum of the Accrual Distribution Amount
and the Stated Principal Distribution Amount. For purposes of determining the
Stated Principal Distribution Amount, the Asset Value of the Mortgage Loans
comprising the Mortgage Pool will be reduced by taking into account [the
Senior Interest in] all distributions of principal thereof (including
prepayments) received or due to be received by the Trustee during the Due
Period prior to such Distribution Date.
Distributions in reduction of Stated Principal Balance on the [Class A]
Certificates will be made first to the Class A-1 Certificates until the Stated
Principal Balance of the Class A-1 Certificates has been reduced to zero; next
to the Class A-2 Certificates until the Stated Principal Balance of the Class
A-2 Certificates has been reduced to zero; next to the Class A- 3 Certificates
until the Stated Principal Balance of the Class A-3 Certificates has been
reduced to zero; and then to the Class A-4 Certificates. Distributions in
reduction of Stated Principal Balance on [Certificates of a particular Class]
[Class A Certificates of a particular Subclass] will be made to the holder of
the Certificates of such [Class] [Subclass] either pro rata in the proportion
which the Stated Principal Balance of each Certificate of such [class]
[subclass] bears to the aggregate Stated Principal Balance of all the
Certificates of such [Class] [Subclass] or by random lot. Except as provided
herein, the Final Scheduled Distribution Date of each [Class] [Subclass] of
[Class A] Certificates has been determined based upon [the Senior Interest in]
scheduled payments of principal and interest on the Mortgage Loans comprising
the Mortgage Pool assuming no prepayments. Reinvestment Income at the Assumed
Reinvestment Rate, [and application of % of the Excess Cash Flow, as defined
herein, to the payment of Certificates.] The rate of prepayments on the
Mortgage Loans will depend on the prevailing level of interest rates and other
economic factors, and no assurance can be given as to the actual prepayment
rate of any Mortgage Loan.
The aggregate initial Asset Value of the Mortgage Loans comprising the
Mortgage Pool will be equal to at least 100% of the initial aggregate Stated
Principal Balance of the [Class A] Certificates.
The Asset Value of the Mortgage Loans comprising the Mortgage Pool will be
equal to the lesser of (a) the then present value of the [Senior Interest in
the] stream of remaining regularly scheduled monthly payments of principal and
interest on such Mortgage Loans [(after taking into account the applicable
portion of the Reserve Fund and the Buy-Down Fund)] together with Reinvestment
Income thereon from the assumed date of receipt of
S-21
<PAGE>
<PAGE>
such payments to the next succeeding Distribution Date at the Assumed
Reinvestment Rate, discounted at the rate of % per annum with the same
frequency as distributions are made on the Certificates and (b) the product of
the Asset Value Cap calculated from time to time in the manner provided in the
Pooling and Servicing Agreement and the then outstanding principal balance of
such Mortgage Loan.
[ % of the Excess Cash Flow will be applied to the distributions on [Class
A] Certificates on each Distribution Date until such time that, even in the
event of excessive prepayments of the Mortgage Loans, sufficient funds will be
available to make distributions of interest on the [Class A] Certificates on
each succeeding Distribution Date. Thereafter, it will no longer be necessary
to provide for the possibility of a Special Distribution on the [Class A]
Certificates in respect of prepayments on such Mortgage Loans.]
On each Distribution Date, the distributions in reduction of Stated
Principal Balance on the [Class A] Certificates will be equal to the [Class A]
Stated Principal Distribution Amount. The [Class A] Stated Principal
Distribution Amount will be the amount by which (i) the Stated Principal
Balance of the [Class A] Certificates (before taking into account the amount
of interest accrued on the Class A-4 Certificates to be added to the Stated
Principal Balance thereof on the Distribution Date), exceeds (ii) the
aggregate Asset Value of the Mortgage Loans comprising the Mortgage Pool as of
such Distribution Date.
[In addition, % of the Excess Cash Flow from the Mortgage Loans comprising
the Mortgage Pool will be applied to the distributions of the [Class A]
Certificates on each Distribution Date until ]. Excess Cash Flow as of each
Distribution Date will be the amount, if any, by which (i) the [Senior
Interest in the] cash flow received from the Mortgage Loans and deposited in
the Certificate Account for the Certificates [and any amounts deposited in
such Certificate Account from any related Buy-Down Fund and GPM Fund on the
date of issuance of the Certificates], plus any Reinvestment Income thereon,
[together with any amounts otherwise distributable to the Class B
Certificateholders or in the Reserve Fund that are required to be distributed
to holders of the Class A Certificates] exceeds (ii) the sum of (a) the [Class
A] Stated Principal Distribution Amount on such Distribution Date and (b) all
interest accrued, whether or not then payable, on the Stated Principal Balance
of the [Class A] Certificates since the preceding Distribution Date, and (c)
any Special Distributions in reduction of Stated Principal Balance made since
the preceding Distribution Date (or since the date of issuance of the
Certificates in the case of the first Distribution Date). [On any Distribution
Date, Excess Cash Flow not so applied will be [distributed first to restore
the amount in the Reserve Fund to the Required Reserve, and then] to the
holders of the Class B Certificates to the extent of any current deficiency in
scheduled distributions to such Certificateholders on such Distribution Date.]
[Any excess will then be distributed to holders of the Residual Certificates.
Any Excess Cash Flow so distributed will not be available to make subsequent
distributions on the [Class A] Certificates.]
[SPECIAL DISTRIBUTIONS
The [Class A] Certificates may receive special distributions in reduction of
Stated Principal Balance ("Special Distributions") as a consequence of
principal prepayments on the Mortgage Loans comprising the Mortgage Pool
and/or low yields then available for reinvestment. The Trustee will be
required each month to determine, based on assumptions specified in the
Pooling and Servicing Agreement, the amount that will be available in the
Certificate Account for the distribution of interest that will have accrued on
such [Class A] Certificates (the "Available Interest Amount") through the
earlier of the last day of the month of determination or the last day of the
[second] month preceding the next Distribution Date (the earlier of such dates
being referred to as the "Available Interest Accrual Date"). If the Available
Interest Amount as so determined is less than the amount of interest that will
have accrued on such [Class A] Certificates to the Available Interest Accrual
Date, there will be distributed, on the first day of the month succeeding the
month of determination (the "Special Distribution Date"), the portion of the
Stated Principal Balance of the [Class A] Certificates that will cause the
Available Interest Amount to equal the amount of interest that will have
accrued to the Available Interest Accrual Date on the Certificates to be
outstanding immediately after such distribution. The amount of the Special
Distribution on the Certificates distributed on any Special Distribution Date
will not exceed the amount of
S-22
<PAGE>
<PAGE>
distributions in reduction of Stated Principal Balance on such Certificates
that would otherwise be required to be made on the next Distribution Date.
The Trustee will notify each registered holder of [Class A] Certificates to
receive a Special Distribution by letter mailed at least five days prior to
the date set for such Special Distribution.]
[OPTIONAL TERMINATION
On any Distribution Date on or after the [later] of or the date on which
the Stated Principal Balance of the [Class A-3] Certificates has been reduced
to zero, the Depositor will have the right to repurchase, in whole, but not in
part, the Mortgage Loans comprising the Mortgage Pool. Additionally, on any
Distribution Date on which the aggregate principal amount of the Mortgage
Loans comprising the Mortgage Pool is less than [10]% of the initial aggregate
principal amount of such Mortgage Loans, the Depositor will have the right to
repurchase, in whole, but not in part, such Mortgage Loans. Any such
repurchase will be made at a purchase price equal to [the outstanding
principal balance of such Mortgage Loans, together with accrual and unpaid
interest thereon, net of servicing fees and other compensation, to the last
day of the month of such repurchase, plus the appraised value of any property
acquired in respect thereof]. Any such termination will be effected in
compliance with the requirements of Section 860F(a)(iv) of the Code so as to
constitute a "qualifying liquidation" thereunder. The proceeds of any such
repurchase will be treated as a distribution on the Mortgage Loans for
purposes of distributions to the Certificateholders. In no event will the
Trust continue beyond the expiration of 21 years from the death of the last
survivor of the persons named in the Pooling and Servicing Agreement.]
TRUSTEE
The Trustee for the Certificates will be
, a bank organized and existing under the laws of the
with its principal office located at ,
.
THE MASTER SERVICER
The Master Servicer is a corporation that commenced operation in
, . The Master Servicer may be an affiliate of the Depositor. The Master
Servicer is a FNMA/FHLMC approved seller-servicer based in . As of
, the Master Servicer serviced, for other investors and for its own
account, approximately mortgage loans with an aggregate principal balance in
excess of $ . The Master Servicer conducts operations through FHA approved
branch offices in . The Master Servicer originated approximately $ in
mortgage loans in 19 . The Master Servicer's consolidated stockholder's
equity as of was approximately $ .
The information set forth above has been provided by the Master Servicer.
The Depositor makes no representation as to the accuracy or completeness of
such information.
The Master Servicer shall obtain and maintain in effect a bond, corporate
guaranty or similar form of insurance coverage (the "Performance Bond"),
insuring against loss occasioned by the errors and omissions of the Master
Servicer's officers, employees and any other person acting on behalf of the
Master Servicer in its capacity as Master Servicer and guaranteeing the
performance, among other things, of the obligations of the Master Servicer to
purchase certain Mortgage Loans and to make advances, as described in the
Prospectus under "Description of the Certificates--Assignment of Mortgage
Loans" and "--Advances", in an amount acceptable to the Rating Agency.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicing compensation payable to the Master Servicer will be equal to
% of the outstanding principal balance of each Mortgage Loan in the Mortgage
Pool less [(a)] any servicing compensation to the servicer of each such
Mortgage Loan (the "Servicer") (including such compensation paid to the Master
Servicer as the direct Servicer of a Mortgage Loan for which there is no
Servicer) under the terms of an agreement with the Master Servicer pursuant to
which the Servicer services such Mortgage Loan (a "Servicing Agreement") [.]
S-23
<PAGE>
<PAGE>
[, and (b) the amount payable to the Depositor, as described below.] [Pursuant
to the Pooling and Servicing Agreement, on each Distribution Date, the Master
Servicer will remit to [the Depositor] in respect of each interest payment on
a Mortgage Loan an amount equal to % of the outstanding principal balance of
such Mortgage Loan, before giving effect to any payments due on the preceding
Due Date.] The Master Servicer will be permitted to withdraw from the
Certificate Account, in respect of each interest payment on a Mortgage Loan,
an amount equal to % of the outstanding principal balance of such Mortgage
Loan, before giving effect to any payments due on the preceding Due Date.
Servicing compensation to the Servicers of the Mortgage Loans shall be payable
by withdrawal from the related Servicing Account (as defined in the
Prospectus) prior to deposit in the Certificate Account. In addition, each
Servicer (with respect to the Mortgage Loans serviced by it) and the Master
Servicer will be entitled to servicing compensation out of insurance proceeds
or liquidation proceeds. Additional servicing compensation in the form of
prepayment charges, assumption fees, late payment charges or otherwise shall
be retained by the Servicers and the Master Servicer to the extent not
required to be deposited in the Certificate Account. The Servicers and the
Master Servicer will pay all expenses incurred in connection with its
responsibilities under the Servicing Agreements and the Pooling and Servicing
Agreement (subject to limited reimbursement as described in the Prospectus),
including, without limitation, the various items of expense enumerated in the
Prospectus.
CERTIFICATE RATING
It is a condition to the issuance of the [Class A] Certificates that they be
rated in one of the two highest categories of the Rating Agency.
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.
[ERISA CONSIDERATIONS]*
[Describe whether any exemption from "plan asset" treatment is available
with respect to the Series.]
[State whether the Series is an Exempt or Nonexempt Series (see "ERISA
Considerations--Prohibited Transaction Class Exemption" in the Prospectus).]
- --------
* If the Series of Certificates offered pursuant to this Version B Prospectus
Supplement evidences interests in Contracts, the disclosure to be set forth
will be substantially similar to the disclosure set forth in Version E under
"ERISA Considerations."
S-24
<PAGE>
<PAGE>
UNDERWRITING
The Depositor has entered into an Underwriting Agreement with [several
Underwriters for whom] Credit Suisse First Boston Corporation, an affiliate of
the Depositor[, is acting as Representative]. The Underwriter[s] [named below]
[has] [have severally] agreed to purchase the [entire] [following respective]
Stated Principal Balance of each [Subc] [C]lass of the [Class A] Certificates:
<TABLE>
<CAPTION>
[UNDERWRITERS CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
- ------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Credit Suisse First Boston Corporation.. $ $ $ $
--- --- --- ----
$ $ $ $]
=== === === ====
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriter[s] [is] [are] subject to certain conditions precedent, and that
the Underwriter[s] will be obligated to purchase all of the Certificates if
any are purchased.
The Depositor has been advised [by the Representative] that the
Underwriter[s] propose[s] to offer each [Subc] [C]lass of the Certificates to
the public at the public offering prices set forth on the cover page of this
Prospectus Supplement and [through the Representative,] to certain dealers at
such prices less the following concessions and such dealers may allow the
following discounts on sales to certain other dealers:
<TABLE>
<CAPTION>
CONCESSION
(PERCENT DISCOUNT
OF (PERCENT OF
PRINCIPAL PRINCIPAL
AMOUNT) AMOUNT)
---------- -----------
<S> <C> <C>
Class A-1 Certificates................................... % %
Class A-2 Certificates................................... % %
Class A-3 Certificates................................... % %
Class A-4 Certificates................................... % %
</TABLE>
After the initial public offering, the public offering prices and
concessions and discounts to dealers may be changed by the [Representative]
[Underwriter].
[If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the attached Prospectus will also be used by the
Underwriter after the completion of the offering in connection with offers and
sales related to market-making transactions in the offered Securities in which
the Underwriter acts as principal. Sales will be made at negotiated prices
determined at the time of sale.]
The Depositor has agreed to indemnify the Underwriter[s] against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
LEGAL MATTERS*
The legality of the Certificates will be passed upon for the Depositor and for
the Underwriter[s] by .
The material federal income tax consequences of the Certificates will be passed
upon for the Depositor by .
USE OF PROCEEDS
The Depositor will apply the net proceeds of the offering of the
Certificates towards the simultaneous purchase of the Mortgage Loans
comprising the Mortgage Pool. All of the Mortgage Loans will be acquired in
privately negotiated transactions by the Depositor from one or more affiliates
of the Depositor, which will have acquired such Mortgage Loans from time to
time in the open market or in privately negotiated transactions.
- --------
* If the Series of Certificates offered pursuant to this Version C Prospectus
Supplement evidences interests in Contracts, the disclosure to be set forth
will be substantially similar to the disclosure set forth in Version E under
"Legal Matters."
S-25
<PAGE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER +
+TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF +
+THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD +
+BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 19
- --------------------------------------------------------------------------------
P R O S P E C T U S S U P P L E M E N T
(To Prospectus dated , 19 )
- --------------------------------------------------------------------------------
[Version D]
$ (Approximate)
Credit Suisse First Boston Mortgage Securities Corp.
Depositor
ABS Mortgage Pass-Through Certificates, Series ("SPLITS")
Class -1 SPLITS
$ Original Principal Amount (Approximate)
100% of principal payments of the underlying Certificates
0% of interest payments on the underlying Certificates
Class -2 SPLITS
No Original Principal Amount
0% of principal payments on the underlying Certificates
Interest at % Annual Rate on Class -2 SPLITS notional amount
-----------
The ABS Mortgage Pass-Through Certificates, Series (the "SPLITS
Certificates"), offered hereby evidence undivided percentage ownership
interests in a trust (the "Trust") composed of Conventional Mortgage Pass-
Through Certificates, each having a pass-through rate of % (the "
Certificates"). The mortgage pool underlying the Certificates consists of
conventional one- to four-family residential mortgage loans originated and
serviced by and certain related property. The Certificates will be
transferred to the Trust, pursuant to a Deposit Trust Agreement dated as of
1, 199 , by Credit Suisse First Boston Mortgage Securities Corp. (the
"Depositor") in exchange for the SPLITS Certificates and are more fully
described in this Prospectus Supplement and in the accompanying Prospectus.
The SPLITS Certificates will be issued in two classes, Class -1 (the "Class
-1 Splits") and Class -2 (the "Class -2 SPLITS"). The Class -1 SPLITS
evidence ownership interests in all of the principal payments on the
Certificates. The Class -2 SPLITS evidence ownership interests in all of the
interest payments on the Certificates, net of a servicing fee as described
herein (the "Servicing Fee"). Interest distributions allocable to the Class -2
SPLITS will be passed through monthly at the annual rate of % (the "Annual
Rate") on the then aggregate outstanding notional amount of the Class -2
SPLITS. The notional amount is used solely for purposes of the determination of
interest payments and certain other rights and obligations of Holders of Class
-2 SPLITS and does not represent an interest in principal payments on the
Certificates.
Principal payments and interest at the Annual Rate will be distributed to the
holders of SPLITS Certificates ("Certificateholders" or "Holders") entitled
thereto on the [last] day of the month (or if such day is not a business day,
on the next business day) (the "Distribution Date"), or under the circumstances
described herein, on the Distribution Date in the next month. The first
distribution will be made on , 199 .
The SPLITS Certificates do not represent an obligation of or interest in
Credit Suisse First Boston Mortgage Securities Corp. or any affiliate thereof or
of , any affiliate thereof or any other governmental agency or
instrumentality.
There is currently no secondary market for the SPLITS Certificates and there
is no assurance that one will develop. The Underwriter[s] expect[s] to
establish a market in the SPLITS Certificates, but [is] [are] under no
obligation to do so. There is no assurance that a secondary market will
develop, or, if it does develop, that it will continue.
The yield to maturity on the SPLITS Certificates will depend on the rate of
principal payments (including prepayments) on the Certificates. The
mortgage loans underlying the Certificates are conventional loans and may
be prepaid at any time without penalty. A lower rate of principal than
anticipated would negatively affect the total return to investors in Class -1
SPLITS, which are being offered at a discount to their principal amount. The
yield to maturity on the Class -2 SPLITS will be extremely sensitive to the
rate of principal payments on the Certificates and may fluctuate
significantly from time to time. Investors should fully consider the associated
risks, including the risk that a rapid rate of principal payments could result
in the failure of investors in Class -2 SPLITS to recoup their initial
investment. See "Yield Considerations."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospective investors should consider the factors set forth under Risk
Factors on page S-6 of this Prospectus Supplement.
Prospective investors should consider the limitations discussed under
ERISA Considerations herein and in the accompanying Prospectus.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount (1) Depositor (2)
- -----------------------------------------------------------
<S> <C> <C> <C>
Per Class -1 SPLITS % % %
- -----------------------------------------------------------
Per Class -2 SPLITS %(3) % %(3)
- -----------------------------------------------------------
Total $ $ $
- -----------------------------------------------------------
</TABLE>
(1) Calculated as a percent of gross proceeds of the offering of each Class of
SPLITS Certificates.
(2) Before deduction of expenses payable by the Depositor estimated at $[ ].
(3) Plus accrued interest, if any, on the Class -2 SPLITS from 1, 199
(the "Cut-off Date").
-----------
The SPLITS Certificates are offered by the [several] Underwriter[s] when, as
and if issued and accepted by the Underwriter[s] and subject to [its] [their]
rights to reject orders in whole or in part. It is expected that the SPLITS
Certificates, in definitive, fully registered form, will be ready for delivery
on or about , 199 .
Credit Suisse First Boston
- --------------------------------------------------------------------------------
The date of this Prospectus Supplement is , 19 .
<PAGE>
<PAGE>
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE SPLITS CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN
THE PROSPECTUS AND PURCHASERS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE SPLITS CERTIFICATES MAY
NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES
OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
[IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATION, THIS
PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS WILL ALSO BE USED BY THE
UNDERWRITER AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND
SALES RELATED TO MARKET-MAKING TRANSACTIONS IN THE OFFERED SECURITIES IN WHICH
THE UNDERWRITER ACTS AS PRINCIPAL. SALES WILL BE MADE AT NEGOTIATED PRICES
DETERMINED AT THE TIME OF SALE.]
----------------
UNTIL , 19 , ALL DEALERS EFFECTING TRANSACTIONS IN THE SPLITS
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
----------------
AVAILABLE INFORMATION
The Trust will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information filed by the Trust, can be inspected and copied at the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C.,
and at the Commission's regional offices at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite
1300, New York, New York 10048. Copies of such information can be obtained from
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
(http://www.sec.gov).
S-2
<PAGE>
<PAGE>
SUMMARY OF THE TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Capitalized terms used in this Prospectus Supplement
and not otherwise defined herein shall have the meanings given in the
Prospectus.
<TABLE>
<S> <C>
SECURITIES OFFERED........ ABS Mortgage Pass-Through Certificates, Series
(the "SPLITS Certificates").
$ original principal amount Class -1 SPITS
(approximate). No original Principal Amount -2
SPLITS. The Class -1 SPLITS represent an undivided
percentage ownership interest in 100% of the
monthly principal payments on the underlying
Certificates (the "Mortgage Certificates Principal
Distribution"). The Class -1 SPLITS do not
evidence an ownership interest in the monthly
interest payments on the underlying Certificates.
The Class -2 SPLITS represent an undivided
percentage ownership interest in 100% of the
monthly interest payment on the underlying
Certificates (the "Mortgage Certificate Interest
Certificate Interest Distribution"), net of the
Servicing Fee as described herein (such net rate
of interest on the Class -2 SPLITS then
outstanding notional amount being referred to
herein as the "Annual Rate"). The Annual Rate is
%. The notional amount for the -2 SPLITS is
equal to the unpaid principal balance of the
Certificates, but is used solely for purposes
of determining interest payments and certain other
rights and obligations of holders of Class -2
SPLITS and does not represent any interest in
principal payments.
The SPLITS Certificates will be issued pursuant to
a deposit trust agreement, dated as 1, 19
(the "Deposit Trust Agreement"), between
, as trustee (the
"Trustee") and Credit Suisse First Boston Mortgage
Securities Corp. (the "Depositor").
DEPOSITOR................. Credit Suisse First Boston Mortgage Securities Corp.
CUT-OFF DATE.............. , 19 .
DELIVERY DATE............. On or about , 19 .
DENOMINATIONS............. The Class -1 SPLITS will be offered in fully
registered form, in minimum denominations of $[
] original principal amount and multiples of $[
] in excess thereof. The Class -2 SPLITS will be
offered in fully registered form, in minimum
denominations of $[ ] original notional amount
and multiples of $[ ] in excess thereof.
PRINCIPAL................. The Class -1 SPLITS will receive all principal
payments on the Certificates (including
prepayments). The Class -2 SPLITS receive no
principal payments on the Certificates.
INTEREST.................. The Class -2 SPLITS will receive all interest
payments on the Certificates, after deduction of
the Servicing Fee, as described herein. The
Class -1 SPLITS will receive no interest payments
on the Certificates.
</TABLE>
S-3
<PAGE>
<PAGE>
<TABLE>
<S> <C>
DISTRIBUTION DATES........ Distributions on the Certificates that are
received by the Trustee and become cleared funds
in the hands of the Trustee prior to 1:00 p.m. on
the [last] day of each month following the
distribution date for the Certificates, or,
if such day is not a business day, on the next
business day will be distributed to
Certificateholders on such day (each, a
"Distribution Date"). Distributions on the
Certificates that are received by the Trustee and
become cleared funds in the hands of the Trustee
at or after 1:00 p.m. on any Distribution Date
will be distributed to Certificateholders on the
Distribution Date in the next month. Distributions
will be made only if, and to the extent that,
payments are made on the Certificates and
received by the Trustee. The first Distribution
Date will be , 19 . The Cut-off Date will be
, 19 .
MORTGAGE CERTIFICATES..... % Certificates will aggregate outstanding
principal balances of $[ ] as of the Cut-off
Date. See "The Certificate Pool".
RISK FACTORS.............. For discussion of risk factors that should be
considered with respect to an investment in the
SPLITS Certificates, see "Risk Factors" herein and
in the related Prospectus.
YIELD CONSIDERATIONS...... The rate of payment of principal of the Class -1
SPLITS, and the aggregate amount of each
distribution on and the yield to maturity of all
SPLITS Certificates, will depend on the rate of
payment of principal (including prepayments) of
the mortgage loans underlying the
Certificates. The mortgage loans underlying
the Certificates are conventional mortgage
loans and can be prepaid at any time without
penalty. The rate of payment of principal varies
significantly from time to time and between pools
of mortgage loans at any time and will be affected
by a variety of factors.
The yield to maturity on the Class -2 SPLITS, which
are being offered without any original principal
amount, is extremely sensitive to the rate of
payment of principal of the mortgage loans
underlying the Certificates and may fluctuate
significantly from time to time. Investors should
fully consider the associated risks, including the
risk that if the rate of principal payment is
rapid such investors may not recoup their initial
investment. See "Yield Considerations".
OPTIONAL TERMINATION...... The mortgage loans underlying the Certificates
are subject to repurchase at the option of at such
time as the outstanding principal balance of such
mortgage loans is less than 10% of their
outstanding principal balance as of . The
Depositor may, in the event such option is
exercised, or otherwise, at such time as the
outstanding principal balance of the
Certificates is less than 10% of their
aggregate principal balance as of the Cut-off Date
purchase the SPLITS Certificates, in whole, but
not in part, at the purchase price set forth
herein. See "Description of the
Certificates--Optional Termination" herein.
LEGAL INVESTMENT.......... The SPLITS Certificates constitute "mortgage-
related securities" for purposes of the Secondary
Mortgage Market Enhancement Act (the "Enhancement
Act"), and, as such, are legal investments for
certain
</TABLE>
S-4
<PAGE>
<PAGE>
<TABLE>
<S> <C>
entities to the extent provided in the Enhancement
Act. See "Legal Investment" in the Prospectus.
TRUSTEE...................
. See
"Description of the Certificates--Trustee" herein.
CERTIFICATE RATING........ It is a condition of issuance of the SPLITS
Certificates that they be rated " " by the
Rating Agency prior to issuance. See "Rating"
herein.
ERISA CONSIDERATIONS...... See "ERISA Considerations" in the Prospectus.
TAX ASPECTS............... See "Certain Federal Income Tax Consequences--
General"; "--Non-REMIC Trust Funds" in the
Prospectus. Purchasers of Class A-1 Certificates
should see "Certain Federal Income Tax
Consequences--Non-REMIC Trust Funds--Taxation of
Owners of Trust Fractional Certificates" and "--
Taxation of Owners of Trust Fractional
Certificates--Application of Stripped Bond Rules"
in the Prospectus for discussions of certain tax
considerations particular to the Class A-1
Certificates. Purchasers of Class A-2 Certificates
should see "Certain Federal Income Tax
Consequences--Non-REMIC Trust Funds-- Taxation of
Owners of Trust Interest Certificates" in the
prospectus for discussions of certain tax
considerations particular to the Class A-2
Certificates.*
</TABLE>
- --------
*If the Prospectus Supplement for a Series of Certificates provides that Stroock
& Stroock & Lavan LLP, New York, New York, will pass upon the material federal
income tax consequences of the Certificates for the Depositor, then such
Prospectus Supplement will contain tax disclosure substantially similar to the
disclosure set forth in Version E under "Summary of Terms--Tax Aspects" and
"Certain Federal Income Tax Consequences."
S-5
<PAGE>
<PAGE>
[RISK FACTORS]
[Description of Risk Factors to be added as appropriate]
DESCRIPTION OF THE CERTIFICATES
THE CERTIFICATES
The Certificates are each proportionately based upon and backed by a pool of
conventional oneto four-family residential mortgage loans, originated and
serviced by , and certain related property conveyed to the trust by .
On the Closing Date, the Depositor will deliver to the Trustee Certificates
having an aggregate principal balance of $[ ] (subject to a permitted
variance of up to 5%) and pass-through rates of [ ]%. The mortgage loans
underlying such Certificates are expected to have a weighted average
coupon of approximately % per annum based upon actual information regarding
the coupon rates on the mortgage loans underlying the Certificates that the
Depositor anticipates delivering to the Trustee.
The Certificates are expected to have a weighted average remaining term
to maturity of approximately years based upon actual information regarding
the remaining terms to maturity of the mortgage loans underlying the
Certificates that the Depositor anticipates delivering to the Trustee.
Using such Certificates, the final payment thereon will not be later
than , .
The information presented in this section has been derived from the Current
Report on Form 8-K filed by with respect to the Certificates and
certain other publicly available statistical information regarding the
Certificates and is derived from the expected balances as of the Cut-off
Date of the mortgage loans underlying the Certificates, such balances
being estimated using the method customarily employed by the Depositor.
[Prospective investors should be aware that the Depositor may, in certain
unforeseeable circumstances, deliver to the Trustee Certificates having
characteristics different from those described herein.] Specific information
with respect to the Certificates will be forth in a Current Report on
Form 8-K that will be filed by the Depositor, on behalf of the Trust, with the
Securities and Exchange Commission within 15 days after the issuance of the
SPLITS Certificates. [Set forth additional information with respect to the
Certificates.] [A copy of the Prospectus with respect to the
Certificates will be made available to any registered holder of a SPLITS
Certificate upon written request of such Certificateholder directed to .]
YIELD CONSIDERATIONS
PREPAYMENT EXPERIENCE
Because principal payments on the mortgage loans underlying the Certificates
will be passed through to the holders of the Class -1 SPLITS and will reduce
the notional amount of the Class -2 SPLITS, the rate of payment of principal
of the Class -1 SPLITS and the aggregate amount of distributions on Class -1
SPLITS and Class -2 SPLITS will be directly related to the rate of payment of
principal of the mortgage loans underlying the Certificates. The rate of
principal payments on the underlying mortgage loans will in turn be affected
by the rate of principal prepayments thereon (including, for this purpose,
payments resulting from liquidations of the mortgage loans due to defaults,
casualties, condemnations or other dispositions). The mortgage loans are
conventional and can be prepaid at any time without penalty. Prepayments with
respect to the Certificates may also occur as a result of guaranty
payments and the optional repurchase provision on the Certificates.
Accordingly, the rate of prepayments on the underlying mortgage loans and rate
of payment of principal of the SPLITS Certificates will depend upon future
events and a variety of factors, and no assurance can be given as to either
such rate.
The yield to maturity of any SPLITS Certificates will be affected by the
rate of payment of principal of the Certificates. Specifically, as the
SPLITS Certificates belonging to Class -1 SPLITS are being offered at
significant discounts from their original principal amounts, if the purchaser
of a Class -1 SPLITS
S-6
<PAGE>
<PAGE>
Certificates calculates its anticipated yield to maturity based on an assumed
rate of payment of principal that is faster than that actually received on the
Certificates, its actual yield to maturity will be lower than that so
calculated. Conversely, as the SPLITS Certificates belonging to Class -2
SPLITS are being offered without any original principal amount, if the
purchaser of a Class -2 SPLITS Certificate calculates its anticipated yield to
maturity based on an assumed rate of payment of principal that is slower than
that actually received on the Certificates, its actual yield to maturity
will be lower than that so calculated.
The timing of changes in the rate of prepayments on the mortgage loans under
the Certificates may significantly affect an investor's actual yield to
maturity, even if the average rate of principal payments is consistent with an
investor's expectation. In general, the earlier a prepayment of principal on
the mortgage loans underlying the Certificates 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 SPLITS Certificates may not be offset by a subsequent like
reduction (or increase) in the rate of principal payments.
[BECAUSE THE CLASS -1 SPLITS ARE BEING OFFERED AT A DISCOUNT FROM THEIR
ORIGINAL PRINCIPAL AMOUNT, THE YIELD TO MATURITY THEREON WILL BE SENSITIVE TO
THE RATE OF PRINCIPAL PAYMENTS ON THE MORTGAGE LOANS UNDERLYING THE
CERTIFICATES.]
BECAUSE THE CLASS -2 SPLITS ARE BEING OFFERED WITHOUT ANY PRINCIPAL AMOUNT,
THE YIELD TO MATURITY ON THE CLASS -2 SPLITS WILL BE EXTREMELY SENSITIVE TO
PREPAYMENT EXPERIENCE ON THE MORTGAGE LOANS UNDERLYING THE CERTIFICATES AND
MAY FLUCTUATE SIGNIFICANTLY FROM TIME TO TIME. PROSPECTIVE INVESTORS IN THE
CLASS -2 SPLITS SHOULD FULLY CONSIDER THE ASSOCIATED RISKS, INCLUDING THE RISK
THAT IF THE RATE OF PAYMENT IS RAPID SUCH INVESTORS MAY NOT FULLY RECOUP THEIR
INITIAL INVESTMENT.
Prepayments on mortgage loans are commonly measured relative to a prepayment
standard or model. The model used in this Prospectus Supplement, the Standard
Prepayment Assumption ("SPA"), represents an assumed rate of prepayment each
month relative to the then outstanding principal balance of a pool of new
mortgage loans. SPA 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 an additional 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, SPA assumes a
constant prepayment rate of 6% per annum. SPA does not purport to be either a
historical description of the prepayment experience of any pool of mortgage
loans, or of the Mortgage Loans in the Mortgage Pool.
The following table illustrates, in general, the effect of prepayment rates
on the timing and amount of distributions on each Class of SPLITS Certificates
and their resulting weighted average lives. The table does not purport to
represent the anticipated rate of prepayment on the mortgage loans underlying
the Certificates or the resulting anticipated rate of distributions of
each Class of the SPLITS Certificates.
The table sets forth the projected annual aggregate distributions that would
be made on the Class -1 and Class -2 SPLITS Certificates, and their resulting
weighted average lives, based on various assumed percentages of SPA. The
column headed "0%" assumes that no mortgage loans underlying the
Certificates are prepaid before maturity. The columns headed " %", " %"
and " %" assume that prepayments are made at the specified percentages of SPA.
It has been assumed in preparing the table that (i) the Certificates consist
of $ principal amount of % Certificates, (ii) the mortgage loans underlying
the Certificates have the characteristics described above in "Description of
the Certificates," (iii) all mortgage loans are prepaid at the indicated
percentage of SPA for the life of the Certificates, (iv) the weighted average
remaining term to maturity of the mortgage loans is years, (v) the interest
rate on each mortgage loan is . % in excess of the pass-through rate on
the related Certificate, and (vi) the Certificates are not repurchased at
the option of or the SPLITS Certificates are not repurchased at the
option of Depositor.
S-7
<PAGE>
<PAGE>
PROJECTED ANNUAL AGGREGATE DISTRIBUTIONS ON THE SPLITS CERTIFICATES (THOUSANDS
OF DOLLARS)
<TABLE>
<CAPTION>
CLASS -1 SPLITS CLASS -2 SPLITS
------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDING 0% SPA % SPA % SPA % SPA 0% SPA % SPA % SPA % SPA
- ----------- ------ ----- ----- ----- ------ ----- ----- -----
$ $ $ $ $ $ $ $
------ ----- ----- ----- ------ ----- ----- -----
Total distributions.......... $ $ $ $ $ $ $ $
Weighted average life
(years)(1)...................
</TABLE>
- --------
(1) The weighted average of life of the Class -2 SPLITS which is assumed to be
equal to the weighted average life of the Class -1 SPLITS, is determined
by (i) multiplying the amount of each assumed principal distribution by
the number of years from the date of issuance of the SPLITS Certificates
to the related Distribution Date, (ii) summing the results and (iii)
dividing the sum by the total principal distributions on the SPLITS
Certificates.
The characteristics of the mortgage loans underlying the Certificates, will
not correspond exactly to those assumed in preparing the statistics above. The
total cash flows of the Class -2 SPLITS will therefore differ from those set
forth above even if all of the mortgage loans prepay monthly at the related
assumed prepayment rate. In addition, it is not likely that any mortgage loan
will repay at a constant rate until maturity or that all of the mortgage loans
will prepay at the same rate, and the timing of changes in the rate of
prepayments may significantly affect the total cash flow received by Holder of
a Class -2 SPLITS Certificate.
The Depositor makes no representation that the mortgage loans will prepay in
the manner or at any of the rates assumed in the table set forth above. Each
investor must make his own decision as to the appropriate prepayment
assumption to be used in deciding whether or not to purchase any of the
SPLITS.
The actual rate of principal prepayments on pools of mortgage loans is
influenced by a variety of economic, tax, geographic, demographic, social,
legal and other factors and has fluctuated considerably in recent years. See
"Yield Considerations" in the Prospectus. In addition, the rate of principal
prepayments on the mortgage loans underlying the Certificates may differ
among pools of mortgage loans at any time because of specific factors relating
to the mortgage loans in the particular pool, including, among other things,
the age of the loans, the interest rates on the loans, the terms to stated and
remaining maturity of the loans, the geographic locations of the properties
securing the loans, the extent of the mortgagors' equity in real property
securing the loans, changes in mortgagors' housing needs, job transfers,
unemployment and servicing decisions.
Generally, however, if prevailing interest rates vary significantly from the
interest rates on the mortgage loans underlying the Certificates, the
Certificates are likely to be subject to higher or lower prepayment rates
than if prevailing rates remain at or near the interest rates on the mortgage
loans underlying the Certificates. In general, if prevailing interest
rates fall significantly below the interest rates on the mortgage loans
underlying the Certificates, the Certificates are likely to be
subject to higher prepayment rates than if prevailing rates remain at or above
the interest rates on the mortgage loans underlying Certificates.
Conversely, if interest rates rise above the interest rates on the mortgage
loans underlying the Certificates, the rate of prepayment would be
expected to decrease.
S-8
<PAGE>
<PAGE>
The Depositor believes that the historical payment experience on such
securities is not necessarily indicative of the future payment experience on
the mortgage loans underlying the Certificates. Since the rate of
principal payments (including prepayments) on such mortgage loans will
significantly affect the yield to maturity on the SPLITS Certificates,
prospective investors are urged to consult their investment advisors as to
both the anticipated rate of future principal payments (including prepayments)
on the underlying mortgage loans and the suitability of the SPLITS
Certificates to their investment objectives.
PAYMENT DELAY
The effective yield to Certificateholders will be lower than the yield
otherwise produced by the Annual Rate and purchase price since the monthly
distributions on the Certificates will not be paid to the Holders until
on or after the [last] day of the month next succeeding the month of accrual.
See "Pooling and Servicing Agreement" in the Prospectus. To the extent that a
monthly distribution on a Certificate does not become cleared funds in
the hands of the Trustee prior to 1:00 p.m. on the Distribution Date in the
month such distribution is required to be made by the issuer of such
Certificates, the effective yield to the Certificateholders will be
further reduced since such distribution will not be paid to the Holders until
the Distribution Date in the next succeeding month. See "Description of the
SPLITS Certificates."
DESCRIPTION OF THE SPLITS CERTIFICATES
GENERAL
The SPLITS Certificates will be issued pursuant to a deposit trust
agreement, dated as of , 19 (the "Deposit Trust Agreement"), between
, as trustee (the "Trustee"), and the
Depositor. Pursuant to the Deposit Trust Agreement, the Depositor will
transfer the Certificates to the Trustee in exchange for the SPLITS
Certificates on or about , 19 (the "Delivery Date"). The
Certificates will be registered in the name of the Trustee and payments
on the Certificates will be made directly to the Trustee.
The SPLITS Certificates are to be issued in two classes. Class -1 SPLITS
Certificates (the "Class -1 SPLITS") and Class -2 SPLITS Certificates (the
"Class -2 SPLITS"). The Class -1 SPLITS evidence the Holders' beneficial
ownership of an undivided interest in all of the principal payments of the
Certificates. The Class -2 SPLITS evidence the Holders' beneficial
ownership of an undivided interest in all of the interest payments on the
Certificates after deduction of the Servicing Fee (as defined herein).
Payments of interest on the Class -2 SPLITS will be passed through monthly to
Holders thereof at a % Annual Rate on the outstanding notional amount of such
SPLITS Certificates as of the month preceding the month in which the related
distribution of interest is to be made.
The outstanding principal amount or notional amount, as the case may be, of
each Class of SPLITS Certificates for any month will be equal to the aggregate
outstanding principal balance of the Certificates for that month. The
notional amount is used solely for purposes of the determination of interest
payments and certain other rights and obligations of Holders of Class -2
SPLITS, and Holders of Class -2 SPLITS shall not have any interest in, or be
entitled to any payment with respect to, principal payments on the
Certificates. The aggregate original principal amount of the Class -1
SPLITS and the aggregate original notional amount of the Class -2 SPLITS will
each be $ at the Cut-off Date.
Each Class -1 SPLITS Certificate will evidence a Percentage Interest in the
monthly distributions of principal of the Certificates. Each Class -2
SPLITS Certificate will evidence a Percentage Interest in the monthly
distributions of interest on the Certificates, net of the Servicing Fee.
The Percentage Interest evidenced by each SPLITS Certificate will be
determined by dividing the denomination of such SPLITS Certificate by the
aggregate denominations of all SPLITS Certificates of the same Class. On each
Distribution Date, the Trustee will distribute to each Holder of a SPLITS
Certificate of a Class an amount equal to the product
S-9
<PAGE>
<PAGE>
of such Certificateholder's Percentage Interest evidenced by such SPLITS
Certificate and the interest of such Class in the Mortgage Certificate
Principal Distribution or the Mortgage Certificate Interest Distribution, as
applicable.
The SPLITS Certificates will be issued only in fully registered form. The
Class -1 SPLITS will be issued in minimum denominations of $ and multiples
of $ in excess thereof. The Class -2 SPLITS will be issued in minimum
denominations of $ and multiples of $ in excess thereof.
Principal and interest at a % pass-through rate in respect of the
Certificates is required to be paid by the issuer of the Certificates by
check mailed directly to the registered holder thereof on the day of each
month. Payments of principal and interest will be collected by the Trustee and
held in a segregated non-interest-bearing trust account in the name of and for
the benefit of the Trust. Distributions on the Certificates that are
received by the Trustee and become cleared funds in the hands of the Trustee
prior to 1:00 p.m. on the day of the month or, if such a day is not a
business day, on the next business day, will be distributed to
Certificateholders on such day (each, a "Distribution Date"). Distributions on
the Certificates that are received by the Trustee and become cleared
funds in the hands of the Trustee at or after 1:00 p.m. on any Distribution
Date will be distributed to the Certificateholders on the Distribution Date in
the next month. In each case the distribution will be made to the Holders of
record of the SPLITS Certificates on the close of business on the last
business day of the month preceding the month in which such distribution is
made (the "Record Date"). The first Distribution Date will be , 19 .
Distribution of principal and interest as set forth above will be made by the
Trustee by check mailed to each Certificateholder entitled thereto at the
address appearing in the Certificate Register to be maintained with the
Trustee or, at the request of a Certificateholder, by wire transfer to the
account of such Certificateholder; provided, however, that the final
distribution in retirement of a SPLITS Certificate will be made only upon
presentation and surrender of the SPLITS Certificate at the office of the
Trustee specified in the notice to Certificateholders of such final
distribution. Wire transfers will be made at the expense of Certificateholders
requesting such wire transfers by deducting a wire transfer fee from the
related transfer.
The SPLITS Certificates will be transferable and exchangeable on the
Certificate Register at the office or agency of the Trustee maintained for
that purpose in the City of New York. SPLITS Certificates surrendered to the
Trustee for registration of transfer or exchange must be accompanied by a
written instrument of transfer in form satisfactory to the Trustee. No service
charge will be made for any registration of transfer or exchange of SPLITS
Certificates, but payment of a sum sufficient to cover any tax or other
governmental charge may be required. Such office or agency is currently
located at .
TRUSTEE
The Trustee for the Certificates will be
, a bank organized and existing under the laws of
with its principal office located at
.
SERVICING FEE
The Deposit Trust Agreement provides for a servicing fee (the "Servicing
Fee") in an amount equal to % of each interest distribution on the
Certificates. The Servicing Fee will be deducted by the Trustee prior to
making any payment of interest to Holders of the Class -2 SPLITS.
OPTIONAL TERMINATION
The Deposit Trust Agreement provides that the Depositor may purchase SPLITS
Certificates at such time as (i) the mortgage loans underlying the
Certificates are repurchased by , or (ii) the aggregate unpaid
principal balance of the Certificates is less than [10]% of the aggregate
unpaid principal balance of the Certificates as of the Cut-off Date.
S-10
<PAGE>
<PAGE>
In such event the Class -1 SPLITS will be repurchased at % of their
outstanding principal amount and the Class -2 SPLITS will be repurchased at %
of their outstanding notional amount, in each case, as of the date of such
repurchase. In no event will the Trust continue beyond the expiration of 21
years from the death of the last survivor of the persons named in the Deposit
Trust Agreement.
RATING
It is a condition to the issuance of the SPLITS Certificates that they be
rated " " by the Rating Agency. Such rating addresses the likelihood that
the holders of the SPLITS Certificates will receive payments required under
the Deposit Trust Agreement. In assigning such a rating to mortgage pass-
through certificates, the Ratng Agency takes into consideration the credit
quality of the mortgage pool, including any credit support providers,
structural and legal aspects associated with such certificates, and the extent
to which the payment stream on such mortgage pool is adequate to make required
payments on such certificates. Such rating does not, however, represent an
assessment of the likelihood that principal prepayments will be made by
mortgagors or the degree to which such payments might differ from that
originally anticipated. As a result, holders of the SPLITS Certificates might
suffer a lower than anticipated yield, and holders of the Class -2 SPLITS
might fail, in circumstances of extreme prepayment, to recoup their original
investment.
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.
S-11
<PAGE>
<PAGE>
[ERISA CONSIDERATIONS]
[Describe whether any exemption from "plan asset" treatment is available
with respect to the Series.]
[State whether the Series is an Exempt or a Nonexempt Series (see "ERISA
Considerations--Prohibited Transaction Class Exemption" in the Prospectus).]
To qualify for exemption under PTCE 83-1 (see "ERISA--Prohibited
Transaction Class Exemption" in the Prospectus), a certificate of an Exempt
Series must entitle its holder to pass-through payments of both principal and
interest on the Mortgage Loans. Because holders of Class -1 or Class -2
Certificates are only entitled to pass-through payments of principal (but not
interest) or interest (but not principal), PTCE 83-1 will not exempt Plans
that acquire the Class -1 or Class -2 Certificates from the prohibited
transaction rules of ERISA. Any Plan fiduciary who proposes to cause a Plan
to purchase Class -1 or Class -2 Certificates should consult with its
counsel with respect to the potential consequences under ERISA and the Code
of the Plan's acquisition and ownership of such Certificates. However, one of
the other PTCE's or the Underwriter's PTE may be applicable. See "ERISA
Considerations--Prohibited Transaction Class Exemption" in the Prospectus.
UNDERWRITING
The Depositor has entered into an Underwriting Agreement with [several
Underwriters, for whom] Credit Suisse First Boston Corporation, an affiliate of
the Depositor [, is acting as Representative.] The [Underwriter[s] named below]
[has] [have severally] agreed to purchase from the Depositor the [entire]
[following respective] principal amount[s] of the Class SPLITS:
<TABLE>
<CAPTION>
CLASS -1 CLASS -2
[UNDERWRITER SPLITS SPLITS TOTAL
- -------------------------------- ------------ ------------ ---------
<S> <C> <C> <C>
Credit Suisse First Boston Corporation..... $ $ $
Total ................................... $ $ $ ]
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriter[s] [is] [are] subject to certain conditions precedent, and that
the Underwriter[s] will be obligated to purchase the entire principal amount
of the SPLITS Certificates if any are purchased.
The Depositor has been advised [by the Representative] that the
Underwriter[s] prospose[s] to offer each Class of the SPLITS Certificates to
the public initially at the public offering prices set forth on the cover
page of this Prospectus Supplement [, and through the Representative,] to
certain dealers at such prices less the following concessions and that the
Underwriter[s] and such dealers may allow the following discounts on sales to
certain other dealers:
<TABLE>
<CAPTION>
CONCESSION DISCOUNT
(PERCENT OF (PERCENT OF
GROSS GROSS
PROCEEDS) PROCEEDS)
------------- -------------
<S> <C> <C>
Class -1 SPLITS ... % %
Class -2 SPLITS ... % %
</TABLE>
After the initial public offering, the public offering prices and
concessions and discounts to dealers may be changed by the [Representative]
[Underwriter].
S-12
VERSION D
<PAGE>
<PAGE>
The Depositor has agreed to indemnify the Underwriter[s] against certain
liabilities, including liabilities under the Securities Act of 1933.
[If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the attached Prospectus will also be used by the
Underwriter after the completion of the offering in connection with offers and
sales related to market-making transactions in the offered Securities in which
the Underwriter acts as principal. Sales will be made at negotiated prices
determined at the time of sale.]
All of the Certificates will be acquired in a privately negotiated
transaction by the Depositor from CS First Boston Corporation on terms
substantially similar to those that the Depositor would obtain in an arm's
length transaction. CS First Boston Corporation will have acquired such
Certificates in a privately negotiated transaction.
LEGAL MATTERS
The legality of the SPLITS Certificates will be passed upon for the Depositor
and for the Underwriter[s] by ____________________________________________ and
the material federal income tax consequences of the SPLITS Certificates will be
passed upon for the Depositor by _____________________________________________.
USE OF PROCEEDS
The Depositor will apply substantially all of the net proceeds of the
offering of the SPLITS Certificates towards the simultaneous purchase of the
Certificates underlying the SPLITS Certificates.
S-13
<PAGE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER +
+TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF +
+THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD +
+BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 19
- --------------------------------------------------------------------------------
P R O S P E C T U S S U P P L E M E N T
(To Prospectus dated , 19 )
- --------------------------------------------------------------------------------
[Version E]
$ (Approximate)
Credit Suisse First Boston Mortgage Securities Corp.
Depositor
ABS Manufactured Housing Contract Pass-Through Certificates, Series %
Pass-Through Rate
Principal and interest payable on the th day of each month, beginning ,
19
-----------
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF CREDIT
SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP. OR ANY AFFILIATE THEREOF. [NEITHER
THE CERTIFICATES NOR THE UNDERLYING CONTRACTS ARE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.]
-----------
The ABS Manufactured Housing Contract Pass-Through Certificates, Series,
% Pass-Through Rate (the "Certificates") offered hereby evidence undivided
fractional interests in a trust to be created by Credit Suisse First Boston
Mortgage Securities Corp. (the "Depositor") on or about , 199 (the "Trust").
The Trust property will consist of a pool of [conventional] [FHA Insured] [VA-
guaranteed] [fixed-rate] [variable-rate] manufactured housing conditional sales
contracts and installment loan agreements (the "Contracts") and certain related
property to be conveyed to the Trust by the Depositor (the "Trust Fund"). The
Contracts will be transferred to the Trust, pursuant to a Pooling and Servicing
Agreement (as defined herein), dated as of , 199 , by the Depositor in exchange
for the Certificates and are more fully described in this Prospectus Supplement
and in the accompanying Prospectus. The Certificates offered by this Prospectus
Supplement constitute a separate series of the Certificates being offered by the
Depositor from time to time pursuant to its Prospectus dated , 199 , which
accompanies this Prospectus Supplement and of which this Prospectus Supplement
forms a part. The Prospectus contains important information regarding this
offering that is not contained herein, and prospective investors are urged to
read the Prospectus and this Prospectus Supplement in full.
The Underwriter[s] [do[es] not] intend[s] to make a secondary market for the
Certificates [but [is] [are] under no obligation to do so]. There can be no
assurance that a secondary market will develop, or if it does develop, that it
will continue.
[The Depositor has elected to treat the Trust Fund as a Real Estate Mortgage
Investment Conduit (a "REMIC"). See "Certain Federal Income Tax Consequences"
in the Prospectus.]
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospective investors should consider the factors set forth under Risk Factors
on Page S-7 of this Prospectus Supplement.
Prospective investors should consider the limitations discussed under ERISA
Considerations herein and in the accompanying Prospectus.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to the
Public (1) Discount Depositor (1)(2)
- ---------------------------------------------------------
<S> <C> <C> <C>
Per Certificate % % %
- ---------------------------------------------------------
Total $ $ $
- ---------------------------------------------------------
- ---------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, at the applicable rate from , 19 .
(2) Before deduction of expenses payable by the Depositor estimated at $ .
-----------
The Certificates are offered by the [several] Underwriter[s] when, as and if
issued and accepted by the Underwriter[s] and subject to [their] [its] right to
reject orders in whole or in part. It is expected that the Certificates, in
definitive fully registered form, will be ready for delivery on or about ,
199 .
Credit Suisse First Boston
- --------------------------------------------------------------------------------
The date of this Prospectus Supplement is , 19 .
<PAGE>
<PAGE>
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
CERTIFICATES OFFERED HEREBY. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS, AND PURCHASERS ARE URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES MAY NOT BE CONSUMMATED
UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CERTIFICATES
AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
UNTIL , 19 , ALL DEALERS AFFECTING TRANSACTIONS IN THE CERTIFICATES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS SUPPLEMENT AND A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
[IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATION, THIS
PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS WILL ALSO BE USED BY THE
UNDERWRITER AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND
SALES RELATED TO MARKET-MAKING TRANSACTIONS IN THE OFFERED SECURITIES IN WHICH
THE UNDERWRITER ACTS AS PRINCIPAL. SALES WILL BE MADE AT NEGOTIATED PRICES
DETERMINED AT THE TIME OF SALE.]
----------------
AVAILABLE INFORMATION
The Trust will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information filed by the Trust can be inspected and copied at the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C.,
and at the Commission's regional offices at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite
1300, New York, New York 10048. Copies of such information can be obtained from
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
(http://www.sec.gov).
S-2
<PAGE>
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the Prospectus. Capitalized terms used in this Prospectus Supplement and not
defined shall have the meanings given in the Prospectus.
<TABLE>
<S> <C>
SECURITIES OFFERED........ ABS Manufactured Housing Contract Pass-Through
Certificates, Series , % Pass-Through Rate (the
"Certificates").
PRINCIPAL AMOUNT.......... $ (approximate: subject to a permitted variance
of up to %).
DEPOSITOR................. Credit Suisse First Boston Mortgage Securities Corp.
(the "Depositor").
MASTER SERVICER...........
DENOMINATIONS............. The minimum denomination of a Certificate (a
"Single Certificate") will initially represent
approximately $ aggregate principal amount of
Contracts (as hereinafter defined).
CUT-OFF DATE.............. , 19 .
DELIVERY DATE............. On or about , 19 .
INTEREST.................. Passed through monthly at the rate of % per annum
(the "Pass-Through Rate"), on the day of each
month (each, a "Distribution Date") commencing
, 19 to those persons in whose name the
Certificates are registered as of [the last
Business Day of the month preceding the
Distribution Date] (the "Record Date"). [The Pass-
Through Rate for each Contract will equal the
annual percentage rate (the "APR") then borne by
such Contract less a fee for the servicing of the
Contract (the "Servicing Fee") [, less a fee for
the Limited Guarantee (the "Limited Guarantee
Fee")] [and less the excess interest (the "Excess
Interest")], as described herein under
"Description of the Certificates--Servicing
Compensation, [Limited Guarantee Fee] and Payment
of Expenses."
PRINCIPAL (INCLUDING
PREPAYMENTS).............. Passed through monthly on the Distribution Date,
commencing , 19 .
RISK FACTORS.............. For discussion of risk factors that should be
considered with respect to an investment in the
Certificates, see "Risk Factors" herein and in the
related Prospectus.
CONTRACT POOL............. [Conventional] [FHA-insured] [VA-guaranteed] [fixed
rate] [variable rate] manufactured housing
conditional sales contracts and installment loan
agreements (collectively, the "Contracts") secured
by manufactured homes (as described herein) (the
"Manufactured Homes") [located in the states of
, and ]. The Contracts have been
originated [or acquired] by . See
"Description of the Contract Pool" herein.
[LIMITED GUARANTEE........ Subject to the limitations described below, the
Limited Guarantee will cover the difference
between the amount available for distribution to
the Certificateholders [including Advances] on any
[monthly] Distribution Date and the amount due the
Certificateholders on such Distribution Date to
the extent such shortfall is attributable to
delinquent payments by borrowers on the Contracts
(each, an "Obligor") and losses on Defaulted
Contracts (as hereinafter
</TABLE>
S-3
<PAGE>
<PAGE>
<TABLE>
<S> <C>
defined). The first $ of the Guarantee Amount,
as defined below, will consist of the general
guarantee obligation of . The obligation of
will be backed by the Standby Letter of
Credit issued by and confirmed by , (as
described below). The balance of the Guarantee
Amount consists of the Direct Letter of Credit
issued by and confirmed by , described
below (the Standby Letter of Credit and the Direct
Letter of Credit sometimes collectively are
referred to herein as the "Letters of Credit").
The amount of the Limited Guarantee (the
"Guarantee Amount") on the first Distribution Date
will be $ . Thereafter, the Guarantee Amount
available on any Distribution Date, . See "The
Limited Guarantee."]
The Standby Letter of Credit (the "Standby Letter
of Credit") is an irrevocable obligation
supporting the obligation of under the
Limited Guarantee. If does not make a payment
required of it under the Limited Guarantee, the
Trustee immediately will draw such amount under
the Standby Letter of Credit. If for any reason
does not honor a draw under the Standby
Letter of Credit, is obligated to honor the
Standby Letter of Credit.
The Direct Letter of Credit (the "Direct Letter of
Credit") will be an irrevocable direct pay letter
of credit and will be issued by and confirmed
by .
[The initial Letters of Credit will expire no
earlier than .] The Master Servicer will be
required to replace or renew the Letters of Credit
prior to their expiration until the Trust Fund is
terminated. In the event the Master Servicer does
not renew or replace a Letter of Credit, prior to
its expiration, the Trustee will draw under such
Letter of Credit an amount equal to the required
coverage of that Letter of Credit on such date and
will transfer such funds to a separate trust fund
(the "Limited Guarantee Fund"). Thereafter the
Trustee will draw upon such funds on each
Distribution Date if and to the extent draws would
have been required under the corresponding Letter
of Credit. The Letters of Credit will not be
available to support any obligations of the
Depositor, the Master Servicer or the Unaffiliated
Seller. See "The Limited Guarantee."]
[LETTER OF CREDIT......... The maximum liability of [ ] under an
irrevocable standby letter of credit for the
Contract Pool (the "Letter of Credit"), net of
unreimbursed payments thereunder, will be no more
than [ %] of the initial aggregate principal
balance of the Contract Pool (the "Letter of
Credit Percentage"). The maximum amount available
to be paid under the Letter of Credit will be
determined in accordance with the Pooling and
Servicing Agreement referred to herein. The
duration of coverage and the amount and frequency
of any reduction in coverage will be in compliance
with the requirements established by the Rating
Agency, in order to obtain a rating in one of the
two highest rating categories of such Rating
Agency. The amount available under the Letter of
Credit shall be reduced by the amount of
unreimbursed payments thereunder. See "Credit
Support--Letters of Credit" in the Prospectus.]
</TABLE>
S-4
<PAGE>
<PAGE>
<TABLE>
<S> <C>
HAZARD INSURANCE.......... All of the Contracts will be covered by standard
hazard insurance policies with respect to each
Manufactured Home in an amount at least equal to
[the lesser of its maximum insurable value or the
remaining principal balance on the related
Contract]. The standard hazard insurance policies,
at a minimum, will provide for fire, lightning,
windstorm and extended coverage on terms and
conditions customary in manufactured housing
hazard insurance policies. See "Description of the
Certificates--Hazard Insurance Policies" herein.
[OPTIONAL TERMINATION..... The [Depositor] may, at its option, repurchase from
the Trust all Contracts remaining outstanding at
such time as the aggregate unpaid principal
balance of such Contracts is less than [10%] of
the aggregate principal balance of the Contracts
on the Cut-off Date. The repurchase price will
equal the aggregate unpaid principal balance of
such Contracts together with accrued interest
thereon at the Pass-Through Rate through the last
day of the month during which such repurchase
occurs, plus the appraised value of any property
acquired in respect thereof. [Any such repurchase
will be effected in compliance with the
requirements of Section 860F(a)(iv) of the
Internal Revenue Code of 1986 (the "Code") so as
to constitute a "qualifying liquidation"
thereunder.] See "Description of the
Certificates--Termination; Repurchase of
Certificates" herein.
ADVANCES.................. The Servicers of the Contracts (and the Master
Servicer, with respect to each Contract that it
services directly and otherwise, to the extent the
related Servicer does not do so) will be obligated
to advance delinquent installments of principal
and interest on the Contracts under certain
circumstances. See "Description of the
Certificates--Advances" in the Prospectus.
SECURITY INTERESTS AND
OTHER ASPECTS OF THE In connection with the transfer of the Contracts
CONTRACTS................. from the Depositor to the Trustee, the Depositor
has assigned the security interests in the
Manufactured Homes securing the Contracts to the
Trustee. The [Master Servicer] shall take such
steps as are necessary to perfect and maintain
perfection of such security interest in each
Manufactured Home and, to the extent such interest
is perfected, the Trustee will have a prior claim
over subsequent purchasers of the Manufactured
Home and holders of subsequently perfected
security interests. Under most state laws
Manufactured Homes constitute personal property,
and perfection of a security interest in the
Manufactured Home is obtained, depending on
applicable state law, either by noting the
security interest on the certificate of title for
the Manufactured Home or by filing a financing
statement under the Uniform Commercial Code. [The
certificates of title or Uniform Commercial Code
financing statements will not be amended to
identify the Trustee as the new secured party
because of the administrative burden and expense.]
In the absence of such an endorsement, the Trustee
may not have a perfected security interest in
Manufactured Homes registered in certain states.
In addition, if the Manufactured Home were
relocated to another state without
</TABLE>
S-5
<PAGE>
<PAGE>
<TABLE>
<S> <C>
reperfection of the security interest, or if the
Manufactured Home were to become attached to its
site and a determination were made that the
security interest was subject to real estate title
and recording laws, or as a result of fraud or
negligence, the Trustee could lose its prior
preferred security interest in a Manufactured
Home. Federal and state consumer protection laws
impose requirements upon creditors in connection
with extensions of credit and collections on
installment sales contracts, and certain of these
laws make an assignee of such a contract, such as
the Trustee, liable to the obligor thereon for any
violation by the lender. The [Master Servicer] has
agreed to repurchase any Contract as to which it
has failed to perfect a security interest in the
Manufactured Home securing such Contract, or as to
which a breach of federal or state laws exists if
such breach materially adversely affects the
Trustee's interest in the Contract, unless such
failure or breach has been cured within [90] days
from notice of such breach. See "Special
Considerations" herein and "Certain Legal Aspects
of the Mortgage Loans and Contracts--The
Contracts" in the Prospectus.
TRUSTEE...................
[ ]
CERTIFICATE RATING........ It is a condition of issuance that the Certificates
be rated in one of the two highest rating
categories of a nationally recognized statistical
rating agency (the "Rating Agency").
ERISA CONSIDERATIONS...... See "ERISA Considerations" [in the Prospectus] and
herein.
LEGAL INVESTMENT.......... The Certificates constitute "mortgage related
securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984 (the "Enhancement
Act"), and, as such, are legal investments for
certain entities to the extent provided in the
Enhancement Act. See "Legal Investment" in the
Prospectus.
TAX ASPECTS...............
The Depositor [intends] [does not intend] to make
an election to treat the Trust Fund as a Real
Estate Mortgage Investment Conduit (a "REMIC"),
pursuant to the Internal Revenue Code of 1986. See
["Certain Federal Income Tax Consequences--
General"; ["--REMIC Trust Funds"] ["--Contract
Pools"] in the Prospectus, ["Certain Federal
Income Tax Consequences" herein.
[The extent to which the Contracts, and therefore
the Class [ ] Certificates, will be treated as
"qualifying real property loans" for mutual
savings banks or domestic building and loan
associations, "loans . . . secured by an interest
in real property" for domestic building and loan
associations, and "real estate assets" for real
estate investment trusts depends on certain facts
and circumstances not within the knowledge of the
Depositor. See "Certain Federal Income Tax
Consequences" herein.]
</TABLE>
S-6
<PAGE>
<PAGE>
RISK FACTORS
Prospective Certificateholders should consider, among other things, the
following factors in connection with the purchase of the Certificates:
1. General. An investment in the Certificates may be affected by, among
other things, a downturn in regional or local economic conditions. These
regional or local economic conditions are often volatile, and historically
have affected the delinquency, loan loss and repossession experience of the
Contracts. To the extent that losses on the Contracts are not covered by
[the Limited Guarantee] [the Letter of Credit] [or] applicable insurance
policies, if any, Certificateholders will bear all risk of loss resulting
from default by Obligors and must rely on the value of the Manufactured
Homes for recovery of the outstanding principal and unpaid interest of the
defaulted Contracts. See "The Trust Fund--The Contracts" in the Prospectus.
2. Limited Obligations. The Certificates will not represent an interest
in or obligation of the Depositor. The Certificates will not be insured or
guaranteed by [any government agency or instrumentality,] The First Boston
Corporation or any of its affiliates, including the Depositor, any Servicer
or the Master Servicer.
3. Limited Liquidity. There can be no assurance that a secondary market
will develop for the Certificates or, if it does develop, that it will
provide the holders of the Certificates with liquidity of investment or
that it will remain for the term of the Certificates.
[4. [Limited Guarantee] [Letter of Credit]. The Certificates will be
secured in part by the [Limited Guarantee] [Letter of Credit]. The
[Guarantee Amount] [Letter of Credit Percentage] will be an amount
initially equal to and will decline hereafter [by the amount of
unreimbursed payments thereunder]. The [Limited Guarantee] [Letter of
Credit] will cover delinquent payments by Obligors and losses on defaulted
Contracts. Delinquency on the Contracts may be affected by local, regional
and economic considerations. If delinquency levels are high and the
[Guarantee Amount] [Letter of Credit Percentage] is reduced to zero, the
Certificateholders will bear all losses on the Contracts. See ["The Limited
Guarantee"] ["Letter of Credit"].
5. Prepayment Considerations. The prepayment experience on the Contracts
may affect the average life of the Certificates. Prepayments on the
Contracts may be influenced by a variety of economic, geographic, social
and other factors, including repossessions, aging, seasonality and interest
rates of the Contracts. Other factors affecting prepayment of Contracts
include changes in housing needs, job transfers, unemployment and servicing
decisions. See "Maturity and Prepayment Considerations" in the Prospectus.
6. Security Interests and Other Aspects of the Contracts. Each Contract
is secured by a security interest in a Manufactured Home. Perfection of
security interests in the Manufactured Homes and enforcement of rights to
realize upon the value of the Manufactured Homes as collateral for the
Contracts are subject to a number of federal and state laws, including the
Uniform Commercial Code as adopted in each state (except Louisiana) and
each state's certificate of title statutes, but generally not its real
estate laws. The steps necessary to perfect the security interest in a
Manufactured Home will vary from state to state. In addition, numerous
federal and state consumer protection laws impose requirements on lending
under conditional sales contracts and installment loan agreements such as
the Contracts, and the failure by the lender or seller of goods to comply
with such requirements could give rise to liabilities of assignees for
amounts due under such agreements and claims by such assignees may be
subject to set-off as a result of such lender's or seller's noncompliance.
These laws would apply to the Trustee as assignee of the Contracts.
Pursuant to the Pooling and Servicing Agreement, the seller will warrant
that each Contract complies with all requirements of law and will make
certain warranties relating to the validity, subsistence, perfection and
priority of the security interest in each Manufactured Home securing a
Contract. If the [Limited Guarantee or] [Letter of Credit Percentage]
insurance policies are exhausted and recovery of amounts due on the
Contracts is dependent on repossession and resale of Manufactured Homes
securing Contracts that are in
S-7
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<PAGE>
default, certain other factors may limit the ability of the
Certificateholders to realize upon the Manufactured Homes or may limit the
amount realized to less than the amount due. See "Certain Legal Aspects of
the Mortgage Loans and Contracts--The Contracts" in the Prospectus.
[7. Louisiana Law. Any Contract secured by a Manufactured Home located in
Louisiana will be governed by Louisiana law rather than Article 9 of the
UCC. Louisiana laws provide similar mechanisms for perfection and
enforcement of security interests in manufactured housing used as
collateral for an installment sale contract or installment loan agreement.
Under Louisiana law, a manufactured home that has been affixed
permanently to real estate nevertheless will remain subject to the motor
vehicle registration laws unless the obligor and any holder of a security
interest in the property execute and file in the real estate records for
the parish in which the property is located a document converting the unit
into real property. A manufactured home that is converted into real
property, but then is removed from its site, can be converted back to
personal property governed by the motor vehicle registration laws if the
obligor executes and files various documents in the appropriate real estate
records and all mortgagees under real estate mortgages on the property and
the land to which it was affixed file releases with the motor vehicle
commissions.
So long as a manufactured home remains subject to the Louisiana motor
vehicle laws, liens are recorded on the certificate of title by the motor
vehicle commissioner and repossession can be accomplished by voluntary
consent of the obligor, executory process (repossession proceedings which
must be initiated through the courts but which involve minimal court
supervision) or a civil suit for possession. In connection with a voluntary
surrender, the obligor must be given a full release from liability for all
amounts due under the contract. In executory process repossessions, a
sheriff's sale (without court supervision) is permitted, unless the owner
brings suit to enjoin the sale, and the lender is prohibited from seeking a
deficiency judgment against the obligor unless the lender obtained an
appraisal of the manufactured home prior to the sale and the property was
sold for at least two-thirds of its appraised value.]
DESCRIPTION OF THE CONTRACT POOL
The contract pool (the "Contract Pool") will consist of [conventional] [FHA-
insured] [VA-guaranteed] fixed rate manufactured housing conditional sales
contracts and installment loan agreements (collectively, the "Contracts")
having an [approximate] aggregate principal balance as of the Cut-off Date of
$ , secured by manufactured homes (the "Manufactured Homes"). The
Manufactured Homes will consist of manufactured homes within the meaning of 42
United States Code, Section 5402(6), which defines a "manufactured home" as "a
structure, transportable in one or more sections, which in the traveling mode,
is eight body feet or more in width or forty body feet or more in length, or,
when erected on site, is three hundred twenty or more square feet, and which
is built on a permanent chassis and designed to be used as a dwelling with or
without a permanent foundation when connected to the required utilities, and
includes the plumbing, heating, air-conditioning, and electrical systems
contained therein; except that such term shall include any structure which
meets all the requirements of this paragraph except the size requirements and
with respect to which the manufacturer voluntarily files a certification
required by the Secretary of Housing and Urban Development and complies with
the standards established under this chapter."
The weighted average annualized percentage rate (individually, an "APR") of
the Contracts as of the Cut-off Date will be at least % but no more than %.
All Contracts will have APRs of at least % but no more than %. The weighted
average maturity of the Contracts, as of the Cut-off Date, will be at least
years but no more than years. All Contracts will have original maturities
of at least years but no more than years. None of the Contracts will
have been originated prior to or after , 19 . None of the Contracts will
have a scheduled maturity later than .
S-8
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<PAGE>
The Contracts will have the following characteristics as of the Cut-off Date
(expressed as a percentage of the outstanding aggregate principal balances of
the Contracts having such characteristics relative to the outstanding
aggregate principal balances of all Contracts):
Approximately % of the Contracts are secured by Manufactured Homes which
were new at the time the related Contract was originated and approximately
% of the Contracts are secured by Manufactured Homes which were used at
the time the related Contract was originated.
At least % of the Contracts will be Contracts each having outstanding
principal balances of less than $ .
No more than % of the Contracts will be Contracts each having
outstanding principal balances of more than $ .
No more than % of the Contracts will have had loan-to-value ratios at
origination (based on the retail sales prices of the unit or % of the
manufacturer's invoice price, if less, plus taxes, license fees and
insurance premiums in the case of a new Manufactured Home, or based on the
lesser of the total delivered sales price or the appraised value of the
unit, including taxes, fees and insurance, in the case of a used
Manufactured Home) in excess of %, and the Contracts have a weighted
average loan to value ratio as of the Cut-off Date of %.
The Contracts will be secured by Manufactured Homes located in the states
of . No more than [5]% of the Contracts will be secured by
Manufactured Homes located in any one five digit zip code or project.
[At the date of issuance of the Certificates, no Contract in the Contract
Pool was more than 30 days delinquent.]
[Description of the underwriting policies for conventional Contracts to
be provided.]
Specific information with respect to the Contracts will be available to
purchasers of the Certificates offered hereby at or before the time of
issuance of such Certificates. Such specific information will include the
precise amount of the aggregate principal balances of the Contracts
outstanding as of the Cut-off Date, and will also set forth tables reflecting
the following information regarding the Contracts: years of origination, types
of dwellings on the underlying properties, the sizes of Contracts and
distribution of Contracts by APR, and will be set forth in a Current Report on
Form 8-K that will be filed with the Securities and Exchange Commission by the
Depositor within 15 days after the issuance of the Certificates.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement, to be dated as of the Cut-off Date (the "Pooling and Servicing
Agreement") among the Depositor, , as master servicer (the "Master
Servicer"), and , as trustee (the "Trustee"), a form of which has been
filed as an exhibit to the Registration Statement of which this Prospectus
Supplement forms a part. Reference is made to the accompanying Prospectus for
important additional information regarding the terms and conditions of the
Pooling and Servicing Agreement and the Certificates. Each of the Certificates
at the time of issuance will qualify as a "mortgage related security" within
the meaning of the Secondary Mortgage Market Enhancement Act of 1984.
Distributions of principal and interest as set forth above will be made by
the Master Servicer by check mailed to each Certificateholder entitled thereto
at the address appearing in the Certificate Register to be maintained with the
Trustee or, if eligible for wire transfer as provided in the Pooling and
Servicing Agreement, by wire transfer to the account of such
Certificateholder, provided, however, that the final distribution in
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<PAGE>
retirement of the Certificates will be made only upon presentation and
surrender of the Certificates at the office specified in the notice to
Certificateholders of such final distribution.
The Certificates will be transferable and exchangeable on a Certificate
Register to be maintained by the Trustee at the office or agency of the Master
Servicer maintained for that purpose in New York, New York. Certificates
surrendered to the Trustee for registration of transfer or exchange must be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee. No service charge will be made for any registration of transfer or
exchange of Certificates, but payment of a sum sufficient to cover any tax or
other governmental charge may be required. Such office or agency is currently
located at , .
CONVEYANCE OF CONTRACTS
On the date of issuance of the Certificates, the Depositor will transfer,
assign, set over and otherwise convey to the Trustee all right, title and
interest of the Depositor in the Contracts, including all principal and
interest received on or with respect to the Contracts (other than receipts of
principal and interest due on the Contracts before the Cut-off Date), and all
rights under the hazard insurance policies on the related Manufactured Homes.
The Contracts will be described on a schedule attached to the Pooling and
Servicing Agreement (the "Contract Schedule"). The Contract Schedule will
include the amount of monthly payments due on each Contract as of the date of
issuance of the Certificates, the APR on each Contract and the maturity date
of each Contract. Prior to the conveyance of the Contracts to the Trustee, the
Depositor will cause to be reviewed all the Contract files, including the
certificates of title to, or other evidence of a perfected security interest
in, the Manufactured Homes, confirming the accuracy of the Contract Schedule
delivered to the Trustee.
[The Trustee, itself or through a custodian, will hold, on behalf of the
Certificateholders, the original Contracts and copies of documents and
instruments relating to each Contract and the security interest in the
Manufactured Home relating to each Contract.] In addition, in order to give
notice of the Trustee's right, title and interest in and to the Contracts,
[the Master Servicer, on behalf of] the Depositor, will deliver to the Trustee
a UCC-1 financing statement identifying the Trustee as the secured party and
identifying all the Contracts as collateral. The [Master Servicer] will file
such statement in the appropriate offices in the appropriate states. [The
Contracts will not be stamped or otherwise marked to reflect their assignment
from the Company to the Trustee. If a subsequent purchaser were able to take
physical possession of the Contracts without notice of such assignment, the
Trustee's interest in the Contracts could be defeated.] See "Certain Legal
Aspects of the Mortgage Loans and Contracts--The Contracts" in the Prospectus.
TRUSTEE
The Trustee for the Certificates will be .
THE MASTER SERVICER
The Master Servicer is a corporation that commenced operation in .
The Master Servicer is [an FHA approved seller-servicer] based in . As of
, the Master Servicer serviced, for other investors and for its own
account, approximately mortgage loans with an aggregate principal balance
in excess of $ . The Master Servicer conducts operations through FHA
approved branch offices in . The Master Servicer originated approximately
$ in mortgage loans in 19 . The Master Servicer's consolidated
stockholders' equity as of was approximately $ .
The information set forth above has been provided by the Master Servicer.
The Depositor makes no representation as to the accuracy or completeness of
such information.
[The Master Servicer shall obtain and maintain in effect a bond, corporate
guaranty or similar form of insurance coverage (the "Performance Bond"),
insuring against loss occasioned by the errors and omissions of the Master
Servicer's officers, employees and any other person acting on behalf of the
Master Servicer in its
S-10
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<PAGE>
capacity as Master Servicer and guaranteeing the performance, among other
things, of the obligations of the Master Servicer to purchase certain
Contracts and to make advances, as described in the Prospectus under
"Description of the Certificates--Assignment of Contracts" and "--Advances,"
in an amount acceptable to the nationally recognized statistical rating
organization or organizations rating the Certificates (collectively, the
"Rating Agency").
SERVICING COMPENSATION [, LIMITED GUARANTEE FEE] AND PAYMENT OF EXPENSES
The servicing compensation payable to the Master Servicer will be equal to
an amount, payable out of each interest payment on a Contract, equal to the
excess of each interest payment on a Contract over the Pass-Through Rate, less
[(a)] any servicing compensation payable to the Servicer of such Contract
under the terms of the agreement with the Master Servicer pursuant to which
such Contract is serviced (the "Servicing Agreement") (including such
compensation paid to the Master Servicer as the direct servicer of a Contract
for which there is no Servicer)[.] [, and (b) the amount payable to the
[Depositor,] [Master Servicer], as described below] [.] [, and (c) the Limited
Guarantee Fee.] [Pursuant to the Pooling and Servicing Agreement, on each
Distribution Date, the Master Servicer will remit to [the Depositor] in
respect of each interest payment on a Contract an amount equal to % of the
outstanding principal balance of such Contract before giving effect to any
payments due on the preceding Due Date.] [The Master Servicer will be
permitted to withdraw from the Certificate Account, in respect of each
interest payment on a Contract, an amount equal to % of the outstanding
principal balance of such Contract before giving effect to any payments due on
the preceding Due Date.] See "Description of the Certificates--Servicing and
Other Compensation and Payment of Expenses" in the Prospectus for information
regarding other possible compensation to the Master Servicer and the
Servicers. The Servicers and the Master Servicer will pay all expenses
incurred in connection with their responsibilities under the Servicing
Agreements and the Pooling and Servicing Agreement (subject to limited
reimbursement as described in the Prospectus), including, without limitation,
the various items of expense enumerated in the Prospectus.
[Investors are advised to consult with their own tax advisors regarding the
likelihood that a portion of such servicing compensation might be
characterized as an ownership interest in the interest payments on the
Contracts ("Retained Yield") for federal income tax purposes, by reason of the
extent to which either the weighted average APR, or the stated interest rates
on the Contracts exceeds the Pass-Through Rate, and the tax consequences to
them of such a characterization. In this regard, there are no authoritative
guidelines for federal income tax purposes as to either the maximum amount of
servicing compensation that may be considered reasonable in the context of
this or similar transactions or whether the reasonableness of servicing
compensation should be determined on a weighted average or contract by
contract basis. [The Depositor intends to treat % of such servicing
compensation and % of the amount payable to it described above as Retained
Yield for federal income tax purposes in reports to the Certificateholders and
to the Internal Revenue Service.] See "Certain Federal Income Tax
Consequences--[ ] in the Prospectus for information regarding the
characterization of servicing compensation [and the amounts payable to the
Depositor].
[TERMINATION; REPURCHASE OF CONTRACTS
The Pooling and Servicing Agreement provides that the [Depositor] [Master
Servicer] may purchase from the Trust all Contracts remaining in the Contract
Pool and thereby effect early retirement of the Certificates, provided that
the aggregate unpaid balances of the Contracts at the time of such repurchase
is less than [10%] of the aggregate principal balance of the Contracts on the
Cut-off Date. The purchase price for any such optional repurchases shall be
equal to the outstanding principal balance of such Contracts, together with
accrued interest at the Pass-Through Rate to the first day of the month
following such repurchase plus the appraised value of any acquired property
with respect to the Contracts. [Any such repurchase will be effected in
compliance with the requirements of Section 860F(a)(iv) of the Code in order
to constitute a "qualifying liquidation" thereunder.] In no event will the
Trust continue beyond the expiration of 21 years from the death of the last
survivor of the persons named in the Pooling and Servicing Agreement.]
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INSURANCE
[FHA Insurance and VA Guarantee
% and % of the Contracts, respectively (by aggregate principal balance
as of Cut-Off Date) are subject to FHA insurance and VA guarantees. See
"Description of Insurance" in the Prospectus.]
[Primary Credit Insurance Policies
To be provided.]
[Pool Insurance Policies
To be provided.]
Hazard Insurance Policies
The Master Servicer will cause to be maintained one or more standard hazard
insurance policies with respect to each Manufactured Home in an amount at
least equal to the lesser of its maximum insurable value or the principal
amount due from the Obligor under the related Contract. Such standard hazard
insurance policies, will, at a minimum, provide fire and extended coverage on
terms and conditions customary in manufactured housing hazard insurance
policies. If a Manufactured Home, at the origination of the related Contract,
was located within a federally designated flood area, the Master Servicer also
will cause flood insurance to be maintained in an amount equal to the lesser
of the amounts described above or the maximum amount available for such
Manufactured Home under the federal flood insurance program.
All amounts collected by the Master Servicer under a standard hazard
insurance policy will be applied either to the restoration or repair of the
Manufactured Home or against the unpaid principal balance of the related
Contract upon foreclosure and repossession of the Manufactured Home, after
reimbursing the Master Servicer for amounts previously advanced by it for such
purposes. The Master Servicer may satisfy its obligation to cause the
maintenance of standard hazard and flood insurance policies by maintaining a
blanket policy insuring against hazard and flood losses on all the
Manufactured Homes. Such blanket policy may contain a deductible clause, in
which case the Master Servicer will be required to deposit in the Certificate
Account any amount deducted in connection with insurance claims on repossessed
Manufactured Homes.
[THE LIMITED GUARANTEE
General
If amounts available in the Certificate Account [(following any Advances by
the Master Servicer)] for distribution to the Certificateholders is less than
the amount due to them as a result of defaulted Contracts and delinquent
payments of principal of and interest on the Contracts, the Limited Guarantee
will be available, to the extent of the Guarantee Amount, to fund such
shortfall. The Guarantee Amount on the first Distribution Date will equal
$ . Thereafter, the Guarantee Amount on any Distribution Date will equal
[$ less amounts previously paid with respect to the Limited Guarantee].
$ of the initial Guarantee Amount will be covered by the general payment
obligation of , which obligation will be supported by the Standby Letter
of Credit (described below). The balance of the initial Guarantee Amount will
be covered by the Direct Letter of Credit.
Amounts required to be paid under the Limited Guarantee will be paid first
by under its general payment obligation (or pursuant to the Standby
Letter of Credit) and after such obligation is exhausted, from the Direct
Letter of Credit. If the Guarantee Amount is reduced to zero, the
Certificateholders will bear all losses on the Contracts. As a result,
Certificateholders may be subject to delays in payments of monthly principal
and interest as a result of delinquent payments by Obligors. In the event of a
repossession and resale by the Master
S-12
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Servicer (as Servicer on behalf of the Trustee) of a Manufactured Home
securing a Contract in default, the Trust Fund may not recover the entire
amount of principal and interest due on such Contract. See "The Trust Fund--
The Contracts" and "Certain Legal Aspects of the Mortgage Loans and Contracts"
in the Prospectus.]
Standby Letter of Credit
The Standby Letter of Credit will be an irrevocable standby letter of credit
supporting the payment and repurchase obligations of . The Standby Letter
of Credit will be obtained initially from , and will terminate on .
will confirm the Standby Letter of Credit issued by , meaning that if
for any reason does not honor a draw upon a Standby Letter of Credit,
will be obligated to honor such draw. The amount of the Standby Letter of
Credit on the Closing Date shall be $ . On each subsequent Distribution
Date, the requisite amount of the renewed Standby Letter of Credit or
replacement Standby Letter of Credit shall be the amount of 's obligation
under the Limited Guarantee on the immediately preceding Distribution Date.
Direct Letter of Credit
The Direct Letter of Credit will be an irrevocable direct pay letter of
credit obtained initially from and will be confirmed by . The Direct
Letter of Credit will terminate on . The initial requisite amount of the
Direct Letter of Credit shall be $ and subsequently, the requisite amount
shall be .
Maintenance of Letters of Credit
The Letters of Credit will provide that, if the institution issuing such
Letter of Credit (the "L/C Bank") does not intend to renew such Letter of
Credit, it must give notice thereof to the Master Servicer and the Trustee at
least 45 days prior to the expiration of such Letter of Credit. The Master
Servicer must then obtain a replacement Letter of Credit. If, immediately
prior to the expiration of the Letter of Credit, the Master Servicer has not
obtained a replacement Letter of Credit issued or confirmed by a L/C Bank
which is a qualified bank (an institution whose unsecured long-term debt (or,
in the case of the principal bank in a bank holding company system, the
unsecured long-term debt of such bank or the bank holding company) has a
rating satisfactory to the Rating Agency for the maintenance of the " "
rating of the Certificates, the Trustee shall draw under such expiring Letter
of Credit an amount equal to the 's obligation under the Limited
Guarantee, in the case of the Standby Letter of Credit, or the difference
between the Guarantee Amount and the 's obligation under the Limited
Guarantee, in the case of the Direct Letter of Credit. The amounts so drawn
will be deposited in a separate trust fund (the "Limited Guarantee Fund") and
will be available on each Distribution Date if and to the extent that draws
would have been required under the Standby Letter of Credit or the Direct
Letter of Credit, as the case may be. The funds in the Limited Guarantee Fund
remain the property of the issuer of such Letter of Credit, subject to the
right of the Master Servicer to make withdrawals. Upon termination of the
Pooling and Servicing Agreement, any funds remaining in the Limited Guarantee
Fund will be paid to the issuer of such Letter of Credit. In addition, any
recoveries of delinquent payments previously advanced pursuant to the draws
under a Letter of Credit, and any recoveries in defaulted Contracts whose
repurchase price was deposited in the Certificate Account pursuant to a draw
on a Letter of Credit, will be repaid to the L/C Bank if the Letter of Credit
will be reinstated by such amount, or else will be deposited in the Limited
Guarantee Fund. In the event of insolvency of the L/C Bank, the amount
available to the Trust Fund under the Letter of Credit or from the Limited
Guarantee Fund, as the case may be, may be reduced.
In the event that the L/C Bank that issued or confirmed the Letter of Credit
ceases to be a qualified bank, the Master Servicer will use its best efforts
to obtain a substitute Letter of Credit issued or confirmed by a qualified
bank. If a substitute Letter of Credit issued or confirmed by a qualified bank
has not been obtained in 30 days, the Trustee will draw down the requisite
amount under such Letter of Credit and deposit such funds in the Limited
Guarantee Fund.]
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<PAGE>
[LETTER OF CREDIT
The maximum liability of [ ] under the Letter of Credit, net of
unreimbursed payments thereunder, for the Certificates will be no more than
[ %] of the aggregate principal balance of the Contracts on the Cut-off Date.
The duration of coverage and the amount and frequency of any reduction in
coverage will be in compliance with the requirements established by the Rating
Agency rating the Certificates, in order to obtain a rating in one of the two
highest rating categories of the Rating Agency. The precise amount of coverage
under the Letter of Credit and the duration and frequency of reduction of such
coverage will be set forth in the Current Report on Form 8-K referred to
above. See "Description of the Certificates--Credit Support--The Letter of
Credit" in the Prospectus.]
It is a condition to the issuance of the Certificates that they be rated in
one of the two highest categories of the Rating Agency prior to issuance.
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.
[ERISA CONSIDERATIONS
The acquisition of a Certificate by an employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (a
"Plan") could result in prohibited transactions or other violations of the
fiduciary responsibility provisions of ERISA and section 4975 of the Internal
Revenue Code of 1986 (the "Code") if by virtue of such acquisition, assets
held by the Trust were deemed to be assets of the Plan. [The United States
Department of Labor ("DOL") published final regulations concerning whether or
not the assets of a Plan will be deemed to include any of the underlying
assets of an entity, for purposes of the fiduciary responsibility provisions
of ERISA, when a Plan acquires an equity interest in such entity. The final
regulations state that the assets of a Plan which acquires an equity interest
will not include any of the underlying assets of the entity if the class of
equity interests in question are (1) held by 100 or more investors independent
of the issuer and of each other, (2) freely transferable, and (3) sold as part
of an offering pursuant to an effective registration statement under the
Securities Act of 1933, and then timely registered under section 12(b) or
12(g) of the Securities Exchange Act of 1934. It is expected that the
Certificates will meet the criteria of the regulations: The Underwriter[s]
expect[s] (although no assurances can be given) that the Certificates will be
held by at least 100 independent investors at the conclusion of the offering
made by this Prospectus; there are no restrictions imposed on the transfer of
the Certificates; and the seller intends to cause the registration
requirements to be satisfied.] In addition, even if the Plan's assets are
deemed to include the Contracts, certain exemptions from the prohibited
transaction rules could be applicable, depending in part upon the type and
circumstances of the Plan fiduciary making the decision to acquire a
Certificate. Included among these exemptions are DOL Prohibited Transaction
Exemptions 84-14 (Class Exemption for Plan Asset Transaction Determined by
Independent Qualified Professional Asset Managers), 80-51 (Class Exemption for
Certain Transactions Involving Bank Collective Investment Funds) and 78-19
(Class Exemption for Certain Transactions Involving Insurance Company Pooled
Separate Accounts).
Employee benefit plans which are governmental plans (as defined in section
3(32) of ERISA), and certain church plans (as defined in section 3(33) of
ERISA), are not subject to ERISA requirements.
Any Plan fiduciary considering the purchase of Certificates should consult
its tax and/or legal advisors regarding these and other issues and their
potential consequences.]
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<PAGE>
UNDERWRITING
The Depositor has entered into an Underwriting Agreement with [several
Underwriters, for whom] Credit Suisse First Boston Corporation, an affiliate of
the Depositor[, is acting as Representative]. The Underwriter[s] [named below]
[has] [have severally] agreed to purchase from the Depositor [all] [the
following respective principal amounts] of the Certificates:
<TABLE>
<CAPTION>
[UNDERWRITER
- -------------------
<S> <C>
Credit Suisse First Boston ...................... $
--------
Total ............................................ $ ]
========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriter[s] [is] [are] subject to certain conditions precedent, and that
the Underwriter[s] will be obligated to purchase the entire principal amount
of the Certificates if any are purchased.
The Depositor has been advised [by the Representative] that the
Underwriter[s] propose[s] to offer the Certificates to the public initially
at the public offering prices set forth on the cover page of this Prospectus
Supplement, and [through the Representative,] to certain dealers at such
prices less the following concessions and that the Underwriter[s] and such
dealers may allow the following discounts on sales to certain other dealers:
<TABLE>
<CAPTION>
CONCESSION (PERCENT OF DISCOUNT (PERCENT OF
PRINCIPAL AMOUNT) PRINCIPAL AMOUNT)
------------------------ ------------------------
<S> <C> <C>
% %
</TABLE>
After the initial public offering, the public offering prices and the
concessions and discounts to dealers may be changed by [the Underwriter] [the
Representative].
[If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the attached Prospectus will also be used by the
Underwriter after the completion of the offering in connection with offers and
sales related to market-making transactions in the offered Securities in which
the Underwriter acts as principal. Sales will be made at negotiated prices
determined at the time of sale.]
The Depositor has agreed to indemnify the Underwriter[s] against certain
liabilities, including liabilities under the Securities Act of 1933.
LEGAL MATTERS
The legality of the Certificates will be passed upon for the Depositor and for
the Underwriter[s] by ________________________, New York, New York. The material
federal income tax consequences of the Certificates will be passed upon for the
Depositor by ____________________________________________________________.
USE OF PROCEEDS
The Depositor will apply all of the net proceeds of the offering of the
Certificates towards the simultaneous purchase of the Contracts underlying
the Certificates. Certain of the Contracts will be acquired in privately
negotiated transactions by the Depositor from one or more affiliates of the
Depositor, which will have acquired such Contracts from time to time in
privately negotiated transactions.
S-15
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER +
+TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF +
+THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD +
+BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 19
- --------------------------------------------------------------------------------
P R O S P E C T U S S U P P L E M E N T
(To Prospectus dated , 19 )
- --------------------------------------------------------------------------------
[Version F]
$ (Approximate)
Credit Suisse First Boston Mortgage Securities Corp.
Depositor
ABS Mortgage Pass-Through Certificates, Series , [Class A]
Adjustable Pass-Through Rate
[ Master Servicer ]
-----------
The ABS Mortgage Pass-Through Certificates, Series will be comprised
of Class A Certificates and [one] [two] subclass[es] [(not offered hereby)] of
Class B Certificates (collectively, the "Certificates"). The Certificates, will
represent interests in the Master Trust Fund which will hold an interest in a
pool (the "Mortgage Pool") of adjustable rate, [conventional] mortgage loans
secured by [first mortgages or deeds of trust] [liens] on [one-to-four-unit
residential properties] [cooperative loans evidenced by promissory notes
secured by a lien on shares in cooperative housing corporations and on the
related proprietary leases] (the "Mortgage Loans") [originated] [acquired] by
("Master Servicer"), and certain other property held in trust for the benefit
of the Certificateholders. [ ] will act as Master Servicer.
The Class A Certificates will evidence an initial interest of approximately
% in the Mortgage Loans. The remaining interest in the Mortgage Loans will be
evidenced by the Class B Certificates, which are subordinate to the
Certificates to the extent described herein and in the Prospectus. See
"Description of the Certificates--Distributions" and "--Subordination of the
Class B Certificates; Shifting Interest Credit Enhancement" herein and "Credit
Support--Subordinated Certificates" in the Prospectus.
Principal and interest on the Certificates are distributable on the [25th]
day of each month commencing (each, a "Distribution Date"). After an
initial period, the Mortgage Rate on each Mortgage Loan will adjust [semi-
annually] to a rate equal to the Index (as defined below) plus the fixed
percentage applicable to such Mortgage Loan (the "Gross Margin"), subject to
the interest rate limitations applicable to the Mortgage Loans and the other
provisions set forth herein. The Class A Certificateholders will be entitled to
receive interest on the Class A Principal Balance (as defined herein) at the
Pass-Through Rate. The Pass-Through Rate will equal the weighted average of the
Subsidiary Pass-Through Rates. The initial Pass-Through Rate is approximately
%. The Subsidiary Pass-Through Rate with respect to each Mortgage Loan prior
to its first Adjustment Date (as defined herein) will equal the Mortgage Rate
less . On and after its first Adjustment Date, the Subsidiary Pass-Through
Rate with respect to each Mortgage Loan will equal the [description of index,
e.g. monthly weighted average cost of funds for member institutions of the 11th
District of the Federal Home Loan Bank System, as published by the Federal Home
Loan Bank of San Francisco] (the "Index") plus basis points (the "Pass-
Through Margin") but not more than the lesser of the Periodic Mortgage Rate Cap
(as defined herein) less the Servicing Fee Rate, or the Maximum Subsidiary
Pass-Through Rate (as defined herein).
There is currently no secondary market for the Class A Certificates. There
can be no assurance that a secondary market for the Class A Certificates will
develop or, if it does develop, that it will continue.
An election will be made to treat the assets of the Subsidiary Trust Fund (as
defined herein) as a real estate mortgage investment conduit ("REMIC") for
purposes of federal income taxation (the "Subsidiary REMIC"). An election will
also be made to treat the assets represented by the "regular interests" in the
Subsidiary REMIC constituting a separate trust fund (the "Master Trust Fund")
as a separate REMIC (the "Master REMIC"). See "Certain Federal Income Tax
Consequences" herein.
THE CERTIFICATES DO NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN CREDIT
SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP., [MASTER SERVICER] OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THE CERTIFICATES NOR THE UNDERLYING MORTGAGE
LOANS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospective investors should consider the factors set forth under Risk Factors
on Page S-9 of this Prospectus Supplement.
Prospective investors should consider the limitations discussed under ERISA
Considerations herein and in the accompanying Prospectus.
[The Certificates will initially be delivered by the Depositor to in
exchange for the Mortgage Loans to be deposited by the Depositor into the
Subsidiary Trust Fund. The Class A Certificates may be sold or pledged by ,
directly or through one or more underwriters, from time to time at varying
prices to be determined at the time of such sale or pledge.] [The
Underwriter[s] propose[s] to offer the Class A Certificates from time to time
for sale in negotiated transactions or otherwise, at prices determined at the
time of sale.] See "Plan of Distribution" herein. Expenses attributable to
issuance of the Class A Certificates, estimated to be approximatley $ will
be paid by [the Master Servicer] [the Depositor]. [The Depositor] will be paid
a fee by of $ in connection with the transaction.
[The Class A Certificates are offered by the [several] Underwriter[s] when,
as and if issued and accepted by the Underwriter[s] and subject to [its]
[their] right to reject orders in whole or in part. It is expected that the
Class A Certificates, in definitive fully registered form, will be ready for
delivery on or about , 199 .]
The Certificates, when, as and if issued by the Depositor, are expected to be
available for delivery in New York, New York on or about , 199 .
Credit Suisse First Boston
- --------------------------------------------------------------------------------
The Date of this Prospectus Supplement is , 19 .
<PAGE>
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The Class A Certificates offered hereby constitute a separate series of
Conduit Mortgage and Manufactured Housing Contract Pass-Through Certificates
being offered by CS First Boston Mortgage Securities Corp. from time to time
pursuant to its Prospectus dated . This Prospectus Supplement does not
contain complete information about the offering of the Class A Certificates.
Additional information is contained in the Prospectus, and purchasers are
urged to read both this Prospectus Supplement and the Prospectus in full. Sale
of the Class A Certificates may not be consummated unless the purchaser has
received both this Prospectus Supplement and the Prospectus.
[Until , no offerings of the Class A Certificates may be made by except
pursuant to this Prospectus Supplement and the Prospectus, as supplemented as
of the date of such offering. After such date, no offerings of the Class A
Certificates will be made pursuant to this Prospectus Supplement and
Prospectus.
[Until , all dealers effecting transactions in the Class A Certificates,
whether or not participating in this distribution, may be required to deliver
a Prospectus Supplement and a Prospectus. This is in addition to the
obligation of dealers to deliver a Prospectus Supplement and Prospectus when
acting as underwriter and with respect to their unsold allotments or
subscriptions.]
[IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATION, THIS
PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS WILL ALSO BE USED BY THE
UNDERWRITER AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND
SALES RELATED TO MARKET-MAKING TRANSACTIONS IN THE OFFERED SECURITIES IN WHICH
THE UNDERWRITER ACTS AS PRINCIPAL. SALES WILL BE MADE AT NEGOTIATED PRICES
DETERMINED AT THE TIME OF SALE.]
----------------
AVAILABLE INFORMATION
The Master Trust Fund will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, the Depositor, on behalf of the Master Fund, will file
periodic reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports will not contain audited financial
information with respect to the Master Trust Fund. Such reports and other
information filed by the Depositor on behalf of the Master Trust Fund can be
inspected and copied at the Public Reference Room of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such information can be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
(http://www.sec.gov).
S-2
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SUMMARY OF TERMS
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Capitalized terms used in this Prospectus Supplement
and not defined shall have the meanings ascribed thereto in the Prospectus.
<TABLE>
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SECURITIES OFFERED........ $ ABS Mortgage Pass-Through Certificates,
Series , [Class A,] Adjustable Pass-Through Rate
(the "Class A Certificates").
DEPOSITOR................. Credit Suisse First Boston Mortgage Securities Corp.
MASTER SERVICER...........
CUT-OFF DATE..............
DELIVERY DATE............. On or about .
DESCRIPTION OF THE Two Classes of Certificates evidencing fractional
CERTIFICATES.............. interests in a Trust Fund (the "Master Trust
Fund") consisting of the Subsidiary Regular
Interests (as defined herein) which in the
aggregate generally represent an interest in (i)
all amounts distributable with respect to the
Mortgage Loans, (ii) amounts held in the
Certificate Account, (iii) any property which
secured a Mortgage Loan and is acquired by
foreclosure or deed in lieu of foreclosure, and
(iv) certain other related property, as more fully
described herein and in the Prospectus. The Class
A Certificates initially evidence in the aggregate
an interest in the Mortgage Loans (the "Class A
Percentage") of approximately %. The remaining
interest in the Mortgage Loans will be represented
by the Class B Certificates, [which will consist
of two subclasses, Class B-l (the "Class B-l
Certificates") and Class B-2 (the "Class B-2
Certificates") together,] the "Class B
Certificates"). [The Class B-l Certificates will
initially evidence an approximate % interest in
the Mortgage Loans ("the Class B-1 Percentage")
and the Class B-2 Certificates will initially
evidence an approximate % interest in the
Mortgage Loans (the "Class B-2 Percentage")
(together,] [the "Subordinate Percentage"). The
Class B Certificates will be subordinated in
certain respects to the Class A Certificates, as
more fully described herein. The Class A
Percentage, [and] the Class B[-1 Percentage and
the Class B-2 Percentage] will vary, as described
herein.
The Class A Certificates and the Class B
Certificates are collectively referred to herein
as the "Certificates." The Class A Certificates
represent the Senior Certificates and the Class B
Certificates represent the Subordinate
Certificates, both as described in the
accompanying Prospectus. Only the Class A
Certificates are being offered hereby.
THE INDEX................. [Description e.g., the monthly weighted average
cost of funds for member institutions of the 11th
District of the Federal Home Loan Bank System as
published by the Federal Home Loan Bank of San
Francisco. The Index published in
(reflecting the
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S-3
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related weighted average cost of funds for
) was %.]
THE MORTGAGE LOANS........ The Mortgage Pool will consist of adjustable rate,
[conventional] mortgage loans [originated]
[acquired] by [the Master Servicer] and secured by
first mortgages or deeds of trust on one- to four-
family residential properties. All Mortgage Loans
will have maturities of at least 15 but no more
than 30 years and are secured by properties
located in . [All Mortgage Loans with a Loan-
to-Value Ratio greater than 80% will have private
mortgage insurance.] See "Description of the
Mortgage Pool and Underlying Mortgage Properties"
herein.
PRINCIPAL (INCLUDING Passed through monthly on the Distribution Date
PREPAYMENTS).............. commencing . On each Distribution Date the
Class A Certificateholders are entitled to receive
as payments of principal, in addition to the Class
A Percentage of all scheduled payments on account
of principal, the Class A Prepayment Percentage of
both principal prepayments in part and principal
prepayments in full received by the Master
Servicer with respect to such Mortgage Loans
during the preceding calendar month ("Principal
Prepayments"). See "Description of the
Certificates--Subordination of the Class B
Certificates; Shifting Interest Credit
Enhancement" herein.
INTEREST.................. Interest accrued on each Mortgage Loan will be
passed through to Certificateholders on the
Distribution Date occurring in the month in which
the Due Date (as defined herein) occurs,
commencing , at the Pass-Through Rate. The
Pass-Through Rate will equal the weighted average
of the Subsidiary Pass-Through Rates. The initial
Pass-Through Rate is equal to approximately % per
annum. Prior to the first Adjustment Date after
the Cut-off Date for a Mortgage Loan, the
Subsidiary Pass-Through Rate with respect to such
Mortgage Loan will equal the Mortgage Rate less
. On and after the first Adjustment Date for a
Mortgage Loan, the Subsidiary Pass-Through Rate
with respect to each Mortgage Loan will equal the
Index applicable to such Mortgage Loan plus
basis points (the "Pass-Through Margin"), subject
to the limitation that the Subsidiary Pass-Through
Rate shall not exceed the lesser of the Periodic
Mortgage Rate Cap less the Servicing Fee Rate or
the Maximum Subsidiary Pass-Through Rate. The
Maximum Subsidiary Pass-Through Rates will range
from % to % per annum. The Maximum Subsidiary
Pass-Through Rate with respect to a particular
Mortgage Loan is equal to the Maximum Mortgage
Rate for such Mortgage Loan minus the Servicing
Fee Rate. The weighted average Maximum Subsidiary
Pass-Through Rate as of the Cut-off Date will be
approximately % per annum. Following an initial
period of months, during which the rate of
interest on each Mortgage Loan (the "Mortgage
Rate") is fixed, the Mortgage Rate on each
Mortgage Loan will be adjusted [monthly] [semi-
annually] [annually] on the adjustment dates (each
such date, an "Adjustment Date") specified in the
related mortgage note (each such note, a
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S-4
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"Mortgage Note") to equal the sum of the Index and
a fixed percentage amount (a "Gross Margin") [,
subject to a semi-annual periodic mortgage rate
cap (the "Periodic Mortgage Rate Cap") and a
maximum rate at which interest may accrue (the
"Maximum Mortgage Rate"), as described more fully
herein]. Each Mortgage Loan will have been
originated with an initial Mortgage Rate below the
sum of the applicable Index and Gross Margin for
such Mortgage Loan (the "Initial Mortgage Rate")
and % of the Mortgage Loans as of the Cut-off
Date are expected to be accruing interest at their
Initial Mortgage Rates.] As of the Cut-off Date,
the Mortgage Loans will bear interest at Mortgage
Rates which range from % to % per annum. The
Gross Margins for the Mortgage Loans range as of
the Cut-off Date from to basis points. The
weighted average Gross Margin for the Mortgage
Loans as of the Cut-off Date will be approximately
basis points. [The Periodic Mortgage Rate Cap
for each Mortgage Loan is the Mortgage Rate in
effect immediately prior to any Adjustment Date
plus or minus basis points. The Maximum
Mortgage Rate will range from % to % per annum.]
The weighted average Maximum Mortgage Rate as of
the Cut-off Date will be % per annum. See
"Description of the Mortgage Pool and the
Underlying Mortgaged Properties" herein.
When a Mortgage Loan is prepaid, in whole or in
part, between scheduled payment dates, the
Mortgagor pays interest on the amount prepaid only
to the date of prepayment and not thereafter. This
generally reduces the aggregate amount of interest
which would otherwise be distributed to the Class
A and Class B Certificateholders. To mitigate any
such reduction in yield, [amounts otherwise
payable as the Servicing Fee (as defined herein)
for the period during which any such Principal
Prepayment was made will be reduced by] [to the
extent funds that interest on the Mortgage Loans
exceeds the Subsidiary Pass-Through Rate less the
Servicing Fee Rate for the period during which any
such prepayment is made, the Pooling and Servicing
Agreement provides that] such amount, if any, as
may be necessary to assure that the distributions
made to the Class A and Class B Certificateholders
on the related Distribution Date include an amount
equal to a full month's interest with respect to
each prepaid Mortgage Loan at the applicable
Subsidiary Pass-Through Rate will be paid to the
Master Trust Fund. See "Description of the
Certificates--Distributions" herein.
RISK FACTORS.............. For discussion of risk factors that should be
considered with respect to an investment in the
Certificates, see "Risk Factors" herein and in the
related Prospectus.
SUBORDINATION OF THE
CLASS B CERTIFICATES;
SHIFTING INTEREST CREDIT
ENHANCEMENT..............
The rights of the Class B Certificateholders to
receive distributions with respect to the Mortgage
Loans are subordinated to such rights of the Class
A Certificateholders to the extent of the
Subordinated Amount described below. This
subordination feature is intended to enhance the
likelihood of regular receipt by the holders of
the Class A Certificates of the full amount of the
scheduled monthly payments of principal and
interest due them with respect to the Mortgage
Loans and to protect the Class A
Certificateholders against losses.
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S-5
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As of each Determination Date, the Subordinated
Amount will equal the Class B Principal Balance
(as defined herein) on such date reduced by the
excess of Aggregate Losses (as defined herein)
over cumulative Realized Losses (as defined
herein) borne by the Class B Certificateholders as
of such date, if any. This subordination feature
is intended to enhance the likelihood of regular
receipt by the holders of the Class A Certificates
of the full amount of the scheduled monthly
payments of principal and interest due them with
respect to the Mortgage Loans and to protect the
Class A Certificateholders against losses.
However, in certain circumstances, the
Subordinated Amount could be depleted and payment
deficiencies could result. If, on any Distribution
Date when the Subordinated Amount is greater than
zero, the aggregate amount of payments received
from the Mortgagors on the Mortgage Loans and any
Advances (as defined herein) do not provide
sufficient funds to make full distributions to the
Class A Certificateholders, the amount of the
payment deficiency, plus interest thereon at the
applicable Subsidiary Pass-Through Rate, to the
extent of the Subordinated Amount, will be added
to the amount such Class A Certificateholders are
entitled to receive on the next Distribution Date.
The extent to which the Class A Certificateholders
and the Class B Certificateholders bear Realized
Losses, and, in addition, Special Hazard Realized
Losses, is described herein. See "Description of
the Certificates--Subordination of the Class B
Certificates; Shifting Interest Credit
Enhancement" herein.
The protection afforded to the holders of the Class
A Certificates will be effected (i) by the
preferential right of such holders to receive the
amounts of principal and interest otherwise
distributable to the Class B Certificateholders on
each Distribution Date with respect to the
Mortgage Loans out of available funds on deposit
on such date in the Certificate Account, and (ii)
by distributing to the Class A Certificateholders
a disproportionately greater percentage (the
"Class A Prepayment Percentage") of Principal
Prepayments (as hereinafter defined) and other
payments with respect to the Mortgage Loans. The
Class A Prepayment Percentage will decline from
100% after provided certain criteria
respecting the Mortgage Pool are met. See
"Description of the Certificates--Subordination of
the Class B Certificates; Shifting Interest Credit
Enhancement" herein.
SERVICING FEE............. will act as Master Servicer of the Mortgage
Loans [and will enter into a Servicing Agreement
on the Delivery Date pursuant to which will
subservice the Mortgage Loans]. will receive
a servicing fee (the "Servicing Fee") as
compensation for its services which is calculated
monthly and equals a fixed percentage on the
principal balance of each Mortgage Loan (the
"Servicing Fee Rate"). The Servicing Fee Rate
equals basis points. See "Description of the
Mortgage Pool and Underlying Mortgaged
Properties--Servicing and Sub-Servicing" and
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S-6
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"Description of the Certificates--Servicing
Compensation and Payment of Expenses" herein.
ADVANCES.................. The Master Servicer will be obligated to advance
cash (the "Advances") to the Subsidiary Trust Fund
for distribution in an amount equal to delinquent
installments of principal and interest to the
extent that the Master Servicer determines such
Advances will be recoverable from future payments
and collections on the Mortgage Loans or
otherwise. See "Description of the Certificates--
Advances" in the Prospectus.
DENOMINATIONS............. The minimum denomination of a Class A Certificate
(a "Single Certificate") will initially represent
$ of the Cut-off Date Principal Balance,
provided that one Certificate may be issued in
such lesser amount as is required so that the
Class A Certificateholders in the aggregate equal
the Class A Principal Balance (as defined herein).
OPTIONAL TERMINATION...... The holder of the Subsidiary Residual Interest has
the option to purchase all of the Mortgage Loans
in the Subsidiary Trust Fund, and thereby effect
termination of the Subsidiary Trust Fund and the
Master Trust Fund, on any Distribution Date on
which the aggregate principal balance of the
Mortgage Loans remaining in the Subsidiary Trust
Fund is less than % of the Cut-off Date Principal
Balance. Additionally, the holder of the Class B[-
2] Certificate has the option to purchase all the
Subsidiary Regular Interests (as defined herein)
in the Master Trust Fund. Either of the above
purchases would effect early retirement of the
Class A and Class B Certificates. See "Description
of the Certificates--Optional Termination" herein
and "Description of the Certificates--Termination"
in the Prospectus.
TAX ASPECTS............... An election will be made to treat the assets of the
Subsidiary Trust Fund as a REMIC (the "Subsidiary
REMIC") for federal income tax purposes. As
further specified in the Pooling and Servicing
Agreement, Mortgage Loan interest (net of the
Servicing Fee) in excess of the Subsidiary Pass-
Through Rate and certain payments received by the
Trustee in excess of the principal balance of the
Mortgage Loans will comprise the residual interest
in the Subsidiary REMIC (the "Subsidiary Residual
Interest"). The regular interests in the
Subsidiary REMIC in the aggregate will encompass
the rights to all other amounts distributable with
respect to the Mortgage Loans and certain related
property (the "Subsidiary Regular Interests"). An
election will be made to treat the assets of the
Master Trust Fund (which consists of the
Subsidiary Regular Interests) as a REMIC (the
"Master REMIC"). The Class A Certificates [and
Class B-l Certificates] will be regular interests
in the Master REMIC. The Class B[-2] Certificate
will be the residual interest in the Master REMIC.
[The Class A Certificates will be issued with
original issue discount for federal income tax
purposes. The prepayment assumption that will be
used by the Master Servicer in determining the
rate of accrual of
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S-7
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original issue discount for federal income tax
purposes is a Standard Prepayment Assumption of
%. No representation is made that the Mortgage
Loans will prepay at that rate or at any other
rate.]
The Class A Certificates will be treated as
"qualifying real property loans" under Section
593(d) of the Internal Revenue Code of 1986, as
amended (the "Code"), "loans secured by interests
in real property" under Section 7701(a)(19)(C) of
the Code and "real estate assets" under Section
856(c) of the Code, generally in the same
proportion that the assets in the Subsidiary REMIC
would be so treated. In addition, interest on the
Class A Certificates will be treated as "interest
on obligations secured by mortgages on real
property" under Section 856(c) of the Code,
generally to the extent that such Class A
Certificates are treated as "real estate assets"
under Section 856(c) of the Code.
For further information regarding the federal
income tax consequences of investing in the Class
A Certificates, see "Certain Federal Income Tax
Consequences" herein and in the Prospectus.*
LEGAL INVESTMENT.......... The Class A Certificates constitute "mortgage-
related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984 (the
"Enhancement Act") for so long as they are rated
as described herein, and, as such, are legal
investments for certain entities to the extent
provided in the Enhancement Act. See "Legal
Investment" herein and in the Prospectus.
ERISA CONSIDERATIONS...... See "ERISA Considerations" herein and in the
Prospectus.
TRUSTEE...................
CERTIFICATE RATING........ It is a condition of issuance that the Class A
Certificates be rated at least " " by . See
"Rating" herein.
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* If the Prospectus Supplement for a Series of Certificates provides that
Stroock & Stroock & Lavan LLP will pass upon the material federal income tax
consequences of the Certificates for the Depositor, then such Prospectus
Supplement will contain tax disclosure substantially similar to the disclosure
set forth in Version E under "Summary of Terms--Tax Aspects" and "Certain
Federal Income Tax Consequences."
S-8
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[RISK FACTORS]
[Description of Risk Factors to be added as appropriate]
DESCRIPTION OF THE MORTGAGE POOL AND THE UNDERLYING MORTGAGED PROPERTIES(1)
GENERAL
The Mortgage Pool consists of all of the ownership interest held by the
Subsidiary Trust Fund in Mortgage Loans evidenced by adjustable rate
promissory notes (the "Mortgage Notes") having an aggregate principal balance
at the Cut-off Date of $ . The Mortgage Notes are secured by first trust
deeds or mortgages on properties consisting primarily of detached single
family residential properties with the remaining properties consisting of
units of FNMA or FHLMC eligible condominiums and units in planned unit
developments (the "Mortgaged Properties"). All of the Mortgage Loans were
originated by . All of the Mortgage Loans were originated under one of
two origination programs, one of which is a limited documentation program that
relies primarily upon appraisals and credit reports and the other of which
generally conform to FNMA and FHLMC underwriting guidelines. The Mortgage
Loans have the additional characteristics described below and in the
Prospectus. See "The Mortgage Pools" in the Prospectus.
The Depositor will purchase the Mortgage Loans from and will cause such
Mortgage Loans to be assigned to the Trustee. See "The Trust Fund--Mortgage
Loan Program" in the Prospectus. will act as the master servicer (the
"Master Servicer") for the Mortgage Loans pursuant to the Standard Terms and
Provisions of Pooling and Servicing and Reference Agreement, dated as of
(the "Pooling and Servicing Agreement"), among the Depositor, the Master
Servicer and , as trustee (the "Trustee"). The Mortgage Loans will be
serviced by the Servicer pursuant to a Servicing Agreement with the Master
Servicer, and the Servicer will receive a fee for such services specified in
such Servicing Agreement; provided, however, that the Master Servicer will
remain liable for its servicing obligations under the Pooling and Servicing
Agreement as if the Master Servicer alone were servicing such Mortgage Loans.
See "The Trust Fund--The Mortgage Pools" in the Prospectus and "--Servicing
and Sub-Servicing" herein.
Each Mortgage Loan has a Mortgage Rate subject to [monthly] [semi-annual]
[annual] adjustment on the first day of the month specified in the related
Mortgage Note and on the first day of every month thereafter (each such date,
an "Adjustment Date"), to equal the sum of (i) the Index as most recently
[made available by the Federal Home Loan Bank of San Francisco (the "FHLB")]
on the day days, as specified for the particular Mortgage Note, prior to the
Adjustment Date and (ii) the applicable Gross Margin[; provided, however, that
any increase or decrease on any Adjustment Date will be limited by the
Periodic Mortgage Rate Cap, and in no event will the Mortgage Rate be greater
than the Maximum Mortgage Rate]. The Index applicable on a Rate Adjustment
Date is the Index available days prior to the Adjustment Date. Effective
with the first payment due on a Mortgage Loan after each related Adjustment
Date, the monthly payment will be adjusted to an amount which will fully
amortize the outstanding principal balance of the Mortgage Loan in
substantially equal payments over its remaining term, and pay interest at the
Mortgage Rate as so adjusted. [All] of the Mortgage Loans were
- --------
(1) The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as it was constituted
at the close of business on the Cut-off Date, after deducting the
scheduled principal payments due on or before such date. Prior to the
issuance of the Certificates, Mortgage Loans may be removed from the
Mortgage Pool if, as a result of delinquencies or otherwise, the Depositor
deems such removal necessary or desirable. Other Mortgage Loans may be
included in the Mortgage Pool in lieu of the Mortgage Loans so replaced.
In addition, under certain circumstances the Depositor or the Master
Servicer may substitute Mortgage Loans for those in the Trust Fund. See
"Description of the Certificate--Substitution of Mortgage Loans" herein
and "Description of the Certificates--Assignment of Mortgage Loans" in the
Prospectus. The Depositor believes that the information set forth herein
with respect to the Mortgage Pool is representative of the characteristics
of such Mortgage Pool as it will be constituted at the time the
Certificates are issued, although the range Mortgage Rates and maturities
and certain other characteristics of the Mortgage Loans in the Mortgage
Pool may vary in non-material respects from those set forth herein as a
result of such deletions, repurchases or substitutions.
S-9
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originated with a Mortgage Rate below the sum of the applicable Index and
Gross Margin (the "Initial Mortgage Rate") applicable for an initial period of
months from the date of origination and % of the Mortgage Loans as of the
Cut-off Date will bear interest at their Initial Mortgage Rates. The weighted
average number of months from the Cut-off Date to the first Adjustment Date
for the Mortgage Loans is approximately months. [Due to the application of the
Periodic Mortgage Rate Caps (even assuming no increase in the applicable Index
from the date of origination to the Adjustment Date) or the Maximum Mortgage
Rate, the Mortgage Rate on any Mortgage Loan, as adjusted on any Adjustment
Date, may be less than the sum of the then applicable Index and Gross Margin,
subject to rounding.] If the Index becomes unpublished or is otherwise
unavailable, the Master Servicer will select (or cause to be selected) an
alternative index for Mortgage Loans based upon comparable information in
compliance with applicable federal laws.
The Mortgage Loans were originated in . All of the Mortgage Loans will
have [monthly] payments due on [the first day of each month] (each a "Due
Date"). At origination, of the Mortgage Loans had terms to stated maturity
of 30 years. The latest date on which any Mortgage Loan will mature is. All
Mortgage Loans had Periodic Mortgage Rate Caps equal to basis points. The
Maximum Mortgage Rates range from % to % and the weighted average Maximum
Mortgage Rate is approximately % as of the Cut-off Date.
[Mortgage Loans that are expected to constitute approximately % of the
Initial Principal Balance of the Mortgage Pool as of the Cut-off Date will
have Mortgage Rates that will be convertible from an adjustable to a fixed
Mortgage Rate at the option of the mortgagor upon certain conditions on the
[when convertible] after origination of the related Mortgage Loan. In
determining the fixed rate applicable to a Mortgage Loan eligible for
conversion, the Master Servicer, acting on behalf of the Trustee, will. To the
extent the applicable rate is not available, the Master Servicer will quote a
fixed rate based upon comparable information. In order to be eligible to
convert the applicable Mortgage Rate on such a Mortgage Loan from an
adjustable to a fixed Mortgage Rate, the mortgagor must complete and submit to
the Master Servicer certain conversion documents and a loan modification
agreement, pay the applicable conversion fee and not be in default under the
Mortgage Note or the security documents related to such Mortgage Loan. Upon
conversion, the monthly payments of principal and interest on such Mortgage
Loan will be adjusted to provide for fully amortizing, level monthly payments
until maturity. [Should interest rates decline so that the fixed Mortgage Rate
applicable upon conversion is significantly lower than the prevailing
adjustable Mortgage Rate, due to the application of Interest Rate Caps, or is
significantly lower than the applicable Maximum Mortgage Rate on such Mortgage
Loan, mortgagors may have a significant incentive to effect a conversion.] See
"Description of the Certificates--Purchase of Converted Mortgage Loans"
herein.
The Mortgage Loans have the following characteristics (information provided
as of the Cut-off Date unless otherwise indicated):*
- --------
* The information presented in tabular form may be presented in paragraph
form, or ranges for such information may be provided.
S-10
<PAGE>
<PAGE>
TYPES OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
% OF
NO. MORTGAGE
OF AGGREGATE POOL
PROPERTY TYPES LOANS BALANCES BALANCE
- ------------------------------------------------------- ----- --------- --------
<S> <C> <C> <C>
Single family detached................................. $ . %
Condominium............................................
Planned Unit Developments..............................
---- ----- ------
Total................................................ $ 100.00%
==== ===== ======
</TABLE>
CURRENT LOAN AMOUNTS(1)
<TABLE>
<CAPTION>
% OF
NO. MORTGAGE
OF AGGREGATE POOL
CURRENT LOAN AMOUNTS LOANS BALANCES BALANCE
- ------------------------------------------------------- ----- --------- --------
<S> <C> <C> <C>
Up to $100,000......................................... $ . %
$100,001--150,000......................................
150,001--200,000.......................................
200,001--250,000.......................................
250,001--300,000.......................................
300,001--350,000.......................................
350,001--400,000.......................................
400,001--450,000.......................................
Over $450,001..........................................
---- ----- ------
Total(2)............................................. $ 100.00%
==== ===== ======
</TABLE>
- --------
(1) The largest current loan amount is $ and the smallest current loan
amount is $ .
(2) The average outstanding principal balance is $ .
LOAN-TO-VALUE RATIOS AT ORIGINATION
<TABLE>
<CAPTION>
% OF
NO. MORTGAGE
OF AGGREGATE POOL
LOAN-TO-VALUE RATIOS LOANS BALANCES BALANCE
- ------------------------------------------------------- ----- --------- --------
<S> <C> <C> <C>
70.00% or less......................................... $ . %
70.01% to 75.00%.......................................
75.01% to 80.00%.......................................
80.01% to 85.00%.......................................
85.01% to 90.00%....................................... .
---- ----- ------
Total(1)............................................. $ 100.00%
==== ===== ======
</TABLE>
- --------
(1) The weighted average loan-to-value ratios of the Mortgage Loans, based on
the principal amount at origination and the principal amount as of the
Cut-off Date, respectively, and the lesser of the appraised value at
origination and the purchase price paid by the Mortgagor, was % and %,
respectively.
S-11
<PAGE>
<PAGE>
CURRENT MORTGAGE RATES
<TABLE>
<CAPTION>
% OF
NO. MORTGAGE
OF AGGREGATE POOL
MORTGAGE RATES(1) LOANS BALANCES BALANCE
- ------------------------------------------------------- ----- --------- --------
<S> <C> <C> <C>
. % or less........................................ $ . %
. % or less........................................
. % or less........................................ .
. % or less........................................ .
---- ----- ------
Total(2)............................................. $ 100.00%
==== ===== ======
</TABLE>
- --------
(1) With respect to % of the Mortgage Pool Balance, the Mortgage Rate is the
original Mortgage Rate and does not reflect application of the Index.
(2) The weighted average Mortgage Rate is approximately % per annum.
MORTGAGE LOAN GROSS MARGINS
<TABLE>
<CAPTION>
% OF
NO. MORTGAGE
OF AGGREGATE POOL
GROSS MARGINS LOANS BALANCES BALANCE
- ------------------------------------------------------- ----- --------- --------
<S> <C> <C> <C>
%..................................................... $ . %
.....................................................
.....................................................
.....................................................
.....................................................
---- ----- ------
Total(1)............................................. $ 100.00%
==== ===== ======
</TABLE>
- --------
(1) The weighted average Gross Margin is approximately per annum.
MONTH IN WHICH NEXT ADJUSTMENT DATE FALLS
<TABLE>
<CAPTION>
% OF
NO. MORTGAGE
OF AGGREGATE POOL
MONTH(1) LOANS BALANCES BALANCE
- ------------------------------------------------------- ----- --------- --------
<S> <C> <C> <C>
..................................................... $ . %
.....................................................
.....................................................
.....................................................
.....................................................
---- ----- ------
Total(2)............................................. $ 100.00%
==== ===== ======
</TABLE>
- --------
(1) The adjusted Mortgage Rate will be reflected in payments received by
Certificateholders on the 25th day of the month following the month in
which the Adjustment Date occurs.
(2) The weighted average number of months to the initial Adjustment Date is
months.
S-12
<PAGE>
<PAGE>
LIFETIME MORTGAGE RATE CAPS
<TABLE>
<CAPTION>
% OF
NO. MORTGAGE
OF AGGREGATE POOL
LIFETIME MORTGAGE RATE CAP LOANS BALANCES BALANCE
- ------------------------------------------------------ ----- --------- --------
<S> <C> <C> <C>
%................................................... $ . %
...................................................
...................................................
...................................................
...................................................
...................................................
...................................................
...................................................
...................................................
...................................................
...................................................
...................................................
...................................................
...................................................
...................................................
...................................................
...................................................
...................................................
...................................................
...................................................
---- ----- ------
Total............................................... $ 100.00%
==== ===== ======
</TABLE>
YEARS OF ORIGINATION
<TABLE>
<CAPTION>
% OF
NO. MORTGAGE
OF AGGREGATE POOL
YEAR LOANS BALANCES BALANCE
- ------------------------------------------------------- ----- --------- --------
<S> <C> <C> <C>
%.................................................... $ . %
....................................................
....................................................
....................................................
....................................................
---- ----- ------
Total................................................ $ 100.00%
==== ===== ======
</TABLE>
S-13
<PAGE>
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
% OF
NO. MORTGAGE
OF AGGREGATE POOL
STATES LOANS BALANCES BALANCE
- ------------------------------------------------------- ----- --------- --------
<S> <C> <C> <C>
%.................................................... $ . %
....................................................
....................................................
....................................................
....................................................
....................................................
---- ----- ------
Total................................................ $ 100.00%
==== ===== ======
</TABLE>
[Mortgage Loans for which the loan-to-value ratio at origination was greater
than 80% either (1) will be insured as to payment default for the amount in
excess of 75% of the principal balance by a Primary Mortgage Insurance Policy
until the principal balance of such Mortgage Loan is reduced below 80% of the
lesser of the appraised value at origination or the purchase price of the
Mortgaged Property, or (2) will be covered by a [DESCRIPTION OF ALTERNATIVE].]
Approximately % of the Mortgage Loans were made to refinance the related
Mortgaged Properties and approximately % of the Mortgage Loans have been made
to purchase the related Mortgaged Properties. Approximately % of the Mortgage
Loans will be secured by Mortgaged Properties represented to the originator in
the related loan application to be the primary residence of the mortgagor at
the time of origination. % of the Mortgage Loans are secured by Mortgaged
Properties which were second homes of the mortgagor at the time of origination
based on representations of the Mortgagor. % of the Mortgage Loans were made
to finance the purchase of homes represented by the mortgagor to have been
acquired for investment purposes.
At the date of issuance of the Certificates, no Mortgage Loan will be
delinquent in scheduled payments of principal and interest by more than 30
days and no Mortgage Loan will have been, as of the Cut-off Date, more than 30
days delinquent in scheduled payments of principal and interest more than once
in the previous year.
THE INDEX
[DESCRIPTION OF APPLICABLE INDEX, e.g., The Index is currently published by
the FHLB on or about the last working day of each month and is designed to
represent the monthly weighted average cost of funds for savings institutions
in the 11th District of the Federal Home Loan Bank System (Arizona, California
and Nevada) for the month prior to publication. The Index is computed by the
FHLB for each month by dividing the cost of funds (interest paid during the
month by 11th District savings institutions on savings, advances and other
borrowings) by the average of the total amount of those funds outstanding at
the end of the month and the prior month and annualizing and adjusting the
result to reflect the actual number of days in the particular month. If
necessary, before these calculations are made, the component figures are
adjusted by the FHLB to neutralize the effect of events such as member
institutions leaving the 11th District or acquiring institutions outside the
11th District. The Index has been reported each month since August 1981.]
[The Index reflects the interest costs paid on all types of funds held by
11th District member institutions. The Index is weighted to reflect the
relative amount of each type of funds held at the end of the relevant month.
There are three major components of funds of 11th District institutions: (1)
savings deposits, (2) FHLB advances, and (3) all other borrowings, such as
reverse repurchase agreements and mortgage-backed bonds. Unlike most other
interest rate measures, the Index does not necessarily reflect current market
rates, since the component funds represent a variety of maturities whose costs
may react in different ways to changing conditions.]
S-14
<PAGE>
<PAGE>
[A number of factors affect the performance of the Index which may cause the
Index to move in a manner different from indices tied to specific interest
rates, such as United States Treasury Bills or LIBOR. Because of the various
maturities of the liabilities upon which the Index is based, the Index may not
necessarily reflect the average prevailing market interest rates on new
liabilities of similar maturities. Additionally, the Index may not necessarily
move in the same direction as market interest rates at all times, since as
longer term deposits or borrowings mature and are renewed at prevailing market
interest rates, the Index is influenced by the differential between the prior
and the new rates on those deposits or borrowings. Moreover, as stated above,
the Index is designed to represent the average cost of funds for 11th District
savings institutions for the month prior to the month in which the Index is
published. In addition, such movement of the Index, as compared to other
indices tied to specific interest rates, may be affected by changes instituted
by the FHLB in the method used to calculate the Index. Information Bulletins
announcing the Index may be obtained by contacting the FHLB.]
[The following table sets forth the Index published in each month (with
respect to the 11th District cost of funds in the prior month) for the four
most recent calendar years and for 19 .
<TABLE>
<CAPTION>
19 19 19 19 19
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
January........................................... % % % % %
February..........................................
March.............................................
April.............................................
May...............................................
June..............................................
July..............................................
August............................................
September.........................................
October...........................................
November..........................................
December..........................................
</TABLE>
[MASTER SERVICER]
is a , which was founded in . At had consolidated assets
of $ billion and regulatory capital of $ million. As of , had
executive offices in and savings branches located .
is subject to comprehensive regulation, examination and supervision by
the [FHLBB and the FSLIC,] which regulation is intended primarily for the
benefit of depositors. [Deposits at are insured by the FSLIC up to
$100,000 for each insured account holder, the maximum permitted by law.]
executive offices are located at and its telephone number at that
address is .
Loan Portfolio. [Description.]
Loan Transactions. primary lending is [description.]. has
concentrated its efforts on .
The following table sets forth certain information with respect to loan
originations, loan purchases and sales, and repayment experience during the
periods indicated.
S-15
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Loans receivable at beginning of period..........................
Loans originated.................................................
Loans purchased..................................................
Loans obtained in Equitable acquisition..........................
Loans sold.......................................................
Loan repayments..................................................
Other............................................................
---- ---- ----
Net loan activity................................................
---- ---- ----
Loan receivable at end of period.................................
==== ==== ====
</TABLE>
Loan Underwriting. has adopted written, nondiscriminatory underwriting
standards for use in originating and purchasing residential mortgage loans.
has represented to the Depositor that its underwriting standards are in
substantial conformity with standards set up by the FNMA and the FHLMC, which
conformity facilitates sales of such loans in the secondary market. A detailed
loan application is obtained or reviewed to determine the borrower's ability
to repay, and confirmation of the more significant information is obtained
through the use of credit reports, financial statements and verifications. An
appraisal of the property, conducted by an appraiser meeting the
qualifications set forth in FHLBB guidelines, is required to determine the
adequacy of the collateral. also requires that a survey be conducted and
title insurance be obtained, insuring the priority of its mortgage lien, and,
for loans with a loan-to-value ratio of 80% or more, that private mortgage
insurance be obtained if available. All loan applications must be reviewed by
underwriters to ensure that guidelines are met. Such guidelines are approved
by Board of Directors. has represented to the Depositor that each
Mortgage Loan meets the credit, appraisal and underwriting standards
established by and described above.
[Approximately % of the Mortgage Loans were originated under the limited
documentation program of . has represented that each of the Mortgage
Loans originated under a limited documentation program satisfies the standards
established and followed by for originating and acquiring mortgage loans
under its limited documentation program. Under the program, does not
evaluate the borrower's assets-to-liabilities ratio, but did verify the
borrower's income and availability of funds for down payment, and relies
primarily on a credit report on the borrower (which is required to be
favorable) and at least one appraisal as evidence of the value of the property
securing the loan. The limited documentation program was not available
for loans secured by condominiums and was available only for owner-occupied
primary residences. Under such program, loan-to-value ratios were limited to
% for loans under $ and to % for loans under $ , except that for
loans in certain locations and having certain characteristics, lower maximum
loan-to-value ratios were established.
Loan Portfolio Qualify. In accordance with the requirements of the
Competitive Equality Banking Act of 1987 (the "CEBA"), the FHLBB in December
1987 adopted amendments to its classification of assets regulation. Prior to
December 1987, to monitor an insured institution's asset quality the FHLBB
defined certain assets of savings institutions as scheduled items and
established certain operating restrictions based upon ratios relating to such
assets. The regulation as amended eliminates entirely the "scheduled items"
classification, but retains the existing classification categories of
substandard, doubtful and loss, while altering the effects of the respective
classifications with respect to valuation allowance requirements and minimum
regulatory capital requirements. Specific loss reserves are no longer required
for assets classified as doubtful and institutions are required to charge off
or set aside loss reserves for 100% of the amount of any asset, or portion of
an asset, classified as a loss. The amended regulation requires institutions
to classify their own assets and to establish prudent general allowances for
loan losses, subject to examiner review. Greater examiner discretion,
consistent with the asset classification practices of the banking regulatory
agencies, is permitted by the amended regulation.
S-16
<PAGE>
<PAGE>
The amended regulation also requires institutions to establish loss reserves
for off-balance-sheet items when loss becomes probable and estimable.
One measure of an institution's asset quality is the level of non-performing
loans in its portfolio. Non-performing loans consist of (i) non-accrual loans,
(ii) loans that are 90 or more days contractually past due as to interest or
principal but that are well-secured and in the process of collection or
renewal in the normal course of business, and (iii) loans that have been
renegotiated to provide a deferral of interest or principal because of a
deterioration in the financial condition of the borrower ("restructured
loans"). generally places conventional mortgage loans on non-accrual
status when more than 90 days past due. Where the underlying collateral is a
"home" (as defined in the Rules and Regulations for the Federal Home Loan Bank
System), the loan is placed on non-accrual status when the amount of interest
receivable plus all loan balances secured by the home exceeds 90% of the
appraised value of the security property, provided there is a reasonable
expectation of interest collection.
The following table sets forth information regarding the non-performing
loans as of the dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
19 19 19
----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Non-accrual loans............................................. $ $ $
Accruing loans 90 days or more past due.......................
Restructured loans............................................
</TABLE>
Loan Servicing. The following table sets forth the dollar amounts of
conventional mortgage loans serviced by for itself and other lenders at the
dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
19 19 19
----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Conventional mortgage loans.............................
</TABLE>
Loss and Delinquency Experience. The following table sets forth the
delinquency and foreclosure experience of residential conventional mortgage
loans in the mortgage loan portfolio serviced by and other entities at
the dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------------------------
19 19 19 19
----------------- ----------------- ----------------- -----------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
OF OF TOTAL OF OF TOTAL OF OF TOTAL OF OF TOTAL
LOANS LOANS LOANS LOANS LOANS LOANS LOANS LOANS
------ ---------- ------ ---------- ------ ---------- ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Conventional mortgage
loans delinquent for:
60-89 days.............. $ $ $ $
90 days and over........
In foreclosure..........
Total................. $ $ $ $
</TABLE>
The allowance for loan losses is maintained at an amount management deems
adequate to cover estimated losses. In determining the level to be maintained,
management considers factors such as current economic trends in specific
geographic areas, historical loss experience, borrowers' ability to repay and
repayment performance and estimated collateral values, as well as
considerations such as the availability of indemnifications, mortgage
insurance and seller-provided recourse.
S-17
<PAGE>
<PAGE>
The statistics shown above represent the loss experience for the total
conventional mortgage loan portfolio (including residential and commercial
loans) for each of the periods presented, whereas the aggregate loss
experience on the Mortgage Loans will depend on the results obtained over the
life of the Mortgage Pool.
SERVICING [AND SUB-SERVICING]
The Mortgage Loans will be serviced in accordance with procedures as
described generally in the accompanying Prospectus under the heading
"Description of the Certificates--Servicing by Unaffiliated Sellers." [ ,
as Master Servicer, will enter into a Servicing Agreement with (the
"Servicer") pursuant to which the Servicer will sub-service the Mortgage
Loans. acquired the Mortgage Loans from the Servicer. The Servicer has
serviced the Mortgage Loans since their origination. The Servicing Agreement
can be terminated without cause, but in such event or a successor master
servicer would be required to pay a fee to the Servicer or sell the Servicer's
interest in the Servicing Agreement in an auction proceeding upon termination.
may determine to terminate the Servicer and to service the Mortgage Loans
itself or through other sub-servicers who may be affiliates of .]
[The Servicing Agreement provides for servicing compensation equal to a rate
of basis points per annum on the outstanding principal balance of % of the
Mortgage Pool. In addition, the Servicer is entitled to retain certain late
payment fees, assumption fees and conversion fees related to the Mortgage
Loans. The Servicing Agreement does not require the Servicer to make Advances
or to pay any amount from its servicing compensation with respect to interest
on Principal Prepayments on Mortgage Loans.]
Except as described below, when any Mortgaged Property is conveyed by the
Mortgagor, the Master Servicer generally will enforce, and will cause any
Servicer to enforce, any due-on-sale clause contained in the Mortgage Loan, to
the extent permitted under applicable law and governmental regulations.
Acceleration of Mortgage Loans as a result of enforcement of such due-on-sale
provisions in connection with transfers of the related Mortgaged Properties
will affect the level of prepayments on the Mortgage Loans, thereby affecting
the weighted average life of the related Class A Certificates. See "Maturity
and Prepayment Considerations" in the Prospectus.
All of the Mortgage Loans include a rider to the Mortgage providing that
assumption of the remaining unpaid principal balance of the Mortgage Loan will
be permitted if the borrower provides information required to evaluate the
creditworthiness of the proposed transferee and the transferee is determined
to be creditworthy. In connection with such assumption, a reasonable fee may
be charged as a condition to the loan assumption and any such fee collected in
connection with a Mortgage Loan in the Subsidiary Trust Fund will be retained
by [or the Servicer]. The assumption of Mortgage Loans by buyers of the
related Mortgaged Properties may also affect the level of prepayments on the
Mortgage Loans, thereby affecting the weighted average life of the Class A
Certificates.
INSURANCE
A Standard Hazard Insurance Policy will be maintained with respect to each
Mortgage Loan in an amount equal to the maximum insurable value of the
improvements securing such Mortgage Loan or the principal balance of such
Mortgage Loan, whichever is less. See "Description of Insurance--Standard
Hazard Insurance Policies" in the Prospectus. [No Mortgage Pool Insurance
Policy, Special Hazard Insurance Policy or Mortgagor Bankruptcy Insurance will
be maintained with respect to the Mortgage Pool, nor will any Mortgage Loan
included in the Mortgage Pool be subject to FHA Insurance or a VA Guaranty.]
S-18
<PAGE>
<PAGE>
YIELD CONSIDERATIONS
The effective yield to holders of the Class A Certificates will depend upon,
among other things, the price at which the Class A Certificates are purchased
and the amount and rate at which principal, including both scheduled and
unscheduled payments thereof, is paid to Class A Certificateholders.
The rate of principal payments on the Class A Certificates, the aggregate
amount of each monthly interest payment on the Class A Certificates and the
yield to maturity of the Class A Certificates will be directly related to the
rate of payments of principal on the Mortgage Loans. Principal payments on the
Mortgage Loans may be in the form of scheduled principal payments or
prepayments (for this purpose, the term "prepayment" includes payments
resulting from optional prepayments by the Mortgagors, refinancings,
liquidation of the Mortgage Loans due to defaults, casualties, condemnations
or the like and repurchases by the Depositor or the Master Servicer, as the
case may be). Any such prepayments will result in distributions to
Certificateholders of amounts which would otherwise be distributed over the
remaining term of the Mortgage Loans. In general, the prepayment rate may be
influenced by a number of economic, geographic, social and other factors,
including general economic conditions and homeowner mobility. Other factors
affecting prepayment of mortgage loans include changes in mortgagors' housing
needs, job transfers, unemployment, mortgagors' net equity in the mortgaged
properties and servicing decisions.
The Mortgage Loans may be prepaid by the Mortgagors at any time without
payment of any prepayment fee or penalty. As described herein under
"Description of the Certificates--Subordination of the Class B Certificates;
Shifting Interest Credit Enhancement," all or a disproportionately large
percentage of principal prepayments on the Mortgage Loans will be distributed
to the holders of the Class A Certificates during at least the first fourteen
years after the Cut-off Date. In general, defaults on Mortgage Loans are
expected to occur with greater frequency in their early years, although little
data is available with respect to the rate of default on adjustable rate
Mortgage loans. Increases in the monthly payments on the Mortgage Loans in
excess of those assumed in underwriting such Mortgage Loans may result in a
default rate higher than that on conventional mortgage loans with fixed
mortgage rates. Prepayments, liquidations and purchases of the Mortgage Loans
will result in distributions to Certificateholders of amounts which would
otherwise be distributed over the remaining terms of the Mortgage Loans. Since
the rate of payment of principal on the Mortgage Loans will depend on future
events and a variety of factors (as described more fully herein and in the
Prospectus under "Yield Considerations" and "Maturity and Prepayment
Considerations"), no assurance can be given as to such rate or the rate of
principal prepayments.
[Mortgage Loans that are expected to constitute approximately % of the
initial aggregate principal balance of the Mortgage Loans as of the Cut-off
Date will provide that the mortgagor may, during a specified period of time,
convert the adjustable rate of the related Mortgage Loan to a fixed rate. The
conversion option may be exercised during periods of rising interest rates as
mortgagors attempt to limit their risk of higher rates. If mortgagors were to
exercise their conversion rights in such an interest rate environment, a
purchase of the Mortgage Loan by the Master Servicer would have the same
effect on Certificateholders as a prepayment at a time when prepayments
generally would not be expected. The availability of fixed rate mortgage loans
at competitive interest rates during periods of falling interest rates may
also encourage mortgagors to exercise the conversion option. The convertible
ARM loan is a relatively new type of mortgage loan, so there can be no
certainty as to the rate at which conversions will take place or as to the
rate of prepayments in stable or changing interest rate environments. The
Master Servicer is obligated to purchase Converted Mortgage Loans.
Consequently, the exercise of the conversion option by mortgagors will
generally result in prepayment of principal with respect to the Mortgage
Pool.]
[The rate at which mortgagors exercise their conversion rights and the
resulting purchase of Converted Mortgage Loans by the Master Servicer will
affect the rate of payment of principal, and hence the effective yield on the
Class A Certificates. The purchase price paid will be passed through to the
Certificateholders as principal in the month following the month of such
purchase. The effective yield on the Class A Certificates also will be
S-19
<PAGE>
<PAGE>
affected by the failure of the Master Servicer to purchase Converted Mortgage
Loans and the resulting retention of fixed rate Mortgage Loans in the Mortgage
Pool. See "Description of the Certificates--Purchase of Converted Mortgage
Loans" herein.]
The timing of changes in the rate of prepayments on the Mortgage Loans may
significantly affect an investor's actual yield to maturity, even if the
average rate of principal payments experienced over time is consistent with an
investor's expectations. In general, the earlier a prepayment of principal on
the Mortgage Loans, the greater will be the effect on the 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 would not be fully offset by a subsequent like reduction (or
increase) in the rate of principal payments.
All of the Mortgage Loans comprising the Mortgage Pool are adjustable rate
mortgage loans. The yield to maturity of the Class A Certificates will be
affected by the Mortgage Rates on the Mortgage Loans as they adjust from time
to time. The Depositor is not aware of any publicly available statistics
relating to the principal prepayment experience of adjustable rate mortgage
loans over an extended period of time, and the Depositor's experience with
respect to adjustable rate mortgage loans is insufficient to draw any
conclusions with respect to the expected prepayment rates on the Mortgage
Loans comprising the Mortgage Pool. The rate of payments (including
prepayments) on adjustable rate mortgage loans has fluctuated in recent years.
As is the case with conventional fixed-rate mortgage loans, adjustable rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment. For example, if prevailing mortgage rates
fell significantly below the then current Mortgage Rates on the Mortgage Loans
or significantly below the Maximum Mortgage Rates on the Mortgage Loans, the
rate of prepayment would be expected to increase due to the availability of
fixed-rate mortgage loans at competitive interest rates, which may encourage
Mortgagors to refinance the Mortgage Loans in order to obtain a lower fixed
interest rate. Conversely, if prevailing mortgage rates rose significantly
above the then current Mortgage Rates on the Mortgage Loans, the rate of
prepayment on the Mortgage Loans would be expected to decrease.
[The Mortgage Rates on the Mortgage Loans will adjust semi-annually
(although not on the same Adjustment Dates) and such semi-annual increases and
decreases in the Mortgage Rates on the Mortgage Loans will be limited by the
Periodic Mortgage Rate Cap and Maximum Mortgage Rates applicable to the
Mortgage Loans. In addition, such Mortgage Rates will be based on the Index
(which may not rise and fall consistently with interest rates on other types
of adjustable rate residential mortgage loans) plus the Gross Margin for the
Mortgage Loans (which may be different from then current margins on
residential mortgage loans). As a result, the Mortgage Rates on the Mortgage
Loans at any time may not equal the prevailing rates for similar adjustable
rate mortgage loans, and the rate of prepayment may be lower or higher than
would otherwise be anticipated. See "Yield Considerations" and "Maturity and
Prepayment Considerations" in the Prospectus.]
In addition, if on any Distribution Date, after taking into account any
Advances, amounts otherwise distributable to the Subsidiary Residual
Certificateholder and permitted withdrawals from the Certificate Account,
there are not sufficient funds to pay the principal and interest on the Class
A Certificates, the amount of the resulting shortfall, and in the case of
interest shortfalls, interest at the applicable Pass-Through Rate, will be
added to the amount the Class A Certificateholders are entitled to receive on
the next Distribution Date. See "Description of the Certificates--
Distributions" herein. If any shortfalls occur, the weighted average life of
the Class A Certificates will be increased over that which would result had
such shortfalls not occurred.
The after-tax yield to Certificateholders may be affected by lags between
the time interest income accrues to the Certificateholders and the time the
related income is received. See "Certain Federal Income Tax Consequences"
herein and in the Prospectus.
The effective yield to the holders of Class A Certificates will be lower
than the yield otherwise produced by the Pass-Through Rate and purchase price
because monthly interest will not be payable to such holders until the
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25th day (or if such day is not a Business Day, then on the next succeeding
Business Day) of the month following the month in which interest accrues on
the Mortgage Loans.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates offered hereby will be issued pursuant to the Pooling and
Servicing Agreement, a form of which has been filed as an exhibit to the
Registration Statement. Reference is made to the Prospectus for additional
information regarding the terms and conditions of the Pooling and Servicing
Agreement. The following summaries do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, the
provisions of the Pooling and Servicing Agreement. When particular provisions
or terms used in the Pooling and Servicing Agreement are referred to, the
actual provisions (including definitions of terms) are incorporated by
reference.
The Class A Certificates will be transferable and exchangeable at the office
of the Trustee located at . No service charge will be made for any
registration of transfer or exchange of the Class A Certificates on the
Certificate Register maintained by the Trustee, but the Trustee may require
the payment of a sum sufficient to cover any related tax or other governmental
charge. There is at present no market for the Class A Certificates and there
can be no assurance that a secondary market will develop or that if it does
develop, it will continue. Fluctuating market interest rates may affect the
market value of the Class A Certificates.
DISTRIBUTIONS
Distributions of principal and interest on the Certificates will be made on
the [25th] day of each month, or, if such day is not a Business Day, the next
succeeding Business Day (each a "Distribution Date"), beginning , to the
persons in whose names the Certificates are registered at the close of
business on the last day of the month preceding the month in which payment is
made (the "Record Date"). Certain calculations with respect to the
Certificates will be made on the [15th] day of each month, or if such day is
not a Business Day, the next succeeding Business Day (the "Determination
Date").
Principal received on each Mortgage Loan will be passed through monthly as
described below on the Distribution Date occurring in the month in which the
Due Date occurs. Principal prepayments received during the period from the
first day of any month to the last day of such month ( a "Prepayment Period")
will be passed through on the Distribution Date occurring in the month
following receipt. When a Mortgage Loan is prepaid, in whole or in part,
between scheduled payment dates. the Mortgagor pays interest on the amount
prepaid only to the date of prepayment and not thereafter. The Master Servicer
is not required to pay any part of its servicing compensation to assure that
distributions made to Certificateholders on the related Distribution Date
include an amount equal to one full month's interest at the applicable
Subsidiary Pass-Through Rate.
Interest received by the Subsidiary Trust Fund on each Mortgage Loan will be
passed through monthly on the Distribution Date occurring in the month in
which the Due Date occurs, at the Subsidiary Pass-Through Rate for such
Mortgage Loan. The Pass-Through Rate will equal the weighted average of the
Subsidiary Pass-Through Rates for the Mortgage Loans. Prior to the first
Adjustment Date with respect to each Mortgage Loan that occurs after the Cut-
off Date, the Subsidiary Pass-Through Rate for such Mortgage Loan will equal
the Initial Mortgage Rate less . Thereafter, the Subsidiary Pass-Through
Rate with respect to each Mortgage Loan will equal the Index applicable to
each Mortgage Loan plus basis points (the "Pass-Through Margin") subject to
the limitation that the Subsidiary Pass-Through Rate shall not exceed the
lesser of the Periodic Mortgage Rate Cap less the Servicing Fee Rate and the
Maximum Subsidiary Pass-Through Rate. The Maximum Subsidiary Pass-Through Rate
with respect to a Mortgage Loan shall equal the Maximum Mortgage Rate for such
Mortgage Loan minus the Servicing Fee Rate. The Master Servicer will receive a
servicing fee (the "Servicing Fee") as compensation for the servicing of each
Mortgage Loan which is calculated monthly and equals a fixed percentage
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of the principal balance of the Mortgage Loan (the "Servicing Fee Rate").
[Prior to the first Adjustment Date with respect to a Mortgage Loan that
occurs after the Cut-off Date, the Servicing Fee Rate will be basis points
for such Mortgage Loan. Subsequent to the first Adjustment Date with respect
to a Mortgage Loan that occurs after the Cut-off Date, t][T]he Servicing Fee
Rate shall equal basis points. See "Description of the Mortgage Pool and
the Underlying Mortgaged Properties" above and "Servicing Compensation and
Payment of Expenses" below. The amount of interest on each Mortgage Loan
available to be distributed on each Distribution Date may be expected to
change, among other reasons, as the Mortgage Rate and the Subsidiary Pass-
Through Rate vary with the Index and as the Mortgage Rate reaches the Periodic
Mortgage Rate Cap and the Maximum Mortgage Rate (which will not be the same
for all Mortgage Loans).
The Master Servicer will deposit in the Certificate Account the payments and
collections described in "Description of the Certificates--Payments on
Mortgage Loans" in the Prospectus.
On each Distribution Date, the amount required to be distributed to the
Class A Certificateholders will equal the lesser of the Class A Distribution
Amount and the Master Trust Fund Aggregate Distribution.
The "Class A Distribution Amount" means generally, as of any Distribution
Date, an amount equal to the sum of: (a) one month's interest at the Pass-
Through Rate on the Class A Certificate Principal Balance as of such
Distribution Date; (b) the outstanding balance of all previously due and
unpaid Interest Shortfalls (as defined below) owed to the Class A
Certificateholders with accrued interest thereon at the Pass-Through Rate; (c)
the outstanding balance of all previously due and unpaid Principal Shortfalls
(as defined below) owed to the Class A Certificateholders; (d) the Class A
Percentage of each scheduled payment of principal due on the preceding Due
Date on the Mortgage Loans; (e) the Class A Prepayment Percentage of any
Principal Prepayments received during the related Prepayment Period on the
Mortgage Loans; (f) with respect to Mortgage Loans which became Liquidated
Loans during the related Prepayment Period, the Class A Percentage of the
aggregate principal balance of such Mortgage Loans, net of certain related
unreimbursed advances with respect thereto; (g) the Class A Percentage of any
insurance proceeds received during the related Prepayment Period, net of
certain related unreimbursed advances with respect thereto; and (h) with
respect to Mortgage Loans purchased by the Master Servicer pursuant to the
Pooling and Servicing Agreement during the related Prepayment Period, the
Class A Percentage of the aggregate principal Balances of such Mortgage Loans,
net of certain related unreimbursed advances with respect thereto.
At any time when the Subordinated Amount is equal to zero, the amount
calculated under clauses (a) through (h) above shall not include any amount in
respect of Monthly Payments due on Mortgage Loans which were not actually
received (but shall include payments from funds attributable to advances by
the Master Servicer).
The "Master Trust Fund Aggregate Distribution" shall mean, on any
Distribution Date, the sum of all amounts distributed with respect to the
Subsidiary Regular Interests, as described below.
On each Distribution Date the aggregate amount required to be distributed to
the holders of the Subsidiary Regular Interests is equal to the lesser of (x)
the Subsidiary Trust Fund Regular Distribution and (y) the sum of (i) one
month's interest at the Subsidiary Pass-Through Rate on the principal balance
of each Mortgage Loan, (ii) each payment of the principal due on the related
Due Date on each Mortgage Loan, (iii) any delinquent Mortgagor payment of
principal and interest on such Mortgage Loan received prior to the related
Determination Date, after adjustment of the interest portion of such payment
to the related Subsidiary Pass-Through Rate and deduction of unreimbursed
advances by the Master Servicer with respect to the preceding delinquent
payment, (iv) for each Mortgage Loan which was the subject of a Principal
Prepayment during the related Prepayment Period, the amount of such Principal
Prepayment, (v) for each Mortgage Loan which became a Liquidated Loan during
the related Prepayment Period, the principal balance of such Mortgage Loan,
net of certain unreimbursed advances by the Master Servicer, (vi) with respect
to any Mortgage Loan purchased by the Master Servicer pursuant to the
Agreement, the principal balance of such Mortgage Loan net of certain
unreimbursed advances by the Master Servicer, and (vii) amounts representing
insurance proceeds with respect to a Mortgage Loan.
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The "Subsidiary Trust Fund Regular Distribution" means, generally, as of any
Distribution Date, an amount equal to the amount on deposit in the Certificate
Account as of the close of business on the related Determination Date except:
(a) amounts received on particular Mortgage Loans as late payments or other
recoveries of principal or interest (including Liquidation Proceeds, insurance
proceeds, and condemnation awards) and respecting which the Master Servicer
previously made an unreimbursed Advance of such amounts; (b) amounts
representing reimbursement for certain losses and expenses incurred by the
Master Servicer, as described in the Pooling and Servicing Agreement; (c) all
amounts representing scheduled monthly payments due after the immediately
preceding Due Date; (d) all Principal Prepayments (and interest thereon),
Liquidation Proceeds, insurance proceeds, condemnation awards and repurchase
proceeds received after the related Prepayment Period, including payments of
interest representing interest accrued after the last day of the related Due
Period; (e) all income from Eligible Investments held in the Certificate
Account for the account of the Master Servicer; and (f) certain amounts
distributable to the holder of the Subsidiary Residual Interest pursuant to
the Pooling and Servicing Agreement.
The "Class A Certificate Principal Balance" on any Distribution Date will
equal the portion of the unpaid principal balance of the Mortgage Loans
evidenced by the Class A Certificates as of the Cut-off Date (the "Initial
Class A Certificate Principal Balance") less the sum of payments or recoveries
of, or with respect to, principal of the Mortgage Loans previously distributed
to the Class A Certificateholders and any Realized Losses (as defined below)
including, subject to certain limitations. Special Hazard Realized Losses (as
defined below) previously allocated to the Class A Certificates. The Initial
Class A Certificate Principal Balance is expected to be approximately $ .
See "--Subordination of the Class B Certificates; Shifting Interest Credit
Enhancement" herein.
The "Class B Principal Balance" on any Distribution Date will equal the
Scheduled Principal Balance (as defined below) of the Mortgage Loans minus the
Class A Certificate Principal Balance.
The "Scheduled Principal Balance" of the Mortgage Loans as of the time of
any determination will equal the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date, after application of any scheduled principal
payments due on or before the Cut-off Date, whether or not received, reduced
by the principal portion of all scheduled payments of principal and interest
due on or before the date of determination, whether or not received, and by
all Principal Prepayments distributed to Certificateholders on or before the
date of determination, and further reduced by Realized Losses (as defined
below) with respect to the Mortgage Loans that have been allocated to one or
more classes of Certificates on or before the date of determination.
The "Class A Percentage" shall mean, as to any Distribution Date, the lesser
of 100% and the percentage obtained by dividing the Class A Certificate
Principal Balance by the Scheduled Principal Balance. The "Class A Prepayment
Percentage" shall initially be 100% and shall decline thereafter as provided
under "Subordination of the Class B Certificates; Shifting Interest Credit
Enhancement."
"Interest Shortfall" shall mean, as to any Distribution Date, any excess of
the amount computed pursuant to clause (a) of the term "Class A Distribution
Amount" over the amount of interest distributed to the Class A
Certificateholders on such Distribution Date. "Principal Shortfall" shall
mean, as to any Distribution Date the excess of the sum of the amounts
computed pursuant to clauses (a) through (h) of the term "Class A Distribution
Amount" over the amounts distributed to the Class A Certificateholders (the
"Shortfall"), less the Interest Shortfall.
All distributions will be made by or on behalf of the Trustee to the persons
in whose names the Certificates are registered at the close of business on
each Record Date, which will be the last Business Day of the month preceding
the month in which the related Distribution Date occurs. Such distributions
shall be made either (i) by check mailed to the address of each
Certificateholder as it appears in the Certificate Register or (ii) to any
holder of Certificates having an initial principal balance in excess of
$5,000,000, by wire transfer in immediately available funds to the account of
such Certificateholder specified in writing to the Trustee.
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[On the sixth day of any month or the next succeeding Business Day, the
Master Servicer or the Trustee will provide upon request the Class A
Certificate Principal Balance after giving effect to monthly payments due on
the immediately preceding Due Date.]
SUBORDINATION OF THE CLASS B CERTIFICATES; SHIFTING INTEREST CREDIT
ENHANCEMENT
The rights of the Class B Certificateholders to receive certain
distributions with respect to the Mortgage Loans are subordinate to such
rights of the Class A Certificateholders to the extent of the Subordinated
Amount. As of each Determination Date, the Subordinated Amount will equal the
Class B Principal Balance on such date, reduced by the excess, if any, of
Aggregate Losses over cumulative Realized Losses borne by the Class B
Certificateholders.
Realized Losses shall not be allocated to the Class A Certificates until
after such time as the allocation of such Realized Losses to the Class B
Certificates has reduced the Class B Principal Balance to zero. At such time,
Realized Losses shall be allocated to the Class A Certificates, pro rata among
such Certificates in proportion to their outstanding Class A Certificate
Principal Balances immediately prior to the relevant Distribution Date.
[Notwithstanding the above, Special Hazard Realized Losses shall be allocated
first to the Class B Certificates only until such time as Special Hazard
Realized Losses equal the Special Hazard Subordination Amount, which will be
% of the Cut-off Date Principal Balance. Thereafter, Special Hazard Realized
Losses shall be allocated to the Class A Certificates and the Class B
Certificates, pro rata among such Certificates in proportion to their
outstanding Principal Balances immediately prior to the relevant Distribution
Date.] Any allocation of Realized Losses (or Special Hazard Realized Losses]
to a Class A Certificate or a Class B Certificate on a Distribution Date shall
be made by reducing the Principal Balance thereof by the amount so allocated,
which allocation shall be deemed to have occurred on such Distribution Date.
[Any allocation to the Class B Certificates of a Realized Loss or a Special
Hazard Realized Loss prior to reducing the Special Hazard Subordination Amount
to zero shall have the effect of increasing the Class A Percentage of future
payments of principal on the Mortgage Loans and thereby decreasing the
Subordinate Percentage of such payments of principal.]
"Realized Loss" is defined in the Pooling and Servicing Agreement (i) with
respect to any Liquidated Loan, as the excess of the outstanding principal
balance of such Liquidated Loan over the Liquidation Proceeds, if any,
received in connection with such Liquidated Loan, after application of all
withdrawals permitted to be made by the Master Servicer pursuant to the
Pooling and Servicing Agreement, (ii) with respect to any Mortgage Loan which
has become subject to a valuation by a court of competent jurisdiction of the
Mortgaged Property in an amount less than the then outstanding indebtedness
under the Mortgage Loan, which valuation results from a proceeding under the
United States Bankruptcy Code, as amended from time to time (11 U.S.C.) (a
"Deficient Valuation"), as the excess of the outstanding principal balance of
such Mortgage Loan over the principal amount as reduced in the Deficient
Valuation, or (iii) with respect to any Mortgage Loan purchased by the Master
Servicer or the Depositor pursuant to the Pooling and Servicing Agreement, as
the excess, if any, of 100% of the principal balance of such Mortgage Loan,
together with accrued and unpaid interest at the applicable Subsidiary Pass-
Through Rate to the first day of the month following the month of such
purchase, giving effect to the amount of any unreimbursed Advances made by the
Master Servicer with respect to such Mortgage Loan, over the purchase price
for such Mortgage Loan as the same may be reduced pursuant to an Opinion of
Counsel to prevent such amount from being taxed to the Trust Fund as a
"prohibited transaction", as defined in Section 860F(a)(2) of the Code.
Realized losses may result from, among other things, Special Hazard Realized
Losses. ["Special Hazard Realized Loss" means with respect to any Mortgage
Loan finally liquidated in connection with any physical damage not covered
under a Standard Hazard Insurance Policy or a flood insurance policy, other
than normal wear and tear or other circumstances set forth in the Pooling and
Servicing Agreement an amount equal to the unpaid principal balance of the
Mortgage Loan as of the date of such liquidation, together with interest at
the applicable Mortgage Rate, less the applicable Servicing Fee, from the Due
Date as to which interest was last paid to the Due Date next succeeding such
liquidation, less the proceeds, if any, received in connection with such
liquidation after application of all withdrawals from the Certificate Account
by the Master Servicer permitted pursuant to the Pooling and Servicing
Agreement.]
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"Liquidated Loan" means a Mortgage Loan which, as of the close of business
on the Business Day next preceding the Due Date, has been liquidated through
deed in lieu of foreclosure, sale in foreclosure, trustee's sale or other
realization as provided by applicable law of real property subject to the
related Mortgage and any security agreements or with respect to which payment
under related private mortgage insurance or hazard insurance and/or from any
public or governmental authority on account of a taking or condemnation of any
such property has been received.
The protection afforded to the Class A Certificateholders will be effected
by the preferential right of the Class A Certificateholders to receive the
amount of principal and interest otherwise available for distribution to the
Class B Certificateholders on each Distribution Date out of available funds on
deposit in the distribution account for the Master Trust Fund and by
distributing to the Class A Certificateholders a disproportionately greater
percentage of Principal Prepayments received by the Master Trust Fund from the
Certificate Account, to the extent described herein (the "Class A Prepayment
Percentage"). This disproportionate distribution will have the effect of
accelerating the amortization of the Class A Certificates while increasing the
respective interest in the Mortgage Loans evidenced by the Class B
Certificates. Increasing the respective interest of the Class B Certificates
relative to that of the Class A Certificates is intended to preserve the
availability of the subordination provided by the Class B Certificates.
The Class A Prepayment Percentage for any Distribution Date occurring before
or in will, except as provided below, equal 100%. The Class A Prepayment
Percentage for any Distribution Date occurring subsequent to will be
determined as follows: (a) for any Distribution Date occurring subsequent to
and before or in , the Class A Prepayment Percentage will equal the
Class A Percentage plus % of the Subordinate Percentage for such Distribution
Date, except that prior to the Distribution Date next succeeding the first
Distribution Date, if any, after . , as of which the Step-down
Criteria are satisfied, the Class A Prepayment Percentage will be 100%; (b)
for any Distribution Date occurring subsequent to and before or in , the
Class A Prepayment Percentage will equal the Class A Percentage plus % of the
Subordinate Percentage for such Distribution Date, except that prior to the
Distribution Date next succeeding the first Distribution Date, if any, after
as of which the Step-down Criteria are satisfied, the Class A Prepayment
Percentage will be the Class A Prepayment Percentage in effect in ; (c)
for any Distribution Date occurring subsequent to and before or in , the
Class A Prepayment Percentage will equal the Class A Percentage plus % of the
Subordinate Percentage for such Distribution Date, except that prior to the
Distribution Date next succeeding the first Distribution Date, if any, after
as of which the Step-down Criteria are satisfied, the Class A Prepayment
Percentage will be the Class A Prepayment Percentage in effect in ; (d)
for any Distribution Date occurring subsequent to and before or in ,
the Class A Prepayment Percentage will equal the Class A Percentage plus % of
the Subordinated Percentage for such Distribution Date, except that prior to
the Distribution Date next succeeding the first Distribution Date, if any,
after as of which the Step-down Criteria are satisfied, the Class A
Prepayment Percentage will be the Class A Prepayment Percentage in effect in
; and (e) for any Distribution Date occurring subsequent to , the
Class A Prepayment Percentage will equal the Class A Percentage as of such
Distribution Date except that prior to the Distribution Date next succeeding
the first Distribution Date, if any, after as of which the Step-down
Criteria are satisfied, the Class A Prepayment Percentage will be the Class A
Prepayment Percentage in effect in . The foregoing is subject to the
following: (i) if on any Distribution Date the distribution of all Principal
Prepayments received in the prior month to the holders of the Class A
Certificates would reduce the outstanding Class A Certificate Principal
Balance below zero, the Class A Prepayment Percentage for such Distribution
Date will be limited to the percentage necessary to reduce the Class A
Principal Certificate Balance to zero and thereafter the Class A Percentage
shall be zero; and (ii) if the Class A Percentage on any Distribution Date is
greater than the initial Class A Percentage, the Class A Prepayment Percentage
for such Distribution Date shall be 100%.
The Step-down Criteria shall be met as of any Distribution Date in the 12
months commencing subsequent to February of the year specified in the table
below provided that as of such Distribution Date (a) no more than one time
during the preceding months have the principal balances of outstanding
Mortgage Loans days or
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more delinquent (including loans in foreclosure and the book value of owned
real estate) exceeded % of the Scheduled Principal Balance at such time, and
(b) cumulative Advances deemed to be nonrecoverable as a percentage of the
principal amount of the Class B Certificates as of the Cut-off Date (the
"Subordinated Amount") do not exceed the amounts in the following table:
<TABLE>
<CAPTION>
CUMULATIVE
NON-RECOVERABLE
ADVANCES AS A
PERCENTAGE OF THE
YEAR SUBORDINATED AMOUNT
--------------------------------------------------------- -------------------
<S> <C>
....................................................... %
.......................................................
.......................................................
.......................................................
or thereafter............................................
</TABLE>
The definition of "Step-down Criteria" may be amended by the Depositor and
the Trustee, with prior written notice of such amendment to the Rating Agency,
in a manner that will not result in the lowering or withdrawal of the then
current rating of the Class A Certificates. Such amendment shall not require
the consent of any Certificateholder.
[PURCHASE OF CONVERTED MORTGAGE LOANS
The Pooling and Servicing Agreement provides that is obligated to
purchase from the Subsidiary Trust Fund any Convened Mortgage Loan in the
month following the month in which the related mortgagor exercises the
conversion option, for a price equal to the lesser of (a) 100% of the unpaid
principal balance of such Mortgage Loan, and (b) the Subsidiary Trust Fund's
adjusted federal income tax basis on the date such Mortgage Loan is to be
purchased, in each case plus accrued interest, if any, at the applicable
Subsidiary Pass-Through Rate in effect immediately prior to such conversion to
the last day of the month in which such Mortgage Loan became a Converted
Mortgage Loan, net of the applicable amounts due to the Master Servicer with
respect to that Mortgage Loan. will be obligated to deposit the amount of
the purchase price in the Certificate Account for distribution on the
Distribution Date in the month following the month of such conversion.
In the event defaults upon its obligation to repurchase any Converted
Mortgage Loan, the Trustee may attempt to sell the Mortgage Loan for the price
which was to be paid by the Master Servicer. A Converted Mortgage Loan will
remain in the Trust as a Mortgage Loan with a fixed Mortgage Rate unless and
until purchased by the Master Servicer or otherwise sold in accordance with
the Pooling and Servicing Agreement. So long as serves as Master
Servicer, the failure of the Master Servicer to repurchase a Converted
Mortgage Loan, after notice, is an Event of Default under the Pooling and
Servicing Agreement. The Trustee and a successor master servicer under the
Pooling and Servicing Agreement will not have any obligation to purchase any
Converted Mortgage Loan.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicing Fee payable to the Master Servicer will be payable out of each
interest payment on a Mortgage Loan and will be an adjustable amount equal to
one month's interest (or in the case of any payment of interest which
accompanies a Principal Prepayment made by the Mortgagor, interest for the
number of days covered by such payment of interest) at the applicable
Servicing Fee Rate on the principal balance of such Mortgage Loan. The
Servicing Fee Rate is not the same for each Mortgage Loan. The Servicing Fee
Rate is basis points. The Master Servicer will be permitted to retain or
withdraw from the Certificate Account, in respect of each interest payment
received on a Mortgage Loan, the Servicing Fee with respect to such Mortgage
Loan, calculated on the basis of the same principal amount and period
respecting which the interest payment is computed. In addition, , as
holder of the Subsidiary Residual Interest Certificate, will receive an amount
equal to (i) with respect to each Mortgage Loan, the principal balance of such
Mortgage Loan times the
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difference, if any, between the Mortgage Rate (net of the Servicing Fee) and
the Subsidiary Pass-Through Rate, [less such amount as may be necessary to
assure that the distributions made to the Subsidiary Regular Certificateholder
on the related Distribution Date include an amount equal to one full month's
interest at the applicable Subsidiary Pass-Through Rate], and (ii) gains, if
any, arising from sale of Mortgaged Property acquired as a result of
foreclosure in respect of a Mortgage Loan or arising from a repurchase
pursuant to an optional termination. See "Certain Federal Income Tax
Consequences" in the Prospectus. See "Description of the Certificates--
Servicing Compensation and Payment of Expenses" in the Prospectus for
information regarding other possible compensation to the Master Servicer.
The Master Servicer will pay all expenses incurred in connection with its
responsibilities under the Pooling and Servicing Agreement (subject to limited
reimbursement as described in the Prospectus), including, without limitation,
any amounts payable to the Servicer or any other sub-servicer, the fees and
expenses of the Trustee and the other various items of expense enumerated in
the Prospectus.
[ADJUSTMENT TO SERVICING FEE IN CONNECTION WITH PREPAID MORTGAGE LOANS
When a Mortgage Loan is prepaid, in whole or in part, between schedule
payment dates, the Mortgagor pays interest on the amount prepaid only to the
date of prepayment and not thereafter. As a result, the aggregate amount of
interest which would otherwise be distributed to Certificateholders may be
reduced. To mitigate this reduction in yield, the Pooling and Servicing
Agreement provides that with respect to any such Principal Prepayment, the
Servicing Fee otherwise payable to the Master Servicer will be reduced in such
amount, if any, as may be necessary to assure that the distributions made to
Certificateholders on the related Distribution Date include an amount equal to
one full month's interest at the applicable Subsidiary Pass-Through Rate for
such Mortgage Loan. Thus, so long as there are sufficient funds otherwise
payable from the Servicing Fee on each Distribution Date, Certificateholders
will always receive a full month's interest with respect to any such principal
prepayments. See "Distributions" above.]
THE TRUSTEE
, a banking association, will act as Trustee for the Certificates
pursuant to the Pooling and Servicing Agreement. The Trustee's principal
executive offices are located at , and its telephone number is ( ) .
REPURCHASE OR SUBSTITUTION OF MORTGAGE LOANS
Under certain circumstances, the Master Servicer may be required to
repurchase one or more Mortgage Loans from the Subsidiary Trust Fund.
Generally, the repurchase obligation arises when the documentation with
respect to a Mortgage Loan is discovered to be materially defective or when a
breach of a representation or warranty is discovered, which breach materially
and adversely affects the interests of Certificateholders. See "Description of
the Certificates--Assignment of Mortgage Loans" in the Prospectus.
In the event of a repurchase of a Mortgage Loan, the repurchase price would
be equal to the sum of the outstanding principal balance of such Mortgage Loan
on the date of repurchase plus interest accrued thereon at the Subsidiary
Pass-Through Rate to the first day of the month following the month in which
such repurchase is effected; provided, however, that if such repurchase at the
price so determined would result in net income to the Subsidiary Trust Fund
that would be subject to tax as income derived from a "prohibited
transaction," as defined in Section 860F(a)(2) of the Code, or would otherwise
subject the Subsidiary Trust Fund to tax, then, notwithstanding the foregoing.
the repurchase price for such Mortgage Loan shall be the maximum amount such
that the repurchase would not result in such tax, as evidenced by an Opinion
of Counsel, in form and substance satisfactory to the Trustee, which shall be
delivered in the event of any such reduction.
Within a period of three months, or in the case of a "defective obligation"
within the meaning of Section 860(G)(a)(4)(B) of the Code, within two years
from the Delivery Date of the Certificates, the Depositor or the
S-27
<PAGE>
<PAGE>
Master Servicer may, instead of repurchasing a Mortgage Loan required to be
repurchased pursuant to the Pooling and Servicing Agreement, deliver a
mortgage loan (a "Replacement Mortgage Loan") in substitution for any Mortgage
Loan that would otherwise have been repurchased (a "Deleted Mortgage Loan").
Generally, the repurchase obligation arises when the documentation with
respect to a Mortgage Loan is discovered to be materially defective or when a
breach of a representation or warranty is discovered, which breach materially
and adversely affects the interests of Certificateholders. See "Description of
the Certificates--Assignment of Mortgage Loans" in the Prospectus.
To the extent that the Depositor or the Master Servicer, as the case may be,
elects to deliver a Replacement Mortgage Loan for a Mortgage Loan it would
otherwise be obligated to repurchase, such Replacement Mortgage Loan must, on
the date of such substitution: (a) have an outstanding principal balance,
after deduction of payments due in the month of substitution, not in excess of
the principal balance of the Deleted Mortgage Loan; (b) have a Maximum
Mortgage Rate no lower than (and not more than 1% per annum higher than) the
Maximum Mortgage Rate of the Deleted Mortgage Loan; (c) have the same Index,
Gross Margin, Periodic Mortgage Rate Cap and frequency of Adjustment Dates as
those of the Deleted Mortgage Loan; (d) be accruing interest at a rate no
lower than and have the same Payment Adjustment Date as the Payment Adjustment
Date of the Deleted Mortgage Loan; (e) have a Loan-to-Value Ratio no higher
than that of the Deleted Mortgage Loan; (f) have a term to maturity no greater
than (and not more than one year less than) that of the Deleted Mortgage Loan;
and (g) comply with each representation and warranty with respect to Mortgage
Loans in the Pooling and Servicing Agreement. Upon any such substitution, the
Depositor or the Master Servicer, as the case may be, will deliver the
Mortgage File relating to the Replacement Mortgage Loan to the Trustee and the
Trustee will release the Deleted Mortgage Loan (or any property acquired in
respect thereof) from the Subsidiary Trust Fund.
For any month in which a Replacement Mortgage Loan is substituted for any
Deleted Mortgage Loan, the Master Servicer will determine the amount, if any,
by which the aggregate principal balance of all such Replacement Mortgage
Loans as of the date of substitution is less than the aggregate principal
balance of all such Deleted Mortgage Loans (after application of the scheduled
principal portion of the monthly payments due in such month). The amount of
any such shortage shall be deposited by the Depositor or the Master Servicer,
as the case may be, from its own funds into the Certificate Account in the
month of substitution, without any reimbursement therefor, and will be
distributed to Certificateholders on the Distribution Date in the month
following such substitution. See "Description of the Certificates--
Distributions on Certificates" in the Prospectus.
VOTING RIGHTS
At any time that any Class A Certificates or Class B Certificates are
outstanding, the voting rights of a Class A Certificate or Class B Certificate
are obtained by dividing the then outstanding principal balance of such
Certificate by the aggregate principal balances at such time of all the Class
A Certificates and Class B Certificates.
[OPTIONAL TERMINATION
The Pooling and Servicing Agreement provides that the holder of the
Subsidiary Residual Interest Certificate, at its option, may purchase from the
Subsidiary Trust Fund all Mortgage Loans remaining in the Mortgage Pool and
all property acquired in respect of a Mortgage Loan, provided that the
aggregate unpaid balance of the Mortgage Loans at the time of any such
repurchase is less than % of the Cut-off Date Principal Balance.
Additionally, the holder of the Class B[-2] Certificate, at its option, may
purchase from the Master Trust Fund all Subsidiary Regular Interests remaining
in the Master Trust Fund and all other property in such Trust Fund, provided
that the Subsidiary Regular Interests at the time of any such repurchase
represent interests in less than % of the Cut-off Date Principal Balance of
the Mortgage Loans. The purchase price for any such repurchase will be 100% of
the unpaid principal balance of each Mortgage Loan or Subsidiary Regular
Interest, as the case may be, together with accrued and unpaid interest with
respect to each Mortgage Loan through the last day of the month of such
repurchase. Any property acquired in respect of a Mortgage Loan and remaining
in
S-28
<PAGE>
<PAGE>
the applicable Trust Fund at the time such optional termination is effected
will be purchased at its appraised value. Either of the above purchases would
thereby effect early retirement of the Class A Certificates.]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
REMIC ELECTION
An election will be made to treat the assets of the Subsidiary Trust Fund as
a REMIC (the "Subsidiary REMIC") for federal income tax purposes. Amounts (i)
with respect to each Mortgage Loan equal to the principal balance of such
Mortgage Loan times the difference, if any, between the Mortgage Rate (net of
the Servicing Fee) and the Subsidiary Pass-Through Rate and (ii) representing
gains, if any, arising from the sale of Mortgaged Property acquired as a
result of foreclosure in respect of a Mortgage Loan or arising from a
repurchase pursuant to an optional termination will comprise the residual
interest in the Subsidiary REMIC. The regular interests in the Subsidiary
REMIC in the aggregate will encompass the rights to all other amounts
distributable with respect to the Mortgage Loans. An election will be made to
treat as a REMIC (the "Master REMIC") the Master Trust Fund comprised of the
regular interests in the Subsidiary REMIC. The Class A [and B-l] Certificates
will represent the regular interests in the Master REMIC. initially will
retain the residual interests in both the Master REMIC and the Subsidiary
REMIC. See "Certain Federal Income Tax Consequences" in the Prospectus. The
Internal Revenue Service has issued permitting REMICs to issue regular interests
bearing variable rates based on (i) certain fixed formulas using an objective
interest index or (ii) a weighted average of the interest rates of the
"qualified mortgages" held by the REMIC.
[ORIGINAL ISSUE DISCOUNT
The Class A Certificates may be issued with original issue discount.
Although no rulings or regulations have been issued by the Internal Revenue
Service clarifying the application of the statutory provisions requiring the
use of a prepayment assumption for the accrual of original issue discount on
REMIC regular interests to variable rate regular interests and the matter is,
therefore, not entirely certain, it appears likely that the rules of the Code
relating to original issue discount would be applied to include in income as
original issue discount any excess of the stated redemption price at maturity
over the issue price of the Class A Certificate as if such Certificate would
bear interest in each period after the first Distribution Date at a rate
determined as if the Index were to remain constant over the life of such
Certificate at its value as of the Closing Date (or possibly as of the date of
pricing of the Certificates). Applying that assumption would effectively
convert such Class A Certificate to a debt instrument having an initial fixed
rate followed by a higher rate in subsequent periods to which the rules
described in the Prospectus under the heading "Certain Federal Income Tax
Consequences--REMIC Trust Funds--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount" could be applied for purposes of
determining the portion of the excess of the stated redemption price at
maturity of a Class A Certificate over the issue price of such Certificate
that accrues each day. In addition to the daily accrual of the discount
described above, each Class A Certificateholder will be required to accrue,
and include in income daily, the stated interest on each Class A Certificate
to the extent not included in the stated redemption price at maturity. For a
more detailed discussion of the accrual of original issue discount, see
"Certain Federal Income Tax Consequences--REMIC Trust Funds--Taxation of
Owners of REMIC Regular Certificates" in the Prospectus.]
Absent clarification in the regulations, the Master Servicer intends to
report original issue discount to the Internal Revenue Service and to
Certificateholders in the manner described above, using a prepayment
assumption that is a Standard Prepayment Assumption ("SPA") of %. A
prepayment assumption of 100% of SPA assumes a prepayment rate of 0.2% per
annum of the then outstanding principal balance of such mortgage loans in the
first month of the lives increased by 0.2% per annum each month thereafter
until the thirtieth such month. Beginning in the thirtieth month and in each
month thereafter during the lives of the mortgage loans, 100% of SPA assumes a
constant prepayment rate of 6% per annum. No representation is made that the
Mortgage Loans will prepay at this rate or any other rate.
S-29
<PAGE>
<PAGE>
LEGAL INVESTMENT
The Class A Certificates will constitute, for so long as they are rated as
described below, "mortgage-related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984 (the "Enhancement Act"), and, as such,
will be legal investments for certain entities to the extent provided in the
Enhancement Act. Such investments, however, will be subject to general
regulatory considerations governing investment practices under state and
federal law. Institutions whose investment activities are subject to review by
certain regulatory authorities may be, or may become, subject to restrictions,
which may be retroactively imposed by such regulatory authorities, on the
investment by such institutions in certain mortgage-related securities.
Investors should consult their own legal advisors to determine whether, and to
what extent, the Class A Certificates may be purchased by such investors. See
"Legal Investment" in the Prospectus.
RATING
It is a condition to the issuance of the Certificates that the Class A
Certificates be rated at least " " by . (" "). Securities rated " " by
are " ."
[The ratings of Moody's on mortgage pass-through Certificates address the
likelihood of the receipt by certificateholders of all distributions on the
underlying mortgage loans. Moody's rating opinions address the structural,
legal, issuer and tax-related aspects associated with the Certificates,
including the nature of the underlying mortgage loans. Moody's ratings on
pass-through Certificates do not represent any assessment of the likelihood of
principal prepayments by mortgagors (including, in the case of the Class A
Certificates, prepayments resulting from the repurchase of Converted Mortgage
Loans) or of the degree to which such payments might differ from that
originally anticipated. Moody's rating of the Class A Certificates will not
represent any assessment of the Master Servicer's ability to repurchase
Converted Mortgage Loans. The rating does not address the possibility that
Certificateholders might suffer a lower than anticipated yield.]
ERISA CONSIDERATIONS*
[A fiduciary of any employee benefit plan and certain other retirement plans
and arrangements (including individual retirement accounts, and annuities,
Keogh plans, and collective investment funds in which such funds, accounts,
annuities or arrangements are invested) that are subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the Code
should carefully review with legal advisors whether the purchase or holding of
Certificates could give rise to a transaction that is prohibited or not
otherwise permissible either under ERISA or the Code. See "ERISA
Considerations" in the Prospectus.]
PLAN OF DISTRIBUTION
[The Master Servicer has agreed, pursuant to the Purchase Agreement dated
(the "Purchase Agreement"), to pay the Depositor a fee of $ in connection
with the exchange of the Certificates and the residual interest in the
Subsidiary REMIC for the Mortgage Loans. The Depositor will sell the
Certificates and such residual interest to the Master Servicer in exchange for
the Mortgage Loans subject to the terms and conditions set forth in the
Purchase Agreement. Pursuant to the Purchase Agreement, the Depositor or its
affiliates have certain preferential rights in connection with resales of the
Class A Certificates.]
[ may be deemed, by virtue of the exchange, to be an "Underwriter"
within the meaning of the Securities Act of 1933 in connection with reoffers
and sales by of the Class A Certificates. Until , such reoffers and
sales by Master Servicer will be made pursuant to this Prospectus Supplement
and the
- --------
* [Note: If the Series of Certificates offered pursuant to this Version F
Prospectus Supplement evidences interests in Contracts, the disclosure to be
set forth will be substantially similar to the disclosure set forth in
Version E under "ERISA Considerations" or in the Prospectus under "ERISA
Considerations."]
S-30
<PAGE>
<PAGE>
Prospectus, as amended and supplemented as of the date of such reoffering.
After such date, this Prospectus Supplement and Prospectus may not be used in
connection with such reoffers and sales. The Depositor has been advised by
that such reoffers and sales may be made by from time to time in
negotiated transactions or otherwise at varying prices determined at the time
of sale, and may be made to or through one or more Underwriters, agents or
dealers, including, without limitation, the Depositor or one of its
affiliates, who may receive compensation in the form of underwriting
discounts, concessions or commissions.]
[The Purchase Agreement provides that will indemnify the Depositor and
its affiliates against certain liabilities, including liabilities under the
Securities Act of 1933, or contribute to payments the Depositor and its
affiliates, as the case may be required to make in respect thereof.]
[The Depositor has entered into an Underwriting Agreement with [several
Underwriters, for whom] Credit Suisse First Boston Corporation, an affiliate of
the Depositor[, is acting as Representative.] The [Underwriter[s] named below[
[has] [have severally] agreed to purchase from the Depositor the [entire]
[following respective] principal amounts[s] of the Class A Certificates:
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2
UNDERWRITER CERTIFICATES CERTIFICATES TOTAL
- ----------------------------------------------- ------------ ------------ -----
<S> <C> <C> <C>
Credit Suisse First Boston Corporation......... $ $ $
Total........................................ $ $ $ ]
</TABLE>
[The Underwriting Agreement provides that the obligations of the
Underwriter[s] [is] [are] subject to certain conditions precedent, and that
the Underwriter[s] will be obligated to purchase the entire principal amount
of the Class A Certificates if any are purchased.]
The Underwriter[s] [[has] [have] advised the Depositor that the
Underwriter[s] propose[s] to offer the Class A Certificates from time to time
for sale in one or more negotiated transactions or otherwise at prices to be
determined at the time of sale. The Underwriter[s] may effect such
transactions by selling the Class A Certificates to or through dealers and
such dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Underwriter[s] and any purchasers of the
Class A Certificates for whom they may act as agent.
The Underwriter[s] and any dealers that participate with the Underwriter[s]
in the distribution of the Certificates may be deemed to be underwriters, and
any discounts or commissions received by them and any profit on the resale of
Class A Certificates by them may be deemed to be underwriting discounts or
commissions, under the Securities Act of 1933, as amended (the "Act").
[If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the attached Prospectus will also be used by the
Underwriter after the completion of the offering in connection with offers and
sales related to market-making transactions in the offered Securities in which
the Underwriter acts as principal. Sales will be made at negotiated prices
determined at the time of sale.]
[The Depositor has agreed to indemnify the Underwriter[s] against certain
liabilities, including liabilities under the Securities Act of 1933 or to
contribute to payments the Underwriter[s] may be required to make in respect
thereof.]
LEGAL MATTERS
The legality of the Certificates will be passed upon for the Depositor and for
the Underwriter[s] by _________________________________________________________.
The material federal income tax consequences of the Class A Certificates will be
passed upon for the Depositor by ______________________________________________.
S-31
<PAGE>
<PAGE>
USE OF PROCEEDS
[The Certificates are being initially sold and delivered by the Depositor to
in exchange for the Mortgage Loans to be deposited by the Depositor in
the Subsidiary Trust Fund. Other than its fee in connection with such exchange
the Depositor will receive no other proceeds from the sale of the
Certificates. may subsequently sell the Certificates in one or more
transactions. It is expected that will use the proceeds of such sale for
general corporate purposes. See "Plan of Distribution" herein.
[The Depositor will apply the net proceeds of the offering of the Class A
Certificates towards the simultaneous purchase of the Mortgage Loans
underlying the Certificates. Certain of the Mortgage Loans will be acquired in
privately negotiated transactions by the Depositor from one or more
affiliates.
S-32
<PAGE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus supplement shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale of
these securities in any State in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws
of any State.
SUBJECT TO COMPLETION, DATED , 19
PROSPECTUS SUPPLEMENT
(To Prospectus Dated December __ [VERSION G]
$________________ (APPROXIMATE)
CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP.
Depositor
Adjustable Rate ABS Mortgage Pass-Through Certificates, Series
Class A-1 Certificates
___________________
The Adjustable Rate ABS Mortgage Pass-Through Certificates, Series
(the "Certificates") will be comprised of three classes of certificates: Class
A-1, Class IO and Class R. Only the Class A-1 Certificates are offered hereby.
The Certificates evidence 100% of the beneficial ownership interest in a trust
fund (the "Trust Fund") to be created by Credit Suisse First Boston Mortgage
Securities Corp. (the "Depositor"), the assets of which will consist primarily
of (a) classes (or portions of classes) of mortgage pass-through certificates
(the "Mortgage Certificates"), each of which is part of one of series of
mortgage pass-through certificates initially sold by the Resolution Trust
Corporation and acquired by the Depositor in the secondary market, (b) a
Reserve Fund and (c) a Yield Support Agreement provided by . The
Certificates will be issued pursuant to a Pooling Trust Agreement (the
"Pooling Agreement") among the Depositor, as Certificate
Administrator and , as Trustee. See "Description of the
Certificates."
As more fully described herein, commencing with a rate of ______% per annum,
interest will accrue on the Class A-1 Certificates at a per annum rate 0.30% in
excess of the London interbank offered rate for three-month U.S. dollar deposits
("LIBOR"),determined quarterly as set forth herein ("LIBOR"). The amount of
interest accrued on the Class A-1 Certificates will be reduced by the amount of
certain prepayment interest shortfalls and deferred interest as described herein
under "Description of Certificates--Interest." Interest generally will be paid
quarterly, to the extent funds are available therefor as described herein on the
25th day of each February, May, August and November or, any such day is not a
business day on the next succeeding business day, beginning in ;
provided, however, that if all distributions on the Mortgage Certificates due on
such day have not been received prior to 1:00 p.m. (New York time) on such day,
distributions will be made on the next succeeding business day. Each such date
is referred to as a "Distribution Date." See "Summary of Terms--Distribution
Date" and "Description on the Certificates" herein.
Principal payments on the Class A-1 Certificates will be made on each
Distribution Date to the extent funds are available therefor, as described
herein, until the Class A-1 Certificates are paid in full. See "Description of
the Certificates--Distributions of Interest and Principal."
PROSPECTIVE INVESTORS IN THE CERTIFICATES SHOULD CONSIDER THE FACTORS DISCUSSED
UNDER "RISK FACTORS" IN THIS PROSPECTUS SUPPLEMENT ON PAGE S-17.
(COVER CONTINUED ON NEXT PAGE)
THE CLASS A-1 CERTIFICATES DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF CS
FIRST BOSTON MORTGAGE SECURITIES CORP., THE TRUSTEE, THE CERTIFICATE
ADMINISTRATOR OR ANY OF THEIR AFFILIATES. NEITHER THE CERTIFICATES NOR THE
UNDERLYING MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY
OR INSTRUMENTALITY OR BY ANY OTHER PARTY.
____________________
THE CLASS A-1 CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE LIMITATIONS DISCUSSED UNDER ERISA
CONSIDERATIONS HEREIN AND IN THE ACCOMPANYING PROSPECTUS.
____________________
The Class A-1 Certificates will be offered by Credit Suisse First Boston
Corporation ("First Boston") from time to time to the public in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. Proceeds to the Depositor from the sale of the Class A-1 Certificates are
anticipated to be approximately $_____________, plus accrued interest thereon at
the Certificate Rate from , but before deducting expenses payable by the
Depositor, estimated to be $ ___________.
The Class A-1 Certificates are offered by First Boston when, as and if delivered
to and accepted by First Boston, subject to prior sale, withdrawal or
modification of the offer without notice, the approval of counsel and other
conditions. It is expected that the Class A-1 Certificates will be delivered
only through the same day funds settlement system of the Depository Trust
Company on or about .
CREDIT SUISSE FIRST BOSTON
________________________________________________________________________________
The date of this Prospectus Supplement is [ ], 19
<PAGE>
<PAGE>
On or about the Distribution Date occurring in and on each
succeeding Distribution Date until successful, the Trustee will attempt to sell
the Mortgage Certificates at auction for a price which, together with amounts on
deposit in the Reserve Fund, is at least equal to the then-outstanding Principal
Balance of the Class A-1 Certificates, plus interest accrued and unpaid thereon.
The proceeds of any such sale of the Mortgage Certificates, together with funds
on deposit in the Reserve Fund (to the extent needed), will be used to retire
the Class A-1 Certificates.
Prospective investors should consider:
. The yield on the Class A-1 Certificates will be sensitive to, among
other things, the rate and timing of principal payments on the
Mortgage Certificates (which likely will be different for different
Mortgage Certificates) and the level of LIBOR.
. As described under "Special Consideration--Basis Risk" and "Yield
and Prepayment Considerations--Basis Risk; LIBOR" herein, under some
prepayment and interest rate scenarios, an investor may not receive
all interest accrued on the Class A-1 Certificates with respect to
one or more Distribution Dates on such Distribution Dates, or in
certain cases, prior to the retirement of the Class A-1
Certificates.
The Class A-1 Certificates will be issued only in book-entry form, and the
purchasers thereof will not be entitled to receive definitive certificates
except in the limited circumstances set forth herein. The Class A-1
Certificates will be registered in the name of Cede & Co., as nominee of The
Depository Trust Company, which will be the "holder" or "Certificateholder" of
such Certificates, as such terms are used herein. See "Description of the
Certificates" herein.
The Class A-1 Certificates may not be an appropriate investment for
individual investors. There is currently no secondary market for the Class A-1
Certificates and there can be no assurance that a secondary market will develop
or, if it does develop, that it will provide Certificateholders with liquidity
of investment at any particular time or for the life of the Class A-1
Certificates. First Boston intends to act as a market maker in the Class A-1
Certificates, subject to applicable provisions of federal and state securities
laws and other regulatory requirements, but is under no obligation to do so and
any such market making may be discontinued at any time. There can be no
assurance that any investor will be able to sell a Class A-1 Certificate at a
price which is equal to or greater than the price at which such Certificate was
purchased.
An election will be made to treat the portion of the Trust Fund consisting
of the Mortgage Certificates as a real estate mortgage investment conduit (the
"REMIC") for federal income tax purposes. As described more fully herein and in
the Prospectus, the payments on the Class A-1 Certificates which are derived
from the Mortgage Certificates and the Class IO Certificates will constitute
"regular interests" in the REMIC and the Class R Certificate will constitute the
"residual interest" in the REMIC. See "Summary Information--Federal Income Tax
Status" and "Federal Income Tax Considerations" herein and "Certain Federal
Income Tax Consequences" in the Prospectus.
The Class A-1 Certificates represent one Class of a separate Series of
Certificates which Class is being offered by the Depositor pursuant to the
Prospectus dated accompanying this Prospectus Supplement.
The Prospectus shall not be considered complete without this Prospectus
Supplement and any prospective investor shall not purchase any Certificate
offered hereby unless it shall have received both the Prospectus and this
Prospectus Supplement. The Prospectus contains important information regarding
this offering which is not contained herein, and prospective investors are urged
to read the Prospectus and this Prospectus Supplement in full.
____________________
UNTIL ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A-1
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
[IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATION, THIS
PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS WILL ALSO BE USED BY THE
UNDERWRITER AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND
SALES RELATED TO MARKET-MAKING TRANSACTIONS IN THE OFFERED SECURITIES IN WHICH
THE UNDERWRITER ACTS AS PRINCIPAL SALES WILL BE MADE AT NEGOTIATED PRICES
DETERMINED AT THE TIME OF SALE.]
S-2
VERSION G
<PAGE>
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and
in the Prospectus. Capitalized terms used herein and not defined shall have
the meaning given in the Prospectus or the Pooling Agreement, as
applicable. See "Index of Significant Prospectus Supplement Definitions"
herein and "Index of Significant Definitions" in the Prospectus.
<TABLE>
<S> <C>
Securities Offered $________ (approximate) initial Principal
Balance of Adjustable Rate ABS Mortgage
Pass-Through Certificates, Series ,
Class A-1, evidencing a class of "regular
interests" in the REMIC.
Other Securities Adjustable Rate Conduit Mortgage Pass-Through
Certificates, Series , Class IO,
evidencing a class of "regular interests" in
the REMIC, and the Class R Certificate,
evidencing the "residual interest" in the
REMIC. The Class IO Certificates and the
Class R Certificate are not offered hereby.
The Class A-1, Class IO and Class R
Certificates are referred to collectively
herein as the "Certificates."
Forms of Certificates;
Denominations The Class A-1 Certificates will be issued as
Book-Entry Certificates, through the
facilities of The Depository Trust Company.
See "Description of the Certificates--Book-
Entry Form" herein. The Class A-1
Certificates will be issued, maintained and
transferred in book-entry form only in minimum
denominations of $1,000 initial principal
balance and integral multiples of $1,000
initial principal balance in excess thereof.
Depositor Credit Suisse First Boston Mortgage Securities
Corp.
Certificate Administrator Certain administrative functions with
respect
to the Certificates will be performed by
Trustee
Cut-off Date (after giving effect to
distributions on the Mortgage Certificates on
such date).
</TABLE>
S-3
VERSION G
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Closing Date On or about .
Final Scheduled
Distribution Date _______, 20__. The Final Scheduled
Distribution Date has been set to coincide
with the Distribution Date succeeding the
latest maturity date of any Mortgage Loan in
any Underlying Mortgage Pool.
The Trust Fund The Class A-1 Certificates evidence interests
in a trust fund (the "Trust Fund"), the assets
of which will consist primarily of (a)
classes (or portions of classes) of mortgage
pass-through certificates (the "Mortgage
Certificates"), each of which is part of one
of series of mortgage pass-through
certificates initially sold by the Resolution
Trust Corporation and which were acquired by
the Depositor in the secondary market, (b) a
Reserve Fund and (c) a Yield Support Agreement
provided by See "--The Reserve
Fund" and "--The Yield Support Agreement"
below. The Trust Fund will be established and
the Certificates will be issued pursuant to a
Pooling Trust Agreement (the "Pooling
Agreement"), dated as of .
See "Description of the Certificates--General"
herein.
Risk Factors For discussion of risk factors that should be
considered with respect to an investment in
the Certificates, see "Risk Factors" herein
and in the related Prospectus.
Distribution Date Distributions on the Certificates will be made
quarterly on the 25th day of each February,
May, August and November, beginning in
February , or, if any such day is not a
business day, the following business day;
provided, however, that if the Trustee has not
received all distributions on the Mortgage
Certificates due on or before such day prior
to 1:00 p.m. New York time on such day,
payments on the Certificates will be made on
the next succeeding business day. Each such
day, a "Distribution Date."
Record Date The "Record Date" for each Distribution Date
will be the close of business on the last
business day of the month preceding the month
in which such Distribution Date occurs.
Distributions on
Certificates Interest Distributions. The amount of
interest payable on the Class A-1 Certificates
on each Distribution
</TABLE>
S-4
VERSION G
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Date (the "Interest Accrual Amount") will be
equal to the interest accrued at the
applicable rate of interest from the 25th day
of the third month preceding the month in
which such Distribution Date occurs through
the 24th of the month in which such
Distribution Date occurs (each, an "Interest
Accrual Period"). If Interest Available Funds
(as defined herein) with respect to a
Distribution Date are insufficient to pay the
Interest Accrual Amount on such date, any
shortfall in the amount paid on account of
interest on such date will be carried forward
to succeeding Distribution Dates and will bear
interest until paid at the Class A-1 Pass-
Through Rate in effect from time to time.
Payments received on the Mortgage Certificates
on account of interest will be distributed on
each Distribution Date first to pay to the
holders of the Class A-1 Certificates their
respective Interest Accrual Amounts, next to
pay to holders of the Class A-1 Certificates
interest due them with respect to prior
Distribution Dates that remains unpaid
(together with interest on such amounts), and
then to pay current interest and any overdue
interest to the Certificate Administrator for
deposit into the Reserve Fund in respect of
the Class IO Certificates, all as more fully
set forth herein under "Description of the
Certificates--Distributions on the
Certificates." DUE TO THE FACTORS DISCUSSED
UNDER "SPECIAL CONSIDERATIONS -- BASIS RISK,"
INTEREST AVAILABLE FUNDS MAY NOT ALWAYS BE
SUFFICIENT TO PAY THE HOLDERS OF THE CLASS A-1
CERTIFICATES THEIR FULL INTEREST ACCRUAL
AMOUNTS ON EACH DISTRIBUTION DATE.
The Interest Accrual Amount for the Class A-1
Certificates on each Distribution Date will
equal the product of (i) one-fourth of the
Class A-1 Pass-Through Rate for such
Distribution Date and (ii) the outstanding
Principal Balance thereof (subject to
reduction in respect of Deferred Interest and
Nonsupported Interest Shortfalls incurred with
respect to the Mortgage Loans underlying the
Mortgage Certificates). The Interest Accrual
Amount for the Class IO Certificates on each
Distribution Date will equal the product of
(i) one-
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fourth of the Class IO Pass-Through Rate for
such Distribution Date and (ii) the
outstanding Principal Balance of the Class A-1
Certificates, subject to reduction in respect
of Deferred Interest and Nonsupported Interest
Shortfalls.
The "Class A-1 Pass-Through Rate" during the
initial Interest Accrual Period will be __%
per annum. During each succeeding Interest
Accrual Period, the Class A-1 Pass-Through
Rate will be 0.30% in excess of the arithmetic
mean of the London interbank offered rate
quotations for three-month Eurodollar deposits
("LIBOR") on the second business day prior to
the first day of such Interest Accrual Period
(each, a "Reset Date"), determined as
described herein under "Description of the
Certificates -- Determination of LIBOR."
During each Interest Accrual Period the "Class
IO Pass-Through Rate" will be a variable rate
equal to the excess, if any, of (X) the
weighted average of the Weighted Average
Mortgage Certificate Pass-Through Rate, for
each of the Underlying Series Distribution
Dates that occurs in the "collection Period"
related to such Interest Accrual Period
(determined as described herein) (such
weighted average, the "Quarterly Mortgage
Certificate Pass-Through Rate") over (Y) the
Class A-1 Pass-Through Rate for such Interest
Accrual Period. The "Weighted Average
Mortgage Certificate Pass-Through Rate" with
respect to any Underlying Series Distribution
Date will be equal to the weighted average of
the pass-through rates of the Mortgage
Certificates applicable to such Underlying
Series Distribution Date, weighted on the
basis of the outstanding principal balances
thereof prior to distributions on such
Underlying Series Distribution Date. The
Weighted Average Mortgage Certificate Pass-
Through Rate with respect to the Underlying
Series Distribution Date in is
expected to be approximately ____%. The
"Collection Period" with respect to each
Distribution Date is the period commencing on
the day after the previous Distribution Date
(or, in the
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case of the first Collection Period, on
November 26, 1995) and ending on such
Distribution Date.
Interest on the Certificates will be calculated
on the basis of actual days elapsed in a 360-
day year.
Principal Distributions. Distributions in
respect of principal on the Class A-1
Certificates will be made on each Distribution
Date in an amount equal to the sum of all
amounts distributed in respect of principal on
the Mortgage Certificates during the
Collection Period ending on such Distribution
Date.
Reserve Fund On the Closing Date, the Depositor will deposit
or cause to be deposited into an account (the
"Reserve Fund") maintained by the Certificate
Administrator, (a) cash in the amount of $
million, and (b) the Class IO Certificates.
All distributions on the Class IO Certificates
will be made to the Certificate Administrator
for deposit into the Reserve Fund. Amounts on
deposit in the Reserve Fund from time to time
will be available on each Distribution Date to
be paid to holders of the Class A-1
Certificates to the extent that distributions
on account of interest received on the
Mortgage Certificates in the related
Collection Period are insufficient to pay such
holders, Interest Accrual Amount for such date
together with any overdue interest. NO
ASSURANCE CAN BE GIVEN THAT AMOUNTS ON DEPOSIT
IN THE RESERVE FUND FROM TIME TO TIME WILL,
TOGETHER WITH THE BALANCE OF INTEREST
AVAILABLE FUNDS ON ANY DISTRIBUTION DATE, BE
SUFFICIENT TO ALLOW FULL DISTRIBUTIONS IN
RESPECT OF INTEREST ON THE CLASS A-1
CERTIFICATES ON SUCH DISTRIBUTION DATE. The
Reserve Fund will be an asset of the Trust
Fund, but will not be an asset of the REMIC.
See "Description of the Certificates --
Reserve Fund" herein.
The Yield Support
Agreement On the Closing Date, the Trustee, acting on
behalf of the holders of the Class A-1
Certificates, will enter into a yield support
agreement (the "Yield Support Agreement") with
, a __________ corporation (the
"Yield Support Counterparty").
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Pursuant to the terms of the Yield Support
Agreement, in the event that LIBOR on any
Reset Date (determined as described herein
under "Description of Certificates--
Determination of LIBOR") exceeds a rate equal
to LIBOR as set with respect to the first
Distribution Date plus 2.0% (the "Strike
Rate"), the Yield Support Counterparty will be
obligated to pay to the Certificate
Administrator, for the benefit of the holders
of the Class A-1 Certificates, on the
Distribution Date related to the Interest
Accrual Period following such Reset Date, an
amount equal to the product of (x) the
difference between LIBOR at such Reset Date
(determined as described above) and the Strike
Rate and (y) Principal Balance of the Class A-
1 Certificates outstanding prior to
distributions on such Distribution Date.
Amounts paid by the Yield Support Counterparty
on any Distribution Date will be available to
make distributions in respect of interest on
the Class A-1 Certificates and, to the extent
not required for such distributions, will be
paid to the Certificate Administrator for
deposit into the Reserve Fund. NO ASSURANCE
CAN BE GIVEN THAT AMOUNTS PAID BY THE YIELD
SUPPORT COUNTERPARTY ON ANY DISTRIBUTION DATE
WILL, TOGETHER WITH THE BALANCE OF THE
INTEREST AVAILABLE FUNDS FOR SUCH DISTRIBUTION
DATE, BE SUFFICIENT TO ALLOW FULL
DISTRIBUTIONS IN RESPECT OF INTEREST ON THE
CLASS A-1 CERTIFICATES ON SUCH DISTRIBUTION
DATE OR ON ANY FUTURE DISTRIBUTION DATES.
The Yield Support Agreement will terminate upon
the reduction of the Principal Balance of the
Class A-1 Certificates to zero.
The Yield Support Agreement also may be
terminated by the Trustee under the
circumstances described herein under
"Description of the Certificates -- The Yield
Support Agreement -- Termination."
Mandatory Auction Prior to the Distribution Date occurring in
, the Trustee will cause the
Certificate Administrator to hold an auction
(the "Auction") for the sale of the Mortgage
Certificates. If the highest bid, together
with amounts on deposit in the Reserve
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Fund, is at least equal to the then
outstanding Principal Balance of the Class A-1
Certificates, together with interest accrued
and unpaid thereon through such Distribution
Date, the Trustees will sell the Mortgage
Certificates and pay in full the Class A-1
Certificates on . If no
sufficient bid is obtained, the Trustee will
continue to hold the Mortgage Certificates and
the Certificate Administrator will continue to
make required distributions of interest and
principal on the Class A-1 Certificates. The
auction procedure will be repeated with
respect to each succeeding Distribution Date
until a sufficiently high bid is obtained.
Optional Repurchase of
the Mortgage Certificates The beneficial owner of the Class IO
Certificates will have the option to purchase
the Mortgage Certificates from the Trust Fund
on any Distribution Date on which the Mortgage
Certificate Balance is equal to 5% or less of
the original Mortgage Certificate Balance.
See "The Pooling Agreement -- Termination"
herein.
[Expense Fund The Depositor will deposit in an account
established by the Trustee with the
Certificate Administrator (the "Expense Fund")
on the Closing Date cash in an amount
necessary to meet the requirements of each
Rating Agency. Funds on deposit in the
Expense Fund will be used to pay amounts owing
to the Trustee pursuant to the Pooling
Agreement and the fees of the Certificate
Administrator. Funds on deposit in the
Expense Fund will not be available to make
payments on the Certificates.]
Ratings It is a condition of the issuance of the
Certificates that the Class A-1 Certificates
be rated at least "Aaa" by Moody's Investors
Service, Inc. ("Moody's") and "AAA" by
Standard & Poor's ("S&P").
THE RATINGS OF THE RATING AGENCIES DO NOT
ADDRESS THE LIKELIHOOD OF PAYMENT OF INTEREST
ON THE CLASS A-1 CERTIFICATES AT A RATE IN
EXCESS OF THE QUARTERLY MORTGAGE CERTIFICATE
PASS-THROUGH RATE.
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The ratings of Moody's and S&P on mortgage
securities address the likelihood of the
receipt by the holders thereof of all
distributions of principal and interest to
which such holders are entitled (except as set
forth in the preceding paragraph). There is
no assurance that such ratings will continue
for any period of time or that they will not
be revised or withdrawn entirely by such
rating agency if, in its judgment,
circumstances so warrant. A revision or
withdrawal of such ratings may have an adverse
effect on the market price of the Class A-1
Certificates. A security rating is not a
recommendation to buy, sell or hold
securities.
The Depositor has not requested a rating on the
Class A-1 Certificates from any other rating
agency, although data with respect to the
Mortgage Loans and Mortgage Certificates may
have been provided to other agencies solely
for their informational purposes. There can
be no assurance that if a rating is assigned
to the Class A-1 Certificates by any other
rating agency, such rating will be as high as
that assigned by Moody's and S&P. See
"Rating."
Mortgage Certificates The assets of the REMIC will consist
primarily of classes (or a portion of such
classes) of senior mortgage pass-through
certificates (the "Mortgage Certificates"),
each of which is a part of one of separate
series of mortgage pass-through certificates
sold by the Resolution Trust Corporation
("RTC") (each an "Underlying Series"),
identified in the following table.
<CAPTION>
--------------------------------------------------------------
UNDERLYING SERIES
--------------------------------------------------------------
Series Designation Classes of Mortgage Certificates
------------------------ --------------------------------
<S> <C>
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
-----------------------------------------------------------
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Each of the Mortgage Certificates evidences a
senior interest in a mortgage pool (each, an
"Underlying Mortgage Pool") previously formed
by the RTC. Payments on each Class of
Mortgage Certificates will be made on the 25th
day of each month (or if such day is not a
business day, the succeeding business day)
(each, an "Underlying Series Distribution
Date") primarily from amounts received in
respect of the mortgage loans that constitute
the corpus of the related Underlying Mortgage
Pool (in the aggregate, the "Mortgage Loans").
Such amounts, together, with any payments
under the Yield Support Agreement and payments
from the Reserve Fund, are the sole source of
payments on the Class A-1 Certificates. As of
the Underlying Series Distribution Date in
, after giving effect to
distributions and principal balance reductions
on such date, the Mortgage Certificates had
characteristics approximately as set forth
under "The Mortgage Certificates."
The Mortgage Loans The Mortgage Loans are contained in separate
pools of adjustable interest rate,
conventional, residential first mortgage loans
having characteristics approximately as set
forth in the table entitled "Selected Mortgage
Loan Data" under "Description of the Mortgage
Loans." The interest rate on each Mortgage
Loan is subject to adjustment periodically (as
specified in the related mortgage note) to a
rate equal to the sum (subject to rounding) of
(i) a specified index and (ii) an individual
gross margin, subject to certain limitations.
For
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approximately $______ by principal balance
as of the Cut-Off Date of the Mortgage Loans,
the index used is the monthly weighted average
cost of funds for member institutions of the
Eleventh District of the Federal Home Loan
Bank System, as published by the Federal Home
Loan Bank of San Francisco ("COFI"). Such
Mortgage Loans are referred to herein as "COFI
Mortgage Loans." For the remaining Mortgage
Loans, the index generally used is the weekly
average yield on U.S. Treasury securities
adjusted to a constant maturity ("CMT") of one
year or the weekly auction average
(investment) rate on U.S. Treasury Bills with
a six-month maturity ("CBE"), each as
published by the Federal Reserve Board in
Statistical Release H.15 (519), or a
comparable release. Some of the Mortgage
Loans use a CMT yield of two, three or five
years. Such Mortgage Loans using CMT or CBE
are referred to herein as "CMT Mortgage
Loans."
The Mortgage Loans are subject to overall
maximum interest rates. Some of the Mortgage
Loans are also subject to a minimum interest
rate. Some of the Mortgage Loans are subject
to negative amortization.
Some of the Mortgage Loans have mortgage
interest rates that may be converted to fixed
interest rates at the option of the mortgagor.
Upon conversion to a fixed rate, such Mortgage
Loans generally are required to be purchased
by the servicer of the related Underlying
Mortgage Pool. See "Description of the
Mortgage Loans" and "Yield and Prepayment
Considerations."
Optional Repurchase of Mortgage Loans. The
Underlying Mortgage Pool with respect to each
Mortgage Certificate is subject to special
termination a "Special Termination" at such
time as the aggregate outstanding principal
balance of all the mortgage loans underlying
all the mortgage certificates of the related
Underlying Series is equal to or less than 25%
of the initial aggregate principal balance of
such mortgage loans. See "The
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Mortgage Certificates--Special Termination"
herein. In addition, the Mortgage Loan
Servicer with respect to each Underlying
Series has the option to repurchase the
Mortgage Loans from the related Underlying
Mortgage Pool at such time as the aggregate
scheduled principal balance thereof is reduced
to less than 10% of the original aggregate
principal balance thereof. See "The Mortgage
Certificates--Optional Termination" herein.
Any such repurchase will accelerate the rate
at which principal payments are made on the
Class A-1 Certificates.
Certain Prepayment and
Yield Considerations NO INVESTMENT SHOULD BE MADE IN THE CLASS A-1
CERTIFICATES UNLESS AN INVESTOR HAS CONSIDERED
CAREFULLY THE ASSOCIATED RISKS OF INVESTING IN
SUCH CLASS A-1 CERTIFICATES AS DISCUSSED BELOW
AND UNDER "SPECIAL CONSIDERATIONS" AND "YIELD
AND PREPAYMENT CONSIDERATIONS" HEREIN.
Prepayments and Excess Cash. The rate of
principal payments on the Class A-1
Certificates will be affected by the rate of
principal payments on the Mortgage Loans
(including, for this purpose, prepayments,
which may include amounts received by virtue
of condemnation, insurance or foreclosure) and
by the application of Excess Cash to the
principal balance of the Mortgage
Certificates. If a Class A-1 Certificate is
purchased at a discount from its initial
principal amount by a purchaser that
calculates its anticipated yield to maturity
based on an assumed rate of payment of
principal that is faster than that actually
experienced on the Mortgage Loans, the actual
yield to maturity will be lower than that so
calculated. Conversely, if a Certificate is
purchased at a premium by a purchaser that
calculates its anticipated yield to maturity
based on an assumed rate of payment of
principal that is slower than that actually
experienced on the Mortgage Loans, the actual
yield to maturity will be lower than that so
calculated.
Timing of Payments. The timing and amount of
payments, including prepayments, on the
Mortgage
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Loans may significantly affect an investor's
yield. In general, the earlier a prepayment of
principal on the Mortgage Loans, the greater
will be the effect on an investor's yield to
maturity. As a result, the effect on an
investor's yield of principal prepayments
occurring at a rate higher (or lower) than the
rate anticipated by the investor during the
period immediately following the issuance of
the Class A-1 Certificates will not be offset
by a subsequent like reduction (or increase)
in the rate of principal prepayments.
Basis Risk; LIBOR. The interest rate payable to
the Holders of the Class A-1 Certificates is
based on LIBOR. However, the Mortgage Loans
bear interest at adjustable rates based on
various indices. LIBOR and such various
indices may respond to different economic and
market factors, and there is no necessary
correspondence between them. THERE CAN BE NO
ASSURANCE THAT FUNDS AVAILABLE IN THE RESERVE
FUND OR PAYMENTS UNDER THE YIELD SUPPORT
AGREEMENT WILL BE SUFFICIENT TO MAKE UP ANY
AMOUNT BY WHICH THE INTEREST COLLECTED ON THE
MORTGAGE CERTIFICATES IS LESS THAN THE
INTEREST ACCRUAL AMOUNT OF THE CLASS A-1
CERTIFICATES.
Auction Risk. There can be no assurance that
the Trustee will, on or on
any date thereafter, be able to sell the
Mortgage Certificates for a price sufficient
(together with amounts on deposit in the
Reserve Fund) to allow the Class A-1
Certificates to be paid in full. Therefore,
there can be no assurance that the Class A-1
Certificates will be retired on
.
See "Special Considerations" and "Yield and
Prepayment Considerations" herein for a fuller
discussion of the factors affecting the yield
to maturity of the Class A-1 Certificates.
Liquidity The Underwriter may, from time to time, buy and
sell Class A-1 Certificates, but is not
obligated to do so. There is currently no
secondary market for the Class A-1
Certificates, and there can be no assurance
that one will develop. There is no assurance
that any
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such market, if established, will continue.
Each Certificateholder will receive monthly
reports pertaining to the Class A-1
Certificates and the Mortgage Certificates.
There are a limited number of sources which
provide certain information about mortgage-
backed securities in the secondary market;
however, there can be no assurance that any of
these sources will provide information about
the Class A-1 Certificates or the Mortgage
Certificates. Investors should consider the
effect of limited information on the liquidity
of the Class A-1 Certificates.
Federal Income Tax Status [An election will be made to treat the Trust
Fund, and the Trust Fund will qualify, as a
REMIC for federal income tax purposes. The
Class A-1 and Class IO Certificates will
constitute "regular interests" in the REMIC
and generally will be treated as newly
originated debt instruments for federal income
tax purposes. The Class R Certificates will
constitute the sole class of "residual
interests" in the REMIC. [The Class A-1 and
Class IO Certificates will be considered to be
issued with original issue discount in an
amount equal to the excess of all
distributions of principal and interest
expected to be received thereon over their
respective issue prices (including accrued
interest).]
The Prepayment Assumption (as defined in the
Prospectus) that will be used in determining
the rate of accrual of original issue discount
for federal income tax purposes is based on an
18% constant prepayment rate ("CPR"). See
"Yield and Prepayment Considerations" in this
Prospectus Supplement. No representation is
made as to the rate at which the Mortgage
Certificates will prepay.
See "Certain Federal Income Tax Consequences --
Federal Income Tax Consequences for REMIC
Certificates" in the Prospectus.
ERISA Considerations A fiduciary of any employee benefit plan
subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code"), or a
governmental plan subject to any
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federal, state or local law ("Similar Law")
which is, to a material extent, similar to the
foregoing provisions of ERISA or the Code
(collectively, a "Plan"), should carefully
review with its legal advisors whether the
purchase or holding of Class A-1 Certificates
could give rise to a transaction prohibited or
not otherwise permissible under ERISA, the
Code or Similar Law. See "ERISA
Considerations" in this Prospectus Supplement
and in the Prospectus.
Legal Investment The Class A-1 Certificates will constitute
"mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act
of 1984 ("SMMEA") so long as they are rated in
one of the two highest rating categories by at
least one nationally recognized statistical
rating organization. As such, the Class A-1
Certificates are legal investments for certain
entities to the extent provided in SMMEA.
However, there are regulatory requirements and
considerations applicable to regulated
financial institutions and restrictions on the
ability of such institutions to invest in
certain types of mortgage related securities.
Prospective purchasers of the Class A-1
Certificates should consult their own legal,
tax and accounting advisors in determining the
suitability of and consequences to them of the
purchase, ownership and disposition of the
Class A-1 Certificates. See "Legal
Investment" in this Prospectus Supplement.
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RISK FACTORS
Prospective investors should consider the following factors in
connection with a purchase of the Class A-1 Certificates.
1. Troubled Originators. The Mortgage Loans in each Underlying
Mortgage Pool were originated or purchased by one or more depository
institutions (each a "Depository Institution") for which the Resolution
Trust Corporation ("RTC") was appointed as conservator or receiver or from
which the RTC acquired the Mortgage Loans. Each of such Depository
Institutions was either insolvent and in the process of liquidation or in
serious financial difficulty and being operated under a conservatorship
with a significant likelihood of subsequently being placed in receivership
and liquidated. It is possible that the financial difficulties experienced
by certain Depository Institutions may have adversely affected either or
both of (i) the standards and procedures by which the Mortgage Loans were
originated by such Depository Institutions or, if purchased from another
originator, the standards and procedures by which the Depository
Institutions selected such Mortgage Loans for purchase and reviewed them
prior to purchase and (ii) the manner in which such Mortgage Loans were
serviced prior to assumption of servicing responsibilities by the servicer
of the related Mortgage Certificates. The RTC, usually acting in its
capacity as conservator or receiver of a Depository Institution, made
certain representations and warranties regarding the Mortgage Loans and is
obligated to repurchase or replace or provide indemnification to the
Trustee and the holders of the related Underlying Series with respect to
Mortgage Loans as to which there is a breach of such representations and
warranties. The RTC, acting in its corporate capacity guaranteed the
obligations incurred in connection with such representations and
warranties. There can be no assurance, however, that such remedy will
apply to all problems that may arise with respect to a Mortgage Loan by
reason of the financial difficulties experienced by the related Depository
Institution.
2. Limited Information; Incomplete Mortgage Files. In preparing
the information regarding the Mortgage Certificates and the Mortgage Loans
contained in this Prospectus Supplement, the Depositor has relied upon
information provided by the RTC in the Prospectus Supplements applicable to
each Underlying Series and on information as to each such series
subsequently provided by the various servicers of the Mortgage
Certificates. The Depositor is unable to verify such information and there
can be no assurance of its accuracy or completeness or the accuracy or
completeness of the information presented herein which is derived from
information provided by the RTC and such servicers. Information available
to the RTC and disclosed in the Prospectus Supplement with respect to an
Underlying Mortgage Pool generally was derived solely from the records of
one or more Depository Institutions without independent review. In many
cases, the information available to the RTC concerning the Depository
Institutions did not permit the RTC to determine fully the origination,
credit appraisal and underwriting practices of such institution or the
manner of servicing of the Mortgage Loans. In many Depository Institutions
the mortgage files were incomplete, and did not contain original notes,
appraisal information, or information regarding whether the mortgaged
properties were owner-occupied, whether there had been modifications,
waivers or
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amendments with respect to such Mortgage Loans or whether such Mortgage
Loans otherwise had terms inconsistent with information used by the RTC to
prepare related disclosure (which disclosure has been relied on, in part,
by the Depositor, in preparing this Prospectus Supplement). If there are a
large number of Mortgage Loans in any given Underlying Mortgage Pool which
the RTC is obligated to replace or repurchase, the average life and yield
on the related Mortgage Certificates could be adversely affected.
3. General. An investment in certificates (such as the Class A-
1 Certificates) evidencing interests in mortgage loans may be affected,
among other things, by a decline in real estate values or a decline in
mortgage market rates. Recently such declines in real estate values have
been experienced in several significant market areas within the United
States. If relevant residential real estate markets should experience an
overall decline in property values such that the outstanding balances of
the Mortgage Loans in a particular Underlying Mortgage Pool become equal to
or greater than the value of the related mortgaged properties, the actual
rates of delinquencies, foreclosures and losses could be higher than those
now generally experienced in the mortgage lending industry. To the extent
that such losses are not covered by the classes of certificates which are
subordinate to the Mortgage Certificates from that pool and the cash
available in the related Underlying Reserve Funds, holders of the Class A-1
certificates will bear all risk of loss resulting from default by
mortgagors and will have to depend primarily on the value of the mortgaged
properties for recovery of the outstanding principal and unpaid interest of
the defaulted Mortgage Loans.
4. Limited Obligations. The Certificates will not represent an
interest in or obligation of the Depositor, the Trustee, the Certificate
Administrator, the RTC or any of the Depository Institutions. The
Certificates will not be insured or guaranteed by any government agency or
instrumentality. With respect to the Mortgage Certificates, however, the
RTC, acting in its corporate capacity, has guaranteed the obligation of the
RTC, acting in its capacity as receiver or conservator of the various
Depository Institutions, pursuant to its representations and warranties, to
repurchase Mortgage Loans or to indemnify against loss under certain
circumstances.
5. Basis Risk. The interest rate payable to the holders of the
Class A-1 Certificates is based on LIBOR. However, the underlying Mortgage
Loans bear interest based on various indices (the "Indices") calculated at
various frequencies. LIBOR and the Indices respond to different economic
and market factors, and there is no necessary correspondence between them.
Thus, it is possible, for example, that LIBOR may rise during periods in
which the Indices are stable or are falling or that, even if both LIBOR and
the Indices rise during the same period, LIBOR may rise much more sharply
than the Indices. THERE CAN BE NO ASSURANCE THAT FUNDS AVAILABLE IN THE
RESERVE FUND OR PAYMENTS UNDER THE YIELD SUPPORT AGREEMENT WILL BE
SUFFICIENT TO MAKE UP ANY AMOUNT BY WHICH THE INTEREST COLLECTED ON THE
MORTGAGE CERTIFICATES IS LESS THAN THE INTEREST ACCRUAL AMOUNT OF THE CLASS
A-1 CERTIFICATES.
6. Limited Liquidity. There can be no assurance that a
secondary market will develop for the Class A-1 Certificates or, if it does
develop, that it will provide the
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holders with liquidity of investment or that it will continue for the term
of the Class A-1 Certificates.
7. Prepayment and Yield Considerations. The prepayment
experience on the Mortgage Loans will affect the average life of the Class
A-1 Certificates. Prepayments on the Mortgage Loans may be influenced by a
variety of economic, geographic, social and other factors, including the
difference between the interest rates on the Mortgage Loans and prevailing
mortgage interest rates. Other factors affecting prepayment of Mortgage
Loans include changes in housing needs, job transfers, unemployment and
servicing decisions. See "Yield and Prepayment Considerations-_______".
In addition, the yield on the Class A-1 Certificates will be sensitive to,
among other things, the level of LIBOR.
8. Co-op Loans. Many of the Underlying Mortgage Pools contain
Mortgage Loans made in connection with a purchase or refinancing of
cooperative apartments. Such loans ("Co-op Loans") are not secured by
liens on real estate. The "owner" of a cooperative apartment does not own
the real estate constituting the apartment, but owns shares of stock in a
corporation which holds title to the building in which the apartment is
located, and by virtue of owning such stock is entitled to a proprietary
lease to occupy the specific apartment (the "Lease"). Thus, a Co-op Loan
is a personal loan secured by a lien on the shares and assignment of the
Lease. If the borrower defaults on a Co-op Loan, the lender's remedies are
similar to the remedies which apply to a foreclosure of a mortgage or deed
of trust, in that the lender can foreclose the loan and assume "ownership"
of the apartment.
There are certain risks which arise as a result of the
cooperative form of ownership which differentiate Co-op Loans from other
types of Mortgage Loans. For example, the power of the board of directors
of most cooperative corporations to reject a proposed purchaser of a unit
owner's shares (and prevent the sale of an apartment) for any reason (other
than reasons based upon unlawful discrimination), or for no reason,
significantly reduces the universe of potential purchasers in the event of
a foreclosure. Moreover, cooperative apartment owners run a special risk
in buildings where the "sponsor" (i.e., the owner of the unsold shares in
the corporation) holds a significant number of unsold apartments that the
sponsor may go into default on a loan which is secured by a mortgage on the
building. In such event, the unit owners would be forced by special
assessment to make the payments on the delinquent loan or risk losing their
apartments in a foreclosure proceeding brought by the holder of the
mortgage on the building. Not only would the value attributable to the
right to occupy a particular apartment be adversely affected by the special
assessment, but the foreclosure of a mortgage on the building in which the
apartment is located could result in a total loss of the shareholder's
equity in the building (and a corresponding loss of the lender's security
for its Co-op Loan).
9. Geographic Concentration. [To be provided.]
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DESCRIPTION OF THE CLASS A-1 CERTIFICATES
GENERAL
The Adjustable Rate Conduit Mortgage Pass-Through Certificates Series
will include the following three classes: the Class A-1
Certificates, the Class IO Certificates and the Class R Certificates
(collectively, the "Certificates"). Only the Class A-1 Certificates are
offered hereby.
The Certificates evidence 100% of the beneficial ownership interest in
a trust fund (the "Trust Fund"), the assets of which will consist primarily
of (a) classes (or portions of classes) of mortgage pass-through
certificates (the "Mortgage Certificates"), each of which is part of one of
series of mortgage pass-through certificates initially sold by the
Resolution Trust Corporation and acquired by the Depositor in the secondary
market, (b) a Reserve Fund and (c) a Yield Support Agreement provided by
See "--The Reserve Fund" and "--The Yield Support Agreement"
below. The Trust Fund will be established and the Certificates will be
issued pursuant to a Pooling Trust Agreement (the "Pooling Agreement"),
dated as of among the Depositor, the Certificate
Administrator and the Trustee.
The Class A-1 Certificates will have the initial Principal Balance set
forth on the cover page hereof, subject to an upward or downward variance
of 5%.
The Class A-1 Certificates will be issued as Book-Entry Certificates
through the facilities of The Depository Trust Company. See "--Book-Entry
Form" below. The Class A-1 Certificates will be issued, maintained and
transferred only in minimum denominations of $1,000 initial principal
balance and integral multiples of $1,000 initial principal balance in
excess thereof. The "Record Date" for each distribution on the Class A-1
Certificates is , with respect to the initial Distribution
Date, and with respect to each subsequent Distribution Date, the last
business day of the calendar month immediately preceding the month in which
the applicable Distribution Date occurs. The undivided percentage interest
(the "Percentage Interest") represented by any Class A-1 Certificate will
be equal to the percentage obtained by dividing the initial Principal
Balance of such Class A-1 Certificate by the aggregate initial Principal
Balance of all Class A-1 Certificates.
DISTRIBUTIONS
Distributions on the Certificates will be made quarterly on the 25th
day of each February, May, August and November, beginning in February
or, if any such day is not a business day, the following business day;
provided, however that if the Certificate Administrator has not received
all distributions on the Mortgage Certificates due on or before such day,
prior to 1:00 p.m. New York time on such day, payments on the Certificates
will be made on the next succeeding business day (each such day, a
"Distribution Date"). Distributions to a holder of a Class A-1 Certificate
will be made on each Distribution Date in an amount equal to such holder's
Percentage Interest multiplied by the amount, if any, to be
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distributed to the Class A-1 Certificates. Distributions will be made on
each Distribution Date to holders of record on the related Record Date,
which, unless Definitive Certificates are issued under the circumstances
described below under "-- Book Entry Form", will be Cede & Co. as nominee
for DTC.
Interest Distributions. Distributions in respect of interest on each
Class of Certificates (other than the Class R Certificates) on each
Distribution Date will be made only up to the amount of the Interest
Available Funds for such Distribution Date. The amounts of interest that
will accrue during each Interest Accrual Period on each Class of
Certificates, after adjustment for any Non-Supported Interest Shortfalls
and any Deferred Interest (each as described below), are referred to herein
as the "Interest Accrual Amounts" thereof. The "Interest Accrual Period"
with respect to each Distribution Date is the period commencing on the 25th
day of the third month preceding the month in which such Distribution Date
occurs and ending on the 24th day of the month in which such Distribution
Date occurs.
The "Interest Accrual Amount" for the Class A-1 Certificates on each
Distribution Date will equal the product of (i) one-fourth of the Class A-1
Pass-Through Rate for such Distribution Date and (ii) the outstanding
Principal Balance thereof, subject to reduction in respect of Deferred
Interest and Nonsupported Interest Shortfalls incurred with respect to the
Mortgage Loans underlying the Mortgage Certificates. The Interest Accrual
Amount for the Class IO Certificates on each Distribution Date will equal
the product of (i) one-fourth of the Class IO Pass-Through Rate for such
Distribution Date and (ii) the outstanding Principal Balance of the Class
A-1 Certificates, subject to reduction in respect of Deferred Interest and
Nonsupported Interest Shortfalls. The Class R Certificates are not
entitled to distributions in respect of interest and, therefore, have no
Interest Accrual Amount.
"Interest Available Funds" with respect to any Distribution Date will
be equal to the sum of (a) all payments in respect of interest received by
the Certificate Administrator on the Mortgage Certificates during the
related Collection Period, (b) any payments made by the Yield Support
Counterparty on such Distribution Date under the Yield Support Agreement
and (c) all amounts on deposit in the Reserve Fund (up to the excess of the
Interest Accrual Amount of the Class A-1 Certificates over the amount
described in clauses (a) and (b) above). Interest Available Funds will be
distributed on each Distribution Date first to pay to the holders of the
Class A-1 Certificates their Interest Accrual Amounts, next to pay to
holders of the Class A-1 Certificates interest due them with respect to
prior Distribution Dates that remains unpaid (together with interest
thereon), and then to pay current interest and any overdue interest in
respect of the Class IO Certificates to the Certificate Administrator for
deposit into the Reserve Fund.
If Interest Available Funds with respect to a Distribution Date are
insufficient to pay the Interest Accrual Amount of the Class A-1
Certificates on such date, any shortfall in the amount paid in respect
thereof on such date will be carried forward to succeeding Distribution
Dates and will bear interest until paid at the Class A-1 Pass-Through Rate
in effect from time to time.
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The "Class A-1 Pass-Through Rate" during the initial Interest Accrual
Period will be __% per annum. During each succeeding Interest Accrual
Period, the Class A-1 Pass-Through Rate will be 0.30% in excess of the
arithmetic mean of the London interbank offered rate quotations for three-
month Eurodollar deposits ("LIBOR") on the second business day prior to the
first day of such Interest Accrual Period (each, a "Reset Date") determined
as described below under "-- Determination of LIBOR" below.
During each Interest Accrual Period the "Class IO Pass-Through Rate"
will be a variable rate equal to the excess, if any, of (X) the weighted
average of the Weighted Average Mortgage Certificate Pass-Through Rate for
each of the Underlying Series Distribution Dates that occurs during the
Collection Period related to such Interest Accrual Period (determined as
described herein) (such weighted average, the "Quarterly Mortgage
Certificate Pass-Through Rate") over (Y) the Class A-1 Pass-Through Rate
for such Interest Accrual Period. The "Weighted Average Mortgage
Certificate Pass-Through Rate" with respect to any Underlying Series
Distribution Date will be equal to the weighted average of the pass-through
rates of the Mortgage Certificates applicable to such Underlying Series
Distribution Date, weighted on the basis of the outstanding principal
balances of such classes prior to distributions on such Underlying Series
Distribution Date. The Weighted Average Mortgage Certificate Pass-Through
Rate with respect to the Underlying Series Distribution Date in
is expected to be approximately ____%. The "Collection Period" with
respect to a Distribution Date is the period commencing on the day after
the preceding Distribution Date (or, in the case of the first Collection
Period, on ) and ending on such Distribution Date.
Interest on the Certificates will be calculated on the basis of actual
days elapsed in a 360-day year.
Deferred Interest allocated to the Mortgage Certificates on each
Underlying Series Distribution Date occurring during the Collection Period
related to any Distribution Date (as reported on the remittance reports
relating to such Mortgage Certificates) will be allocated between the Class
A-1 Certificates and the Class IO Certificates on the related Distribution
Date, pro rata, based on the Interest Accrual Amounts of each thereof
(before reduction for such Deferred Interest). See "Description of the
Underlying Mortgage Loans -- __________" and "The Mortgage Certificates --
Distributions on the Mortgage Certificates." The amount of Deferred
Interest allocated in reduction of the Interest Accrual Amount of the Class
A-1 Certificates will be added to the Principal Balance of such Class as of
such Distribution Date.
Prepayment Interest Shortfalls allocated to the Mortgage Certificates
on each Underlying Series Distribution Date occurring during the Collection
Period related to any Distribution Date (as reported on the remittance
reports relating to such Mortgage Certificates) will be allocated between
the Class A-1 Certificates and the Class IO Certificates on the related
Distribution Date, pro rata, based on the Interest Accrual Amounts thereof
(before reduction for such interest shortfall on such Distribution Date).
See "The Mortgage Certificates -- Distributions on the Mortgage
Certificates" herein.
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The "Principal Balance" of the Class A-1 Certificates as of any
Distribution Date will be equal to the Mortgage Certificate Balance as of
the preceding Distribution Date. The "Mortgage Certificate Balance" as of
any Distribution Date will be equal to the sum of the Mortgage Certificate
Balances (after giving effect to all distributions and other principal
balance reductions on the Mortgage Certificates during the Collection
Period ending on such Distribution Date). Neither the Class IO
Certificates nor the Class R Certificates have any Principal Balance and,
therefore, neither is entitled to distributions in respect of principal.
DUE TO THE FACTORS DISCUSSED UNDER "SPECIAL CONSIDERATIONS -- BASIS
RISK," INTEREST AVAILABLE FUNDS MAY NOT ALWAYS BE SUFFICIENT TO PAY THE
HOLDERS OF THE CLASS A-1 CERTIFICATES THEIR FULL INTEREST ACCRUAL AMOUNTS
ON EACH DISTRIBUTION DATE.
Principal Distributions. Distributions in respect of principal on the
Class A-1 Certificates will be made on each Distribution Date in an amount
equal to the sum of all amounts distributed in respect of principal on the
Mortgage Certificates during the Collection Period ending on such
Distribution Date.
RESERVE FUND
The Pooling Agreement will require the Certificate Administrator to
establish a separate trust account, which it will hold for the benefit of
the Trustee on behalf of the holders of the Class A-1 Certificates (the
"Reserve Fund").
On the Closing Date, the Depositor will deposit or cause to be
deposited into the Reserve Fund, cash in the amount of . In
addition, the Depositor will cause the beneficial owners of the Class IO
Certificates to irrevocably pledge the Class IO Certificates to the Reserve
Fund, for the benefit of the beneficial owners of the Class A-1
Certificates. All distributions on the Class IO Certificates will be made
to the Certificate Administrator for deposit into the Reserve Fund.
Amounts on deposit in the Reserve Fund from time to time will be available
on each Distribution Date to be paid to holders of the Class A-1
Certificates to the extent that amounts described in clauses (a) and (b) of
the definition of Interest Available Funds are insufficient to pay such
holders' Interest Accrual Amount for such date together with any overdue
interest. The Reserve Fund will be an asset of the Trust Fund, but will not
be an asset of the REMIC. Amounts in the Reserve Fund will be invested in
"eligible assets," as defined in the Pooling Agreement, at the discretion
of the Certificate Administrator, provided each such investment matures no
later than the succeeding Distribution Date.
The Depositor will not have any obligation to deposit additional
monies in the Reserve Fund after the Closing Date.
NO ASSURANCE CAN BE GIVEN THAT AMOUNTS ON DEPOSIT IN THE RESERVE FUND
FROM TIME TO TIME WILL BE SUFFICIENT TO ALLOW FULL DISTRIBUTIONS IN RESPECT
OF INTEREST ON THE CLASS A-1 CERTIFICATES ON ANY DISTRIBUTION DATE.
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The following table, which was prepared on the basis of the
assumptions set forth below, illustrates the balances that would be
available in the Reserve Fund on the dates indicated under the various
scenarios stated.
[INSERT TABLE]
THE YIELD SUPPORT AGREEMENT
The following is a summary of certain features of the Yield Support
Agreement (as defined below).
General. On the Closing Date, the Trustee, acting on behalf of the
holders of the Class A-1 Certificates, will enter into a yield support
agreement (the "Yield Support Agreement") with , a __________
corporation, (the "Yield Support Counterparty"). The Yield Support
Agreement will be governed by and construed in accordance with the law of
the State of New York and will be documented on a standard form published
by the International Swap and Derivatives Association, Inc., as
supplemented by a schedule and a confirmation.
Payment Terms. Pursuant to the terms of the Yield Support Agreement,
in the event that LIBOR on any Reset Date (determined as described below
under "--Determination of LIBOR") exceeds a rate equal to LIBOR as set with
respect to the first Distribution Date plus 2.0% (the "Strike Rate"), the
Yield Support Counterparty will be obligated to pay to the Certificate
Administrator, for the benefit of the holders of the Class A-1
Certificates, on the Distribution Date related to the Interest Accrual
Period following such Reset Date, an amount equal to the product of (x) the
difference between LIBOR at such Reset Date (determined as described above)
and the Strike Rate and (y) amounts paid by the Yield Support Counterparty
on any Distribution Date will be available to make distributions in respect
of interest on the Class A-1 Certificates and, to the extent not required
for such distributions, will be paid to the Certificate Administrator for
deposit into the Reserve Fund.
NO ASSURANCE CAN BE GIVEN THAT AMOUNTS PAID BY THE YIELD SUPPORT
COUNTERPARTY ON ANY DISTRIBUTION DATE WILL BE SUFFICIENT, TOGETHER WITH THE
BALANCE OF THE INTEREST AVAILABLE FUNDS FOR SUCH DISTRIBUTION DATE, TO
ALLOW FULL DISTRIBUTIONS IN RESPECT OF INTEREST ON THE CLASS A-1
CERTIFICATES ON SUCH DISTRIBUTION DATE OR ON ANY FUTURE DISTRIBUTION DATES.
Termination. Unless earlier terminated as described below, the Yield
Support Agreement will terminate upon the reduction of the Principal
Balance of the Class A-1 Certificates to zero.
Pursuant to the Yield Support Agreement, certain events may occur in
respect of the Yield Support Counterparty that will give the Trustee the
right to terminate the Yield Support Agreement subject to the terms and
provisions thereof. The Trustee will have the right to terminate the Yield
Support Agreement if any of the following events occur:
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(i) the Yield Support Counterparty fails to make any payment due under
the Yield Support Agreement and such nonpayment continues for three
business days after notice from the Trustee;
(ii) the Yield Support Counterparty fails to perform or observe its
obligations under such Yield Support Agreement (other than its obligation
to make any payment due under such Yield Support Agreement) and such
failure continues for a period of 30 days after notice from the Trustee;
(iii) any representation made by the Yield Support Counterparty under
such Yield Support Agreement proves to have been incorrect or misleading in
any material respect as of the time it was made;
(iv) certain events of bankruptcy or insolvency occur with respect to
the Yield Support Counterparty;
(v) the Yield Support Counterparty undertakes certain mergers,
consolidations or transfers of its assets or is dissolved;
(vi) a withholding tax is imposed on payments by the Yield Support
Counterparty under such Yield Support Agreement; or
(vii) a change in law occurs after the Closing Date which makes it
unlawful for the Yield Support Counterparty to perform its obligations in
respect of the Yield Support Agreement.
Breakage Fee. If the Yield Support Agreement is terminated by the
Trustee, the market value of the Yield Support Agreement will be
established by the Trustee on the basis of market quotations of the cost to
the Trust Fund of entering into a replacement yield support agreement, in
accordance with the procedures set forth in the Yield Support Agreement
(such amount, the "Breakage Fee"). The Yield Support Counterparty will be
required to pay the Trustee, for the benefit of the holders of the Class A-
1 Certificates the amount of any Breakage Fee. Upon any such termination
of the Yield Support Agreement, the Trustee will distribute to the holders
of the Class A-1 Certificates, on a pro rata basis, any applicable Breakage
Fee paid by the Yield Support Counterparty.
The Yield Support Counterparty.
As of _______ ___, , the end of its most recent fiscal year, the
Yield Support Counterparty had total assets of approximately $_____
million, total liabilities of approximately $_____ million, and
Shareholders' equity of approximately $_____ million.
[The Yield Support Counterparty's outstanding senior unsecured
indebtedness has been rated [ ] by Moody's, [ ] by S&P, and [ ]
by Fitch Investors Service, L.P. ("Fitch").]
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Copies of the Yield Support Counterparty's annual reports are
available from _________________________ by contacting _____________ at
(612) ___________________.
The above information was provided by the Yield Support Counterparty.
MANDATORY AUCTION
Prior to the Distribution Date occurring in , the Trustee
will cause the Certificate Administrator, to hold an auction (the
"Auction") for the sale of the Mortgage Certificates.
If the highest bid obtained, together with amounts on deposit in the
Reserve Fund, is at least equal to the then outstanding Principal Balance
of the Class A-1 Certificates, together with interest accrued and unpaid
thereon through such Distribution Date, the trustee will sell the Mortgage
Certificates and pay in full the Class A-1 Certificates on
. If no sufficient bid is obtained, the Trustee will continue to hold
the Mortgage Certificates and the Certificate Administrator will continue
to make required distributions of interest and principal on the Class A-1
Certificates. The auction procedure will be repeated with respect to each
succeeding Distribution Date until a sufficiently high bid is obtained.
DETERMINATION OF LIBOR
On each Reset Date, the Certificate Administrator will determine
LIBOR for the succeeding Interest Accrual Period on the basis of the
offered LIBOR quotations of the Reference Banks, as such quotations are
provided to the Certificate Administrator as of 11:00 a.m. (London time) on
such Reset Date. As used in this section with respect to a Reset Date,
"business day" means a day on which banks are open for dealing in foreign
currency and exchange in London and New York City; "Reference Banks" means
four leading banks engaged in transactions in Eurodollar deposits in the
International Eurocurrency market (i) with an established place of business
in London, (ii) whose quotations appear on the Reuters Screen LIBO Page on
the Rate Determination Date in question and (iii) which have been
designated as such by the Certificate Administrator and are able and
willing to provide such quotations to the Certificate Administrator on each
Reset Date; and "Reuters Screen LIBO Page" means the display designated as
page "LIBO" on the Reuters Monitor Money Rates Service (or such other page
as may replace the LIBO page on that service for the purpose of displaying
London interbank offered rate quotations or major banks). If any Reference
Bank should be removed from the Reuters Screen LIBO Page or in any other
way fails to meet the qualifications of a Reference Bank, the Certificate
Administrator may, in its sole discretion, designate an alternative
Reference Bank.
On each Reset Date, LIBOR for the next Interest Accrual Period
will be established by the Certificate Administrator as follows:
(i) If on any Reset Date two or more of the Reference Banks
provide such offered quotations, LIBOR for the next Interest Accrual
Period will be the arithmetic
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mean of such offered quotations (rounding such arithmetic mean upwards
if necessary to the nearest whole multiple of 1/16%).
(ii) If on any Reset Date only one or none of the Reference Banks
provides such offered quotations, LIBOR for the next Interest Accrual
Period will be the higher of (x) LIBOR as determined on the previous
Reset Date or (y) the Reserve Interest Rate. The "Reserve Interest
Rate" will be the rate per annum which the Certificate Administrator
determines to be either (A) the arithmetic mean (rounding such
arithmetic mean upwards if necessary to the nearest whole multiple of
1/16%) of the one-month Eurodollar lending rate that New York City
banks selected by the Certificate Administrator are quoting, on the
relevant Reset Date, to the principal London offices of at least two
leading banks in the London interbank market or (B) in the event that
the Certificate Administrator can determine no such arithmetic mean,
the lowest one-month Eurodollar lending rate that the New York City
banks selected by the Certificate Administrator are quoting on such
Reset Date to leading European banks.
(iii) If on any Reset Date the Certificate Administrator is
required but is unable to determine the Reserve Interest Rate in the
manner provided in paragraph (ii) above, LIBOR for the next Interest
Accrual Period will be LIBOR as determined on the Previous Reset Date.
The establishment of LIBOR by the Certificate Administrator and
the Certificate Administrator's subsequent calculation of the rates of
interest applicable to the Class A-1 Certificates for the relevant Interest
Accrual Period (in the absence of manifest error) will be final and
binding. The Class A-1 Pass-Through Rate for any Interest Accrual Period
may be obtained by telephoning the Certificate Administrator at _________.
OPTIONAL REPURCHASE OF THE MORTGAGE CERTIFICATES
The beneficial owner of the Class IO Certificates will have the
option, but not the obligation, to purchase the Mortgage Certificates from
the Trust Fund on any Distribution Date on which the Mortgage Certificate
Balance is equal to 5% or less of the original Mortgage Certificate
Balance.
[EXPENSE FUND
The Depositor will deposit in an account established by the Trustee
with the Certificate Administrator (the "Expense Fund") on the Closing Date
cash in an amount necessary to meet the requirements of each Rating Agency.
Funds on deposit in the Expense Fund will be used to pay amounts owing to
the Trustee pursuant to the Pooling Agreement and the fees of the
Certificate Administrator. Funds on deposit in the Expense Fund will not
be available to make payments on the Certificates.]
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DENOMINATIONS
The Class A-1 Certificates will be issued in minimum denominations of
$1,000 initial principal balance and integral multiples of $1,000 initial
principal balance in excess thereof.
BOOK-ENTRY FORM
The Class A-1 Certificates initially will be represented by one
physical certificate registered in the name of Cede & Co. ("Cede"), as
nominee of DTC, which will be the "holder" or "Certificateholder" of such
Certificates, as such terms are used herein. No person acquiring an
interest in the Class A-1 Certificates (a "Beneficial Owner") will be
entitled to receive a Class A-1 Certificate in certificated form (a
"Definitive Certificate") representing such person's interest in the Class
A-1 Certificates, except as set forth below. Unless and until Definitive
Certificates are issued under the limited circumstances described herein,
all references to actions taken by Certificateholders or holders shall
refer to actions taken by DTC upon instructions from its DTC Participants
(as defined below), and all references herein to distributions, notices,
reports and statements to Certificateholders or holders shall refer to
distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Class A-1 Certificates, as the case may be, for
distribution to Beneficial Owners in accordance with DTC procedures.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Securities Exchange Act of 1934,
as amended. DTC was created to hold securities for its participating
organizations ("DTC Participants") and to facilitate the clearance and
settlement of securities transactions among DTC Participants through
electronic book-entries, thereby eliminating the need for physical movement
of certificates. DTC Participants include securities brokers and dealers
(including the Underwriter), banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to
banks, brokers, dealers, trust companies and other institutions that clear
through or maintain a custodial relationship with a DTC Participant, either
directly or indirectly ("Indirect DTC Participants").
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make Class A-1
transfers of Class A-1 Certificates among DTC Participants on whose behalf
it acts with respect to the Class A-1 Certificates and to receive and
transmit distributions of principal of and interest on the Class A-1
Certificates. DTC Participants and Indirect DTC Participants with which
Beneficial Owners have accounts with respect to the Class A-1 Certificates
similarly are required to make Class A-1 transfers and receive and transmit
such payments on behalf of their respective Beneficial Owners.
Beneficial Owners that are not DTC Participants or Indirect DTC
Participants but desire to purchase, sell or otherwise transfer ownership
of, or other interests in, Class A-1 Certificates may do so only through
DTC Participants and Indirect DTC Participants. In addition, Beneficial
Owners will receive all distributions of principal and interest from the
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Master Servicer, or a paying agent on behalf of the Master Servicer,
through DTC Participants. DTC will forward such distributions to its DTC
Participants, which thereafter will forward them to Indirect DTC
Participants or Beneficial Owners. Beneficial Owners will not be
recognized by the Trustee, the Trust Administrator, the Master Servicer or
any paying agent as Certificateholders, as such term is used in the Pooling
and Servicing Agreement, and Beneficial Owners will be permitted to
exercise the rights of Certificateholders only indirectly through DTC and
its DTC Participants.
Because DTC can only act on behalf of DTC Participants, who in turn
act on behalf of Indirect DTC Participants and certain banks, the ability
of a Beneficial Owner to pledge Class A-1 Certificates to persons or
entities that do not participate in the DTC system, or to otherwise act
with respect to such Class A-1 Certificates, may be limited due to the lack
of a physical certificate for such Class A-1 Certificates. In addition,
under a Class A-1 format, Beneficial Owners may experience delays in their
receipt of payments, since distributions will be made by the Master
Servicer, or a paying agent on behalf of the Master Servicer, to Cede, as
nominee for DTC.
DTC has advised the Depositor that it will take any action permitted
to be taken by a Certificateholder under the Pooling Agreement only at the
direction of one or more DTC Participants to whose accounts with DTC the
Class A-1 Certificates are credited. Additionally, DTC has advised the
Depositor that it will take such actions with respect to specified voting
interests only at the direction of and on behalf of DTC Participants whose
holdings of Class A-1 Certificates evidence such specified voting
interests. DTC may take conflicting actions with respect to voting
interests to the extent that DTC Participants whose holdings of Class A-1
Certificates evidence such voting interests authorize divergent action.
Neither the Depositor, the Certificate Administrator nor the Trustee
will have any responsibility for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Class A-1
Certificates held by Cede, as nominee for DTC, or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests. In the event of the insolvency of DTC, a DTC Participant or an
indirect DTC Participant in whose name Class A-1 Certificates are
registered, the ability of the Beneficial Owners of such Class A-1
Certificates to obtain timely payment and, if the limits of applicable
insurance coverage by the Securities Investor Protection Corporation are
exceeded or if such coverage is otherwise unavailable, ultimate payment, of
amounts distributable with respect to such Class A-1 Certificates may be
impaired.
The Class A-1 Certificates will be converted to Definitive
Certificates and re-issued to Beneficial Owners or their nominees, rather
than to DTC or its nominee, only if (i) the Certificate Administrator is
advised that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to the Class A-1 Certificates
and the Certificate Administrator is unable to locate a qualified
successor, (ii) the Certificate Administrator, at its option, elects to
terminate the book-entry system through DTC or (iii) after the occurrence
of a dismissal or resignation of the Certificate Administrator under the
Pooling Agreement, Beneficial Owners representing not less than 51% of the
voting interests
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of the outstanding Class A-1 Certificates advise the Trustee through DTC,
in writing, that the continuation of a book-entry system through DTC (or a
successor thereto) is no longer in the Beneficial Owners' best interest.
Upon the occurrence of any event described in the immediately
preceding paragraph, the Certificate Administrator (or, if the Certificate
Administrator has been dismissed, the Trustee) will be required to notify
all Beneficial Owners through DTC Participants of the availability of
Definitive Certificates. Upon surrender by DTC of the physical
certificates representing the Class A-1 Certificates and receipt of
instructions for re-registration, the Certificate Administrator will
reissue the Class A-1 Certificates as Definitive Certificates to Beneficial
Owners.
TERMINATION
The Trust Fund will terminate upon the earlier of (a) the distribution
to holders of the Certificates of all amounts required to be distributed to
them pursuant to the Pooling Agreement and (b) the termination of the
Pooling Agreement.
CERTIFICATE ACCOUNT
All payments and collections in respect of the Mortgage Certificates
will be deposited in an account maintained by the Certificate Administrator
(the "Certificate Account") in the name of the Trustee with a depository
institution (which may be the Certificate Administrator) and in a manner
acceptable to each Rating Agency. See "Description of the Certificates --
Payments on the Mortgage Loans" and " -- Collection of Payments on Mortgage
Certificates" in the Prospectus.
ACTIONS IN RESPECT OF THE MORTGAGE CERTIFICATES
If at any time the Trustee, as the Mortgage Certificateholder, is
requested in such capacity to take any action or to give any consent,
approval or waiver, including without limitation in connection with an
amendment of an Underlying Pooling Agreement or if an event of default
occurs under an Underlying Pooling Agreement with respect to the Mortgage
Loan Servicer or the Mortgage Loan Trustee thereunder, the Pooling
Agreement provides that the Trustee, in its capacity as
certificateholder, may take action in connection with the enforcement of
any rights and remedies available to it in such capacity with respect
thereto, will promptly notify all of the holders of the Certificates and
will act only in accordance with written directions of holders of the
Certificates evidencing in excess of 50% of the Voting Rights.
VOTING RIGHTS
Certain actions specified in the Prospectus that may be taken by
holders of the Certificates evidencing a specified percentage of all
undivided interests in the Trust Fund may be taken by holders of the
Certificates entitled in the aggregate to such percentage of the Voting
Rights. At any time that any Certificates are outstanding, the "Voting
Rights" under
S-30
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<PAGE>
<PAGE>
the Pooling Agreement will be allocated 1% to the Class R Certificate, 1%
to the Class IO Certificate and the remainder to the Class A-1 Certificate.
CERTIFICATE ADMINISTRATOR
[To be provided.]
TRUSTEE
[To be provided.]
THE MORTGAGE CERTIFICATES
GENERAL
The description of the Mortgage Certificates contained in this
Prospectus Supplement is a general summary of certain characteristics of
the Mortgage Certificates and does not purport to be complete. Such
description is subject to, and is qualified in its entirety by reference
to, the actual terms and provisions of the Prospectuses and Prospectus
Supplements related to each of the Mortgage Certificates (collectively, the
"Underlying Disclosure Documents") and the Pooling and Servicing Agreements
relating to each of the Mortgage Certificates (collectively, the
"Underlying Pooling Agreements"). Copies of the Underlying Disclosure
Documents and the Underlying Pooling Agreements are available from First
Boston by calling ________ at (212) _________. Investors are urged to
obtain copies of such documents and read this Prospectus Supplement in
conjunction therewith.
The assets of the REMIC will consist primarily of classes (or
portions of classes) of senior mortgage pass-through certificates (the
"Mortgage Certificates"), each of which is a part of one of separate
series of mortgage pass-through certificates (each an "Underlying Series").
Each of the Mortgage Certificates was issued pursuant to a separate
Underlying Pooling Agreement, generally dated as of the first day of the
month of initial issuance of the related Underlying Series (as to each, the
"Underlying Series Cut-off Date"), generally among the RTC, the servicer or
master servicer of the related Mortgage Loans (each, a "Mortgage Loan
Servicer") and the trustee of the related Mortgage Certificates (each, a
"Mortgage Loan Trustee").
The Mortgage Certifictes were each issued on the dates set forth in
the following table for each such Mortgage Certificate, each in an offering
registered by the RTC under the Securities Act of 1933, as amended (the
"Securities Act").
S-31
VERSION G
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE CERTIFICATES DATE OF ISSUANCE
--------------------- ----------------
<S> <C>
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
</TABLE>
Each Underlying Series consists of multiple classes of mortgage pass-
through certificates representing interests in separate trusts (each, an
"Underlying Trust Fund"), previously formed by the RTC, each such
Underlying Trust Fund consisting, in part, of multiple mortgage pools.
Each of the Mortgage Certificates evidences a senior interest in a separate
mortgage pool (each, an "Underlying Mortgage Pool"), which is part of one
of the Underlying Trust Funds, consisting primarily of adjustable interest
rate, conventional, one- to four-family, residential first mortgage loans
(the "Mortgage Loans"), sold by the RTC to the related Mortgage Loan
Trustee for the benefit of holders of the certificates of the related
Underlying Series. Except as set forth in the following sentence, the
Underlying Series relating to each class of Mortgage Certificates includes
at least one class of certificates (as to each Underlying Series, the
"Related Subordinated Certificates") which represents an interest in the
same Underlying Mortgage Pool as such class of Mortgage Certificates and
which is subordinated to such class of Mortgage Certificates. With respect
to three Mortgage Certificates, which have an aggregate Mortgage
Certificate Principal Amount as of the Cut-off Date of $__________, the
principal balances of the Related Subordinated Certificates have been
reduced to zero.
S-32
VERSION G
<PAGE>
<PAGE>
Each of the Mortgage Certificates has been assigned the ratings set
forth in the following table by the rating agencies identified therein:
RATINGS APPLICABLE TO MORTGAGE CERTIFICATES
<TABLE>
<CAPTION>
MORTGAGE CERTIFICATES MOODY'S S&P FITCH
--------------------- ------- ------ -----
<S> <C> <C> <C>
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
</TABLE>
-----------------------------------------
NR = Not Rated
Certain characteristics of the Mortgage Certificates are described
below. Certain of the information with respect to the Mortgage
Certificates has been derived from the original offering documents relating
to such Mortgage Certificates and from publicly available data and other
data available to the Depositor with respect thereto. IT SHOULD BE NOTED
THAT THERE MAY HAVE BEEN MATERIAL CHANGES IN FACTS AND CIRCUMSTANCES SINCE
THE DATES SUCH DOCUMENTS WERE PREPARED, INCLUDING, BUT NOT LIMITED TO,
CHANGES IN PREPAYMENT SPEEDS AND PREVAILING INTEREST RATES AND OTHER
ECONOMIC FACTORS, WHICH MAY LIMIT THE USEFULNESS OF, AND BE DIRECTLY
CONTRARY TO THE ASSUMPTIONS USED IN PREPARING, THE INFORMATION SET FORTH IN
SUCH DOCUMENTS.
The following table sets forth expected approximate characteristics of
the Mortgage Certificates based on remittance reports received with respect
to the Underlying Series Distribution Dates occurring in .
S-33
VERSION G
<PAGE>
<PAGE>
SUMMARY DESCRIPTION OF THE MORTGAGE CERTIFICATES
(BASED ON THE REMITTANCE REPORTS)
<TABLE>
<CAPTION>
Class Current
Weighted
Original Original Original % in Current Mortgage Current Current
Average
Collateral Class % of Trust Collateral Certificate Class % of
Net
Underlying Series Class Balance Balance Deal Fund Balance Balance Balance Deal
Index Margin
- ----------------- ----- ---------- -------- -------- ----- ---------- ----------- ------- -------
- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series [INSERT
Series TABLE]
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
</TABLE>
Totals/Weighted Averages
S-34
VERSION G
<PAGE>
<PAGE>
On the Closing Date, the Principal Balance of the Class A-1
Certificates will equal the aggregate principal balance of the Mortgage
Certificates. In the event that any of the actual characteristics as of the
Cut-off Date of the Mortgage Certificates varies materially from those
described herein, revised information regarding the Mortgage Certificates
will be made available to purchasers of the Class A-1 Certificates on or
before the Closing Date.
DISTRIBUTIONS ON THE MORTGAGE CERTIFICATES
The following is a discussion of the characteristics of the Mortgage
Certificates in general. The precise characteristics of specific Mortgage
Certificates may vary from the general descriptions set forth below. There
are substantial variations among the Underlying Pooling Agreements for the
various Underlying Series. The following discussion does not purport to
describe with specificity the terms of any specific Underlying Pooling
Agreement, but is instead a general description of the major economic terms
of the Mortgage Certificates, with certain major variations from the general
descriptions with respect to certain Mortgage Certificates or groups of
Mortgage Certificates noted. Investors are urged to obtain the Underlying
Pooling Agreements and the Underlying Disclosure Documents from First Boston
and read such agreements in conjunction with this Prospectus Supplement.
Distributions of interest and in reduction of principal balance of each
class of Mortgage Certificates are made on the 25th day of each month or, if
such 25th day is not a business day, on the succeeding business day (each,
an "Underlying Series Distribution Date").
In general, for each Underlying Mortgage Pool, the related class of
Mortgage Certificates evidences, in the aggregate, the right to receive all
of the principal payments on the Mortgage Loans in such Underlying Mortgage
Pool, the right to receive the interest payments on such Mortgage Loans at
the applicable Mortgage Certificate Pass-Through Rate and, in some cases as
discussed below, the right to receive Excess Cash attributable to such
Mortgage Loans, in each case until the related Mortgage Certificate
Principal Amounts have been reduced to zero. However, the Series ,
Certificates and the Series Certificates (which
have an aggregate Mortgage Certificate Principal Amount as of the Cut-off
Date of $__________) evidence the right to receive, in addition to payments
in respect of interest and certain payments in respect of Excess Cash, only
their pro rata share (based on the principal balances of such Mortgage
Certificates and the Related Subordinated Certificates) of all of the
principal payments on the Mortgage Loans in the related Underlying Mortgage
Pools until the related Mortgage Certificate Principal Amounts have been
reduced to zero (rather than all such principal payments).
Distributions on each Mortgage Certificate (other than distributions in
respect of Excess Cash) will generally be made from the Mortgage Pool
Available Distribution Amount. For each Underlying Mortgage Pool, the
related "Mortgage Pool Available Distribution Amount" with respect to any
Underlying Series Distribution Date will equal the sum of: (i) all
previously undistributed amounts received before the related Determination
Date with respect to the Mortgage Loans in such Mortgage Pool and (ii) all
Advances made by the Mortgage Loan Servicer or the Mortgage Loan Trustee (or
amounts withdrawn from the related Reserve Fund in respect of
S-35
VERSION G
<PAGE>
<PAGE>
delinquent mortgage loan payments), and any other payments required to be
made by the Mortgage Loan Servicer with respect to such Underlying Series
Distribution Date, less (x) the portion of the related Servicing Fee payable
to the Mortgage Loan Servicer and (y) all other amounts which are due or
reimbursable to the Mortgage Loan Servicer with respect to such Mortgage
Loans; provided, however, that the Mortgage Pool Available Distribution
Amount with respect to any Underlying Series Distribution Date shall not
include:
(a) Monthly Payments due on the related Mortgage Loans on a date
subsequent to the related Due Period;
(b) Principal Prepayments received after the related Prepayment
Period (together with any interest payments received with such
prepayments to the extent that they represent the payment of interest
accrued on the Mortgage Loans in the related Mortgage Pool for the
period subsequent to the related Prepayment Period); and
(c) liquidation proceeds, insurance proceeds and proceeds of the
sale of any Mortgage Loans in the related Mortgage Pool received after
the related Prepayment Period.
The due period (the "Due Period") related to each Underlying Series
Distribution Date commences on the second day of the month preceding the
month in which such Underlying Series Distribution Date occurs and ends on
the Due Date in the month of such Underlying Series Distribution Date. The
due date (the "Due Date") for any Mortgage Loan is the date in each month on
which its Monthly Payment is due. Generally, for each Underlying Series
Distribution Date, the prepayment period (the "Prepayment Period") is the
calendar month preceding the month in which such Underlying Series
Distribution Date occurs. With respect to certain Mortgage Loans, however,
the Prepayment Period with respect to each Underlying Series Distribution
Date is the period beginning on the Determination Date in the month
preceding the month in which such Underlying Series Distribution Date occurs
and ending on the day preceding the Determination Date in the month in which
such Underlying Series Distribution Date occurs. The Determination Date for
each Underlying Series is generally the 15th day (or if such day is not a
business day, the preceding business day) of the month in which the related
Underlying Series Distribution Date occurs.
INTEREST DISTRIBUTIONS
The "Mortgage Certificate Interest Distribution Amount" for any class
of Mortgage Certificates on any Underlying Series Distribution Date is
generally the amount of interest accrued during the preceding Mortgage
Certificate Interest Accrual Period for such class at the related Mortgage
Certificate Pass-Through Rate on the Mortgage Certificate Principal Amount
of such class immediately preceding such Underlying Series Distribution
Date, less any allocable Prepayment Interest Shortfall and allocable
Deferred Interest, each as described below. The "Mortgage Certificate
Interest Accrual Period" for any Underlying Series Distribution Date is
generally the preceding calendar month. Interest on the Mortgage
Certificates will be calculated on the basis of a 360-day year assumed to
consist of twelve 30-day months.
S-36
VERSION G
<PAGE>
<PAGE>
The Mortgage Certificate Principal Amount with respect to any Mortgage
Certificate and any Underlying Series Distribution Date is equal to the
initial principal amount of such Mortgage Certificate plus (x) any Deferred
Interest allocated to such Mortgage Certificate and less (y) the amount of
any principal distributions previously made on such Mortgage Certificate.
With respect to each Mortgage Certificate Interest Accrual Period, the
Mortgage Certificate Pass-Through Rates will each be a variable rate per
annum equal to the weighted average of the Mortgage Interest Rates on each
of the Mortgage Loans in the related Mortgage Pool as in effect prior to the
Due Date in the Due Period immediately preceding the related Underlying
Series Distribution Date minus the amount set forth for such class in the
succeeding table (each such amount, the "Fee/Excess Rate"). The Fee/Excess
Rate with respect to each Mortgage Certificate generally represents amounts
retained to pay servicing fees, master servicing fees payable to the related
Mortgage Loan Servicer and, in some cases, amounts to be distributed as
Excess Cash.
<TABLE>
<CAPTION>
FEE/EXCESS RATES
---------------------------------------------
Mortgage Certificates Fee/Excess Rates
--------------------- ----------------
<S> <C>
Series
Series
Series
Series
Series
Series
Series
Series
Series [INSERT TABLE]
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
</TABLE>
If either (x) an adjustment to the Mortgage Interest Rate on any
Interest Adjustment Date without a simultaneous adjustment of the Monthly
Payment or (y) the limitation on adjustments to Monthly Payments due to a
Payment Adjustment Cap or the graduated Monthly Payments of certain GPM
Loans causes the amount of interest accrued on the principal balance of a
Mortgage
S-37
VERSION G
<PAGE>
<PAGE>
Loan during any period to exceed the related Monthly Payment, the payment of
such excess interest ("Deferred Interest") may be deferred and the amount
thereof added to the principal balance of such Mortgage Loan. To the extent
any Deferred Interest is added to the principal balance of the Mortgage
Loans in any Mortgage Pool, an allocable portion of such Deferred Interest
will reduce the interest payable to, and will be added to the Mortgage
Certificate Principal Amount of, the related Mortgage Certificates (such
allocable portion based upon the proportion that the interest payable on
such class of Mortgage Certificates bears to the total amount of interest
payable on all classes of certificates related to such Mortgage Pool).
The "Monthly Payment" is, with respect to any Mortgage Loan and any
month, the scheduled Monthly Payment of principal and interest, excluding
any Balloon Payment, on such Mortgage Loan which is either payable by a
borrower in such month under the related note, or in the case of Mortgage
Loans which have been discharged and the related mortgaged property is held
as part of the Underlying Trust Fund ("REO Property"), would otherwise have
been payable under the note relating to such REO Property. A "Balloon
Payment" is the final scheduled payment of principal and interest on a
Balloon Mortgage Loan.
When a borrower makes a full or partial prepayment of a Mortgage Loan
between Due Dates, the borrower pays interest on the amount prepaid only
from the last scheduled Due Date to the date of prepayment. In order to
mitigate any shortfall in interest resulting from such prepayments prior to
a scheduled Due Date, subject to certain limitations in the Underlying
Pooling Agreements, the portion of the servicing fee payable to the Mortgage
Loan Servicer (less a portion thereof reserved for payment of certain fees
and expenses) will be reduced by the amount necessary to provide the
interest payable on the related Mortgage Loans for the entire Prepayment
Period in which the prepayments occurred, adjusted to the Mortgage Interest
Rate less the applicable Servicing Fee. The following chart sets forth the
percentage, as to each Mortgage Certificate, at which the Servicing Fee
available to offset such interest shortfalls is calculated. To the extent
that reductions in the portion of the Servicing Fee payable to the related
Mortgage Loan Servicer are insufficient to offset such interest shortfalls,
the amount of such insufficiency (a "Prepayment Interest Shortfall"), will
be allocated to the classes of Mortgage Certificates in proportion to the
interest accrued thereon. The Servicing Fees payable to any Mortgage Loan
Servicer with respect to any Underlying Series will be available to offset
interest shortfalls relating to mortgage pools other than the Underlying
Mortgage Pools, and to the extent that such shortfalls occur with respect to
more than one mortgage pool relating to any Underlying Series on an
Underlying Series Distribution Date, such Servicing Fee will be allocated to
offset such interest shortfalls pro rata based on the amounts of the
interest shortfalls in each mortgage pool.
PRINCIPAL DISTRIBUTIONS
Distributions in reduction of the Mortgage Certificate Principal
Amounts of the Mortgage Certificates on each Underlying Series Distribution
Date are generally required to be made (subject to the availability of
funds) in an aggregate amount equal to the Pool Principal Distribution
Amount for the related Underlying Mortgage Pool on such Underlying Series
Distribution Date. However, with respect to the and
Certificates (which have an aggregate Mortgage
Certificate Principal Amount as of the
S-38
VERSION G
<PAGE>
<PAGE>
Cut-off Date of $_________), distributions in reduction of the Mortgage
Certificate Principal Amounts thereof are required to be made (subject to
the availability of funds) in an amount equal to the pro rata share of each
such class of the related Pool Principal Distribution Amount for the related
Underlying Mortgage Pool on each Underlying Series Distribution Date. The
pro rata share of each such class will be determined by dividing the
principal balance of such class by the sum of the principal balance of such
class and the principal balances of the Related Subordinated Certificates.
With respect to such Mortgage Certificates, if certain levels of realized
losses are experienced in the related Mortgage Pools, the Related
Subordinated Certificates will not be entitled to distributions in respect
of prepayments on the related Mortgage Loans and all such prepayments will
be allocated to the Mortgage Certificates in reduction of their Mortgage
Certificate Principal Amounts.
The "Pool Principal Distribution Amount" for each Underlying Mortgage
Pool on any Underlying Series Distribution Date generally equals the sum of
(i) the principal component of all scheduled Monthly Payments due on each
Mortgage Loan in such Underlying Mortgage Pool in the preceding Due Period
(the "Scheduled Principal Distribution Amount"), (ii) the principal
component of each Balloon Payment received on any Balloon Mortgage Loan in
such Underlying Mortgage Pool during the related Due Period, (iii) the
scheduled principal balance of each Mortgage Loan in such Underlying
Mortgage Pool that either was sold or became a liquidated mortgage loan
during the related Prepayment Period, (iv) all full or partial principal
prepayments received on each Mortgage Loan in such Underlying Mortgage Pool
during the related Prepayment Period and (v) with respect to two of the
Mortgage Certificates, the Excess Cash, if any, related to such Underlying
Mortgage Pool.
CROSSOVER AMOUNTS
On each Underlying Series Distribution Date (other than with respect to
the Underlying Series relating to the Excess Cash Allocation Certificates)
following the retirement of all classes of certificates related to a
mortgage pool that is part of one of the Underlying Trust Funds, all
payments and other recoveries in respect of such mortgage pool ("Crossover
Amounts") will be applied to cover shortfalls in principal and interest on
the remaining certificates relating to the other mortgage pools that are
part of the same Underlying Trust Fund (which may include one or more
classes of Mortgage Certificates) on a pro rata basis in proportion to the
respective amount of such shortfalls.
Any remaining Crossover Amounts after the application thereof to cover
shortfalls will be allocated among the related mortgage pools, pro rata,
based on the aggregate principal balances of all classes of senior
certificates in the related mortgage pools, and applied on each Underlying
Series Distribution Date in reduction of the principal balances of each
class of senior certificates currently entitled to distribution of
principal.
EXCESS CASH
The "Excess Cash" in respect of any Underlying Mortgage Pool for any
Underlying Series Distribution Date is generally the excess, if any, of the
Mortgage Pool Available Distribution Amount (together, in the case of the
Excess Cash Preservation Certificates, with amount
S-39
VERSION G
<PAGE>
<PAGE>
withdrawn from the related underlying Reserve Fund in respect of realized
losses) for such Underlying Mortgage Pool over the sum of (1) the Mortgage
Certificate Interest Distribution Amount for the related class of Mortgage
Certificates and the Related Subordinated Certificates, if any, and (2) the
amounts set forth in clauses (i) through (iv) of the definition of Pool
Principal Distribution Amount, as set forth above.
In the case of the two Mortgage Certificates described above under the
definition of Pool Principal Distribution Amount, Excess Cash in respect of
the related Mortgage Pools is distributed on each Underlying Series
Distribution Date to such Mortgage Certificates in reduction of their
Mortgage Certificate Principal Amounts. With respect to the remaining
Mortgage Certificates (the "Excess Cash Allocation Certificates"), Excess
Cash is not allocated exclusively to the related Mortgage Certificates.
Instead, the Underlying Pooling Agreements relating to such Mortgage
Certificates provide that Excess Cash will be distributed to one or more
classes of certificates related to such Underlying Series other than the
Mortgage Certificates (as described in greater detail in the related
Underlying Disclosure Documents) in some cases in respect of interest, in
some cases in respect of losses and other shortfalls and in some cases as
payments in reduction of principal amount in excess of the amount of
principal received in respect of the related mortgage loans, prior to being
distributed in reduction of the Mortgage Certificate Principal Amount of the
related Mortgage Certificates. The amount of Excess Cash distributed in
reduction of the Mortgage Certificate Principal Amount of a Mortgage
Certificate could have a significant effect on the weighted average life of
such Mortgage Certificate.
UNDERLYING SERIES RESERVE FUNDS
To increase the likelihood of full distributions of interest and
principal to holders of the certificates issued in each Underlying Series,
the RTC established with various collateral agents one or more reserve funds
with respect to each Underlying Series. The reserve funds relating to each
Underlying Series that are available to cover realized losses and, in some
cases, other shortfalls (such realized losses and other cover shortfalls,
"Covered Amounts") on the related Underlying Mortgage Pools are each
referred to herein as the "Underlying Series Reserve Fund" with respect to
each Underlying Series. Each Underlying Series Reserve Fund originally
consisted of an initial deposit by the RTC of securities, cash or other
property (the "Initial Deposits") equal in value to the amounts set forth in
the following table under the heading "Original Reserve Fund Balance". The
current values of the securities, cash and other property contained in each
of the Underlying Series Reserve Funds, as reported by the Mortgage Loan
Servicers, is set forth in the following table under the heading "Current
Reserve Fund Balance". Such Underlying Series Reserve Funds were
established pursuant to collateral security agreements (each, a "Collateral
Security Agreement") generally among the RTC, the related Mortgage Loan
Trustee and a collateral agent. The amounts held in each Underlying Series
Reserve Fund are required to be invested, at the direction of the RTC, in
certain permitted investments acceptable to the related rating agencies.
The earnings, if any, resulting from the investment of amounts held in the
Underlying Series Reserve Funds are remitted to the RTC.
S-40
VERSION G
<PAGE>
<PAGE>
Amounts on deposit in the related Underlying Series Reserve Funds are
used to offset Covered Amounts relating to each Underlying Mortgage Pool
prior to the allocation of such amounts to the Related Subordinated
Certificates, if any. Each of the Underlying Series Reserve Funds is
available to cover not only Covered Amounts relating to the related
Underlying Mortgage Pools, but also other mortgage pools contained in the
same Underlying Trust Funds. The aggregate outstanding principal balances
of the mortgage loans not contained in the Underlying Mortgage Pools as to
which Covered Amounts will be covered by each of the Underlying Series
Reserve Funds is set forth in the following table under the heading "Balance
of Other Mortgage Loans Covered."
UNDERLYING SERIES RESERVE FUNDS
(BASED ON REMITTANCE REPORTS)
<TABLE>
<CAPTION>
BALANCE OF
ORIGINAL RESERVE CURRENT RESERVE OTHER MORTGAGE
MORTGAGE CERTIFICATES FUND BALANCE FUND BALANCE LOANS COVERED
- --------------------------- ---------------- --------------- --------------
<S> <C> <C> <C>
Series
Series
Series
Series
Series
Series
Series
Series [INSERT TABLE]
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
</TABLE>
With respect to two of the Mortgage Certificates (which have an
aggregate Mortgage Certificate Principal Amount as of the Cut-off Date of
$__________), the Mortgage Loan Trustee will effect a transfer of funds in
the related Underlying Series Reserve Fund, to the extent available, on each
Underlying Series Distribution Date to the extent that the Mortgage Pool
Available Distribution Amount for any Mortgage Pool and any allocable
Crossover Amounts are less than the related Mortgage Certificate Interest
Distribution Amount for the related class of Mortgage Certificates and the
amount of interest distributable to the Related Subordinated
S-41
VERSION G
<PAGE>
<PAGE>
Certificates and Pool Principal Distribution Amount. With respect to six of
the Mortgage Certificates (which have an aggregate Mortgage Certificate
Principal Amount as of the Cut-Off Date of $ ), the Mortgage Loan Trustee
will be required to effect a transfer of funds in the related Underlying
Series Reserve Fund, to the extent available, on each Underlying Series
Distribution Date in an amount equal to any realized losses sustained with
respect to Mortgage Loans in the related Mortgage Pools in the related
Prepayment Period, only to the extent that any resulting shortfalls in the
related Mortgage Certificate Interest Distribution Amounts and related
Mortgage Certificate Principal Distribution Amounts are not covered out of
distributions in respect of Excess Cash on such Distribution Date. With
respect to the remaining Mortgage Certificates (the "Excess Cash
Preservation Certificates"), the Mortgage Loan Trustee will be required to
effect a transfer of funds in the related Underlying Series Reserve Fund, to
the extent available, on each Underlying Series Distribution Date in an
amount equal to any realized losses sustained with respect to Mortgage Loans
in the related Mortgage Pools in the related Prepayment Period.
<TABLE>
<CAPTION>
SERVICING FEES AVAILABLE
-------------------------------------------
TO OFFSET INTEREST SHORTFALLS
-------------------------------------------
Mortgage Certificates Available Fees
--------------------- --------------
<S> <C>
Series
Series
Series
Series
Series
Series
Series
Series
Series [INSERT TABLE]
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
</TABLE>
If the funds available in any Underlying Series Reserve Fund on any
Underlying Series Distribution Date are insufficient to pay the full amounts
due with respect to all related classes of Certificates on such Underlying
Series Distribution Date, such funds will be paid to the holders of the
Mortgage Certificates and the senior certificates related to the other
mortgage pools covered by
S-42
VERSION G
<PAGE>
<PAGE>
such Underlying Series Reserve Fund in proportion to the respective
shortfalls of each such class that would be caused by the insufficiency of
amounts available absent a transfer of funds from such Underlying Series
Reserve Fund.
None of the Underlying Series Reserve Funds have been allocated on a
pro rata basis among the related mortgage pools. Rather, distributions from
each Underlying Series Reserve Fund, to the extent of funds available
therein, will be made without regard to the order, frequency or magnitude of
the losses and other shortfalls on mortgage loans in each covered mortgage
pool. Disproportionate losses or delinquencies in the mortgage pools
covered by the Underlying Series Reserve Funds that are not Underlying
Mortgage Pools could deplete the coverage provided for the Mortgage
Certificates by such Underlying Series Reserve Funds. Consequently, an
Underlying Series Reserve Fund may be unavailable on an Underlying Series
Distribution Date to offset Covered Amounts with respect to a class of
Mortgage Certificates even though the amount of the losses and other
shortfalls experienced by the related Underlying Mortgage Pool may have been
proportionately less than that experienced by the other covered mortgage
pools.
The terms of each Collateral Security Agreement require the related
collateral agent to release funds in the related Underlying Series Reserve
Funds to the RTC under certain circumstances related to the delinquency and
loss experience of the related mortgage loans if the balance on deposit in
such Underlying Series Reserve Funds exceeds the "Reserve Fund Requirement"
as such term is variously defined in the related Collateral Security
Agreements and described in the related Underlying Disclosure Documents.
Each Collateral Security Agreement provides that, with the approval of
the related rating agencies, and at the option of the RTC, the related
Underlying Series Reserve Fund can be replaced, in whole or in part, with a
form of credit enhancement that is, or is invested in securities or
obligations, which are backed by the full faith and credit of the United
States of America.
SUBORDINATION
After the coverage provided to each of the Mortgage Certificates by the
related Underlying Reserve Funds has been depleted, additional coverage
against losses and other shortfalls on the related Mortgage Loans will be
provided to each class of Mortgage Certificates by the subordination of the
class or classes of Related Subordinated Certificates, if any. In general,
the protection afforded to the Mortgage Certificates by the subordination of
any Related Subordination Certificates will be effected in two ways: (i) by
the preferential right of the Mortgage Certificates to receive distributions
on any Underlying Series Distribution Date after the depletion of the
related Underlying Series Reserve Fund and (ii) by the allocation of losses
on the related Mortgage Loans first to such Related Subordinated
Certificates until the principal balances thereof have been reduced to zero
prior to the allocation of any such losses to the Mortgage Certificates.
The following table indicates the current aggregate principal balance of the
class or classes of Related Subordinated Certificates for each class of
Mortgage Certificates.
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<PAGE>
<PAGE>
BALANCES OF RELATED SUBORDINATED CERTIFICATES
(BASED ON REMITTANCE REPORTS)
<TABLE>
<CAPTION>
CURRENT AGGREGATE PRINCIPAL PERCENTAGE OF
BALANCE OF RELATED RELATED UNDERLYING
MORTGAGE CERTIFICATES SUBORDINATED CERTIFICATES MORTGAGE POOL
--------------------- --------------------------- ------------------
<S> <C> <C>
Series
Series
Series
Series
Series
Series
Series
Series [INSERT TABLE]
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
</TABLE>
SPECIAL TERMINATION
With respect to each Underlying Series, subject to the limitations
imposed by the related Underlying Pooling Agreement, by no later than the
tenth business day after the first Underlying Series Distribution Date on
which the aggregate outstanding principal balance of all related classes of
certificates is less than 25% of the initial related aggregate principal
balance of such certificates, the related Mortgage Loan Trustee will solicit
bids for the related mortgage loans (including the Mortgage Loans contained
in the related Underlying Mortgage Pools) and any other property remaining
in the related Trust Fund. The related Mortgage Loan Trustee, however, will
not accept any bid for such mortgage loans and other property unless certain
minimum requirements are met, including that the proceeds distributable as a
result of such sale would be at least equal to 100% of the then outstanding
aggregate principal balance of all related classes of certificates plus
accrued interest thereon through the applicable Interest Accrual Period.
The sale of the mortgage loans and any other property in any Underlying
Trust Fund must be for an amount no less than fair market value. If the
proceeds from a proposed
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<PAGE>
sale of any mortgage loans and any other property remaining in any
Underlying Trust Fund would be insufficient to satisfy the requirements of
the two preceding sentences, the related Mortgage Loan Trustee will continue
to solicit bids as described above from time to time as it deems
appropriate, until a bid satisfying the requirements of the two preceding
sentences is received. The proceeds of such sale will be treated as a
prepayment of the mortgage loans for purposes of distributions to
Certificateholders. Any such sale will effect a termination of the related
Underlying Trust Fund and an early retirement of the related certificates
(including the related Mortgage Certificates). Any resulting distribution on
a class of Mortgage Certificates will increase the amount distributable on
the Class A-1 Certificates in respect of principal and will result in a
shortening in the weighted average life thereof. There can be no assurance
as to the timing of Special Terminations with respect to the Mortgage
Certificates. Such terminations could occur for none, for only some, or for
all of the Mortgage Certificates, and any such terminations could occur
prior to the Distribution Date on the Class A-1
Certificates.
OPTIONAL TERMINATION
With respect to each Underlying Series, any of the related Mortgage
Loan Servicers, any holder of a related residual certificate or the owner of
the assets pledged to any reserve fund (including the related Underlying
Reserve Fund) may effect an early termination of the related trust on any
Underlying Series Distribution Date after the date on which the aggregate
scheduled principal balance of the related mortgage loans is reduced to less
than 10% of the aggregate scheduled principal balance as of the related
Underlying Series Cut-Off Date, by purchasing all such mortgage loans at a
purchase price, payable in cash, equal to 100% of the aggregate unpaid
principal balance of such mortgage loans plus one month's interest thereon
at the applicable mortgage interest rate. The proceeds of such sale will be
treated as a prepayment of the mortgage loans for purposes of distributions
to certificateholders. Any such sale will effect a termination of the
related Underlying Trust Fund and an early retirement of the related
Certificates (including the related Mortgage Certificates). Any resulting
distribution on a class of Mortgage Certificates will increase the amount
distributable on the Class A-1 Certificates in respect of principal and will
result in a shortening in the weighted average life thereof.
ASSIGNMENT OF MORTGAGE LOANS AND WARRANTIES
At the time of issuance of each Underlying Series, the RTC caused the
mortgage loans in the related Underlying Trust Fund to be assigned to the
related Mortgage Loan Trustee, together with all principal and interest due
on or with respect to such mortgage loans, other than principal and interest
due on or before the related Underlying Series Cut-Off Date.
In addition, the RTC delivered to the related Mortgage Loan Trustee, as
to each related mortgage loan (to the extent such documents were available
to the RTC), (i) the related mortgage note, endorsed to the order of, or
assigned to, the related Mortgage Loan Trustee without recourse; (ii) a
mortgage and mortgage assignment meeting the requirements of the related
Underlying Pooling Agreement; (iii) a lender's title insurance policy or
attorney's opinion of title issued as of the date of origination of the
mortgage loan, or an officer's certificate to the effect that
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<PAGE>
such policy or opinion was issued on such date and remains in full force and
effect; (iv) any insurance policies covering the mortgaged property,
including the primary mortgage insurance policy, to the extent required; and
(v) such other documents as may be described in the related Underlying
Pooling Agreement (such documents collectively, the "Mortgage Loan File").
The applicable Mortgage Loan Trustee is required to hold such documents for
each Underlying Series in trust for the benefit of all certificateholders of
such Underlying Series. In a substantial number of cases, some or all of the
documents described above were not delivered by the RTC to the related
Mortgage Loan Trustees as of the closing dates for the related Underlying
Series.
In the related Underlying Pooling Agreement for each Underlying Series,
the RTC represented and warranted, among other things, that: (i) the
information set forth in the schedule of Mortgage Loans appearing as an
exhibit to the related Underlying Pooling Agreement was correct in all
material respects; (ii) immediately prior to the sale and assignment of the
related mortgage loans to the applicable Mortgage Loan Trustee, the RTC had
good title to each mortgage loan; (iii) each mortgage loan, other than any
co-op loan, was covered by a title insurance policy or an attorney's opinion
of title and each such policy was in full force and effect; (iv) to the best
of the RTC's knowledge, each mortgaged property was free of material damage
and in good repair; (v) as of the date of issuance of the related
certificates, each mortgage constituted a valid first lien on the related
mortgaged property (subject only to (a) the lien of current real property
taxes and assessments, (b) covenants, conditions, and restrictions, rights
of way, easements, and other matters of public record as of the date of the
recording of such mortgage, such exceptions appearing of record and either
being acceptable to mortgage lending institutions generally or specifically
referred to in the related title insurance policy and which do not adversely
affect the value of the mortgaged property and (c) other matters to which
like properties are commonly subject that do not materially interfere with
the benefits of the security intended to be provided by the Mortgage); and
(vi) as of the date of initial issuance of the related certificates, there
were no delinquent taxes, assessments or other outstanding charges affecting
the mortgaged properties. In addition, the RTC represented and warranted in
each related Underlying Pooling Agreement, among other things, that, as of
the date of the initial issuance of the related certificates, all Monthly
Payments due on or prior to a date which was not longer, with respect to any
Underlying Series, than [four months] prior to the related Underlying Series
Cut-Off Date had been made. The sole remedy for any breach of the RTC's
representations and warranties contained in each related Underlying Pooling
Agreement or for defects in mortgage loan documents is the obligation of the
RTC to indemnify the related Underlying Trust Fund for losses realized on
mortgage loans as to which such breaches or defects occur if there is a
connection between such losses and such breaches or defects. Subject to
certain exceptions as set forth in the Underlying Disclosure Documents, the
RTC acting in its corporate capacity will guarantee such obligation of the
Seller. The proceeds of any such repurchase or indemnification will be
passed through to related certificateholders as liquidation proceeds.
PAYMENTS ON MORTGAGE LOANS; UNDERLYING SERIES CERTIFICATE ACCOUNT
The Underlying Pooling Agreement for each Underlying Series requires
the related Mortgage Loan Servicer to maintain a custodial account or
accounts (the "Underlying Series Certificate Account") in the name of the
related Mortgage Loan Trustee for the benefit of the
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<PAGE>
<PAGE>
related certificateholders. The amount at any time credited to the
Underlying Series Certificate Account is required to be fully insured to the
maximum coverage possible or be invested in Permitted Investments (as
defined in the Underlying Disclosure Documents) that mature, or are subject
to withdrawal or redemption, on or before the business day preceding the
next succeeding Underlying Series Distribution Date. The income from
Permitted Investments of funds in the Underlying Series Certificate Account
is generally paid to the related Mortgage Loan Servicer, and the risk of
loss of funds in the Underlying Series Certificate Account resulting from
such investments will be borne by the related Mortgage Loan Servicer. The
amount of each such loss will be required to be deposited by the related
Mortgage Loan Servicer in the Underlying Series Certificate Account
immediately as realized.
The Mortgage Loan Servicers are required to deposit in the related
Certificate Accounts amounts representing the following collections and
payments (other than in respect of principal of or interest on the related
mortgage loans due on or before the Underlying Series Cut-Off Date): (i)
all installments of principal and interest on the applicable mortgage loans
and any principal and/or interest required to be advanced by the related
Mortgage Loan Servicer that was due on the applicable Due Date net of
servicing fees due the related Mortgage Loan Servicer, Retained Yield, if
any, and certain other amounts specified in the applicable Underlying
Pooling Agreement; (ii) all amounts received in respect of such mortgage
loans representing late payments of principal and interest to the extent
such amounts were not previously advanced by the related Mortgage Loan
Servicer with respect to such mortgage loans, net of servicing fees due the
related Mortgage Loan Servicer; (iii) all principal prepayments (whether
full or partial) on such mortgage loans received; and (iv) any amounts
received by the related Mortgage Loan Servicer as insurance proceeds (to the
extent not applied to the repair or restoration of the Mortgaged Property)
or liquidation proceeds.
COLLECTION AND OTHER SERVICING PROCEDURES
The Mortgage Loan Servicers are required to make reasonable efforts to
collect all payments called for under the mortgage loans and are required,
consistent with the Underlying Pooling Agreements and any applicable
insurance policies, to follow such collection procedures as each deems
necessary or desirable. Consistent with the above, each Mortgage Loan
Servicer may, in its discretion, waive any prepayment, late payment or
assumption charge or penalty interest in connection with prepayment, late
payment or assumption of a mortgage loan or extend the due dates for
payments due on a mortgage note, provided that insurance coverage for such
mortgage loan will not be adversely affected.
ADVANCES
With respect to classes of Mortgage Certificates, the Mortgage Loan
Servicers are required under the related Underlying Pooling Agreement to
advance prior to each Underlying Series Distribution Date, from their own
funds or from funds held in the related Certificate Accounts for
distribution on a future Underlying Series Distribution Date, scheduled
installments of principal and interest due on a mortgage loan on the
preceding Due Date and not collected by such Mortgage Loan Servicer from the
related borrower (any such advance, an
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<PAGE>
"Advance"). Each such Mortgage Loan Servicer will be obligated to make such
an advance to the extent that such Advances are, in its judgment, reasonably
recoverable from future payments and collections on the Mortgage Loan out of
Insurance Proceeds, Liquidation Proceeds or otherwise. Any advance
previously made by such Mortgage Loan Servicer is reimbursable to such
Mortgage Loan Servicer from funds in the Certificate Account to the extent
that such Mortgage Loan Servicer determines that such advance is not
ultimately recoverable from insurance proceeds, liquidation proceeds or
otherwise. With respect to each Mortgage Certificate, the related Mortgage
Loan Trustee will generally be obligated to make any required Advance if the
Mortgage Loan Servicer fails in its obligation to do so, to the extent
provided in the related Underlying Pooling Agreement.
With respect to the remaining classes of Mortgage Certificates,
neither the related Mortgage Loan Servicer nor the related Mortgage Loan
Trustee will be required to make Advances. The amount of any delinquent
Monthly Payments with respect to related Mortgage Loans is instead withdrawn
from the related Underlying Reserve Fund, to the extent funds are available,
in order to make full distributions on the related Mortgage Certificates and
Related Subordinated Certificates, if any.
MORTGAGE LOAN TRUSTEE AND COLLATERAL AGENT
[TO BE PROVIDED]
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DESCRIPTION OF THE MORTGAGE LOANS
GENERAL
As of the Cut-Off Date, the Mortgage Certificates represented
approximately $_______ of the beneficial interest in separate Underlying
Mortgage Pools which, in turn, were comprised of mortgage loans having an
aggregate principal balance as of such date of approximately $____. The
Mortgage Loans in each Underlying Mortgage Pool are adjustable rate,
conventional, one-to-four family residential first mortgage loans having
characteristics approximately as set forth in the table below. The related
mortgaged properties include owner-occupied, vacation and investor-owned
properties, condominiums, cooperatives, and units in Planned Unit
Developments. With respect to some of the Mortgage Loans, the type of the
related mortgaged property was unknown as of the date of issuance of the
related Mortgage Certificates. [Attached to this Prospectus Supplement as
Appendix A are copies of the tables prepared and delivered to prospective
investors by the RTC in connection with the issuance of each class of the
Mortgage Certificates. Such information may not have been accurate when
prepared (See "Special Considerations--Troubled Originators" and "--Limited
Information" herein). The Depositor cannot assume the accuracy or
completeness of any information set forth in Appendix A, which is provided
solely for the convenience of investors who may not have ready access to the
RTC disclosure regarding the Mortgage Loans.] The information regarding the
Mortgage Loans set forth herein (including in the tables below) is based on
information contained in the Prospectuses and Prospectus Supplements of the
RTC relating to the offerings of the Mortgage Certificates and on
information provided by the Mortgage Loan Servicers, subsequent to the
issuance of the Mortgage Certificates. IT SHOULD BE NOTICED THAT THERE MAY
HAVE BEEN MATERIAL CHANGES IN FACTS AND CIRCUMSTANCES SINCE THE DATE SUCH
DOCUMENTS AND INFORMATION WERE PREPARED, INCLUDING, BUT NOT LIMITED TO,
CHANGES IN PREPAYMENT SPEEDS AND PREVAILING INTEREST RATES AND OTHER
ECONOMIC FACTORS, WHICH MAY LIMIT THE USEFULNESS OF, AND EVEN BE DIRECTLY
CONTRARY TO THE ASSUMPTIONS USED IN PREPARING SUCH INFORMATION AND
DOCUMENTS. Neither the Depositor nor the Certificate Administrator can
provide any assurances as to the accuracy or completeness of such
information.
SELECTED MORTGAGE LOAN DATA
[INSERT TABLES]
Interest Rate Adjustments. Each Mortgage Loan will bear interest at a
rate (the "Mortgage Interest Rate") which will adjust periodically, in
accordance with the terms of the related mortgage note, to a rate equal to
the then-current Index (as defined herein) plus the applicable fixed
percentage specified in the related mortgage note (the "Gross Margin").
Mortgage Loans for which COFI (as defined herein) is the Index are referred
to herein as "COFI Mortgage Loans." Mortgage Loans for which CMT or CBE
(each as defined herein) is the Index are referred to herein as "CMT
Mortgage Loans." The Mortgage Interest Rate for each Mortgage Loan
generally began to adjust on the first day of the month prior to the first
six-month or one-year anniversary of its first payment date and then
monthly, semi-annually or
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annually thereafter (each a "Rate Adjustment Date"). The interest rate on
all of the COFI Mortgage Loans adjusts monthly.
Generally, each Mortgage Loan is subject to an overall maximum interest
rate (the "Lifetime Cap"). For the Monthly COFI Mortgage Loans, the
Lifetime Cap ranges from 0% to 125% per annum. For the CMT Mortgage Loans,
the Lifetime Cap ranges from 0% to 125% per annum. Some of the Mortgage
Loans are subject to minimum interest rates. [In addition to the Lifetime
Cap, interest rate adjustments on the [CMT] Mortgage Loans generally limited
are to 1.00% in the case of semi-annual adjustments and 2.00% in the case of
annual adjustments.]
Effective with the first payment due on a Mortgage Loan after the
related Rate Adjustment Date, the monthly principal and interest payment
generally will be adjusted to an amount that will fully amortize the then-
outstanding principal balance of such Mortgage Loan over its remaining term
to stated maturity and that will be sufficient to pay interest at the
adjusted Mortgage Interest Rate. Therefore, any partial prepayments may
reduce the weighted average life of a Mortgage Loan but will not (except for
partial prepayments made in the final year of the original term of such
Mortgage Loan) cause the final payment on such Mortgage Loan to occur prior
to its stated maturity. An increase in the Mortgage Interest Rate on a
Mortgage Loan will result in a larger portion of each higher Monthly Payment
being allocated to interest and a smaller portion being allocated to
principal.
COFI, CMT AND CBE
The "Index" with respect to each COFI Mortgage Loan is the monthly
weighted average cost of funds for member institutions in the Eleventh
District of the Federal Home Loan Bank System, as published by the Federal
Home Loan Bank of San Francisco ("COFI"). The Index with respect to each
CMT Mortgage Loan generally is either (a) the weekly average yield on U.S.
Treasury securities adjusted to a constant maturity ("CMT") of one year or
(b) the weekly auction average (investment) rate on U.S. Treasury Bills with
a six-month maturity ("CBE"), each as published by the Federal Reserve Board
in Statistical Release H.15 (519) or any similar publication or, if not so
published, as reported by any Federal Reserve Bank or by any U.S. Government
department or agency and made available to the servicer as of a date which
is a number of days prior to each Rate Adjustment Date for such Mortgage
Loan. Some of the Mortgage Loans use a CMT index based on a 2, 3 or 5 year
maturity. In general, should the applicable Index not be published or
become otherwise unavailable, the servicer of the Mortgage Loan will select
a comparable alternative index over which it has no control and which is
readily verifiable.
The monthly averages of CMT and CBE in the tables below are not
necessarily indicative of CMT or CBE on any given date in the relevant month
since significant week-to-week fluctuations in any such Index may occur in
any month as well as over longer periods. In addition, such monthly
averages do not purport to be a prediction of the value of CMT or CBE on any
Rate Adjustment Date or for the lives of the Mortgage Loans.
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COFI. The following table sets forth COFI for each of the last six
calendar years or portions thereof, based on information reported by The
Federal Home Loan Bank of San Francisco ("FHLBSF");
MONTHLY COFI
<TABLE>
<CAPTION>
YEAR
---------------------------------------
Month(1) 19 19 19 19 19 19
-------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
January
February
March
April
May
June
July
August
September
October
November
December
</TABLE>
____________________
(1) COFI reflects the weighted average cost of funds of the members of the
Eleventh District for the month indicated. It is usually announced by
the FHLBSF on the last working day of the month following the month in
which the cost of funds was incurred.
The FHLBSF publishes COFI in its monthly Information Bulletin. Any
individual may request regular receipt by mail of Information Bulletins by
writing the Federal Home Loan Bank of San Francisco's Marketing Department,
P.O. Box 7948, San Francisco, California 94120, or by calling (415) 616-
2610. COFI may also be obtained by calling the FHLBSF at (415) 616-2600.
COFI is designed to represent the monthly weighted average cost of
funds for savings institutions in Arizona, California and Nevada that are
member institutions of the Eleventh Federal Home Loan Bank District (the
"Eleventh District"). COFI for a particular month reflects the interest
costs paid on all types of funds held by Eleventh District member
institutions and is calculated by dividing the cost of funds by the average
of the total amount of those funds outstanding at the end of that month and
of the prior month and annualizing and adjusting the result to reflect the
actual number of days in the particular month. If necessary, before these
calculations are made, the component figures are adjusted by the FHLBSF to
neutralize the effect of events such as member institutions leaving the
Eleventh District or acquiring funds held at the end of the relevant month.
The major components of funds of Eleventh District member institutions are:
(i) savings deposits, (ii) time deposits, (iii) FHLBSF advances, (iv)
repurchase agreements and (v) all other borrowings. Because the component
funds represent a variety of maturities whose costs may react in different
ways to changing conditions, COFI does not necessarily reflect any
particular current market rate.
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A number of factors affect the performance of COFI, which may cause it
to move in a manner different from indices tied to specific interest rates,
such as United States Treasury Bills or LIBOR. Because the liabilities upon
which COFI is based were issued at various times under various market
conditions and with various maturities, COFI may not necessarily reflect the
prevailing market interest rates on new liabilities of similar maturities.
Moreover, as stated above, COFI is designated to represent the average cost
of funds for Eleventh District savings institutions for the month prior to
the month in which it is due to be published. Additionally, COFI may not
necessarily move in the same direction as market interest rates at all
times, since as longer term deposits or borrowings mature and are renewed at
prevailing market interest rates, COFI is influenced by the differential
between the prior and the new rates on those deposits or borrowings. In
addition, movements of COFI, as compared to other indices tied to specific
interest rates, may be affected by changes instituted by the FHLBSF in the
method used to calculate COFI.
CMT AND CBE. The following table sets forth the monthly averages of
CMT and CBE for each of the last six calendar years or portions thereof,
based on information published in the Federal Reserve Board in Statistical
Release H.15 (519):
MONTHLY AVERAGES OF CMT
<TABLE>
<CAPTION>
Year
---------------------------------------
Month 19 19 19 19 19 19
----- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
January
February
March
April
May
June
July
August
September
October
November
December
</TABLE>
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<PAGE>
MONTHLY AVERAGES OF CBE
<TABLE>
<CAPTION>
Year
---------------------------------------
Month 19 19 19 19 19 19
----- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
January
February
March
April
May
June
July
August
September
October
November
December
</TABLE>
Convertible Mortgage Loans. Under the terms of certain of the Mortgage
Loans, the borrower has the option at certain times and under certain
conditions to convert the Mortgage Interest Rate to a fixed rate from a
variable rate based on the applicable Index (each such loan, a "Convertible
Mortgage Loan"). The option to convert to a fixed Mortgage Interest Rate
may be exercised by the borrower on the date or dates specified in the
related note. The borrower's option to convert to a fixed Mortgage Interest
Rate may have expired with respect to certain of the Convertible Mortgage
Loans. The conversion option typically may not be exercised if the borrower
is in default under the terms of the related note or mortgage. In most
cases, the Convertible Mortgage Loan may be converted to a fixed interest
rate loan with a Mortgage Interest Rate based upon FNMA's or FHLMC's
required net yield for the purchase of 15-year (for Mortgage Loans with
original repayment terms of 15 years or less) or 30-year (for Mortgage Loans
with original repayment terms of greater than 15 years) fixed-rate mortgage
loans, under 30-day or 60-day mandatory delivery commitments. In either
case, the fixed interest rate will be computed by adding a specified margin
to the applicable FNMA quotation or the applicable FHLMC quotation. Upon
conversion, the Monthly Payments of principal and interest generally will be
adjusted to provide for fully amortizing, level Monthly Payments until
maturity.
The Pooling and Servicing Agreements applicable to the Mortgage Loans
provide that the Mortgage Loan Servicers will be obligated to purchase any
Mortgage Loan as to which the borrower exercises the right to convert to a
fixed Mortgage Interest Rate for a price equal to 100% of the unpaid
principal balance of such Mortgage Loan plus unpaid accrued interest at the
applicable Mortgage Interest Rate. The Mortgage Loan Servicer's purchase
obligation is not insured or guaranteed by any person. The proceeds of any
such purchased converted Mortgage Loan will be treated as a prepayment and
will be passed through to the Trustee, as holder of the related Mortgage
Certificates. A converted Mortgage Loan bearing a fixed Mortgage Interest
Rate will remain in the Mortgage Pool until purchased or repaid. Any
failure to purchase a
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converted Mortgage Loan would cause the related Underlying Mortgage Pool to
include both fixed rate and adjustable rate Mortgage Loans.
Balloon Mortgage Loans. Certain of the Mortgage Loans are Balloon
Mortgage Loans. A "Balloon Mortgage Loan" is a Mortgage Loan that provided
on the date of origination for amortization on the basis of an amortization
schedule extending beyond its stated maturity with a disproportionate
Monthly Payment due on its stated maturity date equal to the remaining
principal balance of such Mortgage Loan. The ability of a borrower to repay
such a Balloon Mortgage Loan upon the maturity thereof frequently will
depend on the borrower's ability to refinance such Balloon Mortgage Loan,
which in turn will depend on a variety of factors, including the prevailing
level of Mortgage interest rates.
Negative Amortization Mortgage Loans. The Monthly Payment on a
Mortgage Loan is adjusted after an initial period and at periodic intervals
thereafter, all as specified in the related note (each, a "Payment Change
Date"), generally to an amount that would fully amortize the remaining
principal balance of the Mortgage Loan over its remaining amortization term
on a level-debt service basis, at the Mortgage Interest Rate in effect on
the related Payment Change Date. However, with respect to certain of the
Mortgage Loans, increases in the Monthly Payment may be limited by the terms
of the related note (the "Payment Adjustment Cap"), which generally provides
that no Monthly Payment may increase by more than a percentage, specified in
the related note, above the Monthly Payment in effect during the preceding
period. With respect to certain of the Mortgage Loans, application of the
Payment Adjustment Cap will be at the option of the borrower.
In addition, with respect to the COFI Mortgage Loans, as to which
interest rates adjust monthly, because the rate at which interest accrues
changes more frequently than payments adjust and because adjustment of
Monthly Payments on such Mortgage Loans may be subject to the various
limitations described above, the amount of interest accruing on the
remaining principal balance of such a Mortgage Loan at the applicable
Mortgage Interest Rate may exceed the amount of the interest portion of the
Monthly Payment. The resulting shortfall in the interest portion of the
related Monthly Payment will be added to the unpaid principal balance of the
related Mortgage Loan in the month during which any such shortfall occurs as
"Deferred Interest," resulting in negative amortization of the Mortgage
Loan. With respect to such Mortgage Loans negative amortization is
generally limited, however, such that the principal balance of the Mortgage
Loan cannot generally exceed the percentage of its original principal
balance specified in the applicable note. If the calculated Monthly Payment
would result in negative amortization exceeding the limit specified in the
related note, the borrower generally is required to pay as the Monthly
Payment until the next Payment Change Date an amount that would fully
amortize the remaining principal balance of the Mortgage Loan over its
remaining amortization term on a level-debt service basis without regard to
any limitations. As a result of such negative amortization, the final
payment at the end of the term of the related Mortgage Loan may be larger
than previous Monthly Payments under such Mortgage Loan.
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Non-Monthly Payment Loans. Certain of the Mortgage Loans may provide
for payments of principal at biweekly, quarterly, semiannual or annual
intervals, rather than at monthly intervals.
Graduated Payment Mortgage Loans. Certain of the Mortgage Loans may
provide for an initial period of Monthly Payments in an amount that would be
insufficient to fully amortize the principal balance of the Mortgage Loan
over its stated term, and that may be insufficient to pay accrued interest,
followed by scheduled increasing Monthly Payments prior to a date specified
in the related note. To the extent the amount of interest accruing on the
principal balance of such a Mortgage Loan at the applicable Mortgage
Interest Rate exceeds the Monthly Payment, such excess will be added to the
unpaid principal balance of the related Mortgage Loan, resulting in negative
amortization.
YIELD AND PREPAYMENT CONSIDERATIONS
Prepayments and Excess Cash. The rate of principal payments on the
Class A-1 Certificates will be affected by the rate of principal payments on
the Mortgage Loans (including, for this purpose, prepayments, which may
include amounts received by virtue of condemnation, insurance or
foreclosure) and by the application of Excess Cash to the principal balance
of the Mortgage Certificates.
Principal prepayments may be influenced by a variety of economic
geographic, demographic, social, tax, legal and other factors. In general,
if prevailing interest rates fall significantly below the interest rates on
the Mortgage Loans, the Mortgage Loans are likely to be subject to higher
prepayments than if prevailing rates remain at or above the interest rates
on such Mortgage Loans. Conversely, if prevailing interest rates rise above
the interest rates on such Mortgage Loans, the rate of prepayments would be
expected to decrease. Other factors affecting prepayment of the Mortgage
Loans include changes in borrowers' housing needs, job transfers,
unemployment, borrowers' net equity in the mortgaged properties and
servicing decisions.
All of the Mortgage Loans are adjustable rate mortgage loans ("ARMs").
The Depositor is not aware of any publicly available statistics that set
forth principal prepayment experience or prepayment forecasts of ARMs over
an extended period of time, the prepayment experience of the Mortgage
Certificates is insufficient to draw any conclusions with respect to the
expected prepayment rates of the Mortgage Loans. The rate of principal
prepayments with respect to ARMs has fluctuated in recent years. As is the
case with conventional fixed rate mortgage loans, ARMs may be subject to a
greater rate of principal prepayments in a declining interest rate
environment. For example, if prevailing interest rates fall significantly,
ARMs could be subject to higher prepayment rates than if prevailing interest
rates remain constant because the availability of fixed rate mortgage loans
at competitive interest rates may encourage mortgagors to refinance their
ARMs to "lock in" a lower fixed interest rate. No assurances can be given
as to the rate of prepayments on the Mortgage Loans in stable or changing
interest rate environments.
S-55
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<PAGE>
<PAGE>
Excess Cash related to each of the Underlying Mortgage Pools will be
allocated in reduction of the Mortgage Underlying Certificate Principal
Balances of the Certificates in various ways. See "Description of the
Mortgage Certificates--Principal Distributions."
If a Class A-1 Certificate is purchased at a discount from its initial
principal amount by a purchaser that calculates its anticipated yield to
maturity based on an assumed rate of payment of principal that is faster
than that actually experienced on the Mortgage Loans, the actual yield to
maturity will be lower than that so calculated. Conversely, if a
Certificate is purchased at a premium by a purchaser that calculates its
anticipated yield to maturity based on an assumed rate of payment of
principal that is slower than that actually experienced on the Mortgage
Loans, the actual yield to maturity will be lower than that so calculated.
Timing of Payments. The timing of changes in the rate of prepayments
on the Mortgage Loans and the timing of distribution of Excess Cash may
significantly affect an investor's actual yield to maturity, even if the
average rate of principal payments is consistent with an investor's
expectation. In general, the earlier a prepayment of principal of the
Mortgage Loans or a distribution of Excess Cash, the greater the effect on
an investor's yield to maturity. The effect on an investor's yield of
principal payments occurring at a rate higher (or lower) than the rate
anticipated by the investor during the period immediately following the
issuance of the Certificates may not be offset by a subsequent like decrease
(or increase) in the rate of principal payments.
Basis Risk; LIBOR. The interest rate payable to the Holders of the
Class A-1 Certificates is based on LIBOR. However, the Mortgage Loans bear
interest at adjustable rates based on various indices. LIBOR and such
various indices may respond to different economic and market factors, and
there is no necessary correspondence between them. Thus, it is possible,
for example, that LIBOR may rise during periods in which the indices of the
Mortgage Loans are stable or are falling, or that even if both LIBOR and
such indices rise during the same period, LIBOR may rise much more rapidly
and sharply than the indices. THERE CAN BE NO ASSURANCE THAT FUNDS
AVAILABLE IN THE RESERVE FUND OR PAYMENTS UNDER THE YIELD SUPPORT AGREEMENT
WILL BE SUFFICIENT TO MAKE UP ANY AMOUNT BY WHICH THE INTEREST COLLECTED ON
THE MORTGAGE CERTIFICATES IS LESS THAN THE INTEREST ACCRUAL AMOUNT OF THE
CLASS A-1 CERTIFICATES.
Mortgage Certificates. The Trust Fund contains Mortgage Certificates
which were issued at different times, are backed by different pools of
Mortgage Loans, have different allocations of principal and interest and
payment priorities among various classes, and may perform differently in
various interest and prepayment rate environments. The performance
characteristics of the Class A-1 Certificates will reflect a combination of
the performance characteristics of the various Mortgage Certificates. As a
result, it will be difficult to predict the likely yield and payment
experience of the Mortgage Certificates.
Special Terminations. Each of the Underlying Mortgage Pools is subject
to termination as described under "Description of the Mortgage Certificates-
-Special Termination." Any such
S-56
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<PAGE>
<PAGE>
termination may have the effect of decreasing the weighted average life of
the Class A-1 Certificates.
Auction Risk. There can be no assurances that the Trustee will, on
or on any date thereafter, be able to sell the Mortgage
Certificates for a price sufficient (together with amounts on deposit in the
Reserve Fund) to allow the Class A-1 Certificates to be paid in full.
[Reinvestment Risk. Investors should consider the risk that rapid
rates of prepayments on the Mortgage Loans, and therefore of principal
payments on the Certificates, may coincide with periods of low prevailing
interest rates. During such periods, the effective interest rates on
securities in which an investor may choose to reinvest amounts received as
principal payments on such investor's Certificate may be lower than the
Class A-1 Pass-Through Rate. Conversely, slow rates of prepayments on the
Mortgage Loans, and therefore of principal payments on the Class A-1
Certificates, may coincide with periods of high prevailing interest rates.
During such periods, the amount of principal payments available to an
investor for reinvestment at such high prevailing interest rates may be
relatively low.]
Convertible ARM Loans. As discussed above under "DESCRIPTION OF THE
MORTGAGE LOANS," borrowers under certain of the Mortgage Loans have the
option to convert the Mortgage Loan to a fixed rate loan. As previously
discussed, the related Mortgage Loan Servicers are obligated to purchase any
such Converted Mortgage Loans. Unless and until such a purchase is
effected, a Converted Mortgage Loan will stay in the Underlying Mortgage
Pool and the Mortgage Interest Rate will be fixed rather than based on an
Index. The yield on the Class A-1 Certificates may thus be adversely
affected. In addition, the purchase of a Converted Mortgage Loan may affect
the rate of principal payments on the Class A-1 Certificates and, as a
result, the yield on such Certificates.
WEIGHTED AVERAGE LIVES
The weighted average life of a security refers to the average amount of
time that will elapse from the date of its issuance until each dollar of
principal of such security will be distributed to the investor. The weighted
average life of a Class A-1 Certificate is determined by (a) multiplying the
amount of the reduction, if any, of the principal balance of such
Certificate from one Distribution Date (or, in the case of the first
distribution, from ) to the next Distribution Date by the
number of years from the date of issuance to the second such Distribution
Date, (b) summing the results and (c) dividing the sum by the aggregate
amount of the reductions in the principal balance of such Certificate
referred to in clause (a). The weighted average lives of the Class A-1
Certificates will be influenced by, among other factors, the rate at which
principal is paid on the Mortgage Loans.
CPR MODEL
Prepayments on mortgage loans are commonly measured relative to a
prepayment or model. The model used in this Prospectus Supplement, known as
a conditional or a constant prepayment rate ("CPR"), represents a rate of
payment of unscheduled principal on the
S-57
VERSION G
<PAGE>
<PAGE>
Mortgage Loans expressed as an annualized percentage of the outstanding
principal balance of the Mortgage Loans at the beginning of each period. CPR
does not purport to be a historical description of prepayment experience or a
prediction of the anticipated rate of prepayment of any pool of mortgage
loans, including the Mortgage Loans.
PRICING ASSUMPTION
The Class A-1 Certificates were structured assuming, a month other
things, a prepayment assumption of 18% CPR and LIBOR at a rate of ____%. The
assumptions as to prepayments and LIBOR to be used for pricing purposes for
the Class A-1 Certificates may vary as determined at the time of sale. The
actual rates of prepayments and the actual levels of LIBOR may vary
considerably from the rates used for any pricing assumption.
WEIGHTED AVERAGE LIFE, FINAL DISTRIBUTION DATE AND PRE-TAX YIELD TABLES
The following tables indicate the weighted average lives (in years),
the final Distribution Dates and the pre-tax yields to maturity (on a
corporate bond equivalent basis) of the Class A-1 Certificates, assuming
various percentages of CPR and various constant levels of LIBOR, among other
things.
For each of the following tables it was assumed that (i) The Mortgage
Certificates in the Trust Fund have the principal balances set forth on Table
__ on p. S-__ [adjusted, etc.]; (ii) each Mortgage Loan underlying a Mortgage
Certificate has a Mortgage Interest Rate as of the Cut Off Date, remaining
term to maturity and loan age equivalent to the weighted average mortgage
interest rate of such Mortgage Loans, the weighted average remaining term to
maturity and the weighted average loan age of such Mortgage Loans as of the
Cut Off Date, as reported in the applicable Remittance Reports prepared by the
servicers; (iii) the Mortgage Loans prepay at the percentages of CPR
indicated; (iv) all amounts due with respect to the Mortgage Loans are applied
to the payment of the Mortgage Certificates on the 25th of the month in
accordance with the applicable Prospectus and Prospectus Supplement of the
RTC; (v) for the first Interest Accrual Period, the Class A-1 Pass-Through
Rate is ____%; (vi) LIBOR with respect to each Interest Accrual Period after
the first is equal to the levels shown; (vii) the Closing Date is
___, 19 ; (viii) each quarterly distribution on the Class A-1 Certificates is
made on the 25th day of the relevant month, commencing on , ;
(ix) each month consists of 30 days; (x) funds on deposit in the Reserve Fund
earn interest at ____; and (xi) the Class A-1 Certificates are purchased at
par.
[INSERT TABLES]
The yields set forth in the above table were calculated by determining
the monthly discount rates which, when applied to the assumed stream of cash
flows to be paid on the Class A-1 Certificates, would cause the discounted
present value of such assumed stream of cash flows to equal the assumed
purchase price of the Class A-1 Certificates indicated above and converting
such monthly rates to corporate bond equivalent rates. Such calculation does
not take into account variations that may occur in the interest rates at which
investors may be able to reinvest funds received by them as payments of
principal of and interest on the Class A-1 Certificates
S-58
VERSION G
<PAGE>
<PAGE>
and consequently does not purport to reflect the return of any investment in
the Class A-1 Certificates when such reinvestment rates are considered.
Listed below are historical values of Three-Month LIBOR since
___________:
<TABLE>
<CAPTION>
3 MONTH LIBOR
MONTHLY AVERAGES
YEAR
MONTH 19 19 19 19 19
-------------------------------------------
<S> <C> <C> <C> <C> <C>
January
February
March
April
May
June
July
August
September
October
November
December
</TABLE>
Historical LIBOR experience is not a predictor of future LIBOR
notes, which are influenced by numerous factors, the impact of
which cannot be predicted. The foregoing rates do not purport to
be a prediction of the value of LIBOR on any Reset Date or for the
lives of the Class A-1 Certificates.
ACTUAL EXPERIENCE WILL VARY FROM ASSUMPTIONS
Discrepancies will exist between the characteristics of the actual
underlying Mortgage Certificates and Mortgage Loans and the characteristics
assumed therefore in preparing the tables contained herein. To the extent
that the Mortgage Certificates and Mortgage Loans have characteristics which
differ from those assumed in preparing the tables, the Class A-1 Certificates
may mature earlier or later than indicated by the tables and the weighted
average lives and pre-tax yields may also differ. In addition, it is unlikely
that the Mortgage Loans will prepay at any constant rate or at the same rate,
or that LIBOR will remain constant at any level. The timing of changes in the
rate of prepayment and level of LIBOR may significantly affect the yield
realized by a holder of the Class A-1 Certificates. Under certain prepayment
and LIBOR scenarios, investors may not receive the full amount of their
investments.
S-59
VERSION G
<PAGE>
<PAGE>
THE MORTGAGE LOAN SERVICERS
The names of the Mortgage Loan Servicers related to each of the
Mortgage Certificates are set forth in the following table:
MORTGAGE LOAN SERVICERS
<TABLE>
<CAPTION>
MORTGAGE CERTIFICATES SERVICER
--------------------- ------------------------------------
<S> <C>
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
</TABLE>
According to FHLMC and FNMA, each of the Mortgage Loan Servicers (other
than __________) is approved by such organizations to service residential
mortgage loans.
S-60
VERSION G
<PAGE>
<PAGE>
[to be provided]
The preceding information with respect to the Mortgage Loan Servicers
was derived by the Depositor from publicly available information which the
Depositor believes to be reliable. However, the Depositor makes no
representations with respect thereto and assumes no responsibility for the
accuracy or completeness thereof.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
An election will be made to treat the Trust Fund as a REMIC for federal
income tax purposes. The Class A-1 and Class IO Certificates will be
designated as regular interests in the REMIC, and the Class R Certificate
will be designated as the residual interest in the REMIC.
The Class A-1 Certificates will be treated as "qualifying real property
loans" for mutual savings banks and domestic building and loan associations,
"regular or residual interests in a
S-61
VERSION G
<PAGE>
<PAGE>
REMIC" for domestic building and loan associations, and "real estate assets"
for real estate investment trusts, to the extent described in the
Prospectus.
The Class A-1 Certificates generally will be treated as newly
originated debt instruments for federal income tax purposes. Beneficial
Owners of the Class A-1 Certificates will be required to report income on
such Certificates in accordance with the accrual method of accounting.
It is anticipated that the Class A-1 Certificates will be issued [at a
premium] [with de minimis original issue discount] for federal income tax
purposes.
The Prepayment Assumption (as defined in the Prospectus) that the
Certificate Administrator intends to use in determining the rate of accrual
of original issue discount will be calculated using 18% CPR. No
representation is made as to the actual rate at which the Mortgage Loans
will prepay.
See "Certain Federal Income Tax Consequences -- General" and " -- REMIC
Trust Funds" in the Prospectus.
ERISA CONSIDERATIONS
The Department of Labor has granted to the Underwriter an
administrative exemption (the "Exemption") from certain of the prohibited
transaction rules of ERISA and certain related excise taxes imposed by the
Code with regard to the initial purchase, the holding and the subsequent
resale by ERISA Plans of certificates in pass-through trusts that meet the
conditions and requirements of the Exemption. The Exemption should apply to
the liquidation, holding, and resale of the Class A-1 Certificates by an
ERISA Plan, provided that specified conditions (certain of which are
described below) are met.
Among the conditions which must be satisfied for the Exemption to apply
to the acquisition by an ERISA Plan of the Class A-1 Certificates are the
following: (1) the acquisition of the Certificates by an ERISA Plan is on
terms (including the price for such Certificates) that are at least as
favorable to the ERISA Plan as they would be in an arm's-length transaction
with an unrelated party; (2) the rights and interests evidenced by the
Certificates acquired by the ERISA Plan are not subordinated to the rights
and interests evidenced by other certificates of the Trust; (3) the
Certificates acquired by the ERISA Plan have received a rating at the time
of such acquisition that is in one of the three highest generic rating
categories from any of S&P, Fitch, Duff & Phelps Credit Rating Co. or
Moody's Investors Service, Inc.; (4) the sum of all payments made to the
Underwriter in connection with the distribution of the Class A-1
Certificates represents not more than reasonable compensation for
underwriting such Certificates; and (5) the sum of all payments made to and
retained by the Certificate Administrator represents not more than
reasonable compensation for the Certificate Administrator's services under
the Pooling Agreement and reimbursement of the Certificate Administrator's
reasonable expenses in connection therewith.
S-62
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<PAGE>
<PAGE>
In addition, it is a condition that the ERISA Plan investing in the
Class A-1 Certificates be an "accredited investor" as defined in Rule
501(a)(1) of Regulation D of the Commission under the Securities Act.
The Exemption does not apply to the acquisition and holding of Class A-
1 Certificates by ERISA Plans sponsored by the Issuer, the Underwriter, the
Trustee, the Certificate Administrator, or any affiliate of such parties.
Moreover, the Exception provides relief from certain self-dealing/conflict
of interest prohibited transactions, only if, among other requirements (i)
an ERISA Plan's investment in the Class A-1 Certificates does not exceed 25%
of all of that Class outstanding at the time of the acquisition and (ii)
immediately after the acquisition, no more than 25% of the assets of an
ERISA Plan with respect to which the person who has discretionary authority
or renders advice are invested in certificates representing an interest in a
trust containing assets sold or serviced by the same person.
USE OF PROCEEDS
The proceeds from the sale of the Class A-1 Certificates (net of
expenses incurred in connection with the issuance of the Class A-1
Certificates) will be used by the Depositor to purchase the Mortgage
Certificates.
LEGAL INVESTMENT CONSIDERATIONS
The Class A-1 Certificates constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984 (the
"SMMEA") so long as they are rated in one of the two highest rating
categories by at least one nationally recognized statistical rating
organization. As such, the Class A-1 Certificates are legal investments for
certain entities to the extent provided in the 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 Class A-1
Certificates, as such Certificates 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 such Certificates. It
should also be noted that certain states recently have enacted, or have
proposed enacting, legislation limiting to varying extent the ability of
certain entities (in particular insurance companies) to invest in mortgage
related securities. The appropriate characterization of the Class A-1
Certificates under various legal investment restrictions, and thus the
ability of investors subject to these restrictions to purchase Class A-1
Certificates, may be subject to significant interpretive uncertainties.
Investors should consult with their own legal advisors in determining
whether and to what extent Class A-1 Certificates constitute legal
investments for such investors. See "Legal Investment" in the Prospectus.
METHOD OF DISTRIBUTION
First Boston proposes to place the Class A-1 Certificates from time to
time in one or more negotiated transactions, or otherwise, at varying prices
to be determined in each case, at
S-63
VERSION G
<PAGE>
<PAGE>
the time of sale. The Class A-1 Certificates are offered subject to prior
sale and acceptance and to certain other conditions.
[If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the attached Prospectus will also be used by the
Underwriter after the completion of the offering in connection with offers and
sales related to market-making transactions in the offered Securities in which
the Underwriter acts as principal. Sales will be made at negotiated prices
determined at the time of sale.]
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and the
Underwriter[s] by ____________________________________________________________.
RATINGS
It is a condition to the issuance of the Class A-1 Certificates that
such Certificates be rated at least "Aaa" by Moody's and at least "AAA" by
S&P. There is no assurance that such ratings will continue for any period
of time or that they will not be revised or withdrawn entirely by such
rating agency if, in its judgment, circumstances so warrant. A revision or
withdrawal of such ratings may have an adverse effect on the market price of
the Class A-1 Certificates. A security rating is not a recommendation to
buy, sell or hold securities.
THE RATINGS OF THE RATING AGENCIES DO NOT ADDRESS THE LIKELIHOOD OF
PAYMENT OF INTEREST ON THE CLASS A-1 CERTIFICATES AT A RATE IN EXCESS OF THE
QUARTERLY MORTGAGE CERTIFICATE PASS-THROUGH RATE.
The ratings of Moody's and S&P on mortgage pass-through certificates
address the likelihood of the receipt by holders hereof of all distributions
of principal and interest to which such holders are entitled (except as set
forth in the preceding paragraph).
Moody's and S&P's rating opinions address the structural, legal and
issuer aspects associated with the certificates, including the nature of the
underlying mortgage assets and the credit quality of the credit support
provider, if any. Moody's and S&P's ratings on pass-through certificates do
not represent any assessment of the likelihood that principal prepayments
may differ from those originally anticipated and consequently may adversely
affect the timing of such prepayments could have on an investor's
anticipated yield.
The Depositor has not requested a rating on the Certificates from any
other rating agency, although data with respect to the Mortgage Loans or the
Mortgage Certificates may have been provided to other agencies solely for
their informational purposes. There can be no assurance that if a rating is
assigned to the Class A-1 Certificates by any other rating agency, such
rating will be as high as that assigned by Moody's or S&P.
S-64
VERSION G
<PAGE>
<PAGE>
[INSERT INDEX]
S-65
VERSION G
<PAGE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus supplement shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale of
these securities in any State in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws
of any State.
SUBJECT TO COMPLETION, DATED , 19
PROSPECTUS SUPPLEMENT
(To Prospectus Dated December __ [VERSION H]
$________________ (APPROXIMATE)
ABS HOME EQUITY LOAN TRUST 199_
Home Equity Loan Asset-Backed Certificates, Series 199 -
Credit Suisse First Boston Mortgage Securities Corp.
Depositor
Each Home Equity Loan Asset-Backed Certificate, Series 199 -
(collectively, the "Certificates") will represent an undivided interest in the
ABS Home Equity Trust 199 - (the "Trust") to be formed pursuant to a Trust
Agreement among Credit Suisse First Boston Mortgage Securities Corp., as
Depositor, [ ], as Servicer, and [ ], as Trustee. The
property of the Trust will include certain home equity revolving credit line
loans (the "Mortgage Loans") secured primarily by second deeds of trust or
mortgages on residential properties that are primarily one- to four-family
properties, the collections in respect of such Mortgage Loans, and certain other
property relating to such Mortgage Loans, including the benefit of a [Letter of
Credit] [Surety Bond] as described more fully herein. The Servicer will service
the Mortgage Loans, and the Depositor initially will own the undivided interest
in the Trust not represented by the Certificates.
Interest at the [variable] rate described herein (the "Certificate
Rate") will be distributed on the [15th] day of each month, or, if such [15th]
day is not a business day, the next succeeding business day (each a
"Distribution Date"), commencing in [ ]. Principal will be distributed
on each Distribution Date commencing in [ ], or, in certain limited
circumstances, earlier, as more fully described herein.
[The Certificates initially will be represented by physical
certificates registered in the name of Cede & Co., the nominee of The Depository
Trust Company ("DTC"). The interests of the beneficial owners of the
Certificates ("Certificate Owners") will be represented by book-entries on the
records of DTC and participating members thereof. Definitive Certificates will
be available only under the limited circumstances described herein.]
There currently is no market for the Certificates offered hereby.
____________________ (the "Underwriter") intends to make a secondary market in
the Certificates but is under no obligation to do so. There can be no assurance
that a secondary market for the Certificates will develop or, if it does
develop, that it will continue.
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE
INFORMATION SET FORTH IN "RISK FACTORS" BEGINNING ON PAGE S-9 HEREIN AND ON PAGE
19 IN THE PROSPECTUS.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF THE DEPOSITOR OR ANY AFFILIATE THEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Certificates will be purchased by the Underwriter from the
Depositor and will be offered by the Underwriter from time to time to the public
in negotiated prices or otherwise at varying prices to be determined at the time
of sale. The aggregate proceeds to the Depositor from the sale of the
Certificates are expected to be $ , before deducting expenses
payable by the Depositor, estimated to be $ .
The Certificates offered hereby are offered by the Underwriter,
subject to prior sale, to withdrawal, cancellation or modification of the offer
without notice, to delivery to and acceptance by the Underwriter and certain
further conditions. It is expected that delivery of the Certificates will be
made in [book-entry form through the facilities of The Depository Trust Company]
on or about , 199 .
_________________________
CREDIT SUISSE FIRST BOSTON
_________________, 199
Until ninety days after the date of this Prospectus Supplement, all
dealers effecting transactions in the Certificates, whether or not participating
in this distribution, may be required to deliver a Prospectus Supplement and
Prospectus. This is in addition to the obligation of dealers acting as
underwriters to deliver a Prospectus Supplement and Prospectus with respect to
their unsold allotments or subscriptions.
_________________________
The Certificates offered hereby constitute part of a separate Series
of Asset-Backed Certificates and are being offered by Depositor from time to
time pursuant to its Prospectus dated ________________. This Prospectus
Supplement does not contain complete information about the offering of the
Certificates. Additional information is contained in the Prospectus and
investors are urged to read both this Prospectus Supplement and the Prospectus
in full. Sales of the Certificates may not be consummated unless the purchaser
has received both this Prospectus Supplement and the Prospectus.
C-1
<PAGE>
<PAGE>
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF THE DEPOSITOR OR ANY AFFILIATE THEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
C-2
<PAGE>
<PAGE>
The Certificates will be purchased by the Underwriter from the
Depositor and will be offered by the Underwriter from time to time to the public
in negotiated prices or otherwise at varying prices to be determined at the time
of sale. The aggregate proceeds to the Depositor from the sale of the
Certificates are expected to be $ , before deducting expenses
payable by the Depositor, estimated to be $ .
The Certificates offered hereby are offered by the Underwriter,
subject to prior sale, to withdrawal, cancellation or modification of the offer
without notice, to delivery to and acceptance by the Underwriter and certain
further conditions. It is expected that delivery of the Certificates will be
made in [book-entry form through the facilities of The Depository Trust Company]
on or about , 199 .
_________________________
CREDIT SUISSE FIRST BOSTON
_________________, 199
C-3
<PAGE>
<PAGE>
SUMMARY OF TERMS
The following summary of certain pertinent information is qualified in
its entirety by reference to the detailed information appearing elsewhere in
this Prospectus Supplement and the accompanying Prospectus. Certain capitalized
terms used herein are defined elsewhere in the Prospectus Supplement or in the
Prospectus. Reference is made to the Glossary of Terms in the Prospectus for
the definitions of certain capitalized terms.
<TABLE>
<S> <C>
Trust....................... ABS Home Equity Loan Trust (the "Trust") will be
formed pursuant to a trust agreement to be dated as
of _______________, 199 (the "Agreement") among
Credit Suisse First Boston Mortgage Securities
Corp., as Depositor (the "Depositor"), [ ],
as servicer (together with any successor in such
capacity, the "Servicer"), and [ ], as
trustee (the "Trustee"). The property of the Trust
will include certain home equity loans (the
"Mortgage Loans") purchased by the Depositor either
directly or through its affiliates in the ordinary
course of its business [from _____________, the
originator of the Mortgage Loans (the "Bank")], and
secured primarily by second deeds of trust or
mortgages (the "Mortgages") on residential
properties that are primarily one- to four-family
properties (the "Mortgaged Properties"), the
collections in respect of such Mortgage Loans, the
Mortgages on the properties securing the Mortgage
Loans, including any properties acquired by
foreclosure or deed in lieu of foreclosure or
otherwise, the benefits of the [Letter of Credit]
[Surety Bond], rights under certain hazard
insurance policies covering the Mortgaged
Properties, and certain other property relating to
the Mortgage Loans, as described more fully herein.
The Trust property will include the principal
balances (the "Loan Balances") of the Mortgage
Loans upon their transfer to the Trust and any
additions to such Loan Balances due to new draws by
the borrowers ("Additional Balances") funded by the
[Bank] [Servicer] [Seller] [Depositor] under the
home equity lines of credit (the "HELOCs") relating
to the Mortgage Loans during the life of the Trust.
See "THE HELOCs" herein and "THE TRUST FUND" in the
Prospectus.
Securities Offered.......... Each of the Trust's Home Equity Loan Asset-Backed
Certificates offered hereby (the "Certificates")
represents an undivided interest in the Trust.
Each Certificate represents the right to receive
payments of interest at the [variable] rate
described below (the "Certificate Rate"), payable
monthly, and monthly payments of principal during
the Amortization Period, as defined herein, funded
from a percentage of the payments received with
respect to the Mortgage Loans or, in certain
circumstances, from draws on the [Letter of Credit]
[Surety Bond.] The aggregate undivided interest
(the "Investor Interest") in the Trust represented
by the Certificates will initially represent $
of principal (the
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initial "Certificate Principal Balance"), which
will decline as principal is paid to the
Certificateholders during the Amortization Period,
except as otherwise provided herein. The Depositor
initially will hold the remaining undivided
interest (the "Depositor Interest") in the Trust
not represented by the Certificates. The
Certificates will be issued pursuant to the
Agreement. See "DESCRIPTION OF THE CERTIFICATES"
herein and in the Prospectus.
The Mortgage Loans.......... The Mortgage Loans arise under HELOCs and are
secured by deeds of trust or mortgages (which are
primarily second deeds of trust or mortgages) on
residential properties located primarily in [ ]
that are primarily one- to four-family
residential properties. As of ____________, 199
(the "Cut-off Date) the aggregate of the Loan
Balances of the Mortgage Loans was $ (the
"Cut-off Date Pool Balance"), of which
approximately % of the Mortgage Loans are
secured by properties located in [ ].
The remaining Mortgage Loans are secured by
properties located in states, with no single
state accounting for more than % of the Cut-
off Date Pool Balance. The combined loan-to-value
ratio of a Mortgage Loan, computed at the maximum
amount the borrower was permitted to draw down
under the HELOC (the "Credit Limit") and taking
into account the amounts of any related senior
mortgage loans (the "Combined Loan-to-Value
Ratio"), based upon a valuation (as described under
"THE HOME EQUITY LENDING PROGRAM") of the Mortgaged
Property obtained by the Bank at the time of
execution of the loan agreement governing such Home
Equity Credit Line, generally did not exceed %,
subject to exceptions deemed appropriate by the
Depositor. The weighted average Combined Loan-to-
Value Ratio of the Mortgage Loans, as described
under "THE HELOCs," was approximately % as of
the Cut-off Date. See "THE HOME EQUITY LENDING
PROGRAM -- Underwriting Procedures Relating to
HELOCs" herein.
Interest on each Mortgage Loan is payable monthly
and computed on the average daily outstanding Loan
Balance for each billing cycle at a variable rate
per annum (the "Loan Rate") equal at any time
(subject to minimum and maximum rates, as described
herein under "THE HOME EQUITY LENDING PROGRAM --
HELOC Terms," and further subject to applicable
usury limitations) to the sum of (i) the [prime
rate published in the "Money Rates" section of the
Wall Street Journal on the ___ calendar day of each
month (or, if no rate is published on the ___, then
on the next succeeding calendar day on which a
prime rate is published)] and (ii) a margin,
currently %. See "THE HELOCS" herein and
"CERTAIN LEGAL ASPECTS OF THE
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MORTGAGE LOANS AND CONTRACTS - The Contracts
-- Applicability of Usury Laws" in the Prospectus.
Principal amounts may be drawn down by the
borrower under the HELOC from time to time,
subject to the borrower's Credit Limit. A
borrower may repay principal at any time. The
Cut-off Date Loan Balances of the Mortgage Loans
ranged from $0.00 to $ and averaged $ .
Credit Limits under the HELOCs as of the Cut-off
Date ranged from approximately $ to $
and averaged $ . Each HELOC was originated
in the period from _____ to __________, 199 , and,
as of the Cut-off Date, the weighted average loan
utilization rate was approximately %. See
"THE HOME EQUITY LENDING PROGRAM" and "THE HELOCS"
herein.
During the term of the Trust, all Additional
Balances will be property of the Trust. The
aggregate amount of the Loan Balances at any time
(the "Pool Balance") will fluctuate from day to day
because the amount of draws by borrowers and the
amount of principal payments will usually differ on
each day. Because the Depositor Interest
represents the interest in the Trust not
represented by the Certificates, the amount of the
Depositor Interest will fluctuate from day to day
as draws are made and principal is paid under the
Mortgage Loans.
The aggregate undivided interest in the Loan
Balances in the Trust evidenced by the Certificates
will never exceed the Certificate Principal Balance
regardless of the amount of the Pool Balance at any
time.
Denominations............... The Certificates will be offered for purchase in
denominations of [$1,000] and integral multiples
thereof. The interest evidenced by a Certificate
in the Certificateholders' undivided interest in
the Trust (the "Percentage Interest") will be equal
to the percentage derived by dividing the
denomination of such Certificate by the Initial
Certificate Principal Balance.
Registration of
Certificates................ [The Certificates will initially be represented by
physical certificates registered in the name of
Cede & Co. ("Cede"), as the nominee of The
Depository Trust Company ("DTC"). No person
acquiring a beneficial ownership interest in the
Certificates (a "Certificate Owner") will be
entitled to receive a definitive certificate
representing such person's interest, except in the
event that Definitive Certificates are issued under
the limited circumstances described herein. All
references herein to Certificateholders shall refer
to Certificate Owners, except as otherwise
specified herein. See "Description of the
Certificates -- Registration of Certificates."]
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Depositor................... Credit Suisse First Boston Mortgage Securities
Corp. The principal executive offices of the
Depositor are located at 11 Madison Avenue, New
York, New York 10010 (telephone (212) 325-2000).
See "THE DEPOSITOR" in the Prospectus.
Servicer.................... The Servicer of the Mortgage Loans will be [the
Bank] [ ] (the "Servicer"). The principal
executive offices of the Servicer are located at
_____________ (telephone (___) __________). See
"SERVICING OF MORTGAGE LOANS -- The Servicer"
herein.
Collections................. All collections on the Mortgage Loans will be
allocated by the Servicer in accordance with the
Loan Agreements between amounts collected in
respect of interest ("Interest Collections") and
amounts collected in respect of principal
("Principal Collections"). All such amounts will
then be allocated in accordance with the respective
interests of the Certificateholders and the
Depositor in such Interest Collections and
Principal Collections. The Servicer will generally
deposit net collections on the Mortgage Loans
allocable to the Investor Interest and
distributable to the Certificateholders in an
account established for such purpose under the
Agreement (the "Collection Account"). See
"DESCRIPTION OF THE CERTIFICATES -- Payments on
Mortgage Loans; Deposits to Collection Account"
herein and "DESCRIPTION OF THE CERTIFICATES --
Payments on Mortgage Loans" in the Prospectus.
Interest.................... Interest will be distributed monthly on the ___ day
of each month or, if such day is not a business
day, on the next succeeding business day (each, a
"Distribution Date"), commencing in ________, at
the Certificate Rate for the related Interest
Period (as defined below). The Certificate Rate
for a Distribution Date will equal [the arithmetic
mean of London Interbank offered quotations for
one-month Eurodollar deposits ("LIBOR") determined
as specified herein, as of the second London
business day prior to the immediately preceding
Distribution Date (or as of ___________, 199_, in
the case of the first Distribution Date) plus _____
basis points, subject to a maximum rate described
under "DESCRIPTION OF THE CERTIFICATES --
Distributions on the Certificates" herein] [___%
per annum]. Interest on the Certificates in
respect of any Distribution Date will accrue from
the preceding Distribution Date (or in the case of
the first Distribution Date, from the date of the
initial issuance of the Certificates (the "Closing
Date")) through the day preceding such Distribution
Date (each such period, an "Interest Period") on
the basis of the [actual number of days in the
Interest Period and a 360-day year]. Interest
payments
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will be funded from the portion of the
Interest Collections collected during the
immediately preceding calendar month (or, in the
case of the initial Distribution Date, the period
from __________, 199_ through the last day of the
calendar month immediately preceding such
Distribution Date) (the "Collection Period")
allocable to the Investor Interest and, if
necessary, from draws on the [Letter of Credit]
[Surety Bond]. See "DESCRIPTION OF THE
CERTIFICATES" herein and "RISK FACTORS --
Limitations, Reduction and Substitution of Credit
Support" in the Prospectus.
Revolving Period............ In order to maintain the Certificate Principal
Balance at $___________ (except in certain limited
circumstances) for a period of approximately
______________ months from the first day of the
month in which the Certificates are issued or for
such shorter period as may result from the
occurrence of an Early Amortization Event, as
described herein (the "Revolving Period"),
Principal Collections allocable to the Investor
Interest will be paid to the Depositor rather than
the Certificateholders so that the
Certificateholders maintain the same Investor
Interest in the Trust. Unless earlier terminated
by the occurrence of an Early Amortization Event,
the Revolving Period will end on _________. See
"DESCRIPTION OF THE CERTIFICATES" herein.
Principal Payments;
Amortization Period......... Unless an Early Amortization Event shall have
earlier occurred, during the period beginning
____________ and ending when the Certificate
Principal Balance has been reduced to zero or when
the Trust otherwise terminates (the "Amortization
Period"), Principal Collections allocated to the
Investor Interest will no longer be paid to the
Depositor but instead will be distributed monthly
to the Certificateholders as provided herein on
each Distribution Date beginning with the
Distribution Date in the month following the month
in which the Amortization Period commences. See
"DESCRIPTION OF THE CERTIFICATES -- Early
Amortization Events" herein for a discussion of the
events which might lead to the early commencement
of the Amortization Period. During the
Amortization Period, the amount of Principal
Collections allocable to the Investor Interest (the
"Principal Allocation") will equal the ratio of the
Certificate Principal Balance to the Pool Balance,
in each case as of the end of the last day of the
Revolving Period (the "Investor Percentage" for
such period) multiplied by the Principal
Collections received during the related Collection
Period.
Allocations based upon the Investor Percentage
during the Amortization Period may result in
distributions of principal with respect to any
Collection Period to Certificate- holders in
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amounts that are greater relative to the declining
balance of the Certificate Principal Balance than
would be the case if no fixed Investor Percentage
were used to determine the percentage of Principal
Collections distributed in respect of the Investor
Interest. See "DESCRIPTION OF THE CERTIFICATES --
Payments on Mortgage Loans; Deposits to Collection
Account" herein.
[Letter of Credit]
[Surety Bond]
Issuer.................... ______________ (the "[Letter of Credit] [Surety
Bond] Issuer"). See "THE [LETTER OF CREDIT]
[SURETY] BOND ISSUER" herein.
[Letter of Credit]
[Surety Bond].............. On the Closing Date, the [Letter of Credit] [Surety
Bond] Issuer will issue a [letter of credit]
[surety bond] (the "[Letter of Credit] [Surety
Bond]") in favor of the Trustee on behalf of the
Trust. In the event that, on any Distribution
Date, available amounts on deposit in the
Collection Account with respect to the preceding
Collection Period are insufficient to provide for
the payment of the amount required to be
distributed to the Certificateholders and the
Servicer on such Distribution Date, the Trustee
will draw on the [Letter of Credit] [Surety Bond],
to the extent of the [Letter of Credit] [Surety
Bond] Amount for such Distribution Date, in an
amount equal to such deficiency. On each
Distribution Date, any amounts remaining in the
Collection Account with respect to the preceding
Collection Period, after all other distributions
have been made as described above, will be
distributed to the [Letter of Credit] [Surety Bond]
Issuer. See "DESCRIPTION OF THE CERTIFICATES --
The [Letter of Credit] [Surety Bond]" and "--
Distributions on the Certificates" herein and "RISK
FACTORS Limitations, Reduction and Substitution of
Credit Support" and "CREDIT SUPPORT" in the
Prospectus.
[Letter of Credit]
[Surety Bond]
Amount..................... The amount available under the [Letter of Credit]
[Surety Bond] (the "[Letter of Credit] [Surety
Bond] Amount") for the initial Distribution Date
will be $__________. For each Distribution Date
thereafter, the [Letter of Credit] [Surety Bond]
Amount will equal the lesser of (i) ____% of the
Pool Balance as of the first day of the preceding
Collection Period (after giving effect to any
amounts distributed with respect to principal of
the Mortgage Loans on the Distribution Date
occurring in such preceding Collection Period) and
(ii) the [Letter of Credit] [Surety Bond] Amount as
of the first day of the preceding Collection
Period, minus any amounts drawn
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under the [Letter of Credit] [Surety Bond] during
such preceding Collection Period, plus any amounts
----
paid to the [Letter of Credit] [Surety Bond] Issuer
on the Distribution Date occurring in such
preceding Collection Period up to the amount of any
previous draws on the [Letter of Credit] [Surety
Bond].
Record Date................. The last day [of the month] preceding a
Distribution Date.
Servicing................... The Servicer will be responsible for servicing,
managing and making collections on the Mortgage
Loans. The Servicer will deposit collections
allocable to the Investor Interest into the
Collection Account as described herein. On the
_______ business day, but no later than the _______
calendar day, of each month (the "Determination
Date"), the Servicer will calculate, and instruct
the Trustee regarding, the amounts to be paid, as
described herein, with respect to the related
Collection Period to the Certificateholders. See
"DESCRIPTION OF THE CERTIFICATES -- Distributions
on the Certificates" herein. The Servicer will
receive a monthly servicing fee in the amount of
___% per annum (the "Servicing Fee Rate"), of the
related Pool Balance and certain other amounts, as
servicing compensation from the Trust. See
"SERVICING OF MORTGAGE LOANS -- Servicing
Compensation and Payment of Expenses" herein. In
certain limited circumstances, the Servicer may
resign or be removed, in which event either the
Trustee or a third-party servicer will be appointed
as successor Servicer. See "SERVICING OF THE LOANS
-- Certain Matters Regarding the Servicer" and "THE
TRUST AGREEMENT -- Events of Default" and "--Rights
Upon Events of Default" in the Prospectus.
Final Payment of
Principal;
Termination................. The Trust will terminate on the Distribution Date
following the earlier of (i) the reduction of the
Certificate Principal Balance to zero and after
which there is no unreimbursed Certificate
Principal Balance Loss Deduction Amount and (ii)
the final payment or other liquidation of the last
Mortgage Loan in the Trust. The Investor Interest
will be subject to optional retransfer to the
Depositor on any Distribution Date after the
Certificate Principal Balance is reduced to an
amount less than or equal to $____________ ([5]% of
the initial Certificate Principal Balance). The
retransfer price will be equal to the sum of the
outstanding Certificate Principal Balance and
accrued and unpaid interest thereon at the
Certificate Rate through the day preceding the
final Distribution Date. See "DESCRIPTION OF THE
CERTIFICATES -- Optional Termination" herein and
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"DESCRIPTION OF THE CERTIFICATES -- Termination" in
the Prospectus.
Trustee..................... [______________] (the "Trustee") will act as
Trustee on behalf of the Certificateholders.
Mandatory Retransfer
of Certain Mortgage
Loans and Private
Securities.................. The Depositor will make certain representations and
warranties in the Agreement with respect to the
Mortgage Loans in its capacity as Depositor. If
the Depositor breaches certain of its
representations and warranties with respect to any
Mortgage Loan and such breach, materially and
adverse affects the interests of the Trust, the
Certificateholders or the [Letter of Credit]
[Surety Bond] Issuer and is not cured within the
specified period, the Mortgage Loan will be removed
from the Trust after the expiration of a specified
period from the date on which the Depositor becomes
aware or receives notices of such breach and will
be reassigned to the Depositor. See "DESCRIPTION
OF THE CERTIFICATES -- Assignment of Mortgage
Loans" herein.
Federal Tax
Considerations.............. [Special tax counsel to the Depositor is of the
opinion that, under existing law, the Certificates
are properly characterized as debt of the Depositor
for federal income tax purposes. Under the
Agreement, the Depositor and the Certificateholders
will agree to treat the Certificates as
indebtedness of the Depositor for federal, state
and local income and franchise tax purpose. See
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES" in the
Prospectus for additional information concerning
the applicable federal income tax laws.]
ERISA Considerations........ A fiduciary of any employee benefit plan subject to
the Employee Retirement Income Security Act of
1974; as amended ("ERISA"), or the Code should
carefully review with its legal advisors whether
the purchase or holding of Certificates could give
rise to a transaction prohibited or not otherwise
permissible under ERISA or the Code. See "ERISA
CONSIDERATIONS" in the Prospectus.
Certificate Rating.......... It is a condition to the issuance of the
Certificates that they be rated in the [ ]
highest rating category by at least one nationally
recognized statistical rating organization (the
"Rating Agency"). See "RATING" herein.
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RISK FACTORS
Investors should consider, among other things, the following factors in
connection with the purchase of the Certificates.
[Delinquent Mortgage Loans. The Trust will include Mortgage Loans
which are days or fewer delinquent. As of the Cut-off Date, the aggregate
Loan Balance of such delinquent Mortgage Loan was $ . [In addition, the
Mortgage Loans in all likelihood include obligations of borrowers who are or are
about to become bankrupt or insolvent.] If there are not sufficient funds from
Interest Collections allocated to the Investor Interest to cover the Liquidation
Loss Amount for any Collection Period and the [Letter of Credit] [Surety Bond]
Amount has been reduced to zero, the Certificate Principal Balance will be
reduced which (unless otherwise later reimbursed) would result in a reduction in
the aggregate amount of principal returned to the Certificateholders and in the
amount of Interest Collections allocable to the Investor Interest and available
to provide protection against defaults in subsequent Collection Periods.]
Prepayment Considerations. All of the Mortgage Loans may be prepaid in
whole or in part at any time without penalty. Home equity loans, such as the
Mortgage Loans, have been originated in significant volume only during the past
few years and neither the Depositor nor the Servicer is aware of any publicly
available studies or statistics on the rate of prepayment of such loans.
Generally, home equity loan are not viewed by borrowers as permanent financing.
Accordingly, the Mortgage Loans may experience a higher rate of prepayment than
traditional loans. The Trust's prepayment experience may be affected by a wide
variety of factors, including generally economic condition, interest rates, the
availability of alternative financing and homeowner mobility. In addition,
substantially all of the Mortgage Loans contain due-on-sale provisions and the
Servicer intends to enforce such provisions unless (i) such enforcement is not
permitted by applicable law or (ii) the Servicer, in a manner consistent with
reasonable commercial practice, permits the purchaser of the related Mortgaged
Property to assume the Mortgage Loans. To the extent permitted by applicable
law, such assumption will not relates the original borrower from its obligation
under any such Mortgage Loan.
[Servicer's Ability to Change the Terms of the HELOCs. The Servicer
may permit an increase in the Credit Limit under a HELOC if the new Credit Limit
under the HELOC, plus the outstanding principal balance of any related senior
loans, does not exceed (i) ___% (___% for a condominium, townhouse, duplex, or
vacation condo/house), if the market value of the Mortgaged Property is
$__________ or less, or ___% (___% for a condominium, townhouse, duplex, or
vacation condo/house), and if the market value of the Mortgaged Property exceeds
$_________, based upon an appraisal or the tax assessed value of the Mortgaged
Property at the time the increase was requested. An increase in the Credit
Limit under a HELOC in accordance with the previous sentence may be made without
the consent of the Trustee. Additional Balances arising under a Mortgage Loan
as a result of an increase in the Credit Limit will be treated the same as
Additional Balances arising under a Mortgage Loan for which there has been no
increase in the Credit Limit. In addition to such changes, the Servicer may
agree to other changes in the terms of a Loan Agreement, provided that such
changes (i) do not materially adversely affect the interest of the
Certificateholders, (ii) are consistent with prudent business practice, (iii)
are also being applied to the comparable segment of home equity credit lines
being held for the Servicer's own account, and (iv) do not change the terms of
the HELOC so as to change the terms for the amortization of principal. There
can be no assurance that changes in applicable law or the marketplace for home
equity loans or prudent business practice will not result in changes in the
terms of the Loan Agreements. The Servicer may also extend the period during
which draws under the HELOCs may be made.]
Legal Considerations. The Mortgage Loans are secured by deeds of trust
or mortgages (which generally are second deeds of trust or mortgages). With
respect to Mortgage Loans that are secured by first mortgages, the Servicer has
the power under certain circumstances to consent to a new mortgage lien on the
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Mortgaged Property having priority over such Mortgage Loan. Mortgage Loans
secured by second mortgages are entitled to proceeds that remain from the sale
of the related Mortgage Property after any related senior mortgage loan and
prior statutory liens have been satisfied. In the event that such proceeds are
insufficient to satisfy such loans and prior liens in the aggregate [and the
[Letter of Credit] [Surety Bond] provider is unable to perform its obligations
under the [Letter of Credit] [Surety Bond] is exhausted] the Trust and,
accordingly, the Holders, bear (i) the risk of delay in distributions while a
deficiency judgment against the borrower is obtained and (ii) the risk of loss
if the deficiency judgment cannot be obtained or is not realized upon. See
"CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND CONTRACTS" in the Prospectus.
In the event of a bankruptcy or insolvency of the Servicer, the
bankruptcy trustee or receiver may have the power to prevent the Trustee or the
Holders from appointing a successor Servicer.
Book-Entry Securities. Issuance of the Certificates in book-entry form
may reduce the liquidity of such Certificates in the secondary trading market
since investors may be unwilling to purchase Certificates for which they cannot
obtain physical securities.
Since transactions in the Certificates can be effected only through
DTC, participating organizations, indirect participants and certain banks, the
ability of a Certificate Owner to pledge a Certificate to persons or entitles
that do not participate in the DTC, system or otherwise to take actions in
respect of such Certificates, may be limited due to lack of a physical security
representing the Certificates.
Certificate Owners may experience some delay in their receipt of
distributions of interest and principal on the Certificates since such
distributions will be forwarded by the Trustee to DTC and DTC will credit such
distributions to the accounts of its Participants (as defined herein) which will
thereafter credit them to the accounts of Certificate Owners either directly or
indirectly through indirect participants. See "DESCRIPTION OF THE CERTIFICATES-
- - Registration of Certificates" herein
[Taxation. In the opinion of special tax counsel to the Depositor, the
Certificates are properly characterized as debt of the Depositor for Federal
income tax purposes. If the IRS were to contend successfully that the
Certificates were not debt obligations of the Depositor for Federal income tax
purposes, the arrangement among the Depositor and the Certificateholders might
be classified for Federal income tax purposes as either a partnership or an
association taxable as a corporation that owns the Mortgage Loans. See "CERTAIN
FEDERAL INCOME TAX CONSIDERATIONS" in the Prospectus.]
Certificate Rating. The rating of the Certificates will depend
primarily on assessment by the Rating Agencies of the Mortgage Loans [and upon
the claims-paying ability of the [Letter of Credit] [Surety Bond] provider].
[Any reduction in a rating assigned to the claims-paying ability of the [Letter
of Credit] [Surety Bond] provider below the rating initially given to the
Certificates may result in a reduction in the rating of the Certificates.] The
rating by the Rating Agencies of the Certificates is not a recommendation to
purchase, hold or sell the Certificates, inasmuch as such rating does not
comment as to the market price or suitability for a particular investor. There
is no assurance that the ratings will remain in place for any given period of
time or the ratings will not be lowered or withdrawn by the Rating Agencies. In
general, the ratings address credit risk and do not address the likelihood of
prepayments.
THE [LETTER OF CREDIT] [SURETY BOND] ISSUER
The following information with respect to ____________ ("___________")
has been furnished by ____________________.
[DESCRIPTION OF LC/SURETY ISSUER]
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THE HOME EQUITY LENDING PROGRAM
GENERAL
THE HELOCs were originated by ______________ (the "Bank") under its
home equity lending program. The Bank has offered variable-rate home equity
revolving credit lines since ______________. As of _________, __, the Bank
owned approximately $ million aggregate principal amount of outstanding
loans originated in the State of _______________ under home equity credit lines
(the "Bank's Portfolio").
UNDERWRITING PROCEDURES RELATING TO HELOCS
[Each revolving home equity line of credit is originated after a review
by the Bank in accordance with its established underwriting procedures, which
are intended to assess the applicant's ability to assume and repay such home
equity lines of credit and the adequacy of the real property which serves as
collateral for such home equity lines of credit. The maximum home equity line
of credit provided by the Bank is $_______.
Each applicant for a home equity line of credit is required to complete
an application which lists the applicant's assets, liabilities, income, credit
and employment history and other demographic and personal information. If
information in the loan application demonstrates that there is sufficient income
and equity to justify making a home equity line of credit, the Bank will conduct
a further credit investigation of the applicant. This investigation includes
(i) obtaining and reviewing an independent credit bureau report on the credit
history of the borrower in order to evaluate the borrower's ability to repay;
(ii) obtaining a verification of employment from the applicant's employer; (iii)
obtaining and reviewing pay stubs, income tax returns and/or W-2 forms in order
to verify the applicant's income; and (iv) in the case of all home equity lines
of credit originated with a Credit Limit in excess of $_________ or with any
Credit Limit, if originated after __________, obtaining a drive-by appraised
value (a "Drive-By Appraised Value") of the property to be mortgaged through an
independent frontal exterior inspection and neighborhood observation (a "Drive-
By Appraisal") of the property or, in the case of home equity lines of credit
originated prior to _________ in an amount of $_______ or less, making an
estimate of the value (the "Estimated Value") of the property to be mortgaged
through, (a) in the case of home equity lines of credit originated for such
properties located in the State of __________, the use of a formula that assumed
that the then current value of the property was equal to the amount the
applicant paid for the property together with appreciation of __% of the
purchase price for each year since the applicant purchased the property and (b)
in the case of home equity lines of credit originated for such properties
located in ___________, a property tax bill which reflected a 100% assessment on
the property.
Although no complete title search of the property to be mortgaged is
required, a bring-down to the date of origination of the home equity lines of
credit of the complete title search obtained by the borrower at the time of his
original purchase of the mortgaged property must be delivered.
The Bank calculates the maximum amount of the loan that the customer
may obtain by taking ___% (or, in the case of home equity lines of credit
originated prior to _______, __%) of the Drive-By Appraised Value or Estimated
Value, as the case may be, of the property and subtracting any outstanding
senior mortgage balance. Financial insurance premiums and fees are not
considered in the loan amount when making such computation.
Applications for loans exceeding the maximum amount calculated in the
preceding paragraph require regional manager approval. Overrides of other
criteria may be authorized by branch managers up to their lending limits. Among
the reasons that the Bank grants overrides are the existence of compensating
balances of the borrower in accounts held by the Bank (which balances will not
necessarily be available in the event of a default or
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delinquency of any HELOC in the Pool) and relationships between the borrower and
the trust department of the Bank.
No information is available with respect to the portion of the home
equity lines of credit in the Bank's Portfolio as to which overrides of
underwriting criteria were granted.]
HELOC TERMS
[A borrower may access a home equity line of credit by writing a check
supplied by the Bank or through a check overdraft facility. On home equity
lines of credit originated prior to __________, __ in ______________ __, there
is no automatic termination of the draw-down period so long as the borrower is
not in default under the loan agreement. On all home equity lines of credit
originated in __________, and on home equity lines of credit originated after
_________, __ in __________ __, there is a ___ year draw down period on the
lines as long as the borrower is not in default under the loan agreement. Home
equity lines of credit bear interest at a variable rate which may change
monthly. Home equity lines of credit are subject to a maximum per annum
interest rate of ___ percentage points and to applicable usury limitations. See
"CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND CONTRACTS -- The Contracts --
Applicability of Usury Laws" in the Prospectus. The monthly periodic rate on
the home equity revolving lines of credit is 1/12th of the annual percentage
rate (the "Loan Rate"), which is the sum of the Index Rate plus a spread (the
"Margin") of predominantly _____%.
Interest on a home equity line of credit is calculated at the Loan Rate
applied to the daily balance of the account for each day of the billing cycle.
A borrower is required to pay each month the amount of interest accrued on the
line during the previous month. There are no minimum principal payment
requirements for home equity lines of credit originated prior to _________, __
in __________. For all lines of credit originated in ________________ and lines
of credit originated after ____________, __ in ____________, principal
repayments vary depending on the option selected by the borrower. A borrower
who selects an "interest only" option has no minimum principal payment during
the first ten year draw period and thereafter has a minimum monthly principal
payment during the ten years following the draw period of 1/120th of the
principal amount outstanding on the last day of the ten year draw period. A
borrower who selects a "principal and interest" option has a minimum monthly
principal payment during the first ten year draw period of 1/200th of the
principal amount outstanding on the last day of the applicable billing cycle and
thereafter has a minimum monthly payment of 1/120th of the principal amount
outstanding on the last day of the draw period. Billing statements are mailed
monthly. The statement details all debits and credits and specifies the minimum
payment due and the available credit line. All payments are due ___ days after
the billing statement is issued.
The "Index Rate" is based on the "prime rate" published in the "Money
Rates" section of The Wall Street Journal on the applicable billing date for
-----------------------
each HELOC (or if such day is not a banking day in _________ or _______, on the
banking day immediately preceding such day), with charges becoming effective on
the first day of the next billing cycle.
If more than one prime rate is published, then the highest rate
published will be used. The Loan Agreements further provide that if publication
of the Index Rate is discontinued, the Bank will change the Index Rate upon
notification in accordance with such Loan Agreements. Except for any
amortization of principal which may occur as a result of the required monthly
minimum payments, there are no required payments of principal.
The Bank also offers a "fixed rate" loan option whereby a borrower may
repay all or a portion of the outstanding loan balance, in excess of $______, at
a fixed rate. If a borrower selects a "fixed rate" option the amount converted
will be treated as a principal payment on the line of credit and the available
line of credit will be reduced by the "fixed rate" option amount.
S-12
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<PAGE>
<PAGE>
The Bank has the right under each HELOC originated prior to
_____________, with 30 days prior written notice of the amendment or longer
notice period if applicable in accordance with Federal and applicable
___________ law, to change any of its terms, including increasing the monthly
periodic rate or changing the Index Rate at any time. Unless otherwise
indicated in the notice, all such changes will apply to both new and outstanding
balances. For home equity lines of credit originated after __________, __, the
Bank may make changes preapproved by each individual obligor and changes that
are considered immaterial. Notwithstanding the foregoing, no change shall be
made to the terms of the HELOCs after ___________, __ unless, in connection with
such change, the Depositor delivers to the Trustee an opinion of counsel stating
that such change will not cause the Trust, or the arrangement by which the
Certificates are issued, to be classified as a taxable mortgage pool within the
meaning of Section 7701(i) of the Internal Revenue Code of 1986, as amended.
The Bank has the right to suspend or terminate the right to obtain
additional credit, or to require the borrower to pay the entire balance due plus
all other accrued but unpaid charges immediately, if the borrower fails to make
any required payment by the due date, if the borrower's original loan
application was fraudulent or contained a material misrepresentation or if the
borrower sells or transfers the mortgaged property or acts in any way which
adversely affects the lien of the mortgage or the maintenance of the property.
The Bank has the right to suspend the right to obtain additional credit or to
reduce a borrower's credit limit, if the value of the mortgaged property
declines significantly below its appraised value, if the Bank reasonably
believes the borrower will be unable to repay the line due to a material
financial change, if the borrower is in default under the loan agreement, if
government action either impairs the Bank's security interest or prevents it
from imposing the annual percentage rate, if a regulatory agency has notified
the Bank that continued advances would institute a unsafe and unsound practice
or if the maximum annual percentage is reached.]
SERVICING OF THE MORTGAGE LOANS
THE SERVICER
[The Servicer is a _____________________ [which is wholly owned by
___________________.
The Servicer conducts a general banking business throughout the
____________, and, with its subsidiaries, offers a broad array of commercial and
retail loan and deposit products and services, mortgage banking and brokerage
and investment services. At ____________, the Servicer had total assets of
approximately $____________ billion and total deposits of approximately
$_________ billion.
The principal executive offices of the Servicer are located at
_________________ (telephone (___) ___-____.]
SERVICING OF HELOCS
[Centralized controls and standards have been established by the
Servicer for the servicing and collection of home equity lines of credit.
Servicing includes, but is not limited to, post-origination loan processing,
customer service, remittance processing, collections and liquidations.
The collection process is initiated ten days after the payment due date
with the computer generation of a late notice. To make payment arrangements, a
collector attempts to contact the borrower when the home equity line of credit
is 15 to 30 days past due.
S-13
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<PAGE>
<PAGE>
During the period when an account is 45 to 60 days past due, a credit
bureau report is obtained, homeowner's insurance is verified, the status of
senior mortgages and property taxes is checked and a title search and "drive-by"
appraisal are ordered.
If arrangements have not been made to cure the delinquency within 61
days of the line becoming past due, drawing privileges are canceled. The line
is referred to outside counsel and is placed on a "non-accrual" status after 90
days of delinquency. All legal expenses are assessed to the account and become
the responsibility of the borrower. When it is determined by the Servicer that
there is no possibility of recovery from the mortgaged property or from other
leviable assets or wage attachments, the line is charged-off.
Reinstatement arrangements can be made up until the point of sale. Any
foreclosures initiated on a junior mortgage are subject to the senior mortgage
or mortgages and any outstanding property taxes. If the Servicer purchases the
property through the foreclosure action, the account is transferred to the
Servicer's REO Department which is maintained at _________. The REO Department
is responsible for maintaining and marketing the property.
The Servicer may not foreclose on the property securing a junior
mortgage loan unless the Servicer forecloses subject to any senior mortgages, in
which case the Servicer may pay the entire amount due on the senior mortgage to
the senior mortgagees at or prior to the foreclosure sale. If a senior mortgage
is in default after the Servicer has initiated its foreclosure action, the
Servicer may advance funds to keep senior mortgages current until such time as
the Servicer satisfies such senior mortgages. In the event that foreclosure
proceedings have been instituted on a senior mortgage prior to the initiation of
the Servicer's foreclosure action, the Servicer may either satisfy the senior
mortgage at the time of the foreclosure sale or take other action to protect the
Trust's interest in the related property.]
DELINQUENCY AND LOSS EXPERIENCE OF THE SERVICER'S PORTFOLIO
The following tables set forth the delinquency and loss experience for
each of the periods shown for the Servicer's portfolio of home equity lines of
credit. The Servicer believes that there have been no material trends or
anomalies in the historical delinquency and loss experience as represented in
the following tables. The information in the tables below has not been adjusted
to eliminate the effect of the growth in the size of the Servicer's portfolio
during the periods shown. Accordingly, loss and delinquency as percentages of
aggregate principal balance of such loans for each period may be higher than
those shown if a group of such loans were artificially isolated at a point in
time and the information showed the activity only in that isolated group. The
data presented in the following tables are for illustrative purposes only, and
there is no assurance that the delinquency and loss experience of the HELOCs
will be similar to that set forth below.
S-14
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<PAGE>
<PAGE>
<TABLE>
<CAPTION>
DELINQUENCY EXPERIENCE (Dollars in Thousands)
As of As of December 31,
__________, 1995(1)
- ------------------------------------------------------------------------
1994 1993 1992
----------------------------- ------------------------- ----------------------- ----------------------
Number of Amount Number of Amount Number Amount Number
Amount
Loans Loans of Loans of Loans
- ---------- ------------- --------- ----------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Portfolio Principal $ $ $
$
Outstanding at
Period End...............
Delinquency(1) $ $ $
$
30-59 Days...............
60-89 Days...............
90 or More Days(2)....... _____ _____ _____ _____ _____ _____ _____
Total Delinquencies........ $ $ $
Total Delinquencies % % % % % % %
as a Percentage
of the Portfolio
at Period End............
</TABLE>
- ---------------------------
(1) The period of delinquency is based on the number of days payments are
contractually past due for all loans other than mortgage loans previously
charged off.
(2) Includes mortgage loans in foreclosure and not charged off
<TABLE>
<CAPTION>
LOSS EXPERIENCE (Dollars in Thousands)
As of As of December 31,
__________, 1995(1)
- ------------------------------------------------------------------------
1994 1993 1992
----------------------------- ------------------------- ----------------------- ----------------------
Number of Amount Number of Amount Number Amount Number
Amount
Loans Loans of Loans of Loans
- ---------- ------------- --------- ----------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Portfolio Principal $ $ $
Outstanding at
Period End...............
Gross Losses............... $ $ $
Recoveries................. $ $ $
Net Losses................. $ $ $
Net Losses as a $ $ $
Percentage of
Portfolio at
Period End...............
</TABLE>
- ---------------------------
(1) Net Losses equal total principal charged off less recoveries. The customary
policy of the Bank is to charge off mortgage loans in full that are 120
days past due unless foreclosure proceedings are planned or there are
indications that the account will be brought current. An account that is
not charged off because there are indications that payment is imminent
generally will be charged off after an additional 60 to 90 days if such
payment is not forthcoming.
(2) This percentage represents the ___-month period ended ___________, 1995
annualized and is not necessarily indicative of the results which may occur
for the full year.
S-15
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<PAGE>
<PAGE>
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicing compensation to be paid to the Servicer in respect of its
servicing activities relating to the Mortgage Loans will be paid to it from
Interest Collections at the time such collections are received or from amounts
drawn on the [Letter of Credit] [Surety Bond] and will be equal to ___% per
annum, (the "Servicing Fee Rate") of the Pool Balance. The Investor Percentage
of such servicing fee (the "Investor Servicing Fee") will be paid as described
under "DESCRIPTION OF THE CERTIFICATES -- Distributions on the Certificates --
Distribution of Interest Collections and Draw Amounts" herein. All assumption
fees, late payment charges and other fees and charges, to the extent collected
from borrowers, will be retained by the Servicer as additional servicing
compensation.
[The Servicer will pay certain ongoing expenses associated with the
Trust and incurred by it in connection with its responsibilities under the
Agreement, including, without limitation, payment of the fees and disbursements
of the Trustee, any custodian appointed by the Trustee, the Certificate
Registrar and any paying agent.] In addition, the Servicer will be entitled to
reimbursement for certain expenses incurred by it in connection with defaulted
Mortgage Loans and in connection with the restoration of Mortgaged Properties,
such right of reimbursement being prior to the rights of Certificateholders to
receive any related Liquidation Proceeds.
THE HELOCS
The Trust will be formed in accordance with the laws of the State of
New York pursuant to the Agreement. The Depositor will transfer the Mortgage
Loans to the Trust, without recourse, in exchange for the Certificates and a
certificate initially to be held by it representing the Depositor's interest in
the Trust (the "Depositor Certificate"). The property of the Trust will consist
of the Mortgage Loans, all proceeds of the Mortgage Loans, all monies on deposit
in the Collection Account and the Certificate Account, the Mortgages on the
properties securing the Mortgage Loans, including any properties acquired by
foreclosure or deed in lieu of foreclosure, the benefits of the [Letter of
Credit] [Surety Bond], and the proceeds on any insurance policies covering the
Mortgage Loans or Mortgaged Properties or any obligors on the Mortgages.
[Pursuant to the Agreement, the Depositor will be required to transfer Eligible
Additional Mortgage Loans (to the extent available) to the Trust, in order to
avoid the occurrence of an Early Amortization Event resulting from a decline in
the Depositor's Interest, and otherwise will be allowed to transfer Eligible
Additional Mortgage Loans to the Trust (subject to certain limitations and
conditions) from time to time. See "DESCRIPTION OF THE CERTIFICATES --
Transfers of Eligible Additional Mortgage Loans to the Trust" herein.] In
addition, the Depositor may, subject to certain limitations and conditions
specified in the Agreement, cause the retransfer from the Trust to it of certain
Mortgage Loans. See "DESCRIPTION OF THE CERTIFICATES -- Optional Retransfers of
Mortgage Loans to the Depositor" herein.
The Mortgage Loans to be transferred to the Trust (collectively, the
"Pool") are evidenced by loan agreements (each, a "Loan Agreement") secured by
credit line deeds of trust or mortgages (which are primarily second deeds of
trust or mortgages on Mortgaged Properties, approximately ___% of which are
located in ________ and approximately ___% of which are located in other states,
with no single state accounting for more than ___% of the Cut-off Date Pool
Balance[, and represent substantially all of the home equity credit lines
originated by the Bank which meet the criteria specified in the Agreement and
described below] (the "Mortgage Loans"). Because the Mortgage Loans include the
loans generated under substantially all the HELOCs and because the Loan Balances
will include all amounts payable by borrowers under such HELOCs, some of the
Mortgage Loans will be generated under recently solicited, unseasoned HELOCs
[and the Pool will include delinquent Mortgage Loans and may include obligations
of borrowers who are or are about to become bankrupt or insolvent]. Many of the
Mortgage Loans are less than the Credit Limit under the corresponding HELOC.
Additional Balances on such Mortgage
S-16
VERSION H
<PAGE>
<PAGE>
Loans will be property of the Trust and will increase the Pool Balance. The
amount of the [Letter of Credit] [Surety Bond] was determined taking into
account, among other considerations, the nature of the HELOCs and the Mortgage
Loans.
Each Mortgage Loan included in the Pool was generated under a HELOC
that, as of the Cut-off Date, was an Eligible HELOC. An "Eligible HELOC" is
defined in the Agreement as any home equity credit line that: [selection
criteria of HELOCs to be added]. Each HELOC was originated between ________ and
the Cut-off Date [in the ordinary course of the Bank's home equity revolving
credit line loan program]. Subject to exceptions deemed appropriate by the
[Bank] as to individual HELOCs, the [Bank's] general policy was to require that
the Combined Loan-to-Value Ratio under the HELOC at the origination not exceed
80% of the market value of the Mortgaged Property, based upon an appraisal or
the tax assessed value of the Mortgaged Property at the time of the HELOC was
originated, as described under "THE HOME EQUITY LENDING PROGRAM" herein.
Substantially all of the Mortgaged Properties were one- to four-family
residential properties. As of the Cut-off Date, the weighted average loan
utilization rate was approximately ___%.
Set forth below is a description of certain additional characteristics
of the HELOC's as of the Cut-off Date:
S-17
VERSION H
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
LOAN POOL STATISTICS
CUT-OFF DATE LOAN BALANCES
Range of Number of % of Pool
Cut-Off Date Home Equity Aggregate Loan by Aggregate
Loan Balances Credit Lines Balances Loan Balances
- ------------- ------------ -------- -------------
<S> <C> <C> <C>
$ to $.............. $ %
$ to $..............
$ to $..............
$ to $..............
$ to $..............
$ to $..............
$ to $..............
$ to $..............
$ to $..............
$ to $..............
$ to $..............
$ to $..............
$ to $..............
$ to $..............
$ to $..............
Total........................ $ %
<CAPTION>
CUT-OFF DATE LOAN RATES
Range of Number of % of Pool
Cut-Off Date Home Equity Aggregate Loan by Aggregate
Loan Balances Credit Lines Balances Loan Balances
- ------------- ------------ -------- -------------
<S> <C> <C> <C>
$ to $.............. $ %
$ to $..............
$ to $..............
$ to $..............
$ to $..............
$ to $..............
Total........................ $ %
</TABLE>
S-18
VERSION H
<PAGE>
<PAGE>
CUT-OFF DATE MARGIN RANGES -- PRIME INDEXED MORTGAGE LOANS
<TABLE>
<CAPTION>
Number of % of Pool
Home Equity Aggregate Loan by Aggregate
Margin Credit Lines Balances Loan Balances
- ------ ------------ -------- -------------
<S> <C> <C> <C>
%.................... $ %
%....................
Total............... $ %
==========
</TABLE>
CREDIT LIMIT UTILIZATION RATES
<TABLE>
<CAPTION>
Range of Number of % of Pool
Credit Limit Home Equity Aggregate Loan by Aggregate
Utilization Rates Credit Lines Balances Loan Balances
- ----------------- ------------ -------- -------------
<S> <C> <C> <C>
0.00% to 5.00%............ $ %
5.01% to 10.00%...........
10.01% to 15.00%...........
15.01% to 20.00%...........
20.01% to 25.00%...........
25.01% to 30.00%...........
30.01% to 35.00%...........
35.01% to 40.00%...........
40.01% to 45.00%...........
45.01% to 50.00%...........
50.01% to 55.00%...........
55.01% to 60.00%...........
60.01% to 65.00%...........
65.01% to 70.00%...........
70.01% to 75.00%...........
75.01% to 80.00%...........
80.01% to 85.00%...........
85.01% to 90.00%...........
90.01% to 95.00%...........
95.01% to 100.00%.......... ___________ ___________ __________
Total.............. $ %
==========
</TABLE>
S-19
VERSION H
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
COMBINED LOAN-TO-VALUE RATIOS/1/
Range of Number of % of Pool
Combined Loan-to- Home Equity Aggregate Loan by Aggregate
Value Ratios Credit Lines Balances Loan Balances
- ------------ ------------ -------- -------------
<S> <C> <C> <C>
0.00% to 5.00%............ $ %
5.01% to 10.00%...........
10.01% to 15.00%...........
15.01% to 20.00%...........
20.01% to 25.00%...........
25.01% to 30.00%...........
30.01% to 35.00%...........
35.01% to 40.00%...........
40.01% to 45.00%...........
45.01% to 50.00%...........
50.01% to 55.00%...........
55.01% to 60.00%...........
60.01% to 65.00%...........
65.01% to 70.00%...........
70.01% to 75.00%...........
75.01% to 80.00%...........
80.01% to 85.00%...........
85.01% and above........... ___________ ___________ ____________
Total............... $ %
============
</TABLE>
MORTGAGE LOAN INTEREST RATE FLOORS
<TABLE>
<CAPTION>
Number of % of Pool
Interest Home Equity Aggregate Loan by Aggregate
Rate Floors Credit Lines Balances Loan Balances
- ----------- ------------ -------- -------------
<S> <C> <C> <C>
None.......................
%....................
%.................... ____________ ___________ ____________
Total............... $ %
============
</TABLE>
- --------------
/1/ The information in this table is as of the Cut-Off Date.
S-20
VERSION H
<PAGE>
<PAGE>
MORTGAGE LOAN INTEREST RATE CEILINGS
<TABLE>
<CAPTION>
Number of % of Pool
Interest Home Equity Aggregate Loan by Aggregate
Rate Ceilings Credit Lines Balances Loan Balances
- ------------- ------------ -------- -------------
<S> <C> <C> <C>
%....................
%....................
None....................... ____________ ___________ ____________
Total............... $ %
============
</TABLE>
PROPERTY USE OF MORTGAGE LOANS
<TABLE>
<CAPTION>
Number of % of Pool
Home Equity Aggregate Loan by Aggregate
Property Use Credit Lines Balances Loan Balance
- ------------ ------------ -------- ------------
<S> <C> <C> <C>
Owner Occupied.............
Non-Owner Occupied.........
Unknown.................... ____________ ___________ ____________
Total............... $ 100%
============
</TABLE>
LIEN PRIORITY OF MORTGAGE LOANS
<TABLE>
<CAPTION>
Number of % of Pool
Home Equity Aggregate Loan by Aggregate
Lien Priority Credit Lines Balances Loan Balances
- ------------- ------------ -------- -------------
<S> <C> <C> <C>
First Mortgage.............
Second Mortgage............
Third Mortgage.............
Unknown.................... ____________ ___________ ____________
Total............... $ 100%
============
</TABLE>
S-21
VERSION H
<PAGE>
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF MORTGAGE LOANS
<TABLE>
<CAPTION>
Number of % of Pool
Home Equity Aggregate by Aggregate
State Credit Lines Loan Balances Loan Balances
- ----- ------------ ------------- -------------
<S> <C> <C> <C>
_______....................
_______.................... _____________ ___________ ____________
Total............... $ %
============
</TABLE>
PROPERTY TYPE OF MORTGAGE LOANS
<TABLE>
<CAPTION>
Number of % of Pool
Home Equity Aggregate Loan by Aggregate
Number of Units Credit Lines Balances Loan Balances
- --------------- ------------ -------- -------------
<S> <C> <C> <C>
Single Family Detached.....
Single Family Attached.....
2-4 Family.................
Condominium................
Cooperative................
Unknown.................... _____________ ____________ ____________
Total............... $ 100%
============
</TABLE>
S-22
VERSION H
<PAGE>
<PAGE>
ORIGINATION YEAR OF MORTGAGE LOANS
<TABLE>
<CAPTION>
Number of % of Pool
Home Equity Aggregate by Aggregate
Origination Year Credit Lines Loan Balance Loan Balances
- ---------------- ------------ --------------- --------------
<S> <C> <C> <C>
1984.......................
1985.......................
1986.......................
1987.......................
1988.......................
1989.......................
1990.......................
1991.......................
1992....................... _____________ ____________ ___________
Total............... $ 100%
===========
</TABLE>
DAYS DELINQUENT AS OF CUT-OFF DATE
<TABLE>
<CAPTION>
Number of % of Pool
Home Equity Aggregate Loan by Aggregate
Days Delinquent Credit Lines Balance Loan Balances
- --------------- ------------ ------- -------------
<S> <C> <C> <C>
30-59......................
60-89...................... _____________ ____________ ___________
Total............... $ 100%
===========
</TABLE>
No assurance can be given that the values of the Mortgaged Properties as of
the dates of origination of the related HELOCs have remained or will remain
constant or have not declined. If the residential real estate market generally
or the residential real estate market in ____________ should experience an
overall decline in property values such that the outstanding Loan Balances under
the HELOCs, together with any senior financing of the Mortgaged Properties,
equal or exceed the delinquencies, foreclosures and losses could be higher than
those currently experienced in the mortgage lending industry in general. For
information concerning possible declines in value of the Mortgaged Properties,
see "RISK FACTORS -- Risks of the Trust Assets" in the Prospectus. In
addition, adverse economic conditions (which may or may not affect real property
values) may affect the timely payment by borrowers of scheduled payments under
the Mortgage Loans and, accordingly, the actual rates of delinquencies,
foreclosures and losses with respect to the Pool. To the extent that such
losses are not covered by draws on the [Letter of Credit] [Surety Bond], they
will be borne by Holders of the Certificates.
The descriptions in this Prospectus Supplement of the Pool and the Mortgaged
Properties are based upon the Pool as it is expected to be constituted as of the
close of business on the Cut-off Date, as adjusted for the scheduled principal
and interest payments due on or before such date. Prior to the issuance of the
Certificates, Mortgage Loans may be removed from the Pool as a result of
prepayments, delinquencies, incomplete documentation, or otherwise if
S-23
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<PAGE>
<PAGE>
the Depositor deems such removal necessary or desirable. A limited number of
other mortgage loans may be included in the Pool prior to the issuance of the
Certificates, unless including such mortgage loans would materially alter the
characteristics of the Pool as described herein. The Depositor believes that the
information set forth herein will be representative of the characteristics of
the Pool as it will be constituted at the time the Certificates are issued,
although the range of Loan Rates and maturities and certain other
characteristics of the Mortgage Loans in the Pool may vary.
MATURITY AND PREPAYMENT CONSIDERATIONS
The Agreement provides that the Certificateholders will not receive
payments of principal until the Distribution Date on _____________ (i.e., the
---
first Distribution Date after the first Collection Period following the end of
the Revolving Period) or, if earlier, the Distribution Date in the month after
the first Collection Period of an Early Amortization Event. During the
Amortization Period, Certificateholders will be entitled to receive on each
Distribution Date the Investor Percentage described herein of the Principal
Collections received in the preceding Collection Period until the Certificate
Principal Balance is reduced to zero. Allocations of Principal Collections
based on the Investor Percentage (which is fixed for the Amortization Period to
equal the percentage derived from dividing the Certificate Principal Balance by
the Pool Balance, in each case at the end of the Revolving Period) may result in
distributions of principal to the Certificateholders greater than those that
would result from distributions of principal based upon the proportion that the
declining Certificate Principal Balance bears to the Pool Balance. [The
Agreement permits the Depositor, at its option, but subject to the satisfaction
of certain conditions specified in the Agreement, including the conditions
described herein, to remove Mortgage Loans from the Trust at any time during the
life of the Trust (including the Amortization Period), so long as the Pool
Balance after such removal is not less than the Pool Balance at the Closing
Date. The Depositor may also, under certain circumstances, add Eligible
Additional Mortgage Loans to the Trust. Such removals and additions may affect
the rate at which principal is distributed to Certificateholders. See
"DESCRIPTION OF THE CERTIFICATES -- Transfers of Eligible Additional Mortgage
Loans to the Trust" and "--Optional Retransfers of Mortgage Loans to the
Depositor."]
All of the Mortgage Loans may be prepaid without penalty in full or in
part at any time. The prepayment experience with respect to the Mortgage Loans
will affect the life of the Certificates.
The rate of prepayment on the Mortgage Loans cannot be predicted. Home
equity credit lines such as the Mortgage Loans have been originated in
significant volume only during the past few years and the Depositor is not aware
of any publicly available studies or statistics on the rate of prepayment of
such loans. Generally, home equity credit lines are not viewed by borrowers as
permanent financing. Accordingly, the Mortgage Loans may experience a higher
rate of prepayment than traditional first mortgage loans. On the other hand,
because the Mortgage Loans will amortize as described herein, the absence of
voluntary borrower prepayments could cause rates of principal payment to be
slower than, or similar to, those of traditional fully-amortizing first
mortgages. The prepayment experience of the Trust with respect to the Mortgage
Loans may be affected by a wide variety of factors, including general economic
conditions, economic conditions in ___________, prevailing interest rate levels,
the availability of alternative financing and homeowner mobility, the frequency
and amount of any future draws on the HELOCs and changes affecting the
deductibility for Federal income tax purposes of interest payments on home
equity credit lines. Substantially all of the Mortgage Loans contain "due-on-
sale" provisions, and the Servicer intends to enforce such provisions, unless
such enforcement is not permitted by applicable law. The enforcement of a "due-
on-sale" provision will have the same effect as a prepayment of the related
Mortgage Loan. See "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS -- 'Due-on-Sale'
Clauses" in the Prospectus. The yield to an investor who purchases the
Certificates in the secondary market at a price other than par will vary from
the anticipated yield if the actual rate of prepayment on the Mortgage Loans is
different than the rate anticipated by such investor at the time such
Certificates were purchased.
S-24
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Collections on the Mortgage Loans may vary because, among other things,
borrowers may make payments during any month as low as the minimum monthly
payment for such month or as high as the entire principal outstanding balance
plus accrued interest and the fees and charges thereon. It is possible that
borrowers may fail to make scheduled payments. Collections on the Mortgage
Loans may vary due to seasonal purchasing and payment habits of borrowers.
Because the Mortgage Loans have a variable interest rate and a fixed payment,
changes in underlying interest rates will vary the allocation of payments
between interest and principal.
No assurance can be given as to the level of prepayments that will be
experienced by the Trust and it can be expected that a portion of borrowers will
not prepay their Mortgage Loans to any significant degree. See "YIELD
CONSIDERATIONS" and "MATURITY AND PREPAYMENT CONSIDERATIONS" in the Prospectus.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement. A form of
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus Supplement and the Prospectus is a part. The following
summaries describe certain provisions of the Agreement. The summaries do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Agreement. Wherever particular
sections or defined terms of the Agreement are referred to, such sections or
defined terms are hereby incorporated herein by reference.
GENERAL
The Certificates will be issued in denominations of [$1,000] and
integral multiples thereof and will evidence specified undivided interests in
the Trust. [Definitive] Certificates[, if issued,] will be transferable and
exchangeable at the corporate trust office of the Trustee, which will initially
act as Certificate Registrar. See "--Registration of Certificates" below. No
service charge will be made for any registration of exchange or transfer of
Certificates, but the Trustee may require payment of a sum sufficient to cover
any tax or other governmental charge.
The outstanding principal amount of the Certificates ("Certificate
Principal Balance") will be equal to the initial principal amount of the
Certificates, minus the amount of principal payments paid to the
Certificateholders, and minus the amount of Certificate Principal Balance Loss
Deduction Amounts, if any, which have not been reimbursed as provided herein.
See "--Distributions on the Certificates" below. Each Certificate represents
the right to receive payments of interest at the Certificate Rate and payments
of principal during the Amortization Period funded from Interest Collections and
Principal Collections, respectively, allocated to the investor interest and
draws on the [Letter of Credit] [Surety Bond].
The Depositor initially will own the interest (the "Depositor
Interest") not represented by the Certificates. The Depositor Interest will
represent an undivided interest in the Trust, including the right to receive
certain percentages (the "Depositor Percentage") of Interest Collections and
Principal Collections. The initial amount of the Depositor Interest was
determined on the basis of, among other factors, the size required to absorb
reductions in the aggregate amount of Loan Balances in the Trust without causing
an Early Amortization Event, which would result in the early commencement of the
Amortization Period. There can be no assurance that the Depositor Interest will
be sufficient for such purpose. While the Depositor is obligated (subject to
certain conditions and limitations) to transfer Eligible Additional Mortgage
Loans (to the extent available) to the Trust, there can be no assurance that
sufficient Eligible Additional Mortgage Loans will be available.
During the Revolving Period, the Certificate Principal Balance will
remain constant except in certain limited circumstances. See "--Distributions
on the Certificates" below. The Pool Balance, however, will vary each day as
principal is paid on the Mortgage Loans, liquidation losses are incurred,
Additional Balances are drawn
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down by borrowers under the HELOCs, Mortgage Loans are retransferred to the
Depositor or Eligible Additional Mortgage Loans are transferred to the Trust.
Consequently, the amount of the Depositor Interest will fluctuate each day to
reflect the changes in the Pool Balance. During the Amortization Period, the
Certificate Principal Balance will decline as the Investor Percentage of
Principal Collections is distributed to the Certificateholders. As a result,
during the Amortization Period, the Depositor Interest may increase each month
to reflect the reductions in the Certificate Principal Balance but may change
each day to reflect the variations in the Pool Balance.
ASSIGNMENT OF MORTGAGE LOANS
At the time of issuance of the Certificates, the Depositor will
transfer to the Trust all of its right, title and interest in and to each
Mortgage Loan (including any Additional Balances arising in the future) conveyed
by it to the Trust, including all principal (including Net Liquidation Proceeds)
and interest received on or with respect to each such Mortgage Loan subsequent
to the Closing Date (other than any amounts received in respect of taxes,
insurance premiums, assessments and similar items, as provided in the Agreement)
plus the Investor Percentage of Interest Collections on the Mortgage Loans
during the period from the Cut-Off Date to the second business day preceding the
Closing Date, but not in excess of the amount needed to distribute the required
interest to Certificateholders on the first Distribution Date and to pay the
related Investor Servicing Fee. The Trustee, concurrently with such transfer,
will deliver the Certificates and the Depositor Interest to the Depositor. Each
HELOC under which a Mortgage Loan assigned to the Trust was generated will be
identified in a schedule appearing as an exhibit to the Agreement.
The Depositor will deliver the files containing, among other things,
the Loan Agreement, the Mortgage Note and the Mortgage relating to each Mortgage
Loan (the "Mortgage Files") to the Trustee (or a custodian on its behalf) on the
Closing Date. The Trustee (or a custodian on its behalf) will review each
Mortgage File within ________ days of receipt thereof. If any such document is
found not to have been executed or received or to be unrelated to the Mortgage
Loan or to have not been recorded as required by the Agreement, the Trustee (or
custodian on its behalf) will notify the Depositor, which shall have a period of
___ days after such notice to correct or cure such defect. If the defect cannot
be cured within the ____ day period, the Depositor will be obligated to accept
the retransfer of such Mortgage Loan from the Trust. Upon such retransfer, the
Loan Balance of such Mortgage Loan will be deducted from the Pool Balance, thus
reducing the amount of the Depositor Interest by the same amount. If the
deduction would cause the Depositor Interest to become less than zero, the
Depositor will be obligated to make a deposit in the Collection Account in the
amount ("Retransfer Deposit Amount") by which the Depositor Interest is less
than zero. Notwithstanding the foregoing, however, no such retransfer shall be
considered to have occurred unless such deposit is actually made. The
obligation of the Depositor to accept a retransfer of a defective Mortgage Loan
and, if applicable, pay the Retransfer Deposit Amount, is the sole remedy
regarding any defects in the Mortgage Files available to the Trustee or the
Certificateholders.
The Depositor will make certain representations and warranties as to
the accuracy in all material respects of certain information furnished to the
Trustee with respect to each Mortgage Loan on the schedule of Mortgage Loans
appearing as an exhibit to the Agreement. In addition, the Bank will represent
and warrant that, among other things: [(i) each Mortgage Loan has been
generated under an eligible HELOC; (ii) at the time of transfer to the Trust,
the Depositor has transferred all of the Depositor's right, title and interest
in each Mortgage Loan, free of any lien (subject to certain exceptions); (iii)
each Mortgage Loan was generated under a HELOC that complied, at the time of
origination, in all material respects with applicable state and Federal laws;
and (iv) as of the date of origination of the related HELOC, the related
Mortgaged Property was covered by hazard insurance in an amount at least equal
to the lesser of (a) the maximum insurable value of the improvements thereon and
(b) the combined Credit Limit under the HELOC and the unpaid principal balance
of any mortgage loan senior thereto. Upon discovery of a breach of any such
representation and warranty which materially and adversely affects the interests
of the Trust, the Certificateholders or the [Letter of Credit] [Surety Bond]
Issuer in the related Mortgage Loan, the Depositor will have a period of ___
days after discovery or notice of the breach to effect a cure. If the breach
cannot be cured within the ___ day period, the Depositor will be obligated to
accept a retransfer of the Mortgage Loan from the Trust. The same
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procedure and limitations that are set forth in the preceding paragraph for the
retransfer of a Mortgage Loan respecting which there is a defect in the Mortgage
File will apply to the retransfer of a Mortgage Loan that is required to be
retransferred because of a breach of a representation or warranty in the
Agreement that materially and adversely affects the interests of the
Certificateholders.
Any Mortgage Loan required to be retransferred to the Depositor as
described in the preceding two paragraphs is referred to as a "Defective
Mortgage Loan."
The Depositor may, but is not obligated to, retransfer a Defective
Mortgage Loan to the Trust within ___ days of the transfer of such Defective
Mortgage Loan to the Depositor if all defects in respect of such Defective
Mortgage Loan have been cured and such Defective Mortgage Loan satisfies the
applicable representations and warranties in the Agreement at the time of such
retransfer to the Trust.
[TRANSFERS OF ELIGIBLE ADDITIONAL MORTGAGE LOANS TO THE TRUST
If, for each of five consecutive business days during the Revolving
Period, the Depositor Interest for each such date is less than 10% of the Pool
Balance, then not later than the first business day of the calendar month
beginning at least ten business days after such fifth business day thereafter
the Depositor will be obligated to transfer to the Trust Eligible Additional
Mortgage Loans (but only to the extent available in the [Depositor's] [Seller's]
[Bank's] portfolio), which may be generated under home equity credit lines in
any billing cycle, so that, after giving effect to such transfer, the Depositor
Interest will equal at least 10% of the Pool Balance on such date. An Eligible
Additional Mortgage Loan is a home equity loan that was originated under a HELOC
that, as of the date of notice by the Depositor to the Trustee, the Servicer and
the [Letter of Credit] [Surety Bond] Issuer of its transfer to the Trust (the
"Notice Date"), was an Eligible HELOC and that, as of the Notice Date, complies
with the representations and warranties described under "Assignment of Mortgage
Loans" above. The Depositor must satisfy the following conditions, among
others, in order to transfer Eligible Additional Mortgage Loans to the Trust:
(i) the Pool Balance, after giving effect to such transfer, will not exceed
$ ; (ii) the Mortgage Files for such Eligible Additional Mortgage Loans
shall have been delivered to the Trustee (or a custodian on its behalf); and
(iii) the Depositor shall have given notice of the proposed transfer to the
Rating Agency and the Rating Agency has not notified the Depositor in writing
prior to the transfer date that such transfer will result in a reduction or
withdrawal of its then-current rating for the Certificates.
In addition, the Depositor may, at its election, transfer Eligible
Additional Mortgage Loans subject to satisfaction of the conditions described
above.]
[OPTIONAL RETRANSFERS OF MORTGAGE LOANS TO THE DEPOSITOR
Subject to the conditions specified in the Agreement, the Depositor
may, at its option, require the retransfer of one or more Mortgage Loans (which
may have been generated under a HELOC in any billing cycle) from the Trust to it
on the last day of any Collection Period. The Pool Balance after giving effect
to such retransfer must not be less than the Pool Balance on the Closing Date.
The Depositor will be required to satisfy the following conditions, among
others: (i) the Depositor shall reasonably believe that such retransfer will
not cause an Early Amortization Event to occur; (ii) as of the fifth business
day prior to the proposed transfer, not more than 10% (based on Loan Balances)
of the Mortgage Loans (after giving effect to the proposed transfer) are
delinquent more than 30 days and the weighted average delinquency of all of the
Mortgage Loans (before and after giving effect to the proposed transfer) is not
more than 60 days; (iii) the Depositor shall have represented that no selection
procedures reasonably believed by the Depositor to be adverse to the interests
of the Certificateholders or the [Letter of Credit] [Surety Bond] Issuer were
used to select the Mortgage Loans to be removed; (iv) the Depositor shall have
received evidence satisfactory to it that the reassignment will not, as of the
date thereof, prevent the transfer of the Mortgage Loans (including any
Additional Balances) to the Trust from being recognized as a sale under
generally accepted
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accounting principles and shall have received no evidence that such reassignment
will, as of the date thereof, prevent such transfer from being recognized as a
sale for regulatory purposes; and (v) each Rating Agency shall have been
notified of the proposed retransfer and prior to the date of retransfer has not
notified the Depositor in writing that such retransfer would result in a
reduction or withdrawal of its then-current rating of the Certificates.]
PAYMENTS ON MORTGAGE LOANS; DEPOSITS TO COLLECTION ACCOUNT
The Servicer will follow such collection procedures with respect to the
Mortgage Loans as it follows from time to time with respect to mortgage loans in
its servicing portfolio comparable to the Mortgage Loans. See "DESCRIPTION OF
THE CERTIFICATES -- Payments on Mortgage Loans" in the Prospectus.
The Servicer will establish and maintain a separate account in the name
of the Trustee for the benefit of the Certificateholders and the [Letter of
Credit] [Surety Bond] Issuer (the "Collection Account"). See "DESCRIPTION OF
THE CERTIFICATES -- Distributions on Certificates" in the Prospectus. [The
Collection Account will be established initially with the trust department of
the Trustee.] Funds in the Collection Account may be invested in Eligible
Investments maturing in general not later than the business day preceding the
next Distribution Date. Eligible Investments consist of certain investments
acceptable to each Rating Agency for a structured transaction having the rating
initially assigned to the Certificates. All net income and gain realized from
any such investment will be paid to the Servicer.
Investor Percentage and Depositor Percentage. Pursuant to the
Agreement, the Servicer will allocate between the Investor Interest and the
Depositor Interest all amounts (including any Net Liquidation Proceeds)
collected under the Mortgage Loans on account of interest ("Interest
Collections"), all amounts (including Net Liquidation Proceeds) collected under
the Mortgage Loans on account of principal ("Principal Collections") and the
amount of the unrecovered Loan Balance of any Defaulted Mortgage Loan at the end
of the Collection Period in which such Defaulted Mortgage Loan became a
Defaulted Mortgage Loan (the "Liquidation Loss Amount"). A "Defaulted Mortgage
Loan" is a Mortgage Loan that has been written off as uncollectible by the
Servicer. The Collection Period for a Distribution Date is the calendar month
preceding such Distribution Date or, in the case of the first Distribution Date,
the period from the Cut-off Date through the last day of the calendar month
preceding the month in which such Distribution Date occurs. The Servicer will
make each allocation by reference to the Investor Percentage and the Depositor
Percentage applicable in each case during a Collection Period.
For convenience, this Prospectus Supplement refers to the Investor
Percentage with respect to Interest Collections, Principal Collections and
Liquidation Loss Amounts as if the Investor Percentage were the same percentage
at all times in each case. The Investor Percentage may be a different
percentage for each Collection Period, and will vary primarily as a result of
changes in the Pool Balance.
The Investor Percentage will be calculated as follows:
Interest Collections and Liquidation Loss Amounts. When used with
respect to Interest Collections and Liquidation Loss Amounts at any time,
"Investor Percentage" means the percentage equivalent of a fraction the
numerator of which is the Certificate Principal Balance and the denominator of
which is the Pool Balance, in each case as of the end of the immediately
preceding Collection Period (or, in the case of the first Collection Period, as
of the Closing Date).
Principal Collections during the Revolving Period. When used with
respect to Principal Collections during the Revolving Period, "Investor
Percentage" means the percentage equivalent of a fraction the numerator of which
is the amount of the Certificate Principal Balance and the denominator of which
is the Pool Balance, in each case as of the end of the immediately preceding
Collection Period (or in the case of the first Collection Period, as of the
Closing Date).
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Principal Collections during the Amortization Period. When used with
respect to Principal Collections during the Amortization Period, "Investor
Percentage" means the percentage equivalent of a fraction the numerator of which
is the amount of the Certificate Principal Balance and the denominator of which
is the Pool Balance, in each case as of the end of the Revolving Period.
The Depositor Percentage will, in all cases, be equal to 100% minus the
applicable Investor Percentage.
As a result of the calculations described above, Interest Collections
in each Collection Period will be allocated to the Certificateholders based on
the relationship of the Certificate Principal Balance to the Pool Balance (which
may fluctuate from month to month). As described above, the Investor Percentage
applied when allocating Principal Collections is expected to vary from month to
month during the Revolving Period, because the Certificate Principal Balance as
a percentage of the Pool Balance will fluctuate from month to month. During
the Amortization Period, however, the amount of Principal Collections allocated
to the Investor Interest will be determined by reference to a fixed percentage
which will be equal to the Investor Percentage with respect to Principal
Collections on the last day of the Revolving Period.
Deposits in the Collection Account and Payments to the Depositor. On
the Closing Date, the Servicer will deposit in the Collection Account funds in
the amount of the Investor Percentage of Interest Collections on the Mortgage
Loans received during the period from the Cut-Off Date to the second business
day preceding the Closing Date, but not in excess of the amount needed to
distribute the required interest on the Certificates and the Investor Servicing
Fee to be distributed on the initial Distribution Date. On and after the
Closing Date, the Servicer will, subject to the following paragraph, deposit on
a daily basis within two business days following receipt thereof (i) during each
Collection Period in the Revolving Period, the Investor Percentage of Interest
Collections and (ii) during each Collection Period in the Amortization Period,
the Investor Percentage of all Interest Collections and Principal Collections.
The Servicer will pay to the Depositor within two business days of its receipt
thereof (i) during each Collection Period in the Revolving Period, the Depositor
Percentage of all Interest Collections and, if the Depositor Interest (after
giving effect to any transfers of Additional Balances or Eligible Additional
Mortgage Loans to the Trust on such day) is equal to or greater than zero, the
Depositor Percentage of all Principal Collections and the Investor Percentage of
all Principal Collections and (ii) during each Collection Period in the
Amortization Period, the Depositor Percentage of Interest Collections and, if
the Depositor Interest (after giving effect to any transfers of Additional
Balances or Eligible Additional Mortgage Loans to the Trust on such day) is
greater than zero, the Depositor Percentage of all Principal Collections.
The Trustee will establish and maintain a separate account (the
"Distribution Account"). On the business day preceding each Distribution Date
the Servicer will transfer amounts in the Collection Account for distribution to
Certificateholders to the Distribution Account.
The Trustee will deposit in the Distribution Account any amounts drawn
on the [Letter of Credit] [Surety Bond] as described below.
Any Principal Collections not paid to the Depositor because of the
limitations described above ("Unallocated Principal Collections"), will be
deposited and retained in the Collection Account for payment to the Depositor,
during the Revolving Period, if and when the Depositor Interest is greater than
zero and, during the Amortization Period, to the Certificateholders.
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DISTRIBUTIONS ON THE CERTIFICATES
Beginning with the Distribution Date occurring in _____________,
distributions on the Certificates will be made by the Trustee out of amounts on
deposit in the Distribution Account on each Distribution Date to the persons in
whose names such Certificates are registered at the close of business on the
[day prior to each Distribution Date] (the "Record Date"), except as provided in
"Registration of Certificates" below. The term "Distribution Date" means the
___ day of each month (or if such ___ day is not a business day the next
succeeding business day). Distributions will be made by check mailed (or upon
the request of a Certificateholder owning Certificates having denominations
aggregating at least $________, by wire transfer or otherwise) to the address of
the person entitled thereof [(which, in the case of Book-Entry Certificates,
will be DTC or its nominee)] as it appears on the Certificate Register in
amounts calculated as described herein on the _____ business day (but no later
than the _____ calendar day) of the month in which the related Distribution Date
occurs (the "Determination Date"). However, the final distribution in respect
of the Certificates will be made only upon presentation and surrender thereof at
the office or the agency of the Trustee specified in the notice to
Certificateholders of such final distribution.
Distributions of Interest Collections and Required Amounts. On each
Distribution Date, the Trustee, on behalf of the Trust, shall pay the following
amounts in the following order of priority to the following persons from the
Investor Interest of all Interest Collections collected during the related
Collection Period, together with the Required Amount, if any, drawn on the
[Letter of Credit] [Surety Bond] for such Distribution Date.
[(i) to the Certificateholders, interest at the Certificate Rate for
the Interest Period preceding such Distribution Date on the Certificate
Principal Balance outstanding immediately prior to such Distribution Date;
(ii) to the Certificateholders, any interest on the Certificates
accrued in accordance with clause (i) that has not been previously distributed
to Certificateholders plus, to the extent legally permissible, interest thereon
at the Certificate Rate applicable from time to time (an "Unpaid Interest
Shortfall");
(iii) to the Servicer, the Investor Servicing Fee for the related
Interest Period and all accrued and unpaid Investor Servicing Fees for previous
Interest Periods;
(iv) if such Distribution Date is in the Revolving Period, to the
Depositor, the Investor Percentage of the aggregate of all Liquidation Loss
Amounts incurred in the preceding Collection Period; provided that the Depositor
Interest (after giving effect to any transfers of Additional Balances and
Eligible Additional Mortgage Loans on such date and to the distribution of such
Liquidation Loans Amount) is equal to or greater than zero;
(v) if such Distribution Date is in the Amortization Period, to the
Certificateholders, the Investor Percentage of the aggregate of all Liquidation
Loss Amounts incurred in the preceding Collection Period;
(vi) to the Certificateholders, the aggregate of the amounts allocable
pursuant to clause (v) that were not previously distributed pursuant to such
clause (each such undistributed amount being referred to herein as a
"Certificate Principal Balance Loss Deduction Amount"); and
(vii) to the Certificateholders, accrued and unpaid interest on each
unreimbursed Certificate Principal Balance Loss Deduction Amount (such interest
being calculated at the Certificate Rate for each Interest Period during which
such unreimbursed amount was outstanding.]
Any amounts remaining in the Collection Account collected during or
with respect to the preceding Collection Period, after all other distributions
have been made, will be distributed to the [Letter of Credit] [Surety Bond]
Issuer.
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A Certificate Principal Balance Loss Deduction Amount represents a loss
of principal in respect of Defaulted Mortgage Loans allocable to the Investor
Interest and will arise when the Investor Percentage of Interest Collections and
the Required Amount are not sufficient to cover such loss, in accordance with
the priority of distributions described above. As described under "General"
above, any Certificate Principal Balance Loss Deduction Amounts which have not
been reimbursed, as provided herein, will reduce the Certificate Principal
Balance.
The Required Amount for each distribution Date will be the lesser of
(i) the [Letter of Credit] [Surety Bond] Amount and (ii) the amount, if any, by
which (a) the full amount distributable on such Distribution Date pursuant to
clauses (i) through (vii) above exceeds (b) the Investor Percentage of the
Interest Collections for the related Collection Period. The Required Amount
will be drawn on the [Letter of Credit] [Surety Bond].
Distributions of Principal. On each Distribution Date after the first
Collection Period in the Amortization Period, the Trustee will distribute to the
Certificateholders the Investor Percentage of Principal Collections received in
the preceding Collection Period. In addition, the Trustee will distribute to
Certificateholders on any Distribution Date during the Amortization Period any
Retransfer Deposit Amount (or draw on the [Letter of Credit] [Surety Bond] in
respect thereof) received in the preceding Collection Period and any Unallocated
Principal Collections then on deposit in the Distribution Account. The
aggregate distributions of principal to the Certificateholders will not exceed
the Initial Certificate Principal Balance.
[Calculation of Certificate Rate. With respect to the initial
Distribution Date, the Certificate Rate will equal __%. Thereafter, on each
Distribution Date, the Certificate Rate will be equal to LIBOR as of the second
London Business Day (as defined below) prior to the immediately preceding
Distribution Date plus ________ basis points. However, if the Certificate Rate
calculated as described in the preceding sentence for any such Distribution Date
is greater than the weighted average of the Net Loan Rates for the Mortgage
Loans for the preceding Collection Period, the Certificate Rate for any such
Distribution Date will be equal to the weighted average of the Net Loan Rates.
The Net Loan Rate for a Mortgage Loan is its Loan Rate less the Servicing Fee
Rate. Interest payable on any Distribution Date will accrue on the Certificates
from the preceding Distribution Date (or, in the case of the first Distribution
Date, from the Closing Date) through the day preceding such Distribution Date
(an "Interest Period"). All calculations of interest accrued on the
Certificates will be made on the basis of [the actual number of days in an
Interest Period and a year assumed to consist of 360 days.]
The term "Certificate Principal Balance" means (i) the original
principal amount of the Certificates less (ii) all amounts previously
distributed to Certificateholders under "-Distributions of Principal" above,
less (iii) the aggregate of all unreimbursed Certificate Principal Balance Loss
Deduction Amounts.
Calculation of LIBOR. "LIBOR" with respect to any Distribution Date
will be determined by the Trustee and will be equal to the offered rates for
deposits in United States dollars having a maturity of one month (the "Index
Maturity") commencing on the second London Business Day (as defined below) prior
to the previous Distribution Date, which appear on the Reuters Screen LIBO Page
as of approximately 11:00 A.M., London time, on such date of calculation. If at
least two such offered rates appear on the Reuters Screen LIBO Page, LIBOR will
be the arithmetic mean (rounded upwards, if necessary, to the nearest one-
sixteenth of a percent) of such offered rates. If fewer than two such quotations
appear, LIBOR with respect to such distribution Date will be determined at
approximately 11:00 A.M., London time, on such determination date on the basis
of the rate at which deposits in the United States dollars having the Index
Maturity are offered to prime banks in the London interbank market by four major
banks in the London interbank market selected by the Trustee and in a principal
amount equal to an amount of not less than U.S. $1,000,000 and that is
representative for a single transaction in such market at such time. The Trustee
will request the principal London office of each of such banks to provide a
quotation of its rate. If at least two such quotations are provided, LIBOR will
be the arithmetic mean (rounded upwards as aforesaid) of such quotations. If
fewer than two quotations are provided, LIBOR with respect to such Distribution
Date will be the arithmetic mean
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(rounded upwards as aforesaid) of the rates quoted at approximately 11:00 A.M.,
New York City time, on such determination date by three major banks in New York,
New York selected by the Trustee for loans in United States dollars to leading
European banks having the Index Maturity and in a principal amount equal to an
amount of not less than U.S. $1,000,000 and that is representative for a single
transaction in such market at such time; provided, however, that if the banks
selected as aforesaid by the Trustee are not quoting as mentioned in this
sentence, LIBOR in effect for the applicable period will be LIBOR in effect for
the previous period.]
[For purposes of calculating LIBOR, a "London Business Day" will be any
Business Day on which dealings in deposits in United States dollars are
transacted in the London interbank market and "Reuters Screen LIBO Page" will be
the display designated as page "LIBO" on the Reuters Monitor Money Rates Service
(or such other page as may replace the LIBO page on that service for the purpose
of displaying London interbank offered rates of major banks.)]
THE [LETTER OF CREDIT] [SURETY BOND]
On the Closing Date, the [Letter of Credit] [Surety Bond] Issuer will
issue the [Letter of Credit] [Surety Bond] in favor of the Trustee on behalf of
the Trust to support payments on the Certificates. On each Determination Date,
the Servicer will determine the amounts required to be drawn on the [Letter of
Credit] [Surety Bond], up to the [Letter of Credit] [Surety Bond] Amount, on the
related Distribution Date. On each Distribution Date, any amounts remaining in
the Collection Account with respect to the preceding Collection Period, after
all other distributions have been made as described above, will be distributed
to the [Letter of Credit] [Surety Bond] Issuer. See "Distributions on
Certificates" above.
The amount available under the [Letter of Credit] [Surety Bond] (the
"Letter of Credit] [Surety Bond] Amount") for the initial Distribution Date will
be $ . For each Distribution Date thereafter, the [Letter of Credit]
[Surety Bond] Amount will equal the lesser of (i) ___% of the Pool Balance as of
the first day of the preceding Collection Period (after giving effect to any
amounts distributed with respect to principal of the Mortgage Loans on the
Distribution Date occurring in such preceding Collection Period) and (ii) the
[Letter of Credit] [Surety Bond] Amount as of the first day of the preceding
Collection Period, minus any amounts drawn under the [Letter of Credit] [Surety
Bond] during such preceding Collection Period, plus any amounts paid to the
[Letter of Credit] [Surety Bond] Issuer on the Distribution Date occurring in
such preceding Collection Period up to the amount of any previous draws on the
[Letter of Credit] [Surety Bond].
EARLY AMORTIZATION EVENTS
As described above, the Revolving Period will continue until the close
of business on the last day of __________ unless an Early Amortization Event
occurs prior thereto. The term "Early Amortization Event" refers to any of the
following events:
[(a) failure on the part of the Servicer or the Depositor (i) to make
any payment or deposit on the date required under the Agreement within five
business days after such payment or deposit is required to be made, (ii) to
observe or perform in any material respect certain covenants of the Servicer or
the Depositor or (iii) to observe or perform in any material respect any other
covenants or agreements of the Servicer or the Depositor set forth in the
Agreement, which failure, in each case, materially and adversely affects the
interests of the Certificateholders and which, in the case of clause (iii),
continues unremedied for a period of 60 days after written notice and continues
to materially and adversely affect the interests of the Certificateholders for
such period;
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(b) any representation or warranty made by the Servicer or the
Depositor in the Agreement proves to have been incorrect in any material respect
when made, as a result of which the interests of the Certificateholders are
materially and adversely affected, which continues to be incorrect in any
material respect for a period of 60 days after written notice and which
continues to materially and adversely affect the interests of the
Certificateholders for such period; provided, however, that an Early
Amortization Event shall not be deemed to occur thereunder if the Depositor has
accepted retransfer of the related Mortgage Loan or all such Mortgage Loans, if
applicable, during such period (or such longer period (not to exceed an
additional 60 days) as the Trustee may specify) in accordance with the
provisions of the Agreement;
(c) the Trust becomes subject to registration as an investment company
under the Investment Company Act of 1940, as amended;
(d) if the Depositor fails to transfer to the Trust Eligible
Additional Mortgage Loans by the time it is required to do so;
(e) an Event of Default under the Trust Agreement (as described in the
Prospectus under "DESCRIPTION OF THE CERTIFICATES -- Rights Upon Event of
Default") occurs;
(f) the [Letter of Credit] [Surety Bond] Amount is less the % of
the Certificate Principal Balance; or
(g) if the average of the Investor Percentage of Interest Collections
for any three consecutive Collection Periods is less than the amounts to be
distributed to Certificateholders as set forth in subsections (i) through (vii)
under "Distributions on the Certificates -- Distributions of Interest
Collections and Required Amounts" above for the three Distribution Dates
relating to such Collection Periods.]
[In the case of any event described in clauses (a), (b) or (e), an
Early Amortization Event will be deemed to have occurred only if, after the
expiration of the applicable grace period, if any, described in such clauses,
either the Trustee or holders of Certificates evidencing Percentage Interests
aggregating more than 51% or the [Letter of Credit] [Surety Bond] Issuer (but
only if the [Letter of Credit] [Surety Bond] is outstanding or the [Letter of
Credit] [Surety Bond] Issuer has not been fully reimbursed for all amounts paid
to the Trust by the [Letter of Credit] [Surety Bond] Issuer), by written notice
to the Depositor and the Servicer (and to the Trustee if given by the
Certificateholders or the [Letter of Credit] [Surety Bond] Issuer) declare that
an Early Amortization Event has occurred as of the date of such notice. In the
case of any event described in clauses (c), (d) or (f), an Early Amortization
Event will be deemed to have occurred without any notice or other action on the
part of the Trustee or the Certificateholders or the [Letter of Credit] [Surety
Bond] Issuer immediately upon the occurrence of such event. On the date on
which an Early Amortization Event is deemed to have occurred, the Amortization
Period will commence. In such event, distributions of principal to the
Certificateholders will begin on the first Distribution Date following the month
in which the Early Amortization Event occurs. If, because of the occurrence of
an Early Amortization Event, the Amortization Period begins earlier than
____________, the date on which the Amortization Period is scheduled to
commence, Certificateholders will begin receiving distributions of principal
earlier than they would otherwise have been the case under the Agreement, which
may shorten the final maturity of the Certificates.]
OPTIONAL TERMINATION
The Depositor may effect a retransfer of the Certificateholders'
interest in each Mortgage Loan, and all property acquired in respect of any
Mortgage Loan, remaining in the Trust for an amount equal to the sum of the
Certificate Principal Balance plus accrued and unpaid interest thereon at the
applicable Certificate Rate through the day preceding the final Distribution
Date if the Certificate Principal Balance immediately prior to the final
Distribution Date is less than or equal to [5%] of the original Certificate
Principal Balance. The purchase price will
S-33
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<PAGE>
be distributed to the Certificateholders in lieu of the amount that would
otherwise be distributed if such option were not exercised, which will be
applied as provided in the Agreement.
[REGISTRATION OF CERTIFICATES
The Certificates will initially be registered in the name of Cede, the
nominee of DTC. DTC is a limited-purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC accepts securities for deposit from its participating
organizations ("Participants") and facilities the clearance and settlement of
securities transactions between Participants in such securities through
electronic book-entry changes in accounts of Participants, thereby eliminating
the need for physical movement of certificates. Participants include securities
brokers and dealers, banks and trust companies and clearing corporations and may
include certain other organizations. Indirect access to the DTC system is also
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Certificate Owners who are not Participants but desire to purchase,
sell or otherwise transfer ownership of the Certificates may do so only through
Participants (unless and until Definitive Certificates are issued). In
addition, Certificate Owners will receive all distributions of principal of and
interest on the Certificates from the Trustee through Participants. Certificate
Owners will not receive or be entitled to receive certificates representing
their respective interests in the Certificates, except under the limited
circumstances described below.
Unless and until Definitive Certificates are issued, it is anticipated
that the only Certificateholder of the Certificates will be Cede, as nominee of
DTC, and Certificate Owners will not be Certificateholders as that term is used
in the Agreement. Certificate Owners are only permitted to exercise the rights
of Certificateholders indirectly through Participants.
While the Certificates are outstanding (except under the circumstances
described below), under the rules, regulations and procedures creating and
affecting DTC and its operations (the "Rules"), DTC is required to make book-
entry transfers among Participants on whose behalf it acts with respect to the
Certificates and is required to receive and transmit distributions of principal
of and interest on the Certificates. Participants with whom Certificate Owners
have accounts with respect to Certificates are similarly required to make book-
entry transfers and receive and transmit such distributions on behalf of their
respective Certificate Owners. Accordingly, although Certificate Owners will
not possess certificates, the Rules provide a mechanism by which Certificate
Owners will receive distributions and will be able to transfer their interests.
Unless and until Definitive Certificates are issued, Certificate Owners
who are not Participants may transfer ownership of Certificates only through
Participants by instructing such Participants to transfer Certificates, by book-
entry transfer, through DTC for the account of the purchasers of such
Certificates, which account is maintained with their respective Participants.
Under the Rules and in accordance with DTC's normal procedures, transfers of
ownership of Certificates will be executed through DTC and the accounts of the
respective Participants at DTC will be debited and credited. Similarly, the
respective Participants will make debits or credits, as the case may be, on
their records on behalf of the selling and purchasing Certificates Owners.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificateholder to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
S-34
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Certificates will be issued in registered form to Certificate Owners,
or their nominees, rather than to DTC (such Certificates being referred to
herein as "Definitive Certificates"), only if (i) DTC or the Servicer advises
the Trustee in writing that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to the Certificates and
the Servicer or the Trustee is unable to locate a qualified successor, (ii) the
Servicer, at its sole option, advises the Trustee in writing that it elects to
terminate the book-entry system through DTC or (iii) after the occurrence of an
Event of Servicing Termination, DTC, at the direction of Certificate Owners
owing Certificates evidencing Percentage Interests aggregating at least 51%,
advises the Trustee in writing that the continuation of a book-entry system
through DTC (or a successor thereto) to the exclusion of any physical
certificates being issued to Certificate Owners is no longer in the best
interests of Certificate Owners. Upon the issuance of Definitive Certificates
to Certificate Owners, such Certificates will be transferable directly (and not
exclusively on a book-entry basis) and registered holders will deal directly
with the Trustee with respect to transfers, notices and distributions. If
Definitive Certificates are issued, the Record Date may be changed to the last
day of the month immediately preceding the related Distribution Date.
DTC has advised the Servicer and the Trustee that, unless and until
Definitive Certificates are issued, DTC will take any action permitted to be
taken by a Certificateholder under the Agreement only at the direction of one or
more Participants to whose accounts with DTC the Certificates are credited. DTC
has advised the Servicer that DTC will take such action with respect to any
Percentage Interests of the Certificates only at the direction of and on behalf
of such Participants with respect to such Percentage Interests of the
Certificates. DTC may take actions, at the direction of the related
Participants, with respect to some Certificates which conflict with actions
taken with respect to other Certificates.]
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will
be applied by the Depositor towards the purchase of the Mortgage Loans. The
Mortgage Loans will have been acquired by the Depositor from _____________ in a
privately negotiated transaction.
LEGAL INVESTMENT CONSIDERATIONS
Although, as a condition to their issuance, the Certificates will be
rated in the [highest] rating category of the Rating Agency, the Certificates
will not constitute "mortgage related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984 ("SMMEA"), because most of the Mortgages
securing the Mortgage Loans are not first mortgages. Accordingly, many
institutions with legal authority to invest in comparably rated securities based
on first mortgage loans may not be legally authorized to invest in the
Certificates, which because they evidence interests in a pool that includes
junior mortgage loans are not "mortgage related securities" under SMMEA. See
"LEGAL INVESTMENT" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, dated ______________, and the Terms Agreement relating to the
Certificates, dated _____________ (collectively the "Underwriting Agreement"),
between the Depositor and Credit Suisse First Boston (the "Underwriter"), an
affiliate of the Depositor, the Depositor has agreed to sell to the Underwriter,
and the Underwriter has agreed to purchase from the Depositor, all of the
Certificates.
S-35
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<PAGE>
<PAGE>
The Underwriting Agreement provides that the Underwriter's obligations
thereunder are subject to certain conditions precedent, and that the Underwriter
will be obligated to purchase all of the Certificates if any are purchased.
The distribution of the Certificates by the Underwriter will be
effected from time to time in one or more negotiated transactions or otherwise
at varying prices to be determined at the time of sale. The Underwriter may
effect such transactions by selling the Certificates to or through dealers, and
such dealers may receive from the Underwriter compensation in the form of
underwriting discounts, concessions or commissions. The Underwriter and any
dealers that participate with the Underwriter in the distribution of the
Certificates may be deemed to be underwriters, and any discounts, commissions or
concessions received by them, and any profit on the resale of the Certificates
purchased by them, may be deemed to be underwriting discounts and commissions
under the Securities Act of 1933, as amended (the "Act").
The Underwriting Agreement provides that the Depositor will indemnify
the Underwriter against certain civil liabilities, including liabilities under
the Act.
LEGAL MATTERS
Certain legal matters with respect to the Certificates will be passed
upon by Stroock & Stroock & Lavan LLP, New York, New York.
RATING
It is a condition to issuance that the Certificates be rated not lower
than _________ by Standard & Poor's Corporation and ________________ by Moody's
Investors Service Inc.
A securities rating addresses the likelihood of the receipt by
Certificateholders of distributions on the Mortgage Loans to which they are
entitled. The rating takes into consideration the characteristics of the
Mortgage Loans and the structural, legal and tax aspects associated with the
Certificates. The ratings on the Certificates do not, however, constitute
statements regarding the likelihood or frequency of prepayments on the Mortgage
Loans or the possibility that Certificateholders might realize a lower than
anticipated yield.
A securities rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each securities rating should be evaluated
independently of similar ratings on different securities.
S-36
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==================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED
IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
ANY SECURITIES OTHER THAN THE OFFERED SECURITIES OFFERED HEREBY,
NOR AN OFFER OF THE OFFERED SECURITIES IN ANY STATE OR
JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER WOULD
BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE;
HOWEVER, IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS IS REQUIRED BY LAW TO BE DELIVERED,
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS WILL BE AMENDED OR
SUPPLEMENTED ACCORDINGLY.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT
Page
<S> <C>
Summary................................................... S-
Risk Factors.............................................. S-
Description of the Mortgage Loans......................... S-
The Seller................................................ S-
Description of the Sale and Purchase Agreement............ S-
The Servicer.............................................. S-
Prepayment and Yield Considerations....................... S-
Description of the Certificates........................... S-
Servicing of the Mortgage Loans........................... S-
The Trustee............................................... S-
Certain Legal Aspects of the Mortgage Loans............... S-
The Certificate Insurance Policy and the Certificate Insurer S-
Certain Federal Income Tax Considerations................. S-
ERISA Considerations...................................... S-
Legal Investment.......................................... S-
Underwriting.............................................. S-
Report of Experts......................................... S-
Ratings................................................... S-
Legal Matters............................................. S-
Index of Significant Prospectus Supplement Definitions.... S-
Annex I................................................... I-1
PROSPECTUS
Prospectus Supplement.....................................
Additional Information....................................
Incorporation of Certain Information by Reference.........
Summary...................................................
Risk Factors..............................................
The Trust Fund............................................
The Depositor.............................................
Use of Proceeds...........................................
Maturity, Prepayment and Yield Considerations.............
Description of the Securities.............................
Credit Support............................................
Description of Insurance..................................
Certain Legal Aspects of the Mortgage Loans and Contracts.
Certain Federal Income Tax Consequences...................
ERISA Considerations......................................
Legal Investment..........................................
Plan of Distribution......................................
Legal Matters.............................................
Index of Terms............................................
</TABLE>
===========================================================
===========================================================
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS
SUPPLEMENT, ALL DEALERS EFFECTING TRANSACTIONS IN THE
OFFERED CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT
AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
===========================================================
(SELLER)
$_________
Asset-Backed Certificates,
Series 199_-_
Credit Suisse First Boston Mortgage Securities Corp.
(Depositor)
PROSPECTUS SUPPLEMENT
LOGO
===========================================================
===========================================================
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses expected to be incurred in connection with the issuance and
distribution of the securities being registered, other than underwriting
compensation, are as set forth below. All such expenses except for the
registration and filing fees, are estimated.
<TABLE>
<S> <C>
SEC Registration Fee.......................................... $295.00
Legal Fees and Expenses....................................... *
Accounting Fees and Expenses.................................. *
Trustee's Fees and Expenses (including counsel fees).......... *
Printing and Engraving Fees................................... *
Rating Agency Fees............................................ *
Miscellaneous................................................. *
-------
Total....................................................... *
=======
</TABLE>
- ----------
* To be completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article V of the Certificate of Incorporation of the Depositor and Article X
of the By-laws of the Depositor provide for the indemnification of the
officers and directors of the Depositor in certain circumstances. Reference is
made to Exhibit 3.1 of this Registration Statement for the complete text of
the Certificate of Incorporation and reference is made to Exhibit 3.2 of this
Registration Statement for the complete text of the By-laws.
The ultimate parent of the Depositor carries directors' and officers'
liability insurance that covers certain liabilities and expenses of the
Depositor's directors and officers.
For provisions regarding the indemnification of controlling persons,
directors and officers of the Depositor by Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, reference
is made to the proposed forms of Underwriting Agreement filed as Exhibits 1.1
and 1.2 to this Registration Statement.
II-1
<PAGE>
<PAGE>
ITEM 16. EXHIBITS
(a) Financial Statements filed as part of the Registration Statement: none
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PG. NO.
------- ----------- -------
<C> <S> <C>
*1.1 --Forms of Underwriting Agreement (Mortgage Loans/Mortgage
Certificates)
*1.2 --Form of Underwriting Agreement (Contracts)
**3.1 --Restated Certificate of Incorporation of Depositor
**3.1.1 --Certificate of Amendment to the Certificate of
Incorporation of Depositor
*3.2 --By-laws of Depositor
*4.1 --Form of Standard Terms and Provisions of Pooling and
Servicing Mortgage Certificates)
*4.2 --Forms of Reference Agreement (Mortgage Loans/Mortgage
Certificates)
*4.3 --Form of Deposit Trust Agreement between Depositor and
Trustee
*4.4 --Form of Master Seller's Warranty and Servicing Agreement
*4.5 --Form of Standard Terms and Provisions of Pooling and
Servicing (Contracts)
*4.6 --Forms of Reference Agreement (Contracts)
*4.7 --Form of Standard Terms and Provisions of Pooling and
Servicing and Reference Agreement
*4.8 --Form of Pooling and Servicing Agreement (Mortgage Loans)
***4.9 --Form of Indenture
***4.10 --Form of Sale and Servicing Agreement
***4.11 --Form of Servicing Agreement
****5.1 --Opinion of Stroock & Stroock & Lavan LLP with respect to certain
matters involving the Certificates and Notes
****8.1 --Opinion of Stroock & Stroock & Lavan LLP as to tax matters
(included as part of Exhibit 5.1)
****23.1 --Consent of Stroock & Stroock & Lavan LLP (included as part of
Exhibit 5.1)
24.1 --Power of Attorney (included as part of signature page)
****25.1 --Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939 of the Indenture Trustee.
*28.1 --Form of Performance Bond
*28.2 --Form of Letter of Credit
*28.3 --Form of Primary Mortgage Insurance Policy
*28.4 --Form of Pool Insurance Policy
*28.5 --Form of Special Hazard Insurance Policy
*28.6 --Form of Mortgagor Bankruptcy Bond
</TABLE>
- --------
* As previously filed in connection with Registration Statement on Form S-11
(Registration No. 33-47579) and incorporated herein by reference.
** As previously filed in connection with Registration Statement on Form S-3
(Registration No. 333-21329) and incorporated herein by reference.
*** As previously filed in connection with Registration Statement on Form S-3
(Registration No. 333-29239) and incorporated herein by reference.
**** To be filed by amendment.
II-2
<PAGE>
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) Undertaking pursuant to Rule 415.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(b) As to documents subsequently filed that are incorporated by reference:
The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13 (a) or Section 15 (d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Undertaking in respect of indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(d) As to Qualification of Trust Indentures under the Trust Indenture Act of
1939 for Delayed Offerings.
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
II-3
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, State of New York on the 11th day of August,
1998.
CREDIT SUISSE FIRST BOSTON MORTGAGE
SECURITIES CORP.
/s/ Scott J. Ulm
-------------------------------------
Scott J. Ulm
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Scott J. Ulm, Lee Olesky,
William S. Pitofsky, Patrick D. Coleman, Diane Sottile and Thomas
Zingalli, or any of them (with full power to each of them to act alone), his or
her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him or her and his or her name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
II-4
<PAGE>
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/ LEE OLESKY Director and August 11,
- ------------------------------------- President 1998
LEE OLESKY (Principal
Executive Officer)
/s/ SCOTT J. ULM Director and August 11,
- ------------------------------------- Chairman of the 1998
SCOTT J. ULM Board
/s/ WILLIAM S. PITOFSKY Director and August 11,
- ------------------------------------- Vice President 1998
WILLIAM S. PITOFSKY
/s/ PATRICK D. COLEMAN Director August 11,
- ------------------------------------- 1998
PATRICK D. COLEMAN
/s/ DIANE SOTTILE Treasurer (Principal August 11,
- ------------------------------------- Financial Officer) 1998
DIANE SOTTILE
/s/ THOMAS ZINGALLI Vice President and August 11,
- ------------------------------------- Controller 1998
THOMAS ZINGALLI (Principal
Accounting Officer)
</TABLE>
II-5
<PAGE>
