The information in this prospectus supplement is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities Exchange Commission is effective. This prospectus supplement
is not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED ________________, 200_ Prospectus
supplement dated _________, ___) (to prospectus dated , )
$--------
[---------------]
Seller and Servicer
Credit Suisse First Boston
Mortgage Securities Corp.
Depositor
Mortgage-Backed Pass-Through Certificates, Series 200_-___
Issuer
The Trust
The trust will hold a pool of [one- to four-family
residential][commercial][multifamily] mortgage loans.
Offered Certificates
The trust will issue these classes of certificates that are offered under this
prospectus supplement:
o [_] classes of Class A Certificates
Credit Enhancement
Credit enhancement for all of these certificates will be provided by
subordinated certificates, overcollateralization represented by the excess of
the balance of the mortgage loans over the balance of the Class A Certificates,
[and a financial guaranty insurance policy issued by [_____].
You should consider carefully the risk factors beginning on page S-__ in this
prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the offered certificates or determined
that this prospectus supplement or the prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
The Attorney General of the State of New York has not passed on or endorsed the
merits of this offering. Any representation to the contrary is unlawful.
[Underwriter] will offer the Class A Certificates subject to availability.
[Name of Underwriter]
Underwriter
Version B
<PAGE>
Important notice about information presented in this
prospectus supplement and the prospectus
You should rely on the information contained in this document or to which
we have referred you to in this prospectus supplement. We have not authorized
anyone to provide you with information that is different. This document may only
be used where it is legal to sell these securities.
We provide information to you about the offered certificates in two
separate documents that progressively provide more detail:
o the prospectus, which provides general information, some of which may not
apply to your series of certificates; and
o this prospectus supplement, which describes the specific terms of your
series of certificates.
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions.
You can find a listing of the pages where capitalized terms used in this
prospectus supplement are defined under the caption "Index of Terms" beginning
on page 126 in the prospectus.
TABLE OF CONTENTS
[INSERT HERE]
<PAGE>
SUMMARY
The following summary is a very general overview of the offered
certificates and does not contain all of the information that you should
consider in making your investment decision. To understand all of the terms of
the offered certificates, you should read carefully this entire document and the
prospectus.
Title of securities.......[_____________________ Mortgage-Backed Pass-Through
Certificates, Series 200_-__].
Depositor Credit Suisse First Boston Mortgage Securities Corp.
Seller [______________________________].
Servicer [______________________________].
Trustee [______________________________].
Financial guaranty insurer[______________________________].
Mortgage Pool [______][fixed][adjustable] rate mortgage loans
with an aggregate principal balance of approximately
$[ ] as of the cut-off date, secured by [first/junior]
liens on [one- to four-family residential]
[commercial] [multifamily] properties.
Cut-off date [ ] 1, [ ].
----------------- -------
Closing date On or about [ , 200_].
---------------
Distribution date.........Beginning on [__________, 200_], and
thereafter on the [ ] day of each month, or if the [ ]
day is not a business day, on the next business day.
Scheduled final distribution date [__________, 20__]. The actual
final distribution date could be substantially
earlier.
Form of offered certificates. Book-entry.
See "Description of the Certificates--Book-Entry
Registration" in this prospectus supplement.
Minimum denominations.....$25,000.
S-3
<PAGE>
Offered Certificates
----------------------------------------------------------------------
Initial Initial
Certificate Rating
Pass-Through Principal Initial
Class Rate Balance (___/___) Designations
--------
----------------------------------------------------------------------
----------------------------------------------------------------------
Class A Certificates:
----------------------------------------------------------------------
----------------------------------------------------------------------
[A-1 Adjustable $ AAA/AAA Senior/Adjustable
Rate -------- Rate]
----------------------------------------------------------------------
[A-2 % $ AAA/AAA Senior/Fixed
-------- -------- Rate]
----------------------------------------------------------------------
[A-3 % $ AAA/AAA Senior/Lockout/Fixed
-------- -------- Rate]
----------------------------------------------------------------------
Total Class
A Certificates: $[_______]
----------------------------------------------------------------------
Non-Offered Certificates
----------------------------------------------------------------------
Class SB and Class R Certificates:
----------------------------------------------------------------------
SB NA $[ ] NA Subordinate
-------
----------------------------------------------------------------------
R NA $[ ] NA Subordinate
-------
----------------------------------------------------------------------
Total Class SB and Class R Certificates: $[ ]
----------------------------------------------------------------------
Total offered and
non-offered certificates: $[ ]
-------------
----------------------------------------------------------------------
Other Information:
Class A-1:
Adjustable
Rate: Initial Formula Maximum
Class A-1: [ ]% One-Month LIBOR + weighted average
------ [ ]% net mortgage
rate on the
------ mortgage loans
S-4
<PAGE>
The Trust
The depositor will establish a trust with respect to the Mortgage-Backed
Pass-Through Certificates, Series 200_-__ under a pooling and servicing
agreement. On the closing date, the depositor will deposit the pool of mortgage
loans described in this prospectus supplement into the trust. Each certificate
will represent a partial ownership interest in the trust.
[The trust will also include credit enhancement for the Class A Certificates in
the form of a financial guaranty insurance policy provided by _____________.]
The Mortgage Pool
The mortgage loans to be deposited into the trust have the following
characteristics as of the cut-off date:
[insert table]
[The interest rate on the mortgage loans will adjust on each adjustment date to
equal the sum of Six-Month LIBOR and the note margin on the mortgage, subject to
a maximum and minimum interest rate.]
For additional information regarding the mortgage pool see "Description of the
Mortgage Pool" in this prospectus supplement.
Distributions on the Offered Certificates
Amount available for monthly distribution. On each monthly distribution date,
the trustee will make distributions to investors. The amount available for
distribution will include:
o collections of monthly payments on the mortgage loans, including
prepayments and other unscheduled collections [plus]
o [advances for delinquent payments] minus
o the fees and expenses of the subservicers and the servicer, including
reimbursement for advances [minus]
o [the premium paid to the financial guaranty insurer].
See "Description of the Certificates--Glossary of Terms--Available Distribution
Amount" in this prospectus supplement.
Priority of distributions. Distributions on the offered certificates will be
made from available amounts as follows:
o [Payment to servicer for certain unreimbursed advances]
o Distribution of interest to the Class A Certificates
o Distributions of principal to the Class A Certificates
o [Reimbursement to the financial guaranty insurer for payments made by the
financial guaranty insurer to the Class A Certificates]
o Payments of excess interest payments on the mortgage loans to make
principal payments on the Class A Certificates, until the amount of
overcollateralization reaches the required amount
o Distributions of interest in respect of prepayment interest shortfalls on
the Class A Certificates
o Distribution of remaining funds to the Class SB and Class R Certificates
Interest distributions. The amount of interest owed to each class of Class A
Certificates on each distribution date will equal:
o the pass-through rate for that class of certificates multiplied by
o the principal balance of that class of certificates as of the day
immediately prior to the related distribution date multiplied by
o 1/12, in the case of the fixed-rate certificates or the actual number of
days in the interest accrual period divided by 360, in the case of the
adjustable rate certificates minus
S-5
<PAGE>
o the share of some types of interest shortfalls allocated to that class.
See "Description of the Certificates--Interest Distributions" in this prospectus
supplement.
Allocations of principal. Principal distributions on the certificates will be
allocated among the various classes of offered certificates as described in this
prospectus supplement. Until the required amount of overcollateralization is
reached, all principal payments on the mortgage loans will be distributed among
the Class A Certificates, unless the Class A Certificates are no longer
outstanding.
In addition, the Class A Certificates will receive a distribution in respect of
principal, to the extent of any excess interest payments on the mortgage loans
available to cover losses and then to increase the amount of
overcollateralization until the required amount of overcollateralization is
reached. In addition, the Class A Certificates will receive a distribution of
principal from the financial guaranty insurance policy to cover losses on the
mortgage loans allocated to the Class A Certificates.
See "Description of the Certificates--Principal Distributions on the Class A
Certificates" in this prospectus supplement.
Credit Enhancement
The credit enhancement for the benefit of the certificates consists of:
Excess Interest. Because more interest is paid by the mortgagors than is
necessary to pay the interest on the certificates each month, there will be
excess interest. Some of this excess interest may be used to protect the
certificates against some losses, by making an additional payment of principal
up to the amount of the losses.
Overcollateralization. Any excess interest not used to cover interest shortfalls
or current period losses will be paid as principal on the Class A Certificates
to reduce the principal balance of the Class A Certificates below the aggregate
principal balance of the mortgage loans. The excess amount of the balance of the
mortgage loans represents overcollateralization, which may absorb some losses on
the mortgage loans, if not covered by excess interest. If the level of
overcollateralization falls below what is required, the excess interest
described above will also be paid to the certificates as principal. This will
reduce the principal balance of the certificates faster than the principal
balance of the mortgage loans so that the required level of
overcollateralization is reached.
See "Description of the Certificates--Allocation of Losses; Subordination" in
this prospectus supplement.
[The Financial Guaranty Insurance Policy
_____________ will issue a financial guaranty insurance policy as a means of
providing additional credit enhancement for the Class A Certificates. Under the
policy, the financial guaranty insurer will pay an amount that will cover any
shortfalls in amounts available to pay the interest distribution amount for the
Class A Certificates on any distribution date, the principal portion of any
losses on the mortgage loans allocated to the Class A Certificates and any
unpaid certificate principal balance of the Class A Certificates on the final
distribution date. The financial guaranty insurance policy will not provide
coverage for prepayment interest shortfalls.]
[See "Description of the Certificates--Financial Guaranty Insurance Policy" and
"The Financial Guaranty Insurer" in this prospectus supplement.]
[Advances
For any month, if the servicer does not receive the full scheduled payment on a
mortgage loan, the servicer will advance funds to cover the amount of the
scheduled payment that was not made. However, the servicer will advance funds
only if it determines that the advance will be recoverable from future payments
or collections on that mortgage loan.
S-6
<PAGE>
See "Description of the Certificates--Advances" in this prospectus supplement.]
Optional Termination
On any distribution date on which the principal balances of the mortgage loans
is less than 10% of their principal balances as of the cut-off date, the
servicer or the depositor will have the option to:
o purchase from the trust all remaining mortgage loans, causing an early
retirement of the certificates; or
o purchase all the certificates.
Under either type of optional purchase, holders of the outstanding certificates
will receive the outstanding principal balance of the certificates in full with
accrued interest. However, no purchase of the mortgage loans or certificates
will be permitted if it would result in a draw under the policy unless the
financial guaranty insurer consents to the termination. In either case, there
will be no reimbursement of principal reductions or related interest that
resulted from losses allocated to the certificates.
See "Pooling and Servicing Agreement--Termination" in this prospectus supplement
and "Description of the Certificates--Termination" in the prospectus.
Ratings
When issued, the offered certificates will receive ratings which are not lower
than those listed in the table on page S-[ ] of this prospectus supplement. The
ratings on the offered certificates address the likelihood that holders of the
offered certificates will receive all distributions on the underlying mortgage
loans to which they are entitled. A security rating is not a recommendation to
buy, sell or hold a security and may be changed or withdrawn at any time by the
assigning rating agency. The ratings also do not address the rate of principal
prepayments on the mortgage loans. For example, the rate of prepayments, if
different than originally anticipated, could adversely affect the yield realized
by holders of the offered certificates.
See "Ratings" in this prospectus supplement.
Legal Investment
When issued, the Class [ ] Certificates will not be "mortgage related
securities" for purposes of SMMEA. You should consult your legal advisors in
determining whether and to what extent the offered certificates constitute legal
investments for you.
See "Legal Investment" in this prospectus supplement for important information
concerning possible restrictions on ownership of the offered certificates by
regulated institutions.
ERISA Considerations
The Class A Certificates may be considered eligible for purchase by persons
investing assets of employee benefit plans or individual retirement accounts.
Persons investing assets of such plans or accounts should consult with their
counsel before purchasing the notes.
See "ERISA Considerations" in this prospectus supplement and in the prospectus.
Tax Status
For federal income tax purposes, the depositor will elect to treat the trust as
[ ] real estate mortgage investment conduit[s]. The certificates, other than the
Class R Certificates, will represent ownership of regular interests in the trust
and will be treated as representing ownership of debt for federal income tax
purposes. You will be required to include in income all interest and original
issue discount, if any, on such certificates in accordance with the accrual
method of accounting regardless of your usual methods of accounting. For federal
income tax purposes, each of the Class R Certificates will be the sole residual
interest in one of the [ ] real estate mortgage investment conduits.
For further information regarding the federal income tax consequences of
investing in the offered certificates, including important information regarding
the tax treatment of the Class R Certificates, see "Material Federal Income Tax
Consequences" in this prospectus supplement and in the prospectus.
S-7
<PAGE>
RISK FACTORS
The offered certificates are not suitable investments for all investors.
In particular, you should not purchase any class of offered certificates unless
you understand the prepayment, credit, liquidity and market risks associated
with that class.
The offered certificates are complex securities. You should possess,
either alone or together with an investment advisor, the expertise necessary to
evaluate the information contained in this prospectus supplement and the
prospectus in the context of your financial situation and tolerance for risk.
You should carefully consider, among other things, the following factors
in connection with the purchase of the offered certificates:
Risk of Loss
The return on your Losses on the mortgage loans may occur due to a
certificates may be wide variety of causes, including a decline in
affected by losses real estate values, and adverse changes in the
on the mortgage borrower's financial condition. A decline in
loans, which could real estate values or economic conditions
occur due to a nationally or in the regions where the
variety of causes, mortgaged properties are located may increase
and are more likely the risk of losses on the mortgage loans.
because a [Special risks for specific loan types, such as
significant number negative amortization or escalating payments,
of mortgage loans will be disclosed if material to an individual
are secured by offering.]
junior liens on the
mortgaged property. [______% of the mortgage loans included in the
mortgage loan pool are secured by second
mortgages or deeds of trust. Proceeds from
liquidation of the property will be available
to satisfy the mortgage loans only if the
claims of any senior mortgages have been
satisfied in full. When it is uneconomical to
foreclose on the mortgaged property or engage
in other loss mitigation procedures, the
servicer may write off the entire outstanding
balance of the mortgage loan as a bad debt. The
foregoing risks are particularly applicable to
mortgage loans secured by second liens that
have high combined loan-to-value ratios or low
junior ratios because it is comparatively more
likely that the servicer would determine
foreclosure to be uneconomical. As of the
cut-off date, the weighted average combined
loan-to-value ratio of the mortgage loans is
______%, and approximately ______% of the
mortgage loans will have combined loan-to-value
ratios in excess of ______%.]
[The underwriting [The underwriting standards under which the
standards for the junior mortgage loans were underwritten are
junior mortgage analogous to credit lending, rather than
loans create mortgage lending, since underwriting decisions
greater risks to were based primarily on the borrower's credit
you, compared to history and capacity to repay rather than on
those for first the value of the collateral upon foreclosure.
lien loans.] The underwriting standards allow loans to be
S-8
<PAGE>
approved with combined loan-to-value ratios of
up to 125%. See "Description of the Mortgage
Pool--Underwriting Standards" in this prospectus
supplement. Because of the relatively high combined
loan-to-value ratios of the mortgage loans and the
fact that a significant number of the mortgage loans
are secured by junior liens, losses on the mortgage loans
will likely be higher than on traditional first
lien mortgage loans.]
[Origination [[ ]% of the mortgage loans included in
disclosure the mortgage pool are subject to special rules,
practices for the disclosure requirements and other regulatory
mortgage loans provisions because they are high cost loans.
could create Purchasers or assignees of these high cost
liabilities that loans, could be exposed to all claims and
may affect the defenses that the mortgagors could assert
return on your against the originators of the mortgage loans.
certificates.] Remedies available to the mortgagor include
monetary penalties, as well as recission rights
if the appropriate disclosures were not given as
required. See "Certain Legal Aspects of the
Mortgage Loans and Contracts--The Mortgage Loans--
Anti-Deficiency Legislation and Other Limitations on
Lenders" in the prospectus].
The return on your One risk of investing in mortgage-backed
certificates may be securities is created by any concentration of
particularly the related properties in one or more
sensitive to geographic regions. Approximately __% of
changes in real the cut-off date principal balance of the
estate markets in mortgage loans are located in [California]. If
specific areas. the regional economy or housing market weakens
in [California], or in any other region having
a significant concentration of properties
underlying the mortgage loans, the mortgage
loans in that region may experience high rates
of loss and delinquency, resulting in losses to
Class A Certificateholders. A region's
economic condition and housing market may be
adversely affected by a variety of events,
including natural disasters such as
earthquakes, hurricanes, floods and eruptions,
and civil disturbances, including riots.
[Concentrations material to an individual
offering will be disclosed.]
Some of the Approximately ___% of the mortgage loans (based
mortgage loans on principal balances) are not fully amortizing
provide for large over their terms to maturity and, thus, will
payments at require substantial principal payments (i.e., a
maturity. balloon amount) at their stated maturity.
Mortgage loans which require payment of a balloon amount
involve a greater degree of risk because the ability of a
mortgagor to pay a balloon amount typically will depend
upon the mortgagor's ability either to timely refinance the
loan or to sell the related mortgaged property.
See "Description of the Mortgage Pool" in this prospectus
supplement.
S-9
<PAGE>
The return on your The only credit enhancement for the Class A
certificates will Certificates will be:
be reduced if o the excess interest payments on the
losses exceed the mortgage loans;
credit enhancement o overcollateralization represented by the
available to your excess of the balance of the mortgage loans
certificates. over the balance of the Class A
Certificates; and
[o a financial guaranty insurance policy
issued by ____________.]
The return on your Mortgage loans similar to those included in the
certificates may be mortgage loan pool have been originated for a
reduced in an limited period of time. During this time,
economic downturn. economic conditions nationally and in most
regions of the country have been generally
favorable. However, a deterioration in
economic conditions could adversely affect the
ability and willingness of mortgagors to repay
their loans. No prediction can be made as to
the effect of an economic downturn on the rate
of delinquencies and losses on the mortgage
loans.
[The reloading of [With respect to mortgage loans which were used
debt could increase for debt consolidation, there can be no
your risk.] assurance that the borrower will not incur
further debt. This reloading of debt could
impair the ability of borrowers to service
their debts, which in turn could result in
higher rates of delinquency and loss on the
mortgage loans.]
The value of your If the performance of the mortgage loans is
certificates may be substantially worse than assumed by the rating
reduced if losses agencies, the ratings of any class of the
are higher than certificates may be lowered in the future.
expected This would probably reduce the value of those
certificates. Neither the depositor, the
servicer nor any other entity will have any
obligation to supplement any credit
enhancement, or to take any other action to
maintain any rating of the certificates.
See "Summary-Credit Enhancement" and
"Description of the Certificates-Allocation of
Losses; Subordination" in this prospectus
supplement.
Adverse The trust could become liable for an
environmental environmental condition at a mortgaged
conditions on the property. Any potential liability could reduce
mortgaged or delay payments to certificateholders.
property may
reduce or delay "Phase I" environmental assessments have been
your payments performed on all but [ ] of the mortgaged
properties, which constitutes [ ]% of the initial pool
balance. None of the environmental assessments revealed
material adverse environmental conditions or circumstances
affecting any mortgaged property, except those cases:
o in which the adverse conditions were
remediated or abated before the date of
issuance of the certificates;
S-10
<PAGE>
o in which an operations and maintenance
plan or periodic monitoring of the mortgaged
property or nearby properties was
recommended;
o involving a leaking underground storage tank or
groundwater contamination at a nearby property that had
not yet materially affected the mortgaged property and
for which a responsible party either has been identified
under applicable law or was then conducting remediation
of the related condition;
o in which groundwater, soil or other contamination was
identified or suspected, and an escrow reserve,
indemnity, environmental insurance or other collateral
was provided to cover the estimated costs of continued
monitoring, investigation, testing or remediation;
o involving radon; or
o in which the related borrower has agreed to seek a "case
closed" status for the issue from the applicable
governmental agency.
Some of the mortgage loans carry environmental insurance
which may provide coverage in an amount equal to all or a
portion of the principal amount of the loan or an amount
necessary to provide for certain remediation expenses.
There can be no assurance, however, that should such
coverage be needed, coverage would be available or
uncontested, that the terms and conditions of such coverage
would be met, that coverage would be sufficient for the
claims at issue or that coverage would not be subject to
certain deductibles.
To decrease the likelihood of environmental liability
against the trust, the servicer is required to obtain a
satisfactory environmental site assessment of a mortgaged
property and see that any required remedial action is taken
before acquiring title or assuming its operation.
See "Description of the Mortgage Pool--Underwriting
Standards--Environmental Assessments" in this prospectus
supplement and "Description of the
Certificates--Enforcement of Due-on-Sale Clauses;
Realization Upon Defaulted Mortgage Loans," "Risk
Factors--Environmental conditions may subject the mortgaged
property to liens or impose costs on the property owner"
and "Certain Legal Aspects of the Mortgage Loans and
Contracts--Environmental Legislation" in the prospectus.
S-11
<PAGE>
Loss Mitigation
Practices
The release of a [The servicer may use a wide variety of
lien may increase practices to limit losses on the mortgage
your risk. loans. The pooling and servicing agreement
permits the servicer to release the lien
on a limited number of mortgaged properties securing
the mortgage loans, if the mortgage loan is current in
payment. See "Pooling and Servicing Agreement--
Refinancing of Senior Lien" and "--Collection and
Liquidation Practices; Loss Mitigation"
in this prospectus supplement.]
Limited Obligations
Payments on the The certificates represent interests only in
mortgage loans, the Mortgage-Backed Pass-Through Certificates,
together with the Series 200_-___ Trust. Credit enhancement
financial guaranty includes overcollateralization, excess
insurance policy, interest, [and a financial guaranty insurance
are the primary policy]. The certificates do not represent an
source of payments interest in or obligation of the depositor, the
on your servicer or any of their affiliates. None of
certificates. the depositor, the servicer or any of their
affiliates will have any obligation to replace or
supplement the credit enhancement, or to take any other
action to maintain any rating of the certificates. If
proceeds from the assets of the Mortgage-Backed
Pass-Through Certificates, Series 200_-___ Trust are not
sufficient to make all payments provided for under the
pooling and servicing agreement, investors will have no
recourse to the depositor, the servicer or any of its
affiliates.
Liquidity Risks
You may have to A secondary market for your certificates may
hold your not develop. Even if a secondary market does
certificates to develop, it may not continue or it may be
maturity if their illiquid. Neither the underwriter nor any
marketability is other person will have any obligation to make a
limited. secondary market in your certificates.
Illiquidity means you may not be able to find a buyer to
buy your securities readily or at prices that will enable
you to realize a desired yield. Illiquidity can have a
severe adverse effect on the market value of your
certificates.
Any class of offered certificates may experience
illiquidity, although typically illiquidity is more likely
for classes that are especially sensitive to prepayment,
credit or interest rate risk, or that have been structured
to meet the investment requirements of limited categories
of investors.
S-12
<PAGE>
Special Yield and
Prepayment
Considerations
The yield to The yield to maturity on each class of offered
maturity on your certificates will depend on a variety of
certificates will factors, including:
vary depending on
the rate of o the rate and timing of principal payments
prepayments. on the mortgage loans, including
prepayments, defaults and liquidations, and
repurchases due to breaches of
representations or warranties;
o the pass-through rate for that class;
o interest shortfalls due to mortgagor
prepayments; and
o the purchase price of that class.
In general, if you purchase a certificate at a price higher
than its outstanding principal balance and principal
distributions on your certificate occur faster than you
assumed at the time of purchase, your yield will be lower
than you anticipated. Conversely, if you purchase a
certificate at a price lower than its outstanding principal
balance and principal distributions on that class occur
more slowly than you assumed at the time of purchase, your
yield will be lower than you anticipated.
The rate of Because mortgagors can typically prepay their
prepayments on the mortgage loans at any time, the rate and timing
mortgage loans will of principal distributions on the offered
vary depending on certificates are highly uncertain. Typically,
future market when market interest rates increase, borrowers
conditions, and are less likely to prepay their mortgage
other factors. loans. This could result in a slower return of
principal to you at a time when you might have
been able to reinvest your funds at a higher
rate of interest than the pass-through rate on
your class of certificates. On the other hand,
when market interest rates decrease, borrowers
are typically more likely to prepay their
mortgage loans. This could result in a faster
return of principal to you at a time when you
might not be able to reinvest your funds at an
interest rate as high as the pass-through rate
on your class of certificates.
S-13
<PAGE>
[Approximately ___% of the mortgage loans permit the
mortgagor to convert the adjustable rate on the mortgage
loan to a fixed rate. Upon the conversion, the subservicer
or the servicer will repurchase the mortgage loan, which
will have the same effect as a prepayment in full.
Mortgagors may be more likely to exercise their conversion
options when interest rates are rising. As a result, the
certificates may receive greater prepayments at a time when
prepayments would not normally be expected.]
See "Maturity and Prepayment Considerations" in
the prospectus.
[______% of the mortgage loans provide for payment of a
prepayment charge. Prepayment charges may reduce the rate
of prepayment on the mortgage loans until the end of the
period during which such prepayment charges apply. See
"Description of the Mortgage Pool--Mortgage Pool
Characteristics" in this prospectus supplement and
"Maturity and Prepayment Considerations" in the
prospectus.]
The yield on your The offered certificates of each class have
certificates will different yield considerations and different
be affected by the sensitivities to the rate and timing of
specific principal distributions. The following is a
characteristics general discussion of yield considerations and
that apply to that prepayment sensitivities of each class.
class, discussed
below. See "Certain Yield and Prepayment
Considerations" in this prospectus supplement.
Class A The Class A Certificates are subject to various
Certificates priorities for payment of principal.
Distributions of principal on the Class A
Certificates with an earlier priority of
payment will be affected by the rates of
prepayment of the mortgage loans early in the
life of the mortgage pool. Those classes of
Class A Certificates with a later priority of
payment will be affected by the rates of
prepayment of the mortgage loans experienced
both before and after the commencement of
principal distributions on those classes.
See "Description of the Certificates--Principal
Distributions on the Class A Certificates" in this
prospectus supplement.
[Class A-1 The interest rate on the Class A-1 Certificates
Certificates will vary with One-Month LIBOR. Therefore,
the yield to investors on the Class A-1 Certificates will
be sensitive to fluctuations in the level of LIBOR.
Investors should consider whether this volatility is
suitable to their investment needs.]
The Class A-1 Certificates may not always receive interest
at a rate equal to One-Month LIBOR plus the applicable
margin. If the weighted average of the net mortgage rates
S-14
<PAGE>
on the mortgage loans is less than One-Month LIBOR plus the
applicable margin, the interest rate on the Class A-1
Certificates will be reduced to that weighted average rate.
Thus, the yield to investors in the Class A-1 Certificates
will be sensitive to fluctuations in the level of One-Month
LIBOR and may be adversely affected by the application of
the weighted average net mortgage rate on the related
mortgage loans . The prepayment of the mortgage loans with
higher net mortgage rates may result in a lower weighted
average net mortgage rate. If on any distribution date the
application of the weighted average net mortgage rate
results in an interest payment lower than One-Month LIBOR
plus the applicable margin on the Class A-1 Certificates
during the related interest accrual period, the value of
those certificates may be temporarily or permanently
reduced. In a rising interest rate environment, the Class
A-1 Certificates may receive interest at the weighted
average net mortgage rate for a protracted period of time.
In addition, in such a situation, there would be less
excess interest payments on the mortgage loans to cover
losses and to create additional overcollateralization.
[Class A-3 It is not expected that the Class A-3
Certificates Certificates will receive any distributions of
principal until the distribution date _______________ in
_______________, Until the distribution date in , the Class
A-3 Certificates may receive a portion of principal
prepayments that is smaller than its pro rata share of
principal prepayments.]
[Risks Particular
to Multifamily
Properties:]
[Reductions in [ ] mortgaged properties, securing mortgage
occupancy and loans that represent [ ]% of the initial pool
rent levels on balance, are multifamily rental properties. A
multifamily decrease in occupancy or rent levels could
properties could result in realized losses on the mortgage
adversely affect loans. Occupancy and rent levels on multifamily
their value and properties may be adversely affected by:
cash flow
o local, regional or national economic conditions, which
may limit the amount of rent that can be charged for
rental units or result in a reduction in timely rent
payments;
o construction of additional housing units
in the same market;
S-15
<PAGE>
o local military base or
industrial/business closings;
o developments at local colleges and
universities;
o national, regional and local politics,
including current or future rent
stabilization and rent control laws and
agreements;
o trends in the senior housing market;
o the level of mortgage interest rates,
which may encourage tenants in multifamily
rental properties to purchase housing; and
o lack of amenities, unattractive physical
attributes or bad reputation of the
mortgaged property.]
[Student housing [ ] of the mortgaged properties, securing
concentrations mortgage loans that represent [ ]% of the
may affect cash initial pool balance, are student housing or
flow of a have high concentrations of student tenants. In
multifamily addition to other multifamily real estate
property risks, student housing risks include:
o increased influence of economic, social, governmental
and demographic factors as they relate to the number of
students attending colleges and universities in need of
student housing;
o reliance upon the well-being of the
colleges or universities to which the
facilities relate;
o student housing facilities are subject to competition
from colleges and universities as well as other
providers of student housing and physical layouts may
not be readily convertible to traditional multifamily
use;
o maintenance and insurance costs of
student housing can exceed the typical costs
of other multifamily housing;
o tenants or sub-tenants are individuals
who often have little or no credit history,
may not have parental guarantees and are not
tied to the local community; and
o turnover of tenants or sub-tenants can be significant
and student housing is less utilized or subject to
reduced rents during summer months.
[ ] mortgaged properties, consisting principally of student
housing, securing mortgage loans that represent [ ]% of the
initial pool balance are primarily leased to one tenant,
which increases the adverse effect of a tenant default or
lease termination.
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<PAGE>
See "Description of the Mortgage
Pool--Significant Mortgage Loans--[ ]" in this prospectus
supplement and "--Losses may be caused by tenant credit
risk on the mortgage loans" below.]
[Restrictions Tax credit, and city, state and federal housing
imposed on subsidies or similar programs may apply to
multifamily multifamily properties. The limitations and
properties by restrictions imposed by these programs could
government result in realized losses on the mortgage loans
programs could that may be allocated to your class of
also adversely certificates. These programs may include:
affect their
value and cash o rent limitations that could adversely
flow affect the ability of borrowers to increase
rents to maintain the condition of their
mortgaged properties and satisfy operating
expenses; and
o tenant income restrictions that may reduce the number of
eligible tenants in those mortgaged properties and
result in a reduction in occupancy rates.
The differences in rents between subsidized or supported
properties and other multifamily rental properties in the
same area may not be a sufficient economic incentive for
some eligible tenants to reside at a subsidized or
supported property that may have fewer amenities or be less
attractive as a residence.]
[Risks Particular
to Office
Properties:]
[Economic decline [ ] mortgaged properties, securing mortgage
in tenant loans that represent [ ]% of the initial pool
businesses or balance, are office properties.
changes in
demographic Economic decline in the businesses operated by
conditions could the tenants of office properties may increase
adversely affect the likelihood that a tenant may be unable to
the value and pay its rent, which could result in realized
cash flow from losses on the mortgage loans. A number of
office properties economic and demographic factors may adversely
affect the value of office properties,
including:
o the quality of the tenants in the
building;
o the physical attributes of the building
in relation to competing buildings;
o access to transportation;
o the availability of tax benefits;
o the strength and stability of businesses
operated by the tenant or tenants;
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<PAGE>
o the desirability of the location for
business; and
o the cost of refitting office space for a new tenant,
which is often significantly higher than the cost of
refitting other types of properties for new tenants.
These risks may be increased if revenue depends on a single
tenant, if the property is owner-occupied or if there is a
significant concentration of tenants in a particular
business or industry. [ ] of the mortgaged properties
representing [ ]% of the initial pool balance are secured
by single tenant office properties. For a description of
risk factors relating to single tenant properties, see
"--Losses may be caused by tenant credit risk on the
mortgage loans" below.]
[Competition with Competition from other office properties in the
other office same market could decrease occupancy or rental
properties could rates at office properties. Decreased occupancy
also adversely could result in realized losses on the mortgage
affect the value loans. Competition is affected by a property's
and cash flow age, condition, design, such as floor sizes and
from office layout, location, access to transportation and
properties ability to offer amenities to its tenants,
including sophisticated building systems, such as fiber
optic cables, satellite communications or other base
building technological features.]
[Risks Particular
to Retail
Properties:]
[A significant [ ] mortgaged properties, securing mortgage
tenant ceasing to loans that represent [ ]% of the initial pool
operate at a balance, are retail properties.
retail property
could adversely A significant tenant ceasing to do business at
affect its value a retail property could result in realized
and cash flow losses on the mortgage loans. The loss of a
significant tenant may be the result of the tenant's
voluntary decision not to renew a lease or to terminate it
in accordance with its terms, the bankruptcy or insolvency
of the tenant, the tenant's general cessation of business
activities or for other reasons. There is no guarantee that
any tenants will continue to occupy space in the related
retail property.
Some component of the total rent paid by retail tenants may
be tied to a percentage of gross sales. As a result, the
correlation between the success of tenant businesses and
property value is more direct for retail properties than
other types of commercial property. Significant tenants or
anchor tenants at a retail property play an important part
in generating customer traffic and making a retail property
a desirable location for other tenants at that property.
Some tenants at retail properties may be entitled to
terminate their leases or pay
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<PAGE>
reduced rent if an anchor tenant ceases operations at that
property. If anchor stores in a mortgaged property were to
close, the borrower may be unable to replace those anchor
tenants in a timely manner on similar terms, and customer
traffic may be reduced, possibly impacting sales at the
remaining retail tenants. A retail "anchor tenant" is
typically understood to be a tenant that is larger in size
and is important in attracting customers to a retail
property, whether or not it is located on the mortgaged
property.
These risks may be increased when the property is a single
tenant property. [ ] of the mortgaged properties
representing [ ]% of the initial pool balance are single
tenant retail properties. For a description of risk factors
relating to single tenant properties, see "--Losses may be
caused by tenant credit risk on the mortgage loans" below.]
[Retail Changes in consumer preferences and market
properties are demographics may adversely affect the value and
vulnerable to cash flow from retail properties, particularly
changes in properties with a specialty retail focus. You
consumer may experience losses on the certificates due
preferences to these changes. Retail properties are
particularly vulnerable to changes in consumer
preferences and market demographics that may
relate to:
o changes in consumer spending patterns;
o local competitive conditions, such as an
increased supply of retail space or the
construction of other shopping centers;
o the attractiveness of the properties and
the surrounding neighborhood to tenants and
their customers;
o the public perception of the safety of
the neighborhood; and
o the need to make major repairs or
improvements to satisfy major tenants.]
[Competition from Retail properties face competition from sources
alternative outside their local real estate market.
retail Catalogue retailers, home shopping networks,
distribution the internet, telemarketing and outlet centers
channels may all compete with more traditional retail
adversely affect properties for consumer dollars. These
the value and alternative retail outlets are often
cash flow from characterized by lower operating costs.
retail properties Continued growth of these alternative retail
outlets could adversely affect the rents collectible at the
retail properties which secure mortgage loans in the trust
and result in realized losses on the mortgage loans.]
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<PAGE>
[Risks Particular
to Industrial
Properties:]
[Changes in [ ] mortgaged properties, securing mortgage
economic and loans that represent [ ]% of the initial pool
demographic balance, are industrial properties. Economic
conditions could decline in the businesses operated by the
adversely affect tenants of industrial properties could result
the value and in realized losses on the mortgage loans that
cash flow from may be allocated to your class of certificates.
industrial
properties These risks are similar to those of tenants of
office properties. Industrial properties, however, may be
more dependent on a single tenant. [ ] of the mortgaged
properties representing [ ]% of the initial pool balance
are secured by single tenant industrial properties. For a
description of risk factors relating to office properties,
see "--Economic decline in tenant businesses or changes in
demographic conditions could adversely affect the value and
cash flow from office properties," and for a description of
risk factors relating to single tenant properties, see
"--Losses may be caused by tenant credit risk on the
mortgage loans" below.]
[Restrictions Site characteristics at industrial properties
imposed by site may impose restrictions that could cause
characteristics realized losses on the mortgage loans that may
could also be allocated to your class of certificates.
adversely affect Site characteristics which affect the value of
the value and an industrial property include:
cash flow from
industrial o clear heights;
properties
o column spacing;
o number of bays and bay depths;
o truck turning radius;
o divisibility;
o zoning restrictions; and
o overall functionality and accessibility.
An industrial property requires availability of labor
sources, proximity to supply sources and customers, and
accessibility to rail lines, major roadways and other
distribution channels.]
[Restrictions Properties used for many industrial purposes
imposed by are more prone to environmental concerns than
increased other property types. For a description of risk
environmental factors relating to environmental risks, see
risks could also "--Adverse environmental conditions on the
adversely affect mortgaged property may reduce or delay your
the value and payments" above.]
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<PAGE>
cash flow from
industrial
properties
[Risks Particular
to Hospitality
Properties:]
[Reductions in [ ] mortgaged properties, securing mortgage
room rates or loans that represent [ ]% of the initial pool
occupancy at a balance, are hospitality properties. A decrease
hospitality in room rates or occupancy at hospitality
property could properties could result in realized losses on
adversely affect the mortgage loans that may be allocated to
its value and your class of certificates. Room rates and
cash flow occupancy levels may depend upon the following
factors.
o The proximity of a hospitality property to major
population centers or attractions.
o Adverse local, regional or national economic conditions
or the construction of competing hospitality properties.
Because hospitality property rooms typically are rented
for short periods of time, the performance of
hospitality properties tends to be affected by adverse
economic conditions and competition more quickly than
other commercial properties.
o A hospitality property's ability to attract customers
and a portion of its revenues may depend on its having a
liquor license. A liquor license may not be transferable
if a foreclosure on the mortgaged property occurs.
o In many parts of the country the hotel and lodging
industry is seasonal in nature. Seasonality will cause
periodic fluctuations in room and other revenues,
occupancy levels, room rates and operating expenses.
o The viability of hospitality properties that are
franchisees of national or regional hotel chains depends
in large part on the continued existence and financial
strength of the franchisor. The public perception of the
franchise service mark and the duration of the franchise
license agreement are also important. If the franchisee
defaults on its debt, the trustee may be unable to use
the franchise license without the consent of the
franchisor due to restrictions on transfers imposed by
the franchise license agreements.]
[Risks Associated
with Tenants
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<PAGE>
Generally:]
[Losses may be Cash flow or value of a mortgaged property
caused by tenant could be reduced if tenants are unable to meet
credit risk on their lease obligations or become insolvent.
the mortgage loans The inability of tenants to meet their
obligations may result in realized losses on
the mortgage loans that may be allocated to
your class of certificates.
o If tenant sales in retail properties decline, rents
based on sales will decline. Tenants may be unable to
pay their rent or other occupancy costs as a result of
poor cash flow due to sales declines or the amount of
the gross sales component of rent will be reduced. If a
tenant defaults, the borrower may experience delays and
costs in enforcing the lessor's rights.
o If a tenant were to become insolvent and subject to any
bankruptcy or similar law, the collection of rental
payments could be interrupted and foreclosure on the
mortgaged property made more difficult. See "Certain
Legal Aspects of the Mortgage Loans and
Contracts--Anti-Deficiency Legislation and Other
Limitations on Lenders" in the prospectus.
These risks may be increased when the property is a single
tenant property, is owner-occupied or is leased to
relatively few tenants. [ ]of the mortgaged properties
representing [ ]% of the initial pool balance are secured
by single tenant properties.]
[Losses may be The income from and market value of retail,
caused by the office, multifamily and industrial properties
expiration of or would decline if space leases expired or
tenant defaults terminated, or tenants defaulted and the
on leases borrowers were unable to renew the leases or
relet the space on comparable terms.
If space is not renewed at all or is not renewed on
favorable terms, the trust may experience realized losses on
the mortgage loans that may be allocated to your class of
certificates.
Even if borrowers successfully relet vacated space, the
costs associated with reletting, including tenant
improvements, leasing commissions and free rent, can exceed
the amount of any reserves maintained for that purpose and
reduce cash flow from the mortgaged properties. Although
many of the mortgage loans require the borrower to maintain
escrows for leasing expenses, there is no guarantee that
these reserves will be sufficient.]
[Tenant The bankruptcy or insolvency of a major tenant,
bankruptcy such as an anchor tenant, or a number of
entails risks smaller tenants, may adversely affect the
income produced by a mortgaged property and result in
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<PAGE>
realized losses on the mortgage loans that may be allocated
to your class of certificates. Under the federal bankruptcy
code, a tenant has the option of assuming or rejecting any
unexpired lease. If the tenant rejects the lease, the
landlord's claim for breach of the lease would be a general
unsecured claim against the tenant, unless collateral
secures the claim. The claim would be limited to the unpaid
rent reserved under the lease for the periods before the
bankruptcy petition or earlier surrender of the leased
premises that are unrelated to the rejection, plus the
greater of one year's rent or 15% of the remaining reserved
rent, but not more than three years' rent. Even if
provisions in the lease prohibit assignment, in a
bankruptcy, the tenant may assign the lease to another
entity that could be less creditworthy than the tenant may
have been at the time of origination of the mortgage loan.
See "Certain Legal Aspects of the Mortgage Loans and
Contracts" in the prospectus.]
[Losses may be [Losses may be realized on the mortgage loans
caused by that may be allocated to your class of inadequate.
inadequate certificates if property management is property inadequate.
property The property manager is responsible for the
management following activities:
o responding to changes in the local market;
o planning and implementing the rental
structure, including establishing levels of
rent payments; and
o ensuring that maintenance and capital
improvements are carried out in a timely
fashion.
Sound property management controls costs, provides
appropriate service to tenants and ensures that
improvements are maintained. Sound property management can
also maintain cash flow, reduce vacancy, leasing and repair
costs and preserve building value. Property management
errors can impair the long-term viability of a property.]
[Conflicts of Managers of mortgaged properties and the
interests between borrowers may experience conflicts of
property managers interest in the management or ownership of mortgaged
and owners properties. These conflicts of interest could result in
losses losses result in realized losses on the mortgage loans
that may be allocated to your class of
certificates. These conflicts of interests may
exist because:
o the mortgaged properties may be managed
by property managers affiliated with the
borrowers;
o the mortgaged properties may be managed
by property managers who also manage other
properties that compete with the mortgaged
properties; and
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<PAGE>
o affiliates of the managers or the borrowers, or the
managers or the borrowers or both, may also own other
properties, including competing properties.]
[Limited alternative[ ] mortgaged properties, securing mortgage
uses of other loans that represent approximately [ ]% of the initial
property types pool balance, are "special purpose" properties
affect their that have limited alternative uses. "Special
value and cash
flow
"Special purpose" limitations could result in cash flow
realized losses on the mortgage loans that maybe allocated
to your class of certificates. Mortgage loans
secured by other property types, including mixed use
properties, may pose risks not associated with mortgage
loans secured by liens on other types of income-producing
real estate.]
[Losses may An appraisal was conducted for each mortgaged
result if the property in connection with its origination,
servicer is and the loan-to-value ratios as of the cut-off
unable to sell a date referred to in this prospectus supplement
mortgaged are based on the appraisals. If the servicer
property securing forecloses on a mortgaged property and realizes
a defaulted liquidation proceeds that are less than the
mortgage loan for appraised value, a realized loss on the
its appraised mortgage loan could result that may be
value allocated to your class of certificates.
Appraisals are not guarantees of present or future value.
Appraisals seek to establish the amount a typically
motivated buyer would pay a typically motivated seller as
of a designated date. This amount could be significantly
higher than the amount obtained from the sale of a
mortgaged property under a distress or liquidation sale at
a subsequent date. If a borrower defaults on a mortgage
loan, the servicer may be unable to sell the related
mortgaged property for its appraised value.
Appraisals are estimates of value at the time of the
appraisal based on the analysis and opinion of the
appraiser. The values of the mortgaged properties may have
changed significantly since the appraisal was performed.
Most appraisals have not been updated since the mortgage
loan was originated.]
[Subordinate [ ] of the mortgaged properties securing [ ]%
financing on the of the initial pool balance are encumbered by
mortgaged subordinate debt that is not part of the
property may mortgage pool. The existence of subordinate
increase risks indebtedness may adversely affect the
borrower's financial viability or the enforcement of its
lender's security interest in the mortgaged property and
result in realized losses on the mortgage loans that may be
allocated to your class of certificates. The borrower's
financial viability or the enforcement of the lender's
security interest could be adversely affected by
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<PAGE>
subordinate financing because:
o refinancing the mortgage loan at maturity
for the purpose of making any balloon
payments may be more difficult;
o reduced cash flow could result in
deferred maintenance; and
o if the borrower defaults after the holder of the
subordinated debt files for bankruptcy or is placed in
involuntary receivership, foreclosing on the mortgaged
property could be delayed.
The holder of any material subordinate debt on each of the
mortgaged properties has agreed not to foreclose for so
long as the mortgage loan is outstanding and the trust is
not pursuing a foreclosure action. All of the mortgage
loans either prohibit the borrower from encumbering the
mortgaged property with additional secured debt or require
the consent of the holder of the first lien before so
encumbering the mortgaged property. A violation of this
prohibition, however, may not become evident until the
mortgage loan otherwise defaults. For a description of
subordinate debt relating to the mortgaged properties, see
"Description of the Mortgage Pool--Secured Subordinate
Financing" in this prospectus supplement.]
[Mezzanine debt The direct parents of some borrowers have pledged
secured by equity or are permitted to pledge their equity interest
in the borrower in the borrower to secure mezzanine debt incurred by
may increase risk the parent or other obligations. The existence of this
indebtedness could adversely affect the financial viability
of such borrower or the availability of proceeds from the
operation of the property to fund items such as
replacements, tenant improvements or other capital
expenditures. The value of the equity in the borrower held
by the sponsoring entities of the borrower could also be
adversely affected by the existence of mezzanine
indebtedness or other obligations. There is a risk that any
holder of mezzanine debt may attempt to use its rights as
owner of the mezzanine loan to protect itself against an
exercise of rights by the lender under the mortgage loan.
For a description of mezzanine debt relating to the
mortgaged properties see "Description of the Mortgage
Pool--Unsecured Subordinate and Mezzanine Financing" in this
prospectus supplement.]
[Related Borrowers Some borrowers under the mortgage loans are
may make losses affiliated or under common control with one
on the mortgage another. When borrowers are related, any
loans more severe adverse circumstances relating to one borrower
or its affiliates, and affecting one mortgage
loan or mortgaged property, also can affect the related
borrower's mortgage loans or mortgaged properties which
could make losses more likely or more severe or both than
S-26
<PAGE>
would be the case if there were no related borrowers.
For example, a borrower that owns or controls several
mortgaged properties and experiences financial difficulty
at one mortgaged property might defer maintenance at one or
more other mortgaged properties to satisfy current expenses
of the mortgaged property experiencing financial
difficulty. Alternatively, the borrower could attempt to
avert foreclosure by filing a bankruptcy petition. The
bankruptcy or insolvency of one borrower or its affiliate
could have an adverse effect on the operation of all of the
mortgaged properties of that borrower and its affiliates
and on the ability of those mortgaged properties to produce
sufficient cash flow to make required payments on the
mortgage loans. The insufficiency of cash flows could
result in realized losses on the mortgage loans that may be
allocated to your class of certificates. See "Certain Legal
Aspects of the Mortgage Loans and
Contracts--Anti-Deficiency Legislation and Other
Limitations on Lenders" in the prospectus.]
[Larger-than- Several mortgage loans, either individually or
average balance together with other mortgage loans with which they
loans may make cross-collateralized, have outstanding severe balances
losses more severe that are substantially higher than the average
outstanding balance. If a mortgage pool includes
mortgage loans with larger-than-average balances, any
realized losses on the mortgage loans with
larger-than-average balances could be more severe, relative
to the size of the pool, than would be the case if the
aggregate balance of the pool were distributed among a
larger number of mortgage loans.]
[Losses could [ ] mortgage loans, representing [ ]% of the
result from initial pool balance, are cross-collateralized
limitation on with one or more other mortgage loans.
enforceability of Cross-collateralization arrangements involving
cross-collateraliza-more than one borrower could be challenged as a
tion fraudulent conveyance by creditors of a borrower or by the
representative or the bankruptcy estate of a borrower, if
that borrower were to become a debtor in a bankruptcy case.
The additional security provided by cross-collateralization
would not be available if a court determines that the grant
was a fraudulent conveyance. If a creditor were to
successfully assert a fraudulent conveyance claim it could
result in realized losses on the mortgage loans that may be
allocated to your class of certificates. See "Certain Legal
Aspects of the Mortgage Loans and
Contracts--Anti-Deficiency Legislation and Other
Limitations on Lenders" in the prospectus and "Description
of the Mortgage Pool--Terms and Conditions of the Mortgage
Loans--Related Borrowers, Cross-Collateralized Mortgage
Loans and Mortgage Loans Collateralized
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<PAGE>
by Multiple Properties" in this prospectus supplement.]
[Tax considerations [Payment of taxes on any net income from "foreclosure
related to property" acquired by the trust will reduce the net proceeds
foreclosure available for distribution to certificateholders. If the
may reduce payments trust acquires a mortgaged property after a default on the
to certificate- related mortgage loan under a foreclosure or delivery of a
holders deed in lieu of foreclosure, that property will be
considered "foreclosure property" under the tax rules
applicable to real estate mortgage investment conduits.
It will continue to be considered "foreclosure
property" for a period of three full years after
the taxable year of acquisition by the
trust, with possible extensions. Any net income from this
"foreclosure property," other than qualifying "rents from
real property," will subject the real estate mortgage
investment conduit containing the mortgage loans to federal
and possibly state or local tax on that income at the
highest marginal corporate tax rate.]
[State law Some jurisdictions, including California, have
limitations on laws that prohibit more than one "judicial
remedies action" to enforce a mortgage, and some courts
have viewed the term "judicial action" broadly. The pooling
and servicing agreement will require the servicer and any
replacement special servicer to obtain legal advice before
enforcing any rights under the mortgage loans that relate
to properties where the rule could be applicable. In
addition, the servicer and any replacement special servicer
may be required to foreclose on properties in states where
the "one action" rules apply before foreclosing on
properties located in states where judicial foreclosure is
the only permitted method of foreclosure.
Because of these considerations, the ability of the
servicer and any replacement special servicer to foreclose
on the mortgage loans may be limited by the application of
state laws. Actions could also subject the trust to
liability as a "mortgagee-in-possession" or result in
equitable subordination of the claims of the trustee to the
claims of other creditors of the borrower. The servicer
will be required to consider these factors in deciding what
alternative to pursue after a default.]
[Bankruptcy rules [Operation of the federal bankruptcy code and the related
may limit the state laws may interfere with the ability of a lender to
ability of a foreclose upon a lender mortgaged property and to take other
lender to enforce actions to enforce its remedies against the borrower or
remedies the mortgaged property. For a description of
risks related to bankruptcy, see "Certain Legal
Aspects of the Mortgage Loans and Contracts--Anti-Deficiency
Legislation and Other Limitations on Lenders" in
the prospectus.]
[Increases in [ ] mortgaged properties securing mortgage
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<PAGE>
ground rents may loans, which represent [ ]% of the initial
adversely affect pool balance, are subject solely to the lien of
a borrower's a mortgage on the applicable borrower's
ability to make leasehold interest under a ground lease. [ ]
payments under a mortgaged properties securing mortgage loans,
related mortgage which represent [ ]% of the initial pool
loan and cause balance, are subject to the lien of either a
realized losses mortgage on both the borrower's leasehold
on the mortgage interest and the ground lessor's fee simple
loans interest in the mortgaged property or a
mortgage on the borrower's leasehold interest in a portion
of the mortgaged property and the borrower's fee simple
interest in the remaining portion of the mortgaged
property.
Mortgage loans secured by leasehold interests may provide
for the resetting of ground lease rents based on factors
such as the fair market value of the related mortgaged
property or prevailing interest rates. Bankruptcy rules may
limit the ability of a lender to enforce remedies.
The bankruptcy of a lessor or a lessee under a ground lease
could result in losses on the mortgage loans. Upon
bankruptcy of a lessor or a lessee under a ground lease,
the debtor entity has the right to assume and continue or
reject and terminate the ground lease. Section 365(h) of
the federal bankruptcy code permits a ground lessee whose
ground lease is rejected by a debtor ground lessor to
remain in possession of its leased premises under the rent
reserved in the lease for the term, including renewals of
the ground lease. The ground lessee, however, is not
entitled to enforce the obligation of the ground lessor to
provide any services required under the ground lease. If a
ground lessee/borrower in bankruptcy rejected any or all of
its ground leases, the leasehold mortgagee would have the
right to succeed to the ground lessee/borrower's position
under the lease only if the ground lessor had specifically
granted the mortgagee that right. If the ground lessor and
the ground lessee/borrower are involved in concurrent
bankruptcy proceedings, the trustee may be unable to
enforce the bankrupt ground lessee/borrower's obligation to
refuse to treat a ground lease rejected by a bankrupt
ground lessor as terminated. If this happened, a ground
lease could be terminated notwithstanding lender protection
provisions contained therein or in the mortgage. If the
borrower's leasehold were to be terminated after a lease
default, the leasehold mortgagee would lose its security.
Each of the ground leases related to the mortgage loans,
however, generally contains the following protections to
mitigate this risk:
o It requires the lessor to give the leasehold mortgagee
notice of lessee defaults and an opportunity to cure
them.
o It permits the leasehold estate to be assigned to and by
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<PAGE>
the leasehold mortgagee at and after a foreclosure sale.
o It contains certain other protective provisions
typically included in a "mortgageable" ground lease.
See "Description of the Mortgage Pool--Ground Leases" in
this prospectus supplement.]
[Your payments Noncompliance with zoning and building codes
may be reduced or may cause the borrower to experience cash flow
delayed if zoning delays and shortfalls. These delays or
and building code shortfalls in payments could result in realized
noncompliance on losses in the mortgage loans that may be
the mortgaged allocated to your class of certificates.
properties
adversely affects Each seller has taken steps to establish that
the ability of the use and operation of the related mortgaged
borrowers to make properties securing the mortgage loans are in
payments on the compliance in all material respects with all
mortgage loans applicable zoning, land-use, building, fire and
health ordinances, rules, regulations, and orders. Evidence
of this compliance may be in the form of legal opinions,
certifications from government officials, title policy
endorsements or representations by the related borrower in
the related mortgage loan documents. These steps may not
have revealed all possible violations. Some violations may
exist at any particular mortgaged property, but the seller
does not consider those defects known to it to be material.
In many cases, the use, operation or structure of a
mortgaged property constitutes a permitted nonconforming
use or structure that may not be rebuilt to its current
state if a material casualty event occurs. Generally,
insurance proceeds will be available in the event of a
casualty affecting the mortgaged property. The insurance
proceeds will be available to rebuild the mortgaged
property or for application to the mortgage loan. If a
mortgaged property could not be rebuilt to its current
state or its current use were no longer permitted due to
building violations or changes in zoning or other
regulations, then the borrower might experience cash flow
delays and shortfalls as referred to above.]
[Changes in As the mortgage loans are repaid, liquidated or
concentrations of repurchased, the characteristics of the pool
borrowers, may vary. For example, the relative
mortgage loans or concentrations of properties, geographic
property location, property characteristics, and number
characteristics of borrowers and affiliated borrowers may
may increase the change. Classes that have a lower priority for
likelihood of payment of principal are more likely to be
losses on the exposed to risks associated with any of these
certificates changes.]
S-29
<PAGE>
[Compliance with If the borrower were required to pay expenses
the Americans and fines imposed by the Americans with
with Disabilities Disabilities Act of 1990, the amount available
Act may reduce to make payments on the mortgage loan would be
payments to reduced. Reductions in funds available to make
certificateholders mortgage loan payments could result in realized
losses on the mortgage loans that may be allocated to your
class of certificates. Under the Americans with
Disabilities Act, all public accommodations are required to
meet federal requirements related to access and use by
disabled persons. If the mortgaged properties do not comply
with this law, the borrowers may be required to incur costs
of compliance. Noncompliance could result in the imposition
of fines by the federal government or an award of damages
to private litigants.]
[Litigation may Legal proceedings may be pending and, from
reduce payments to time to time, threatened, against the
certificates borrowers and their affiliates relating to the business
of the borrowers and their affiliates, or arising
out of the ordinary course of that business.
This litigation could have a material adverse
effect on the distributions to
certificateholders.]
S-30
<PAGE>
INTRODUCTION
The Depositor will establish a trust with respect to Series -__ on the
closing date, under a pooling and servicing agreement among the depositor, the
servicer and the trustee, dated as of the cut-off date. On the closing date, the
depositor will deposit into the trust a pool of mortgage loans that, in the
aggregate, will constitute a mortgage pool, and that will be secured by first or
junior liens on one-to four-family residential properties.
Some capitalized terms used in this prospectus supplement have the
meanings given below under "Description of the Certificates--Glossary of Terms"
or in the prospectus under "Glossary."
DESCRIPTION OF THE MORTGAGE POOL
General
The mortgage pool will consist of mortgage loans with an aggregate
principal balance outstanding as of the cut-off date, after deducting payments
of principal due on or before the cut-off date, of $ . The mortgage loans are
secured by [first] [and junior liens] on fee simple or leasehold interests in
[one- to four-family residential][commercial][multifamily] real properties.
[___% of the mortgage loans have a due date other than the first day of each
month]. In each case, the property securing the mortgage loan is referred to as
the mortgaged property. [The mortgage pool will consist of [fixed]
[adjustable]-rate mortgage loans with terms to maturity of not more than [ ]
years from the date of origination. [Approximately __% of the mortgage loans are
secured by second liens on the mortgaged properties.] All percentages of the
mortgage loans described in this prospectus supplement are approximate
percentages by aggregate principal balance as of the cut-off date unless
otherwise indicated.
All of the mortgage loans were purchased by the depositor from, and will
be serviced by, [ ]. See "The Seller and Servicer" below.
Under the terms of the pooling and servicing agreement, the Seller will
make representations and warranties with respect to the mortgage loans to the
trustee for the benefit of the certificateholders.
To the extent that the Seller does not repurchase a mortgage loan in the
event of a breach of its representations and warranties with respect to that
mortgage loan, neither the Depositor nor any other person will be required to
repurchase the mortgage loan.
[Balloon Loans
[ ] of the mortgage loans, which represent approximately [ ]% of the
initial pool balance, are balloon loans that provide for monthly payments of
principal based on amortization schedules significantly longer than the
remaining terms of those mortgage loans. As a result, a substantial principal
amount will be due and payable together with the corresponding interest payment
on each balloon loan on its maturity date, unless the borrower prepays the
balloon loan before its maturity date.]
S-31
<PAGE>
[Defeasance
[ ]% of the mortgage loans secured by commercial properties provide that
after a specified period, if no default exists under the mortgage loan, the
borrower may exercise a defeasance option to obtain the release of one or more
of the mortgaged properties, from the lien of the mortgage upon satisfaction of
conditions, including that the borrower:
(1) pays on any due date
o all interest accrued and unpaid on the principal balance of the
mortgage note to and, including that due date,
o all other sums, excluding scheduled interest or principal
payments not yet due and owing, due under the mortgage loan, and
o any costs and expenses related to the release,
(2) delivers or pledges to the trustee defeasance collateral
o that consists of direct, non-callable obligations of, or
non-callable obligations, fully guaranteed as to timely payment
by, the United States of America; and
o that provides payments:
o on or before all successive scheduled payment dates from that due
date to the related maturity date, and
o in an amount equal to or greater than the scheduled payments due
on those dates under the mortgage loan, or, for
cross-collateralized mortgage loans or mortgage loans secured by
multiple mortgaged properties which permit defeasance, an amount
equal to not less than the portion of the scheduled payments
allocable to the released mortgaged property, and
(3) delivers a security agreement granting the trust a first priority
security interest in the defeasance collateral and an opinion of
counsel to that effect.
The mortgaged property will be released from the lien of the mortgage loan
and the defeasance collateral will be substituted as the collateral securing the
mortgage loan when these conditions are met.]
[Prepayment Provisions
Each mortgage loan prohibits voluntary principal prepayments at any time
except during an open period following the expiration of the lockout period and
defeasance period for that mortgage loan or during a period following the
lockout period when any prepayment must be accompanied by a prepayment premium.
S-32
<PAGE>
Any prepayment premiums actually collected on the mortgage loans will be
distributed to the respective classes of certificateholders in the amounts and
priorities described under "Description of the
Certificates--Distributions--Distributions of Prepayment Premiums" in this
prospectus supplement. The enforceability of provisions similar to the
provisions of the mortgage loans providing for the payment of a prepayment
premium upon an involuntary prepayment is unclear under the laws of a number of
states. The obligation to pay a prepayment premium with an involuntary
prepayment may not be enforceable under applicable law or, if enforceable, the
foreclosure proceeds may not be sufficient to make the payment.
Liquidation proceeds recovered from any defaulted mortgage loan will, in
most cases, be applied to cover outstanding servicing expenses and unpaid
principal and interest before being applied to cover any prepayment premium due.
The depositor makes no representation as to the enforceability of the provision
of any mortgage loan requiring the payment of a prepayment premium or as to the
collectability of any prepayment premium. Generally, no prepayment premium will
be payable upon any mandatory prepayment of a mortgage loan caused by a casualty
or condemnation. See "Certain Legal Aspects of the Mortgage Loans and
Contracts--Default Interest and Limitations on Prepayments" in the prospectus.
In most cases, no prepayment premium will be payable upon any mandatory
prepayment of a mortgage loan caused by a casualty or condemnation. No
prepayment premium will be payable with the repurchase of a mortgage loan by a
seller for a breach of representation or warranty or any failure to deliver any
related documentation on the part of that seller. No prepayment premium will be
payable with the purchase of all of the mortgage loans and any REO properties in
connection with the termination of the trust fund or with the purchase of
defaulted mortgage loans by the servicer or any holder or holders of
certificates evidencing a majority interest in the controlling class.]
[Related Borrowers, Cross-Collateralized Mortgage Loans and Mortgage Loans
Collateralized by Multiple Properties
[ ] mortgage loans, which represent [ ]% of the initial pool balance, are
cross-collateralized mortgage loans among groups of related borrowers. [ ]
mortgage loans, other than the cross-collateralized mortgage loans, which
represent [ ]% of the initial pool balance, are secured by one or more mortgages
encumbering multiple mortgaged properties. Each of these mortgage loans is
evidenced by a separate mortgage note, and is not treated as a set of
cross-collateralized mortgage loans. Because of this, the total number of
mortgage loans in the mortgage pool is [ ], while the total number of mortgaged
properties in the mortgage pool is [ ]. In most cases, we treat a mortgage loan
that is secured by mortgaged properties that are located in more than one state
as an individual mortgage loan, except that when we describe the geographic
concentration and property type distribution of the mortgage pool, we treat
these mortgage loans as multiple mortgage loans that are allocated a cut-off
date balance based on the allocated loan amount. Losses could result from
limitations on the enforceability of cross-collateralization. For a discussion
of risks related to cross-collateralized loans, see "Risk Factors" in this
prospectus supplement.
[insert additional disclosure regarding isolating individual properties
and risks, rights and obligations of the parties in respect of the
cross-collateralized groups, as appropriate]
S-33
<PAGE>
In addition to the cross-collateralized loans and the mortgage loans
secured by multiple mortgaged properties, some sets of mortgage loans were made
to borrowers who are affiliated or under common control with one another. None
of these sets of mortgage loans represents more than [ ]% of the initial pool
balance.]
[Due-on-Sale and Due-on-Encumbrance Provisions
All of the mortgage loans contain both due-on-sale and due-on-encumbrance
clauses. With limited exceptions, these clauses either:
o permit the holder of the mortgage to accelerate the maturity of
the related mortgage loan if the borrower sells or transfers or
encumbers the mortgaged property in violation of the terms of the
mortgage or other loan documents, or
o prohibit the borrower from doing so without the consent of the
holder of the mortgage. See "--Secured Subordinate Financing" in
this prospectus supplement.
Some of the mortgage loans permit either:
o transfer of the related mortgaged property if specified
conditions are satisfied or if the transfer is to a borrower
reasonably acceptable to the lender, or
o transfers to specified parties related to the borrower.
The servicer will determine, in accordance with the servicing standard,
whether to exercise any right the holder of any mortgage may have under a
due-on-sale or due-on-encumbrance clause to accelerate payment of the related
mortgage loan or to withhold its consent to the transfer or encumbrance of the
mortgaged property.]
[Secured Subordinate Financing
[ ] mortgage loans representing [ ]% of the initial pool balance are
secured by mortgaged properties known to be encumbered by subordinated debt that
is not part of the mortgage pool. In all cases, the holder of any material
subordinated debt has agreed not to foreclose for so long as the related
mortgage loan is outstanding and the trust is not pursuing a foreclosure action.
All of the remaining mortgage loans either prohibit the borrower from
encumbering the mortgaged property with additional secured debt or will require
the consent of the trustee before so encumbering the property. See "Risk
Factors--Subordinate financing on the mortgaged property may increase risks" in
this prospectus supplement and "Certain Legal Aspects of the Mortgage Loans and
Contracts--Subordinate Financing" in the prospectus.
The following table indicates those mortgaged properties that are known to
the depositor to be encumbered by secured subordinate debt, the initial
principal amount of the secured subordinate debt and the cut-off date principal
balances of the related mortgage loans.
Secured Subordinate Debt
S-34
<PAGE>
PRINCIPAL
% OF AMOUNT OF
LOAN CUT-OFF INITIAL SECURED
CONTROL LOAN DATE POOL SUBORDINATE
NUMBER NUMBER PROPERTY NAME BALANCE BALANCE DEBT
[Unsecured Subordinate and Mezzanine Financing
Some of the mortgage loans may permit the borrower to incur unsecured
subordinated debt in the future, in most cases, conditioned upon delivery of a
subordination agreement or standstill agreement or both and requirements that
limit the use of proceeds to refurbishing or renovating the property or
acquiring furniture, fixtures and equipment for the property or both. [ ] of the
mortgage loans having a cut-off date balance of $[ ], and representing
approximately [ ]% of the initial pool balance, permits the borrower to incur
unsecured subordinated debt and/or mezzanine debt secured by equity interests in
the borrower if the sum of all mezzanine, subordinated and other debt secured by
the mortgaged property does not exceed 80% of the lesser of the (a) fair market
value of the property determined by the lender and (b) the most recent purchase
price of the property. Some of the mortgage loans also permit the owner of the
borrower to incur "mezzanine debt" secured by the ownership interest in the
borrower. This financing effectively reduces the indirect equity interest of any
such owner in the related mortgaged property. No such "mezzanine debt" is
included in the mortgage pool. At the time such mezzanine or subordinated debt
is incurred, the DSCR for that mortgage loan may not be less than 1.20x and the
total DSCR (on a pro forma basis) must not be less than 1.10x. Subject to these
tests, there is no cap on the amount of unsecured subordinated debt or mezzanine
debt that may be incurred.
Additional debt, in any form, may cause a diversion of funds from property
maintenance and increase the likelihood that the borrower will become the
subject of a bankruptcy proceeding.
Except as described above, the depositor has not been able to confirm
whether the respective borrowers under the mortgage loans have any other debt
outstanding.
See "Risk Factors--Subordinate financing on the mortgaged property may
increase risk" and "--Mezzanine debt secured by equity in the borrower may
increase risk" in this prospectus supplement and "Certain Legal Aspects of the
Mortgage Loans and Contracts--Subordinate Financing" in the prospectus.]
[Ground Leases
[ ] mortgaged properties securing mortgage loans, which represent [ ]% of
the initial pool balance, are subject solely to the lien of a mortgage on the
applicable borrower's leasehold interest in such mortgaged property.
S-35
<PAGE>
[ ] mortgaged properties securing mortgage loans, which represent [ ]% of
the initial pool balance, are subject to the lien of either:
o a mortgage on both the borrower's leasehold interest and the
ground lessor's fee simple interest in the mortgaged property or
o a mortgage on both the borrower's leasehold interest in a portion
of the mortgaged property and the borrower's fee simple interest
in the remaining portion of the mortgaged property.
[ ] of the ground leases (including any extension options) expire less
than ten years after the stated maturity of the related mortgage loan. Under the
terms of each such ground lease, the ground lessor generally has either made its
fee interest subject to the related mortgage or, typically, has agreed to give
the holder of the mortgage loan notice of, and has granted such holder the right
to cure, any default or breach by the lessee.]
[Significant Mortgage Loans
[The [ ] Loan
The Loan. The "[ ] loan" representing [ ]% of the initial pool balance was
originated by [ ] on [ ] and has a principal balance as of the cut-off date of
approximately $[ ]. The [ ] loan is a balloon loan with a maturity date of [ ]
and is secured by, among other things, a fee mortgage encumbering a [[ ] unit
multifamily building with retail space] located in [ ]. The [ ] loan was made to
[ ].
Payment and prepayment terms for the [ ] loan are set forth in the
following table:
[[ ] Loan Payment and Prepayment Table].
The [ ] Property. [ ].
Defeasance. [ ].
Value. [ ].
Underwritten NCF and DSC Ratio. [ ].
Property Management. [ ].
Master Lease. [ ].
Debt Service Reserve. [ ].
Lockbox. [ ].]
S-36
<PAGE>
Mortgage Pool Characteristics
None of the mortgage loans will have been originated prior to , or will
have a maturity date later than 1, 20 . No mortgage loan will have a remaining
term to maturity as of the cut-off date of less than months. The weighted
average remaining term to maturity of the mortgage loans as of the cut-off date
will be approximately months. The weighted average original term to maturity of
the mortgage loans as of the cut-off date will be approximately months. __% of
the mortgage loans are fully amortizing and have original terms to maturity of
approximately fifteen years, with a weighted average remaining term to stated
maturity of these mortgage loans of __ months. __% of the mortgage loans are
fully amortizing and have original terms to maturity of approximately thirty
years, with a weighted average remaining term to stated maturity of these
mortgage loans of __ months.
[Approximately % of the mortgage loans will be Buy-Down Loans.]
None of the mortgage loans provide for deferred interest or negative
amortization.
[Approximately ___% of the mortgage loans are Convertible Mortgage Loans,
which provide that, at the option of the related mortgagor, the adjustable
interest rate on a mortgage loan may be converted to a fixed interest rate. Upon
conversion, the mortgage rate will be converted to a fixed interest rate
determined in accordance with the formula set forth in the related mortgage note
which formula is intended to result in a mortgage rate which is not less than
the then current market interest rates, subject to applicable usury laws. After
the conversion, the monthly payments of principal and interest will be adjusted
to provide for full amortization over the remaining term to scheduled maturity.]
[The servicer will be obligated to repurchase any Convertible Mortgage
Loan following the conversion thereof at a price equal to the unpaid principal
balance thereof plus accrued interest to the first day of the month in which the
purchase price is to be distributed to the Class A Certificates. If the servicer
fails to repurchase a Convertible Mortgage Loan following the conversion
thereof, it will not constitute an Event of Default under the Pooling and
Servicing Agreement and the mortgage loan will remain in the trust fund as a
fixed-rate loan.]
Approximately ___% of the mortgage loans will have mortgage rates
calculated on the basis of the simple interest method. See "The Trust Fund--The
Mortgage Pools--Simple Interest Loans" in the prospectus.
[Mortgage Rate Adjustment: The mortgage rate on the mortgage loans will
adjust semi-annually commencing approximately six months after origination, on
the adjustment date specified in the related mortgage note, to a rate equal to
the sum, rounded as specified in the related mortgage notes, of Six-Month LIBOR
and the note margin set forth in the related mortgage note, subject to the
limitations described in this prospectus supplement.]
[The amount of the monthly payment on each mortgage loan will be adjusted
semi-annually on the due date of the month following the month in which the
adjustment date occurs to equal the amount necessary to pay interest at the
then-applicable mortgage rate and to fully amortize the outstanding principal
balance of each mortgage loan over its remaining term to
S-37
<PAGE>
stated maturity. As of the cut-off date, ___% of the mortgage loans will have
reached their first adjustment date. The mortgage loans will have various
adjustment dates, note margins and limitations on the mortgage rate adjustments,
as described below.]
[The mortgage rate on each loan may not increase or decrease on any
adjustment date by more than a specified percentage per annum. This periodic
rate cap is not more than ___%, except that the mortgage rate on some of the
mortgage loans may adjust up to ___% on the initial adjustment date.]
[The mortgage rate on a mortgage loan may not exceed the maximum mortgage
rate or be less than the minimum mortgage rate specified for such mortgage loan
in the related mortgage note. The minimum mortgage rate for each mortgage loan
will be equal to the note margin, except in the case of ____% of the mortgage
loans, which have a minimum mortgage rate greater than the note margin. The
minimum mortgage rates on the mortgage loans will range from ____% to ____%,
with a weighted average minimum mortgage rate as of the cut-off date of _____%.
The maximum mortgage rates on the mortgage loans will range from ____% to
______%, with a weighted average maximum mortgage rate as of the cut-off date of
____%. No mortgage loan provides for payment caps on any adjustment date that
would result in deferred interest or negative amortization.]
[Six-Month LIBOR. The reference date with respect to each mortgage loan is
the date as of which Six-Month LIBOR, as published by The Wall Street Journal,
is determined. The reference date with respect to each mortgage loan is:
o the first business day of the month immediately preceding the
month in which the adjustment date occurs,
o the date forty-five days prior to the adjustment date,
o the date fifteen days prior to the adjustment date, or
o the 20th day of the month preceding the month in which the
adjustment date occurs;
except that the reference date with respect to ___ mortgage loans, representing
approximately ___% of the aggregate principal balance of the mortgage loans,
will adjust with respect to Six-Month LIBOR as published by Fannie Mae and as
most recently available as of the date forty-five days prior to the adjustment
date.]
[Listed below are levels of Six-Month LIBOR as published by The Wall
Street Journal that are or would have been applicable to mortgage loans with a
reference date of the first business day of the preceding month, and having the
following adjustment dates for the indicated years. There can be no assurance
that levels of Six-Month LIBOR published by Fannie Mae, or published in The Wall
Street Journal on a different reference date would have been at the same levels
as those set forth below. The following does not purport to be representative of
future levels of Six-Month LIBOR, as published by Fannie Mae or The Wall Street
Journal. No
S-38
<PAGE>
assurance can be given as to the level of Six-Month LIBOR on any adjustment date
or during the life of any mortgage loan based on Six-Month LIBOR.]
[table of Six-Month LIBOR]
The initial mortgage rate in effect on a mortgage loan typically will be
lower, and may be significantly lower, than the mortgage rate that would have
been in effect based on Six-Month LIBOR and the related note margin. Therefore,
unless Six-Month LIBOR declines after origination of a mortgage loan, the
related mortgage rate will typically increase on the first adjustment date
following origination of such mortgage loan, subject to the periodic rate cap.
The repayment of the mortgage loans will be dependent on the ability of the
mortgagors to make larger monthly payments following adjustments of the mortgage
rate. Mortgage loans that have the same initial mortgage rate may not always
bear interest at the same mortgage rate because such mortgage loans may have
different adjustment dates (and the mortgage rates therefore may reflect
different related Index values), note margins, maximum mortgage rates and
minimum mortgage rates. The net mortgage rate with respect to each mortgage loan
as of the cut-off date will be set forth in the mortgage loan schedule attached
to the Pooling and Servicing Agreement. The net mortgage rate on each mortgage
loan will be adjusted on each adjustment date to equal the servicing fee rate,
which the mortgage rate on the mortgage loan minus the sum of (i) the rate per
annum at which the servicing fee accrues on the mortgage loan and (ii) the
policy premium rate, which is the amount of the premium payable to the financial
guaranty insurer with respect to the financial guaranty insurance policy,
subject to any periodic rate cap, but may not exceed the maximum net mortgage
rate, or be less than the minimum net mortgage rate for such mortgage loan. See
"Description of the Mortgage Pool--Mortgage Pool Characteristics" in this
prospectus supplement.]
Set forth below is a description of some additional characteristics of the
mortgage loans as of the cut-off date unless otherwise indicated. All
percentages of the mortgage loans are approximate percentages by aggregate
principal balance as of the cut-off date unless otherwise indicated. Unless
otherwise specified, all principal balances of the mortgage loans are as of the
cut-off date and are rounded to the nearest dollar.
Mortgage Rates
Cut-off Date
Number of Principal Percent of
Mortgage Rates (%) Mortgage Loans Balance Mortgage Pool
$ %
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<PAGE>
Total $ %
As of the cut-off date, the weighted average mortgage rate of the mortgage
loans will be approximately % per annum.
Original Mortgage Loan Principal Balances
Cut-off Date
Original Mortgage Number of Principal Percentage of
Loan Balance Mortgage Loans Balance Mortgage Pool
$ $ %
Total $ %
As of the cut-off date, the average unpaid principal balance of the
mortgage loans will be approximately $ .
S-40
<PAGE>
Net Mortgage Rates of the Mortgage Loans
Number of Cut-off Date Percent of
Net Mortgage Mortgage Principal Mortgage
Rates (%) Loans Balance Loans
6.000-................6.499 $ %
6.500-................6.999
7.000-................7.499
7.500-................7.999
8.000-................8.499
8.500-................8.999
9.000-................9.499
9.500-................9.999
10.000-...............10.499
11.000-...............11.499
11.500-...............11.999
12.000-...............12.499
12.500-...............12.999
13.000-...............13.499
Total.................. $ %
As of the cut-off date, the weighted average net mortgage rate of the
mortgage loans will be approximately _______% per annum.
[Combined Loan-to-Value Ratios
Cut-off date
Combined Loan Number of Principal Percentage of
to Value Ratio (%) Mortgage Loans Balance Mortgage Pool
$ %
Total $ %
The weighted average combined LTV ratio at origination of the mortgage
loans will be approximately %.]
--------
-
[The method for calculating the combined LTV ratio is described below
under the caption "Underwriting Standards."]
S-41
<PAGE>
[Junior Ratios of the Mortgage Loans
Cut-off
Number of Date Percent of
Mortgage Principal Mortgage
Junior Ratio(%) Loans Balance Loans
- $ %
-
-
-
-
-
-
-
-
-
Total $ %
=====
------------------
Excludes mortgage loans secured by first liens on the related
mortgaged property. With respect to each mortgage loan secured by a
second lien on the related mortgaged property, the Junior Ratio is
the ratio of the original principal balance of the mortgage loan to
the sum of (i) the original principal balance of that mortgage loan,
and (ii) the unpaid principal balance of any senior lien at the time
of the origination of that mortgage loan.
The weighted average Junior Ratio as of the cut-off date was
approximately __%.]
Geographic Distributions of Mortgaged Properties
Cut-off Date
Number of Principal Percentage of
State Mortgage Loans Balance Mortgage Pool
[California $ %
Connecticut
Illinois
New Jersey
New York]
Other (1)
S-42
<PAGE>
Total $ %
(1) Other includes states and the District of Columbia with under 3%
concentrations individually.
No more than % of the mortgage loans will be secured by mortgaged
properties located in any one zip code area in California and no more than % of
the mortgage loans will be secured by mortgaged properties located in any one
zip code area outside California.
Mortgage Loan Purpose
Cut-off Date
Number of Principal Percentage of
Loan Purpose Mortgage Loans Balance Mortgage Pool
Purchase $ %
Rate/Term
Refinance
Equity Refinance
Total $ %
The weighted average combined LTV ratio at origination of rate and term
refinance mortgage loans will be %. The weighted average combined LTV ratio at
origination of equity refinance mortgage loans will be %.
Mortgage Loan Documentation Types
Cut-off Date
Number of Principal Percentage of
Documentation Type Mortgage Loans Balance Mortgage Pool
Full $ %
Reduced
Total $ %
o For purposes of the above table, Reduced Documentation Type
includes mortgage loans which were underwritten under a no stated
income program.
[The weighted average LTV ratio at origination of the mortgage loans which
were underwritten under a reduced loan documentation program will be %. No more
than % of the reduced loan documentation mortgage loans will be secured by
mortgaged properties located in California.]
S-43
<PAGE>
Occupancy Types
Cut-off Date
Number of Principal Percentage of
Occupancy Mortgage Loans Balance Mortgage Pool
Primary Residence $ %
Second/Vacation
Non Owner-occupied
Total $ %
Mortgaged Property Types
Cut-off Date
Number of Principal Percentage of
Property Type Mortgage Loans Balance Mortgage Pool
Single-family $ %
detached
Planned Unit
Developments
(detached)
Two- to
four-family units
Condo Low-Rise
(less than 5
stories)
Condo Mid-Rise (5
to 8 stories)
Condo High-Rise
(9 stories or
more)
Townhouse
Planned Unit
Developments
(attached)
Cooperative Units
Multifamily
Leasehold
S-44
<PAGE>
Total $ %
[Lien Priority of the Mortgage Loans
Number of Cut-off Date Percent of
Lien Property Mortgage Loans Principal Mortgage
Balance Loans
First Lien $ %
-- ---
Second Lien $ %
-- ---
Total $ %]
== ===
-
Remaining Term of Scheduled Maturity of the Mortgage Loans
Number of Cut-off Date Percent of
Months Remaining to Scheduled Mortgage Principal Mortgage
Maturity Loans Balance Loans
$
%
%
%
%
%
%
%
%
Total $ % %
The weighted average remaining term to maturity of the mortgage loans as
of the cut-off date was approximately ___ months.
[In connection with each mortgage loan that is secured by a leasehold
interest, the related seller shall have represented to the depositor that, among
other things:
o the use of leasehold estates for residential properties is an
accepted practice in the area where the related mortgaged
property is located;
o residential property in the area consisting of leasehold estates
is readily marketable;
o the lease is recorded and no party is in any way in breach of any
provision of the lease;
S-45
<PAGE>
o the leasehold is in full force and effect and is not subject to
any prior lien or encumbrance by which the leasehold could be
terminated or subject to any charge or penalty; and
o the remaining term of the lease does not terminate less than ten
years after the maturity date of each such mortgage loan.
Underwriting Standards
General
All of the mortgage loans included in the mortgage pool will be acquired
by the depositor from the seller. The following is a brief description of the
various underwriting standards and the procedures applicable to the mortgage
loans.
All [one- to four-family residential][commercial][multifamily] mortgage
loans must meet acceptable credit, appraisal and underwriting criteria as
established by the seller. The seller's underwriting standards are applied in
accordance with applicable state and federal laws and regulations. Underwriting
guidelines are established to set acceptable criteria regarding credit history,
repayment ability, adequacy of necessary liquidity, and adequacy of the
collateral. These guidelines typically conform to secondary market standards,
particularly for conforming loan amounts.
Additional loan-to-value ratio guidelines are established for individual
programs and loan amount ranges.
[The mortgage loans have been originated under documentation guidelines
classified as "Full Doc", "Low Doc Reduced Doc" and "Streamline Refinance Doc."
The Full Doc program consists of two years of tax returns for self-employed
applicants, paystubs and W-2's for salaried applicants and bank statements for
verification of liquidity. The Low Doc program utilizes income as stated by the
borrower in the loan application and, for certain loan-to-value ratios and loan
amounts, assets as stated by the borrower. In Low Doc transactions, independent
confirmation of the borrower's source of income is obtained. The Reduced
Documentation program utilizes borrower paystubs and W-2 forms and a Streamline
Refinance Documentation program utilizes borrower paystubs and original
appraised value with a current drive-by inspection.]
The seller's underwriting of the mortgage loans consisted of an analysis
of the following applicant information:
o an applicant's income, employment, assets, debts, payments and
specific questions regarding credit history,
o an evaluation and confirmation of an applicant's credit history,
o the adequacy and stability of an applicant's income, including a
review of the documentation, verification of employment and
income, an analysis of tax returns and statements of assets and
liabilities.
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o calculations are made to establish the relationship between fixed
expenses and gross monthly income, which are reviewed for the
applicant's overall ability to repay the mortgage loan including
other income sources, commitment to the property as evidenced by
loan to value, other liquid resources, ability to accumulate
assets and other compensating factors, and
o the adequacy of the mortgaged property to serve as collateral for
a mortgage loan, including a physical inspection of the property,
an evaluation of the property's value for recent sales of
comparable properties and its conformity to neighborhood
standards.
[All mortgage loans are subject to a sampling by the seller's internal
Quality Assurance Department, which reviews and reverifies a statistical
sampling of loans on a regular basis. All loans with loan-to-value ratios over
80% have either private mortgage insurance coverage in an amount meeting Fannie
Mae and Freddie Mac requirements or a higher interest rate in lieu of private
mortgage insurance.] Adequate title insurance and hazard insurance is required
for all loans. From time to time, loan-to-value ratio exceptions may be made for
credit worthy applicants who exhibit strong compensating factors and well
supported collateral valuations.
[Environmental Assessments
"Phase I" environmental site assessments or updates of previously
conducted assessments were performed on all but [ ] of the mortgaged properties,
which constitute [ ]% of the initial pool balance. "Phase II" environmental site
assessments were performed on some mortgaged properties. These environmental
site assessments were performed for the seller or the report was delivered to
the seller as part of its acquisition or origination of the mortgage loan. For
all but [ ] of the mortgaged properties which represent [ ]% of the initial pool
balance, these environmental assessments were performed during the 12-month
period before the cut-off date.
Material adverse environmental conditions or circumstances revealed by
these environmental assessments for the mortgaged properties are described in
"Risk Factors--Adverse environmental conditions on the mortgaged property may
reduce or delay your payments."
The information contained in this prospectus supplement is based on the
environmental assessments and has not been independently verified by the
depositor, the seller, the servicer, the underwriters or any of their respective
affiliates.]
[Property Condition Assessments
Inspections or updates of previously conducted inspections of all except [
] of the mortgaged properties, which constitute [ ]% of the initial pool
balance, were conducted in connection with the origination or the purchase of
the related mortgage loan by independent licensed engineers or architects or
both. For all but [ ] of the mortgaged properties, which secure mortgage loans
representing [ ]% of the initial pool balance, the inspections were conducted
within the 12-month period before the cut-off date for the related mortgage
loan. The inspections were conducted to inspect the exterior walls, roofing,
interior construction, mechanical and
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electrical systems and general condition of the site, buildings and other
improvements located at a mortgaged property. The resulting reports on some of
the mortgaged properties indicated a variety of deferred maintenance items and
recommended capital expenditures. In some instances, repairs or maintenance were
completed before closing or cash reserves were established to fund the deferred
maintenance or replacement items or both.]
[Appraisals
An appraisal for each mortgaged property was performed or an existing
appraisal updated in connection with the origination or the purchase of the
related mortgage loan. For all but [ ] of the mortgaged properties, which secure
mortgage loans representing [ ]% of the initial pool balance, the appraisals
were performed during the 12-month period before the cut-off date. The appraised
value of the mortgaged property or properties is greater than the original
principal balance of the mortgage loan or the aggregate original principal
balance of any set of cross-collateralized loans. All appraisals were conducted
by an independent appraiser that is state certified or designated as a member of
the Appraisal Institute. The appraisal for all but [ ] mortgaged properties,
which constitute [ ]% of the initial pool balance, or a separate letter contains
a statement by the appraiser to the effect that the appraisal guidelines of
Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of
1989, were followed in preparing the appraisal. However, none of the depositor,
the underwriters, or the seller has independently verified the accuracy of the
appraiser's statement. For a discussion of the risks related to appraisals, see
"Risk Factors--Losses may result if the servicer is unable to sell a mortgaged
property securing a defaulted mortgage loan for its appraised value" in this
prospectus supplement.
For information about the values of the mortgaged properties available to
the depositor as of the cut-off date.]
[Hazard, Liability and Other Insurance
The mortgage loans typically require that the mortgaged property be
insured by a hazard insurance policy with a customary deductible and in an
amount at least equal to the lesser of the outstanding principal balance of the
mortgage loan and 100% of the full insurable replacement cost of the
improvements located on the mortgaged property. If applicable, the policy
contains appropriate endorsements to avoid the application of co-insurance and
does not permit reduction in insurance proceeds for depreciation.
Flood insurance, if available, must be in effect for any mortgaged
property that at the time of origination included any area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards. The flood insurance policy must meet the requirements of the then
current guidelines of the Federal Insurance Administration, be provided by a
generally acceptable insurance carrier and be in an amount representing coverage
not less than the least of:
o the outstanding principal balance of the mortgage loan,
o the full insurable value of the mortgaged property,
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o the maximum amount of insurance available under the National
Flood Insurance Act of 1968, and
o 100% of the replacement cost of the improvements located on the
mortgaged property, except in some cases where self-insurance was
permitted.
The standard form of hazard insurance policy typically covers physical
damage or destruction of the improvements on the mortgaged property caused by
fire, lightning, explosion, smoke, windstorm and hail, riot or strike and civil
commotion. The policies may contain some conditions and exclusions to coverage.
Each mortgage typically also requires the borrower to maintain
comprehensive general liability insurance against claims for personal and bodily
injury, death or property damage occurring on, in or about the mortgaged
property in an amount customarily required by institutional lenders.
Each mortgage typically further requires the related borrower to maintain
business interruption or rent loss insurance in an amount not less than 100% of
the projected rental income from the related mortgaged property for not less
than twelve months.
The mortgaged properties are typically not insured for earthquake risk.
For mortgaged properties located in California and some other seismic zones, the
seller typically conducted seismic studies to assess the "probable maximum loss"
for the related mortgaged properties. In some circumstances, the related
borrower was required to obtain earthquake insurance covering the mortgaged
properties. Some of these mortgaged properties may be insured for earthquake
risk in amounts less than the outstanding principal balances of the mortgage
loan.]
[Earnouts and Additional Collateral Loans
Some of the mortgage loans are additionally secured by cash reserves or
irrevocable letters of credit that will be released upon satisfaction by the
borrower of leasing-related or other conditions, including, in some cases,
achieving specified debt service coverage ratios or loan-to-value ratios. If
these conditions are not met, under some mortgage loans, the related reserve or
credit enhancement amount will be applied to partially defease or prepay the
related mortgage loan. Any resulting partial prepayment may not be required to
be accompanied by payment of a prepayment premium or yield maintenance payment.
Under [ ] mortgage loans, amounts will be retained as additional collateral.]
THE SELLER AND SERVICER
General
General
[____________________], is the seller and servicer for all the mortgage loans in
the mortgage pool.
[ADDITIONAL SERVICER INFORMATION TO BE INCLUDED]
----------------------------------------------
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DESCRIPTION OF THE CERTIFICATES
General
The Mortgage-Backed Pass-Through Certificates, Series 200_-___ will
include the following [three] classes of Class A Certificates:
o [Class A-1 Certificates, or the Adjustable Rate Certificates
o Class A-2 Certificates; and
o Class A-3 Certificates, or the Lockout Certificates; and together with
the Class A-2 Certificates, the Fixed Rate Certificates]
In addition to the Class A Certificates, the Mortgage-Backed Pass-Through
Certificates, Series 200_-___ will also include [two] classes of certificates
which are designated as the Class SB Certificates and Class R Certificates. Only
the Class A Certificates are offered by this prospectus supplement. See
"Glossary" in the prospectus for the meanings of capitalized terms and acronyms
not otherwise defined in this prospectus supplement.
The certificates will evidence the entire beneficial ownership interest in
the trust fund. The trust fund will consist of:
o the mortgage loans
o the assets as from time to time that are identified as deposited
in respect of the mortgage loans in the Custodial Account and in
the Payment Account and belonging to the trust fund
o property acquired by foreclosure of the mortgage loans or deed in
lieu of foreclosure
o any applicable primary insurance policies and primary hazard
insurance policies
o the financial guaranty insurance policy; and
o all proceeds of any of the foregoing.
The Class A Certificates will be available only in book-entry form through
facilities of The Depository Trust Company. The Class A Certificates will be
issued, maintained and transferred on the book-entry records of DTC and its
participants. The Class A Certificates will be issued in minimum denominations
of $25,000 and integral multiples of $1 in excess thereof.
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The Class A Certificates will be represented by one or more certificates
registered in the name of the nominee of DTC. The depositor has been informed by
DTC that DTC's nominee will be Cede & Co. No beneficial owner will be entitled
to receive a certificate of any class in fully registered form, a definitive
certificate, except as described in this prospectus supplement under
"--Book-Entry Registration of Certain of the Offered Certificates--Definitive
Certificates." Unless and until definitive certificates are issued for the Class
A Certificates under the limited circumstances described in this prospectus
supplement:
o all references to actions by certificateholders with respect to
the Class A Certificates shall refer to actions taken by DTC upon
instructions from its participants, and
o all references in this prospectus supplement to distributions,
notices, reports and statements to certificateholders with
respect to the Class A Certificates shall refer to distributions,
notices, reports and statements to DTC or Cede, as the registered
holder of the Class A Certificates, for distribution to
beneficial owners by DTC in accordance with DTC procedures.
According to DTC, the foregoing information with respect to DTC has been
provided for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind.
Book-Entry Registration of Certain of the Offered Certificates
General. Beneficial owners that are not participants or indirect
participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, the Class A Certificates may do so only through participants
and indirect participants. In addition, beneficial owners will receive all
distributions of principal of and interest on the Class A Certificates from the
paying agent through DTC and participants. Accordingly, beneficial owners may
experience delays in their receipt of payments. Unless and until definitive
certificates are issued for the Class A Certificates, it is anticipated that the
only registered certificateholder of the Class A Certificates will be Cede, as
nominee of DTC. Beneficial owners will not be recognized by the trustee or the
servicer as certificateholders, as the term is used in the pooling and servicing
agreement, and beneficial owners will be permitted to receive information
furnished to certificateholders and to exercise the rights of certificateholders
only indirectly through DTC, its participants and indirect participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of the Class A
Certificates among participants and to receive and transmit distributions of
principal of, and interest on, the Class A Certificates. Participants and
indirect participants with which beneficial owners have accounts with respect to
the Class A Certificates similarly are required to make book-entry transfers and
receive and transmit distributions on behalf of their respective beneficial
owners. Accordingly, although beneficial owners will not possess physical
certificates evidencing their interests in the Class A Certificates, DTC's rules
provide a mechanism by which beneficial owners, through their participants and
indirect participants, will receive distributions and will be able to transfer
their interests in the Class A Certificates.
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None of the depositor, the servicer or the trustee will have any liability
for any actions taken by DTC or its nominee, including, without limitation,
actions for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Class A Certificates held by Cede, as
nominee for DTC, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Definitive Certificates. Definitive certificates will be issued to
beneficial owners or their nominees, respectively, rather than to DTC or its
nominee, only under the limited conditions described in the prospectus under
"Description of the Certificates--Form of Certificates."
Upon the occurrence of an event described in the prospectus in the third
paragraph under "Description of the Certificates--Form of Certificates," the
trustee is required to notify, through DTC, participants who have ownership of
Class A Certificates as indicated on the records of DTC of the availability of
definitive certificates for their Class A Certificates. Upon surrender by DTC of
the definitive certificates representing the Class A Certificates and upon
receipt of instructions from DTC for re-registration, the trustee will reissue
the Class A Certificates as definitive certificates issued in the respective
principal amounts owned by individual beneficial owners, and thereafter the
trustee and the servicer will recognize the holders of the definitive
certificates as certificateholders under the pooling and servicing agreement.
For additional information regarding DTC and the DTC registered
certificates, see "Description of the Certificates--Form of Certificates" in the
prospectus.
Glossary of Terms
The following terms are given the meanings shown below to help describe
the cash flows on the certificates:
Accrued Certificate Interest - For any distribution date and class of
Class A Certificates, an amount equal to interest accrued during the related
Interest Accrual Period on the Certificate Principal Balance of the certificates
of that class immediately prior to that distribution date at the related
pass-through rate less interest shortfalls, if any, allocated thereto for that
distribution date, to the extent not covered with respect to the Class A
Certificates by the subordination provided by the Class SB Certificates
including:
(i) any Prepayment Interest Shortfall to the extent not covered by
the servicer as described in this prospectus supplement under "Description
of the Certificates--Interest Distributions";
(ii) the interest portions of Realized Losses, including Excess
Special Hazard Losses, Excess Fraud Losses, Excess Bankruptcy Losses, and
Extraordinary Losses not allocated through subordination;
(iii)the interest portion of any Advances that were made with respect
to delinquencies that were ultimately determined to be Excess Special
Hazard Losses, Excess Fraud Losses, Excess Bankruptcy Losses or
Extraordinary Losses; and
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(iv) any other interest shortfalls not covered by subordination,
including interest shortfalls relating to the Soldiers' and Sailors' Civil
Relief Act of 1940, or Relief Act, or similar legislation or regulations,
all allocated as described below.
Any reductions will be allocated among the holders of all classes of
certificates in proportion to the respective amounts of Accrued Certificate
Interest that would have been payable on that distribution date absent these
reductions. In the event that any shortfall described in the immediately
preceding four clauses above is allocated to the offered certificates, or the
Available Distribution Amount on any distribution date is less than the Interest
Distribution Amount due on any distribution date, the amount of any shortfall
will be drawn under the financial guaranty insurance policy and distributed to
the holders of the Class A Certificates. Notwithstanding the foregoing, if
payments are not made as required under the financial guaranty insurance policy,
any interest shortfalls may be allocated to the Class A Certificates as
described above. See "--Financial Guaranty Insurance Policy" below. Accrued
Certificate Interest on each class of Class A Certificates will be distributed
on a pro rata basis. Accrued Certificate Interest on the Class A-2 and Class A-3
Certificates is calculated on the basis of a 360-day year consisting of twelve
30-day months. Accrued Certificate Interest on the Class A-1 Certificates will
be calculated on the basis of the actual number of days in the Interest Accrual
Period and a 360-day year.
Available Distribution Amount - For any distribution date, an amount equal
to:
o the aggregate amount of scheduled payments on the mortgage loans
due on the related due date and received on or prior to the
related determination date, after deduction of the related
servicing fees and any subservicing fees, which are collectively
referred to as the servicing fees, and the premium payable on the
financial guaranty insurance policy;
o all unscheduled payments, including mortgagor prepayments on the
mortgage loans, Insurance Proceeds, Liquidation Proceeds and
proceeds from repurchases of and substitutions for the mortgage
loans occurring during the preceding calendar month; and
o all Advances made for that distribution date, in each case net of
amounts reimbursable therefrom to the servicer and any
subservicer.
In addition to the foregoing amounts, with respect to unscheduled
collections, not including mortgagor prepayments, the servicer may elect to
treat such amounts as included in the Available Distribution Amount for the
distribution date in the month of receipt, but is not obligated to do so. As
described in this prospectus supplement under "--Principal Distributions on the
Class A Certificates," any amount with respect to which such election is so made
shall be treated as having been received on the last day of the preceding
calendar month for the purposes of calculating the amount of principal and
interest distributions to any class of certificates. With respect to any
distribution date, the due date is the first day of the month in which that
distribution date occurs and the determination date is the 20th day of the month
in which that distribution date occurs or, if that day is not a business day,
the immediately succeeding business day.
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On any distribution date, the policy premium rate is equal to one-twelfth
of the product of the percentage specified in the Insurance and Indemnity
Agreement, dated as of ______, ____ among the financial guaranty insurer, the
depositor, the trustee, the seller and the servicer, and the aggregate
Certificate Principal Balance of the Class A Certificates immediately prior to
such distribution date.
Certificate Principal Balance - For any Class A Certificate as of any date
of determination, an amount equal to the initial Certificate Principal Balance
of that certificate, reduced by the aggregate of (a) all amounts allocable to
principal previously distributed with respect to that certificate, including
amounts paid pursuant to the financial guaranty insurance policy, and (b) any
reductions in the Certificate Principal Balance of that certificate deemed to
have occurred in connection with allocations of Realized Losses in the manner
described in this prospectus supplement, other than any amounts that have been
paid pursuant to the financial guaranty insurance policy.
Cumulative Insurance Payments - The aggregate of any payments made with
respect to the Class A Certificates by the financial guaranty insurer under the
financial guaranty insurance policy.
Excess Bankruptcy Losses - Bankruptcy Losses in excess of the Bankruptcy
Amount.
Excess Cash Flow-On any distribution date, the excess of the Available
Distribution Amount over the sum of (a) the Interest Distribution Amount and (b)
the sum of the amounts described in clauses [ ] of the definition of Principal
Distribution Amount.
Excess Fraud Losses - Fraud Losses in excess of the Fraud Loss Amount.
Excess Special Hazard Losses - Special Hazard Losses in excess of the
Special Hazard Amount.
Excess Subordinated Amount - On any distribution date, the excess, if any,
of (a) the Subordinated Amount on such distribution date over (b) the Targeted
Subordinated Amount.
Final Disposition - A Final Disposition is deemed to have occurred upon a
determination by the servicer that it has received all Insurance Proceeds,
Liquidation Proceeds and other payments or cash recoveries which the servicer
reasonably and in good faith expects to be finally recoverable with respect to a
defaulted mortgage loan.
Interest Accrual Period - For the Class A-2 and Class A-3 Certificates,
the calendar month preceding the month in which the distribution date occurs.
For the Class A-1 Certificates, (a) for the distribution date in __________,
___, the period commencing on the closing date and ending on the day preceding
the distribution date in ________ ___, and (b) with respect to any distribution
date after the distribution date in _________ ___, the period commencing on the
distribution date in the month immediately preceding the month in which the
distribution date occurs and ending on the day preceding the distribution date.
Interest Distribution Amount - The aggregate amount of Accrued Certificate
Interest to be distributed to the holders of the Class A Certificates for that
distribution date.
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Lockout Prepayment Percentage - For any distribution date occurring prior
to the distribution date in , 0%. For any distribution date occurring after the
first five years following the closing date, a percentage determined as follows:
o for any distribution date during the [sixth] year after the
closing date, [30]%;
o for any distribution date during the [seventh] year after the
closing date, [40]%;
o for any distribution date during the [eighth] year after the
closing date, [60]%;
o for any distribution date during the [ninth] year after the
closing date, [80]%; and
o for any distribution date thereafter, [100]%.
Lockout Scheduled Percentage - For any distribution date occurring prior
to the distribution date in , 0% and for any distribution date thereafter, 100%.
Principal Distribution Amount -On any distribution date, the lesser of (a)
the balance of the Available Distribution Amount remaining after the Interest
Distribution Amount has been distributed and (b) the sum of:
(1) the principal portion of all scheduled monthly payments on the
mortgage loans received or advanced with respect to the related due
period;
(2) the principal portion of all proceeds of the repurchase of
mortgage loans or, in the case of a substitution, amounts representing a
principal adjustment as required by the pooling and servicing agreement
during the preceding calendar month;
(3) the principal portion of all other unscheduled collections
received on the mortgage loans during the preceding calendar month or
deemed to be received during the preceding calendar month including,
without limitation, full and partial prepayments made by the respective
mortgagors, to the extent not distributed in the preceding month;
(4) the principal portion of any Realized Losses incurred on the
mortgage loans for the preceding calendar month to the extent payable from
Excess Cash Flow on such distribution date; and
(5) the Subordination Increase Amount for such distribution date.
Subordinated Amount - On any distribution date, the excess, if any, of (a)
the aggregate Stated Principal Balances of the mortgage loans after giving
effect to distributions of principal to be made on such distribution date over
(b) the Certificate Principal Balance of the Class A Certificates as of such
date, after taking into account the payment to the Class A Certificates of the
amounts described in clauses [ ] of the definition of Principal Distribution
Amount on such distribution date.
Subordination Increase Amount - On any distribution date, any amount of
Excess Cash Flow actually applied as an accelerated payment of principal on the
Class A Certificates.
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Subordination Reduction Amount - On any distribution date, the lesser of
(a) the Excess Subordinated Amount and (b) the amount available for distribution
specified in clauses [ ] of the definition of Principal Distribution Amount.
Targeted Subordinated Amount - On any distribution date, the required
level of the Subordinated Amount, as set forth in the Pooling and Servicing
Agreement.
Distributions
Distributions on the Class A Certificates will be made by the trustee on
the [ ] day of each month or, if that day is not a business day, then the next
succeeding business day, commencing in _______, [ ]. Distributions on the
certificates will be made to the persons in whose names the certificates are
registered at the close of business on the day prior to each distribution date
or, if the certificates are no longer DTC registered certificates, on the record
date. See "Description of the Certificates--Distributions on Certificates" in
the prospectus. Distributions will be made by check or money order mailed, or
upon the request of a certificateholder owning Class A Certificates having
denominations, aggregating at least $1,000,000, by wire transfer or otherwise,
to the address of the person entitled to the distribution, which, in the case of
DTC registered certificates, will be DTC or its nominee, as it appears on the
trustee's register in amounts calculated as described in this prospectus
supplement on the determination date. However, the final distribution relating
to 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 the final distribution. A business day is any day other
than:
o a Saturday or Sunday or
o a day on which banking institutions in the State of New York, [
], [ ] or [ ] are required or authorized by law to be closed.
[Distributions of Prepayment Premiums
Any prepayment premium actually collected on a mortgage loan during any
collection period will be distributed on the related distribution date to the
holders of the [Class A-1, Class A-2, A-3] Certificates as additional interest
and not in reduction of their certificate balances in an amount up to, in the
case of each class, the product of
the prepayment x discount rate x principal
premium fraction for allocation fraction
that class of that class
The discount rate fraction for any class of certificates is a fraction not
greater than 1.0 or less than 0.0 and equal to:
pass-through rate for
that class of certificates - relevant discount rate
___________________________________________________________________
mortgage rate of the related mortgage loan -relevant discount rate
The principal allocation fraction for each class of certificates for any
distribution date is:
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the portion, if any, of the principal distribution amount allocated
to that class of certificates for that distribution date
____________________________________________________________________
entire Principal Distribution Amount for that distribution date
The portion of the prepayment premium remaining after the payment of the
amount calculated as described above will be distributed to the holders of the
Class [ ] Certificates.
For any prepaid mortgage loan, the discount rate means the yield for "This
Week" as reported by the Federal Reserve Board in Federal Reserve Statistical
Release H.15(519) for the constant maturity treasury having a maturity
coterminous with the maturity date or anticipated repayment date of that
mortgage loan as of the determination date. If there is no discount rate for
instruments having a maturity coterminous with the remaining term to maturity or
anticipated repayment date, where applicable, of the mortgage loan, then the
discount rate will be equal to the linear interpolation of the yields of the
constant maturity treasuries with maturities next longer and shorter than the
remaining term to maturity or anticipated repayment date. For some of the
mortgage loans, the discount rate is a semiannual rate.
The prepayment premiums, if any, collected on the mortgage loans during
any collection period may not be sufficient to fully compensate
certificateholders of any class for any loss in yield attributable to the
related prepayments of principal.]
Interest Distributions
Holders of each class of Class A Certificates will be entitled to receive
interest distributions in an amount equal to the Accrued Certificate Interest on
that class on each distribution date, to the extent of the Available
Distribution Amount for that distribution date, commencing on the first
distribution date in the case of all classes of Class A Certificates entitled to
interest distributions.
Prepayment Interest Shortfalls will result because interest on prepayments
in full is distributed only to the date of prepayment, and because no interest
is distributed on prepayments in part, as these prepayments in part are applied
to reduce the outstanding principal balance of the related mortgage loans as of
the due date in the month of prepayment.
However, on any distribution date, any Prepayment Interest Shortfalls
resulting from prepayments in full during the preceding calendar month will be
offset by the servicer, but only to the extent those Prepayment Interest
Shortfalls do not exceed the amount of the servicing fee due on such
distribution date. Prepayment Interest Shortfalls resulting from partial
prepayments will not be offset by the servicer from servicing compensation or
otherwise. No assurance can be given that the servicing compensation available
to cover Prepayment Interest Shortfalls will be sufficient therefor. See
"Pooling and Servicing Agreement--Servicing and Other Compensation and Payment
of Expenses" in this prospectus supplement.
[If on any distribution date the Available Distribution Amount is less
than Accrued Certificate Interest on the Class A Certificates for that
distribution date, the shortfall will be
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allocated among the holders of all classes of Class A Certificates in proportion
to the respective amounts of Accrued Certificate Interest for that distribution
date. In addition, the amount of any such interest shortfalls that are covered
by subordination, specifically, interest shortfalls not described in the
definition of Available Distribution Amount preceding paragraph, will be unpaid
Accrued Certificate Interest and will be distributable to holders of the
certificates of those classes entitled to those amounts on subsequent
distribution dates, in each case to the extent of available funds after interest
distributions as required in this prospectus supplement.
These shortfalls could occur, for example, if delinquencies on the
mortgage loans were exceptionally high and were concentrated in a particular
month and Advances by the servicer did not cover the shortfall. Any amounts so
carried forward will not bear interest. Any interest shortfalls will not be
offset by a reduction in the servicing compensation of the servicer or
otherwise, except to the limited extent described in the preceding paragraph
with respect to Prepayment Interest Shortfalls resulting from prepayments in
full.
The pass-through rates on all classes of Class A Certificates, other than
the Class A-1 Certificates, are fixed and are listed on page S- of this
prospectus supplement.
The pass-through rates on the Class A-1 Certificates are calculated as
follows:
The pass-through rate on the Class A-1 Certificates with respect to the
initial Interest Accrual Period is % per annum, and as to any Interest Accrual
Period thereafter, will be a per annum rate equal to % plus the arithmetic mean
of the London interbank offered rate quotations for one-month Eurodollar
deposits, determined monthly as described in this prospectus supplement, with a
maximum rate of % per annum and a minimum rate of % per annum.
The pass-through rates on the Class A-1 Certificates for the current and
immediately preceding Interest Accrual Period may be obtained by telephoning the
trustee at __________.]
[The pass-through rates on all classes of the Class A Certificates will
increase by __% per annum for each distribution date after the first
distribution date on which the servicer and the depositor are permitted to
exercise their option to purchase the mortgage loans from the trust as described
under "Pooling and Servicing Agreement--Termination," in this prospectus
supplement. Notwithstanding the foregoing, the pass-through rates on the Class A
Certificates will not increase as described above if proceeds for optional
termination are available for payment to the certificateholders on or prior to
any distribution date.]
As described in this prospectus supplement, the Accrued Certificate
Interest allocable to each class of certificates is based on the Certificate
Principal Balance of that class.
Determination of LIBOR
LIBOR for any Interest Accrual Period after the initial Interest Accrual
Period will be determined as described in the three succeeding paragraphs.
On each distribution date, LIBOR shall be established by the trustee and
as to any Interest Accrual Period, LIBOR will equal the rate for United States
dollar deposits for one month which
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appears on the Dow Jones Telerate Screen Page 3750 as of 11:00 A.M., London
time, on the second LIBOR Business Day prior to the first day of that Interest
Accrual Period--the LIBOR rate adjustment date. Telerate Screen Page 3750 means
the display designated as page 3750 on the Telerate Service or any other page as
may replace page 3750 on that service for the purpose of displaying London
interbank offered rates of major banks. If the rate does not appear on that page
or any other page as may replace that page on that service, or if the service is
no longer offered, any other service for displaying LIBOR or comparable rates as
may be selected by the trustee after consultation with the servicer, the rate
will be the reference bank rate.
The reference bank rate will be determined on the basis of the rates at
which deposits in the U.S. Dollars are offered by the reference banks, which
shall be three major banks that are engaged in transactions in the London
interbank market, selected by the trustee after consultation with the servicer.
The reference bank rate will be determined as of 11:00 A.M., London time, on the
day that is one LIBOR business day prior to the immediately preceding
distribution date to prime banks in the London interbank market for a period of
one month in amounts approximately equal to the aggregate Certificate Principal
Balance of the Class A-1 Certificates then outstanding. The trustee will request
the principal London office of each of the reference banks to provide a
quotation of its rate. If at least two quotations are provided, the rate will be
the arithmetic mean of the quotations. If on that date fewer than two quotations
are provided as requested, the rate will be the arithmetic mean of the rates
quoted by one or more major banks in New York City, selected by the trustee
after consultation with the servicer, as of 11:00 A.M., New York City time, on
that date for loans in U.S. Dollars to leading European banks for a period of
one month in amounts approximately equal to the aggregate Certificate Principal
Balance of the Class A-1 Certificates then outstanding. If no quotations can be
obtained, the rate will be LIBOR for the prior distribution date, or in the case
of the first LIBOR rate adjustment date, % with respect to the Class A-1
Certificates; provided however, if, under the priorities listed previously in
this paragraph, LIBOR for a distribution date would be based on LIBOR for the
previous distribution date for the third consecutive distribution date, the
trustee shall select an alternative comparable index over which the trustee has
no control, used for determining one-month Eurodollar lending rates that is
calculated and published or otherwise made available by an independent party.
LIBOR business day means any day other than (i) a Saturday or a Sunday or (ii) a
day on which banking institutions in the city of London, England are required or
authorized by law to be closed.
The establishment of LIBOR by the trustee and the trustee's subsequent
calculation of the pass-through rates applicable to the Class A-1 Certificates
for the relevant Interest Accrual Period, in the absence of manifest error, will
be final and binding.
Principal Distributions on the Class A Certificates
Except as provided below, holders of the Class A Certificates will be
entitled to receive on each distribution date, in the priority described in this
prospectus supplement and to the extent of the portion of the Available
Distribution Amount remaining after the distribution of the Interest
Distribution Amount is distributed, a distribution allocable to principal equal
to the Principal Distribution Amount.
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Distributions of principal on the Class A Certificates on each
distribution date will be made, after distribution of the Interest Distribution
Amount, as follows:
(i) the Principal Distribution Amount to the Class A-3 Certificates
in reduction of its Certificate Principal Balance, until its Certificate
Principal Balance has been reduced to zero, an amount equal to the sum of
the following:
(A) the Lockout Scheduled Percentage of the Class A-3
Certificates' pro rata share, based on its Certificate Principal
Balance relative to the aggregate Certificate Principal Balance of
all classes of Certificates, of the aggregate of the amounts
described in clauses [ ] of the definition of Principal Distribution
Amount; and
(B) the Lockout Prepayment Percentage of the Class A-3
Certificates' pro rata share, based on its Certificate Principal
Balance relative to the aggregate Certificate Principal Balance of
all classes of Class A Certificates, of the aggregate of the amounts
described in clause [ ] of the definition of Principal Distribution
Amount;
provided that if the aggregate of the amounts set forth in the definition of
Principal Distribution Amount is more than the balance of the Available
Distribution Amount remaining after the Interest Distribution Amount has been
distributed, the amount paid to the Class A-3 Certificates under this clause (i)
shall be reduced by an amount equal to the Class A-3 Certificates' pro rata
share, based on its aggregate Certificate Principal Balance relative to the
aggregate Certificate Principal Balance of the Class A Certificates of that
difference; and
(ii) the balance of the Principal Distribution Amount remaining after
the distributions, if any, described in clause (i) above shall be
distributed in the following order of priority:
(A) first, concurrently, Class A-1 and Class A-2 Certificates,
on a pro rata basis, until their Certificate Principal Balances have
been reduced to zero; and
(B) second, to the Class A-3 Certificates until its Certificate
Principal Balance has been reduced to zero.]
On each distribution date, the financial guaranty insurer shall be
entitled to receive, after payment to the Class A Certificateholders of the
Interest Distribution Amount and the Principal Distribution Amount for such
distribution date, but before application of any Subordination Increase Amount,
from the Excess Cash Flow to the extent available therefor, the aggregate of any
payments made with respect to the Class A Certificates by the financial guaranty
insurer under the financial guaranty insurance policy to the extent not
previously reimbursed, plus interest thereon.
Overcollateralization Provisions
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The Pooling and Servicing Agreement requires that, on each distribution
date, Excess Cash Flow, if any, be applied on such distribution date as an
accelerated payment of principal on the Class A Certificates, but only as
follows: The Excess Cash Flow for any distribution date will derive primarily
from the amount of interest accrued on the mortgage loans in excess of the sum
of (a) interest at the related pass-through rates on the Certificate Principal
Balances of the Class A Certificates, (b) the premium payable on the financial
guaranty insurance policy in respect of the mortgage loans and (c) accrued
servicing fees in respect of the mortgage loans, in each case in respect of such
distribution date. Excess Cash Flow will be applied on any distribution date as
follows:
o first, to pay to the holders of the Class A Certificates the
principal portion of Realized Losses incurred on the mortgage
loans for the preceding calendar month;
o second, to pay to the financial guaranty insurer any Cumulative
Insurance Payments;
o third, to pay any Subordination Increase Amount;
o fourth, to pay the holders of the Class A Certificates the amount
of any Prepayment Interest Shortfalls allocated thereto, to the
extent not covered by the Servicing Fee payable on such
distribution date;
o fifth, to pay the holders of the Class A Certificates any
Prepayment Interest Shortfalls remaining unpaid from prior
distribution dates together with interest thereon; and
o sixth, to pay to the holders of the Class SB Certificates and
Class R Certificates any balance remaining, in accordance with
the terms of the Pooling and Servicing Agreement.
The application of Excess Cash Flow to the payment of principal on the Class A
Certificates has the effect of accelerating the amortization of the Class A
Certificates relative to the amortization of the mortgage loans.
The Pooling and Servicing Agreement requires that the Excess Cash Flow, to
the extent available as described above, will be applied as an accelerated
payment of principal on the Class A Certificates to the extent that the Targeted
Subordinated Amount exceeds the Subordinated Amount as of such distribution
date.
Subordination Reduction Amount: In the event that the Targeted
Subordinated Amount is permitted to decrease or "step down" on a distribution
date in the future, a portion of the principal that would otherwise be
distributed to the holders of the Class A Certificates on such distribution date
shall not be distributed to the holders of the Class A Certificates on such
distribution date. This has the effect of decelerating principal distributions
to the Class A Certificates relative to the amortization of the mortgage loans,
and of reducing the Subordinated Amount. If, on any distribution date, the
Excess Subordinated Amount is, or, after taking into account all other
distributions to be made on such distribution date would be, greater than zero
(i.e., the Subordinated Amount is or would be greater than the Targeted
Subordinated Amount),
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<PAGE>
then any amounts relating to principal which would otherwise be distributed to
the holders of the Class A Certificates on such distribution date shall instead
be distributed to the holders of the Class SB Certificates in an amount equal to
the Subordination Reduction Amount for such distribution date.
Financial Guaranty Insurance Policy
The following summary of the terms of the financial guaranty insurance
policy does not purport to be complete and is qualified in its entirety by
reference to the financial guaranty insurance policy. The following information
regarding the financial guaranty insurance policy has been supplied by the
financial guaranty insurer for inclusion in this prospectus supplement.
Glossary of Terms: As used in this section and in the financial guaranty
insurance policy, the following terms shall have the following meanings:
o Agreement - The Pooling and Servicing Agreement, dated as of
_________, _____, among the depositor, the Seller, the Servicer
and the trustee, without regard to any amendment or supplement
thereto unless such amendment or supplement has been approved in
writing by the financial guaranty insurer.
o Business Day - Any day other than a Saturday, a Sunday or a day
on which banking institutions in New York City or in the city in
which the corporate trust office of the trustee under the
Agreement or the financial guaranty insurer is located are
authorized or obligated by law or executive order to close.
o Deficiency Amount - For the related Class A Certificates as of
any distribution date, (i) any shortfall in amounts available in
the Payment Account to pay interest accrued during the Interest
Accrual Period on the Certificate Principal Balance of the Class
A Certificates at the applicable Pass-Through Rate, net of any
interest shortfalls relating to the Relief Act and any Prepayment
Interest Shortfalls allocated to the Class A Certificates, (ii)
the principal portion of any Realized Loss allocated to the Class
A Certificates and (iii) the Certificate Principal Balance of the
Class A Certificates to the extent unpaid on the final
distribution date or earlier termination of the trust fund
pursuant to the terms of the Agreement. For purposes of
determining the Deficiency Amount, the final distribution date
will be the distribution date in ____________.
o Holder - Any person who is the registered or beneficial owner of
any Class A Certificate and who, on the applicable distribution
date, is entitled under the terms of the Class A Certificates to
payment thereunder.
o Insured Amount - As of any distribution date, any Deficiency
Amount.
o Notice - The telephonic or telegraphic notice, promptly confirmed
in writing by telecopy substantially in the form of Exhibit A
attached to the financial guaranty insurance policy, the original
of which is subsequently delivered by registered or
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<PAGE>
certified mail from the trustee specifying the Insured Amount which shall
be due and owing on the applicable distribution date.
Capitalized terms used in the financial guaranty insurance policy and not
otherwise defined in the financial guaranty insurance policy shall have the
meanings set forth in the Agreement as of the date of execution of the financial
guaranty insurance policy, without giving effect to any subsequent amendment to
or modification of the Agreement unless the amendment or modification has been
approved in writing by the financial guaranty insurer.
The financial guaranty insurer, in consideration of the payment of the
premium and subject to the terms of the related financial guaranty insurance
policy, thereby unconditionally and irrevocably guarantees to any Holder that an
amount equal to each full and complete Insured Amount will be paid to the
trustee or its successor, as trustee for the Holders. The financial guaranty
insurer's obligations under each financial guaranty insurance policy for a
particular Insured Amount shall be discharged to the extent funds equal to the
applicable Insured Amount are received by the trustee, whether or not such funds
are properly applied by the trustee. Insured Amounts shall be paid only at the
time set forth in each financial guaranty insurance policy, and no accelerated
Insured Amounts shall be paid regardless of any acceleration of the Class A
Certificates, unless such acceleration is at the sole option of the financial
guaranty insurer. The financial guaranty insurance policy does not cover any
interest shortfalls relating to the Relief Act or Prepayment Interest
Shortfalls.
Notwithstanding the foregoing paragraph, the financial guaranty insurance
policy does not cover shortfalls, if any, attributable to the liability of the
trust fund, any REMIC or the trustee for withholding taxes, if any, including
interest and penalties in respect of any such liability.
The financial guaranty insurer will pay any amounts payable under the
financial guaranty insurance policy no later than 12:00 noon, New York City
time, on the later of the distribution date on which the related Deficiency
Amount, as defined below, is due or the Business Day following receipt in New
York, New York on a Business Day of a Notice; provided that if such Notice is
received after 12:00 noon, New York City time, on such Business Day, it will be
deemed to be received on the following Business Day. If any such Notice received
is not in proper form or is otherwise insufficient for the purpose of making a
claim under the financial guaranty insurance policy it shall be deemed not to
have been received for purposes of this paragraph, and the financial guaranty
insurer shall promptly so advise the trustee and the trustee may submit an
amended Notice.
Insured Amounts due under the financial guaranty insurance policy, unless
otherwise stated in the financial guaranty insurance policy, are to be disbursed
by the financial guaranty insurer to the trustee on behalf of the Holders by
wire transfer of immediately available funds in the amount of the Insured
Amount.
The financial guaranty insurance policy is being issued under and pursuant
to and shall be construed under, the laws of the State of New York, without
giving effect to the conflict of laws principles thereof.
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<PAGE>
The financial guaranty insurance policy is not cancelable for any reason.
The premium on the financial guaranty insurance policy is not refundable for any
reason including payment, or provision being made for payment, prior to maturity
of the related Class A Certificates.
Allocation of Losses; Subordination
Subject to the terms thereof, the financial guaranty insurance policy will
cover all Realized Losses allocated to the Class A Certificates. If payments are
not made as required under the financial guaranty insurance policy, Realized
Losses will be allocable to the Class A Certificates based on the following
priorities.
The subordination provided to the Class A Certificates by the Class SB
Certificates will cover Realized Losses on the mortgage loans that are Defaulted
Mortgage Losses, Fraud Losses, Bankruptcy Losses and Special Hazard Losses. Any
Realized Losses which are not Excess Special Hazard Losses, Excess Fraud Losses,
Excess Bankruptcy Losses or Extraordinary Losses will be allocated as follows:
o first, to the Excess Cash Flow for the related distribution date;
and
o second, to the Class SB Certificates
and the remainder of the Realized Losses among all the remaining classes of
Class A Certificates on a pro rata basis.
Any allocation of a Realized Loss, other than a Debt Service Reduction, to
a certificate will be made by reducing:
o its Certificate Principal Balance, in the case of the principal
portion of the Realized Loss, in each case until the Certificate
Principal Balance of that class has been reduced to zero, and
o the Accrued Certificate Interest thereon, in the case of the
interest portion of the Realized Loss, by the amount so allocated
as of the distribution date occurring in the month following the
calendar month in which the Realized Loss was incurred.
In addition, any allocation of a Realized Loss to a Class A Certificate may also
be made by operation of the payment priority to the Class A Certificates
described under "--Principal Distributions on the Class A Certificates" in this
prospectus supplement.
As used in this prospectus supplement, subordination refers to the
provisions discussed above for the sequential allocation of Realized Losses
among the various classes, as well as all provisions effecting those allocations
including the priorities for distribution of cash flows in the amounts described
in this prospectus supplement.
As described in the prospectus, in some circumstances the servicer may
permit a servicing modification--the modification of a defaulted mortgage loan
to reduce the applicable mortgage rate or to reduce its outstanding principal
amount. Any principal reduction of this type shall constitute a Realized Loss at
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<PAGE>
the time of the reduction, and the amount by which each monthly payment is
reduced by any mortgage rate reduction shall constitute a Realized Loss in the
month in which each such reduced monthly payment is due.
Servicing modification reductions shall be allocated when incurred, as
provided above, in the same manner as other Realized Losses as described in this
prospectus supplement. Any Advances made on any mortgage loan will be reduced to
reflect any related servicing modifications previously made. The mortgage rate
and Net Loan Rate as to any mortgage loan will be deemed not reduced by any
servicing modification, so that the calculation of Accrued Certificate Interest
payable on the Class A Certificates will not be affected by the servicing
modification.
Any Excess Special Hazard Losses, Excess Fraud Losses, Excess Bankruptcy
Losses, Extraordinary Losses or other losses of a type not covered by
subordination will be allocated on a pro rata basis among the Class A
Certificates and in an aggregate amount equal to the percentage of that loss
equal to the then aggregate Certificate Principal Balance of the Class A
Certificates divided by the then aggregate Stated Principal Balance of the
mortgage loans, in each case subject to the limitations set forth in the Pooling
and Servicing Agreement, and the remainder of the Realized Losses will be
allocated to the Class SB Certificates.
An allocation of a Realized Loss on a "pro rata basis" among two or more
classes of certificates means an allocation to each of those classes of
certificates on the basis of its then outstanding Certificate Principal Balance
prior to giving effect to distributions to be made on that distribution date in
the case of an allocation of the principal portion of a Realized Loss, or based
on the Accrued Certificate Interest thereon in respect of that distribution date
in the case of an allocation of the interest portion of a Realized Loss.
In order to maximize the likelihood of distribution in full of the
Interest Distribution Amount and Principal Distribution Amount, on each
distribution date, holders of Class A Certificates have a right to distributions
of the Available Distribution Amount that is prior to the rights of the holders
of the Class SB Certificates and Class R Certificates, to the extent necessary
to satisfy the Interest Distribution Amount and Principal Distribution Amount.
The Special Hazard Amount shall initially be equal to $ . As of any date
of determination following the cut-off date, the Special Hazard Amount shall
equal $ less the sum of (A) any amounts allocated through subordination relating
to Special Hazard Losses and (B) the Adjustment Amount. The Adjustment Amount
will be equal to an amount calculated under the terms of the pooling and
servicing agreement.
The Fraud Loss Amount shall initially be equal to $ . As of any date of
determination after the cut-off date, the Fraud Loss Amount shall equal (X)
prior to the third anniversary of the cut-off date an amount equal to ____% of
the aggregate principal balance of all of the mortgage loans as of the cut-off
date minus the aggregate amounts allocated through Subordination for Fraud
Losses up to that date of determination and (Y) from the third to the fifth
anniversary of the cut-off date, an amount equal to (1) the lesser of (a) the
Fraud Loss Amount as of the most recent anniversary of the cut-off date and (b)
____% of the aggregate principal balance of all of the mortgage loans as of the
most recent anniversary of the cut-off date minus (2) the aggregate amounts
allocated through subordination for Fraud Losses since the
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<PAGE>
most recent anniversary of the cut-off date up to that date of determination. On
and after the fifth anniversary of the cut-off date, the Fraud Loss Amount shall
be zero and Fraud Losses shall not be allocated through subordination.
The Bankruptcy Amount will initially be equal to $ . As of any date of
determination on or after the first anniversary of the cut-off date, the
Bankruptcy Amount will equal the excess, if any, of (1) the lesser of (a) the
Bankruptcy Amount as of the business day next preceding the most recent
anniversary of the cut-off date and (b) an amount calculated under the terms of
the pooling and servicing agreement, which amount as calculated will provide for
a reduction in the Bankruptcy Amount, over (2) the aggregate amount of
Bankruptcy Losses allocated solely to the Class SB Certificates through
subordination since that anniversary.
Realized Losses allocated to the Class A Certificates will be covered by
the financial guaranty insurance policy. In the event payments are not made as
required under such policy, these losses will be borne by the holders of the
Class A Certificates.
With respect to any defaulted mortgage loan that is finally liquidated,
through foreclosure sale, disposition of the related mortgaged property if
acquired on behalf of the certificateholders by deed in lieu of foreclosure, or
otherwise, the amount of loss realized, if any, will equal the portion of the
Stated Principal Balance remaining, if any, plus its interest through the last
day of the month in which that mortgage loan was finally liquidated, after
application of all amounts recovered, net of amounts reimbursable to the
servicer or the subservicer for expenses, including attorneys' fees, towards
interest and principal owing on the mortgage loan.
Notwithstanding the foregoing, the provisions relating to subordination
will not be applicable in connection with a Bankruptcy Loss so long as the
servicer has notified the trustee in writing that:
o the servicer is diligently pursuing any remedies that may exist
in connection with the representations and warranties made
regarding the related mortgage loan and
o either:
o the related mortgage loan is not in default with regard to
payments due thereunder or
o delinquent payments of principal and interest under the related
mortgage loan and any premiums on any applicable primary hazard
insurance policy and any related escrow payments relating to that
mortgage loan are being advanced on a current basis by the
servicer or a subservicer.
[Advances
Prior to each distribution date, the servicer is required to make Advances
which were due on the mortgage loans on the immediately preceding due date and
delinquent on the business day next preceding the related determination date.
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These Advances are required to be made only to the extent they are deemed
by the servicer to be recoverable from related late collections, Insurance
Proceeds or Liquidation Proceeds. The purpose of making these Advances is to
maintain a regular cash flow to the certificateholders, rather than to guarantee
or insure against losses. The servicer will not be required to make any Advances
for reductions in the amount of the monthly payments on the mortgage loans due
to Debt Service Reductions or the application of the Relief Act or similar
legislation or regulations. Any failure by the servicer to make an Advance as
required under the pooling and servicing agreement will constitute an event of
default thereunder, in which case the trustee, as successor servicer, will be
obligated to make any Advance, in accordance with the terms of the pooling and
servicing agreement.
All Advances will be reimbursable to the servicer on a first priority
basis from either (a) late collections, Insurance Proceeds and Liquidation
Proceeds from the mortgage loan as to which such unreimbursed Advance was made
or (b) as to any Advance that remains unreimbursed in whole or in part following
the final liquidation of the related mortgage loan, from any amounts otherwise
distributable on any of the Class A Certificates.]
THE FINANCIAL GUARANTY INSURER
The following information has been supplied by the financial guaranty
insurer for inclusion in this Prospectus Supplement. No representation is made
by the depositor, the underwriters or any of their affiliates as to the accuracy
or completeness of such information.
[financial guaranty insurer discloser]
CERTAIN YIELD AND PREPAYMENT CONSIDERATIONS
General
The yields to maturity and the aggregate amount of distributions on the
Class A Certificates will be affected by the rate and timing of principal
payments on the mortgage loans, the amount and timing of mortgagor defaults
resulting in Realized Losses and by adjustments to the mortgage rates. The rate
of default of mortgage loans secured by second liens may be greater than that of
mortgage loans secured by first liens. The yields may be adversely affected by a
higher or lower than anticipated rate of principal payments on the mortgage
loans in the trust fund. The rate of principal payments on the mortgage loans
will in turn be affected by the amortization schedules of the mortgage loans,
the rate and timing of mortgagor prepayments on the mortgage loans by the
mortgagors, liquidations of defaulted mortgage loans and repurchases of mortgage
loans due to breaches of some representations and warranties.
The timing of changes in the rate of prepayments, liquidations and
repurchases of the mortgage loans may, and the timing of Realized Losses will,
significantly affect the yield to an investor, even if the average rate of
principal payments experienced over time is consistent with an investor's
expectation. In addition, the rate of prepayments of the mortgage loans and the
yield to investors on the certificates may be affected by refinancing programs,
which may include general or targeted solicitations, as described under
"Maturity and Prepayment Considerations" in the prospectus. Since the rate and
timing of principal payments on the
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mortgage loans will depend on future events and on a variety of factors, as
described in this prospectus supplement and in the prospectus under "Yield
Considerations" and "Maturity and Prepayment Considerations," no assurance can
be given as to the rate or the timing of principal payments on the Class A
Certificates.
The amount of Excess Cash Flow may be adversely affected by the prepayment
of mortgage loans with higher mortgage rates. Any reduction of this type will
reduce the amount of Excess Cash Flow that is available to cover Realized
Losses, increase overcollateralization on the related classes of Class A
Certificates and cover Prepayment Interest Shortfalls, to the extent and in the
manner described in this prospectus supplement. See "Description of the Mortgage
Pool--General," "Description of the Certificates--Overcollateralization
Provisions" and "--Allocation of Losses; Subordination" in this prospectus
supplement.
The Class A Certificates are subject to various priorities for payment of
principal as described in this prospectus supplement. Distributions of principal
on classes of Class A Certificates having an earlier priority of payment will be
affected by the rates of prepayment of the mortgage loans early in the life of
the mortgage pool. The timing of commencement of principal distributions and the
weighted average lives of classes of Class A Certificates with a later priority
of payment will be affected by the rates of prepayment of the mortgage loans
both before and after the commencement of principal distributions on those
classes. In addition, the yield to maturity of the Class A Certificates will
depend on whether, to what extent, and the timing with respect to which, Excess
Cash Flow is used to accelerate payments of principal on the Class A
Certificates or any Subordination Reduction Amount is released. See "Description
of the Certificates--Overcollateralization Provisions" in this prospectus
supplement.
The mortgage loans in most cases may be prepaid by the mortgagors at any
time without payment of any prepayment fee or penalty, although a portion of the
mortgage loans provide for payment of a prepayment charge, which may have a
substantial effect on the rate of prepayment of those mortgage loans. See
"Description of the Mortgage Pool--Mortgage Pool Characteristics" in this
prospectus supplement.
Most of the mortgage loans contain due-on-sale clauses. As described under
"Description of the Certificates--Principal Distributions on the Class A
Certificates" in this prospectus supplement, during specified periods all or a
disproportionately large percentage of principal prepayments on the mortgage
loans will be allocated among the Class A Certificates, other than the Lockout
Certificates, and during specified periods no principal prepayments on the
mortgage loans will be distributed to the Lockout Certificates. Furthermore, if
the Certificate Principal Balances of the Class A Certificates, other than the
Lockout Certificates, have been reduced to zero, the Lockout Certificates may,
under some circumstances, receive all mortgagor prepayments made during the
preceding calendar month.
Prepayments, liquidations and purchases of the mortgage loans will result
in distributions to holders of the Class A Certificates of principal amounts
which would otherwise be distributed over the remaining terms of the mortgage
loans. Factors affecting prepayment, including defaults and liquidations, of
mortgage loans include changes in mortgagors' housing needs, job transfers,
unemployment, mortgagors' net equity in the mortgaged properties, changes in the
value of the mortgaged properties, mortgage market interest rates, solicitations
and servicing decisions. In
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addition, if prevailing mortgage rates fell significantly below the mortgage
rates on the mortgage loans, the rate of prepayments, including refinancings,
would be expected to increase. Conversely, if prevailing mortgage rates rose
significantly above the mortgage rates on the mortgage loans, the rate of
prepayments on the mortgage loans would be expected to decrease. Furthermore,
since mortgage loans secured by second liens are not generally viewed by
borrowers as permanent financing and generally carry a high rate of interest,
the mortgage loans secured by second liens may experience a higher rate of
prepayment than traditional first lien mortgage loans. Prepayment of the related
first lien may also affect the rate of prepayments in the mortgage loans.
The rate of defaults on the mortgage loans will also affect the rate and
timing of principal payments on the mortgage loans. In general, defaults on
mortgage loans are expected to occur with greater frequency in their early
years. The rate of default of mortgage loans secured by second liens is likely
to be greater than that of mortgage loans secured by traditional first lien
mortgage loans, particularly in the case of mortgage loans with high combined
LTV ratios or low junior ratios. The rate of default on mortgage loans which are
refinance or reduced documentation mortgage loans, and on mortgage loans with
high LTV ratios, may be higher than for other types of mortgage loans.
Furthermore, the rate and timing of prepayments, defaults and liquidations on
the mortgage loans will be affected by the general economic condition of the
region of the country in which the related mortgaged properties are located. The
risk of delinquencies and loss is greater and prepayments are less likely in
regions where a weak or deteriorating economy exists, as may be evidenced by,
among other factors, increasing unemployment or falling property values. See
"Maturity and Prepayment Considerations" in the prospectus. In addition, because
borrowers of Balloon Loans are required to make a relatively large single
payment upon maturity, it is possible that the default risk associated with
Balloon Loans is greater than that associated with fully-amortizing mortgage
loans. See "Risk Factors" in this prospectus supplement.
To the extent that any losses are incurred on any of the mortgage loans
that are not covered by the Excess Cash Flow, a reduction in the Subordinated
Amount or the financial guaranty insurance policy, holders of the Class A
Certificates will bear the risk of losses resulting from default by mortgagors.
See "Risk Factors--The return on your certificates will be reduced if losses
exceed the credit enhancement available to your certificates" in this prospectus
supplement. Even where the financial guaranty insurance policy covers all losses
incurred on the mortgage loans, this coverage may accelerate principal payments
on the Class A Certificates, thus reducing the weighted average life of the
Class A Certificates.
The periodic increase in interest paid by the mortgagor of a Buy-Down Loan
may increase the risk of default with respect to the related mortgage loan. See
"Yield Considerations" in the prospectus.
The amount of interest otherwise payable to holders of the Class A
Certificates will be reduced by any interest shortfalls to the extent not
covered by subordination or the servicer, including Prepayment Interest
Shortfalls. These shortfalls will not be offset by a reduction in the servicing
fees payable to the servicer or otherwise, except as described in this
prospectus supplement with respect to some Prepayment Interest Shortfalls. See
"Yield Considerations" in the prospectus and "Description of the
Certificates--Interest Distributions" in this prospectus
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supplement for a discussion of the effect of principal prepayments on the
mortgage loans on the yield to maturity of the Class A Certificates and possible
shortfalls in the collection of interest.
In addition, the yield to maturity on each class of the Class A
Certificates will depend on, among other things, the price paid by the holders
of the Class A Certificates and the related pass-through rate. The extent to
which the yield to maturity of any Class A Certificate is sensitive to
prepayments will depend, in part, upon the degree to which it is purchased at a
discount or premium. In general, if a class of Class A Certificates is purchased
at a premium and principal distributions thereon occur at a rate faster than
assumed at the time of purchase, the investor's actual yield to maturity will be
lower than anticipated at the time of purchase. Conversely, if a class of Class
A Certificates is purchased at a discount and principal distributions thereon
occur at a rate slower than assumed at the time of purchase, the investor's
actual yield to maturity will be lower than anticipated at the time of purchase.
For additional considerations relating to the yield on the certificates, see
"Yield Considerations" and "Maturity and Prepayment Considerations" in the
prospectus.
Because the mortgage rates on the mortgage loans and the pass-through
rates on the Class A Certificates (other than the Class A-1 Certificates) are
fixed, the rates will not change in response to changes in market interest
rates. Accordingly, if market interest rates or market yields for securities
similar to the offered certificates were to rise, the market value of the
offered certificates may decline.
The yield to investors on the Class A-1 Certificates will be sensitive to
fluctuations in the level of LIBOR and the pass-through rate will be capped. See
"Risk Factors--The yield on your certificates will be affected by the specific
characteristics that apply to that class, discussed below - Class A-1
Certificates". A number of factors affect the performance of any index, such as
LIBOR, and may cause such index to move in a manner different from other
indices. To the extent that any index may reflect changes in the general level
of interest rates less quickly than other indices, in a period of rising
interest rates, increases in the yield to the Class A-1 Certificateholders due
to such rising interest rates may occur later than that which would be produced
by other indices. Moreover, an increase in the level of LIBOR will increase the
likelihood that the pass-through rate on the Class A-1 Certificates will be
limited by the weighted average Net Loan Rate on the mortgage loans in
accordance with such index, than of mortgage loans which adjust in accordance
with other indices.
Class A Certificates: The rate and timing of principal payments on and the
weighted average lives of the Class A Certificates will be affected primarily by
the rate and timing of principal payments, including prepayments, defaults,
liquidations and purchases, on the mortgage loans.
Lockout Certificates: Investors in the Lockout Certificates should be
aware that because the Lockout Certificates do not receive any distributions of
payments of principal prior to the distribution date occurring in , and may
receive a disproportionately small percentage of principal prepayments until the
distribution date occurring in ______, unless the Certificate Principal Balances
of the Class A Certificates, other than the Lockout Certificates, have been
reduced to zero, the weighted average life of the Lockout Certificates will be
longer than would otherwise be the case. The effect on the market value of the
Lockout Certificates of
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changes in market interest rates or market yields for similar securities will be
greater than for other classes of Class A Certificates entitled to principal
distributions.
Assumed Final Distribution Date: The assumed final distribution date with
respect to each class of the Class A Certificates is 25, , which is the
distribution date immediately following the latest scheduled maturity date for
any mortgage loan. No event of default, change in the priorities for
distribution among the various classes or other provisions under the pooling and
servicing agreement will arise or become applicable solely by reason of the
failure to retire the entire Certificate Principal Balance of any class of
certificates on or before its assumed final distribution date.
The actual final distribution date with respect to each class of Class A
Certificates could occur significantly earlier than the assumed final
distribution date for that class because:
o Excess Cash Flow will be used to make accelerated payments of
principal, i.e. Subordination Increase Amounts, to the holders of
the Class A Certificates, which payments will have the effect of
shortening the weighted average lives of the Class A Certificates
of each class,
o prepayments are likely to occur, which will also have the effect
of shortening the weighted average lives of the Class A
Certificates, and
o the servicer may cause a termination of the trust when the
aggregate Stated Principal Balance of the mortgage loans in the
trust is less than 10% of the aggregate cut-off date balance.
Weighted Average Life: Weighted average life refers to the average amount
of time that will elapse from the date of issuance of a security to the date of
distribution to the investor of each dollar distributed in reduction of
principal of the security assuming no losses. The weighted average life of the
Class A Certificates will be influenced by, among other things, the rate at
which principal of the mortgage loans is paid, which may be in the form of
scheduled amortization, prepayments or liquidations.
Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The model used in this prospectus supplement, the
prepayment speed assumption, represents an assumed rate of prepayment each month
relative to the then outstanding principal balance of a pool of new mortgage
loans. A prepayment assumption of 100% PSA assumes constant prepayment rates of
0.20% per annum of the then outstanding principal balance of the mortgage loans
in the first month of the life of the mortgage loans and an additional 0.20% 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% PSA
assumes a constant prepayment rate of 6% per annum each month. As used in the
table below, "0% PSA" assumes prepayment rates equal to 0% of PSA--no
prepayments. Correspondingly, "100% PSA" and " % PSA" assumes prepayment rates
equal to 100% of PSA and % of PSA, respectively, and so forth. PSA 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 .
The table captioned "Percent of Initial Certificate Principal Balance
Outstanding at the Following Percentages of PSA" has been prepared on the basis
of assumptions as listed in this
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paragraph regarding the weighted average characteristics of the Mortgage loans
that are expected to be included in the trust fund as described under
"Description of the Mortgage Pool" in this prospectus supplement and their
performance. The table assumes, among other things, that: (i) as of the date of
issuance of the Class A Certificates, the mortgage loans have the following
characteristics:
Aggregate principal $ $
balance
Weighted average % %
mortgage rate
Weighted average % %
servicing fee rate
Weighted average
original term to
maturity (months)
Weighted average
remaining term to
maturity (months)
(ii)except with respect to the Balloon Loans the scheduled monthly
payment for each mortgage loan has been based on its outstanding balance,
mortgage rate and remaining term to maturity, so that the mortgage loan will
amortize in amounts sufficient for its repayment over its remaining term to
maturity; (iii) none of the unaffiliated sellers, the servicer or the depositor
will repurchase any mortgage loan, as described under "The Trust Fund--The
Mortgage Pools" and "Description of the Certificates--Assignment of Mortgage
Loans" in the prospectus, and neither the servicer nor the depositor exercises
any option to purchase the mortgage loans and thereby cause a termination of the
trust fund; (iv) there are no delinquencies or Realized Losses on the mortgage
loans , and principal payments on the mortgage loans will be timely received
together with prepayments, if any, at the respective constant percentages of PSA
set forth in the table; (v) there is no Prepayment Interest Shortfall or any
other interest shortfall in any month; (vi) payments on the certificates will be
received on the 25th day of each month, commencing in _________; (vii) payments
on the mortgage loans earn no reinvestment return; (viii) there are no
additional ongoing trust fund expenses payable out of the trust fund; and (ix)
the certificates will be purchased on _______________, _______. Clauses (i)
through (ix) above are collectively referred to as the structuring assumptions.
The actual characteristics and performance of the mortgage loans will
differ from the assumptions used in constructing the table below, which is
hypothetical in nature and is provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the mortgage loans will prepay at a constant
level of PSA until maturity or that all of the mortgage loans will prepay at the
same level of PSA. Moreover, the diverse remaining terms to maturity and
mortgage rates of the mortgage loans could produce slower or faster principal
distributions than indicated in the table at the various constant percentages of
PSA specified, even if the weighted average remaining term to maturity and
weighted average mortgage rate of the mortgage loans are as assumed. Any
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difference between the assumptions and the actual characteristics and
performance of the mortgage loans, or actual prepayment or loss experience, will
affect the percentages of initial Certificate Principal Balances outstanding
over time and the weighted average lives of the classes of Class A Certificates.
In accordance with the foregoing discussion and assumptions, the following
table indicates the weighted average life of each class of Class A Certificates,
and sets forth the percentages of the initial Certificate Principal Balance of
each class of Class A Certificates that would be outstanding after each of the
distribution dates at the various percentages of PSA shown.
Percent of Initial Certificate Principal Balance Outstanding
at the Following Percentages of PSA
Class A-1 Class A-2 Class A-3
DISTRIBUTION DATE % % % % % % % % %
Initial Percentage
Weighted Average
Life in Years (**)
------------
o Indicates a number that is greater than zero but less than 0.5%.
o (Table continued on next page.)
** The weighted average life of a certificate of any class is determined by
(i) multiplying the net reduction, if any, of the Certificate Principal
Balance by the number of years from the date of issuance of the
certificate to the related distribution date, (ii) adding the results, and
(iii) dividing the sum by the aggregate of the net reduction of the
Certificate Principal Balance described in (i) above.
This table has been prepared based on the structuring assumptions,
including the assumptions relating to the characteristics and performance of the
mortgage loans, which differ from their actual characteristics, and should be
read in conjunction therewith.
POOLING AND SERVICING AGREEMENT
General
The certificates will be issued under a pooling and servicing agreement
dated as of __________, ____, among the depositor, the seller, the servicer, and
__________, as trustee. Reference is made to the prospectus for important
information in addition to that described in this prospectus supplement
regarding the terms and conditions of the pooling and servicing agreement and
the Class A Certificates. The trustee will appoint ____________________to
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serve as custodian in connection with the certificates. The Class A Certificates
will be transferable and exchangeable at the corporate trust office of the
trustee, which will serve as certificate registrar and paying agent. The
depositor will provide a prospective or actual certificateholder without charge,
on written request, a copy, without exhibits, of the pooling and servicing
agreement. Requests should be addressed to the President, Credit Suisse First
Boston Mortgage Securities Corp., [ ].
Servicing and Other Compensation and Payment of Expenses
The servicing fees for each mortgage loan are payable out of the interest
payments on that mortgage loan. The servicing fees relating to each mortgage
loan will be at least % per annum and not more than % per annum of the
outstanding principal balance of that mortgage loan, with a weighted average
servicing fee of approximately % per annum.
The servicer is obligated to pay some ongoing expenses associated with the
trust fund and incurred by the servicer in connection with its responsibilities
under the pooling and servicing agreement. See "Description of the Certificates"
in the prospectus for information regarding other possible compensation to the
servicer and subservicers and for information regarding expenses payable by the
servicer.
Voting Rights
There are actions specified in the prospectus that may be taken by holders
of certificates evidencing a specified percentage of all undivided interests in
the trust fund and may be taken by holders of certificates entitled in the
aggregate to that percentage of the voting rights. ___% of all voting rights
will be allocated among all holders of the Class A Certificates, ___% of all
voting rights will be allocated among all holders of the Class R Certificates
and ___% of all voting rights will be allocated among all holders of the Class
SB Certificates, respectively, in each case in proportion to the percentage
interests evidenced by their respective certificates. The pooling and servicing
agreement may be amended without the consent of the holders of the Class R
Certificates in specified circumstances.
Termination
The circumstances under which the obligations created by the pooling and
servicing agreement will terminate relating to the Class A Certificates are
described in "Description of the Certificates--Termination" in the prospectus.
The servicer will have the option, on any distribution date on which the
aggregate Stated Principal Balance of the mortgage loans is less than 10% of the
aggregate principal balance of the mortgage loans as of the cut-off date, either
to purchase all remaining mortgage loans and other assets in the trust fund,
except for the policy, thereby effecting early retirement of the Class A
Certificates or to purchase, in whole but not in part, the certificates. Any
such purchase of mortgage loans and other assets of the trust fund shall be made
at a price equal to the sum of (a) 100% of the unpaid principal balance of each
mortgage loan or the fair market value of the related underlying mortgaged
properties with respect to defaulted mortgage loans as to which title to such
mortgaged properties has been acquired if such fair market value is less than
such unpaid principal balance, net of any unreimbursed Advance attributable to
principal, as of the date of repurchase plus (b) accrued
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interest thereon at the Net Loan Rate to, but not including, the first day of
the month in which the repurchase price is distributed plus (c) any amounts due
to the financial guaranty insurer under the insurance and indemnity agreement.
Distributions on the certificates relating to any optional termination
will be paid, first, to the Class A Certificates and second, to the Class SB
Certificates in the order of their payment priority. The proceeds of any such
distribution may not be sufficient to distribute the full amount to each class
of certificates if the purchase price is based in part on the fair market value
of the underlying mortgaged property and the fair market value is less than 100%
of the unpaid principal balance of the related mortgage loan. Any purchase of
mortgage loans and termination of the trust requires the consent of the
financial guaranty insurer if it would result in a draw on the policy. Any such
purchase of the certificates will be made at a price equal to 100% of their
Certificate Principal Balance plus the sum of interest thereon for the
immediately preceding Interest Accrual Period at the then-applicable
pass-through rate and any previously unpaid Accrued Certificate Interest. Upon
the purchase of such certificates or at any time thereafter, at the option of
the servicer, the mortgage loans may be sold, thereby effecting a retirement of
the certificates and the termination of the trust fund, or the certificates so
purchased may be held or resold by the servicer or the depositor.
Upon presentation and surrender of the Class A Certificates in connection
with the termination of the trust fund or a purchase of certificates under the
circumstances described in the two preceding paragraphs, the holders of the
Class A Certificates will receive an amount equal to the Certificate Principal
Balance of that class plus interest thereon for the immediately preceding
Interest Accrual Period at the then-applicable pass-through rate, plus any
previously unpaid Accrued Certificate Interest. However, distributions to the
holders of the most subordinate class of certificates outstanding will be
reduced, as described in the preceding paragraph, in the case of the termination
of the trust fund resulting from a purchase of all the assets of the trust fund.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
____________________, counsel to the depositor, has filed with the depositor's
registration statement an opinion to the effect that, assuming compliance with
all provisions of the pooling and servicing agreement, for federal income tax
purposes, the trust fund will qualify as a REMIC under the Internal Revenue
Code.
For federal income tax purposes:
o the Class R Certificates will constitute the sole class of
"residual interests" in the REMIC and
o each class of Class A Certificates and the Class SB Certificates
will represent ownership of "regular interests" in the REMIC and
will be treated as debt instruments of the REMIC
See "Material Federal Income Tax Consequences--Classification of REMICs
and FASITs" in the prospectus.
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For federal income tax purposes, the Class Certificates will, [the Class
Certificates may] [and all other Classes of Class A Certificates will not] be
treated as having been issued with original issue discount. The prepayment
assumption that will be used in determining the rate of accrual of original
issue discount, market discount and premium, if any, for federal income tax
purposes will be based on the assumption that, subsequent to the date of any
determination the mortgage loans will prepay at a rate equal to % PSA. No
representation is made that the mortgage loans will prepay at that rate or at
any other rate. See "Material Federal Income Tax Consequences--General" and
"--Taxation of Owners of REMIC and FASIT Regular Certificates--Original Issue
Discount" in the prospectus.
If the method for computing original issue discount described in the
prospectus results in a negative amount for any period with respect to a
certificateholder, the amount of original issue discount allocable to that
period would be zero and the certificateholder will be permitted to offset that
negative amount only against future original issue discount, if any,
attributable to those certificates.
In some circumstances the OID regulations permit the holder of a debt
instrument to recognize original issue discount under a method that differs from
that used by the issuer. Accordingly, it is possible that the holder of a
certificate may be able to select a method for recognizing original issue
discount that differs from that used by the servicer in preparing reports to the
certificateholders and the IRS.
Some of the classes of Class A Certificates may be treated for federal
income tax purposes as having been issued at a premium. Whether any holder of
one of those classes of certificates will be treated as holding a certificate
with amortizable bond premium will depend on the certificateholder's purchase
price and the distributions remaining to be made on the certificate at the time
of its acquisition by the certificateholder. Holders of those classes of
certificates should consult their tax advisors regarding the possibility of
making an election to amortize such premium. See "Material Federal Income Tax
Consequences--Taxation of Owners of REMIC and FASIT Regular Certificates" and
"--Premium" in the prospectus.
The Class A Certificates will be treated as assets described in Section
7701(a)(19)(C) of the Internal Revenue Code and "real estate assets" under
Section 856(c)(4)(A) of the Internal Revenue Code in the same proportion that
the assets of the trust fund 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)(3)(B) of the Internal Revenue
Code to the extent that the Class A Certificates are treated as "real estate
assets" under Section 856(c)(4)(A) of the Internal Revenue Code. Moreover, the
Class A Certificates will be "qualified mortgages" within the meaning of Section
860G(a)(3) of the Internal Revenue Code if transferred to another REMIC on its
startup day in exchange for a regular or residual interest therein. However,
prospective investors in Class A Certificates that will be treated as assets
described in Section 860G(a)(3) of the Internal Revenue Code should note that,
notwithstanding that treatment, any repurchase of a certificate pursuant to the
right of the servicer or the depositor to repurchase the Class A Certificates
may adversely affect any REMIC that holds the Class A Certificates if the
repurchase is made under circumstances giving rise to a Prohibited Transaction
Tax. See "The Pooling and Servicing Agreement--Termination" in this prospectus
supplement and "Material
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Federal Income Tax Consequences--Taxation of Owners of REMIC Residual
Certificates--Prohibited Transaction and Other Taxes" in the prospectus.
For further information regarding federal income tax consequences of
investing in the Class A Certificates, see "Material Federal Income Tax
Consequences--Taxation of Owners of REMIC and FASIT Regular Certificates" in the
prospectus.
METHOD OF DISTRIBUTION
In accordance with the terms and conditions of an underwriting agreement,
dated , will serve as underwriter and has agreed to purchase and the depositor
has agreed to sell the Class A Certificates. The certificates being sold to the
underwriter are referred to as the underwritten certificates. It is expected
that delivery of the underwritten certificates will be made only in book-entry
form through the Same Day Funds Settlement System of DTC on or about
_____________, against payment therefor in immediately available funds.
In connection with the underwritten certificates, the underwriter has
agreed, in accordance with the terms and conditions of the underwriting
agreement, to purchase all of the underwritten certificates if any of its
underwritten certificates are purchased thereby.
The underwriting agreement provides that the obligations of the
underwriter to pay for and accept delivery of the underwritten certificates are
subject to, among other things, the receipt of legal opinions and to the
conditions, among others, that no stop order suspending the effectiveness of the
depositor's registration statement shall be in effect, and that no proceedings
for that purpose shall be pending before or threatened by the Commission.
The distribution of the underwritten certificates by the underwriter may
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. Proceeds to
the depositor from the sale of the underwritten certificates, before deducting
expenses payable by the depositor, will be approximately % of the aggregate
Certificate Principal Balance of the underwritten certificates plus accrued
interest thereon from the cut-off date.
The underwriter may effect these transactions by selling the underwritten
certificates to or through dealers, and those dealers may receive compensation
in the form of underwriting discounts, concessions or commissions from the
underwriter for whom they act as agent. In connection with the sale of the
underwritten certificates, the underwriter may be deemed to have received
compensation from the depositor in the form of underwriting compensation. The
underwriter and any dealers that participate with the underwriter in the
distribution of the underwritten certificates may be deemed to be underwriters
and any profit on the resale of the underwritten certificates positioned by them
may be deemed to be underwriting discounts and commissions under the Securities
Act of 1933, as amended.
The underwriting agreement provides that the depositor will indemnify the
underwriter, and that under limited circumstances the underwriter will indemnify
the depositor, against some liabilities under the Securities Act, or contribute
to payments required to be made in respect thereof.
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There is currently no secondary market for the Class A Certificates. The
underwriter intends to make a secondary market in the underwritten certificates
but is not obligated 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 Class A Certificates will not be listed on any securities
exchange.
The primary source of information available to investors concerning the
Class A Certificates will be the monthly statements discussed in the prospectus
under "Description of the Certificates--Reports to Certificateholders," which
will include information as to the outstanding principal balance of the Class A
Certificates. There can be no assurance that any additional information
regarding the Class A Certificates will be available through any other source.
In addition, the depositor is not aware of any source through which price
information about the Class A Certificates will be available on an ongoing
basis. The limited nature of this information regarding the Class A Certificates
may adversely affect the liquidity of the Class A Certificates, even if a
secondary market for the Class A Certificates becomes available.
LEGAL OPINIONS
[Certain legal matters relating to the certificates will be passed upon for
the depositor by , and for the ------------------------ ------------------------
underwriter by , .] ---------------------- ------------------------
[EXPERTS
The consolidated financial statements of [financial guaranty insurer]
____________ [and subsidiaries], as of December 31, ____ and ____ and for each
of the years in the three-year period ended December 31, ____ are incorporated
by reference in this prospectus supplement and in the registration statement in
reliance upon the report of _________, independent certified public accountants,
incorporated by reference in this prospectus supplement, and upon the authority
of __________ as experts in accounting and auditing.]
RATINGS
It is a condition of the issuance of the Class A Certificates that they be
rated "AAA" by __________ and ____________.
[______________________ 's ratings on mortgage pass-through certificates address
the likelihood of the receipt by certificateholders of payments required under
the pooling and servicing agreement. ____________________ 's ratings take into
consideration the credit quality of the mortgage pool, structural and legal
aspects associated with the certificates, and the extent to which the payment
stream in the mortgage pool is adequate to make payments required under the
certificates. ________________ 's rating on the certificates does not, however,
constitute a statement regarding frequency of prepayments on the mortgage s. See
"Certain Yield and Prepayment Considerations" in this prospectus supplement. In
addition, the ratings do not address the likelihood of the receipt of any
amounts in respect of Prepayment Interest Shortfalls.
The ratings assigned by to mortgage pass-through certificates address the
likelihood of the receipt by certificateholders of all distributions to which
they are entitled under the transaction structure. _________________'s ratings
reflect its analysis of the
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riskiness of the underlying mortgage loans and the structure of the transaction
as described in the operative documents. 's ratings do not address the effect on
the certificates' yield attributable to prepayments or recoveries on the
underlying mortgage loans . In addition, the ratings do not address the
likelihood of the receipt of any amounts in respect of Prepayment Interest
Shortfalls.
The depositor has not requested a rating on the Class A Certificates by any
rating agency other than _______________ and __________________. However, there
can be no assurance as to whether any other rating agency will rate the Class A
Certificates, or, if it does, what rating would be assigned by any other rating
agency. A rating on the Certificates by another rating agency, if assigned at
all, may be lower than the ratings assigned to the Class A Certificates by and .
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
organization. Each security rating should be evaluated independently of any
other security rating. In the event that the ratings initially assigned to the
Class A Certificates are subsequently lowered for any reason, no person or
entity is obligated to provide any additional support or credit enhancement with
respect to the Class A Certificates.
LEGAL INVESTMENT
The Class A Certificates will not constitute "mortgage related securities"
for purposes of SMMEA because the mortgage pool includes mortgage loans that are
secured by subordinate liens on the related mortgage properties.
One or more classes of the Class A Certificates may be viewed as "complex
securities" under TB13a, which applies to thrift institutions regulated by the
OTS.
The depositor makes no representations as to the proper characterization
of any class of the Class A Certificates for legal investment or other purposes,
or as to the ability of particular investors to purchase any class of the Class
A Certificates under applicable legal investment restrictions. These
uncertainties may adversely affect the liquidity of any class of Class A
Certificates. Accordingly, all investors whose investment activities are subject
to legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their legal advisors in
determining whether and to what extent any class of the Class A Certificates
constitutes a legal investment or is subject to investment, capital or other
restrictions.
See "Legal Investment" in the prospectus.
ERISA CONSIDERATIONS
A fiduciary of any ERISA plan, any insurance company, whether through its
general or separate accounts, or any other person investing ERISA plan assets,
as defined under "ERISA Considerations" in the prospectus, should carefully
review with its legal advisors whether the purchase or holding of Class A
Certificates could give rise to a transaction prohibited or not otherwise
permissible under ERISA or Section 4975 of the Internal Revenue Code. The
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purchase or holding of the Class A Certificates by or on behalf of an ERISA plan
or with ERISA plan assets may qualify for exemptive relief under the RFC
exemption, as described under "ERISA Considerations" in the prospectus. However,
the RFC exemption contains a number of conditions which must be met for the
exemption to apply, including the requirement that any ERISA plan must be an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of the
Commission under the Securities Act.
Insurance companies contemplating the investment of general account assets
in the Class A Certificates should consult with their legal advisors with
respect to the applicability of Section 401(c) of ERISA, as described under
"ERISA Considerations--Insurance Company General Accounts" in the prospectus.
The DOL issued final regulations under Section 401(c) on January 4, 2000, but
these final regulations are not generally applicable until July 5, 2001.
Any fiduciary or other investor of ERISA plan assets that proposes to
acquire or hold the Class A Certificates on behalf of an ERISA plan or with
ERISA plan assets should consult with its counsel with respect to: (i) whether
the specific and general conditions and the other requirements of the RFC
exemption would be satisfied, or whether any other prohibited transaction
exemption would apply, and (ii) the potential applicability of the general
fiduciary responsibility provisions of ERISA and the prohibited transaction
provisions of ERISA and Section 4975 of the Internal Revenue Code to the
proposed investment. See "ERISA Considerations" in the prospectus.
The sale of any of the Class A Certificates to an ERISA plan is in no
respect a representation by the depositor or the underwriter that such an
investment meets all relevant legal requirements relating to investments by
ERISA plans generally or any particular ERISA plan, or that such an investment
is appropriate for ERISA plans generally or any particular ERISA plan.
S-80
<PAGE>
Credit Suisse First Boston Mortgage Securities Corp.
$
Mortgage-Backed Pass-Through Certificates,
Series 200_-___
Prospectus supplement
[Name of Underwriter]
Underwriter
You should rely only on the information contained or incorporated by reference
in this prospectus supplement and the prospectus. We have not authorized anyone
to provide you with different information.
We are not offering the certificates offered hereby in any state where the offer
is not permitted.
Dealers will be required to deliver a prospectus supplement and prospectus when
acting as underwriters of the certificates offered hereby and with respect to
their unsold allotments or subscriptions. In addition, all dealers selling the
offered certificates, whether or not participating in this offering, may be
required to deliver a prospectus supplement and prospectus until _______, .
