<PAGE>
SUBJECT TO COMPLETION, DATED MAY 10, 1999
THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY
BE CHANGED. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
PRIOR TO THE TIME A FINAL PROSPECTUS SUPPLEMENT IS DELIVERED. 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.
<PAGE>
FILED PURSUANT
TO 424(B)(3)
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 17, 1998)
$1,600,000,000 (APPROXIMATE)
LB COMMERCIAL MORTGAGE TRUST 1999-C1
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1999-C1
Structured Asset Securities Corporation (the "Depositor") will establish the
Trust. The Trust will issue the seven (7) classes of "Offered Certificates"
described in the table below, together with ten (10) additional classes of
"Private Certificates". The Depositor is offering only the Offered Certificates
pursuant to this prospectus supplement. The Depositor is not offering the
Private Certificates pursuant to this prospectus supplement. The Private
Certificates are subordinate to, and provide credit enhancement for, the Offered
Certificates.
The assets of the Trust will include a pool of 198 fixed rate, monthly pay
mortgage loans secured by first priority liens on various commercial and
multifamily residential properties. The mortgage pool will have an "Initial Pool
Balance" of approximately $1,746,894,129. The mortgage loans and related
mortgaged properties are more fully described in this prospectus supplement.
------------------------
YOU SHOULD FULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE S-30 IN THIS
PROSPECTUS SUPPLEMENT PRIOR TO INVESTING IN THE OFFERED CERTIFICATES.
---------------------
No governmental agency or instrumentality has insured or guaranteed the Offered
Certificates
or the underlying mortgage loans.
The Offered Certificates will represent interests in the Trust only and will not
represent an interest in or obligations of any other party.
This prospectus supplement may be used to offer and sell the Offered
Certificates
only if accompanied by the Depositor's prospectus dated .
<TABLE>
<CAPTION>
APPROXIMATE INITIAL ASSUMED FINAL
CERTIFICATE BALANCE OR % OF INITIAL POOL INITIAL PASS- DISTRIBUTION DATE
OFFERED CERTIFICATES NOTIONAL AMOUNT(1) BALANCE THROUGH RATE(3) (5) CUSIP NO.
- ---------------------------------- ----------------------- ----------------- --------------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
Class A-1.........................
Class A-2.........................
Class B...........................
Class C...........................
Class D...........................
Class E...........................
Class X...........................
<CAPTION>
EXPECTED RATINGS
(MOODY'S/
OFFERED CERTIFICATES DCR) (6)
- ---------------------------------- ----------------
<S> <C>
Class A-1......................... Aaa/AAA
Class A-2......................... Aaa/AAA
Class B........................... Aa2/AA
Class C........................... A2/A
Class D........................... Baa2/BBB
Class E........................... Baa3/BBB-
Class X........................... Aaa/AAA
</TABLE>
(FOOTNOTES TO TABLE ON NEXT PAGE)
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Lehman Brothers Inc. ("Lehman") and Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill"; and, together with Lehman, the "Underwriters") will
purchase the Offered Certificates from the Depositor, subject to the
satisfaction of certain conditions. Lehman will act as lead manager and sole
bookrunner with respect to the Offered Certificates. Each Underwriter currently
intends to sell its allocation of the Offered Certificates from time to time in
negotiated transactions or otherwise at varying prices to be determined at the
time of sale. See "Method of Distribution" in this Prospectus Supplement.
Proceeds to the Depositor from the sale of the Offered Certificates will be an
amount equal to approximately % of the initial aggregate Certificate Balance
of the Offered Certificates, plus accrued interest, before deducting expenses
payable by the Depositor.
<PAGE>
LEHMAN BROTHERS
MERRILL LYNCH & CO.
The date of this Prospectus Supplement is .
<PAGE>
FOOTNOTES TO THE TABLE ON THE COVER OF THIS PROSPECTUS SUPPLEMENT:
(1) The actual initial Certificate Balance or Notional Amount of any class of
Offered Certificates may be larger or smaller than the aggregate principal
balance or notional amount, as the case may be, shown in the table on the
cover of this prospectus supplement, depending on the actual size of the
Initial Pool Balance. The Initial Pool Balance may be as much as 5% larger
or smaller than the amount set forth in this prospectus supplement. The
terms "Certificate Balance" and "Notional Amount" have the respective
meanings set forth under "Description of the Offered Certificates--General"
in this prospectus supplement.
(2) The Class X Certificates will not have a Certificate Balance and will not
entitle the holders thereof to any distributions of principal. The Class X
Certificates will accrue interest on a Notional Amount that is equal to the
aggregate of the Certificate Balances outstanding from time to time of those
classes of Certificates that do have Certificate Balances.
(3) In addition to distributions of interest, the holders of one or more classes
of the Offered Certificates may be entitled to receive a portion of any
prepayment premiums and/or yield maintenance charges received from time to
time on the underlying mortgage loans. See "Description of the Offered
Certificates--Distributions-- Distributions of Prepayment Premiums and Yield
Maintenance Charges" in this prospectus supplement.
(4) The Pass-Through Rate shown in the table on the cover page for the Class X
Certificates is the rate applicable for distributions to be made in July
1999. The Pass-Through Rate for such class is variable as described under
"Description of the Offered Certificates--Distributions--Calculations of
Pass-Through Rates" in this prospectus supplement.
(5) The table on the cover shows the month and year in which the Assumed Final
Distribution Date for each Class of Offered Certificates occurs. The term
"Assumed Final Distribution Date" has the meaning set forth defined under
"Summary of Prospectus Supplement--Relevant Dates and Periods" in this
prospectus supplement. The "Rated Final Distribution Date", which is also
defined under "Summary of Prospectus Supplement--Relevant Dates and Periods"
in this prospectus supplement, occurs in .
(6) By Moody's Investors Service, Inc. ("Moody's") and Duff & Phelps Credit
Rating Co. ("DCR"; and, together with Moody's, the "Rating Agencies"). See
"Ratings" in this prospectus supplement.
IMPORTANT NOTICE ABOUT THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS
Information about the Offered Certificates is contained in two separate
documents, each of which provides summary information in the front part thereof
and more detailed information in the text that follows: (a) the accompanying
prospectus dated November 17, 1998 (the "Prospectus"), which provides general
information, some of which may not apply to the Offered Certificates; and (b)
this prospectus supplement dated (this "Prospectus Supplement"),
which describes the specific terms of the Offered Certificates.
YOU SHOULD READ BOTH THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN FULL
TO OBTAIN MATERIAL INFORMATION CONCERNING THE OFFERED CERTIFICATES. If the
descriptions of the Offered Certificates vary between this Prospectus Supplement
and the Prospectus, you should rely on the information contained in this
Prospectus Supplement. You should only rely on the information contained in this
Prospectus Supplement and the Prospectus. The Depositor has not authorized any
person to give any information or to make any representation that is different.
This Prospectus Supplement and the Prospectus include cross-references to
sections in these materials where you can find further related discussions. The
Table of Contents in this Prospectus Supplement and the Prospectus identify the
pages where these sections are located.
This Prospectus Supplement uses certain capitalized terms that are defined
either in a different section of this Prospectus Supplement or in the
Prospectus. This Prospectus Supplement includes an "Index of Principal
Definitions" that identifies where to locate any definitions contained in this
Prospectus Supplement for those
S-3
<PAGE>
capitalized terms that are most significant or are most commonly used and that
are not otherwise defined in the Prospectus. The Prospectus contains a
"Glossary" in which various significant or commonly used terms are defined.
This Prospectus Supplement and the Prospectus include words such as
"expects", "intends", "anticipates", "estimates" and similar words and
expressions. Such words and expressions are intended to identify forward-looking
statements. Any forward-looking statements are made subject to risks and
uncertainties which could cause actual results to differ materially from those
stated. Such risks and uncertainties include, among other things, declines in
general economic and business conditions, increased competition, changes in
demographics, changes in political and social conditions, regulatory initiatives
and changes in customer preferences, many of which are beyond the control of the
Depositor, the Master Servicer, the Special Servicer, the Trustee or any related
borrower. The forward-looking statements set forth in this Prospectus Supplement
are made as of the date of this Prospectus Supplement. The Depositor has no
obligation to update or revise any such forward-looking statement.
------------------------
The Depositor has filed with the Securities and Exchange Commission (the
"SEC") a registration statement (of which this Prospectus Supplement and the
Prospectus form a part) under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Offered Certificates. This Prospectus
Supplement and the Prospectus do not contain all of the information contained in
the registration statement. For further information regarding the documents
referred to in this Prospectus Supplement and the Prospectus, you should refer
to the registration statement and the exhibits thereto. The registration
statement and such exhibits can be inspected and copied at prescribed rates at
the public reference facilities maintained by the SEC at its Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its Regional
Offices located at: Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 6066; and New York Regional Office, Seven World Trade
Center, New York, New York 10048. Copies of certain of such materials can also
be obtained electronically through the SEC's Internet Web Site
(http://www.sec.gov).
------------------------
The Underwriters are offering the Offered Certificates when, as and if
issued and delivered to and accepted by the Underwriters, subject to prior sale
and subject to the Underwriters' right to reject orders in whole or in part. The
Depositor expects to deliver the Offered Certificates in book-entry form through
the Same-Day Funds Settlement System of The Depository Trust Company on or about
June 10, 1999, against payment therefor in immediately available funds.
There is currently no secondary market for the Offered Certificates. Each
Underwriter has informed the Depositor that it presently intends to make a
secondary market in the Offered Certificates, but it is not obligated to do so.
There can be no assurance that such a market will develop or, if it does
develop, that it will continue. The Depositor does not intend to list the
Offered Certificates on any securities exchange. See "Risk Factors--Risks
Related to the Offered Certificates--Risks Associated with Liquidity and Market
Value" in this Prospectus Supplement.
------------------------
S-4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
IMPORTANT NOTICE ABOUT THE INFORMATION
CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS................ S-3
EXECUTIVE SUMMARY............................ S-7
SUMMARY OF PROSPECTUS SUPPLEMENT............. S-8
RISK FACTORS................................. S-30
Risks Related to the Offered
Certificates............................. S-30
Risks Related to the Mortgage Loans........ S-33
DESCRIPTION OF THE MORTGAGE POOL............. S-49
General.................................... S-49
Certain Terms and Conditions of the
Mortgage Loans........................... S-50
Credit Lease Loans......................... S-55
Assessments of Property Condition.......... S-58
Additional Mortgage Loan Information....... S-59
Mortgage Pool Characteristics.............. S-61
Significant Mortgage Loans................. S-65
Assignment of the Mortgage Loans........... S-79
Representations and Warranties............. S-80
Cures and Repurchases...................... S-82
Changes in Mortgage Pool Characteristics... S-82
SERVICING OF THE MORTGAGE LOANS.............. S-83
General.................................... S-83
The Master Servicer and the Special
Servicer................................. S-85
Servicing and Other Compensation and
Payment of Expenses...................... S-85
Evidence as to Compliance.................. S-90
Modifications, Waivers, Amendments and
Consents................................. S-90
Custodial Account.......................... S-92
The Controlling Class Representative....... S-95
Realization Upon Defaulted Mortgage Loans;
Sale of Defaulted Mortgage Loans and REO
Properties............................... S-96
REO Properties............................. S-99
Inspections; Collection of Operating
Information.............................. S-100
<CAPTION>
PAGE
---------
<S> <C>
Replacement of the Special Servicer........ S-101
Maintenance of Insurance................... S-101
Certain Matters Regarding the Depositor,
the Master Servicer and the Special
Servicer................................. S-102
Events of Default.......................... S-103
Rights Upon Event of Default............... S-105
Sale of Master Servicing Rights............ S-105
DESCRIPTION OF THE OFFERED CERTIFICATES...... S-106
General.................................... S-106
Registration and Denominations............. S-108
Collection Account......................... S-108
Seniority.................................. S-109
Certain Relevant Characteristics of the
Mortgage Loans........................... S-111
Distributions.............................. S-111
Allocation of Realized Losses and Certain
Other Shortfalls and Expenses............ S-119
P&I Advances............................... S-121
Appraisal Reductions....................... S-122
Reports to Certificateholders; Certain
Available Information.................... S-123
Voting Rights.............................. S-130
Amendment.................................. S-130
Termination................................ S-131
The Trustee................................ S-131
YIELD AND MATURITY CONSIDERATIONS............ S-133
Yield Considerations....................... S-133
Price/Yield Tables......................... S-136
Weighted Average Lives..................... S-138
USE OF PROCEEDS.............................. S-139
FEDERAL INCOME TAX CONSEQUENCES............ S-140
General.................................... S-140
Discount and Premium; Prepayment
Premiums................................. S-140
Constructive Sales of Class X
Certificates............................. S-141
Characterization of Investments in Offered
Certificates............................. S-141
Possible Taxes on Income From
Foreclosure Property and Other Taxes..... S-142
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Reporting and Other Administrative
Matters.................................. S-143
CERTAIN ERISA CONSIDERATIONS................. S-144
LEGAL INVESTMENT............................. S-147
METHOD OF DISTRIBUTION....................... S-148
LEGAL MATTERS................................ S-149
RATINGS...................................... S-149
INDEX OF PRINCIPAL DEFINITIONS............... S-151
ANNEX A-1--CERTAIN CHARACTERISTICS OF THE
MORTGAGE LOANS............................. A-1
ANNEX A-2--CERTAIN MONETARY TERMS OF THE
MORTGAGE LOANS............................. A-2
ANNEX A-3--CERTAIN INFORMATION REGARDING
RESERVES................................... A-3
ANNEX B--TERM SHEET.......................... B-1
ANNEX C-1--PRICE/YIELD TABLES................ C-1
<CAPTION>
PAGE
---------
<S> <C>
ANNEX C-2--DECREMENT TABLES.................. C-2
ANNEX D--FORM OF DELINQUENT LOAN STATUS
REPORT..................................... D-1
ANNEX E--FORM OF HISTORICAL LOAN MODIFICATION
REPORT..................................... E-1
ANNEX F--FORM OF HISTORICAL LOSS ESTIMATE
REPORT..................................... F-1
ANNEX G--FORM OF REO STATUS REPORT........... G-1
ANNEX H--FORM OF WATCH LIST REPORT........... H-1
ANNEX I--FORM OF OPERATING STATEMENT
ANALYSIS................................... I-1
ANNEX J--FORM OF NOI ADJUSTMENT WORKSHEET.... J-1
ANNEX K--FORM OF COMPARATIVE FINANCIAL STATUS
REPORT..................................... K-1
</TABLE>
S-6
<PAGE>
EXECUTIVE SUMMARY
This Executive Summary summarizes selected information relating to the
Offered Certificates. It does not contain all of the information you need to
consider in making your investment decision. TO UNDERSTAND ALL OF THE TERMS OF
THE OFFERING OF THE OFFERED CERTIFICATES, YOU SHOULD READ CAREFULLY THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN FULL.
<TABLE>
<CAPTION>
INITIAL APPROX. INITIAL
CERTIFICATE % OF APPROX. PASS-THROUGH PASS-
BALANCE OR INITIAL POOL INITIAL CREDIT RATE THROUGH
CLASS(ES) RATINGS(1) NOTIONAL AMOUNT(2) BALANCE SUPPORT(3) DESCRIPTION RATE
- -------------- ------------- --------------------- --------------- --------------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Offered Certificates
A-1........... Aaa/AAA
A-2........... Aaa/AAA
B............. Aa2/AA
C............. A2/A
D............. Baa2/BBB
E............. Baa3/BBB-
X............. Aaa/AAA
Private Certificates--Not Offered Hereby(6)(7)
F............. (8)
G............. (8)
H............. (8)
J............. (8)
K............. (8)
L............. (8)
M............. (8)
<CAPTION>
WEIGHTED
AVERAGE
LIFE PRINCIPAL
CLASS(ES) (YEARS)(4) WINDOW(4)
- -------------- ------------- -------------
<S> <C> <C>
Offered Certif
A-1...........
A-2...........
B.............
C.............
D.............
E.............
X.............
Private Certif
F.............
G.............
H.............
J.............
K.............
L.............
M.............
</TABLE>
- ------------------------
(1) Ratings shown are those of Moody's and DCR, respectively. Classes marked
"NR" will not be rated by the applicable rating agency.
(2) Depending on the actual size of the Initial Pool Balance, the initial
Certificate Balance or Notional Amount of any class of Certificates may be
larger or smaller than the aggregate principal balance or notional amount
shown above. The Initial Pool Balance may be as much as 5% larger or smaller
than the amount presented in this prospectus supplement.
(3) Represents the aggregate initial Certificate Balance (expressed as a
percentage of the Initial Pool Balance) of all classes of Certificates that
are subordinate to the indicated class.
(4) Based on the assumptions that each borrower timely makes all payments on its
mortgage loan, that each mortgage loan with an Anticipated Repayment Date
(as defined under "Summary of Prospectus Supplement--The Mortgage Loans and
Mortgaged Properties" in this Prospectus Supplement) is paid in full on such
date, and that no mortgage loan is otherwise prepaid prior to stated
maturity. Further based on the other Modeling Assumptions (as defined under
"Yield and Maturity Considerations" in this Prospectus Supplement).
(5) Notional Amount.
(6) The Depositor has provided information in this Prospectus Supplement
regarding the terms of the Private Certificates solely because of its
potential relevance to an investment decision with respect to the Offered
Certificates.
(7) The Private Certificates also include the Class R-I, Class R-II and Class
R-III Certificates, which do not have Certificate Balances, Notional Amounts
or Pass-Through Rates.
(8) Not presented.
S-7
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
This summary contains selected information from this Prospectus Supplement.
It does not contain all of the information you need to consider in making your
investment decision. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE
OFFERED CERTIFICATES, YOU SHOULD READ CAREFULLY THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS IN FULL.
OVERVIEW OF THE TRANSACTION
<TABLE>
<S> <C>
ESTABLISHMENT OF THE TRUST...... The Depositor is establishing a trust, to be designated as
LB Commercial Mortgage Trust 1999-C1 (the "Trust"). The
assets of the Trust (collectively, the "Trust Fund") will
primarily consist of a pool of certain multifamily and
commercial mortgage loans having the characteristics
described in this Prospectus Supplement (collectively, the
"Mortgage Loans").
ISSUANCE OF THE CERTIFICATES.... The Depositor is establishing the Trust for purposes of
issuing the Series 1999-C1 Commercial Mortgage
Pass-Through Certificates (the "Certificates") in multiple
classes (each, a "Class"). The Certificates will, in the
aggregate, represent the entire beneficial ownership of
the Trust. The registered holders of the Certificates are
referred to in this Prospectus Supplement as "Holders" or
"Certificateholders".
THE GOVERNING DOCUMENT.......... The governing document for purposes of establishing the
Trust and issuing the Certificates will be a Pooling and
Servicing Agreement to be dated as of the Cut-off Date,
between the Depositor, the Trustee, the Master Servicer
and the Special Servicer (the "Pooling Agreement"). See
"--The Relevant Parties" and "--Relevant Dates and
Periods" below. The Pooling Agreement will also govern the
servicing and administration of the Mortgage Loans and the
other assets of the Trust. The Depositor will file a copy
of the Pooling Agreement with the SEC as an exhibit to a
Current Report on Form 8-K ("Form 8-K"), within 15 days
after the initial issuance of the Offered Certificates.
The SEC will make such Form 8-K and its exhibits available
to the public for inspection.
RELEVANT PARTIES
DEPOSITOR....................... Structured Asset Securities Corporation, a special purpose
Delaware corporation. The Depositor is a direct,
wholly-owned subsidiary of Lehman. See "--The Issuer" in
the Prospectus.
MASTER SERVICER................. First Union National Bank, a national banking association.
See "Servicing of the Mortgage Loans--The Master Servicer
and the Special Servicer--The Master Servicer" in this
Prospectus Supplement.
SPECIAL SERVICER................ GMAC Commercial Mortgage Corporation, a California
corporation. See "Servicing of the Mortgage Loans--The
Master Servicer and the Special Servicer--The Special
Servicer" in this Prospectus Supplement.
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
The Holder (or Holders) of Certificates representing a
majority interest in the Controlling Class will have the
right, subject to certain conditions described in this
Prospectus Supplement, to replace the Special Servicer
and, further, to elect a representative from whom the
Special Servicer will seek advice and approval and take
direction. At any particular time, the "Controlling Class"
will, in general, be the most subordinate Class of
Certificates (other than the Class X, Class R-I, Class
R-II and Class R-III Certificates) outstanding with a
then-current Certificate Balance that is at least equal to
25% of the initial Certificate Balance thereof. See
"Servicing of the Mortgage Loans--Replacement of the
Master Servicer or the Special Servicer" and "--The
Controlling Class Representative" in this Prospectus
Supplement.
TRUSTEE......................... Norwest Bank Minnesota, National Association, a national
banking association. See "Description of the Offered
Certificates--The Trustee" in this Prospectus Supplement.
The Trustee will also have certain duties with respect to
REMIC administration (in such capacity, the "REMIC
Administrator").
RELEVANT DATES AND PERIODS
CUT-OFF DATE.................... In general, June 1, 1999. The Cut-off Date is the date as
of which each particular Mortgage Loan became part of the
Trust. As to any individual Mortgage Loan, the Cut-off
Date is its scheduled due date occurring in June 1999.
References in this Prospectus Supplement and in the
Prospectus to the "Cut-off Date" are to the applicable
Cut-off Date for each Mortgage Loan.
CLOSING DATE.................... On or about June 10, 1999. The Closing Date is the date on
which the Offered Certificates will initially be issued.
DISTRIBUTION DATE............... The 15th day of each month or, if any such 15th day is not
a business day, the next succeeding business day. The
first Distribution Date will be July 15, 1999. The
Distribution Date is the date each month on which
distributions are to be made on the Certificates.
RECORD DATE..................... With respect to any Distribution Date, the last business
day of the calendar month immediately preceding the month
in which such Distribution Date occurs. The Record Date is
relevant for establishing which Certificateholders are
entitled to receive distributions on the related
Distribution Date.
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C>
DETERMINATION DATE.............. In general, with respect to any Mortgage Loan and
Distribution Date, the 8th day of the calendar month in
which such Distribution Date occurs or, if any such 8th
day is not a business day, the immediately preceding
business day. However, with respect to certain Mortgage
Loans that have scheduled due dates that occur on or after
the 8th day of a calendar month, the Determination Date
will be the first business day coinciding with or
following such scheduled due dates. References in this
Prospectus Supplement and in the Prospectus to
"Determination Date" are to the applicable Determination
Date for each Mortgage Loan and Distribution Date. The
Determination Date is relevant for purposes of
establishing the end of the applicable Collection Period
for the related Distribution Date.
COLLECTION PERIOD............... With respect to any Mortgage Loan for any Distribution
Date, the period that begins immediately following the
Determination Date in the calendar month prior to the
month in which such Distribution Date occurs and continues
through and includes the Determination Date in the
calendar month in which such Distribution Date occurs,
except that the first Collection Period begins immediately
following the Cut-off Date. References in this Prospectus
Supplement and in the Prospectus to "Collection Period"
are to the applicable Collection Period for each Mortgage
Loan and Distribution Date. Amounts available for
distribution on any Distribution Date will be a function
of the payments and other collections received, and any
advances of payments due, in respect of each Mortgage Loan
during the related Collection Period.
INTEREST ACCRUAL PERIOD......... With respect to any Distribution Date, the calendar month
immediately preceding the month in which such Distribution
Date occurs. The amount of interest distributable with
respect to the interest-bearing Certificates on any
Distribution Date will be a function of the interest
accrued through the end of the related Interest Accrual
Period.
RATED FINAL DISTRIBUTION DATE... The Distribution Date in . As discussed in this
Prospectus Supplement, the ratings assigned to the Offered
Certificates will represent the likelihood of timely
receipt by the Holders thereof of all interest to which
they are entitled on each Distribution Date and, except in
the case of the Class X Certificates, the ultimate receipt
by the Holders thereof of all principal to which they are
entitled by the Rated Final Distribution Date.
ASSUMED FINAL DISTRIBUTION
DATE.......................... With respect to any Class of Certificates, the
Distribution Date on which the Holders of such
Certificates would be expected to receive their last
distribution based upon--
- the assumption that each borrower timely makes all
payments on its Mortgage Loan;
- the assumption that each underlying Mortgage Loan with
an Anticipated Repayment Date is paid in full on that
date;
</TABLE>
S-10
<PAGE>
<TABLE>
<S> <C>
- the assumption that no borrower otherwise prepays its
Mortgage Loan prior to stated maturity; and
- the other Modeling Assumptions set forth under "Yield
and Maturity Considerations" in this Prospectus
Supplement.
The Assumed Final Distribution Date for each Class of
Offered Certificates is the Distribution Date in the
calendar month and year set forth below for such Class.
</TABLE>
<TABLE>
<CAPTION>
ASSUMED FINAL
DISTRIBUTION
CLASS DATE
- ------------------------------------------------ ----------------
<S> <C>
Class A-1.......................................
Class A-2.......................................
Class B.........................................
Class C.........................................
Class D.........................................
Class E.........................................
Class X.........................................
</TABLE>
OVERVIEW OF THE CERTIFICATES
<TABLE>
<S> <C>
GENERAL......................... The Certificates will consist of seventeen (17) Classes,
seven (7) of which will be Classes of Offered Certificates
and ten (10) of which will be Classes of Private
Certificates. The Depositor is only offering the Offered
Certificates pursuant to this Prospectus Supplement. The
Depositor does not intend to register any of the Private
Certificates under the Securities Act, and is not offering
such Certificates to you pursuant to this Prospectus
Supplement or the Prospectus. The Depositor has included
information regarding the Private Certificates in this
Prospectus Supplement because of its potential relevance
to an investment decision with respect to the Offered
Certificates.
CERTAIN CHARACTERISTICS OF
THE CERTIFICATES
A. THE OFFERED CERTIFICATES..... Each Class of Offered Certificates will have the
approximate initial Certificate Balance or Notional Amount
as set forth below and will accrue interest at an annual
rate (the "Pass-Through Rate") as set forth or otherwise
described below:
</TABLE>
<TABLE>
<CAPTION>
APPROX. INITIAL
CERTIFICATE BALANCE PASS-THROUGH
CLASS OR NOTIONAL AMOUNT(1) RATE
- ---------------------------- ------------------------- -----------------
<S> <C> <C>
Class A-1...................
Class A-2...................
Class B.....................
Class C.....................
Class D.....................
Class E.....................
Class X..................... (2) (3)
(FOOTNOTES TO TABLE ON NEXT PAGE)
</TABLE>
S-11
<PAGE>
--------------------------------------------------------------
(1) The actual initial Certificate Balance or
Notional Amount of any Class of Offered
Certificates at the date of issuance may be
larger or smaller than the amount shown
above, depending on the actual size of the
Initial Pool Balance. The actual size of the
Initial Pool Balance may be as much as 5%
larger or smaller than the amount presented
in this Prospectus Supplement.
(2) The Class X Certificates will accrue
interest based on a Notional Amount equal to
the aggregate of the Certificate Balances
outstanding from time to time of those
Classes of Certificates that have Certificate
Balances.
(3) The Pass-Through Rate shown above for the
Class X Certificates is the rate applicable
for the Distribution Date in July 1999. The
Pass-Through Rate for such Class will be
variable as described under "Description of
the Offered
Certificates--Distributions--Calculations of
Pass-Through Rates" in this Prospectus
Supplement. In general, the Pass-Through Rate
for the Class X Certificates will be a
function of the weighted average of the strip
rates at which interest accrues on the
respective components of the Notional Amount
of the Class X Certificates from time to
time.
<TABLE>
<S> <C>
See "Description of the Offered Certificates--General" and
"--Distributions--Calculations of Pass-Through Rates" in
this Prospectus Supplement.
B. THE PRIVATE CERTIFICATES..... Each Class of the Private Certificates will have the
approximate initial Certificate Balance as set forth below
and will accrue interest at the Pass-Through Rate as set
forth below:
</TABLE>
<TABLE>
<CAPTION>
APPROX. INITIAL
CERTIFICATE PASS-THROUGH
CLASS BALANCE(1) RATE
- ----------------------------- -------------------- -------------
<S> <C> <C>
Class F......................
Class G......................
Class H......................
Class J......................
Class K......................
Class L......................
Class M......................
Class R-I.................... N/A(2) N/A(2)
Class R-II................... N/A(2) N/A(2)
Class R-III.................. N/A(2) N/A(2)
</TABLE>
-------------------------------------------------------
(1) The actual initial Certificate Balance of any
Class of Private Certificates at the date of
issuance may be larger or smaller than the
amount shown above, depending on the actual
size of the Initial Pool Balance. The actual
size of the Initial Pool Balance may be as
much as 5% larger or smaller than the amount
presented in this Prospectus Supplement.
(2) The Class R-I, Class R-II and Class R-III
Certificates do not have Certificate Balances
or Pass-Through Rates.
S-12
<PAGE>
<TABLE>
<S> <C>
Registration and
Denominations................. It is expected that the Depositor will deliver the Offered
Certificates in book-entry form in original denominations
of: (i) in the case of the Class X Certificates, $250,000
initial notional amount and in any whole dollar
denomination in excess thereof; and (ii) in the case of
the other Classes of Offered Certificates, $10,000 initial
principal amount and in any whole dollar denomination in
excess thereof. Each Class of Offered Certificates will be
represented by one or more Certificates registered in the
name of Cede & Co., as nominee of The Depository Trust
Company ("DTC"). As a result, you will not receive a fully
registered physical certificate representing your interest
in any Offered Certificate, except under the limited
circumstances described in this Prospectus Supplement and
in the Prospectus. See "Description of the Offered
Certificates-- Registration and Denominations" in this
Prospectus Supplement and "Description of the
Securities--Book-Entry Registration" in the Prospectus.
OPTIONAL TERMINATION............ The Trust may be terminated when the aggregate Stated
Principal Balance (as defined under "Description of the
Offered Certificates--Certain Relevant Characteristics of
the Mortgage Loans" in this Prospectus Supplement) of the
Mortgage Pool is less than 1.0% of the Initial Pool
Balance. See "Description of the Offered
Certificates--Termination" in this Prospectus Supplement.
FEDERAL INCOME TAX
CONSEQUENCES.................. The Pooling Agreement will require the Trustee, as REMIC
Administrator, to make elections to treat designated
portions of the Trust Fund as three separate "real estate
mortgage investment conduits" (each, a "REMIC"). The
lowest-tier REMIC will hold, among other things, the
Mortgage Loans, as well as any Mortgaged Properties (as
defined in this Prospectus Supplement under "--The
Mortgage Loans and Mortgaged Properties" below) that may
have been acquired by the Trust following a borrower
default, but will exclude collections of certain
additional interest accrued (and deferred as to payment)
in respect of each Mortgage Loan with an Anticipated
Repayment Date that remains outstanding after such date
(such excluded collections of additional interest are
referred to in this Prospectus Supplement as the
"Non-REMIC Assets"). The Non-REMIC Assets will
collectively constitute a grantor trust (the "Grantor
Trust") for federal income tax purposes. The Offered
Certificates will evidence "regular interests" in a REMIC.
</TABLE>
S-13
<PAGE>
<TABLE>
<S> <C>
As a result of the foregoing, the Offered Certificates
will be treated as newly issued debt instruments for
federal income tax purposes. You will have to report
income on your Certificates in accordance with the accrual
method of accounting even if you are otherwise a cash
method taxpayer.
The Class and Class X Certificates will, and the
other Classes of Offered Certificates will not, be issued
with original issue discount. If you own a Certificate
issued with original issue discount, you may be required
to report original issue discount income before receiving
a corresponding amount of cash.
For tax information reporting purposes, the Trustee, as
REMIC Administrator, will compute the accrual of discount
and premium on the Certificates based on the assumption
that each Mortgage Loan with an Anticipated Repayment Date
will be paid in full on such date and on the further
assumption that no borrower will otherwise prepay its
Mortgage Loan prior to stated maturity.
It is anticipated that any prepayment premium or yield
maintenance charge allocable to a Class of Offered
Certificates will be ordinary income to the Holders of
such Class as such amounts become due to the Trust. See
"Description of the Offered
Certificates--Distributions--Distributions of Prepayment
Premiums and Yield Maintenance Charges" in this Prospectus
Supplement.
For a more detailed discussion of the federal income
aspects of investing in the Certificates, see "Federal
Income Tax Consequences" in this Prospectus Supplement and
"Federal Income Tax Considerations" in the Prospectus.
ERISA........................... It is anticipated that certain employee benefit plans and
other retirement arrangements subject to Title I of ERISA
or Section 4975 of the Code will be able to invest in the
Class A-1, Class A-2 and Class X Certificates, without
giving rise to a prohibited transaction, based upon an
individual prohibited transaction exemption granted to
Lehman by the U.S. Department of Labor. However,
investments in the other Offered Certificates by, on
behalf of or with assets of such entities, will be
restricted as described under "Certain ERISA
Considerations" in this Prospectus Supplement.
If you are a fiduciary of any employee benefit plan or
other retirement arrangement subject to Title I of ERISA
or section 4975 of the Code, you should review carefully
with your legal advisors whether the purchase or holding
of the Offered Certificates could give rise to a
transaction that is prohibited under ERISA or Section 4975
of the Code. If you are using funds of an insurance
company general account to purchase any Offered
Certificates, you should consider the availability of
Prohibited Transaction Class Exemption 95-60. See "Certain
ERISA Considerations" in this Prospectus Supplement and
"ERISA Considerations" in the Prospectus.
</TABLE>
S-14
<PAGE>
<TABLE>
<S> <C>
LEGAL INVESTMENT................ The following Classes of Offered Certificates, upon
initial issuance, will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"):
- Class A-1
- Class A-2
- Class B
- Class X
The other Offered Certificates, upon initial issuance,
will not constitute "mortgage related securities" within
the meaning of SMMEA. You should consult your own legal
advisors to determine whether and to what extent the
Offered Certificates constitute legal investments for you.
See "Legal Investment" in this Prospectus Supplement and
in the Prospectus.
CERTAIN INVESTMENT
CONSIDERATIONS................ The yield to maturity on any Offered Certificate will be
affected by the rate and timing of prepayments and other
collections of principal on or in respect of the Mortgage
Loans. In the case of Offered Certificates purchased at a
discount, a slower than anticipated rate of prepayments
could result in a lower than anticipated yield. In the
case of Class X Certificates or any other Offered
Certificates purchased at a premium, a faster than
anticipated rate of prepayments could result in a lower
than anticipated yield. If you are contemplating the
purchase of a Class X Certificate, you should be aware
that the yield to maturity on the Class X Certificates
will be highly sensitive to the rate and timing of
principal prepayments and other liquidations of Mortgage
Loans and that an extremely rapid rate of prepayments
and/or other liquidations in respect of the Mortgage Loans
could result in a complete or partial loss of your initial
investment. See "Yield and Maturity Considerations" in
this Prospectus Supplement and "Yield and Prepayment
Considerations" in the Prospectus.
RATINGS......................... It is a condition to the issuance of the respective
Classes of the Offered Certificates that they receive the
credit ratings indicated below:
</TABLE>
<TABLE>
<CAPTION>
CLASS MOODY'S/DCR
- --------------------------------------------------------- -------------
<S> <C>
Class A-1................................................ Aaa/AAA
Class A-2................................................ Aaa/AAA
Class B.................................................. Aa2/AA
Class C.................................................. A2/A
Class D.................................................. Baa2/BBB
Class E.................................................. Baa3/BBB-
Class X.................................................. Aaa/AAA
</TABLE>
S-15
<PAGE>
<TABLE>
<S> <C> <C>
The ratings of the Offered Certificates address the timely
payment of interest and, except in the case of the Class X
Certificates, the ultimate payment of principal on or
before the Rated Final Distribution Date. Such ratings do
not, however, address--
- the tax attributes of the Offered Certificates or of the
Trust,
- the likelihood or frequency of voluntary or involuntary
principal prepayments on the Mortgage Loans,
- the degree to which prepayments on the Mortgage Loans
might differ from those originally anticipated,
- the likelihood that prepayment premiums or yield
maintenance charges will be received with respect to the
Mortgage Loans, or
- the likelihood that any Mortgage Loan with an
Anticipated Repayment Date will remain outstanding past
such date and will thereafter accrue any interest at a
rate in excess of its current mortgage interest rate.
A security rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or
withdrawal at any time by the assigning rating agency.
For a description of the limitations of the ratings of the
Offered Certificates, see "Ratings" in this Prospectus
Supplement and "Risk Factors--Limited Nature of Rating" in
the Prospectus.
REPORTS TO CERTIFICATEHOLDERS... On each Distribution Date, the following reports will be
available to you and will contain the information
described under "Description of the Offered
Certificates--Reports to Certificateholders; Certain
Available Information" in this Prospectus Supplement:
- Delinquent Loan Status Report
- Historical Loan Modification Report
- Historical Loss Estimate Report
- REO Status Report
- Watch List Report
- Loan Payoff Notification Report
- Comparative Financial Status Report
- Operating Statement Analysis
Upon reasonable prior notice, you will be permitted to
review at the Trustee's offices during normal business
hours a variety of information and documents that pertain
to the Mortgage Loans and Mortgaged Properties, including
loan documents, borrower operating statements, rent rolls
and property inspection reports.
See "Description of the Offered Certificates--Reports to
Certificateholders; Certain Available Information" in this
Prospectus Supplement.
</TABLE>
S-16
<PAGE>
<TABLE>
<S> <C> <C>
THE CERTIFICATES: A STRUCTURAL SUMMARY
SENIORITY....................... The following chart sets forth the relative seniority of
the respective Classes of Certificates for purposes of--
- making distributions of interest and, if and when
applicable, distributions of principal, and
- allocating losses and other shortfalls on the Mortgage
Loans, as well as certain default-related and otherwise
unanticipated expenses of the Trust.
In general, each identified Class of Certificates will,
for the above specified purposes, be subordinate to each
other Class of Certificates, if any, listed above it in
the following chart. Accordingly, the Class A-1, Class A-2
and Class X Certificates (collectively, the "Senior
Certificates") are the most senior Classes of
Certificates.
SUMMARY SENIORITY CHART
MOST SENIOR
[LOGO]
MOST SUBORDINATE
THE ONLY FORM OF CREDIT SUPPORT FOR ANY CLASS OF OFFERED
CERTIFICATES WILL BE THE ABOVE-REFERENCED SUBORDINATION OF
THE OTHER CLASSES OF
</TABLE>
S-17
<PAGE>
<TABLE>
<S> <C> <C>
CERTIFICATES TO WHICH IT IS SENIOR, INCLUDING ALL OF THE
PRIVATE CERTIFICATES.
See "Description of the Offered Certificates--General",
"-- Seniority", "--Distributions" and "--Allocation of
Realized Losses and Certain Other Shortfalls and Expenses"
in this Prospectus Supplement.
DISTRIBUTIONS
A. GENERAL...................... Distributions of interest and principal will generally be
made to the Holders of the various Classes of Certificates
entitled thereto, sequentially based upon their relative
seniority as depicted in the Summary Seniority Chart
above. See "Description of the Offered
Certificates--Seniority" and "--Distributions--Priority of
Payments" in this Prospectus Supplement.
B. DISTRIBUTIONS OF INTEREST.... Each Class of Certificates (other than the Class R-I,
Class R-II and Class R-III Certificates) will bear
interest. In the case of each such Class, such interest
will accrue during each Interest Accrual Period based
upon--
- the Pass-Through Rate for such Class for the related
Distribution Date,
- the Certificate Balance or Notional Amount, as the case
may be, of such Class outstanding immediately prior to the
related Distribution Date, and
- the assumption that each year consists of twelve 30-day
months.
The timing of a prepayment on a Mortgage Loan may result
in the collection of less than a full month's interest on
such Mortgage Loan during the Collection Period of
prepayment. As and to the extent described in this
Prospectus Supplement, such shortfalls (net of the
respective portions thereof attributable to the fees of
the Master Servicer and certain other items) will be
allocated to reduce the amount of accrued interest
otherwise payable to the Holders of the respective Classes
of interest-bearing Certificates, in reverse order of
their seniority as depicted in the Summary Seniority Chart
above. Any allocations of such shortfalls among the
Holders of the respective Classes of the Senior
Certificates will be made on a PRO RATA basis.
On each Distribution Date, subject to available funds and
the payment priorities described in this Prospectus
Supplement, you will be entitled to receive your
proportionate share of all unpaid distributable interest
accrued in respect of your Class of Offered Certificates
through the end of the related Interest Accrual Period.
See "Description of the Offered
Certificates--Distributions--Calculations of Interest",
"--Distributions--Priority of Payments" and "--Allocation
of Realized Losses and Certain Other Shortfalls and
Expenses" in this Prospectus Supplement.
C. DISTRIBUTIONS OF PRINCIPAL... The respective Classes of Certificates with Certificate
Balances are referred to in this Prospectus Supplement as
the "Principal Balance Certificates". In general, subject
to available funds and the payment priorities described
above, the Holders of each Class of
</TABLE>
S-18
<PAGE>
<TABLE>
<S> <C> <C>
Principal Balance Certificates will be entitled to receive
an aggregate amount of principal over time equal to the
related Certificate Balance. However, the Pooling
Agreement will require the Trustee to make such
distributions of principal in a specified sequential order
such that--
- No distributions of principal will be made to the
Holders of any Class of Private Certificates until the
Certificate Balance of each Class of Offered
Certificates (other than the Class X Certificates, which
have no Certificate Balance) is reduced to zero.
- No distributions of principal will be made to the
Holders of the Class B, Class C, Class D or Class E
Certificates until, in the case of each such Class, the
Certificate Balance of each more senior Class of Offered
Certificates (other than the Class X Certificates, which
have no Certificate Balance) is reduced to zero.
- No distributions of principal will be made to the
Holders of the Class A-2 Certificates until either:
(i) the Certificate Balance of the Class A-1 Certificates
is reduced to zero; or
(ii) because of losses on the Mortgage Loans and/or
certain default-related or other unanticipated expenses of
the Trust, the Certificate Balances of the Class B,
Class C, Class D, Class E, Class F, Class G, Class H,
Class J, Class K, Class L and Class M Certificates
(collectively, the "Subordinate Principal Balance
Certificates") have been reduced to zero (in which
case, any distributions of principal on the Class A-1
and Class A-2 Certificates will be made on a PRO RATA
basis).
The aggregate distributions of principal to be made on the
respective Classes of Certificates with Certificate
Balances on any Distribution Date will be a function of--
- the amount of all scheduled payments of principal due or
deemed due on the Mortgage Loans during the related
Collection Period that are either received as of the
related Determination Date or advanced by the Master
Servicer, and
- the amount of any prepayments and other unscheduled
collections of previously unadvanced principal in respect
of the Mortgage Loans that are received during the
related Collection Period.
</TABLE>
S-19
<PAGE>
<TABLE>
<S> <C>
See "Description of the Offered Certificates--Calculation
of the Principal Distribution Amount" and
"--Distributions--Priority of Payments" in this Prospectus
Supplement.
D. DISTRIBUTIONS OF PREPAYMENT
PREMIUMS AND YIELD MAINTENANCE
CHARGES....................... Any prepayment premium and/or yield maintenance charge
collected in respect of a Mortgage Loan will be
distributed, in the proportions described in this
Prospectus Supplement, to the Holders of the Class X
Certificates and/or to the Holders of any other Class or
Classes of Certificates senior to the Class G Certificates
that may be entitled to receive a portion of the related
prepayment of principal. See "Description of the Offered
Certificates--Distributions of Prepayment Premiums and
Yield Maintenance Charges" in this Prospectus Supplement.
ALLOCATION OF LOSSES AND CERTAIN
OTHER SHORTFALLS AND
EXPENSES...................... Losses on the Mortgage Loans, together with certain
default-related and other unanticipated expenses of the
Trust, may cause the aggregate Stated Principal Balance of
the Mortgage Loans to be less than the aggregate
Certificate Balance of the respective Classes of Principal
Balance Certificates (any such deficit being referred to
in this Prospectus Supplement as a "Mortgage Pool
Deficit"). If a Mortgage Pool Deficit exists following the
distributions made on the Certificates on any Distribution
Date, then the Certificate Balances of the respective
Classes of the Subordinate Principal Balance Certificates
will be successively reduced, in the reverse order of
their seniority as depicted in the Summary Seniority Chart
above, until the subject Mortgage Pool Deficit is
eliminated. If a Mortgage Pool Deficit exists at any time
after the Certificate Balances of the respective Classes
of the Subordinate Principal Balance Certificates have all
been reduced to zero, then the Certificate Balances of the
Class A-1 and Class A-2 Certificates will be reduced on a
PRO RATA basis, until the subject Mortgage Pool Deficit is
eliminated.
In addition, the timing of a prepayment on a Mortgage Loan
may result in the collection of less than a full month's
interest on such Mortgage Loan during the Collection
Period of prepayment. As and to the extent described in
this Prospectus Supplement, such shortfalls (net of the
respective portions thereof attributable to the fees of
the Master Servicer and certain other items) will be
allocated to reduce the amount of accrued interest
otherwise payable to the Holders of the respective Classes
of interest-bearing Certificates, in reverse order of
their seniority as depicted in the Summary Seniority Chart
above. Any allocations of such shortfalls among the
Holders of the respective Classes of the Senior
Certificates will be made on a PRO RATA basis.
</TABLE>
S-20
<PAGE>
<TABLE>
<S> <C>
See "Description of the Offered Certificates--Allocation
of Realized Losses and Certain Other Shortfalls and
Expenses" and "Servicing of the Mortgage Loans--Servicing
and Other Compensation and Payment of Expenses" in this
Prospectus Supplement.
ADVANCES........................ In general, the Master Servicer will be required to make
advances (each, a "P&I Advance"), for distribution to the
Certificateholders, in the amount of any delinquent
monthly payments (other than balloon payments) of
principal and interest due on the Mortgage Loans. The
Master Servicer and, in some cases, the Special Servicer
will also generally be required to make advances (each, a
"Servicing Advance") to cover certain costs and expenses
relating to the servicing and administration of the
Mortgage Loans. P&I Advances and Servicing Advances are
collectively referred to in this Prospectus Supplement as
"Advances". If the Special Servicer fails to make any
Servicing Advances that it is required to make, the Master
Servicer will, to the extent it is aware of such failure,
be required to make such Advance. If the Master Servicer
fails to make any Advance that it is required to make, the
Trustee will, to the extent it is aware of such failure,
be required to make such Advance. None of the Master
Servicer, the Special Servicer or the Trustee, however,
will be required to make any Advance that it determines,
in its good faith and reasonable judgment, will not be
recoverable from proceeds of the related Mortgage Loan. As
and to the extent described in this Prospectus Supplement,
any party that makes an Advance will be entitled to
receive interest thereon.
See "Description of the Offered Certificates--P&I
Advances" and "Servicing of the Mortgage Loans--Servicing
and Other Compensation and Payment of Expenses" in this
Prospectus Supplement.
APPRAISAL REDUCTIONS............ If certain adverse events or circumstances, called
"Appraisal Trigger Events", occur or exist with respect to
a Mortgage Loan or the related Mortgaged Property, the
Special Servicer will be obligated to obtain a new
appraisal of such Mortgaged Property. The new appraised
value may reflect an "Appraisal Reduction Amount", which
will, in general, be calculated based upon a comparison of
(i) 90% of such new appraised value to (ii) the principal
balance of, and certain other amounts due under, the
subject Mortgage Loan. If an Appraisal Reduction Amount
does exist, the amount otherwise required to be advanced
in respect of interest on the subject Mortgage Loan will
be reduced generally in the same proportion that the
Appraisal Reduction Amount bears to the principal balance
of such Mortgage Loan. Due to the payment priorities, this
will generally reduce the funds available to pay interest
on the most subordinate Class of Certificates then
outstanding. See "Description of the Offered
Certificates-- Appraisal Reductions" in this Prospectus
Supplement.
</TABLE>
S-21
<PAGE>
<TABLE>
<S> <C>
THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
THE MORTGAGE POOL............... The Trust Fund will primarily consist of the pool of
Mortgage Loans (the "Mortgage Pool"). Each Mortgage Loan
constitutes the obligation of one or more persons
(individually and collectively, as to such Mortgage Loan,
the "Borrower") to repay a specified sum with interest.
Each Mortgage Loan will be secured by a first lien on the
fee and/or leasehold interest of the related Borrower or
another person in one or more commercial or multifamily
residential properties (each, a "Mortgaged Property").
For more detailed information on the Mortgage Loans, see
the following sections in this Prospectus Supplement:
- "Description of the Mortgage Pool"
- "Risk Factors--Risks Related to the Mortgage Loans"
- Annex A-1--Certain Characteristics of the Mortgage Loans
- Annex A-2--Certain Monetary Terms of the Mortgage Loans
- Annex A-3--Certain Information Regarding Reserves
Set forth below is certain statistical information
regarding the Mortgage Loans and the Mortgaged Properties.
In reviewing such information, as well as the statistical
information regarding the Mortgage Loans and the Mortgaged
Properties contained elsewhere in this Prospectus
Supplement, you should be aware that--
- All numerical information provided with respect to the
Mortgage Loans is provided on an approximate basis.
- All weighted average information provided with respect
to the Mortgage Loans reflects weighting of the Mortgage
Loans by their Cut-off Date Balances.
- When information with respect to the Mortgaged
Properties is expressed as a percentage of the Initial
Pool Balance, such percentages are based upon the
Cut-off Date Balances of the related Mortgage Loans.
- In certain cases involving a Mortgage Loan that is
secured by multiple Mortgaged Properties located in more
than one state, a portion of such Mortgage Loan has been
allocated to each such Mortgaged Property.
- Statistical information regarding the Mortgage Loans may
change prior to the date of issuance of the Certificates
due to changes in the composition of the Mortgage Pool
prior to the Closing Date.
- Certain capitalized terms used with respect to the
Mortgage Loans are defined under "Description of the
Mortgage Pool" in this Prospectus Supplement.
</TABLE>
S-22
<PAGE>
<TABLE>
<S> <C>
A. GENERAL CHARACTERISTICS...... The Mortgage Pool will have the following general
characteristics as of the Cut-off Date:
</TABLE>
<TABLE>
<S> <C>
Initial Pool Balance(1).................... $1,746,894,129
Number of Mortgage Loans................... 198
Number of Mortgaged Properties............. 236
Maximum Cut-off Date Balance(2)............ $ 160,000,000
Minimum Cut-off Date Balance............... $ 795,220
Average Cut-off Date Balance............... $ 8,822,698
Maximum Mortgage Rate...................... 9.085%
Minimum Mortgage Rate...................... 6.500%
Weighted Average Mortgage Rate............. 7.477%
Maximum Original Term to Maturity.......... 300 months
Minimum Original Term to Maturity.......... 54 months
Weighted Average Original Term to
Maturity................................. 120 months
Maximum Remaining Term to Maturity......... 289 months
Minimum Remaining Term to Maturity......... 50 months
Weighted Average Remaining Term to
Maturity................................. 117 months
Maximum Debt Service Coverage Ratio(3)..... 2.245x
Minimum Debt Service Coverage Ratio........ 1.200x
Weighted Average Debt Service Coverage
Ratio.................................... 1.533x
Maximum Cut-off Date Loan-to-Value
Ratio(4)................................. 79.90%
Minimum Cut-off Date Loan-to-Value Ratio... 38.08%
Weighted Average Cut-off Date Loan-to-Value
Ratio.................................... 62.68%
Maximum Maturity Loan-to-Value Ratio(5).... 76.15%
Minimum Maturity Loan-to-Value Ratio....... 30.18%
Weighted Average Maturity Loan-to-Value
Ratio.................................... 54.25%
</TABLE>
-----------------------------------------------------
(1) The "Initial Pool Balance" is equal to the
aggregate Cut-off Date Balance of the Mortgage
Pool and is subject to a permitted variance of
plus or minus 5%.
(2) The "Cut-off Date Balance" of each Mortgage
Loan is equal to its unpaid principal balance
as of the Cut-off Date, after application of
all payments of principal due in respect of
such Mortgage Loan on or before such date,
whether or not received.
(3) The "Debt Service Coverage Ratio" or "DSCR" for
any Mortgage Loan is equal to the Net Cash Flow
(as such term is defined in this Prospectus
Supplement) generated by the related Mortgaged
Property, divided by the product of 12 times
the monthly payment of principal and/or
interest due in respect of such Mortgage Loan
on the Cut-off Date. DEBT SERVICE COVERAGE
RATIOS HAVE NOT BEEN CALCULATED AND ARE NOT
PRESENTED FOR CREDIT LEASE LOANS (AS SUCH TERM
IS DEFINED BELOW).
(4) The "Cut-off Date Loan-to-Value Ratio" or
"Cut-off Date LTV Ratio" for any Mortgage Loan
is equal to its Cut-off Date
S-23
<PAGE>
Balance, divided by the estimated value of the
related Mortgaged Property as set forth in the
most recent third-party appraisal available to
the Depositor or, in the case of the Mortgage
Loans identified in this Prospectus Supplement
as the Century City Shopping Center Loan and
the Woodland Hills Mall Loan (see
"--Significant Mortgage Loans" below), the
related Borrower's purchase price for the
related Mortgaged Property. CUT-OFF DATE
LOAN-TO-VALUE RATIOS HAVE NOT BEEN CALCULATED
AND ARE NOT PRESENTED FOR CREDIT LEASE LOANS.
(5) The "Maturity Loan-to-Value Ratio" for any
Mortgage Loan that provides for a balloon
payment or has an Anticipated Repayment Date is
equal to the unpaid principal balance of such
Mortgage Loan that will be outstanding as of
its maturity date or Anticipated Repayment
Date, as applicable, assuming no defaults or
prepayments, divided by the estimated value of
the related Mortgaged Property as set forth in
the most recent third-party appraisal available
to the Depositor or, in the case of the
Mortgage Loans identified in this Prospectus
Supplement as the Century City Shopping Center
Loan and the Woodland Hills Mall Loan, the
related Borrower's purchase price for the
related Mortgaged Property. MATURITY
LOAN-TO-VALUE RATIOS HAVE NOT BEEN CALCULATED
AND ARE NOT PRESENTED FOR CREDIT LEASE LOANS OR
FOR FULLY AMORTIZING MORTGAGE LOANS.
<TABLE>
<S> <C>
B. STATE CONCENTRATION.......... The table below shows the number of, and the percentage of
the Initial Pool Balance secured by, Mortgaged Properties
located in the indicated states:
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
MORTGAGED % OF INITIAL
STATE PROPERTIES POOL BALANCE
- ---------------------------------------------- --------------- ------------
<S> <C> <C>
California.................................... 33 22.86%
New York...................................... 12 11.42%
Oklahoma...................................... 7 10.44%
Texas......................................... 30 7.09%
Michigan...................................... 19 5.88%
Florida....................................... 17 5.17%
</TABLE>
<TABLE>
<S> <C>
The remaining Mortgaged Properties are located throughout
32 other states, the District of Columbia and the
Commonwealth of Puerto Rico. No more than 5.0% of the
Initial Pool Balance is secured by Mortgaged Properties
located in any such other jurisdiction.
</TABLE>
S-24
<PAGE>
<TABLE>
<S> <C>
C. PROPERTY TYPES............... The table below shows the number of, and the percentage of
the Initial Pool Balance secured by, Mortgaged Properties
operated for each indicated purpose:
THE MORTGAGE POOL
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
MORTGAGED % OF INITIAL
PROPERTY TYPE PROPERTIES POOL BALANCE
- ---------------------------------------------- --------------- -------------
<S> <C> <C>
Retail........................................ 88 47.87%
Anchored Retail............................. 61 19.41%
Regional Mall............................... 3 14.73%
Super Regional Mall......................... 2 9.42%
Unanchored Retail........................... 22 4.32%
Office........................................ 28 20.38%
Multifamily................................... 47 12.43%
Multifamily Rental.......................... 27 8.32%
Manufactured Housing Community.............. 20 4.11%
Industrial/Warehouse.......................... 15 3.16%
Credit Leases(1).............................. 19 2.90%
Self Storage.................................. 12 0.72%
Mixed Use..................................... 3 0.62%
</TABLE>
-------------------------------------------------------
(1) Properties subject to Credit Leases,
regardless of property type.
<TABLE>
<S> <C>
A. CENTURY CITY SHOPPING CENTER
LOAN.......................... Set forth below is certain loan and property information
in respect of the Mortgage Loan identified in this
Prospectus Supplement as the "Century City Shopping Center
Loan." See "Description of the Mortgage Pool-Significant
Mortgage Loans-Century City Shopping Center Loan" in this
Prospectus Supplement.
</TABLE>
<TABLE>
<S> <C> <C>
Cut-off Date Balance......... $160,000,000
Mortgage Rate................ 7.250%(1)
Original Term to Maturity.... 120 months
Original Amortization Term... Interest only for 12 months
then P&I based on 360-month
amortization
Sponsor...................... Urban Shopping Centers,
Inc. and Eagle Investment
Management Company (advised
by Lend Lease Real Estate
Investments, Inc.)
Anchors...................... Bloomingdale's and Macy's
Property..................... Regional Mall
Size......................... 784,002 SF
Location..................... Los Angeles, CA
Valuation.................... $272,000,000
</TABLE>
S-25
<PAGE>
<TABLE>
<S> <C> <C>
Cut-off Date LTV Ratio....... 58.8%
DSCR......................... 1.42x
Lockbox...................... Springing, if DSCR falls
below 1.25x
------------------------
(1) Anticipated
</TABLE>
<TABLE>
<S> <C>
B. STARWOOD FINANCIAL-PROMUS
LOAN.......................... Set forth below is certain loan and property information
in respect of the Mortgage Loan identified in this
Prospectus Supplement as the "Starwood Financial-Promus
Loan." See "Description of the Mortgage Pool-Significant
Mortgage Loans-Starwood Financial-Promus Loan" in this
Prospectus Supplement.
</TABLE>
<TABLE>
<S> <C> <C>
Cut-off Date Balance......... $154,954,659
Mortgage Rate................ 7.438%
Original Term to Maturity.... 120 months
Original Amortization Term... 262 months
Sponsor...................... Starwood Financial Trust
Flags........................ DoubleTree and Red Lion
Master Lease Guarantor....... Promus Hotel Corporation
Property..................... 17 full and limited service
hotels
Size......................... 3,988 rooms
Locations.................... California, Oregon,
Washington, Colorado, Utah,
Idaho, and Montana
Valuation.................... $336,250,000
Cut-off Date LTV Ratio....... 46.1%
DSCR......................... 2.12x
Lockbox...................... Hard lockbox
</TABLE>
<TABLE>
<S> <C>
C. EAB PLAZA LOAN............... Set forth below is certain loan and property information
in respect of the Mortgage Loan identified in this
Prospectus Supplement as the "EAB Plaza Loan." See
"Description of the Mortgage Pool-Significant Mortgage
Loans-EAB Plaza Loan" in this Prospectus Supplement.
</TABLE>
<TABLE>
<S> <C> <C>
Cut-off Date Balance......... $139,367,162
Mortgage Rate................ 7.330%
Original Term to Maturity.... 120 months
Original Amortization Term... 300 months
Sponsor...................... ABN AMRO Bank, N.V. and The
DeMatteis Organization
Property..................... Twin tower suburban office
building
Size......................... 1,083,511 SF
Location..................... Uniondale, N.Y.
</TABLE>
S-26
<PAGE>
<TABLE>
<S> <C> <C>
Valuation.................... $280,000,000
Cut-off Date LTV Ratio....... 49.8%
DSCR......................... 1.79x
Lockbox...................... Hard lock box Reserves
</TABLE>
<TABLE>
<S> <C>
D. WOODLAND HILLS MALL LOAN..... Set forth below is certain loan and property information
in respect of the Mortgage Loan identified in this
Prospectus Supplement as the "Woodland Hills Mall Loan."
See "Description of the Mortgage Pool-Significant Mortgage
Loans-Woodland Hills Mall Loan" in this Prospectus
Supplement.
</TABLE>
<TABLE>
<S> <C> <C>
Cut-off Date Balance......... $89,644,244
Mortgage Rate................ 7.000%
Original Term to Maturity.... 120 months
Original Amortization Term... 360 months
Sponsor...................... Urban Shopping Centers,
Inc. and J.P. Morgan
Investment Management, Inc.
Anchors...................... Dillard's, Sears, Foley's
and JC Penney
Property..................... Super-Regional Mall
Size......................... 1,093,514 SF
Location..................... Tulsa, OK
Valuation.................... $171,600,000 (December
1998)
Cut-off Date LTV Ratio....... 52.2%
DSCR......................... 1.67x
Lockbox...................... Springing, if DSCR falls
below 1.25x
</TABLE>
<TABLE>
<S> <C>
E. PENN SQUARE MALL LOAN........ Set forth below is certain loan and property information
in respect of the Mortgage Loan identified in this
Prospectus Supplement as the "Penn Square Mall Loan." See
"Description of the Mortgage Pool-Significant Mortgage
Loans-Penn Square Mall Loan" in this Prospectus
Supplement.
</TABLE>
<TABLE>
<S> <C> <C>
Cut-off Date Balance......... $74,844,822
Mortgage Rate................ 7.025%
Original Term to Maturity.... 120 months
Original Amortization Term... 360 months
Sponsor...................... Urban Shopping Centers,
Inc.
Anchors...................... Dillard's, Foley's, JC
Penney and Montgomery Ward
Property..................... Super-Regional Mall
Size......................... 1,074,994 SF
Location..................... Oklahoma City, OK
Valuation.................... $135,000,000
</TABLE>
S-27
<PAGE>
<TABLE>
<S> <C> <C>
Cut-off Date LTV Ratio....... 55.4%
DSCR......................... 1.67x
Lockbox...................... Springing, if DSCR falls
below 1.25x.
</TABLE>
<TABLE>
<S> <C>
CREDIT LEASE LOANS.............. Mortgage Loans identified in this Prospectus Supplement as
"Credit Lease Loans" are secured by Mortgaged Properties
that are subject to a net lease obligation of a tenant
having the characteristics described in the following
sentence that occupies substantially all of the property.
Except in those cases where a public rating has not been
issued, such tenant, its direct or indirect parent or a
guarantor of such tenant's obligations under the lease has
a public senior unsecured long-term debt rating of at
least "BB+" (or the equivalent) from at least one
nationally recognized statistical rating organization. See
"Risk Factors and Other Special Considerations--Risks
Related to the Mortgage Loans--Credit Lease Loans Have
Special Risks" and "--Reliance on Credit Quality of Credit
Tenants and Guarantors Has Special Risks" and "Description
of the Mortgage Pool--Credit Lease Loans" in this
Prospectus Supplement.
PAYMENT TERMS................... Each Mortgage Loan accrues interest at the annual rate
(its "Mortgage Rate") set forth with respect thereto on
Annex A-1 to this Prospectus Supplement. The Mortgage Rate
for each Mortgage Loan is fixed for the entire term of
such Mortgage Loan.
Each Mortgage Loan provides for scheduled payments of
principal and/or interest ("Scheduled P&I Payments") to be
due on a particular day each month (its monthly "Due
Date"). The Due Date for substantially all the Mortgage
Loans is the first day of each month.
Each Mortgage Loan identified in this Prospectus
Supplement as a "Balloon Loan" provides for one of the
following:
- monthly payments of interest only for its entire term to
stated maturity; or
- an amortization schedule that is generally significantly
longer than its remaining term to stated maturity and
which, in some cases, begins only after the end of an
initial interest-only period.
In any event, a Balloon Loan will generally require a
substantial payment of principal on its maturity date
(such payment, together with the corresponding interest
payment, a "Balloon Payment").
Mortgage Loans identified in this Prospectus Supplement as
"ARD Loans" provide material disincentives to the related
Borrower to allow its Mortgage Loan to remain outstanding
past a specified date (the "Anticipated Repayment Date" or
"ARD"). Such disincentives, which in each case begin
effective as of the related Anticipated Repayment Date,
include:
- The accrual of interest in excess of that accrued at the
related Mortgage Rate. Such additional interest will be
deferred until payment in full of all other amounts due
under the ARD Loan (including the entire principal
balance thereof). In general, such additional interest
will be compounded.
</TABLE>
S-28
<PAGE>
<TABLE>
<S> <C>
- The application of certain excess cash flow from the
related Mortgaged Property to pay principal. Such payment
of principal will be in addition to the principal
portion of the Scheduled P&I Payment.
The remaining Mortgage Loans, referred to in this
Prospectus Supplement as "Fully Amortizing Loans", have
amortization schedules that amortize such Mortgage Loans
in full or substantially in full by their respective
maturity dates.
The table below shows the number and percentage of
Mortgage Loans that are Balloon Loans, ARD Loans and Fully
Amortizing Loans, respectively:
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE % OF INITIAL
LOAN TYPE LOANS POOL BALANCE
- ---------------------------------------------- ------------- ------------
<S> <C> <C>
Balloon Loans................................. 162 55.28%
ARD Loans..................................... 23 43.01%
Fully Amortizing Loans........................ 13 1.71%
</TABLE>
<TABLE>
<S> <C>
DELINQUENCY STATUS.............. No Mortgage Loan was more than 30 days delinquent in
respect of any Scheduled P&I Payment as of the Cut-off
Date or at any time during the 12-month period preceding
the Cut-off Date.
PREPAYMENT TERMS................ The prepayment restrictions for each Mortgage Loan are
more fully described on Annex A-1 to this Prospectus
Supplement.
Set forth below is information regarding the remaining
lockout periods for the Mortgage Loans:
Maximum Remaining Lockout Period: 286
Minimum Remaining Lockout Period: 31
Weighted Average Remaining Lockout Period: 115
One hundred ninety-five (195) Mortgage Loans, representing
98.2% of the Initial Pool Balance, are Defeasance Loans.
"Defeasance Loans" permit the related Borrower, no earlier
than the second anniversary of the Closing Date, to obtain
a release of the related Mortgaged Property (or, where
applicable, one or more of the related Mortgaged
Properties) from the lien of the related mortgage or other
security instrument by delivering U.S. Treasury
obligations as substitute collateral.
</TABLE>
S-29
<PAGE>
RISK FACTORS
You should consider the following factors (as well as the factors set forth
under "Risk Factors" in the Prospectus) in deciding whether to purchase the
Offered Certificates of any Class.
RISKS RELATED TO THE OFFERED CERTIFICATES
THE OFFERED CERTIFICATES ARE SUPPORTED BY LIMITED ASSETS. If the assets of
the Trust are insufficient to make payments on your Certificates, no other
assets will be available to you for payment of the deficiency. See "Risk
Factors--Limited Assets" in the Prospectus
RISKS ASSOCIATED WITH LIQUIDITY AND MARKET VALUE. There is currently no
secondary market for the Offered Certificates. The Underwriters have informed
the Depositor that they currently intend to make a secondary market in the
Offered Certificates, but are under no obligation to do so. There can be no
assurance that a secondary market for the Offered Certificates will develop.
Even if a secondary market does develop for the Offered Certificates, there is
no assurance that it will provide you with liquidity of investment or that the
market will continue for the life of the Offered Certificates. The Depositor
does not intend to list the Offered Certificates on any securities exchange.
Lack of liquidity could result in a significant reduction in the market value of
your Certificates. In addition, the market value of your Certificates at any
time may be affected by many factors, including then prevailing interest rates
and the then perceived riskiness of commercial mortgage-backed securities
relative to other investments. See "Risk Factors--Limited Liquidity" in the
Prospectus.
UNCERTAIN YIELDS TO MATURITY. The yield on your Certificates will depend on
(a) the price you paid for such Certificates and (b) the rate, timing and amount
of distributions on such Certificates. The rate, timing and amount of
distributions on your Certificates will, in turn, depend on:
- the Pass-Through Rate(s) for your Certificates;
- the rate and timing of payments and other collections of principal on the
Mortgage Loans;
- the rate and timing of defaults, and the severity of losses, if any, on
the Mortgage Loans;
- the rate, timing, severity and allocation of other shortfalls and expenses
that reduce amounts available for distribution on the Certificates; and
- the collection and distribution of prepayment premiums and yield
maintenance charges with respect to the Mortgage Loans.
Except to the extent that any of your Certificates have a fixed Pass-Through
Rate, these factors cannot be predicted with any certainty. Accordingly, you may
find it difficult to analyze the effect that such factors might have on the
yield to maturity of your Certificates. See "Description of the Mortgage Pool",
"Description of the Offered Certificates--Distributions" and "--Allocation of
Realized Losses and Certain Other Shortfalls and Expenses" and "Yield and
Maturity Considerations" in this Prospectus Supplement. See also "Yield and
Prepayment Considerations" in the Prospectus.
RISKS RELATED TO THE RATE OF PREPAYMENT. If you purchase your Certificates
at a premium, and if payments and other collections of principal on the Mortgage
Loans occur at a rate faster than you anticipated at the time of your purchase,
then your actual yield to maturity may be lower than you had assumed at the time
of your purchase. Conversely, if you purchase your Certificates at a discount,
and if payments and other collections of principal on the Mortgage Loans occur
at a rate slower than you anticipated at the time of your purchase, then your
actual yield to maturity may be lower than you had assumed at the time of your
purchase. You should consider that prepayment premiums and yield maintenance
charges, even if available and distributable in respect of your Certificates,
may not be sufficient to offset fully any loss in yield on your Certificates.
S-30
<PAGE>
The investment performance of your Certificates may vary materially and
adversely from your expectations due to the rate of prepayments and other
unscheduled collections of principal on the Mortgage Loans being faster or
slower than you anticipated. Accordingly, the actual yield to you may not be
equal to the yield you anticipated at the time of your purchase, and the total
return on investment that you expected may not be realized. In deciding whether
to purchase any Offered Certificates, you should make an independent decision as
to the appropriate prepayment assumptions to be used. See "Yield and Maturity
Considerations" in this Prospectus Supplement.
If you purchase Class X Certificates, your yield to maturity will be highly
sensitive to the rate and timing of principal payments and losses on the
Mortgage Loans. Prior to investing in the Class X Certificates, you should fully
consider the associated risks, including the risk that an extremely rapid rate
of amortization, prepayment or other liquidation of the Mortgage Loans could
result in your failure to recoup fully your initial investment.
RISKS ASSOCIATED WITH BORROWER DEFAULTS; DELINQUENCIES AND DEFAULTS BY
BORROWERS MAY DELAY PAYMENTS TO YOU. The rate and timing of delinquencies and
defaults on the Mortgage Loans will affect the amount of distributions on your
Certificates, the yield to maturity of your Certificates, the rate of principal
payments on your Certificates and the weighted average life of your
Certificates. Delinquencies on the Mortgage Loans, unless covered by P&I
Advances, may result in shortfalls in distributions of interest and/or principal
on your Certificates for the current month. Although any such shortfalls may be
made up on future Distribution Dates, no interest would accrue on any such
shortfalls. Thus, any such shortfalls would adversely affect the yield to
maturity of your Certificates.
If you calculate the anticipated yield to maturity for your Certificates
based on an assumed rate of default and amount of losses on the Mortgage Loans
that is lower than the default rate and amount of losses actually experienced
and such additional losses result in a reduction of the distributions on or the
aggregate principal balance or notional amount of your Certificates, your actual
yield to maturity will be lower than you calculated and could, under certain
scenarios, be negative. The timing of any loss on a liquidated Mortgage Loan
that results in a reduction of the distributions on or the aggregate principal
balance or notional amount of your Certificates will also affect the actual
yield to maturity of your Certificates, even if the rate of defaults and
severity of losses are consistent with your expectations. In general, the
earlier your loss occurs, the greater the negative effect on your yield to
maturity.
Even if losses on the Mortgage Loans do not result in a reduction of the
distributions on or the aggregate principal balance or notional amount of your
Certificates, such losses may still affect the timing of distributions on (and,
accordingly, the weighted average life and yield to maturity of) your
Certificates. See "Yield and Maturity Considerations" in this Prospectus
Supplement.
POTENTIAL CONFLICTS OF INTEREST. The Special Servicer will have
considerable latitude in determining whether to liquidate or modify defaulted
Mortgage Loans. See "Servicing of the Mortgage Loans-- Modifications, Waivers,
Amendments and Consents" in this Prospectus Supplement. In certain
circumstances, the existing Special Servicer may be replaced by the Holder or
Holders of Certificates representing a majority interest in the Controlling
Class. The interests of the Holders of the Controlling Class of Certificates
(which, subject to significant losses on the Mortgage Pool, will be a Class of
Private Certificates) may be in conflict with the interests of the Holders of
the Offered Certificates. It is anticipated that GMAC Commercial Mortgage
Corporation (which will act as the Special Servicer) or an affiliate will buy
certain of the Private Certificates, including those that will constitute the
initial Controlling Class. In addition, the Master Servicer or its affiliates
may acquire Certificates. Each of the Master Servicer and the Special Servicer
is obligated to perform its respective servicing duties in accordance with the
terms of the Pooling Agreement, including the servicing standard described in
this Prospectus Supplement. As, or when acting in accordance with the
instructions of, a Holder of Private Certificates, however, each of the Master
Servicer and Special Servicer could have interests when dealing with
S-31
<PAGE>
defaulted Mortgage Loans or otherwise performing its duties under the Pooling
Agreement that may be in conflict with your interests.
In addition, each of the Master Servicer and the Special Servicer services
(and will, in the future, service) existing and new loans for third parties,
including portfolios of loans similar to the Mortgage Loans, in the ordinary
course of its business. The properties securing these mortgage loans may be in
the same markets as certain of the Mortgaged Properties. Consequently, personnel
of the Master Servicer or the Special Servicer, as applicable, may perform
services, on behalf of the Trust, with respect to the Mortgage Loans at the same
time as they are performing services, on behalf of other persons, with respect
to other mortgage loans secured by properties that compete with the Mortgaged
Properties. Despite the obligation of each of the Master Servicer and Special
Servicer to perform its respective servicing obligations in accordance with the
terms of the Pooling Agreement, including the servicing standard described in
this Prospectus Supplement, such other servicing and property management
obligations may pose inherent conflicts for the Master Servicer or the Special
Servicer.
An affiliate of the Depositor and Lehman holds a substantial equity interest
in the Borrower under a Mortgage Loan representing 0.9% of the Initial Pool
Balance.
CERTAIN RIGHTS TO PAYMENT THAT ARE SENIOR TO DISTRIBUTIONS ON THE
CERTIFICATES. The Master Servicer, the Special Servicer and the Trustee are
each entitled to receive out of payments on or proceeds of specific Mortgage
Loans (or, in some cases, out of general collections on the Mortgage Pool)
certain payments or reimbursements for or in respect of compensation, Advances
(with interest thereon) and indemnities, prior to distributions on the
Certificates. In particular, Advances are intended to provide liquidity not
credit support, and the advancing party is entitled to receive interest on its
Advances to offset its cost of funds.
ERISA CONSIDERATIONS. The regulations that govern pension and other
employee benefit plans subject to ERISA and plans and other retirement
arrangements subject to Section 4975(c) of the Code are complex. Accordingly, if
you are using the assets of such plans or arrangements to acquire Offered
Certificates, you are urged to consult legal counsel regarding consequences
under ERISA and the Code of the acquisition, ownership and disposition of
Offered Certificates. In particular, the purchase or holding of the Class B,
Class C, Class D and Class E Certificates by any such plan or arrangement may
result in a prohibited transaction or the imposition of excise taxes or civil
penalties. As a result, such Certificates are not appropriate investments for
any such plan or arrangement, unless the purchase and continued holding of any
such Certificate or interest therein is exempt from the prohibited transaction
provisions of Section 406 of ERISA and Section 4975 of the Code under Sections I
and III of Prohibited Transaction Class Exemption ("PTCE") 95-60. Sections I and
III of PTCE 95-60 provide an exemption from the prohibited transaction rules for
certain transactions involving an insurance company general account. See
"Certain ERISA Considerations" in this Prospectus Supplement and "ERISA
Considerations" in the Prospectus.
RISKS RELATED TO THE YEAR 2000.
General. The transition from the year 1999 to the year 2000 may disrupt the
ability of computerized systems to process information. The collection of
payments on the Mortgage Loans, the servicing of the Mortgage Loans and the
distributions on your Certificates are highly dependent upon computer systems of
the Master Servicer, the Trustee, the Borrowers and other third parties. The
Master Servicer, the Special Servicer and the Trustee are currently modifying
their computer systems and applications and expect that they will be year 2000
ready. They are also assessing the year 2000 readiness of key vendors and
subcontractors to determine whether key processes and business activity will be
interrupted. If the Master Servicer, the Special Servicer, the Trustee or any of
their respective key vendors and subcontractors do not have by the year 2000
computerized systems which are able to correctly interpret data involving dates,
the ability of such party to service the Mortgage Loans (in the case of the
Master Servicer and the Special Servicer) or make distributions with respect to
the Certificates (in the case of the Trustee) may be
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<PAGE>
materially and adversely affected. The failure of any Borrower to be "year 2000
compliant" could adversely affect the ability of the related Mortgaged Property
to compete with other comparable properties.
The Depository Trust Company. DTC has informed members of the financial
community that it has developed and is implementing a program so that its
systems, as the same relate to the timely payment of distributions (including
principal and interest payments) to securityholders, book-entry deliveries, and
settlement of trades within DTC, continue to function appropriately on and after
January 1, 2000. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to properly perform its services is also dependent
upon other parties, including, but not limited to, its participating
organizations (through which Certificateholders will hold their Offered
Certificates), as well as the computer systems of third-party service providers.
DTC has informed the financial community that it is contacting (and will
continue to contact) third-party vendors from whom DTC acquires services to: (i)
impress upon them the importance of such services being year 2000 compliant and
(ii) determine the extent of their efforts with respect to remediation of year
2000 problems with their services. In addition, DTC has stated that it is in the
process of developing contingency plans it deems appropriate.
If problems associated with the year 2000 issue were to occur with respect
to DTC and the services described above, distributions to Certificateholders
could be delayed or otherwise adversely affected.
RISKS RELATED TO THE MORTGAGE LOANS
REPAYMENT OF THE MORTGAGE LOANS DEPENDS ON THE SUCCESSFUL OPERATION OF THE
MORTGAGED PROPERTIES. The Mortgage Loans are secured by first mortgage liens on
interests in the following types of real property:
- Anchored Retail
- Super Regional Mall
- Regional Mall
- Unanchored Retail
- Office
- Multifamily Rental
- Manufactured Housing Community
- Industrial/Warehouse
- Credit Leases
- Self Storage
- Mixed Use
Lending on multifamily and commercial properties is generally perceived as
involving greater risk than lending on the security of single-family residential
properties. This is because multifamily and commercial real estate lending
involves larger loans, and repayment is dependent upon the operation of the
related real estate project.
The ability of a Mortgaged Property to generate net operating income may be
adversely affected by a number of factors, including:
- the age, design and construction quality of the property;
- perceptions regarding the safety, convenience and attractiveness of the
property;
S-33
<PAGE>
- the proximity and attractiveness of competing properties;
- new construction;
- the adequacy of the property's management and maintenance;
- an increase in operating expenses;
- an increase in the capital expenditures needed to maintain the property or
make improvements;
- a decline in the financial condition of a major tenant;
- an increase in vacancy rates; and
- a decline in rental rates as leases are renewed or replaced.
Other factors that may adversely affect the ability of a Mortgaged Property
to generate net operating income are more general in nature, such as:
- national, regional or local economic conditions (including plant closings,
industry slowdowns and unemployment rates);
- local real estate conditions (such as an oversupply of retail space,
office space or multifamily housing);
- demographic factors;
- customer tastes and preferences; and
- retroactive changes in building codes.
The volatility of net operating income generated by a Mortgaged Property
over time will be influenced by many of the foregoing factors, as well as by:
- the length of tenant leases;
- the creditworthiness of tenants;
- the rate at which new rentals occur;
- the percentage of total property expenses in relation to revenue;
- the ratio of fixed operating expenses to those that vary with revenues;
and
- the level of capital expenditures required to maintain the property and to
maintain or replace tenants.
Therefore, Mortgaged Properties with short-term or less creditworthy sources
of revenue and/or relatively high operating costs, such as those operated as
health-care facilities and hotel properties, can be expected to have more
volatile cash flows than Mortgaged Properties with medium to long-term leases
from creditworthy tenants and/or relatively low operating costs. A decline in
the real estate market will tend to have a more immediate effect on the net
operating income of such Mortgaged Properties with short-term revenue sources
and may lead to higher rates of delinquency or defaults.
TENANT CONCENTRATION ENTAILS RISK. In those cases where a Mortgaged
Property is leased to a single tenant or is primarily leased to one or a small
number of major tenants, a deterioration in the financial condition or a change
in the plan of operation of any such tenant can have particularly significant
effects on the net cash flow generated by such Mortgaged Property. If any such
tenant defaults under or fails to renew its lease, the resulting adverse
financial effect on the operation of such Mortgaged Property will be
substantially more severe than would be the case with respect to a property
occupied by a large number of less significant tenants.
S-34
<PAGE>
Any Mortgaged Property operated for retail, office or industrial purposes
also may be adversely affected if there is a concentration of tenants in a
particular business or industry at any such property and that particular
business or industry declines.
TENANT BANKRUPTCY ENTAILS SPECIAL RISKS. The bankruptcy or insolvency of a
major tenant, or a number of smaller tenants, at any particular Mortgaged
Property may adversely affect the income produced by such property. 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
(absent collateral securing the claim). The claim would be limited to the unpaid
rent reserved under the lease for the periods prior to the bankruptcy petition
(or earlier surrender of the leased premises) which 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).
CERTAIN ADDITIONAL RISKS RELATING TO TENANTS. The Mortgaged Properties will
be affected by the expiration of leases and the ability of the respective
Borrowers to renew the leases or relet the space on comparable terms. Even if
vacated space is successfully relet, the costs associated with reletting,
including tenant improvements and leasing commissions in the case of Mortgaged
Properties operated for retail or office purposes, can be substantial and could
reduce cash flow from the Mortgaged Properties. Moreover, if a tenant at any
Mortgaged Property defaults in its lease obligations, the Borrower may incur
substantial costs and experience significant delays associated with enforcing
its rights and protecting its investment, including costs incurred in renovating
and reletting the property.
PROPERTY VALUE MAY BE ADVERSELY AFFECTED EVEN WHEN CURRENT OPERATING INCOME
IS NOT. Various factors may adversely affect the value of the Mortgaged
Properties without affecting their current net operating income, including:
- changes in interest rates;
- the availability of refinancing sources;
- changes in governmental regulations or fiscal policy;
- zoning or tax laws; and
- potential environmental or other legal liabilities.
PROPERTY MANAGEMENT MAY AFFECT PROPERTY VALUE. The operation of a Mortgaged
Property will depend upon the property manager's performance and viability. The
property manager generally is responsible for the following:
- responding to changes in the local market;
- planning and implementing the rental structure;
- operating the property and providing building services;
- managing operating expenses; and
- ensuring that maintenance and capital improvements are carried out in a
timely fashion.
Mortgaged Properties that derive revenues primarily from short-term rental
commitments, such as hotels and self-storage facilities, are generally more
management intensive than properties leased to tenants under long-term leases.
FACTORS AFFECTING THE OPERATION OF RETAIL PROPERTIES. Seventy-six (76)
Mortgage Loans, representing 47.9% of the Initial Pool Balance, are secured by
retail properties at which customers may purchase various consumer goods and
other products or may obtain various entertainment, recreational or personal
services (such Mortgaged Properties, the "Retail Properties").
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The Retail Properties consist of--
- Regional and super-regional malls;
- Community and strip shopping centers;
- Power centers; and
- Individual stores and businesses.
The value and operation of a Retail Property depend on the qualities and
success of its tenants. The success of tenants generally at a Retail Property
will be affected by--
- competition from other retail properties;
- perceptions regarding the safety, convenience and attractiveness of the
property;
- demographics of the surrounding area;
- traffic patterns and access to major thoroughfares;
- availability of parking;
- customer tastes and preferences; and
- the drawing power of other tenants (some tenants may have clauses in their
leases that permit them to cease operations at the property if certain
other stores are not operated at the property).
A Retail Property generally must compete with comparable properties for
tenants. Such competition is generally based on--
- rent (the owner of a Retail Property may be required to offer a potential
tenant a "free rent" period);
- tenant improvements (the owner of a Retail Property may at its own expense
significantly renovate and/or adapt space at the property to meet a
particular tenant's needs); and
- the age and location of the property.
Issues Involving Anchor Tenants. The presence or absence of an "anchor
tenant" in a mall or shopping center also can be important, because anchors play
a key role in generating customer traffic and making the mall or center
desirable for other tenants. An "anchor tenant" is a retail tenant whose space
is substantially larger in size than that of other tenants at the same retail
mall or shopping center and whose operation is vital in attracting customers to
the property. Fifty-four (54) Mortgage Loans, representing 43.6% of the Initial
Pool Balance, are secured by Retail Properties that the Depositor considers to
be "anchored".
The economic performance of an "anchored" Retail Property will be adversely
affected by various factors, including:
- an anchor tenant's failure to renew its lease;
- termination of an anchor tenant's lease;
- the bankruptcy or economic decline of an anchor tenant or a self-owned
anchor;
- the cessation of the business of a self-owned anchor or of an anchor
tenant (notwithstanding its continued payment of rent); or
- a loss of an anchor tenant's ability to attract shoppers.
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NEW FORMS OF COMPETITION. The Retail Properties may also face competition
from sources outside a given real estate market or with lower operating costs.
For example, all of the following compete with more traditional department
stores and specialty shops for consumer dollars:
- factory outlet centers;
- discount shopping centers and clubs;
- catalogue retailers;
- home shopping networks;
- internet web sites; and
- telemarketing.
FACTORS AFFECTING THE OPERATION OF OFFICE PROPERTIES. Twenty-six (26)
Mortgage Loans, representing 20.4% of the Initial Pool Balance, are secured by
office properties (such Mortgaged Properties, the "Office Properties"). A number
of factors will affect the value and operation of an Office Property, including:
- the number and quality of tenants in the building;
- the physical attributes of the building in relation to competing
buildings;
- access to transportation;
- the strength and stability of the local economy;
- the availability of tax benefits;
- the desirability of the location of business; and
- 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).
FACTORS AFFECTING THE OPERATION OF HOSPITALITY PROPERTIES. Eight (8)
Mortgage Loans, representing 11.9% of the Initial Pool Balance, are secured by
full service hotels, limited service hotels or motels (such Mortgaged
Properties, the "Hospitality Properties"). Certain of the Hospitality Properties
are associated with national or regional franchise chains, while others are not
affiliated with any franchise chain but may have their own brand identity.
Various factors may adversely affect the economic performance of a
Hospitality Property, including:
- adverse economic or social conditions, either local, regional or national
(which may limit the amount that can be charged for a room and reduce
occupancy levels);
- the construction of competing hotels or resorts;
- continuing expenditures for modernizing, refurbishing and maintaining
existing facilities prior to the expiration of their anticipated useful
lives (to satisfy such costs, the related Mortgage Loans generally require
the Borrowers to fund reserves for furniture, fixtures and equipment);
- a deterioration in the financial strength or managerial capabilities of
the owner and operator of a Hospitality Property and
- changes in travel patterns caused by changes in access, energy prices,
labor strikes, relocation of highways, the construction of additional
highways or other factors.
In addition, because hotel and motel rooms generally are rented for short
periods of time, such types of properties tend to respond more quickly to
adverse economic conditions and competition than do other commercial properties.
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Risks Relating to Affiliation with a Franchise or Hotel Management
Company. The performance of a Hospitality Property that is affiliated with a
franchise or hotel management company depends in part on:
- the continued existence and financial strength of the franchisor or hotel
management company;
- the public perception of the franchise or hotel chain service mark; and
- the duration of the franchise licensing or management agreements.
Franchise agreements for certain of the Hospitality Properties may terminate
prior to the effective maturity date of the related Mortgage Loan. Replacement
franchises may require significantly higher fees.
The transferability of franchise license agreements is generally restricted.
Accordingly, in the event of a foreclosure of a Hospitality Property, the
Trustee and the Special Servicer may be limited in their ability to use any
franchise license applicable to such property without the franchisor's consent.
Conversely, in the case of certain Mortgage Loans, the Trustee and Special
Servicer may be unable to remove a franchisor or a hotel management company that
it desires to replace following a foreclosure.
Some states require that liquor licenses be held by a natural person and/or
prohibit the transfer of liquor licenses to any person without the prior
approval of the relevant licensing authority. In the event of a foreclosure of a
Hospitality Property, it is unlikely that the Trustee (or the Special Servicer
on its behalf) or any other purchaser in the foreclosure sale would be entitled
to the rights under any liquor license for such property. If such is the case,
it is possible that a new liquor license, if applied for, could not be obtained.
FACTORS AFFECTING THE OPERATION OF MULTIFAMILY RENTAL
PROPERTIES. Twenty-seven (27) Mortgage Loans representing 8.3% of the Initial
Pool Balance, are secured by Mortgaged Properties improved by multifamily
apartment buildings (such Mortgaged Properties, the "Multifamily Rental
Properties"). Factors that will affect the value and operation of a Multifamily
Rental Property include:
- the physical attributes of the apartment building (E.G., its age,
appearance, amenities and construction quality);
- the location of the property;
- the characteristics of the surrounding neighborhood;
- the ability of management to provide adequate maintenance and insurance;
- the property's reputation;
- the level of mortgage interest rates (which may encourage tenants to
purchase rather than lease housing);
- the presence of competing properties;
- the tenant mix (E.G., the tenant population may be predominantly students
or may be heavily dependent on workers from a particular business or
personnel from a local military base);
- adverse local or national economic conditions (which may limit the amount
that may be charged and may result in a reduction in timely rent payments
or a reduction in occupancy levels); and
- state and local regulations (which may affect the building owner's ability
to increase rent to the market rent for an equivalent apartment).
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Effects of State and Local Regulations. Certain states where the Multifamily
Rental Properties are located regulate the relationship between owner and
tenants and require a written lease, good cause for eviction, disclosure of fees
and notification to residents of changed land use. Certain states where the
Multifamily Rental Properties are located also prohibit retaliatory evictions,
limit the reasons for which a landlord may terminate a tenancy, limit the
reasons for which a landlord may increase rent and prohibit a landlord from
terminating a tenancy solely because the building has been sold. In addition,
numerous counties and municipalities impose rent control regulations on
apartment buildings. These regulations may limit rent increases to fixed
percentages, to percentages of increases in the consumer price index, to
increases set or approved by a governmental agency, or to increases determined
through mediation or binding arbitration. In many cases, the rent control laws
do not permit vacancy decontrol. Any limitations on a Borrower's ability to
raise property rents may impair such Borrower's ability to repay its Mortgage
Loan from its net operating income or the proceeds of a sale or refinancing of
the related Multifamily Rental Property.
RISKS ASSOCIATED WITH RELATED PARTIES. Certain groups of Borrowers are
under common control. The largest of these groups of affiliated Borrowers are
obligors under Mortgage Loans representing 2.5% of the Initial Pool Balance. In
addition, Urban Shopping Centers, Inc. has an ownership interest in the
Borrowers under three Mortgage Loans representing 18.6% of the Initial Pool
Balance. See "Description of the Mortgage Pool--Significant Mortgage
Loans--Century City Shopping Center Loan," "--Woodland Hills Mall Loan" and
"--Penn Square Mall Loan." Further, certain tenants lease space at more than one
Mortgaged Property, and certain tenants are related to or affiliated with a
Borrower. See Annex A-1 to this Prospectus Supplement. The bankruptcy or
insolvency of, or other financial problems with respect to, any such Borrower or
tenant could have an adverse effect on the operation of all of the related
Mortgaged Properties and on the ability of such related Mortgaged Properties to
produce sufficient cash flow to make required payments on the related Mortgage
Loans. See "Certain Legal Aspects of Mortgage Loans-- Bankruptcy Laws" in the
Prospectus.
CREDIT LEASE LOANS HAVE SPECIAL RISKS. Nineteen (19) Mortgage Loans,
representing 2.9% of the Initial Pool Balance, are Credit Lease Loans. A "Credit
Lease Loan" is a Mortgage Loan secured by a Mortgaged Property that is subject
to a net lease (a "Credit Lease") with a tenant having the characteristics
described in the next sentence (a "Credit Tenant") and occupying substantially
all of such property. Except in cases where no public rating has been issued,
each Credit Tenant has (or, alternatively, the direct or indirect parent of such
tenant or any guarantor of such tenant's obligations under the related Credit
Lease (a "Credit Lease Guarantor") has) a public senior unsecured long-term debt
or similar rating of at least "BB+" (or the equivalent) by at least one
nationally recognized statistical rating organization. Based on the foregoing,
the Credit Lease Loans were generally underwritten to lower debt service
coverage ratios and higher loan-to-value ratios than would have been acceptable
had the related Mortgaged Properties been leased to less creditworthy tenants.
In the event that a Credit Tenant defaults in its obligations under a Credit
Lease, the Mortgaged Property may not be relet for sufficiently high rent to
support debt service on the related Credit Lease Loan or funds received in
liquidation of such Mortgaged Property may not be sufficient to satisfy the
Borrower's obligations under such Credit Lease Loan.
See "Description of the Mortgage Pool--Credit Lease Loans" in this
Prospectus Supplement.
Any rating assigned to a Credit Tenant or Credit Lease Guarantor, as
applicable, by a rating agency will reflect only such rating agency's assessment
of the relevant obligations of such entity. Such rating is not an assessment of
the likelihood that the Credit Leases will not be terminated (pursuant to their
terms or otherwise) or that the Credit Lease Loans will be timely repaid in
full.
RELIANCE ON CREDIT QUALITY OF CREDIT TENANTS AND GUARANTORS HAS SPECIAL
RISKS. With respect to each Credit Lease Loan, interest and principal payments
depend principally on the payment by the related Credit Tenant or Credit Lease
Guarantor, if any, of monthly rent and other payments due under the related
Credit Lease from such Credit Tenant. A downgrade in the credit rating of any of
the Credit
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Tenants and/or the Credit Lease Guarantors may have a related adverse effect on
the rating of your Certificates even if there is no default under the related
Credit Lease Loan. See "Ratings" in this Prospectus Supplement.
If a Credit Tenant or Credit Lease Guarantor defaults on its obligations to
make monthly rental payments under a Credit Lease or the related guaranty, as
the case may be, the Borrower under the related Credit Lease Loan may not have
the ability to make required payments under such Credit Lease Loan. If a payment
default on a Credit Lease Loan occurs, the Special Servicer may be entitled to
foreclose upon or otherwise realize upon the related Mortgaged Property to
recover amounts due under the Credit Lease Loan and will also be entitled (as
successor to the Borrower), after appointment of a receiver or purchase of the
property at foreclosure, to pursue any available remedies against the defaulting
Credit Tenant and any defaulting Credit Lease Guarantor, which may include
rights to all future monthly rental payments under the subject Credit Lease. If
the default occurs before significant amortization of a Credit Lease Loan has
occurred and no recovery is available from the related Borrower or from the
Credit Tenant or any Credit Lease Guarantor, it is unlikely that the Special
Servicer will be able to recover in full the amounts then due under such Credit
Lease Loan.
See "Description of the Mortgage Pool--Credit Lease Loans" in this
Prospectus Supplement.
LOAN CONCENTRATION ENTAILS RISK. In general, the inclusion a mortgage pool
of one or more loans that have outstanding principal balances that are
substantially larger than the other mortgage loans in the pool can result in
losses that are more severe, relative to the size of the pool, than would be the
case if the aggregate balance of such pool were distributed more evenly. Several
Mortgage Loans have Cut-off Date Balances that are substantially higher than the
average Cut-off Date Balance, which is $8,822,698. The following table sets
forth Cut-off Date Balances and certain other information for the five largest
individual Mortgage Loans. See "Description of the Mortgage Pool--Significant
Mortgage Loans" in this Prospectus Supplement for a description of each of the
Mortgage Loans listed on the following table.
CUT-OFF DATE BALANCES AND CONCENTRATION OF SIGNIFICANT MORTGAGE LOANS
<TABLE>
<CAPTION>
CUT-OFF DATE % OF INITIAL CUT-OFF DATE DEBT SERVICE
MORTGAGE LOAN BALANCE POOL BALANCE LTV RATIO COVERAGE RATIO
- -------------------------------------------------- ------------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
Century City Shopping Center Loan................. $ 160,000,000 9.16% 58.82% 1.42x
Starwood Financial-Promus Loan.................... 154,954,659 8.87 46.08 2.12
EAB Plaza Loan.................................... 139,367,162 7.98 49.77 1.79
Woodland Hills Mall Loan.......................... 89,644,244 5.13 52.24 1.67
Penn Square Mall Loan............................. 74,844,822 4.28 55.44 1.67
------------------- ----- ----- ---
Total/Weighted Average............................ $ 618,810,886 35.42% 52.23% 1.74x
</TABLE>
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GEOGRAPHIC CONCENTRATION ENTAILS RISKS. A concentration of Mortgaged
Properties in a particular locale, state or region increases the exposure of the
Mortgage Pool to various factors, including:
- any adverse economic developments that occur in the locale, state or
region where the Mortgaged Properties are located;
- changes in the real estate market where the Mortgaged Properties are
located;
- changes in governmental rules and fiscal policies in the governmental
jurisdiction where the Mortgaged Properties are located; and
- acts of nature, including floods, tornadoes and earthquakes in the areas
where the Mortgaged Properties are located.
The Mortgaged Properties are located in thirty-eight states, the District of
Columbia and the Commonwealth of Puerto Rico. The Mortgaged Properties located
in each of the following states secure Mortgage Loans (or the allocated loan
amounts) that represent 5% or more of the Initial Pool Balance:
<TABLE>
<CAPTION>
TOTAL CUT-OFF DATE BALANCE % OF
OF MORTGAGE LOANS SECURED INITIAL
BY PROPERTIES IN THE PARTICULAR POOL
STATE STATE BALANCE
- ------------------------------------ --------------------------------- -----------
<S> <C> <C>
California.......................... $ 399,274,153 22.86%
New York............................ $ 199,472,403 11.42%
Oklahoma............................ $ 182,315,798 10.44%
Texas............................... $ 123,820,517 7.09%
Michigan............................ $ 102,726,839 5.88%
Florida............................. $ 90,365,342 5.17%
</TABLE>
RISK OF CHANGES IN MORTGAGE POOL COMPOSITION. The Mortgage Loans amortize
at different rates and mature over a period of thirty years. In addition,
certain Mortgage Loans may be prepaid or liquidated. As a result of the
foregoing, the relative composition of the Mortgage Pool will change over time.
If you purchase Certificates with a Pass-Through Rate that is equal to or
calculated based upon a weighted average of interest rates on the Mortgage
Loans, your Pass-Through Rate will be affected (and may decline) as the relative
composition of the Mortgage Pool changes.
In addition, as payments and other collections of principal are received
with respect to the Mortgage Loans, the remaining Mortgage Pool may exhibit an
increased concentration with respect to property type, number and affiliation of
Borrowers and geographic location. The later the Assumed Final Distribution Date
for your Certificates (that is, except in the case of the Senior Certificates,
the more subordinate that your Certificates are relative to other Offered
Certificates), the more likely you are to be exposed to any risks associated
with changes in concentrations of Borrower, loan or property characteristics.
EXTENSION AND DEFAULT RISKS ASSOCIATED WITH BALLOON LOANS AND ARD
LOANS. One hundred sixty-two (162) Mortgage Loans, representing 55.3% of the
Initial Pool Balance, are Balloon Loans, and twenty-three (23) Mortgage Loans,
representing 43.0% of the Initial Pool Balance, are ARD Loans. The ability of a
Borrower under a Balloon Loan to make the required Balloon Payment at maturity,
and the ability of a Borrower under an ARD Loan to repay such Mortgage Loan on
or before the related Anticipated Repayment Date, in each case depends upon its
ability to refinance the loan or to sell the related Mortgaged Property and,
further, on the financial strength and business plans of the Borrower's sponsor.
The ability of a Borrower to refinance its Mortgage Loan or sell the related
Mortgaged Property will be affected by a number of factors occurring at the time
of attempted refinancing or sale, including:
- the level of available mortgage rates;
- the fair market value of the related Mortgaged Property;
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- the Borrower's equity in the related Mortgaged Property;
- the financial condition of the Borrower;
- operating history of the related Mortgaged Property;
- tax laws;
- prevailing general and regional economic conditions; and
- the availability of credit for multifamily or commercial properties.
See "Description of the Mortgage Pool--Certain Terms and Conditions of the
Mortgage Loans" and "--Additional Mortgage Loan Information" in this Prospectus
Supplement and "Risk Factors--Balloon Payments; Borrower Default" in the
Prospectus.
Any failure of a Borrower under a Balloon Loan to timely pay its Balloon
Payment will be a default thereunder. Subject to certain limitations, the
Special Servicer may extend, modify or otherwise deal with Mortgage Loans that
are in material default or as to which a payment default is reasonably
foreseeable. See "Servicing of the Mortgage Loans--Modifications, Waivers,
Amendments and Consents" in this Prospectus Supplement. There can be no
assurance that any extension or modification will increase the recoveries in a
given case.
The failure of a Borrower under an ARD Loan to repay such Mortgage Loan by
the related Anticipated Repayment Date will not constitute a default thereunder.
Although an ARD Loan includes several provisions that give the Borrower an
incentive to repay such Mortgage Loan by the related Anticipated Repayment Date,
there can be no assurance that such Borrower will be sufficiently motivated or
able to do so.
If any Balloon Loan remains outstanding past its stated maturity, or if any
ARD Loan remains outstanding past its Anticipated Repayment Date, the weighted
average lives of certain Classes of the Offered Certificates may be extended.
See "Yield and Maturity Considerations" in this Prospectus Supplement and "Yield
and Prepayment Considerations" in the Prospectus.
RISKS OF SUBORDINATE AND OTHER ADDITIONAL FINANCING. While all of the
Mortgage Loans either (i) prohibit the related Borrower from encumbering the
Mortgaged Property with additional secured debt or (ii) require the consent of
the mortgagee under the related Mortgage Loan prior to so encumbering such
property, a violation of such prohibition may not become evident until the
related Mortgage Loan otherwise defaults. The existence of any subordinated
indebtedness increases the difficulty of refinancing the related Mortgage Loan
at maturity, and the related Borrower may have difficulty repaying multiple
loans. See "Certain Legal Aspects of Mortgage Loans--Secondary Financing;
Due-On-Encumbrance Provisions" in the Prospectus. Furthermore, certain of the
Mortgage Loans permit, and certain Borrowers have incurred, additional
indebtedness for operating costs or similar purposes. 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.
Owners of certain Borrowers may incur indebtedness that is secured by their
ownership interests in such Borrowers. Such financing effectively reduces the
indirect equity interest of any such Owner in the related Mortgaged Property.
With respect to one (1) Mortgage Loan, representing 0.7% of the Initial Pool
Balance, the owners of the related Borrower were known to have incurred such
indebtedness as of the origination date of the related Mortgage Loan.
The Depositor has not been able to confirm the existence of any other debt
of the respective Borrowers.
LIMITED RECOURSE. You should consider all of the Mortgage Loans to be
nonrecourse loans (I.E., in the event of a default, recourse will be limited to
the related Mortgaged Property or Properties securing
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the defaulted Mortgage Loan). In those cases where recourse to a Borrower or
guarantor is permitted by the loan documents, the Depositor has not undertaken
any evaluation of the financial condition of such Borrower or guarantor.
Consequently, payment on each Mortgage Loan prior to maturity is dependent on
one or more of the following:
- the sufficiency of the net operating income;
- the market value of the property at maturity; or
- the ability of the Borrower to refinance the Mortgaged Property.
None of the Mortgage Loans is insured or guaranteed by any governmental
entity or by any other person.
ENVIRONMENTAL RISKS. A third-party environmental consultant conducted an
environmental site assessment (or updated a previously conducted assessment)
with respect to each Mortgaged Property during the eighteen months (or, in two
cases representing security for 1.0% of the Initial Pool Balance, more than
eighteen months) preceding the Cut-off Date. Each such environmental site
assessment or update generally complied with ASTM standards. In the case of
certain Mortgaged Properties, a "Phase II" environmental assessment was also
performed. If any such assessment or update revealed a material adverse
environmental condition or circumstance at any Mortgaged Property, then
(depending on the nature of the condition or circumstance) one of the following
actions has been or is expected to be taken--
- environmental insurance was obtained;
- an operations and maintenance plan (including, in several cases, in
respect of asbestos-containing materials ("ACMs"), lead-based paint and/or
radon) or periodic monitoring of nearby properties has been or is expected
to be implemented in the manner and within the time frames specified in
the related Mortgage Loan documents; or
- an escrow reserve was established to cover the estimated cost of
remediation.
There can be no assurance, however, that the environmental assessments
identified all environmental conditions and risks or that the related Borrowers
will implement all recommended operations and maintenance plans. In addition,
the current environmental condition of the Mortgaged Properties could be
adversely affected by tenants or by the condition of land or operations in the
vicinity of the Mortgaged Properties (such as underground storage tanks).
Liability of the Trust Under Environmental Laws. Various environmental laws
may make a current or previous owner or operator of real property liable for the
costs of removal or remediation of hazardous or toxic substances on, under or
adjacent to such property. Those laws often impose liability whether or not the
owner or operator knew of, or was responsible for, the presence of such
hazardous or toxic substances. For example, certain laws impose liability for
release of ACMs into the air or require the removal or containment of ACMs. The
owner's liability for any required remediation generally is not limited by law
and accordingly could exceed the value of the property and/or the aggregate
assets of the owner. In addition, the presence of hazardous or toxic substances,
or the failure to remediate the adverse environmental condition, may adversely
affect the owner's or operator's ability to use such property. In certain
states, contamination of a property may give rise to a lien on the property to
ensure the costs of cleanup. In some states this lien has priority over the lien
of an existing mortgage. In addition, third parties may seek recovery from
owners or operators of real property for personal injury associated with
exposure to hazardous substances. Persons who arrange for the disposal or
treatment of hazardous or toxic substances may be liable for the costs of
removal or remediation of such substances at the disposal or treatment facility.
The federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), as well as certain other federal and state
laws, provide that a secured lender (such
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as the Trust) may be liable, as an "owner" or "operator" of the real property,
regardless of whether the Borrower or a previous owner caused the environmental
damage, if (i) agents or employees of the lender are deemed to have participated
in the management of the Borrower or (ii) under certain conditions the lender
actually takes possession of a Borrower's property or control of its day-to-day
operations (as for example, through the appointment of a receiver or
foreclosure). Although recently enacted legislation clarifies the activities in
which a lender may engage without becoming subject to liability under CERCLA and
similar federal laws, such legislation has no applicability to state
environmental laws. Moreover, future laws, ordinances or regulations could
impose material environmental liability.
See "Certain Legal Aspects of the Mortgage Loans--Environmental Matters" in
the Prospectus.
Risks Related to Lead-Based Paint at Multifamily Properties. Federal law
requires owners of residential housing constructed prior to 1978 to disclose to
potential residents or purchasers any condition on the property that causes
exposure to lead-based paint and the potential hazards to pregnant women and
young children, including that the ingestion of lead-based paint chips and/or
the inhalation of dust particles from lead-based paint by children can cause
permanent injury, even at low levels of exposure. Property owners can be held
liable for injuries to their tenants resulting from exposure under various laws
that impose affirmative obligations on property owners of residential housing
containing lead-based paint. The environmental assessments revealed the
existence of lead-based paint at certain of the Multifamily Properties. In these
cases, the Borrowers have either implemented operations and maintenance programs
or are in the process of removing the lead-based paint.
Risks Related to Off-Site LUSTs. Certain of the Mortgaged Properties are in
the vicinity of sites containing leaking underground storage tanks ("LUSTs") or
other potential sources of groundwater contamination. Although the owners of
those Mortgaged Properties and the Trust may not have legal liability for
contamination of the Mortgaged Properties from such off-site sources, the
enforcement of rights against third parties may result in additional transaction
costs.
Risks Related to ACMs. At several of the Mortgaged Properties, ACMs have
been detected through sampling by environmental consultants. The ACMs found at
these Mortgaged Properties are not expected to present a significant risk as
long as the related Mortgaged Property continues to be properly managed. In
connection therewith, the related Borrowers have agreed to establish and
maintain operations and maintenance or abatement programs and/or have funded
environmental reserves. Nonetheless, there can be no assurance that the value of
a Mortgaged Property as collateral for the Mortgage Loan will not be adversely
affected by the presence of ACMs.
RISKS RELATED TO PROPERTY CONDITION. Except for the Mortgaged Properties
securing the Credit Lease Loans, licensed engineers inspected all of the other
Mortgaged Properties during the 12 months preceding the Cut-off Date (except for
14 Mortgaged Properties, representing security for 3.8% of the Initial Pool
Balance, which were inspected during the 20 months preceding the Cut-off Date)
to assess the structure, exterior walls, roofing, interior construction,
mechanical and electrical systems and general condition of the site, buildings
and other improvements located at each Mortgaged Property. In some cases, the
inspections identified conditions at a particular Mortgaged Property requiring
repairs or replacements estimated to cost in excess of $100,000. In such cases,
the Originator generally required the related Borrower to fund reserves, or
deliver letters of credit or other instruments, to cover such costs. There is no
assurance, however, that all conditions requiring repair or replacement were
identified or that such reserves, letters of credit or other instruments will be
adequate to cover the corresponding costs.
RESERVES MAY BE INSUFFICIENT. The Mortgage Loans generally require that
reserves be funded on a monthly basis from cash flow generated by the related
Mortgaged Property to cover ongoing monthly, semi-annual or annual expenses such
as taxes and insurance. The Mortgage Loans generally also required reserves to
be established, or letters of credit or other instruments to be delivered, upon
the closing of the Mortgage Loan to fund identified capital expenditure items,
certain leasing costs, identified environmental
S-44
<PAGE>
remediation costs or identified engineering remediation costs when such needs
were identified. Such reserves, letters of credit or other instruments may not
be sufficient to offset the actual costs of the items which they were intended
to cover. In addition, cash flow from the Mortgaged Properties may not be
sufficient to fund fully the ongoing monthly reserve requirements.
LIMITATIONS ON ENFORCEABILITY OF CROSS-COLLATERALIZATION. The Mortgage Pool
includes seventeen (17) Mortgage Loans that are, either individually or through
cross-collateralization with other such Mortgage Loans, secured by more than one
Mortgaged Property. Certain of those seventeen (17) Mortgage Loans are secured
by multiple Mortgaged Properties as a result of cross-collateralization with
certain other such Mortgage Loans. For purposes of this Prospectus Supplement,
all of those seventeen (17) Mortgage Loans will constitute "Cross-Collateralized
Mortgage Loans". Certain of the Cross-Collateralized Mortgage Loans or
particular groups thereof provide for a full or partial termination of the
applicable cross-collateralization and/or a release of one or more of the
related Mortgaged Properties from the related mortgage lien(s), upon the
satisfaction of the conditions described under "Description of the Mortgage
Pool--Certain Terms and Conditions of the Mortgage Loans" in this Prospectus
Supplement.
Certain of the Cross-Collateralized Mortgage Loans or particular groups
thereof are (in each case) secured by Mortgaged Properties located in two or
more states. Such "multi-state" Mortgage Loans collectively represent 11.6% of
the Initial Pool Balance. Foreclosure actions are brought in state court and the
courts of one state cannot exercise jurisdiction over property in another state.
Therefore, upon a default under any such "multi-state" Mortgage Loan, it may not
be possible to foreclose on the related Mortgaged Properties simultaneously.
Certain of the Cross-Collateralized Mortgage Loans or particular groups
thereof have (in each case) more than one Borrower. Such "multi-Borrower"
Mortgage Loans collectively represent 2.2% of the Initial Pool Balance. If a
Borrower under any such "multi-Borrower" Mortgage Loan were to become a debtor
in a bankruptcy case, the creditors of that Borrower or the representative of
that Borrower's bankruptcy estate could challenge the pledging of such
Borrower's Mortgaged Property as a fraudulent conveyance. A lien granted by a
Borrower under any such "multi-Borrower" Mortgage Loan to secure repayment of
another Borrower's Mortgage Loan or share of the related loan proceeds, as the
case may be, could be avoided if a court were to determine that--
- the first such Borrower was insolvent at the time of granting the lien,
was rendered insolvent by the granting of the lien, was left with
inadequate capital or was not able to pay its debts as they matured, and
- the first such Borrower did not receive fair consideration or reasonably
equivalent value for pledging its Mortgaged Property for the equal benefit
of the other Borrower(s) under such "multi-Borrower" Mortgage Loan or the
other Mortgage Loan(s) with which it is cross-collateralized.
Among other things, a legal challenge to the granting of the lien may focus on
the benefits realized by the debtor/Borrower from the respective Mortgage Loan
proceeds, as well as the benefit to it from the related cross-collateralization
arrangement. If a court were to conclude that the granting of the lien was an
avoidable fraudulent conveyance, that court could nullify the lien or mortgage
effecting the cross-collateralization and nullify or subordinate all or part of
the related Mortgage Loan(s) to existing or future indebtedness of that
Borrower. The court could also allow the Borrower to recover payments it made
pursuant to the avoided cross-collateralization.
LIMITATIONS ON ENFORCEABILITY AND COLLECTABILITY OF PREPAYMENT PREMIUMS AND
YIELD MAINTENANCE CHARGES. Three (3) Mortgage Loans, representing 1.8% of the
Initial Pool Balance, require that, during some period of the related loan term,
any voluntary principal prepayment be accompanied by an additional amount
("Prepayment Consideration") generally calculated as a percentage of the amount
prepaid (a "Prepayment Premium") and/or based on a yield maintenance formula (a
"Yield Maintenance Charge"). See "Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage Loans--
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<PAGE>
Prepayment Provisions" in this Prospectus Supplement. Any Prepayment Premiums
and/or Yield Maintenance Charges collected on the Mortgage Loans will be
distributed to the persons and in the amounts and priorities described in this
Prospectus Supplement under "Description of the Offered Certificates--
Distributions--Distributions of Prepayment Premiums and Yield Maintenance
Charges". The Depositor makes no representation or warranty, however, as to the
collectability of any Prepayment Premium or Yield Maintenance Charges.
The enforceability, under the laws of a number of states, of provisions
providing for the payment of a Prepayment Premium or Yield Maintenance Charge
upon an involuntary prepayment is unclear. Accordingly, the obligation of any
Borrower under its Mortgage Loan to pay a Prepayment Premium or Yield
Maintenance Charge in connection with an involuntary prepayment may not be
enforceable under applicable law. In addition, even if the obligation is
enforceable, any related liquidation proceeds may not be sufficient to make such
payment. Liquidation proceeds are generally applied to cover outstanding
servicing expenses and unpaid principal and interest prior to being applied to
cover any Prepayment Premium or Yield Maintenance Charge due in connection with
the liquidation of such Mortgage Loan. Furthermore, the Special Servicer has
authority to waive a Prepayment Premium or Yield Maintenance Charge in
connection with obtaining a pay-off of a defaulted Mortgage Loan. See "Servicing
of the Mortgage Loans--Modifications, Waivers, Amendments and Consents" in this
Prospectus Supplement and "Certain Legal Aspects of Mortgage
Loans--Enforceability of Prepayment and Late Payment Fees" in the Prospectus.
Prepayments of Mortgage Loans due to casualties or condemnations at the
related Mortgaged Properties could occur at any time and generally would not be
accompanied by any Prepayment Consideration.
In certain circumstances involving the sale of Mortgage Loans by the Trust,
no Prepayment Premium or Yield Maintenance Charge will be payable. See
"Description of the Mortgage Pool--Cures and Repurchases", "Servicing of the
Mortgage Loans--Realization Upon Defaulted Mortgage Loans; Sale of Defaulted
Mortgage Loans and REO Properties" and "Description of the Offered
Certificates--Termination" in this Prospectus Supplement.
LIMITATIONS ON ENFORCEABILITY OF OTHER PROVISIONS. Each of the Mortgage
Loans contains a due-on-sale clause that permits the lender to accelerate the
maturity of the Mortgage Loan upon the sale, transfer or conveyance of the
related Mortgaged Property or certain interests in the related Borrower in
violation of the Mortgage Loan documents. The Mortgage Loans also include
debt-acceleration clauses, each of which permits the lender to accelerate the
debt upon specified monetary or non-monetary defaults by the Borrower. The
courts of all states will enforce acceleration clauses in the event of a
material payment default. The equity courts of any state, however, may refuse to
allow the foreclosure of a mortgage or deed of trust or to permit the
acceleration of the indebtedness if--
- the default is deemed to be immaterial,
- the exercise of such remedies would be inequitable or unjust, or
- the circumstances would render the acceleration unconscionable.
All of the Mortgage Loans are, in each case, secured by an assignment of
leases and rents pursuant to which the related Borrower assigned its right,
title and interest as landlord under the leases on the related Mortgaged
Property and the income derived therefrom to the lender as further security for
the related Mortgage Loan, while retaining a license to collect rents for so
long as there is no default. In the event the Borrower defaults, the license
terminates and the lender is entitled to collect rents. In some cases, such
assignments may not be perfected as security interests prior to actual
possession of the cash flow. In some cases, state law may require that the
lender take possession of the Mortgaged Property and obtain a judicial
appointment of a receiver before becoming entitled to collect the rents. In
addition, if bankruptcy or similar proceedings are commenced by or in respect of
the mortgagor, the lender's ability to collect the
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<PAGE>
rents may be adversely affected. See "Certain Legal Aspects of Mortgage
Loans--Leases and Rents" in the Prospectus.
LIMITATIONS OF APPRAISALS. Appraisals for the Mortgaged Properties securing
all but two of the Mortgage Loans were performed by a state certified appraiser
or an appraiser belonging to the Appraisal Institute and were conducted in
accordance with the Uniform Standards of Professional Appraisal Practices. In
the case of those two Mortgage Loans, which represent 14.3% of the Initial Pool
Balance, the "value" of the related Mortgaged Property was determined based upon
the price recently paid by the related Borrower for such Mortgaged Property.
Appraisals represent the analysis and opinion of an appraiser. They are not
guaranties of, and may not be indicative of, present or future value. There can
be no assurance that another appraiser would not have arrived at a different
valuation, even if such appraiser used the same general approach to and same
method of appraising the property. Moreover, appraisals seek to establish the
amount a typically motivated buyer would pay a typically motivated seller. Such
amount could be significantly higher than the amount obtained from the sale of a
Mortgaged Property under a distress or liquidation sale. Information regarding
the appraised values of the Mortgaged Properties is presented for illustrative
purposes only on Annex A-1 to this Prospectus Supplement.
TAX CONSIDERATIONS RELATED TO FORECLOSURE. If the Trust were to acquire a
Mortgaged Property pursuant to a foreclosure or deed in lieu of foreclosure, the
Special Servicer would be required to retain an independent contractor to
operate and manage the Mortgaged Property. Any net income from such operation
and management, other than qualifying "rents from real property" (as defined in
section 856(d) of the Code), or any rental income based on the net profits of a
tenant or sub-tenant or allocable to a service that is non-customary in the area
and for the type of building involved, will subject the Trust to federal (and
possibly state or local) tax on such income at the highest marginal corporate
tax rate (currently 35% for federal purposes), thereby reducing net proceeds
available for distribution with respect to the Certificates.
UNINSURED LOSS; SUFFICIENCY OF INSURANCE. The Borrowers are generally
required to maintain comprehensive liability insurance, "all-risk" fire,
casualty and hazard insurance, flood insurance (if required by applicable law)
and rental income insurance with respect to the Mortgaged Properties with policy
specifications, limits and deductibles customarily carried for similar
properties. Certain types of losses, however, may be either uninsurable or not
economically insurable, such as losses due to riots or acts of war or
earthquakes. Should an uninsured loss occur, the Borrower could lose both its
investment in and its anticipated profits and cash flow from its Mortgaged
Property, which would adversely affect the Borrower's ability to make payments
under its Mortgage Loan. Although, in general, the Borrowers have covenanted to
insure their respective Mortgaged Properties as described under "Description of
the Mortgage Pool-- Additional Mortgage Loan Information--Hazard, Liability and
Other Insurance" in this Prospectus Supplement, there is a possibility of
casualty losses with respect to a Mortgaged Property for which insurance
proceeds may not be adequate. Consequently, there can be no assurance that any
loss incurred will not exceed the limits of policies obtained.
In addition, earthquake insurance is not required to be maintained by a
Borrower, except in the case of Mortgaged Properties located in the state of
California or in "Seismic Zones 3 or 4" where either (i) a seismic assessment
revealed a probable or bounded maximum loss in excess of 20% of the amount of
the estimated cost of the improvements or (ii) the related Mortgage Loan has a
Cut-off Date Balance in excess of $15 million. In certain cases where earthquake
insurance was obtained with respect to a Mortgaged Property owned by a Borrower
sponsored by a publicly-held entity, such Mortgaged Property may be covered
under a blanket policy which also covers other Mortgaged Properties and/or other
properties not securing the Mortgage Loans. As a result of aggregate and per
occurrence limits under any such blanket policy, losses at other properties
covered thereby may reduce the amount of insurance coverage with respect to a
Mortgaged Property covered thereby.
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<PAGE>
RISKS PARTICULAR TO GROUND LEASES. Several of the Mortgage Loans are secured
by first mortgage liens on the related Borrower's leasehold interest in all or a
portion of the related Mortgaged Property. Upon the bankruptcy of a lessor or a
lessee under a ground lease, the debtor entity has the right to assume
(continue) or reject (breach and vacate the premises) the ground lease. If a
debtor lessor rejects the lease, the lessee has the right to remain in
possession of its leased premises under the rent reserved in the lease for the
term (including renewals). If a debtor lessee/Borrower rejects any or all of its
leases, the Borrower's lender may not be able to succeed to the
lessee/Borrower's position under the lease unless the lessor has specifically
granted the lender such right. If both the lessor and the lessee/Borrowers are
involved in bankruptcy proceedings, the Trustee may be unable to enforce the
bankrupt lessee/Borrower's obligation to refuse to treat as terminated a ground
lease rejected by a bankrupt lessor. In such circumstances, it is possible that
the Trustee could be deprived of its security interest in the leasehold estate,
notwithstanding lender protection provisions contained in the lease or mortgage.
See "Certain Legal Aspects of Mortgage Loans--Leasehold Risks" in the
Prospectus.
RISKS ASSOCIATED WITH ZONING COMPLIANCE. Due to changes in zoning
requirements since the construction thereof, certain of the Mortgaged Properties
may not comply with current zoning laws, including density, use, parking and set
back requirements. In general, each of these properties is considered to be a
permitted non-conforming use or structure. This means that the Borrower is not
required to alter its structure to comply with the new law; however, the
Borrower may be limited in its ability to rebuild the premises "as is" in the
event of a substantial casualty loss. This may adversely affect the cash flow
available following such loss. If a substantial casualty were to occur,
insurance proceeds may not be sufficient to pay the Mortgage Loan in full. In
addition, if the Mortgaged Property were repaired or restored in conformity with
the current law, the value of the Mortgaged Property or the revenue-producing
potential of the Mortgaged Property may be less than that which existed before
the casualty.
COSTS ASSOCIATED WITH COMPLIANCE WITH ADA. Under the Americans with
Disabilities Act of 1990 (the "ADA"), all public accommodations are required to
meet certain federal requirements related to access and use by disabled persons.
If a Mortgaged Property does not currently comply with the ADA, the related
Borrower may be required to incur significant costs in order bring the property
into compliance. In addition, noncompliance could result in the imposition of
fines by the federal government or an award or damages to private litigants.
LITIGATION. You should be aware that there may be legal proceedings pending
and, from time to time, threatened against the Borrowers. The Depositor cannot
provide any assurance that such litigation will not have a material adverse
effect on the distributions to you.
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<PAGE>
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool has an Initial Pool Balance of $1,746,894,129, subject to
a variance of plus or minus 5%. The Initial Pool Balance is equal to the
aggregate Cut-off Date Balance of the Mortgage Loans. The "Cut-off Date Balance"
of each Mortgage Loan is equal to its unpaid principal balance as of the Cut-off
Date, after application of all payments due in respect of such Mortgage Loan on
or before such date, whether or not received. The Cut-off Date Balances of the
Mortgage Loans range from $795,220 to $160,000,000, and the average Cut-off Date
Balance of the Mortgage Loans is $8,822,698.
This "Description of the Mortgage Pool" section contains certain statistical
information regarding the Mortgage Loans and the Mortgaged Properties. In
reviewing such information, as well as the statistical information regarding the
Mortgage Loans and the Mortgaged Properties contained elsewhere in this
Prospectus Supplement, you should be aware that--
- All numerical information provided with respect to the Mortgage Loans is
provided on an approximate basis.
- All weighted average information provided with respect to the Mortgage
Loans reflects weighting of the Mortgage Loans by their Cut-off Date
Balances.
- When information with respect to the Mortgaged Properties is expressed as
a percentage of the Initial Pool Balance, such percentage is based upon
the Cut-off Date Balances of the related Mortgage Loans.
- In certain cases involving a Mortgage Loan that is secured by multiple
Mortgaged Properties located in more than one state, a portion of such
Mortgage Loan has been allocated to each such Mortgaged Property.
- Statistical information regarding the Mortgage Loans may change prior to
the date of issuance of the Certificates due to changes in the composition
of the Mortgage Pool prior to the Closing Date.
- Certain capitalized terms used with respect to the Mortgage Loans are
defined under "Summary of Prospectus Supplement--The Mortgage Loans and
Mortgaged Properties" in this Prospectus Supplement.
Each Mortgage Loan constitutes the obligation of the related Borrower to
repay a specified sum with interest. Each Mortgage Loan is evidenced by a
promissory note (a "Mortgage Note") and secured by a mortgage, deed of trust,
deed to secure debt or other similar security instrument (a "Mortgage") that
creates a first mortgage lien on the fee simple and/or leasehold interest of the
related Borrower or another party in one or more related Mortgaged Properties.
In general, the Mortgage Loans are secured by the Borrower's fee simple interest
in the related Mortgaged Property or the Borrower's leasehold interest and the
ground lessor's fee interest in the related Mortgaged Property. However, nine
(9) Mortgage Loans, representing 16.1% of the Initial Pool Balance, are secured
solely by the Borrower's leasehold interest in the related Mortgaged Property.
In these latter cases, the ground lessor has generally agreed to give the holder
of the Mortgage Loan notice of, and the right to cure, any default by the lessee
and the term of the ground lease extends at least ten (10) years beyond the
maturity date of the Mortgage Loan.
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<PAGE>
The table below shows the number of, and the percentage of the Initial Pool
Balance secured by, Mortgaged Properties operated for each indicated purpose:
<TABLE>
<CAPTION>
NUMBER OF
MORTGAGED % OF INITIAL
PROPERTY TYPE PROPERTIES POOL BALANCE
- ----------------------------------------------------------- --------------- -------------
<S> <C> <C>
Retail..................................................... 88 47.87
Anchored Retail.......................................... 61 19.41
Regional Mall............................................ 3 14.73
Super Regional Mall...................................... 2 9.42
Unanchored Retail........................................ 22 4.32
Office..................................................... 28 20.38
Multifamily................................................ 47 12.43
Multifamily Rental....................................... 27 8.32
Manufactured Housing Community........................... 20 4.11
Industrial/Warehouse....................................... 15 3.16
Credit Leases(1)........................................... 19 2.90
Self Storage............................................... 12 0.72
Mixed Use.................................................. 3 0.62
</TABLE>
- ------------------------
(1) Properties subject to Credit Leases, regardless of property type.
The table below shows the number of, and the percentage of the Initial Pool
Balance secured by, Mortgaged Properties located in the indicated states:
<TABLE>
<CAPTION>
NUMBER OF
MORTGAGED % OF INITIAL
STATE PROPERTIES POOL BALANCE
- ----------------------------------------------------------- --------------- -------------
<S> <C> <C>
California................................................. 33 22.86
New York................................................... 12 11.42
Oklahoma................................................... 7 10.44
Texas...................................................... 30 7.09
Michigan................................................... 19 5.88
Florida.................................................... 17 5.17
</TABLE>
The remaining Mortgaged Properties are located throughout 32 other states,
the District of Columbia and the Commonwealth of Puerto Rico. No more than 5.0%
of the Initial Pool Balance is secured by Mortgaged Properties located in any
such other jurisdiction.
- All of the Mortgage Loans were originated directly or indirectly through
an affiliate of the Depositor or by such affiliate's approved conduit
originators (such affiliate, the "Originator").
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
DUE DATES. Except as indicated in the following sentence, all of the
Mortgage Loans provide for Scheduled P&I Payments to be due on the first day of
each month. Twenty-three (23) Mortgage Loans, representing 4.9% of the Initial
Pool Balance, provide for Scheduled P&I Payments to be due on days other than
the first day of each month.
MORTGAGE RATES; CALCULATIONS OF INTEREST. Each Mortgage Loan bears interest
at a Mortgage Rate that is fixed until maturity. As described below, however,
each ARD Loan will accrue interest after its Anticipated Repayment Date at a
rate that is in excess of the Mortgage Rate otherwise in effect. As used in this
Prospectus Supplement, the term "Mortgage Rate" does not include the incremental
increase in the rate at which interest may accrue on any Mortgage Loan due to a
default or on any ARD Loan after its
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Anticipated Repayment Date. As of the Cut-off Date, the Mortgage Rates for the
Mortgage Loans ranged from 6.500% per annum to 9.085% per annum, and the
weighted average Mortgage Rate for the Mortgage Loans was 7.477% per annum.
No Mortgage Loan provides for negative amortization or, except as described
below with respect to the ARD Loans, for the deferral of interest.
Each Mortgage Loan will accrue interest on the basis of one of the following
conventions as detailed in Annex A-1 to this Prospectus Supplement:
- Actual number of days elapsed during each one-month accrual period (an
"Actual/360 Basis"). Mortgage Loans that accrue interest on an Actual/360
Basis are referred to in this Prospectus Supplement as "Actual/360
Mortgage Loans".
- A 360-day year consisting of twelve 30-day months (a "30/360 Basis").
Mortgage Loans that accrue interest on a 30/360 Basis are referred to in
this Prospectus Supplement as "30/360 Mortgage Loans".
ARD LOANS. Twenty-three (23) Mortgage Loans, representing 43.0% of the
Initial Pool Balance, are ARD Loans.
An "ARD Loan" is characterized by the following features:
- A maturity date that is 20 or more years following origination.
- The designation of an Anticipated Repayment Date that is approximately 10
years following origination. The Anticipated Repayment Date for each ARD
Loan is listed on Annex A-1 to this Prospectus Supplement.
- The ability of the related Borrower to prepay such Mortgage Loan, without
restriction (including without any obligation to pay a Prepayment Premium
or a Yield Maintenance Charge), at any time on or after the related
Anticipated Repayment Date (and, in the case of certain ARD Loans, at any
time on or after a date which may be up to six months prior to the related
Anticipated Repayment Date).
- Until its Anticipated Repayment Date, the accrual of interest at its fixed
Mortgage Rate.
- From and after its Anticipated Repayment Date, the accrual of interest at
a fixed annual rate (the "Revised Rate") equal to the sum of (i) its
Mortgage Rate, plus (ii) a specified margin (such margin, the "Additional
Interest Rate").
- The deferral of any interest accrued from and after the Anticipated
Repayment Date that is in excess of interest accrued at the related
Mortgage Rate on its unpaid principal balance outstanding from time to
time (such excess interest being referred to as "Additional Interest").
Any Additional Interest accrued in respect of an ARD Loan following its
Anticipated Repayment Date will not be payable until the entire principal
balance of, and all other sums due under, such Mortgage Loan have been
paid in full. In general, unpaid Additional Interest in respect of any ARD
Loan will compound monthly at the related Revised Rate.
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<PAGE>
- From and after the Anticipated Repayment Date, the application to
accelerated amortization of principal of any and all monthly cash flow
from the related Mortgaged Property which remains after payment of the
applicable Scheduled P&I Payment and permitted operating expenses and
capital expenditures. Such additional monthly payments of principal are
referred to as "Accelerated Amortization Payments". Accelerated
Amortization Payments and Additional Interest are considered separate from
Scheduled P&I Payments due in respect of any ARD Loan.
By the related Anticipated Repayment Date, the Borrower under each ARD Loan
is required to enter into a lockbox agreement whereby all revenue from the
related Mortgaged Property will be deposited directly into a designated account
(the "Lockbox Account") controlled by the Master Servicer.
BALLOON LOANS. One hundred sixty-three (162) Mortgage Loans, representing
55.3% of the Initial Pool Balance, are Balloon Loans.
A "Balloon Loan" is characterized by either--
- no amortization of principal (I.E., a requirement that the related
Borrower make only payments of interest) prior to stated maturity, or
- an amortization schedule that is significantly longer than the actual term
of such Mortgage Loan,
which in either case results in a Balloon Payment being due in respect of such
Mortgage Loan on its stated maturity date.
FULLY AMORTIZING LOANS. Thirteen (13) Mortgage Loans, representing 1.7% of
the Initial Pool Balance, are Fully Amortizing Loans.
A "Fully Amortizing Loan" is characterized by:
- substantially equal Scheduled P&I Payments throughout the term of such
Mortgage Loan, and
- an amortization schedule that is approximately equal to the actual term of
such Mortgage Loan.
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<PAGE>
AMORTIZATION OF PRINCIPAL. The table below shows the indicated information
regarding the amortization schedules and terms to maturity (or, in the case of
the ARD Loans, to their respective Anticipated Repayment Dates) for the Mortgage
Loans (or the specified sub-groups thereof) as of the Cut-off Date.
<TABLE>
<CAPTION>
FULLY AMORTIZING
BALLOON LOANS ARD LOANS LOANS ALL LOANS
----------------- --------------- ------------------- -------------
<S> <C> <C> <C> <C>
Original Term to Maturity (mos.)
Maximum............................................... 258 170 300 300
Minimum............................................... 54 84 168 54
Weighted Average...................................... 116 121 241 120
Remaining Term to Maturity (mos.)
Maximum............................................... 248 168 289 289
Minimum............................................... 50 79 162 50
Weighted Average...................................... 112 118 235 117
Original Amortization Term (mos.)
Maximum............................................... 360 360 300 360
Minimum............................................... 240 262 168 168
Weighted Average 346 326 225 335
Remaining Amortization Term (mos.)
Maximum............................................... 360 360 289 360
Minimum............................................... 234 260 162 162
Weighted Average...................................... 342 323 221 332
</TABLE>
Certain Mortgage Loans provide for a recast of the amortization schedule and
an adjustment of the Scheduled P&I Payments thereon upon application of
specified amounts of condemnation proceeds or insurance proceeds to pay the
unpaid principal balance of the Mortgage Loan.
PREPAYMENT PROVISIONS. As of their respective dates of origination, all but
one of the Mortgage Loans prohibited voluntary prepayments for some specified
period (a "Lockout Period"). In certain cases, such Lockout Period is followed
by one or both of the following:
- a period (a "Prepayment Consideration Period") during which any voluntary
principal prepayment must be accompanied by a form of Prepayment
Consideration, and/or
- a period (an "Open Period") during which voluntary principal prepayments
may be made without any Prepayment Consideration.
The prepayment terms of each of the Mortgage Loans are more particularly
described in Annex A-1 to this Prospectus Supplement.
LOCKOUT PERIODS. As of the Cut-off Date, a Lockout Period was in effect for
all but one of the Mortgage Loans and--
- the maximum remaining Lockout Period as of the Cut-off Date is 286 months;
- the minimum remaining Lockout Period as of the Cut-off Date is 31 months;
and
- the weighted average remaining Lockout Period as of the Cut-off Date is
115 months.
PREPAYMENT CONSIDERATION. Three (3) Mortgage Loans, representing 1.8% of
the Initial Pool Balance, provide for a Prepayment Consideration Period for some
portion of the related loan term. The Prepayment Consideration for such Mortgage
Loans may be in the form of Prepayment Premiums or Yield Maintenance Charges.
Prepayment Premiums are calculated as a percentage (which may decline over time)
of the principal amount prepaid. Yield Maintenance Charges are calculated on the
basis of a yield
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<PAGE>
maintenance formula (subject, in certain instances, to a minimum equal to a
specified percentage of the principal amount prepaid). Prepayment Premiums
and/or Yield Maintenance Charges actually collected on the Mortgage Loans will
be distributed to the persons and in the amounts and priorities described under
"Description of the Offered Certificates--Distributions--Distributions of
Prepayment Premiums and Yield Maintenance Charges" in this Prospectus
Supplement. The Depositor makes no representation or warranty as to the
enforceability of the provision of any Mortgage Loan requiring the payment of a
Prepayment Premium or Yield Maintenance Charge or as to the collectability of
any Prepayment Premium or Yield Maintenance Charge. See "Risk Factors--Risks
Related to the Mortgage Loans--Limitations on Enforceability and Collectability
of Prepayment Premiums and Yield Maintenance Charges" in this Prospectus
Supplement and "Certain Legal Aspects of Mortgage Loans--Enforceability of
Prepayment and Late Payment Fees" in the Prospectus.
OPEN PERIODS. Where a Mortgage Loan provides for an Open Period, the Open
Period generally begins no more than three months prior to stated maturity (or,
in the case of an ARD Loan, prior to the related Anticipated Repayment Date).
The weighted average Open Period is one month.
DEFEASANCE. One hundred ninety-five (195) Mortgage Loans, representing
98.2% of the Initial Pool Balance, are Defeasance Loans. A "Defeasance Loan" is
a Mortgage Loan that, during specified periods and subject to certain
conditions, permits the related Borrower(s) to pledge to the holder of such
Mortgage Loan the requisite amount of direct, non-callable United States
government securities (the "Defeasance Collateral") and thereby obtain a release
of the related Mortgaged Property (or, in the case of a Cross-Collateralized
Mortgage Loan or group of Cross-Collateralized Mortgage Loans secured by
multiple Mortgaged Properties, one or more of such Mortgaged Properties). In
general, the Defeasance Collateral to be delivered in connection with the
defeasance of any Defeasance Loan must provide for a series of payments that--
- will be made prior, but as close as possible, to all successive Due Dates
through and including the scheduled maturity date (or, in the case of an
ARD Loan, the Anticipated Repayment Date) for such Mortgage Loan, and
- will, in the case of each such Due Date, be in an aggregate amount equal
to or greater than (with any excess to be returned to the related
Borrower) the Scheduled P&I Payment due on such date (or, in the case of
an ARD Loan for its Anticipated Repayment Date, the then remaining unpaid
principal balance of such Mortgage Loan).
If less than all of the Mortgaged Properties securing any Cross-Collateralized
Mortgage Loan or group of Cross-Collateralized Mortgage Loans are to be released
in connection with any such defeasance, the amount of the Defeasance Collateral
will be calculated based on the allocated loan amount for the Mortgaged Property
or Properties to be released and the portion of the Scheduled P&I Payments
attributable to such allocated loan amount.
In connection with any such defeasance, the related Borrower is required to
deliver a security agreement granting the Trust a first priority security
interest in the Defeasance Collateral, together with an opinion of counsel
confirming the first priority status of such security interest.
In no event is defeasance of any Defeasance Loan permitted prior to the
second anniversary of the Closing Date.
"DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" PROVISIONS. All of the Mortgage
Loans contain both a "due-on-sale" clause and a "due-on-encumbrance" clause. In
general, these clauses either permit the holder of the Mortgage to accelerate
the maturity of the related Mortgage Loan if the Borrower sells or otherwise
transfers or encumbers the related Mortgaged Property or prohibit the Borrower
from doing so without the consent of the holder of the Mortgage. See
"--Additional Mortgage Loan Information--
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Other Financing" in this Prospectus Supplement. Certain of the Mortgage Loans,
however, permit one or more of the following types of transfer:
- a transfer of the related Mortgaged Property if certain specified
conditions are satisfied or if the transfer is to a transferee reasonably
acceptable to the lender or a transferee that satisfies certain criteria;
- a transfer of the related Mortgaged Property to a person that is related
to the Borrower; or
- a transfer of certain beneficial interests in the Borrower.
See "Certain Legal Aspects of Mortgage Loans--Due-on-Sale Clauses in
Mortgage Loans" and "--Secondary Financing; Due-on-Encumbrance Provisions" in
the Prospectus.
CROSS-COLLATERALIZED MORTGAGE LOANS. The Mortgage Pool includes seventeen
(17) Mortgage Loans that are, either individually or through
cross-collateralization with other such Mortgage Loans, secured by more than one
Mortgaged Property. Certain of those seventeen (17) Mortgage Loans are secured
by multiple Mortgaged Properties as a result of cross-collateralization with
certain other such Mortgage Loans. For purposes of this Prospectus Supplement,
all of those seventeen (17) Mortgage Loans will constitute "Cross-Collateralized
Mortgage Loans". Certain of the Cross-Collateralized Mortgage Loans or
particular groups thereof provide for a full or partial termination of the
applicable cross-collateralization and/or a release of one or more of the
related Mortgaged Properties from the related mortgage lien(s), upon the
satisfaction of the conditions of one or more of the following conditions:
- the pay down of the Mortgage Loan in an amount equal to a specified
percentage (generally between 115% and 125%) of the portion of the
aggregate loan amount allocated to the Mortgaged Property or Mortgaged
Properties to be released.
- the satisfaction of certain property performance tests (such as an
occupancy test) for the remaining Mortgaged Properties; and/or
- the satisfaction of certain debt service coverage and loan-to-value tests
for the remaining Mortgaged Properties.
The Master Servicer or the Special Servicer, as the case may be, will
determine whether to enforce the cross-default and cross-collateralization
rights upon a default with respect to any of the Cross-Collateralized Mortgage
Loans. The Certificateholders will not have any right to participate in or
control any such determination.
NONRECOURSE NATURE OF MORTGAGE LOANS. You should consider each Mortgage
Loan to be a nonrecourse obligation of the related Borrower (I.E., in the event
of a payment default, the recourse of the Trust will be limited to the related
Mortgaged Property or Properties for satisfaction of the Borrower's
obligations). In those cases where the related Mortgage Loan documents permit
recourse to a Borrower or guarantor, the Depositor has not undertaken an
evaluation of the financial condition of any such person. None of the Mortgage
Loans is insured or guaranteed by any governmental entity or by any other
person.
CREDIT LEASE LOANS
Nineteen (19) Mortgage Loans, representing 2.9% of the Initial Pool Balance,
are Credit Lease Loans. Except in cases where no public rating has been issued,
each Credit Lease Loan is secured by a Mortgage on a Mortgaged Property that is
subject to a net lease with a Credit Tenant, which possesses, or whose parent or
affiliate that guarantees such tenant's obligations possesses, a public senior
unsecured long-term debt or similar rating of at least "BB+" (or the equivalent)
by a nationally recognized statistical rating organization.
Each Credit Lease has a primary lease term (the "Primary Term") that expires
on or after the scheduled final maturity date of the related Credit Lease Loan.
The Credit Lease Loans (exclusive of any
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Balloon Payment thereunder) are scheduled to be fully repaid from monthly rental
payments made over the Primary Term of the related Credit Lease. In connection
with each Credit Lease Loan that provides for a Balloon Payment, the Trust will
have the benefit of a residual value insurance policy that insures the payment
of the Balloon Payment to the extent that the related Mortgaged Property cannot
be sold for such amount at the stated maturity date because of changes in market
conditions. Certain of the Credit Leases give the Credit Tenant the right to
extend the term of the Credit Lease by one or more renewal periods after the end
of the Primary Term.
The amount of the monthly rental payments payable by each Credit Tenant
(plus, in the case of certain Credit Lease Loans, the amount in the debt service
reserve account, which will be drawn upon through the date of the termination to
cover any rent shortfalls) is equal to or greater than the scheduled payment of
all principal, interest and other amounts due each month on the related Credit
Lease Loan (exclusive of any Balloon Payment thereunder). In the case of each
Credit Lease Loan with a debt service reserve account, withdrawals of funds on
deposit in such account will be used to supplement monthly rental payments under
the related Credit Lease in an amount necessary to cover Scheduled P&I Payments
due under such Mortgage Loan during specific months during the term of such
Mortgage Loan.
The table below shows, for each Credit Tenant or related Credit Lease
Guarantor, the number and aggregate Cut-off Date Balance of the related Credit
Lease Loan or Loans, the rating of the Credit Tenant or related Credit Lease
Guarantor and the Credit Lease type.
CREDIT TENANT LEASE LOANS:
<TABLE>
<CAPTION>
NUMBER OF CUT-OFF DATE LEASE CREDIT RATING CREDIT RATING
TENANT/GUARANTOR LOANS BALANCE TYPE(1) (MOODY'S) (S&P)
- ---------------------------------------- ---------- ---------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Eckerd(2)............................... 5 $ 14,986,978 NN/NNN A3 A
CVS..................................... 6 $ 9,927,541 NN A3 A
Kmart................................... 2 $ 8,375,876 NNN Bal BB+
Rite Aid................................ 2 $ 3,927,320 NN/NNN Baal BBB+
Walgreen................................ 1 $ 3,918,245 NN Aa3 A+(3)
Amoco................................... 1 $ 972,782 NNN Aal AA+
Bed, Bath & Beyond...................... 1 $ 4,809,593 B NR BBB-(3)
Winn Dixie.............................. 1 $ 3,815,935 NNN P2(4) A2(4)
---------- ----------------
Total............................... 19 $ 50,734,270 -- -- --
</TABLE>
- ------------------------
Unless otherwise indicated, such ratings were the highest rating assigned to
long-term obligations of the applicable tenant or guarantor, as applicable, by
Moody's and S&P, respectively.
(1) "NNN" means triple net lease; "NN" means double net lease; and "B" means
bond-type lease.
(2) Based upon the rating of Eckerd's parent, JC Penney Corporation, although it
has made no explicit guaranty of Eckerd's obligations.
(3) Issuer Credit Rating.
(4) Commercial paper rating.
Each Credit Lease generally provides that the related Credit Tenant is
responsible for all real property taxes and assessments levied or assessed
against the related Mortgaged Property and, except as discussed below in the
case of certain of the Double Net Leases, for all charges for utility services,
insurance and other operating expenses incurred in connection with the operation
of the related Mortgaged Property.
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Generally, each Credit Lease Loan provides that if the Credit Tenant
defaults beyond applicable notice and grace periods in the performance of any
covenant or agreement in such Credit Lease (a "Credit Lease Default"), then the
holder of the related Mortgage may require the related Mortgagor either (i) to
terminate such Credit Lease or (ii) refrain from the exercise of any of its
rights thereunder. A Credit Lease Default will constitute a default under the
related Credit Lease Loan, although in certain cases, the related Borrower may
possess certain cure rights.
In addition, most of the Credit Leases permit the Credit Tenant, at its own
expense, and generally with the consent of the related Borrower, to make such
alterations or improvements on the related Mortgaged Property as the Credit
Tenant may deem necessary or desirable. Such actions, if undertaken by the
Tenant, will not affect the Credit Tenant's obligation under the Credit Lease.
Lease termination rights and rent abatement rights, if any, provided to
Credit Tenants in the Credit Leases may be divided into three categories: (i)
termination and abatement rights directly arising from certain casualty
occurrences or condemnations ("Casualty or Condemnation Rights"), (ii)
termination and abatement rights arising from a Borrower's default relating to
its obligations under a Credit Lease to perform required maintenance, repairs or
replacements with respect to the related Mortgaged Property ("Maintenance
Rights") and (iii) termination and abatement rights arising from a Borrower's
default in the performance of various other obligations under the Credit Lease,
including remediating environmental conditions not caused by the Credit Tenant,
enforcement of restrictive covenants affecting other property owned by the
Borrower in the area of the related Mortgaged Property and complying with laws
affecting such Mortgaged Property or common areas related to such Mortgaged
Property ("Additional Rights"). Certain Credit Leases ("Bond-Type Leases") do
not provide for Casualty or Condemnation Rights, Maintenance Rights or
Additional Rights, and the Credit Tenants thereunder are required, at their
expense, to maintain their related Mortgaged Property in good order and repair.
However, Credit Tenants under Bond-Type Leases may have the right to effectively
terminate their Credit Leases by acquiring the related Mortgage Loan. Other
Credit Leases provide for Casualty or Condemnation Rights and may provide for
Additional Rights ("Triple Net Leases"). The Credit Tenants under Triple Net
Leases are required, at their expense, to maintain their Mortgaged Properties,
including the roof and structure, in good order and repair. Additionally,
certain of the Credit Leases provide for Casualty or Condemnation Rights and
Maintenance Rights and may provide for Additional Rights ("Double Net Leases").
If the Borrower defaults in the performance of certain obligations under a
Triple Net Lease or a Double Net Lease and the Credit Tenant exercises its
Additional Rights or Maintenance Rights, there could be a disruption in the
stream of Monthly Rental Payments available to pay principal and interest to the
Credit Lease Loans. Generally, Additional Rights and Maintenance Rights are
mitigated by repair and maintenance reserves, debt service coverage ratios in
excess of 1.0x and, prior to the disbursement of such Mortgage Loan, receipt of
tenant estoppel certificates (I.E., a certificate of the Credit Tenant
confirming the non-existence of landlord default).
The Credit Lease with respect to one (1) Credit Lease Loan, representing
0.3% of the Initial Pool Balance, is a Bond-Type Lease, Credit Leases with
respect to nine (9) Credit Lease Loans, representing 1.6% of the Initial Pool
Balance, are Triple Net Leases, and Credit Leases with respect to nine (9)
Credit Lease Loans, representing 1.1% of the Initial Pool Balance, are Double
Net Leases.
At the end of the term of the Credit Leases, Credit Tenants are generally
obligated to surrender the related Mortgaged Properties in good order and in the
original condition received by the Credit Tenant, except for ordinary wear and
tear and repairs required to be performed by the Mortgagor.
In general, each Credit Tenant is obligated under its Credit Lease to make
all monthly rental payments directly to the owner of the related Credit Lease
Loan.
In connection with each Credit Lease that provides for Casualty or
Condemnation Rights, the Trust will have the benefit of a noncancelable Lease
Enhancement Policy issued by the Enhancement Insurer. A "Lease Enhancement
Policy" is an insurance policy that provides, subject to customary exclusions,
that in
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the event of a permitted termination by a Credit Tenant of its Credit Lease as a
result of a casualty or condemnation, the Enhancement Insurer will pay to the
Master Servicer on behalf of the Trustee the "loss of rents" (that is, a lump
sum payment of all outstanding principal plus, subject to the limitation below,
accrued interest on the Credit Lease Loan). The Enhancement Insurer is not
required to pay interest for a period greater than 75 days past the date of the
exercise of a Casualty or Condemnation Right. The "Enhancement Insurer" is Chubb
Custom Insurance Company which, as of the Cut-off Date, had a financial strength
rating of "AAA" from Standard & Poors Ratings Services ("S&P"). If the Credit
Lease permits the Credit Tenant to abate all or a portion of the rent in the
event of a partial condemnation, the "loss of rents" will be an amount equal to
the portion of any monthly rental payments not made by such Credit Tenant for
the period from the date the abatement commences until the earlier of the date
the abatement ceases or the expiration date of the initial term of such Credit
Lease. The Enhancement Insurer is not required to pay amounts due under any
Credit Lease Loan other than principal and, subject to the limitation above,
accrued interest. Accordingly, it is not required to pay any Prepayment Premium
or Yield Maintenance Charge due thereunder or any amounts the Borrower is
obligated to pay thereunder to reimburse the Master Servicer or the Trustee for
outstanding servicing advances.
Each Lease Enhancement Policy contains certain exclusions from coverage,
including loss arising from
damage or destruction directly or indirectly caused by war, insurrection,
rebellion, revolution, usurped power, pollutants or radioactive matter, or from
a taking (other than by condemnation).
The Mortgage Loans which are Credit Lease Loans are indicated on Annex A-1
to this Prospectus Supplement by the designation "CTL" in the property type
column.
ASSESSMENTS OF PROPERTY CONDITION
PROPERTY INSPECTIONS. All of the Mortgaged Properties were inspected in
connection with the origination or acquisition of the related Mortgaged Loans to
assess their general condition. No inspection revealed any patent structural
deficiency or any deferred maintenance considered by the Depositor to be
material and adverse to the interests of the Holders of the Offered Certificates
and for which adequate reserves have not been established.
APPRAISALS. The Mortgaged Properties securing all but two of the Mortgage
Loans were appraised by a state certified appraiser or an appraiser belonging to
the Appraisal Institute, and such appraisals were conducted in accordance with
the Uniform Standards of Professional Appraisal Practices. In general, the
appraisal for each such Mortgaged Property or a separate letter contains a
statement by the appraiser stating that the guidelines in Title XI of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA")
were followed in preparing such appraisal. None of the Depositor, either
Underwriter or the Originator has independently verified the accuracy of such
statement. The primary purpose of each such appraisal was to provide an opinion
of the fair market value of the related Mortgaged Property. There can be no
assurance that another appraiser would have arrived at the same opinion of
value. The resulting "Appraised Values" are shown on Annex A-1 to this
Prospectus Supplement. The "Appraised Values" for the Mortgage Loans identified
in this Prospectus Supplement as the Century City Shopping Center Loan and the
Woodland Hills Mall Loan are, in each case, based on the price paid by the
related Borrower to recently acquire the related Mortgaged Property.
ENVIRONMENTAL ASSESSMENTS. A "Phase I" environmental site assessment was
performed with respect to all the Mortgaged Properties in connection with the
origination of the related Mortgage Loans. In certain cases, additional
environmental testing, as recommended by such "Phase I" assessment, was
performed. In each case where environmental assessments recommended remediation,
the originator determined that the necessary remediation had been undertaken in
a satisfactory manner, was being undertaken in a satisfactory manner or would be
adequately addressed post-closing. In some instances, the Originator required
that reserves be established to cover the estimated cost of such remediation. An
environmental site assessment indicated the presence of an underground storage
tank at a Mortgaged Property for the
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Starwood Financial-Promus Loan. The Originator required the Starwood Financial
Borrower (as defined under "--Significant Mortgage Loans--Starwood
Financial-Promus Loan" below) to establish a reserve of approximately $414,575
for potential costs associated with the removal of such tank.
ENGINEERING ASSESSMENTS. In connection with the origination of each
Mortgage Loan (other than the Credit Lease Loans), a licensed engineer inspected
the related Mortgaged Property to assess the structure, exterior walls, roofing,
interior structure and mechanical and electrical systems. The resulting reports
indicated certain deferred maintenance items and/or recommended capital
improvements with respect to certain of the Mortgaged Properties. In such cases,
the related Borrowers were generally required to deposit with the lender an
amount equal to between 100% and 125% of the licensed engineer's estimated cost
of the recommended repairs, corrections or replacements to assure their
completion.
EARTHQUAKE ANALYSES. A seismic consultant performed an analysis on each of
the thirty-three Mortgaged Properties located in the State of California. This
was done in order to evaluate the structural and seismic condition of the
property and to assess, based primarily on statistical information, the maximum
probable or bounded loss for the property in the case of an earthquake. Each
Mortgaged Property that is located in California and secures any Mortgage Loan
described under "--Significant Mortgage Loans" is covered by earthquake
insurance as described in such section. With respect to the other Mortgaged
Properties located in California, the related seismic analysis reports concluded
that in the event of an earthquake, three of such Mortgaged Properties,
representing security for 1.2% of the Initial Pool Balance, is likely to suffer
a maximum probable or bounded loss in excess of 20% of the amount of the
estimated replacement cost of the improvements. Earthquake insurance is not
required to be maintained by a Borrower, except in the case of Mortgaged
Properties located in the state of California or in "Seismic Zones 3 or 4" where
either (i) a seismic assessment revealed a maximum probable or bounded loss in
excess of 20% of the amount of the estimated replacement cost of the
improvements or (ii) the related Mortgage Loan has a Cut-off Date Balance in
excess of $15 million. In certain cases where earthquake insurance was obtained
with respect to a Mortgaged Property, owned by a Borrower sponsored by a
publicly-held entity, such Mortgaged Property may be covered under a blanket
policy which also covers other Mortgaged Properties and/or other properties not
securing the Mortgage Loans. As a result of aggregate and per occurrence limits
under any such blanket policy, losses at other properties covered thereby may
reduce the amount of insurance coverage with respect to a Mortgaged Property
covered thereby.
ADDITIONAL MORTGAGE LOAN INFORMATION
DELINQUENCIES. No Mortgage Loan will be as of the Cut-off Date, or has been
at any time during the 12-month period preceding the Cut-off Date, 30 days or
more delinquent in respect of any Scheduled P&I Payment.
TENANTS. All of the Mortgaged Properties securing Credit Lease Loans, as
well as 15 other Mortgaged Properties (which fifteen (15) other Mortgaged
Properties together represent security for 3.1% of the Initial Pool Balance),
are leased to a single tenant. See Annex A-1 to this Prospectus Supplement.
Two of the Multifamily Rental Properties have material concentrations of
student tenants.
OTHER FINANCING. While all of the Mortgage Loans either (i) prohibit the
related Borrower from encumbering the Mortgaged Property with additional secured
debt or (ii) require the consent of the holder of the first lien prior to so
encumbering such property. A violation of such prohibition may not become
evident until the related Mortgage Loan otherwise defaults. See "Certain Legal
Aspects of Mortgage Loans--Secondary Financing; Due-On-Encumbrance Provisions"
in the Prospectus. Furthermore, certain of the Mortgage Loans permit, and
certain Borrowers have incurred, additional indebtedness for operating costs or
similar purposes.
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Owners of Borrowers are generally prohibited from incurring indebtedness
that is secured by their ownership interests in such Borrowers. With respect to
one (1) Mortgage Loan, representing 0.7% of the Initial Pool Balance, the owners
of the related Borrower were known to have incurred such indebtedness as of the
origination date of the related Mortgage Loan.
The Depositor has not been able to confirm the existence of any other debt
of the respective Borrowers.
ZONING AND BUILDING CODE COMPLIANCE. The Originator examined whether the
use and operation of the related Mortgaged Properties were in material
compliance with zoning, land-use, environmental, building, fire and health
ordinances, rules, regulations and orders applicable to such Mortgaged
Properties at the time of origination. The Originator may have considered legal
opinions, certifications from government officials, representations by the
related Borrower or property condition assessments undertaken by independent
licensed engineers in assessing compliance. The Depositor does not believe that
there are any material existing violations with respect to the Mortgaged
Properties.
In some cases, the use, operation or structure of a Mortgaged Property
constitutes a permitted nonconforming use or structure. Generally in such cases,
the improvements on such Mortgaged Property may not be rebuilt to their current
state in the event that such improvements are materially damaged or destroyed.
Where a Mortgaged Property constitutes a permitted nonconforming use or
structure and the improvements thereon may not be rebuilt in the event of a
major casualty, the Originator--
- determined that any major casualty that would prevent rebuilding has a
sufficiently remote likelihood of occurring;
- determined that casualty insurance proceeds would be available in an
amount sufficient to pay off the related Mortgage Loan in full;
- determined that the Mortgaged Property, if permitted to be repaired or
restored in conformity with current law, would constitute adequate
security for the related Mortgage Loan; and/or
- required a corresponding endorsement to the title insurance policy.
There is no assurance, however, that the conclusions of the Originator in this
regard are correct.
HAZARD, LIABILITY AND OTHER INSURANCE. Each Mortgage generally requires the
related Borrower to maintain the following insurance coverage--
- Hazard insurance in an amount that generally is (subject to a customary
deductible) at least equal to the lesser of the outstanding principal
balance of the related Mortgaged Loan and 100% of the full insurable
replacement cost of the improvements located on the such Mortgaged
Property. In general, the standard form of hazard insurance policy covers
physical damage to, or destruction of, the improvements on a Mortgaged
Property by fire, lightning, explosion, smoke, windstorm and hail, riot or
strike and civil commotion, subject to the conditions and exclusions set
forth in each policy. However, certain Credit Lease Loans permit the
related Credit Tenant to "self-insure".
- If any portion of a Mortgaged Property was in an area identified in the
Federal Register by the Flood Emergency Management Agency as having
special flood hazards, flood insurance meeting the requirements of the
Federal Insurance Administration guidelines, if available, in an amount
that is not less than the least of: (i) the outstanding principal balance
of such Mortgage Loan; (ii) the full insurable value of such Mortgaged
Property; (iii) the maximum amount of insurance available under the
National Flood Insurance Act of 1968, as amended; and (iv) 100% of the
replacement cost of the improvements located on the related Mortgaged
Property.
- Comprehensive general liability insurance against claims for personal and
bodily injury, death or property damage occurring on, in or about such
Mortgaged Property, in an amount customarily required by institutional
lenders.
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- Business interruption or loss of rents insurance in an amount not less
than the projected rental income or revenue from such Mortgaged Property
for a period of at least six months.
In general, the Mortgaged Properties (including those located in California)
are not insured against earthquake risks. However, earthquake insurance was
required to be in place at the time or origination for each of the Mortgaged
Properties located in California or in "Seismic Zones 3 or 4" as to which a
seismic study established a maximum probable or bounded loss from an earthquake
to be greater than 20% of the amount of the estimated replacement cost of the
improvements or as to which the Cut-off Date Balance of the related Mortgage
Loan is greater than $15 million. In certain such cases where earthquake
insurance was obtained with respect to a Mortgaged Property owned by a Borrower
sponsored by a publicly-held entity, such Mortgaged Property may be covered
under a blanket policy which also covers other Mortgaged Properties and/or other
properties not securing the Mortgage Loans. As a result of aggregate and per
occurrence limits under any such blanket policy, losses at other properties
covered thereby may reduce the amount of insurance coverage with respect to a
Mortgaged Property covered thereby.
MORTGAGE POOL CHARACTERISTICS
Set forth below is certain information regarding the characteristics of the
Mortgage Loans and Mortgaged Properties, presented in a tabular format. In
addition, a detailed presentation of certain characteristics of the Mortgage
Loans and Mortgaged Properties is shown, both on a loan-by-loan/
property-by-property basis and in tabular format, on Annex A-1, Annex A-2 and
Annex A-3 to this Prospectus Supplement. Unless otherwise indicated, such
information is presented as of the Cut-off Date. The statistics in the tables
and schedules on Annex A-1, Annex A-2 and Annex A-3 to this Prospectus
Supplement were derived, in many cases, from information and operating
statements furnished by or on behalf of the respective Borrowers. Such
information and operating statements were generally unaudited and have not been
independently verified by the Depositor or the Underwriters.
For purposes of this Prospectus Supplement, including the tables and
schedules on Annex A-1, Annex A-2 and Annex A-3 to this Prospectus Supplement,
the indicated terms have the following meanings:
1. "Debt Service Coverage Ratio", "DSC Ratio", "Cut-off Date DSC Ratio" or "UW
NCF DSCR" means, with respect to any Mortgage Loan (other than a Credit Lease
Loan), the ratio of (a) "Net Cash Flow" produced by the related Mortgaged
Property to (b) the annualized amount of debt service that will be payable under
that Mortgage Loan commencing after the origination date. Debt Service Coverage
Ratios are not presented in this Prospectus Supplement for Credit Lease Loans
because such Mortgage Loans were, in large part, underwritten based upon the
Credit Tenant. In connection therewith, such ratios would be expected to be
lower than for the other Mortgage Loans. The following discussion does not apply
to Credit Lease Loans or the related Mortgaged Properties.
In general, the "Net Cash Flow" for any Mortgaged Property is (x) the
revenue derived from the use and operation of such Mortgaged Property, less (y)
operating expenses (such as utilities, administrative expenses, repairs and
maintenance, tenant improvement costs, leasing commissions, management fees and
advertising), fixed expenses (such as insurance, real estate taxes and ground
lease payments (if applicable)) and replacement reserves and an allowance for
vacancies and credit losses. Net Cash Flow does not reflect interest expenses
and non-cash items such as depreciation and amortization, and generally does not
reflect capital expenditures.
In determining the Net Cash Flow for any Mortgaged Property, the Originator
relied on one or more of the following items supplied by the related Borrower.
In general, such items were not audited or otherwise confirmed by an independent
party.
- Rolling 12-month operating statements.
- Applicable year-to-date financial statements, if available.
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- Rent rolls that were current as of the date not earlier than six months
prior to the respective date of origination. In general, rent rolls were
used for Mortgaged Properties other than Hospitality Properties (each such
Mortgaged Property other than a Hospitality Property, a "Rental
Property").
In determining the "revenue" component of Net Cash Flow for each Rental
Property, the Originator generally relied on the most recent rent roll (as
applicable) supplied by the related Borrower. Where the actual vacancy shown
thereon and the market vacancy was less than 5.0%, the Originator normally
assumed a minimum of 5.0% vacancy in determining revenue from rents, except
that, in the case of certain anchored shopping centers and certain single tenant
properties (including all the Mortgaged Properties with Credit Tenants), space
occupied by such anchor or single tenants may have been disregarded in
performing the vacancy adjustment due to the length of the related leases or
creditworthiness of such tenants, in accordance with the Originator's
underwriting standards.
In determining rental revenue for Mortgaged Properties that constitute
multifamily, self storage and manufactured housing properties, the Originator
either reviewed rental revenue shown on the certified rolling 12-month operating
statements or annualized the rental revenue and reimbursement of expenses shown
on rent rolls or recent partial year operating statements with respect to the
prior one to twelve month periods.
For the other Rental Properties, the Originator generally annualized rental
revenue shown on the most recent certified rent roll (as applicable), after
applying the vacancy factor, without further regard to the terms (including
expiration dates) of the leases shown thereon. In the case of Hospitality
Properties, gross receipts were determined on the basis of historical operating
levels shown on the Borrower-supplied 12-month trailing operating statements.
In general, any non-recurring revenue items and non-property related revenue
were eliminated from the calculation except in the case of residential health
care facilities.
In determining the "expense" component of Net Cash Flow for each Mortgaged
Property, the Originator generally relied on full-year or year-to-date financial
statements, rolling 12-month operating statements and/or year-to-date financial
statements supplied by the related Borrower, except that--
- If tax or insurance expense information more current than that reflected
in the financial statements was available, the newer information was used.
- Property management fees were generally assumed to be 3% to 6% of
effective gross revenue (except with respect to Hospitality Properties,
where a minimum of 4% of gross receipts was assumed, and except with
respect to certain single-tenant Mortgaged Properties, where fees as low
as 1.5% of effective gross receipts were assumed).
- In general, assumptions were made with respect to the average amount of
reserves for leasing commissions, tenant improvement expenses and capital
expenditures.
- Expenses were generally assumed to include annual replacement reserves
equal to:
(i) in the case of Mortgaged Properties that constitute retail, office and
industrial/warehouse properties, not less than $0.04 and not more than
$0.55 per square foot net rentable commercial area;
(ii) in the case of Multifamily Rental Properties, not less than $175 or
more than $350 per residential unit per year, depending on the
condition of the property;
(iii) in the case of Hospitality Properties, not less than 4.0% of the gross
revenues received by the property owner on an ongoing basis;
(iv) in the case of Mortgaged Properties that constitute manufactured
housing communities, not less than $23.57 per pad per year; and
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(v) in the case of Mortgaged Properties that constitute self storage
facilities, not less than $0.13 or more than $0.15 per square foot per
year. In addition, in some instances, the Originator recharacterized as
capital expenditures those items reported by Borrowers as operating
expenses (thus increasing "net cash flow") where the Originator
determined appropriate.]
2. "Cut-off Date Loan-to-Value Ratio", "Cut-off Date LTV Ratio" or "Cut-off
Date LTV" means, with respect to any Mortgage Loan (other than a Credit Lease
Loan), the ratio, expressed as a percentage, of (a) the Cut-off Date Balance of
a Mortgage Loan to (b) the appraised value of the related Mortgaged Property as
shown on the most recent third-party appraisal thereof available to the
Depositor (or, in the case of the Century City Shopping Center Loan and the
Woodland Hills Mall Loan, based on a recent purchase price paid by the related
Borrower for the related Mortgaged Property). CUT-OFF DATE LOAN-TO-VALUE RATIOS
ARE NOT PRESENTED IN THIS PROSPECTUS SUPPLEMENT FOR CREDIT LEASE LOANS BECAUSE
SUCH MORTGAGE LOANS WERE, IN LARGE PART, UNDERWRITTEN BASED UPON THE CREDIT
TENANT. IN CONNECTION THEREWITH, SUCH RATIOS WOULD BE EXPECTED TO BE HIGHER THAN
FOR OTHER MORTGAGE LOANS.
3. "Maturity Loan-to-Value Ratio", "Maturity Date Loan-to-Value Ratio",
"Maturity LTV Ratio" or "Maturity Date LTV Ratio" means the ratio, with respect
to any Mortgage Loan (other than a Credit Lease Loan), expressed as a
percentage, of (a) the expected balance of a Balloon Loan on its scheduled
maturity date (prior to the payment of any Balloon Payment) or, in the case of
an ARD Loan, on the Anticipated Repayment Date to (b) the appraised value of the
Mortgaged Property as shown on the most recent third-party appraisal thereof
available to the Depositor (or, in the case of the Century City Shopping Center
Loan and the Woodland Hills Mall Loan, based on a recent purchase price paid by
the related Borrower for the related Mortgaged Property). MATURITY LOAN-TO-VALUE
RATIOS ARE NOT PRESENTED IN THIS PROSPECTUS SUPPLEMENT WITH RESPECT TO THE
CREDIT LEASE LOANS.
4. "Loan per Unit", "Loan per Pad" or "Loan per Room" means, with respect to
each Mortgage Loan secured by a lien on a Multifamily Rental Property, a
Mortgaged Property that constitutes a manufactured housing community or a
Hospitality Property, respectively, the Cut-off Date Balance of such Mortgage
Loan divided by the number of dwelling units, pads or guest rooms, respectively,
at or on the related Mortgaged Property.
5. "Loan per Sq. Ft." means, with respect to each Mortgage Loan secured by a
lien on a Mortgaged Property that constitutes a retail, industrial/warehouse,
self storage or office property, the Cut-off Date Balance of such Mortgage Loan
divided by the net rentable square foot area of the related Mortgaged Property.
6. "Year Built/Renovated" means the year that a Mortgaged Property was
originally constructed or, if applicable, most recently renovated in a
substantial manner. With respect to any Mortgaged Property which was constructed
in phases, "Year Built/Renovated" refers to the year that the first phase was
originally constructed.
7. "Weighted Average" or "wtd. avg." means averages weighted on the basis of
the Cut-off Date Balances of the related Mortgage Loans.
8. "Underwriting Reserves" means estimated annual capital costs, as used by the
Originator in determining Net Cash Flow.
9. "Administrative Cost Rate" means, with respect to each Mortgage Loan, the
sum of the Master Servicing Fee Rate for such Mortgage Loan and the per annum
rate at which the monthly fee of the Trustee is calculated.
10. "Original Amortization Term" means, with respect to each Mortgage Loan, the
number of months from origination to the month in which such Mortgage Loan would
fully amortize in accordance with such loan's amortization schedule, without
regard to any Balloon Payment, if any, due on such Mortgage Loan and assuming no
prepayments of principal and no defaults.
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11. "Remaining Amortization Term" means, with respect to each Mortgage Loan,
the number of months remaining from the Cut-off Date to the month in which such
Mortgage Loan would fully amortize in accordance with such loan's amortization
schedule, without regard to any Balloon Payment, if any, due on such Mortgage
Loan and assuming no prepayments of principal and no defaults.
12. The following abbreviations relating to prepayment provisions have the
indicated meanings.
- "L(V)" means, with respect to any Mortgage Loan, a period of V years
during which prepayments of principal are prohibited.
- "1%(W)" means with respect to any Mortgage Loan, a period of W years
during which prepayments of principal are permitted, but must be
accompanied by a Prepayment Premium equal to 1.0% of the principal amount
prepaid.
- "YM1% (X)" means, with respect to any Mortgage Loan, a period of X years
during which prepayments of principal are permitted, but must be
accompanied by an amount that constitutes the greater of a Yield
Maintenance Charge and 1.0% of the principal amount prepaid.
- "O(Z)" means, with respect to any Mortgage Loan, a period of Z years
during which prepayments of principal are permitted without the payment of
any Prepayment Premium or Yield Maintenance Charge and no defeasance can
be required.
13. "D" means each applicable Mortgage Loan, permits the related Borrower to
pledge Defeasance Collateral to the holder of such Mortgage Loan.
14. "Occupancy Percentage" or "Occupancy Rate" means, with respect to any
Mortgaged Property, references to--
- in the case of Mortgaged Properties that constitute multifamily rental
properties and manufactured housing communities, the percentage of rental
units and pads, respectively, that are rented as of the date of
determination,
- in the case of Mortgaged Properties that constitute office and retail
properties, the percentage of the net rentable square footage rented as of
the date of determination,
- in the case of self-storage facilities, either the percentage of the net
rentable square footage rented as of the date of determination or the
percentage of units rented as of the date of determination (depending on
Borrower reporting),
- In the case of Hospitality Properties, the percentage of available rooms
occupied as of the trailing twelve-month (such period ending on the date
of determination).
15. "Remaining Term to Maturity" means, with respect to each Mortgage Loan, the
number of months remaining to maturity (or, in the case of an ARD Loan, to the
Anticipated Repayment Date).
16. "Original Term to Maturity" means, with respect to each Mortgage Loan, the
number of months from origination to maturity (or, in the case of an ARD Loan,
to the Anticipated Repayment Date).
17. "Capital Imp. Reserve" means funded reserves escrowed for repairs,
replacements and corrections of issues outlined in the engineering reports.
18. "Replacement Reserve" means funded reserves escrowed for ongoing items such
as repairs and replacements, including, in the case of Hospitality Properties,
reserves for furniture, fixtures and equipment. In certain cases, however, the
reserve will be subject to a maximum amount, and once such maximum amount is
reached, such reserve will not thereafter be funded, except to the extent it is
drawn upon.
19. "TI/LC Reserve" means funded reserves escrowed for tenant improvement
allowances and leasing commissions. In certain cases, however, the reserve will
be subject to a maximum amount, and once such
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maximum amount is reached, such reserve will not thereafter be funded, except to
the extent it is drawn upon.
20. "Original Interest-Only Period" means, with respect to any Mortgage Loan,
the period, if any, following the related origination date during which
scheduled payments of interest only are required.
21. "Remaining Interest-Only Period" means, with respect to any Mortgage Loan,
the period, if any, following the Cut-off Date during which scheduled payments
of interest only are required.
22. "Shadow" means, with respect to any Retail Property, a store or other
business that materially affects the draw of customers to such Retail Property,
but which may be located at a nearby property or on a portion of such Retail
Property that does not constitute security for the related Mortgage Loan.
23. "NAP" means that with respect to a particular category of data that such
data is not applicable.
24. "NAV" means that with respect to a particular category of data, such data
is not available.
The sum in any column of any of the following tables may not equal the
indicated total due to rounding.
THE DSC RATIO AND THE CUT-OFF DATE LTV RATIO CALCULATIONS FOR THE MORTGAGE
LOANS ARE EXCLUSIVE OF CREDIT LEASE LOANS BECAUSE THE CREDIT LEASE LOANS WERE
ORIGINATED PRIMARILY ON THE BASIS OF THE CREDITWORTHINESS OF THE RELATED CREDIT
TENANTS OR GUARANTORS.
SIGNIFICANT MORTGAGE LOANS
CENTURY CITY SHOPPING CENTER LOAN
THE LOAN. The "Century City Shopping Center Loan" has a Cut-off Date
Balance of $160,000,000, representing 9.2% of the Initial Pool Balance, and is
secured by a first priority Mortgage encumbering the fee simple interest in a
regional mall containing 784,002 square feet of gross leasable area ("GLA")
known as the Century City Shopping Center & Marketplace (the "Century City
Shopping Center Property") located in the Century City submarket of Los Angeles,
California. The Borrower under the Century City Shopping Center Loan (the
"Century City Shopping Center Borrower") is a special purpose entity jointly
owned by Urban Shopping Centers, Inc. ("Urban") and Eagle Investment Management
Company, an institutional investor advised by Lend Lease Real Estate Investment,
Inc. Urban, headquartered in Chicago, Illinois, is a fully integrated developer,
owner and manager of super-regional and regional shopping centers in major
markets throughout the United States. Urban owns interests in several of the
nation's premier shopping centers including Water Tower Place (Chicago,
Illinois), Copley Place (Boston, Massachusetts) and San Francisco Shopping
Centre (San Francisco, California). Through its affiliate, Urban Retail
Properties Co., Urban is one of the largest U.S. retail property managers with
over 50 million square feet of retail space under management in 25 states and
Washington, D.C. Urban is a publicly traded real estate investment trust, and
its shares are listed on the New York Stock Exchange under the symbol "URB".
The Century City Shopping Center Loan is an ARD Loan with an Anticipated
Repayment Date of June 1, 2009 and a stated maturity of June 1, 2029. The
Century City Shopping Center Loan will accrue interest at a fixed Mortgage Rate
anticipated to be 7.25% per annum until the Anticipated Repayment Date, and
calculations in this Prospectus Supplement are based on a 7.25% per annum
Mortgage Rate for the Century City Shopping Center Loan. The Century City
Shopping Center Loan requires monthly payments of interest only during the first
year of the loan. Beginning July 1, 2000, the Century City Shopping Center Loan
requires monthly payments of interest and principal based on an amortization
schedule of 30 years. From and after the Anticipated Repayment Date, the Revised
Rate will equal the greater of (x) 5.00% plus the initial Mortgage Rate, and (y)
5.00% plus the then applicable United States Treasury rate. Any Additional
Interest accrued on the Century City Shopping Center Loan will be deferred and
added to the outstanding principal balance and will earn interest at the Revised
Rate, to the extent permitted by applicable law. From and after the Anticipated
Repayment Date, the Century City Shopping
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Center Borrower must also apply, as available, funds deposited in a lockbox
account toward additional amortization of the outstanding principal balance.
The Century City Shopping Center Borrower is prohibited from voluntarily
prepaying the Century City Shopping Center Loan in whole or in part prior to the
Anticipated Repayment Date. From and after the Anticipated Repayment Date, the
Century City Shopping Center Loan may be voluntarily prepaid in whole or in part
without payment of any Prepayment Consideration. The Century City Shopping
Center Borrower has the right to defease the entire Century City Shopping Center
Loan after the second anniversary of the Closing Date.
THE PROPERTY. The Century City Shopping Center Property is a 784,002 square
foot regional mall located in the master-planned development known as Century
City reflecting its location on the former back-lot of 20th Century Fox Film
Studios. Approximately 10 miles west of downtown Los Angeles, Century City is a
mixed-use development that includes not only the Century City Shopping Center
Property, but also 30 office buildings containing over 9.6 million square feet
of space, 1,200 upper-end residential units and two luxury hotels. The Century
City Shopping Center Property is made up of twelve single and multi-level
interconnected buildings designed as a European-style, open-air marketplace
containing a blend of high-end shopping, restaurants and entertainment. The
mall's anchors are Bloomingdale's and Macy's, which occupy 357,000 square feet
or 45.5% of the total GLA. The mall also includes a 50,000 square foot 14-screen
movie theater leased to AMC Cinema. In-line mall space, including Gelson's
Market, a gourmet food market with 37,140 square feet, totals 377,002 square
feet or 48.1% of the GLA and includes national retailers such as Crate & Barrel,
Restoration Hardware, Ann Taylor and Brooks Brothers, Tiffany's and CK/Calvin
Klein. Originally developed in 1963, the property has been expanded several
times including the 1974 addition of the Macy's building. The movie theater was
added in 1985 and the restaurant marketplace in 1987, and an additional
expansion of approximately 12,000 square feet was completed in 1993. Situated on
an 18.7 acre site, the Century City Shopping Center Property is built atop a
two-level parking garage with 2,943 spaces. Another 595 spaces are leased on a
lot to the south of the property bringing total spaces to 3,538 for a total
parking ratio of 4.5 spaces per 1,000 square feet. As of April 30, 1999, in-line
occupancy at the Century City Shopping Center Property was 91.9% and overall
mall occupancy was 96.1%.
An overview of the center including its anchor tenants and the non-anchor
space as well as other summary information regarding the Century City Shopping
Center Property follow in the charts below.
GLA OVERVIEW OF THE CENTURY CITY SHOPPING CENTER PROPERTY (1)
<TABLE>
<CAPTION>
ANCHOR LEASE
STORE SQUARE FEET AS % OF GLA (2) EXPIRATION
- ---------------------------------------------------------- ----------- ----------------- ----------------------
<S> <C> <C> <C>
Bloomingdale's............................................ 222,000 28.3% 11/7/11
Macy's.................................................... 135,000 17.2% 10/31/11
----------- -----
TOTAL ANCHOR SPACE........................................ 357,000 45.5%
Gelson's Market........................................... 37,140 4.7%
Additional In-Line Mall Shops............................. 339,862 43.3%
----------- -----
TOTAL IN-LINE MALL SPACE.................................. 377,002 48.1%
AMC Cinema................................................ 50,000 6.4%
----------- -----
TOTAL..................................................... 784,002 100.0%
</TABLE>
- ------------------------
(1) As of April 30, 1999 rent roll.
(2) May not sum to total due to rounding.
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TEN LARGEST IN-LINE TENANTS AT THE CENTURY CITY SHOPPING CENTER PROPERTY (1)(2)
<TABLE>
<CAPTION>
LEASE EXPIRATION
TENANT SQUARE FEET DATE
- ------------------------------------------------------------------------------ ----------- --------------------
<S> <C> <C>
AMC Cinema.................................................................... 50,000 9/30/07
Gelson's Market............................................................... 37,140 12/31/04
Compagnie International....................................................... 17,619 1/31/05
Crate & Barrel................................................................ 15,400 6/30/03
Restoration Hardware.......................................................... 12,877 1/31/10
Ann Taylor.................................................................... 12,081 11/17/08
Brooks Brothers............................................................... 10,713 3/31/07
Brentano's.................................................................... 8,975 1/31/02
Houston's..................................................................... 8,775 10/31/06
The Disney Store.............................................................. 7,737 1/31/07
-----------
TOTAL (2)..................................................................... 181,317
</TABLE>
- ------------------------
(1) As of April 30, 1999 rent roll.
(2) Includes the AMC Cinema space.
(3) Total represents 42.5% of Total In-Line Mall Space and AMC Cinema space.
LEASE EXPIRATION SCHEDULE FOR
IN-LINE TENANTS AT THE CENTURY CITY SHOPPING CENTER PROPERTY (1)(2)
<TABLE>
<CAPTION>
EXPIRING SQUARE AS % OF TOTAL
YEAR FEET IN-LINE GLA (3)
- ---------------------------------------------------------------------- ------------------- ---------------------
<S> <C> <C>
1999, including month-to-month leases................................. 9,415 2.2%
2000.................................................................. 23,023 5.4%
2001.................................................................. 11,499 2.7%
2002.................................................................. 27,025 6.3%
2003.................................................................. 57,241 13.4%
2004.................................................................. 60,288 14.1%
2005.................................................................. 30,752 7.2%
2006.................................................................. 24,672 5.8%
2007.................................................................. 100,759 23.6%
2008.................................................................. 26,473 6.2%
2009 & beyond......................................................... 25,567 6.0%
Vacant................................................................ 30,288 7.1%
------- -----
TOTAL................................................................. 427,002 100.0%
5 Year Avg. Rollover.................................................. 25,641 6.0%
7 Year Avg. Rollover.................................................. 31,320 7.3%
</TABLE>
- ------------------------
(1) As of April 30, 1999 rent roll.
(2) Includes the AMC Cinema space.
(3) May not sum to total due to rounding.
IN-LINE MALL SALES AND OCCUPANCY COSTS. In-line mall sales for 1998 were
reported to be $588 per square foot (based on same store sales). As of April 30,
1999, in-line tenant occupancy costs as a percent of sales (based on an analysis
of reported base rent and reimbursements at the Century City Shopping Center
Property) were 15.2% (excluding Gelson's Market).
PROPERTY MANAGEMENT. The Century City Shopping Center Property is managed
by Urban Retail Properties Co. ("Urban Retail"), an affiliate of the Century
City Shopping Center Borrower. The
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management agreement can be terminated by the lender upon, among other
occurrences, an event of default under the loan documents. The management fee is
subordinate to other payments under the loan documents.
VALUE. The Century City Shopping Center Loan has a Cut-off Date LTV Ratio
of 58.8% based on the May, 1999 purchase price of $272,000,000.
DSC RATIO. The Century City Shopping Center Loan has a DSC Ratio of 1.42x.
LOCKBOX. The Century City Shopping Center Borrower must establish a lockbox
account and instruct the tenants of the Century City Shopping Center Property to
pay all rents directly to the lockbox account upon the occurrence and
continuance of one or more of the following events: (1) an event of default
under the Century City Shopping Center Loan, (2) the Century City Shopping
Center Borrower's failure to repay the Century City Shopping Center Loan in full
on or before the Anticipated Repayment Date, or (3) the current debt service
coverage ratio of the Century City Shopping Center Loan (calculated in
accordance with the related loan documents) falling and remaining below 1.25x.
SEISMIC ASSESSMENT. The Century City Shopping Center Property has a seismic
risk assessment with a probable maximum loss of 13.0% of the amount of the
estimated replacement cost of the improvements. The property has the benefit of
an earthquake insurance policy.
STARWOOD FINANCIAL-PROMUS LOAN
THE LOAN. The "Starwood Financial-Promus Loan" has a Cut-off Date Balance
of $154,954,659, representing 8.9% of the Initial Pool Balance, and is secured
by first priority Mortgages encumbering the fee simple and/or leasehold
interests in sixteen full and limited service hotels and assignments of leases
and rents with respect to those sixteen hotels and one other hotel
(collectively, the "Starwood Financial-Promus Properties"). The Starwood
Financial-Promus Properties are leased to a subsidiary of Promus Hotel
Corporation ("Promus"), under a triple net lease, guaranteed by Promus, that
expires on December 31, 2020 (the "Promus Master Lease") and which has been
assigned as additional security for the Starwood Financial-Promus Loan. Promus'
unsecured, long-term debt is rated "Baa2" by Moody's and "BBB+" by S&P. Promus
manages and operates the Starwood Financial-Promus Properties under the
DoubleTree Hotel or Red Lion Inn flags, and the Starwood Financial-Promus
Properties are located in seven western states including Oregon, Washington and
California. The single promissory note evidencing the Starwood Financial-Promus
Loan was entered into by a limited partnership (the "Starwood Financial
Borrower"), which is a special purpose entity owned and controlled by Starwood
Financial Trust ("Starwood Trust"). Starwood Trust is the nation's largest
commercial mortgage REIT, and is a publicly traded company whose shares are
listed on the American Stock Exchange under the symbol of "APT". Promus is one
of the world's leading lodging companies. Promus operates, franchises or owns
over 1,325 hotel properties with more than 192,000 rooms throughout the United
States, Canada, Mexico and Latin America. In addition to the DoubleTree Hotel
and Red Lion Inn flags, Promus operates hotels under several other flags
including DoubleTree Inn, Embassy Suites, Hampton Inn and Homewood Suites.
Promus is a publicly traded company whose shares are listed on the New York
Stock Exchange under the symbol "PRH".
The Starwood Financial-Promus Loan is an ARD Loan with an Anticipated
Repayment Date of April 1, 2009 and a stated maturity of December 31, 2020.
Prior to the Anticipated Repayment Date, the Starwood Financial Borrower must
make monthly payments of principal and interest based on a fixed Mortgage Rate
of 7.438% per annum and an amortization schedule of approximately 21 years and
10 months, which is co-terminus with the expiration of the Promus Master Lease.
From and after the Anticipated Repayment Date, the Revised Rate will equal the
greater of (x) 11.438% per annum, and (y) 4.00% over the then applicable United
States Treasury rate. Any Additional Interest accrued on the Starwood
Financial-Promus Loan will be deferred and added to the outstanding principal
balance and will
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earn interest at the Revised Rate, to the extent permitted by applicable law.
After the Anticipated Repayment Date, the Starwood Financial-Promus Borrower
must also apply net cash flow after debt service toward additional amortization
of principal.
The Starwood Financial Borrower is prohibited from voluntarily prepaying the
Starwood Financial-Promus Loan until 45 days prior to the Anticipated Repayment
Date. After the Anticipated Repayment Date, the Starwood Financial-Promus Loan
may be voluntarily prepaid in whole or in part without payment of any Prepayment
Consideration. The Starwood Financial Borrower has the right to defease all of
the Starwood Financial-Promus Loan, or a portion of the Starwood
Financial-Promus Loan attributable to an individual Starwood Financial-Promus
Property, upon posting defeasance collateral pursuant to a schedule set forth in
the Starwood Financial-Promus Loan documents, beginning after the second
anniversary of the Closing Date.
THE PROPERTIES. The Starwood Financial-Promus Properties are mid-scale,
full and limited service hotels built between 1950 and 1990 containing a total
of 3,988 rooms. The seventeen hotels are located in the western United States in
the states of Oregon, Washington, California, Colorado, Utah, Idaho and Montana.
The individual hotels range in size from 75 rooms to 850 rooms, and 11 of the
hotels operate under the DoubleTree Hotel flag while 6 of the hotels operate
under the Red Lion Inn flag. For the 12 months ended December 31, 1998, the
Starwood Financial-Promus Properties achieved an overall weighted average
occupancy of 71.6% and an overall average daily rate of $83.39.
The following chart summarizes certain information regarding the Starwood
Financial-Promus Properties.
OVERVIEW OF THE STARWOOD FINANCIAL-PROMUS PROPERTIES
RANKED BY APPRAISED VALUE
<TABLE>
<CAPTION>
NO. OF YEAR BUILT/ AVG. ADR
PROPERTY LOCATION ROOMS RENOVATED OCCUPANCY(1) (1) (2)
- ------------------------- ------------------------- ----------- --------------------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
DoubleTree Hotel Seattle Seattle, WA
Airport................ 850 1968, 1971-1980/1995-1996 76.7% $ 95.01
DoubleTree Hotel Salt Salt Lake City, UT
Lake City.............. 496 1984/1992-1997 79.6% $ 108.62
DoubleTree Hotel San San Diego, CA
Diego.................. 300 1990 81.1% $ 105.73
Red Lion's Sacramento Sacramento, CA
Inn.................... 376 1958, 1979-1980/1995 80.3% $ 69.76
DoubleTree Hotel Sonoma Rohnert Park, CA
County................. 245 1987 64.9% $ 94.68
DoubleTree Hotel Durango, CO
Durango................ 159 1986/1996 66.8% $ 97.32
DoubleTree Hotel at the Vancouver, WA
Quay................... 160 1950, 1980s 65.2% $ 77.84
DoubleTree Hotel Boise... Boise, ID 182 1960/1992-1994 78.7% $ 56.17
DoubleTree Hotel Medford, OR
Medford................ 186 1960-1970s/1993 63.8% $ 65.36
Red Lion Inn Eugene...... Eugene, OR 137 1965/1993 59.3% $ 63.31
Red Lion Inn Coos Bay.... Coos Bay, OR 143 1950s, 1970s/1973 65.3% $ 58.52
DoubleTree Hotel Kelso... Kelso, WA 162 1970, 1977 53.9% $ 65.63
DoubleTree Hotel Pendleton, OR
Pendleton.............. 168 1973, 1978/1992-1993 59.2% $ 62.86
DoubleTree Hotel Wenatchee, WA
Wenatchee.............. 149 1973, 1976/1995 74.8% $ 49.38
Red Lion Inn Missoula.... Missoula, MT 76 1972/1993 74.1% $ 48.13
Red Lion Inn Astoria..... Astoria, OR 124 1967, 1972, 1977/1997-1998 46.9% $ 67.90
Red Lion Inn Bend........ Bend, OR 75 1971/1994 61.1% $ 55.32
-----
TOTALS/WEIGHTED AVG...... 3,988 71.6% $ 83.39
<CAPTION>
REVPAR APPRAISED
PROPERTY (1) (3) VALUE
- ------------------------- --------- -------------
<S> <C> <C>
DoubleTree Hotel Seattle
Airport................ $ 72.86 $ 101,200,000
DoubleTree Hotel Salt
Lake City.............. $ 86.41 $ 68,000,000
DoubleTree Hotel San
Diego.................. $ 85.77 $ 42,000,000
Red Lion's Sacramento
Inn.................... $ 56.04 $ 27,100,000
DoubleTree Hotel Sonoma
County................. $ 61.42 $ 19,600,000
DoubleTree Hotel
Durango................ $ 64.99 $ 13,400,000
DoubleTree Hotel at the
Quay................... $ 50.79 $ 11,400,000
DoubleTree Hotel Boise... $ 44.21 $ 7,900,000
DoubleTree Hotel
Medford................ $ 41.72 $ 7,800,000
Red Lion Inn Eugene...... $ 37.51 $ 6,700,000(4)
Red Lion Inn Coos Bay.... $ 38.24 $ 6,600,000
DoubleTree Hotel Kelso... $ 35.36 $ 6,400,000
DoubleTree Hotel
Pendleton.............. $ 37.24 $ 6,000,000
DoubleTree Hotel
Wenatchee.............. $ 36.94 $ 3,900,000
Red Lion Inn Missoula.... $ 35.66 $ 3,450,000
Red Lion Inn Astoria..... $ 31.83 $ 2,500,000
Red Lion Inn Bend........ $ 33.80 $ 2,300,000
TOTALS/WEIGHTED AVG...... $ 59.73 $ 336,250,000
</TABLE>
- ------------------------------
(1) Based on 12 months ended December 31, 1998.
(2) "ADR" means average daily rate.
(3) "RevPar" means revenue per available room.
(4) The hotel located in Eugene, Oregon is not encumbered by a Mortgage.
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THE PROMUS MASTER LEASE. All seventeen of the Starwood Financial-Promus
Properties are leased to a subsidiary of Promus under the Promus Master Lease,
which expires on December 31, 2020. The payment and performance of the lessee's
obligations under the Promus Master Lease are guaranteed by Promus (the "Promus
Guaranty"). The lessee has the right to extend the Promus Master Lease for up to
three five year periods, for an aggregate of 15 years. The terms of the Promus
Master Lease include an annual aggregate base rental of $15,000,000, payable on
a monthly basis, plus a percentage rent payment based on 7.5% of operating
revenues over a base year amount.
The Promus Master Lease is a triple net lease, wherein all obligations and
liabilities of maintaining and operating the Starwood Financial-Promus
Properties are those of, and are assumed by, the lessee. In particular, property
repair and maintenance obligations, and insurance and real estate tax costs and
expenses, are solely those of the lessee. The lessee may not terminate the
Promus Master Lease, or abate rent due thereunder, except in specific instances.
APPRAISED VALUE. The aggregate appraised value of the Starwood Financial-
Promus Properties as of August, 1998 was $336,250,000, and the Starwood
Financial-Promus Loan has a Cut-off Date LTV Ratio of 46.1%. $6,700,000 of such
aggregate appraised value is attributable to the Starwood Financial-Promus
Property located in Eugene, Oregon, as to which there is an assignment of leases
and rents but no mortgage lien (and which therefore cannot be foreclosed upon).
DSC RATIO. The Starwood Financial-Promus Loan has a DSC Ratio of 2.12x.
LOCKBOX. The Starwood Financial Borrower has established a lockbox and the
lessee is required to make all Promus Master Lease rent payments directly to the
lockbox account.
SEISMIC ASSESSMENT. Twelve of the seventeen Starwood Financial-Promus
Properties, located in Seismic Zones 3 or 4, in the states of California,
Oregon, Washington, Montana and Utah, have a portfolio seismic risk assessment
with a probable maximum loss of 5.1% of the amount of the estimated replacement
cost of the improvements. All of Starwood Financial-Promus Properties have the
benefit of an earthquake insurance policy.
EAB PLAZA LOAN
THE LOAN. The "EAB Plaza Loan" has a Cut-off Date Balance of $139,367,162
representing 8.0% of the Initial Pool Balance, and is secured by a first
priority Mortgage encumbering the leasehold interest in a twin-tower office
building containing a net rentable area ("NRA") of 1,083,511 square feet (the
"EAB Plaza Property") located on Long Island in Uniondale, New York. The
Borrower under the EAB Plaza Loan (the "EAB Plaza Borrower") is a special
purpose entity jointly owned by entities controlled by ABN AMRO Bank N.V. ("ABN
AMRO") and The DeMatteis Organization ("DeMatteis"), a private New York based
real estate company. ABN AMRO is the single largest tenant in the EAB Plaza
Property and is the parent company of the property's namesake, European American
Bank. ABN AMRO is one of the world's leading global banks and is headquartered
in the Netherlands with over 3,500 offices in 74 countries and territories. ABN
AMRO is a publicly traded company whose shares are listed on the principal stock
exchanges in Europe. Its shares are also listed on the New York Stock Exchange
in the form of American Depositary Receipts ("ADRs") under the symbol "AAN". The
long term senior unsecured debt of ABN AMRO is rated "Aa2" by Moody's and "AA"
by S&P.
The EAB Plaza Loan is an ARD Loan with an Anticipated Repayment Date of
March 1, 2009 and a stated maturity of March 1, 2024. The EAB Plaza Loan accrues
interest at a fixed Mortgage Rate of 7.33% per annum until the Anticipated
Repayment Date. The EAB Plaza Loan requires monthly payments of interest and
principal based on an amortization schedule of 25 years. From and after the
Anticipated Repayment Date, the Revised Rate will equal the greater of (x)
12.33%, and (y) 5% plus the then applicable United States Treasury rate. Any
Additional Interest accrued on the EAB Plaza Loan will be deferred and added to
the outstanding principal balance and will earn interest at the Revised Rate, to
the
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extent permitted by applicable law. From and after the Anticipated Repayment
Date, the EAB Plaza Borrower must also apply, as available, funds deposited in a
lockbox account toward additional amortization of the outstanding principal
balance.
The EAB Plaza Borrower is prohibited from voluntarily prepaying the EAB
Plaza Loan prior to the Anticipated Repayment Date. After the Anticipated
Repayment Date, the EAB Plaza Loan may be voluntarily prepaid in whole or in
part without payment of any Prepayment Consideration. The EAB Plaza Borrower has
the right to defease the entire EAB Plaza Loan after the second anniversary of
the Closing Date.
THE PROPERTY. The EAB Plaza Property is a twin-tower office building
located near the Nassau Coliseum in Uniondale, New York. The two 14-story office
towers are connected by a two-story glass atrium. The property contains an
aggregate of 1,083,511 square feet of NRA and has the largest floor plates in
the central Nassau County office market, a submarket of the New York City
metropolitan office market. EAB Plaza was built in phases between 1982 and 1985
and is situated on a 36.41 acre site that is leased from the fee owner, the
County of Nassau, under a long-term ground lease (the "Ground Lease"). Amenities
include the two-story landscaped atrium known as the Winter Garden where catered
functions are held. Parking consists of 2,376 spaces in an enclosed garage, 20
covered spaces and 980 spaces in an outdoor parking field for a total of 3,376
spaces. Tenants in the EAB Plaza Property are a mix of large and small financial
services and professional companies. ABN AMRO is the single largest tenant under
a long term lease for 702,721 square feet or 64.9% of the total NRA and
represents approximately 68.2% of the rental revenue (the "ABN AMRO Lease"). ABN
AMRO subleases approximately 56% of its space, with its two major sub-tenants
being Dime Savings Bank and Dreyfus Service Corporation. ABN AMRO's right to
sublease does not release it from any of its obligations under its lease. The
EAB Plaza Property's occupancy level as of March 1, 1999 was 94.2%.
An overview of the EAB Plaza Property including the largest tenants, square
footage and other pertinent information follows.
FIVE LARGEST TENANTS AT THE EAB PLAZA PROPERTY
RANKED BY SQUARE FOOTAGE (1)
<TABLE>
<CAPTION>
AS % OF LEASE
TENANT SQUARE FEET TOTAL NRA EXPIRATION
- ----------------------------------------------------------------------- ----------- ------------- ---------------
<S> <C> <C> <C>
ABN AMRO Bank, N.V..................................................... 702,721 64.9% 1/31/20
Rivkin Radler & Kramer................................................. 79,125 7.3% 6/30/08
Del Laboratories....................................................... 45,824 4.2% 12/31/04
Executive Office Network............................................... 31,405 2.9% 10/31/11
GMAC................................................................... 29,167 2.7% 10/31/99(2)
----------- ---
TOTAL.................................................................. 888,242 82.0%
</TABLE>
- ------------------------
(1) Based on January 6, 1999 rent roll, updated as of March 1, 1999.
(2) GMAC has agreed to an extension of its lease to October 31, 2004.
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<PAGE>
LEASE EXPIRATION SCHEDULE FOR THE EAB PLAZA PROPERTY (1)
<TABLE>
<CAPTION>
EXPIRING AS % OF
YEAR SQUARE FEET TOTAL NRA (2)
- -------------------------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
1999, including month-to-month leases................................................. 36,673(3) 3.4%
2000.................................................................................. 6,442 0.6%
2001.................................................................................. 39,900 3.7%
2002.................................................................................. 26,567 2.5%
2003.................................................................................. 10,918 1.0%
2004.................................................................................. 64,912 6.0%
2005.................................................................................. 11,390 1.1%
2006.................................................................................. 0 0.0%
2007.................................................................................. 5,273 0.5%
2008.................................................................................. 84,736 7.8%
2009 & beyond......................................................................... 734,126 67.8%
Vacant................................................................................ 62,574(4) 5.8%
----------- -----
TOTAL................................................................................. 1,083,511 100.0%
5 Year Avg. Rollover.................................................................. 24,100 2.2%
7 Year Avg. Rollover.................................................................. 28,115 2.6%
</TABLE>
- ------------------------
(1) Based on January 6, 1999 rent roll, updated as of March 1, 1999.
(2) May not sum to total due to rounding.
(3) Includes GMAC's expiring square feet. GMAC has agreed to an extension of its
lease to October 31, 2004.
(4) Reflects 48,692 vacant square feet as reported on January 6, 1999 rent roll,
updated as of March 1, 1999 for subsequent leasing and vacancies for
additional net vacant square feet of 13,882.
PROPERTY MANAGEMENT. The EAB Plaza Property is managed by Douglas
Elliman-Beitler Management Corporation. The lender is entitled to terminate the
management agreement upon acceleration of the loan following the occurrence of
an event of default under the loan documents.
APPRAISED VALUE. The appraised value of the EAB Plaza Property as of
February, 1999 was $280,000,000, and the EAB Plaza Loan has a Cut-off Date LTV
Ratio of 49.8%.
DSC RATIO. The EAB Plaza Loan has a DSC Ratio of 1.79x.
LOCKBOX. The EAB Plaza Borrower has established a lockbox account and is
required to instruct all tenants to make all rent payments into the lockbox
account.
GROUND LEASE. The EAB Plaza Borrower holds a leasehold interest in the EAB
Plaza Property pursuant to a Ground Lease the initial term of which expires
October 29, 2016, subject to the exercise of five 10 year renewal options and
one 14 year renewal option. At the closing of the EAB Plaza Loan, the EAB Plaza
Borrower deposited to a reserve account $634,460 to fully cover the amount of
certain disputed ground rent payments due plus interest. Additional payments
must also be made by the EAB Plaza Borrower to such reserve account to fully
cover further increases in the amount of disputed ground rent payments.
OTHER RESERVES AND ESCROWS. The EAB Plaza Borrower must make on-going
reserve and escrow payments for several purposes as follows: (1) monthly escrow
payments for real estate taxes and insurance, (2) monthly payments of $75,000
into a reserve account to be used for tenant improvements and leasing
commissions, and (3) annual payments of $200,000 to a reserve account for
certain capital expenditures.
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<PAGE>
The EAB Plaza Borrower was also required to deposit $850,000 into a reserve
account for required repairs relating to the parking garage and deposited
$400,000 to a reserve account for the possible construction of an additional 407
parking spaces.
RELEASE OF UNDEVELOPED PARCEL. The EAB Plaza Borrower has the right to
transfer its interest in an undeveloped, non-income producing parcel consisting
of 8.17 acres, subject to certain conditions including, delivery of evidence
that the parcel is not necessary for the EAB Plaza Property to comply with any
zoning or other legal requirements, including its use for parking.
WOODLAND HILLS MALL LOAN
THE LOAN. The "Woodland Hills Mall Loan" has a Cut-off Date Balance of
$89,644,244, representing 5.1% of the Initial Pool Balance, and is secured by a
first priority Mortgage encumbering the fee simple interest in the in-line mall
space (the "Woodland Hills Mall Property") of a super-regional mall known as the
Woodland Hills Mall containing approximately 1.1 million square feet located in
Tulsa, Oklahoma. The Borrower under the Woodland Hills Mall Loan (the "Woodland
Hills Borrower") is a special purpose entity that is jointly owned by Urban
Shopping Centers, Inc. ("Urban") and J.P. Morgan Investment Management, Inc.,
acting on behalf of certain institutional investment clients. Urban,
headquartered in Chicago, Illinois, is a fully integrated developer, owner and
manager of super-regional and regional shopping centers in major markets
throughout the United States. Urban owns interests in several of the nation's
premier shopping centers including Water Tower Place (Chicago, Illinois), Copley
Place (Boston, Massachusetts), and San Francisco Shopping Centre (San Francisco,
California). Through its affiliate, Urban Retail Properties Co., Urban is one of
the largest U.S. retail property managers with over 50 million square feet of
retail space under management in 25 states and Washington, D.C. Urban is a
publicly traded real estate investment trust and its shares are listed on the
New York Stock Exchange under the symbol "URB".
The Woodland Hills Mall Loan is an ARD Loan with an Anticipated Repayment
Date of January 1, 2009 and a stated maturity of January 1, 2029. The Woodland
Hills Mall Loan accrues interest at a fixed Mortgage Rate of 7.00% per annum
until the Anticipated Repayment Date. The Woodland Hills Mall Loan requires
monthly payments of interest and principal based on an amortization schedule of
30 years. From and after the Anticipated Repayment Date, the Revised Rate will
equal the greater of (x) 12.00% and (y) 5.00% plus the then-applicable United
States Treasury rate. Any Additional Interest accrued on the Woodland Hills Mall
Loan will be deferred and added to the outstanding principal balance and will
earn interest at the Revised Rate, to the extent permitted by applicable law.
From and after the Anticipated Repayment Date, the Woodland Hills Mall Borrower
must also apply, as available, funds deposited in a lockbox account toward
additional amortization of the outstanding principal balance.
The Woodland Hills Mall Borrower is prohibited from voluntarily prepaying
the Woodland Hills Mall Loan in whole or in part prior to the Anticipated
Repayment Date. From and after the Anticipated Repayment Date, the Woodland
Hills Mall Loan may be voluntarily prepaid in whole or in part without payment
of any Prepayment Consideration. The Woodland Hills Mall Borrower has the right
to defease the entire Woodland Hills Mall Loan after the second anniversary of
the Closing Date.
THE PROPERTY. The Woodland Hills Mall Property consists of the 384,067
square feet of two-level in-line mall space in the Woodland Hills Mall, a
super-regional mall containing a total GLA of 1,093,514 square feet and four
anchors. The mall's four anchor tenants are Dillard's, Sears, Foley's and JC
Penney, representing 709,447 square feet or 64.9% of the total GLA. The anchor
tenants own their buildings and pads and are not a part of the collateral for
the Woodland Hills Mall Loan. The in-line mall space represents 35.1% of the
mall's overall GLA and leading in-line tenants include nationally recognized
retailers such as Abercrombie & Fitch, Banana Republic, Gap, Ann Taylor and
Victoria's Secret. Located approximately 14 miles southeast of downtown Tulsa,
the Woodland Hills Mall is Oklahoma's largest shopping center and is situated on
over 100 acres with parking for 6,602 vehicles (6.0 spaces per 1,000
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square feet). Originally developed in 1976 as a three-anchor center, the mall
was significantly expanded in 1982 with the addition of 125,000 square feet of
in-line mall space on the second level and the addition of the fourth anchor,
Foley's. Since 1995, nearly $10 million has been invested in the center
including a $9 million renovation of the mall that was completed in 1996. This
complete mall renovation included the addition of new limestone and marble
flooring, new skylights and lighting systems, new exterior entrances, two
rotundas and new interior decorative plants. Along with the renovation, Sears
and JC Penney invested $8 million to renovate the selling areas of their stores,
while Dillard's recently renovated and expanded its store by 95,000 square feet.
As of March 5, 1999, in-line mall occupancy at the Woodland Hills Mall Property
was 91.3% and overall mall occupancy was 96.9%.
An overview of the mall including its anchor tenants and the in-line mall
space as well as other summary information regarding the Woodland Hills Mall
Property follows in the charts below.
GLA OVERVIEW OF THE WOODLAND HILLS MALL PROPERTY (1)
<TABLE>
<CAPTION>
STORE SQUARE FEET AS % OF GLA (3) ANCHOR REA EXPIRATION (4)
- -------------------------------------------------------- ----------- ----------------- -------------------------
<S> <C> <C> <C>
Dillard's............................................... 274,128 25.1% 1/31/37
Sears................................................... 156,166 14.3% 1/31/37
Foley's................................................. 152,820 14.0% 1/31/37
JC Penney............................................... 126,333 11.6% 1/31/37
----------- -----
Total Anchor Space (2).................................. 709,447 64.9%
IN-LINE MALL SPACE...................................... 384,067 35.1%
----------- -----
Total................................................... 1,093,514 100.0%
</TABLE>
- ------------------------
(1) As of March 5, 1999 rent roll.
(2) Anchor space is not a part of the loan collateral.
(3) May not sum to total due to rounding.
(4) "REA" means Reciprocal Easement Agreement between the WoodlandHills Mall
Borrower and each anchor.
TEN LARGEST IN-LINE TENANTS AT THE WOODLAND HILLS MALL PROPERTY (1)
<TABLE>
<CAPTION>
TENANT SQUARE FEET LEASE EXPIRATION DATE
- ------------------------------------------------------------------------------ ----------- ---------------------
<S> <C> <C>
Lerner New York............................................................... 11,803 2/28/03
Express....................................................................... 10,811 1/31/02
The Limited................................................................... 10,192 7/31/01
Abercrombie & Fitch........................................................... 10,182 1/31/07
Gap........................................................................... 7,568 1/31/06
Victoria's Secret............................................................. 7,544 1/31/07
Footaction.................................................................... 6,800 7/31/06
Banana Republic............................................................... 6,500 5/31/10
Champ's....................................................................... 6,255 3/31/99(3)
Structure..................................................................... 6,060 1/31/07
-----------
TOTAL (2)..................................................................... 83,715
</TABLE>
- ------------------------
(1) As of March 5, 1999 rent roll.
(2) Total represents 21.8% of aggregate In-Line Mall Space.
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<PAGE>
(3) Formal lease extension not yet executed.
LEASE EXPIRATION SCHEDULE FOR
IN-LINE TENANTS AT THE WOODLAND HILLS MALL PROPERTY (1)
<TABLE>
<CAPTION>
EXPIRING SQUARE
YEAR FEET AS % OF TOTAL IN-LINE GLA (2)
- --------------------------------------------------------------- ------------------- -----------------------------
<S> <C> <C>
1999, including month-to-month leases.......................... 51,798 13.5%
2000........................................................... 20,497 5.3%
2001........................................................... 44,229 11.5%
2002........................................................... 43,290 11.3%
2003........................................................... 30,750 8.0%
2004........................................................... 18,347 4.8%
2005........................................................... 19,814 5.2%
2006........................................................... 41,632 10.8%
2007........................................................... 49,985 13.0%
2008........................................................... 15,383 4.0%
2009 & beyond.................................................. 14,840 3.9%
Vacant......................................................... 33,502 8.7%
------- -----
TOTAL.......................................................... 384,067 100.0%
5 Year Avg. Rollover........................................... 38,113 9.9%
7 Year Avg. Rollover........................................... 32,675 8.5%
</TABLE>
- ------------------------
(1) As of March 5, 1999 rent roll.
(2) May not sum to total due to rounding.
IN-LINE MALL SALES AND OCCUPANCY COSTS. The Woodland Hills Mall Borrower
reported that in-line mall sales for 1998 were $378 per square foot (based on
same store sales). In-line tenant occupancy costs for 1998 as a percent of sales
(based on an analysis of the Woodland Hills Mall Borrower's reported base rent
and reimbursements) were 12.0%.
PROPERTY MANAGEMENT. The Woodland Hills Mall Property is managed by Urban
Retail Properties Co. ("Urban Retail"), an affiliate of the Woodland Hills Mall
Borrower. The management agreement can be terminated by the lender upon, among
other occurrences, an event of default under the loan documents, and the
management fee is subordinate to other payments under the loan documents.
VALUE. The Woodland Hills Loan has a Cut-off Date LTV Ratio of 52.2% based
upon the December, 1998 purchase price of $171,600,000.
DSC RATIO. The Woodland Hills Mall Loan has a DSC Ratio of 1.67x.
LOCKBOX. The Woodland Hills Borrower must establish a lockbox account and
instruct the tenants of the Woodland Hills Mall Property to pay all rents
directly to the lockbox account upon the occurrence and continuance of one or
more of the following events: (1) an event of default under the Woodland Hills
Mall Loan, (2) the Woodland Hills Mall Borrower's failure to repay the Woodland
Hills Mall Loan in full on or before the Anticipated Repayment Date, or (3) the
current debt service coverage ratio of the Woodland Hills Mall Loan (calculated
in accordance with the related loan documents) falling and remaining below
1.25x.
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PENN SQUARE MALL LOAN
THE LOAN. The "Penn Square Mall Loan" has a Cut-off Date Balance of
$74,844,822, representing 4.3% of the Initial Pool Balance, and is secured by a
first priority Mortgage encumbering fee and leasehold interests in separate
portions of a fully enclosed super-regional mall known as Penn Square Mall
containing over 1.07 million square feet of GLA located in Oklahoma City,
Oklahoma. The collateral for the Penn Square Mall Loan consists of 385,176
square feet comprised of two-level in-line mall shops and a 10-screen movie
theater, and two of the anchor stores containing 404,818 square feet of GLA (the
"Penn Square Mall Property"). The Borrower under the Penn Square Mall Loan (the
"Penn Square Mall Borrower") is a special purpose entity that is owned by Urban
Shopping Centers, Inc. ("Urban"). Urban, headquartered in Chicago, Illinois, is
a fully integrated developer, owner and manager of super-regional and regional
shopping centers in major markets throughout the United States. Urban owns
interests in several of the nation's premier shopping centers including Water
Tower Place (Chicago, Illinois), Copley Place (Boston, Massachusetts) and San
Francisco Shopping Centre (San Francisco, California). Through its affiliate,
Urban Retail Properties Co., Urban is one of the largest U.S. retail property
managers with over 50 million square feet of space under management in 25 states
and Washington, D.C. Urban is a publicly traded REIT and its shares are listed
on the New York Stock Exchange under the symbol "URB".
The Penn Square Mall Loan is an ARD Loan with an Anticipated Repayment Date
of March 1, 2009 and a stated maturity of March 1, 2029. The Penn Square Mall
Loan accrues interest at a fixed Mortgage Rate of 7.025% per annum until the
Anticipated Repayment Date. The Penn Square Mall Loan requires monthly payments
of interest and principal based on an amortization schedule of 30 years. From
and after the Anticipated Repayment Date, the Revised Rate will equal the
greater of (x) 12.025% and (y) 5.00% plus the then applicable United States
Treasury rate. Any Additional Interest accrued on the Penn Square Mall Loan will
be deferred and added to the outstanding principal balance and will earn
interest at the Revised Rate, to the extent permitted by applicable law. From
and after the Anticipated Repayment Date, the Penn Square Mall Borrower must
also apply, as available, funds deposited in a lockbox account toward additional
amortization of the outstanding principal balance.
The Penn Square Mall Borrower is prohibited from voluntarily prepaying the
Penn Square Mall Loan in whole or in part prior to the Anticipated Repayment
Date. From and after the Anticipated Repayment Date, the Penn Square Mall Loan
may be voluntarily prepaid in whole or in part without payment of any Prepayment
Consideration. The Penn Square Mall Borrower has the right to defease the Penn
Square Mall Loan after the second anniversary of the Closing Date.
THE PROPERTY. Penn Square Mall is a two-level super-regional mall
containing a total of 1,074,994 square feet of GLA located in Oklahoma City,
Oklahoma. Penn Square Mall was originally developed in 1960 as a single-level
open-air mall and enclosed in 1981. Substantially renovated in 1988, including
the addition of the second level, Penn Square Mall is anchored by Dillard's,
Foley's, JC Penney and Montgomery Ward. The four anchors represent 689,818
square feet or 64.2% of the total GLA. In-line mall space, including the
10-screen movie theater leased to General Cinema, totals 385,176 square feet, or
35.8% of the overall GLA. Among the in-line mall tenants are nationally
recognized retailers such as Abercrombie & Fitch, Gap, Warner Brothers,
Gymboree, the Disney Store and Eddie Bauer. The mall provides 5,100 parking
spaces (of which 1,400 spaces are located in a three-level parking garage) for a
parking ratio of 4.7 spaces per 1,000 square feet. The leasehold and fee
interest in the Penn Square Mall Property that is collateral for the Penn Square
Mall Loan is made up of a total of 789,994 square feet of GLA, consisting of
385,176 square feet of in-line mall space, and 404,818 square feet of anchor
space occupied by Dillard's and Montgomery Ward. Also part of the collateral are
the Foley's and the JC Penney sub-ground leases whereby Foley's and JC Penney
own their buildings and sub-lease their pads from the Penn Square Mall Borrower.
As of March, 1999, in-line mall space occupancy at the Penn Square Mall Property
was 95.9% and overall mall occupancy was 98.5%.
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<PAGE>
An overview of the mall including its anchor tenants and the in-line mall
space as well as other summary information regarding the Penn Square Mall
Property follows in the charts below.
GLA OVERVIEW OF THE PENN SQUARE MALL PROPERTY(1)
<TABLE>
<CAPTION>
Anchor Lease
STORE Square Feet As % of GLA(2) Expiration
- -------------------------------------------- ----------- --------------- ----------------------
<S> <C> <C> <C>
NON-OWNED GLA:
Foley's(3).................................. 160,000 14.9% 9/30/60
JC Penney (3)............................... 125,000 11.6% 8/30/24
----------- -----
Non-Owned Anchor Space...................... 285,000 26.5%
OWNED GLA:
Dillard's................................... 240,925 22.4% 3/31/03 (4)
Montgomery Ward............................. 163,893 15.3% 10/31/01 (4)
----------- -----
OWNED SUB-TOTAL--ANCHOR SPACE............... 404,818 37.7%
In-Line Mall Shops.......................... 348,293 32.4%
General Cinema.............................. 36,993 3.4%
----------- -----
OWNED SUB-TOTAL--IN-LINE MALL SPACE......... 385,176 35.8%
TOTAL OWNED SPACE........................... 789,994 73.5%
Total....................................... 1,074,994 100.0%
</TABLE>
- ------------------------
(1) As of January 15, 1999 rent roll, updated to reflect leasing as of March,
1999.
(2) May not sum to total due to rounding.
(3) Foley's and JC Penney own their buildings and sub-lease their pads from the
Penn Square Mall Borrower.
(4) Dillard's and Montgomery Ward each have three five-year renewal options.
TEN LARGEST IN-LINE TENANTS AT THE PENN SQUARE MALL PROPERTY(1)
<TABLE>
<CAPTION>
LEASE EXPIRATION
SHOPS SQUARE FEET DATE
- ------------------------------------------------------------------------------ ----------- --------------------
<S> <C> <C>
General Cinema................................................................ 36,993 2/29/08
Limited Express............................................................... 13,480 6/30/03
Limited....................................................................... 11,355 2/28/06
Abercrombie & Fitch........................................................... 11,200 1/31/08
Lerner........................................................................ 9,146 1/31/05
Lane Bryant................................................................... 7,854 1/31/06
B.C. Clark Jewelers........................................................... 6,878 9/30/00
Gap........................................................................... 6,543 1/31/07
Kambers....................................................................... 6,500 1/31/00
Warner Brothers............................................................... 6,400 12/31/05
-----------
TOTAL (2)..................................................................... 116,349
</TABLE>
- ------------------------
(1) As of January 15, 1999 rent roll, updated to reflect leasing as of March,
1999.
(2) Total represents 24.6% of In-Line Mall Shops.
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<PAGE>
LEASE EXPIRATION SCHEDULE FOR
IN-LINE TENANTS AT THE PENN SQUARE MALL PROPERTY (1)
<TABLE>
<CAPTION>
EXPIRING SQUARE AS % OF TOTAL
YEAR FEET IN-LINE GLA (2)
- --------------------------------------------------------------------------- ------------------- -----------------
<S> <C> <C>
1999, including month-to-month leases...................................... 14,979 3.9%
2000....................................................................... 25,540 6.6%
2001....................................................................... 20,417 5.3%
2002....................................................................... 6,215 1.6%
2003....................................................................... 53,414 13.9%
2004....................................................................... 17,781 4.6%
2005....................................................................... 45,739 11.9%
2006....................................................................... 47,254 12.3%
2007....................................................................... 26,308 6.8%
2008....................................................................... 78,168 20.3%
2009 & beyond.............................................................. 33,396 8.7%
Vacant..................................................................... 15,965 4.1%
------- -----
TOTAL...................................................................... 385,176 100.0%
5 Year Avg. Rollover....................................................... 24,113 6.3%
7 Year Avg. Rollover....................................................... 26,298 6.8%
</TABLE>
- ------------------------
(1) As of January 15, 1999 rent roll, updated to reflect leasing as of March,
1999.
(2) May not sum to total due to rounding.
IN-LINE MALL SALES AND OCCUPANCY COSTS. The Penn Square Mall Borrower
reported that 1998 in-line mall sales, exclusive of the movie theater, were $398
per square foot (based on same store sales). For 1998, in-line tenant occupancy
costs, exclusive of the movie theater, as a percent of sales based on an
analysis of the Penn Square Mall Borrower's reported base rent and
reimbursements were 10.2%.
PROPERTY MANAGEMENT. The Penn Square Mall Property is managed by Urban
Retail Properties Co. ("Urban Retail"), an affiliate of the Penn Square Mall
Borrower. The management agreement can be terminated by the lender upon, among
other occurrences, an event of default under the loan documents, and the
management fee is subordinate to other payments under the loan documents.
VALUE. The appraised value of the Penn Square Mall Property as of February,
1999 was $135,000,000, and the Penn Square Mall Loan has a Cut-off Date LTV
Ratio of 55.4%.
DSC RATIO. The Penn Square Mall Loan has a DSC Ratio of 1.67x.
LOCKBOX. The Penn Square Mall Borrower must establish a lockbox account and
instruct the tenants of the Penn Square Mall Property to pay all rents directly
to the lockbox account upon the occurrence and continuance of one or more of the
following events: (1) an event of default under the Penn Square Mall Loan, (2)
the Penn Square Mall Borrower's failure to repay the Penn Square Mall Loan in
full on or before the Anticipated Repayment Date, or (3) the current debt
service coverage ratio of the Penn Square Mall Loan (calculated in accordance
with the related loan documents) falling and remaining below 1.25x.
GROUND LEASE. The Penn Square Mall Borrower holds a leasehold interest in
majority of the Penn Square Mall Property pursuant to a ground lease (the "Penn
Square Mall Ground Lease") that expires September 30, 2060. The Penn Square Mall
Ground Lease requires the Penn Square Mall Borrower to make a ground rent
payment equal to the greater of a minimum rent payment of $500,000 per annum or
a
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percentage rent payment based on defined percentages of the annual gross sales
of tenants. The ground rent payment paid by the Penn Square Mall Borrower in
1998 was $845,395.
ASSIGNMENT OF THE MORTGAGE LOANS
On the Closing Date, the Depositor will acquire the Mortgage Loans from the
Originator or another of its affiliates and will transfer the Mortgage Loans,
without recourse, to the Trustee.
In connection with its transfer of the Mortgage Loans to the Trustee, the
Depositor must deliver or cause to be delivered thereto the following documents,
among others, with respect to each Mortgage Loan--
- the original Mortgage Note, endorsed (without recourse) to the order of
the Trustee (or, if such original Mortgage Note has been lost, a copy
thereof, together with a lost note affidavit);
- the original or a copy of the related Mortgage(s), together with originals
or copies of any intervening assignments of such document(s), in each case
(unless the particular document has not been returned from the applicable
recording office) with evidence of recording thereon;
- the original or a copy of any related assignment(s) of leases and rents,
together with originals or copies of any intervening assignments of such
document(s), in each case (unless the particular document has not been
returned from the applicable recording office) with evidence of recording
thereon;
- a completed assignment of each related Mortgage in favor of the Trustee,
in recordable form (or a certified copy of such assignment as sent for
recording);
- a completed assignment of any related assignment(s) of leases and rents in
favor of the Trustee, in recordable form (or a certified copy of such
assignment as sent for recording);
- an original or copy of all the written modification agreements in those
instances in which the terms or provisions of a Mortgage or Mortgage Note
have been modified;
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- an original or copy of the related lender's title insurance policy (or, if
a title insurance policy has not yet been issued, a commitment for title
insurance "marked-up" at the closing of such Mortgage Loan);
- an assignment in favor of the Trustee of each effective UCC financing
statement in the possession of the transferor (or a certified copy of such
assignment as sent for filing);
- if applicable, the original or a copy of the related ground lease; and
- if applicable, the lease enhancement policy and any residual value
insurance policy.
The Pooling Agreement will require the Trustee to hold all of the documents
so delivered to it with respect to the Mortgage Loans in trust for the benefit
of the Certificateholders and, within a specified period of time following such
delivery, to conduct a review of certain documents. If any of the above-
described documents required to be delivered to the Trustee in respect of each
Mortgage Loan is not so delivered or is otherwise defective, and such omission
or defect materially and adversely affects the value of the related Mortgage
Loan or the interests of the Certificateholders therein, such omission or
defect, as the case may be, will constitute a "Material Document Defect" with
respect to the related Mortgage Loan. The rights of the Trust against the
Depositor with respect to any Material Document Defect are described under
"--Cures and Repurchases" below. All of the above-described documents actually
delivered to the Trustee in respect of any Mortgage Loan will collectively
constitute the "Mortgage File" for such Mortgage Loan.
The Pooling Agreement will further require the Trustee at the expense of the
Depositor, within a specified period following the later of the Closing Date and
receipt of the item, to submit for recording in the real property records of the
appropriate jurisdiction each assignment of Mortgage and assignment of
assignment of leases and rents in its favor delivered by the Depositor with
respect to a Mortgage Loan as described above.
See "The Trust Agreement--Assignment of Mortgage Assets" in the Prospectus.
REPRESENTATIONS AND WARRANTIES
The Depositor will make, as to each Mortgage Loan, the following
representations and warranties (subject to certain exceptions), among others, as
of the Closing Date or as of such other date specified in the particular
representation and warranty:
- The information pertaining to such Mortgage Loan set forth in the schedule
of Mortgage Loans (the "Mortgage Loan Schedule") attached to the Pooling
Agreement was true and correct in all material respects as of the Cut-off
Date.
- To the best of the Depositor's knowledge after having performed the type
of due diligence customarily performed by prudent institutional commercial
and multifamily mortgage lenders, as of the date of its origination, such
Mortgage Loan complied in all material respects with, or was exempt from,
all requirements of federal, state or local law relating to the
origination of such Mortgage Loan.
- The Depositor owns the Mortgage Loan, has good title thereto, has full
right and authority to sell, assign and transfer the Mortgage Loan and is
transferring the Mortgage Loan free and clear of any and all liens,
pledges, charges or security interests.
- The proceeds of the Mortgage Loan have been fully disbursed and there is
no requirement for future advances thereunder.
- To the actual knowledge of the Depositor, the related Mortgage Note, each
related Mortgage, each related assignment of leases and rents, if any, and
each other agreement executed in connection therewith is the legal, valid
and binding obligation of the maker thereof (subject to any
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non-recourse provisions therein and any state anti-deficiency
legislation), enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights
generally, and by general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
- As of the date of its origination, there was no valid offset, defense,
counterclaim or right to rescission with respect to the related Mortgage
Note or any related Mortgage or other agreement executed in connection
with such Mortgage Loan.
- As of the Cut-off Date, to the actual knowledge of the Depositor, there is
no valid offset, defense, counterclaim or right of rescission with respect
to the related Mortgage Note or any related Mortgage or other agreement.
- The assignment of the related Mortgage in favor of the Trustee constitutes
the legal, valid and binding assignment of such Mortgage to the Trustee
(subject to customary bankruptcy and creditors' rights limitations).
- Each related Mortgage is a valid and enforceable first lien on the related
Mortgaged Property, which Mortgaged Property is free and clear of all
encumbrances and liens having priority over or on a parity with the first
lien of such Mortgage, except for
(i) liens for real estate taxes and special assessments not yet due and
payable,
(ii) covenants, conditions and restrictions, rights of way, easements and
other matters of public record as of the date of recording of such
Mortgage, such exceptions appearing of record being customarily
acceptable to mortgage lending institutions generally or specifically
reflected in the appraisal of such Mortgaged Property made in connection
with the origination of such Mortgage Loan, and
(iii) other matters to which like properties are commonly subject which do
not, individually or in the aggregate, materially interfere with the
benefits of the security intended to be provided by such Mortgage or
materially affect the value or marketability of such Mortgaged Property.
- To the actual knowledge of the Depositor, all taxes and governmental
assessments that prior to the Cut-off Date became due or owing in respect
of, and affect, the related Mortgaged Property or Properties have been
paid, or an escrow of funds in an amount sufficient to cover such payments
has been established.
- As of the date of its origination, there was no proceeding pending for the
total or partial condemnation of the related Mortgaged Property or
Properties that materially affects the value thereof, and such Mortgaged
Property was free of material damage.
- As of the Cut-off Date, the Depositor has not received any notice of the
commencement of any proceeding for the total or partial condemnation of
the related Mortgaged Property or Properties that materially affects the
value thereof, and such Mortgaged Property is free of material damage.
- As of the date of its origination, all insurance required under the
related Mortgage for such Mortgage Loan was in full force and effect with
respect to the related Mortgaged Property or Properties.
- As of the Cut-off Date, the Mortgage Loan is not, and in the prior 12
months (or, if originated during such 12-month period, since the date of
origination), has not been, 30 days or more past due in respect of any
Scheduled P&I Payment.
- One or more environmental site assessments were performed with resect to
the related Mortgaged Property or Properties during the 18-month (or, in
two cases representing security for 0.1% of the
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Initial Pool Balance, earlier) period preceding the Cut-off Date, and the
Depositor, having made no independent inquiry other than to review the
report(s) prepared in connection with the assessment(s) referenced in this
Prospectus Supplement, has no knowledge of any material and adverse
environmental condition or circumstance affecting such Mortgaged Property
that was not disclosed in such report(s).
If there exists a breach of any of the above-described representations and
warranties made by the Depositor, and such breach materially and adversely
affects the value of the subject Mortgage Loan or the interests of the
Certificateholders therein, such breach will constitute a "Material Breach" of
such representation and warranty. The rights of the Trust against the Depositor
with respect to any such Material Breach are described under "--Cures and
Repurchases" below.
CURES AND REPURCHASES
If the Depositor discovers or receives notice of (i) a Material Document
Defect with respect to any of its Mortgage Loans as described under
"--Assignment of the Mortgage Loans" above or (ii) a Material Breach of any
representation and warranty made by it as described under "--Representations and
Warranties" above, then the Depositor will be obligated to--
- remedy such Material Document Defect or Material Breach in all material
respects, or
- repurchase the affected Mortgage Loan at a price (the "Purchase Price")
generally equal to the sum of (i) the unpaid principal balance of such
Mortgage Loan at the time of purchase, plus (ii) all unpaid interest
(other than Additional Interest and Default Interest) due in respect of
such Mortgage Loan through the Due Date in the Collection Period of
purchase, plus (iii) all unreimbursed Servicing Advances in respect of
such Mortgage Loan.
The time period within which the Depositor must complete such remedy or
repurchase will generally be limited to 90 days (or, if it is diligently
attempting to correct the problem and certain other conditions are satisfied,
180 days) following the earlier of its discovery or receipt of notice of the
subject Material Document Defect or Material Breach, as the case may be.
However, if any Material Document Defect arises solely out of the failure of the
applicable recording office to return a recorded Mortgage Loan document, and if
the Depositor is diligently attempting to retrieve such document, such time
period may be extended for up to two years following the Closing Date.
The foregoing cure/repurchase obligations of the Depositor will constitute
the sole remedy available to the Certificateholders in connection with a
Material Document Defect or a Material Breach of representations or warranties
with respect to any Mortgage Loan. No other person will be obligated to
repurchase any affected Mortgage Loan in connection with a Material Document
Defect or a Material Breach of representations and warranties if the Depositor
defaults on its obligation to do so.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as it is expected to be
constituted at the time the Offered Certificates are issued, with adjustments
for the scheduled principal payments due on the Mortgage Loans on or before the
Cut-off Date. Prior to the issuance of the Offered Certificates, a Mortgage Loan
may be removed from the Mortgage Pool if the Depositor deems such removal
necessary or appropriate or if it is prepaid. A limited number of other mortgage
loans may be included in the Mortgage Pool prior to the issuance of the Offered
Certificates, unless including such mortgage loans would materially alter the
characteristics of the Mortgage Pool as described in this Prospectus Supplement.
The Depositor believes that the information set forth in this Prospectus
Supplement will be representative of the characteristics of the Mortgage Pool as
it will be constituted at the time the Offered Certificates are issued, although
the range of Mortgage Rates
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and maturities, as well as the other characteristics of the Mortgage Loans
described in this Prospectus Supplement, may vary.
A Current Report on Form 8-K will be available to purchasers of the Offered
Certificates on or shortly after the Closing Date. Such Current Report on Form
8-K will be filed, together with the Pooling Agreement, with the Securities and
Exchange Commission within fifteen days after the initial issuance of the
Offered Certificates. In the event Mortgage Loans are removed from or added to
the Mortgage Pool such removal or addition will be noted in such Current Report
on Form 8-K.
SERVICING OF THE MORTGAGE LOANS
GENERAL
The servicing of the Mortgage Loans and any REO Properties will be governed
by the Pooling Agreement. The following summaries describe certain provisions of
the Pooling Agreement relating to the servicing and administration of the
Mortgage Loans and any REO Properties. The summaries do not purport to be
complete and are subject, and qualified in their entirety by reference, to the
provisions of the Pooling Agreement. Reference is made to the Prospectus for
additional information regarding the terms of the Pooling Agreement relating to
the servicing and administration of the Mortgage Loans and any REO Properties
and to the rights and obligations of the Master Servicer and the Special
Servicer thereunder, PROVIDED THAT THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT
SUPERSEDES ANY CONTRARY INFORMATION SET FORTH IN THE PROSPECTUS. See "Servicing
of Mortgage Loans" and "The Trust Agreement" in the Prospectus. For purposes of
the Prospectus, the Pooling Agreement constitutes a Trust Agreement, a Master
Servicing Agreement and a Special Servicing Agreement.
The Pooling Agreement provides that the Master Servicer and Special Servicer
must each service and administer the Mortgage Loans for which it is responsible,
directly or through sub-servicers, on behalf of the Trustee for the benefit of
the Certificateholders, in accordance with all applicable laws, the express
terms of the Pooling Agreement and the respective Mortgage Loans and, to the
extent consistent with the foregoing, the Servicing Standard. The "Servicing
Standard" requires that the Master Servicer and Special Servicer must each
service and administer the Mortgage Loans and other assets for which it is
responsible:
- with the same care, skill and diligence as is normal and usual in its
general mortgage servicing and asset management activities with respect to
comparable mortgage loans that either are part of other third party
portfolios (giving due consideration to customary and usual standards of
practice of prudent institutional commercial mortgage lenders) or are held
as part of its own portfolio, whichever servicing procedures are a higher
standard;
- with a view to the timely collection of all Scheduled P&I Payments due
under the Mortgage Loans (or, in the case of the Special Servicer, if a
Mortgage Loan comes into and continues in default and if, in the good
faith and reasonable judgment of the Special Servicer, no satisfactory
arrangements can be made for the collection of the delinquent payments,
with a view to the maximization of the recovery on such Mortgage Loan to
the Certificateholders (as a collective whole) on a present value basis);
and
- without regard to:
(a) any known relationship that the Master Servicer or the Special Servicer,
as the case may be, or any affiliate thereof may have with any related
Borrower;
(b) the ownership of any Certificate by the Master Servicer or the Special
Servicer, as the case may be, or any affiliate thereof;
(c) the obligation of the Master Servicer or the Special Servicer, as the
case may be, to make Advances;
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(d) the right of the Master Servicer or the Special Servicer, as the case
may be, or any affiliate thereof to receive reimbursement of costs, or
the compensation payable to it under the Pooling Agreement generally or
with respect to any particular transaction; and
(e) the ownership, servicing or management of other loans or properties not
included in or securing, as the case may be, the Mortgage Loans.
In general, the Master Servicer will be responsible for the servicing and
administration of--
- all Mortgage Loans as to which no Servicing Transfer Event (as defined
below) has occurred, and
- all Corrected Mortgage Loans (also as defined below).
The Special Servicer, on the other hand, will be responsible for the
servicing and administration of--
- each Mortgage Loan (other than a Corrected Mortgage Loan) as to which a
Servicing Transfer Event has occurred (each, a "Specially Serviced
Mortgage Loan"), and
- each Mortgaged Property that has been acquired by the Trust in respect of
a defaulted Mortgage Loan through foreclosure, deed-in-lieu of foreclosure
or otherwise (each, upon acquisition, an "REO Property").
Specially Serviced Mortgage Loans and REO Properties collectively constitute
"Specially Serviced Assets".
Despite the foregoing, the Pooling Agreement will require the Master
Servicer to continue to collect information and prepare all reports to the
Trustee required to be collected or prepared by the Master Servicer thereunder
with respect to any Specially Serviced Mortgage Loans and REO Properties and,
otherwise, to render certain incidental services with respect to any Specially
Serviced Mortgage Loans and REO Properties. Neither the Master Servicer nor the
Special Servicer will have any responsibility for the performance by the other
of its respective obligations and duties under the Pooling Agreement.
A Mortgage Loan will become a Specially Serviced Mortgage Loan (if it has
not already done so) upon the occurrence of a Servicing Transfer Event. Each of
the following events will constitute a "Servicing Transfer Event" in respect of
any Mortgage Loan:
(1) any Scheduled P&I Payment shall be delinquent 60 or more days (or, in the
case of a delinquent Balloon Payment, if it is determined that the related
Borrower has obtained a binding commitment to refinance the subject Mortgage
Loan, such Balloon Payment shall be delinquent for such longer period of
delinquency (not to exceed 120 days) within which such refinancing is
expected to occur);
(2) the Master Servicer shall have determined that (a) a default in making a
Scheduled P&I Payment is likely to occur within 30 days, (b) such default is
likely to remain unremedied for at least 60 days, and (c) in the case of a
Balloon Payment, the related Borrower is not likely to refinance the subject
Mortgage Loan within 120 days after the maturity date;
(3) there shall have occurred a default (other than as described in clause (1)
above) that materially impairs the value of the Mortgaged Property as
security for the Mortgage Loan or otherwise materially adversely affects the
interests of Certificateholders and that continues unremedied for the
applicable grace period under the terms of the Mortgage Loan (or, if no
grace period is specified, for 30 days);
(4) certain events of insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings in respect of or pertaining to the
related Borrower and certain actions by or on behalf of the related Borrower
indicating its insolvency or inability to pay its obligations; or
(5) the Master Servicer shall have received notice of the commencement of
foreclosure or similar proceedings with respect to the related Mortgaged
Property or Properties.
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So long as no other Servicing Transfer Event exists, a Mortgage Loan will
cease to be a Specially Serviced Mortgage Loan (and will become a "Corrected
Mortgage Loan" as to which the Master Servicer will re-assume servicing
responsibilities) if and when:
(a) with respect to the circumstances described in clause (1) of the
preceding paragraph, the related Borrower has made three consecutive full
and timely Scheduled P&I Payments under the terms of such Mortgage Loan
(as such terms may be changed or modified in connection with a bankruptcy
or similar proceeding involving the related Borrower or by reason of a
written modification, waiver or amendment granted or agreed to by the
Special Servicer);
(b) with respect to any of the circumstances described in clauses (2) and
(4) of the preceding paragraph, such circumstances cease to exist in the
good faith, reasonable judgment of the Special Servicer, but, with
respect to any bankruptcy or insolvency proceedings contemplated by
clause (4), no later than the entry of an order or decree dismissing such
proceeding;
(c) with respect to the circumstances described in clause (3) of the
preceding paragraph, when such default is cured as determined by the
Special Servicer; and
(d) with respect to the circumstances described in clause (5) of the
preceding paragraph, when such proceedings are terminated.
THE MASTER SERVICER AND THE SPECIAL SERVICER
THE MASTER SERVICER. First Union National Bank ("FUNB"), a national banking
association, will act as Master Servicer with respect to the Mortgage Pool. FUNB
is a wholly owned subsidiary of First Union Corporation. Its principal servicing
offices are located at NC 1075, 8739 Research Drive-URP4, Charlotte North
Carolina 28262-1075.
As of March 31, 1999, FUNB and its affiliates were responsible for servicing
approximately 4,202 commercial and multifamily loans, totaling approximately
$22.6 billion in aggregate outstanding principal amounts, including loans
securitized in mortgage backed securitization transactions.
The information set forth in this Prospectus Supplement concerning the
Master Servicer has been provided by it. Neither the Depositor nor the
Underwriters makes any representation or warranty as to the accuracy or
completeness of such information. The Master Servicer (except for the
information in the first two paragraphs under this heading) will make no
representations as to the validity or sufficiency of the Pooling Agreement, the
Certificates, the Mortgage Loans, this Prospectus Supplement or related
documents.
THE SPECIAL SERVICER. GMAC Commercial Mortgage Corporation ("GMACCM"), a
corporation organized under the laws of the State of California, is a
wholly-owned direct subsidiary of GMAC Commercial Holding Corporation, a direct
subsidiary of GMAC Mortgage Group, Inc., which in turn is a wholly-owned direct
subsidiary of General Motors Acceptance Corporation. The principal offices of
GMACCM are located at 650 Dresher Road, Horsham, Pennsylvania 19044. As of March
31, 1999, GMACCM was the special servicer of a portfolio of multifamily and
commercial mortgage loans totaling approximately $30 billion in aggregate
outstanding principal amount.
The information set forth in this Prospectus Supplement concerning the
Special Servicer has been provided by it. Neither the Depositor nor the
Underwriters makes any representation or warranty as to the accuracy or
completeness of such information.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
THE MASTER SERVICING FEE. The principal compensation to be paid to the
Master Servicer in respect of its master servicing activities will be the Master
Servicing Fee.
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In general, the "Master Servicing Fee" will--
- be earned in respect of each and every Mortgage Loan (including each
Specially Serviced Mortgage Loan, if any, and each Mortgage Loan, if any,
as to which the related Mortgaged Property has become an REO Property (an
"REO Mortgage Loan")),
- be computed on a 30/360 Basis (except in the case of partial periods, when
it will be computed on the basis of the actual number of days elapsed in
such period and a 360-day year) and accrue at the applicable Master
Servicing Fee Rate on the same principal amount as interest periodically
accrues or is deemed to accrue, as the case may be, in respect of each
Mortgage Loan, and
- be payable monthly on a loan-by-loan basis from amounts received in
respect of interest on each Mortgage Loan.
The "Master Servicing Fee Rate" will be a per annum rate determined on a
loan-by-loan basis. The weighted average Master Servicing Fee Rate for the
Mortgage Loans as of the Cut-off Date was 0.10% per annum.
ADDITIONAL MASTER SERVICING COMPENSATION. As additional servicing
compensation, the Master Servicer will be entitled to receive--
- All Prepayment Interest Excesses, if any, collected in respect of the
entire Mortgage Pool. If a Borrower prepays its Mortgage Loan, in whole or
in part, after the related Due Date during any Collection Period, the
amount of interest (less the amount of related Master Servicing Fees
payable therefrom and any Additional Interest included therein) will, to
the extent actually collected, constitute a "Prepayment Interest Excess".
- All late payment charges and Default Interest, if any, collected in
respect of the Mortgage Loans that, in each such case, accrued in respect
of the related Mortgage Loan during a period when it was not a Specially
Serviced Mortgage Loan or REO Mortgage Loan (but only to the extent that
such late payment charges and Default Interest have not otherwise been
applied to pay the Master Servicer, Special Servicer or Trustee, as
applicable, interest on Advances made thereby with respect to the related
Mortgage Loan as described in this Prospectus Supplement). "Default
Interest" is any interest that (i) accrues on a defaulted Mortgage Loan
solely by reason of the subject default and (ii) is in excess of all
interest at the related Mortgage Rate and any Additional Interest accrued
on such Mortgage Loan.
Modification fees, assumption fees and certain other fees and charges
collected on the Mortgage Loans will be allocated between the Master Servicer
and the Special Servicer as additional servicing compensation.
The Master Servicer will be authorized to invest or direct the investment of
funds held in the Custodial Account (as defined under "--The Custodial Account"
below), the Collection Account (as defined under "Description of the Offered
Certificates--Collection Account" in this Prospectus Supplement), the Interest
Reserve Account (as defined under "Description of the Offered Certificates--
Distributions" in this Prospectus Supplement), any escrow accounts and reserve
accounts with respect to the Mortgage Loans, in certain government securities
and other investment grade obligations specified in the Pooling Agreement
("Permitted Investments"). The Master Servicer will be entitled to retain any
interest or other income earned on such funds, subject, however, to any rights
of the Borrowers thereto in the case of interest or other income earned on funds
in escrow accounts and reserve accounts. However, the Master Servicer will be
required to cover losses of principal on such investments out of its own funds.
PREPAYMENT INTEREST SHORTFALLS. If a Borrower prepays a Mortgage Loan, in
whole or in part, prior to the related Due Date during any Collection Period and
does not pay interest on such prepayment through such Due Date, then the
shortfall in a full month's interest (less the amount of related Master
Servicing Fees and any Additional Interest) on such prepayment will constitute a
"Prepayment Interest Shortfall".
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The Pooling Agreement will provide that, if any Prepayment Interest
Shortfalls are incurred during any Collection Period with respect to Mortgage
Loans that are neither Specially Serviced Mortgage Loans nor REO Mortgage Loans,
the Master Servicer must make a non-reimbursable payment (a "Compensating
Interest Payment") with respect to the related Distribution Date in an amount
equal to the lesser of:
(a) the aggregate of all such Prepayment Interest Shortfalls incurred during
such Collection Period with respect to such Mortgage Loans that are
neither Specially Serviced Mortgage Loans nor REO Mortgage Loans, and
(b) the sum of the following components of the Master Servicer's aggregate
servicing compensation for such Collection Period--
(i) the aggregate of all Prepayment Interest Excesses, if any, collected
with respect to the entire Mortgage Pool during such Collection
Period, and
(ii) with respect to each and every Mortgage Loan for which the Master
Servicer receives Master Servicing Fees during such Collection
Period, the portion of such fees calculated at an annual rate of
0.05% per annum.
To the extent that the Compensating Interest Payment made by the Master
Servicer for the related Distribution Date is LESS than the amount described in
clause (a) of the preceding sentence, such difference, together with the
aggregate of all Prepayment Interest Shortfalls, if any, incurred during the
subject Collection Period in respect of any Specially Serviced Mortgage Loans,
will constitute the "Net Aggregate Prepayment Interest Shortfall" for the
related Distribution Date.
Any Compensating Interest Payment made by the Master Servicer with respect
to any Distribution Date will be included among the amounts distributable as
principal and interest on the Certificates on such Distribution Date as
described under "Description of the Offered Certificates--Distributions" in this
Prospectus Supplement. Any Net Aggregate Prepayment Interest Shortfall for any
Distribution Date will be allocated among the respective Classes of
interest-bearing Certificates, in reduction of the interest distributable
thereon, in the amounts and priorities described under "Description of the
Offered Certificates--Allocation of Realized Losses and Certain Other Shortfalls
and Expenses" in this Prospectus Supplement.
PRINCIPAL SPECIAL SERVICING COMPENSATION. The principal compensation to be
paid to the Special Servicer in respect of its special servicing activities will
be--
- the Special Servicing Fee,
- the Workout Fee, and
- the Liquidation Fee.
THE SPECIAL SERVICING FEE. In general, the "Special Servicing Fee" will--
- be earned in respect of each and every Specially Serviced Mortgage Loan,
if any, and each and every REO Mortgage Loan, if any,
- be computed on a 30/360 Basis (except in the case of partial periods, when
it will be computed on the basis of the actual number of days elapsed in
such period and a 360-day year) and accrue at 0.25% per annum (the
"Special Servicing Fee Rate") on the same principal amount as interest
periodically accrues or is deemed to accrue, as the case may be, in
respect of each Specially Serviced Mortgage Loan or REO Mortgage Loan, if
any, and
- be payable monthly from general collections on all the Mortgage Loans and
any REO Properties on deposit in the Custodial Account from time to time.
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The Workout Fee. The Special Servicer will, in general, be entitled to
receive a Workout Fee with respect to each Corrected Mortgage Loan. As to each
Corrected Mortgage Loan, with limited exception, the "Workout Fee" will be
payable out of, and will be calculated by application of a "Workout Fee Rate" of
1.00% to, each collection of interest (other than Default Interest and
Additional Interest), principal (including scheduled payments, prepayments and
Balloon Payments at maturity) and Prepayment Consideration received on such
Mortgage Loan for so long as it remains a Corrected Mortgage Loan. The Workout
Fee with respect to any Corrected Mortgage Loan will cease to be payable if such
loan again becomes a Specially Serviced Mortgage Loan or if the related
Mortgaged Property becomes an REO Property. Nevertheless, a new Workout Fee will
become payable if and when such Mortgage Loan again becomes a Corrected Mortgage
Loan. If the Special Servicer is terminated (other than for cause) or resigns,
it shall retain the right to receive any and all Workout Fees payable with
respect to Mortgage Loans that became Corrected Mortgage Loans during the period
that it acted as Special Servicer and remained Corrected Mortgage Loans at the
time of such termination or resignation. The successor Special Servicer will not
be entitled to any portion of such Workout Fees.
The Liquidation Fee. The Special Servicer will be entitled to receive a
Liquidation Fee with respect to each Specially Serviced Mortgage Loan as to
which the Special Servicer obtains a full or discounted payoff from the related
Borrower and, except as otherwise described below, with respect to any Specially
Serviced Mortgage Loan or REO Property as to which the Special Servicer receives
any Liquidation Proceeds (as defined under "--Custodial Account" below). As to
each such Specially Serviced Mortgage Loan and REO Property, the "Liquidation
Fee" will be payable from, and will be calculated by application of a
"Liquidation Fee Rate" of 1.00% to, the related payment or proceeds (other than
any portion thereof that represents a recovery of Default Interest or Additional
Interest). Notwithstanding anything to the contrary described above, no
Liquidation Fee will be payable based on, or out of, Liquidation Proceeds
received in connection with:
- the repurchase of any Mortgage Loan by the Depositor for a breach of
representation or warranty or for defective or deficient Mortgage Loan
documentation so long as such repurchase occurs within the 180-day cure
period (see "Description of the Mortgage Pool--Cures and Repurchases" in
this Prospectus Supplement).
- the purchase of any Specially Serviced Mortgage Loan or REO Property by
the Master Servicer, the Special Servicer or any Holder of Certificates of
the Controlling Class (a "Controlling Class Certificateholder") as
described in "--Realization upon Defaulted Mortgage Loans; Sale of
Defaulted Mortgage Loans and REO Properties" below); or
- the purchase of all of the Mortgage Loans and REO Properties by the
Depositor, the Master Servicer, the Special Servicer, Lehman or any
Controlling Class Certificateholder in connection with the termination of
the Trust as described in "Description of the Offered Certificates--
Termination" in this Prospectus Supplement.
ADDITIONAL SPECIAL SERVICING COMPENSATION. As additional special servicing
compensation, the Special Servicer will be entitled to receive all late payment
charges and Default Interest, if any, collected in respect of the Mortgage Loans
that, in each such case, accrued in respect of the related Mortgage Loan during
a period when it was a Specially Serviced Mortgage Loan or an REO Mortgage Loan
(but only to the extent that such late payment charges and Default Interest have
not otherwise been applied to pay the Master Servicer, Special Servicer or
Trustee, as applicable, interest on Advances made thereby with respect to the
related Mortgage Loan as described in this Prospectus Supplement).
Modification fees, assumption fees and certain other fees and charges
collected on the Mortgage Loans will be allocated between the Master Servicer
and the Special Servicer as additional servicing compensation.
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The Special Servicer will be authorized to invest or direct the investment
of funds held in the REO Account (as defined under "--REO Properties" below) in
Permitted Investments. The Special Servicer will be entitled to retain any
interest or other income earned on such funds. However, the Special Servicer
will be required to cover losses of principal on such investments out of its own
funds.
PAYMENT OF EXPENSES; SERVICING ADVANCES. Each of the Master Servicer and
Special Servicer will, in general, be required to pay all ordinary expenses
incurred by it in connection with its servicing activities under the Pooling
Agreement, including the fees of any sub-servicers retained by it, and will not
be entitled to reimbursement therefor except as expressly provided in the
Pooling Agreement. However, the Master Servicer will be permitted to pay, and
the Special Servicer will be permitted to direct payment of, certain of such
expenses (including certain expenses incurred as a result of a Mortgage Loan
default) directly out of the Custodial Account and at times without regard to
the relationship between the expense and the funds from which it is being paid.
See "--The Custodial Account" and "Description of the Offered Certificates--
Collection Account" in this Prospectus Supplement.
In general, customary, reasonable and necessary "out of pocket" costs and
expenses required to be incurred by the Master Servicer or Special Servicer in
connection with the servicing of a Mortgage Loan after a default, delinquency or
other unanticipated event, or in connection with the administration of any REO
Property, will constitute Servicing Advances. Servicing Advances will be
reimbursable from future payments and other collections, including in the form
of Insurance Proceeds, Condemnation Proceeds and Liquidation Proceeds (each as
defined under "--Custodial Account" below), on or in respect of the related
Mortgage Loan or REO Property ("Related Proceeds").
The Special Servicer may request the Master Servicer to make Servicing
Advances in respect of a Specially Serviced Mortgage Loan or REO Property (in
lieu of the Special Servicer making such Advances). Any such request is to be
made in advance of the date on which the Servicing Advance is required to be
made. The Master Servicer is required to make any such Servicing Advance
requested by the Special Servicer. If the request is timely and properly made,
the Special Servicer will be relieved of any obligations with respect to an
Advance that it timely requests the Master Servicer to make (regardless of
whether or not the Master Servicer makes that Advance).
If the Master Servicer or Special Servicer is required under the Pooling
Agreement to make a Servicing Advance, but neither does so within 15 days after
such Servicing Advance is required to be made, then the Trustee will be
required: (a) if it has actual knowledge of such failure, to give the defaulting
party notice of its failure; and (b) if such failure continues for three more
business days, to make such Servicing Advance.
NOTWITHSTANDING THE FOREGOING DISCUSSION OR ANYTHING ELSE TO THE CONTRARY IN
THIS PROSPECTUS SUPPLEMENT, THE MASTER SERVICER, THE SPECIAL SERVICER AND THE
TRUSTEE WILL NOT BE OBLIGATED TO MAKE SERVICING ADVANCES THAT, IN THE REASONABLE
AND GOOD FAITH JUDGMENT OF THE MASTER SERVICER, THE SPECIAL SERVICER OR THE
TRUSTEE, AS THE CASE MAY BE, WOULD NOT BE ULTIMATELY RECOVERABLE FROM RELATED
PROCEEDS (ANY SERVICING ADVANCE NOT SO RECOVERABLE, A "NONRECOVERABLE SERVICING
ADVANCE"). IF THE MASTER SERVICER, THE SPECIAL SERVICER OR THE TRUSTEE MAKES ANY
SERVICING ADVANCE THAT IT SUBSEQUENTLY DETERMINES IS A NONRECOVERABLE SERVICING
ADVANCE, IT MAY OBTAIN REIMBURSEMENT FOR SUCH SERVICING ADVANCE OUT OF GENERAL
FUNDS ON DEPOSIT IN THE CUSTODIAL ACCOUNT FROM TIME TO TIME. See "--Custodial
Account" below.
The Master Servicer, the Special Servicer and the Trustee will each be
entitled to receive interest on Servicing Advances made by it. Such interest
will accrue on the amount of each Servicing Advance for so long as it is
outstanding at a rate per annum equal to the "prime rate" as published in the
"Money Rates" section of THE WALL STREET JOURNAL, as such "prime rate" may
change from time to time. Interest so accrued with respect to any Servicing
Advance will compound annually and be payable--
- out of Default Interest and late payment charges collected on or in
respect of the related Mortgage Loan during the Collection Period in which
such Servicing Advance is reimbursed, and
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- if such Servicing Advance has been reimbursed, then (to the extent that
the Default Interest and late payment charges described in the prior
bullet point are insufficient) out of any amounts then on deposit in the
Collection Account.
EVIDENCE AS TO COMPLIANCE
On or before April 30 of each year, beginning April 30, 2000, each of the
Master Servicer and the Special Servicer must--
- at its expense, cause a firm of independent public accountants, that is a
member of the American Institute of Certified Public Accountants to
furnish a statement to the Trustee, among others, to the effect that (i)
such firm has obtained a letter of representation regarding certain
matters from the management of the Master Servicer or Special Servicer, as
applicable, which includes an assertion that the Master Servicer or
Special Servicer, as applicable, has complied with certain minimum
mortgage loan servicing standards (to the extent applicable to commercial
and multifamily mortgage loans), identified in the Uniform Single
Attestation program for Mortgage Bankers established by the Mortgage
Bankers Association of America, with respect to the servicing of
commercial and multifamily mortgage loans during the most recently
completed calendar year and (ii) on the basis of an examination conducted
by such firm in accordance with standards established by the American
Institute of Certified Public Accountants, such representation is fairly
stated in all material respects, subject to such exceptions and other
qualifications that may be appropriate (except that, in rendering its
report such firm may rely, as to matters relating to the direct servicing
of commercial and multifamily mortgage loans by sub-servicers, upon
comparable reports of firms of independent certified public accountants
rendered on the basis of examinations conducted in accordance with the
same standards (rendered within one year of such report) with respect to
those sub-servicers); and
- deliver to the Trustee, among others, a statement signed by one or more
officers thereof to the effect that, to the best knowledge of such officer
or officers, the Master Servicer or Special Servicer, as the case may be,
has fulfilled its material obligations under the Pooling Agreement in all
material respects throughout the preceding calendar year (or the portion
thereof during which the Certificates were outstanding).
Copies of the foregoing annual accountants' statement and officer's
certificate of each of the Master Servicer and the Special Servicer will be made
available to Certificateholders (at their expense) upon written request to the
Trustee.
MODIFICATIONS, WAIVERS, AMENDMENTS AND CONSENTS
In the case of any Mortgage Loan other than a Specially Serviced Mortgage
Loan and subject to the rights of the Special Servicer described below, the
Master Servicer will be responsible for responding to any request by a Mortgagor
for the consent of the mortgagee with respect to a modification, waiver or
amendment which would not (with limited exceptions involving the waiver of
Default Interest and late payment charges) affect the amount or timing of any of
the payment terms of such Mortgage Loan, result in the release of the related
Borrower from any material terms of such Mortgage Loan, waive any rights
thereunder with respect to any guarantor thereof, relate to the release or
substitution of any material collateral for such Mortgage Loan or relate to any
waiver of or granting of consent under a "due-on-sale" or "due-on-encumbrance"
clause. To the extent consistent with the foregoing, the Master Servicer will
also be responsible for providing or withholding mortgagee consent with respect
to certain routine matters. Except as described above and in other limited
matters, the Master Servicer may not agree to waive, modify or amend any term of
any Mortgage Loan. Furthermore, the Master Servicer may not agree to any
modification, waiver or amendment of any term of any Mortgage Loan that would
cause any REMIC created under the Pooling Agreement to fail to qualify as a
REMIC under the Code or result in the
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imposition of any tax on "prohibited transactions" or "contributions" after the
startup day under the REMIC Provisions (as defined in the Prospectus).
The Pooling Agreement will permit the Special Servicer to modify, waive or
amend any term of any Mortgage Loan if such modification, waiver or amendment
(a) is consistent with the Servicing Standard, and (b) except under the
circumstances described below, will not--
(i) affect the amount or timing of any scheduled payments of principal,
interest or other amount (including Prepayment Premiums and Yield
Maintenance Charges but excluding Default Interest and other amounts
payable as additional servicing compensation) payable under the Mortgage
Loan,
(ii) affect the obligation of the related Borrower to pay a Prepayment
Premium or Yield Maintenance Charge or permit a principal prepayment
during the applicable Lockout Period,
(iii) except as expressly provided by the related Mortgage or in connection
with a material adverse environmental condition at the related
Mortgaged Property, result in a release of the lien of the related
Mortgage on any material portion of such Mortgaged Property without a
corresponding principal prepayment, or
(iv) in the reasonable, good faith judgment of the Special Servicer,
materially impair the security for the Mortgage Loan or reduce the
likelihood of timely payment of amounts due thereon.
Notwithstanding clause (b) of the preceding paragraph, but subject to the
following paragraph and the discussion under "--The Controlling Class
Representative" below, the Special Servicer may--
(i) reduce the amounts owing under any Specially Serviced Mortgage Loan by
forgiving principal, accrued interest and/or any Prepayment Premium or
Yield Maintenance Charge,
(ii) reduce the amount of the Scheduled P&I Payment on any Specially
Serviced Mortgage Loan, including by way of a reduction in the related
Mortgage Rate,
(iii) forbear in the enforcement of any right granted under any Mortgage Note
or Mortgage relating to a Specially Serviced Mortgage Loan,
(iv) accept a principal prepayment on a Specially Serviced Mortgage Loan
during any Lockout Period, or
(v) extend the date on which any Balloon Payment is scheduled to be due in
respect of a Specially Serviced Mortgage Loan;
provided that (w) the related Borrower is in default with respect to the
Specially Serviced Mortgage Loan or, in the reasonable, good faith judgment of
the Special Servicer, such default is reasonably foreseeable, (x) in the
reasonable, good faith judgment of the Special Servicer, such modification,
waiver or amendment would increase the recovery to Certificateholders on a net
present value basis, (y) such modification, waiver or amendment does not result
in a tax being imposed on the Trust Fund or cause any REMIC created pursuant to
the Pooling Agreement to fail to qualify as a REMIC at any time the Certificates
are outstanding and (z) in connection with extending for more than six months
the date on which any Balloon Payment is scheduled to be due in respect of a
Specially Serviced Mortgage Loan, the Special Servicer has obtained an
appraisal, in accordance with the standards of the Appraisal Institute, of the
related Mortgaged Property, performed by an independent appraiser, in connection
with such extension, which appraisal supports the determination of the Special
Servicer contemplated by clause (x) of this proviso.
In no event, however, will the Special Servicer be permitted to
(i) extend the maturity date of a Mortgage Loan beyond a date that is two
years prior to the Rated Final Distribution Date,
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(ii) extend the maturity date of any Mortgage Loan which has a Mortgage Rate
below the then prevailing interest rate for comparable loans, as
determined by the Special Servicer, unless such Mortgage Loan is a
Balloon Loan as to which the Borrower has failed to make the Balloon
Payment at its scheduled maturity and such Balloon Loan is not a
Specially Serviced Mortgage Loan (other than by reason of failure to
make the Balloon Payment) and has not been delinquent in the preceding
12 months (other than with respect to the Balloon Payment), in which
case the Special Servicer may make up to three one-year extensions at
the then-existing Mortgage Rate for such Mortgage Loan (provided that
such limitation of extensions made at a below market rate will not
limit the ability of the Special Servicer to extend the maturity date
of any Mortgage Loan at an interest rate at or in excess of the
prevailing rate for comparable loans at the time of such modification),
(iii) if the Mortgage Loan is secured by a ground lease (but not the related
fee interest), extend the maturity date of such Mortgage Loan beyond a
date which is less than 10 years prior to the expiration of the term of
such ground lease,
(iv) reduce the Mortgage Rate to a rate below the then-prevailing interest
rate for comparable loans, as determined by the Special Servicer, or
(v) defer interest due on any Mortgage Loan in excess of 10% of the unpaid
principal balance of such Mortgage Loan or defer the collection of
interest on any Mortgage Loan without accruing interest on such deferred
interest at a rate at least equal to the Mortgage Rate of such Mortgage
Loan.
The Special Servicer and Master Servicer will each be required to notify the
Trustee and the Master Servicer of any modification, waiver or amendment of any
term of any Mortgage Loan, and to deliver to the Trustee (with a copy to be
delivered to or retained by, as applicable, the Master Servicer), for deposit in
the related Mortgage File, an original counterpart of the agreement related to
such modification, waiver or amendment, promptly (and in any event within 10
business days) following the execution thereof. Upon reasonable prior written
notice to the Trustee, copies of each agreement whereby any such modification,
waiver or amendment of any term of any Mortgage Loan is effected are required to
be available for review during normal business hours at the offices of the
Trustee. See "Description of the Offered Certificates-- Reports to
Certificateholders; Certain Available Information" in this Prospectus
Supplement.
CUSTODIAL ACCOUNT
GENERAL. The Master Servicer will be required to establish and maintain one
or more separate accounts for purposes of holding payments and other collections
in respect of the Mortgage Loans (collectively, the "Custodial Account"). The
Custodial Account must be established in such a manner and/or with such a
depository as are specified in the Pooling Agreement or, as confirmed in writing
by each Rating Agency, as would not cause a qualification, downgrade or
withdrawal of any of the ratings then assigned by such Rating Agency to any
Class of Certificates (any account meeting such criteria, an "Eligible
Account"). The funds held in the Custodial Account may be held as cash or
invested in Permitted Investments.
Any interest or other income earned on funds in the Custodial Account will
be paid to the Master Servicer as additional compensation subject to the
limitations set forth in the Pooling Agreement. See "--Servicing and Other
Compensation and Payment of Expenses" above.
DEPOSITS. Under the Pooling Agreement, the Master Servicer must deposit or
cause to be deposited in the Custodial Account within one business day following
receipt thereof (in the case of payments and other collections on the Mortgage
Loans) or as otherwise required under the Pooling Agreement, the following
payments and collections received or made by or on behalf of the Master Servicer
subsequent to
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the Closing Date (other than in respect of Scheduled P&I Payments due on the
Mortgage Loans on or before the Cut-off Date, which belong to the Depositor):
(i) all payments on account of principal on the Mortgage Loans, including
principal prepayments;
(ii) all payments on account of interest on the Mortgage Loans, including
Default Interest and Additional Interest;
(iii) all Prepayment Premiums, Yield Maintenance Charges and late payment
charges collected in respect of the Mortgage Loans;
(iv) (A) all proceeds received under any hazard, flood, title or other
insurance policy that provides coverage with respect to a Mortgaged
Property or the related Mortgage Loan (collectively with any comparable
amounts received with respect to an REO Property, "Insurance
Proceeds"), other than any such proceeds applied to the restoration of
the property or otherwise released to the related Borrower or another
appropriate person, (B) all proceeds received in connection with the
condemnation or the taking by right of eminent domain of a Mortgaged
Property (collectively with any comparable amounts received with
respect to an REO Property, "Condemnation Proceeds"), other than any
such proceeds applied to the restoration of the property or otherwise
released to the related Borrower or another appropriate person, and (C)
all other amounts received and retained in connection with the
liquidation of defaulted Mortgage Loans by foreclosure or otherwise
(collectively with any amounts received in connection with the sale of
an REO Property and the amounts described in clause (v) below,
"Liquidation Proceeds");
(v) all cash proceeds paid in connection with (A) the repurchase of any
Mortgage Loan by the Depositor as described under "Description of the
Mortgage Pool--Cures and Repurchases" in this Prospectus Supplement, (B)
the purchase of any defaulted Mortgage Loan by any party as described
under "--Realization Upon Defaulted Mortgage Loans; Sale of Defaulted
Mortgage Loans and REO Properties" below and (C) the purchase of all
remaining Mortgage Loans and REO Properties by the Depositor, the Master
Servicer, the Special Servicer, Lehman or any Controlling Class
Certificateholder as described under "Description of the Offered
Certificates-- Termination" in this Prospectus Supplement;
(vi) any amounts required to be deposited by the Master Servicer in
connection with losses incurred with respect to Permitted Investments
of funds held in the Custodial Account;
(vii) all payments required to be deposited by the Master Servicer or the
Special Servicer in the Custodial Account with respect to any
deductible clause in any blanket insurance policy described under
"--Maintenance of Insurance" below;
(viii) any amount required to be transferred from the REO Account (if
established); and
(ix) any other amounts required to be so deposited under the Pooling
Agreement.
Upon receipt of any of the amounts described in clauses (i) through (v)
above with respect to any Specially Serviced Mortgage Loan, the Special Servicer
is generally required to promptly remit such amounts to the Master Servicer for
deposit in the Custodial Account.
WITHDRAWALS. The Master Servicer may make withdrawals from the Custodial
Account for any of the following purposes (the order set forth below not
constituting an order of priority for such withdrawals):
(i) to remit to the Trustee on or before the Distribution Date each month an
amount generally equal to that portion of the Available Distribution
Amount (as defined under "Description of the Offered
Certificates--Distributions" in this Prospectus Supplement) for the
related Distribution Date then on deposit in the Custodial Account,
together with certain amounts to be paid or reimbursed to the Trustee
from the Collection Account and any Prepayment Premiums, Yield
Maintenance Charges and/or Additional Interest received during the
related Collection Period;
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(ii) to apply amounts held for future distribution on the Certificates to
make P&I Advances;
(iii) to reimburse the Trustee or itself (in that order), as applicable, for
unreimbursed P&I Advances (other than P&I Advances that constitute
Nonrecoverable Advances (as defined below), which are reimbursable as
described in clause (viii) below) made thereby (in each case, with its
own funds), such reimbursement to be made out of Related Proceeds;
(iv) to pay itself earned and unpaid Master Servicing Fees in respect of
each Mortgage Loan (including each Specially Serviced Mortgage Loan and
each REO Mortgage Loan), such payment being limited to amounts received
on or in respect of such Mortgage Loan that are allocable as a recovery
of interest thereon (or, if there has been a final liquidation of such
Mortgage Loan and any related REO Property, such payment to be made out
of general collections on the other Mortgage Loans and REO Properties);
(v) to pay the Special Servicer, out of general collections on the Mortgage
Loans and any REO Properties, Special Servicing Fees in respect of each
Specially Serviced Mortgage Loan and each REO Mortgage Loan;
(vi) to pay the Special Servicer (or, if applicable, a predecessor thereto)
earned and unpaid Workout Fees and Liquidation Fees to which it is
entitled as and from the sources described under "--Servicing and Other
Compensation and Payment of Expenses" above;
(vii) to reimburse the Trustee, itself or the Special Servicer (in that
order), as applicable, for any unreimbursed Servicing Advances made
thereby (in each case, with its own funds), such reimbursement to be
made out of Related Proceeds;
(viii) to reimburse the Trustee, itself or the Special Servicer (in that
order), as applicable, out of general collections on the Mortgage Loans
and REO Properties, for any unreimbursed Advances made thereby (in each
case, with its own funds) that have been determined not to be
ultimately recoverable from Related Proceeds (any such Advance, a
"Nonrecoverable Advance");
(ix) to pay the Trustee, itself or the Special Servicer (in the order
provided for in the Pooling Agreement), as applicable, unpaid interest
on any Advance made thereby, such payment to be made out of Default
Interest and late payment charges received (A) in respect of the
Mortgage Loan as to which such Advance was made and (B) during the
Collection Period in which such Advance is reimbursed;
(x) at such time as it reimburses the Trustee, the Special Servicer or
itself, as applicable, for any unreimbursed Advance as described in
clause (iii), (vii) or (viii) above, to pay the Trustee, the Special
Servicer or itself (in that order), as the case may be, out of general
collections on the Mortgage Loans and any REO Properties, any interest
accrued and payable on such Advance and not otherwise payable pursuant
to clause (ix) above;
(xi) to pay, out of general collections on the Mortgage Loans and any REO
Properties, for costs and expenses incurred by the Trust Fund in
connection with environmental remediation as described under
"--Realization Upon Defaulted Mortgage Loans; Sale of Defaulted
Mortgage Loans and REO Properties" below;
(xii) to pay itself, as additional servicing compensation, (A) interest and
investment income earned in respect of amounts held in the Custodial
Account, (B) any Prepayment Interest Excesses collected in respect of
the Mortgage Loans and (C) to the extent not otherwise applied to cover
interest on Advances, any Default Interest and late payment charges
received in respect of Mortgage Loans that are not Specially Serviced
Mortgage Loans or REO Mortgage Loans;
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(xiii) to pay the Special Servicer, as additional servicing compensation, any
Default Interest and late payment charges received in respect of
Specially Serviced Mortgage Loans and REO Mortgage Loans and not
otherwise applied to cover interest on Advances;
(xiv) to pay, out of general collections on the Mortgage Loans and any REO
Properties, for the cost of an independent appraiser or other expert in
real estate matters as required under the Pooling Agreement;
(xv) to pay itself, the Special Servicer, the Depositor, or any of their
respective directors, officers, employees and agents, as the case may
be, out of general collections on the Mortgage Loans and any REO
Properties, amounts payable to any such person as described under
"--Certain Matters Regarding the Depositor, the Master Servicer and the
Special Servicer" below;
(xvi) to pay, out of general collections on the Mortgage Loans and any REO
Properties, for the cost of certain advice of counsel and tax
accountants, the cost of certain opinions of counsel, the cost of
recording the Pooling Agreement and the cost of the Trustee's
transferring Mortgage Files to a successor after having been terminated
by Certificateholders without cause, all as set forth in the Pooling
Agreement;
(xvii) with respect to each Mortgage Loan purchased pursuant to or as
contemplated by the Pooling Agreement, to pay to the purchaser thereof
all amounts received thereon subsequent to the date of purchase;
(xviii) to pay certain servicing expenses that would, if advanced, constitute
Nonrecoverable Advances, but the payment of which is determined
nonetheless to be in the best interests of the Certificateholders; and
(xix) to clear and terminate the Custodial Account upon the termination of
the Pooling Agreement.
THE CONTROLLING CLASS REPRESENTATIVE
SELECTION. The Pooling Agreement permits the Holder or Holders of the
majority of the Voting Rights (as defined under "Description of the Offered
Certificates--Voting Rights" in this Prospectus Supplement) allocated to the
Controlling Class of Certificates to select a representative (the "Controlling
Class Representative") from whom the Special Servicer will seek advice and
approval and take direction under certain circumstances. In addition, if the
Controlling Class of Certificates is held in book-entry form and confirmation of
the identities of the related beneficial owners has been provided to the
Trustee, such beneficial owners entitled to a majority of the Voting Rights
allocated to the Controlling Class will be entitled to directly select a
Controlling Class Representative. The "Controlling Class" of Certificates is the
Class of Principal Balance Certificates with the latest alphabetical Class
designation that has a Certificate Balance that is greater than 25% of its
original Certificate Balance. However, if no Class of Principal Balance
Certificates has a Certificate Balance that is greater than 25% of its original
Certificate Balance, the then outstanding Class of Principal Balance Certificate
with the latest alphabetical Class designation will be the "Controlling Class"
of Certificates. The Class A-1 and Class A-2 Certificates will be treated as one
Class for determining the Controlling Class of Certificates.
CERTAIN RIGHTS AND POWERS. The Controlling Class Representative will be
entitled to advise the Special Servicer with respect to the following actions of
the Special Servicer, and except as otherwise described below, the Special
Servicer will not be permitted to take any of the following actions as to which
the Controlling Class Representative has objected in writing within 10 business
days of having been notified thereof and having been provided with all
reasonably requested information with respect thereto:
(i) any foreclosure upon or comparable conversion (which may include
acquisitions of an REO Property) of the ownership of properties securing
such of the Specially Serviced Mortgage Loans as come into and continue
in default;
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(ii) any modification, amendment or waiver of a monetary term (including the
timing of payments) or any material non-monetary term of a Mortgage
Loan;
(iii) any proposed sale of a defaulted Mortgage Loan or REO Property (other
than in connection with the termination of the Trust as described under
"Description of the Offered Certificates-- Termination" in this
Prospectus Supplement) for less than the applicable Purchase Price;
(iv) any acceptance of a discounted payoff;
(v) any determination to bring an REO Property into compliance with
applicable environmental laws or to otherwise address hazardous material
located at an REO Property;
(vi) any release of collateral (other than in accordance with the terms of,
or upon satisfaction of, a Mortgage Loan);
(vii) any acceptance of substitute or additional collateral for a Mortgage
Loan;
(viii) any waiver of a "due-on-sale" or "due-on-encumbrance" clause; and
(ix) any acceptance of an assumption agreement releasing a Borrower from
liability under a Mortgage Loan.
In addition, except as otherwise described below, the Controlling Class
Representative may direct the Special Servicer to take, or to refrain from
taking, such actions as the Controlling Class Representative may deem advisable
or as to which provision is otherwise made in the Pooling Agreement.
Notwithstanding the foregoing, no such advise, direction or objection
contemplated by either of the two preceding paragraphs may require or cause the
Special Servicer to violate any provision of the Pooling Agreement, including
the Special Servicer's obligation to act in accordance with the Servicing
Standard.
LIMITATION ON LIABILITY OF CONTROLLING CLASS REPRESENTATIVE. The
Controlling Class Representative will not be liable to the Trust or the
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Pooling Agreement, or for errors in
judgment; provided, however, that the Controlling Class Representative will not
be protected against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
or by reason of reckless disregard of obligations or duties. Each
Certificateholder acknowledges and agrees, by its acceptance of its
Certificates, that the Controlling Class Representative may have special
relationships and interests that conflict with those of Holders of one or more
Classes of Certificates, that the Controlling Class Representative may act
solely in the interests of the Holders of the Controlling Class, that the
Controlling Class Representative does not have any duties to the Holders of any
Class of Certificates other than the Controlling Class, that the Controlling
Class Representative may take actions that favor the interests of the Holders of
the Controlling Class over the interests of the Holders of one or more other
Classes, that the Controlling Class Representative will not be deemed to have
been grossly negligent or reckless, or to have acted in bad faith or engaged in
willful misconduct, by reason of its having acted solely in the interests of the
Controlling Class, and that the Controlling Class Representative will have no
liability whatsoever for having so acted, and no Certificateholder may take any
action whatsoever against the Controlling Class Representative for having so
acted.
REALIZATION UPON DEFAULTED MORTGAGE LOANS; SALE OF DEFAULTED MORTGAGE LOANS AND
REO PROPERTIES
A Borrower's failure to make required Mortgage Loan payments may mean that
operating income is insufficient to service the mortgage debt, or may reflect
the diversion of that income from the servicing of the mortgage debt. In
addition, a Borrower that is unable to make Mortgage Loan payments may also be
unable to make timely payments of taxes and to otherwise maintain and insure the
related Mortgaged Property. In general, the Special Servicer will be required to
monitor any Mortgage Loan that is in default, evaluate whether the causes of the
default can be corrected over a reasonable period without significant
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impairment of the value of the related Mortgaged Property, initiate corrective
action in cooperation with the Borrower if cure is likely, inspect the related
Mortgaged Property and take such other actions as are consistent with the
Servicing Standard. A significant period of time may elapse before the Special
Servicer is able to assess the success of any such corrective action or the need
for additional initiatives.
The time within which the Special Servicer can make the initial
determination of appropriate action, evaluate the success of corrective action,
develop additional initiatives, institute foreclosure proceedings and actually
foreclose (or accept a deed to a Mortgaged Property in lieu of foreclosure) on
behalf of the Certificateholders may vary considerably depending on the
particular Mortgage Loan, the Mortgaged Property, the Borrower, the presence of
an acceptable party to assume the Mortgage Loan and the laws of the jurisdiction
in which the Mortgaged Property is located. If a Borrower files a bankruptcy
petition, the Special Servicer may not be permitted to accelerate the maturity
of the related Mortgage Loan or to foreclose on the Mortgaged Property for a
considerable period of time. See "Certain Legal Aspects of Mortgage Loans" in
the Prospectus.
The Pooling Agreement grants to the Master Servicer, the Special Servicer
and any Controlling Class Certificateholder (with priority among such Holders
based on size of percentage interests held in the Controlling Class) a right to
purchase from the Trust certain defaulted Mortgage Loans in the priority
described below. If the Special Servicer has determined, in its good faith and
reasonable judgment, that any defaulted Mortgage Loan will become subject to
foreclosure or similar proceedings, the Special Servicer will be required to
give prompt written notice of such determination to the Trustee and the Master
Servicer. The Trustee will be required, within 10 days after receipt of such
notice, to provide a similar notice to the Controlling Class Certificateholders.
Upon receipt of such notice and for a period of 10 days thereafter, any such
Certificateholder may (but will not be obligated to) purchase any such defaulted
Mortgage Loan from the Trust, at a price equal to the applicable Purchase Price.
If no such Certificateholder has purchased such defaulted Mortgage Loan within
10 days of its having received notice in respect thereof, either the Special
Servicer or the Master Servicer, in that order of priority, may (but is not
obligated to) purchase such defaulted Mortgage Loan from the Trust, at a price
equal to the applicable Purchase Price. Despite the right of the Master
Servicer, the Special Servicer and/or any Controlling Class Certificateholder to
purchase any defaulted Mortgage Loan, the Special Servicer need not delay
foreclosure or similar proceedings with respect to such Mortgage Loan.
The Special Servicer, at any time, may offer to sell any defaulted Mortgage
Loan that has not otherwise been purchased as described in the prior paragraph,
if such a sale would be in the best economic interests of the Trust. Such offer
is to be made in a commercially reasonable manner for a period of not less than
10 days. Subject to any rights that the Controlling Class Representative may
have to object if the winning bid is not at least equal to the applicable
Purchase Price, the Special Servicer will be permitted to accept any cash offer
that constitutes a "fair price" (determined in accordance with the Pooling
Agreement) for the particular Mortgage Loan. See "--The Controlling Class
Representative--Certain Rights and Powers" above.
Notwithstanding any of the foregoing, the Special Servicer will not be
obligated to accept the highest cash bid if the Special Servicer determines, in
accordance with the Servicing Standard, that rejection of such bid would be in
the best interests of the Certificateholders (as a collective whole). In
addition, subject to any rights that the Controlling Class Representative may
have to object if the winning bid is not at least equal to the applicable
Purchase Price, the Special Servicer may accept a lower cash bid (from any
person or entity other than itself or an affiliate) if it determines, in
accordance with the Servicing Standard, that acceptance of such bid would be in
the best interests of the Certificateholders (as a collective whole) (for
example, if the prospective buyer making the lower bid is more likely to perform
its obligations or the terms (other than the price) offered by the prospective
buyer making the lower bid are more favorable).
Neither the Trustee, in its individual capacity, nor any of its affiliates
may bid for or purchase any defaulted Mortgage Loan or any REO Property.
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The Special Servicer will be required to exercise reasonable efforts,
consistent with the Servicing Standard and the discussion under "--The
Controlling Class Representative--Certain Rights and Powers" above, to foreclose
upon or otherwise comparably convert the ownership of properties securing such
of the Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments and
which are not sold as described above. Notwithstanding the foregoing, the
Special Servicer may not, on behalf of the Trust, obtain title to a Mortgaged
Property by foreclosure, deed in lieu of foreclosure or otherwise, or take any
other action with respect to any Mortgaged Property, if, as a result of any such
action, the Trustee, on behalf of the Certificateholders, could, in the
reasonable, good faith judgment of the Special Servicer exercised in accordance
with the Servicing Standard, be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or "operator" of such
Mortgaged Property within the meaning of CERCLA or any comparable law, unless:
(i) the Special Servicer has previously determined in accordance with the
Servicing Standard, based on a report prepared by a person who regularly
conducts environmental audits, that the Mortgaged Property is in
compliance with applicable environmental laws and regulations and there
are no circumstances or conditions present at the Mortgaged Property
that have resulted in any contamination for which investigation,
testing, monitoring, containment, clean-up or remediation could be
required under any applicable environmental laws and regulations; or
(ii) in the event that the determination described in the immediately
preceding clause (i) above cannot be made, (A) the Special Servicer has
previously determined in accordance with the Servicing Standard, on the
same basis as described in the immediately preceding clause (i) above,
that it would maximize the recovery to the Certificateholders on a
present value basis to acquire title to or possession of the Mortgaged
Property and to take such remedial, corrective and/or other further
actions as are necessary to bring the Mortgaged Property into
compliance with applicable environmental laws and regulations and to
appropriately address any of the circumstances and conditions referred
to in the immediately preceding clause (i) above, and (B) the
Controlling Class Representative has not objected to the Special
Servicer's doing so (or, if the Controlling Class Representative has
objected, such objection is, in the Special Servicer's judgment,
contrary to the Servicing Standard). See "--The Controlling Class
Representative-- Certain Rights and Powers" above and "Certain Legal
Aspects of Mortgage Loans--Environmental Matters" in the Prospectus.
The cost of any environmental testing will be covered by, and reimbursable
as, a Servicing Advance, and the cost of any remedial, corrective or other
further action contemplated by clause (ii) of the preceding paragraph will be
payable directly out of the Custodial Account.
If neither of the conditions set forth in clauses (i) and (ii) of the second
preceding paragraph has been satisfied with respect to any Mortgaged Property
securing a defaulted Mortgage Loan, the Special Servicer will be required to
take such action as is in accordance with the Servicing Standard (other than
proceeding against the Mortgaged Property). In connection therewith, the Special
Servicer may, on behalf of the Trust, release all or a portion of such Mortgaged
Property from the lien of the related Mortgage; provided that, if such Mortgage
Loan has a then outstanding principal balance greater than $1 million, then
prior to effecting such release, (i) the Special Servicer must have notified the
Trustee, among others, (ii) the Trustee must have notified the
Certificateholders, (iii) the Holders of Certificates entitled to a majority of
the Voting Rights must not have objected to such release within 30 days of their
having been so notified thereof and (iv) the Controlling Class Representative
must not have objected to such release or, if it did, such objection was, in the
Special Servicer's judgment, inconsistent with the Servicing Standard.
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REO PROPERTIES
If title to any Mortgaged Property is acquired by the Special Servicer on
behalf of the Trust, the Special Servicer will be required to sell such
Mortgaged Property not later than the end of the third calendar year following
the year of acquisition, unless--
- the Internal Revenue Service grants an extension of time to sell such
property (an "REO Extension"), or
- the Special Servicer obtains an opinion of independent counsel generally
to the effect that the holding of such property subsequent to the end of
the third calendar year following the year in which such acquisition
occurred will not result in the imposition of a tax on the Trust or cause
any REMIC created under the Pooling Agreement to fail to qualify as a
REMIC under the Code.
Subject to the foregoing, the Special Servicer will generally be required to
solicit cash offers for any REO Property in such a manner as will be reasonably
likely to realize a fair price for such property. The Special Servicer may
retain an independent contractor to operate and manage any REO Property. The
retention of an independent contractor will not relieve the Special Servicer of
its obligations with respect to such REO Property.
In general, the Special Servicer or an independent contractor employed by
the Special Servicer at the expense of the Trust will be obligated to operate
and manage any Mortgaged Property acquired as REO Property in a manner that (i)
maintains its status as "foreclosure property" under the REMIC Provisions (as
defined in the Prospectus) and (ii) would, to the extent commercially reasonable
and consistent with the foregoing clause (i), maximize the Trust's net after-tax
proceeds from such property. After the Special Servicer reviews the operation of
such property and consults with the Trustee (or any person appointed thereby to
act as REMIC administrator) to determine the Trust's federal income tax
reporting position with respect to the income it is anticipated that the Trust
would derive from such property, the Special Servicer could determine
(particularly in the case of an REO Property that is a hotel or residential
health-care facility) that it would not be commercially reasonable to manage and
operate such property in a manner that would avoid the imposition of a tax on
"net income from foreclosure property", within the meaning of Section
857(b)(4)(B) of the Code, or a tax on "prohibited transactions" under Section
860F of the Code (either such tax referred to in this Prospectus Supplement as
an "REO Tax"). To the extent that income the Trust receives from an REO Property
is subject to--
(i) a tax on "net income from foreclosure property", such income would be
subject to federal tax at the highest marginal corporate tax rate
(currently 35%), or
(ii) a tax on "prohibited transactions", such income would be subject to
federal tax at a 100% rate.
The determination as to whether income from an REO Property would be subject
to an REO Tax will depend on the specific facts and circumstances relating to
the management and operation of each REO Property. Generally, income from an REO
Property that is directly operated by the Special Servicer would be apportioned
and classified as "service" or "non-service" income. The "service" portion of
such income could be subject to federal tax either at the highest marginal
corporate tax rate or at the 100% rate on "prohibited transactions", and the
"non-service" portion of such income could be subject to federal tax at the
highest marginal corporate tax rate or, although it appears unlikely, at the
100% rate applicable to "prohibited transactions". Any REO Tax imposed on the
Trust's income from an REO Property would reduce the amount available for
distribution to Certificateholders. See "Federal Income Tax Consequences" in
this Prospectus Supplement and "Federal Income Tax Considerations" in the
Prospectus. The reasonable "out-of-pocket" costs and expenses of obtaining
professional tax advice in connection with the foregoing will be payable out of
the Custodial Account.
One Mortgage Loan, representing 0.9% of the Initial Pool Balance, is secured
by a Mortgaged Property located in Puerto Rico. In the case of an REO Property
located in Puerto Roco, if the Trust were engaged in a trade or business in
Puerto Rico, the Trust would be subject to Puerto Rican income tax with
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respect to income from such REO Property. If the Trust were not engaged in a
trade or business in Puerto Rico, it would not be subject to Puerto Rican income
tax on income from an REO Property located in Puerto Rico; however, income
received from such REO Property, such as rental payments, would be subject to a
Puerto Rican withholding tax at a rate of 29%. Gain on a sale by the Trust of
REO Property located in Puerto Rico may be subject to Puerto Rican income tax at
a rate of 29%, which may be collected through withholding. For purposes of
computing gain on the sale of such property, the Trust's tax basis in the
property will reflect its original cost to the Trust plus the cost of any
permanent improvements. The imposition of any of these Puerto Rican taxes on the
Trust could reduce the net proceeds available for distribution with respect to
the Certificates. In addition, holders of Certificates would not be entitled to
claim foreign tax credits for federal income tax purposes with respect to any
such Puerto Rican tax imposed on the Trust.
The Special Servicer will be required to segregate and hold all funds
collected and received in connection with any REO Property separate and apart
from its own funds and general assets. If an REO Property is acquired, the
Special Servicer will be required to establish and maintain one or more accounts
(collectively, the "REO Account"), to be held on behalf of the Trustee in trust
for the benefit of the Certificateholders, for the retention of revenues and
other proceeds derived from each REO Property. The REO Account is to be an
Eligible Account. The Special Servicer will be required to deposit, or cause to
be deposited, in the REO Account, upon receipt, all net income, Insurance
Proceeds, Condemnation Proceeds and Liquidation Proceeds received in respect of
an REO Property. The funds held in the REO Account may be held as cash or
invested in Permitted Investments. Any interest or other income earned on funds
in the REO Account will be payable to the Special Servicer, subject to the
limitations set forth in the Pooling Agreement.
The Special Servicer will be required to withdraw from the REO Account funds
necessary for the proper operation, management, leasing, maintenance and
disposition of any REO Property, but only to the extent of amounts on deposit in
the REO Account relating to such REO Property. Promptly following the end of
each Collection Period, the Special Servicer will be required to withdraw from
the REO Account and deposit, or deliver to the Master Servicer for deposit, into
the Custodial Account the aggregate of all amounts received in respect of each
REO Property during such Collection Period, net of (i) any withdrawals made out
of such amounts as described in the preceding sentence and (ii) any portion of
such amounts that may be retained as reserves as described in the next sentence.
The Special Servicer may, subject to certain limitations set forth in the
Pooling Agreement, retain in the REO Account such portion of such proceeds and
collections as may be necessary to maintain a reserve of sufficient funds for
the proper operation, management, leasing, maintenance and disposition of the
related REO Property (including the creation of a reasonable reserve for
repairs, replacements, necessary capital improvements and other related
expenses).
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Special Servicer will be required at its expense to perform or cause to
be performed a physical inspection of a Mortgaged Property as soon as
practicable after the related Mortgage Loan becomes a Specially Mortgage Loan
and annually thereafter for so long as the related Mortgage Loan remains a
Specially Serviced Mortgage Loan. In addition, the Special Servicer must at its
expense perform or cause to be performed a physical inspection of each of the
REO Properties at least once per calendar year. The Master Servicer will be
required at its expense to perform or cause to be performed a physical
inspection of each Mortgaged Property securing a non-Specially Serviced Mortgage
Loan (i) at least once every three calendar years in the case of Mortgaged
Properties securing Credit Lease Loans, (ii) at least once every two calendar
years in the case of Mortgage Loans that have outstanding principal balances of
(or Mortgaged Properties that have allocated loan amounts of) $2,000,000 or less
and (iii) at least once every calendar year in the case of all other such
Mortgaged Properties. The Master Servicer and the Special Servicer will each be
required to prepare or cause to be prepared and deliver to the Trustee a written
report of each such inspection performed by it that generally describes the
condition of the Mortgaged
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Property and that specifies the existence of any sale, transfer or abandonment
of the Mortgaged Property or any material change in its condition or value.
The Special Servicer, in the case of any Specially Serviced Mortgage Loans,
and the Master Servicer, in the case of all other Mortgage Loans, will also be
required to use reasonable efforts to collect from the related Borrowers (and,
in the case of the Special Servicer, to deliver to the Master Servicer) and
review the quarterly and annual operating statements and rent rolls with respect
to each of the Mortgaged Properties and REO Properties. In connection therewith,
with respect to each Mortgaged Property and REO Property, the Master Servicer
will be required to prepare (based on reports generated by itself and the
Special Servicer) and deliver to the Trustee a Comparative Financial Status
Report for, or as of the end of, the applicable period. See "Description of the
Offered Certificates--Reports to Certificateholders; Certain Available
Information" in this Prospectus Supplement. Each of the Mortgage Loans requires
the related Borrower to deliver an annual property operating statement. However,
there can be no assurance that any operating statements required to be delivered
will in fact be delivered, nor are the Master Servicer and the Special Servicer
likely to have any practical means of compelling such delivery in the case of an
otherwise performing Mortgage Loan.
REPLACEMENT OF THE SPECIAL SERVICER
The Pooling Agreement will permit the Holder or Holders of the majority of
the Voting Rights allocated to the Controlling Class to terminate an existing
Special Servicer and to appoint a successor thereto.
Any such termination and appointment of a successor special servicer will be
subject to, among other things, the Trustee's receipt of--
- written confirmation from each Rating Agency that the appointment of such
successor will not result in a qualification, downgrade or withdrawal of
any of the ratings then assigned thereby to the respective Classes of
Certificates, and
- the written agreement of the proposed Special Servicer to be bound by the
terms and conditions of the Pooling Agreement, together with an opinion of
counsel regarding, among other things, the enforceability thereof.
If the Controlling Class of Certificates is held in book-entry form and
confirmation of the identities of the related beneficial owners has been
provided to the Trustee, such beneficial owners entitled to a majority of the
Voting Rights allocated to the Controlling Class will be entitled to directly
replace the Special Servicer.
MAINTENANCE OF INSURANCE
The Pooling Agreement will require the Master Servicer (with respect to
Mortgage Loans other than Specially Serviced Loans) and the Special Servicer
(with respect to Specially Serviced Mortgage Loans) to use reasonable efforts,
consistent with the Servicing Standard, to cause to be maintained for each
Mortgaged Property all insurance coverage as is required under the related
Mortgage. The Pooling Agreement will further provide that--
- if and to the extent that any such Mortgage permits the holder thereof any
discretion (by way of consent, approval or otherwise) as to the insurance
coverage that the related Borrower is required to maintain, the Master
Servicer or the Special Servicer, as the case may be, must exercise such
discretion in a manner consistent with the Servicing Standard; and
- if and to the extent that a Mortgage so permits, the Master Servicer or
the Special Servicer, as the case may be, must use reasonable efforts to
cause the related Borrower to obtain the required insurance coverage from
insurance companies or security or bonding companies qualified to write
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the related insurance policy in the relevant jurisdiction ("Qualified
Insurers") that have a "claims paying ability" or "financial strength"
rating meeting the requirements of the Pooling Agreement.
Any Controlling Class Certificateholder may request that earthquake
insurance be secured for one or more Mortgaged Properties at its expense, to the
extent such insurance may reasonably be obtained.
The Special Servicer will be required, consistent with the Servicing
Standard, to cause to be maintained for each REO Property no less insurance
coverage than was previously required of the applicable Borrower under the
related Mortgage.
If either the Master Servicer or the Special Servicer obtains and maintains
a blanket policy insuring against hazard losses on all of the Mortgage Loans
and/or REO Properties that it is required to service and administer, then, to
the extent such policy (i) is obtained from a Qualified Insurer having a
"claims-paying ability" or "financial strength" rating that meets (or the
obligations of which are guaranteed by an entity having such a rating that
meets) the requirements of the Pooling Agreement and (ii) provides protection
equivalent to the individual policies otherwise required, the Master Servicer or
the Special Servicer, as the case may be, will be deemed to have satisfied its
obligation to cause hazard insurance to be maintained on the related Mortgaged
Properties and/or REO Properties. Such blanket policy may contain a customary
deductible clause, except that if there has not been maintained on the related
Mortgaged Property or REO Property an individual hazard insurance policy
complying with the requirements described in the preceding two paragraphs, and
there occur one or more losses that would have been covered by such individual
policy, then the Master Servicer or Special Servicer, as appropriate, must
promptly deposit into the Custodial Account from its own funds the amount of
such losses that would have been so covered by an individual policy but are not
covered under the blanket policy because of such deductible clause.
CERTAIN MATTERS REGARDING THE DEPOSITOR, THE MASTER SERVICER AND THE SPECIAL
SERVICER
Any entity serving as Master Servicer or Special Servicer under the Pooling
Agreement may have other normal business relationships with the Depositor or the
Depositor's affiliates. The Pooling Agreement will permit each of the Master
Servicer and the Special Servicer to resign from its obligations thereunder (in
such capacity) upon a determination that such obligations are no longer
permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it. Unless otherwise
required by applicable law, no such resignation will become effective until the
Trustee or other successor has assumed the obligations and duties of the
resigning Master Servicer or Special Servicer, as the case may be, under the
Pooling Agreement. The Master Servicer and the Special Servicer will each also
have the right to resign at any other time provided that--
(i) a willing successor thereto reasonably acceptable to the Depositor has
been found,
(ii) each of the Rating Agencies confirms in writing that the successor's
appointment will not result in a qualification, downgrade or withdrawal
of any rating or ratings then assigned to any Class of Certificates,
(iii) the resigning party pays all costs and expenses in connection with such
transfer, and
(iv) the successor accepts appointment prior to the effectiveness of such
resignation and agrees in writing to be bound by the terms and
conditions of the Pooling Agreement.
Unless the long-term debt obligations thereof satisfy the ratings criteria
specified in the Pooling Agreement, the Master Servicer and Special Servicer
will each be required to maintain a fidelity bond and errors and omissions
policy or their equivalent that provides coverage against losses that may be
sustained as a result of an officer's or employee's misappropriation of funds or
errors and omissions, subject to certain limitations as to amount of coverage,
deductible amounts, conditions, exclusions and exceptions permitted by the
Pooling Agreement.
The Pooling Agreement will provide that none of the Depositor, the Master
Servicer or the Special Servicer will be under any liability to the Trust, the
Trustee or the Certificateholders for any action taken,
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or not taken, in good faith pursuant to the Pooling Agreement or for errors in
judgment, except that no such entity will be protected against any liability
that would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of obligations or duties thereunder. The Pooling
Agreement will further provide that the Depositor, the Master Servicer, the
Special Servicer and any director, officer, employee or agent of any of them
will be entitled to indemnification by the Trust Fund against any loss,
liability or reasonable expense incurred in connection with the Pooling
Agreement or the Certificates, other than any loss, liability or expense--
(i) that satisfies the criteria of a Servicing Advance (and which will be
reimbursable out of Related Proceeds);
(ii) that constitutes allocable overhead;
(iii) that, under generally accepted servicing practices in the commercial
real estate loan servicing industry, constitutes a normal and customary
servicing expense with respect to non-defaulted Mortgage Loans;
(iv) specifically required to be borne by such party, without right of
reimbursement, pursuant to the terms thereof;
(iii) incurred in connection with any breach of a representation, warranty or
covenant made therein; or
(iv) incurred by reason of willful misfeasance, bad faith or negligence in
the performance of obligations or duties thereunder.
In addition, the Pooling Agreement will provide that none of the Depositor,
the Master Servicer or the Special Servicer will be under an obligation to
appear in, prosecute or defend any legal action unless (a) such action is
related to its respective responsibilities thereunder and (b) either (i) it is
specifically required to bear the expense of such action or (ii) such action
will not, in its opinion, involve it in any ultimate expense or liability for
which it would not be reimbursed under the Pooling Agreement. However, each of
the Depositor, the Master Servicer and the Special Servicer will be permitted,
in the exercise of its discretion, to undertake any such action that it may deem
necessary or desirable with respect to the enforcement and/or protection of the
rights and duties of the parties to the Pooling Agreement and the interests of
the Certificateholders thereunder. In such event, the legal expenses and costs
of such action, and any liability resulting therefrom, will be expenses, costs
and liabilities of the Trust, and the Depositor, the Master Servicer or the
Special Servicer, as the case may be, will be entitled to charge the Custodial
Account therefor.
Any person into which the Depositor, the Master Servicer or the Special
Servicer may be merged or consolidated, or any person resulting from any merger
or consolidation to which the Depositor, the Master Servicer or the Special
Servicer is a party, or any person succeeding to the business (which may, in the
case of the Master Servicer or Special Servicer, be limited to the commercial
loan servicing business) of the Depositor, the Master Servicer or the Special
Servicer, will be the successor of the Depositor, the Master Servicer or the
Special Servicer, as the case may be, under the Pooling Agreement; except that
no successor or surviving person will succeed to the rights of the Master
Servicer or the Special Servicer unless, among other things, such succession
will not result in any qualification, downgrade or withdrawal of the rating then
assigned by any Rating Agency to any Class of Certificates (as confirmed in
writing).
EVENTS OF DEFAULT
"Events of Default" under the Pooling Agreement will include each of the
following events, circumstances and conditions (and may include others):
(1) any failure by the Master Servicer or the Special Servicer to deposit, or to
remit to the appropriate party for deposit, into the Custodial Account or
REO Account, as applicable, any amount required to be so deposited;
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(2) any failure by the Master Servicer to remit to the Trustee for deposit in
the Collection Account any amount (other than a P&I Advance) required to be
so remitted, which continues unremedied as of a specified time on the
applicable Distribution Date;
(3) any failure by the Master Servicer or the Special Servicer to timely make
any Servicing Advance required to be made by it under the Pooling Agreement,
which Servicing Advance remains unmade for a period of three business days
following the date on which notice has been given to the Master Servicer or
the Special Servicer, as the case may be, by the Trustee as described under
"Servicing of the Mortgage Loans--Servicing and Other Compensation and
Payment of Expenses" in this Prospectus Supplement;
(4) any failure by the Master Servicer or the Special Servicer duly to observe
or perform in any material respect any of its other covenants or agreements
under the Pooling Agreement, which failure continues unremedied for 30 days
after written notice of such failure, requiring the same to be remedied, has
been given to the Master Servicer or the Special Servicer, as the case may
be, by any other party to the Pooling Agreement or to the Master Servicer or
the Special Servicer, as the case may be (with a copy to each other party to
the Pooling Agreement), by Certificateholders entitled to not less than 25%
of the Voting Rights, provided, however, that with respect to any such
failure which is not curable within such 30-day period, the Master Servicer
or the Special Servicer, as the case may be, will be entitled to an
additional cure period of 30 days to effect such cure so long as the Master
Servicer or the Special Servicer, as the case may be, has commenced to cure
such failure within the initial 30-day period and has provided the Trustee
with an officer's certificate certifying that it has diligently pursued, and
is continuing to pursue, a full cure;
(5) any breach by the Master Servicer or the Special Servicer of any of its
representations or warranties contained in the Pooling Agreement that
materially and adversely affects the interests of any Class of
Certificateholders and that continues unremedied for 30 days after written
notice of such breach, requiring the same to be remedied, has been given to
the Master Servicer or the Special Servicer, as the case may be, by any
other party to the Pooling Agreement, or to the Master Servicer or the
Special Servicer, as the case may be (with a copy to each other party to the
Pooling Agreement), by Certificateholders entitled to not less than 25% of
the Voting Rights, provided, however, that with respect to any breach which
is not curable within such 30-day period, the Master Servicer or the Special
Servicer, as the case may be, will be entitled to an additional cure period
of 30 days so long as the Master Servicer or the Special Servicer, as the
case may be, has commenced to cure such breach within the initial 30-day
period and has provided the Trustee with an officer's certificate certifying
that it has diligently pursued, and is continuing to pursue, a full cure;
(6) certain events of insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings in respect of or relating to the
Master Servicer or the Special Servicer and certain actions by or on behalf
of the Master Servicer or the Special Servicer indicating its insolvency or
inability to pay its obligations;
(7) one or more ratings assigned by either Rating Agency to the Certificates has
been qualified, downgraded or withdrawn, or otherwise made the subject of a
"negative" credit watch, which such Rating Agency has determined is solely a
result of the Master Servicer or Special Servicer, as the case may be,
acting in such capacity; and
(8) the Master Servicer or the Special Servicer, as the case may be, is no
longer "approved" by either Rating Agency to act in such capacity for pools
of mortgage loans similar to the Mortgage Pool with ratings similar to that
of the Certificates; and such failure to be so "approved" shall continue
unremedied for 30 days after the receipt by the Master Servicer or Special
Servicer, as the case may be, of notice of such failure or such lesser
period if either Rating Agency confirms in writing that failure to remove
the Master Servicer or Special Servicer, as the case may be, at such earlier
time will,
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in and of itself, cause a downgrade, qualification or withdrawal of the then
current ratings of the Certificates.
When a single entity acts as Master Servicer and Special Servicer, an Event
of Default in one such capacity will constitute an Event of Default in the other
such capacity.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default described in clauses 1-6 under "--Events of Default"
above occurs with respect to the Master Servicer or the Special Servicer and
remains unremedied, the Trustee will be authorized, and at the direction of
Certificateholders entitled to not less than 25% of the Voting Rights, the
Trustee will be required, to terminate all of the rights and obligations of the
defaulting party under the Pooling Agreement and in and to the Trust Fund other
than any rights thereof as a Certificateholder (however, termination based
solely on an Event of Default described in clause 6 under "--Events of Default"
above may be unenforceable). If an Event of Default described in clauses 7 and 8
under "--Events of Default" above occurs with respect to the Master Servicer or
the Special Servicer and remains unremedied, the Trustee is required to
terminate all of the rights and obligations of the defaulting party under the
Pooling Agreement and in and to the Trust Fund other than any rights thereof as
a Certificateholder. Upon any such termination, the Trustee will succeed to all
of the responsibilities, duties and liabilities of the Master Servicer or
Special Servicer, as the case may be, under the Pooling Agreement and will be
entitled to like compensation arrangements. If the Trustee is unwilling to so
act, it may (or, at the written request of Certificateholders entitled to a
majority of the Voting Rights, or if the Trustee is unable, or is not approved
by each Rating Agency, to act as a master servicer or special servicer, as the
case may be, the Trustee will be required to) appoint, or petition a court of
competent jurisdiction to appoint, an established mortgage loan servicing
institution to act as successor Master Servicer or Special Servicer (subject in
the case of successor Special Servicer, to the rights of the Holders of
Certificates evidencing a majority interest in the Controlling Class to
designate a successor Special Servicer), as the case may be, under the Pooling
Agreement. Pending such appointment, the Trustee will be obligated to act in
such capacity.
Certificateholders entitled to at least 66 2/3% of the Voting Rights
allocated to each Class of Certificates affected by any Event of Default may
waive such Event of Default; except that an Event of Default described in
clauses 1, 2, 7 and 8 under "--Events of Default" above may only be waived by
all of the Certificateholders of the affected Classes. Upon any such waiver of
an Event of Default, such Event of Default will cease to exist and will be
deemed to have been remedied for every purpose under the Pooling Agreement.
No Certificateholder will have the right under the Pooling Agreement to
institute any proceeding with respect thereto unless such Holder previously has
given to the Trustee written notice of default and unless (except in the case of
a default by the Trustee) Certificateholders entitled to not less than 25% of
the Voting Rights shall have made written request upon the Trustee to institute
such proceeding in its own name as Trustee thereunder and shall have offered to
the Trustee reasonable indemnity, and the Trustee for 60 days shall have
neglected or refused to institute any such proceeding. The Trustee, however,
will be under no obligation to exercise any of the trusts or powers vested in it
by the Pooling Agreement or to make any investigation of matters arising
thereunder or to institute, conduct or defend any litigation thereunder or in
relation thereto at the request, order or direction of any of the
Certificateholders, unless in the Trustee's opinion, such Certificateholders
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby.
SALE OF MASTER SERVICING RIGHTS
If the Master Servicer is terminated as a result of the Events of Default
described in clauses 7 and 8 under "--Events of Default" above, then subject to
certain conditions, the Trustee will solicit bids for the Master Servicer's
servicing rights under the Pooling Agreement and will deliver the net proceeds
of any resulting sale to the Master Servicer. Any such attempted sale is to
occur during the 45-day period following such termination, during which 45-day
period the Trustee will act as successor Master Servicer. See "--Events of
Default" and "--Rights upon Event of Default" above in this Prospectus
Supplement.
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DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Certificates will be issued on or about the Closing Date, pursuant to
the Pooling Agreement. They will represent in the aggregate the entire
beneficial ownership interest in the Trust. The assets of the Trust will
include:
- the Mortgage Loans;
- any and all payments under and proceeds of the Mortgage Loans received
after the Cut-off Date (exclusive of payments of principal, interest and
other amounts due thereon on or before the Cut-off Date);
- the Mortgage Files for the Mortgage Loans;
- any REO Properties; and
- such funds or assets as from time to time are deposited in the Collection
Account (see "--Collection Account" below), the Custodial Account, the
Interest Reserve Account, and/or the REO Account.
The Certificates will include seventeen (17) separate Classes, seven (7) of
which are Classes of Offered Certificates and ten (10) of which are Classes of
Private Certificates. The tables below set forth the Class designation, the
approximate initial Certificate Balance or Notional Amount and the Pass-Through
Rate (or, in the case of the Class X Certificates, the initial Pass-Through
Rate) for each Class of Certificates.
OFFERED CERTIFICATES
<TABLE>
<CAPTION>
INITIAL APPROXIMATE
CERTIFICATE BALANCE OR INITIAL
CLASS DESIGNATION NOTIONAL AMOUNT(1) CREDIT SUPPORT PASS-THROUGH RATE
- -------------------------------------------------------- ------------------------- --------------------- -----------------------
<S> <C> <C> <C>
Class A-1...............................................
Class A-2...............................................
Class B.................................................
Class C.................................................
Class D.................................................
Class E.................................................
Class X................................................. (2) (3)
</TABLE>
- ------------------------
(1) The actual initial Certificate Balance or Notional Amount of any Class of
Offered Certificates at the date of issuance may be larger or smaller than
the amount shown above, depending on the actual size of the Initial Pool
Balance. The actual size of the Initial Pool Balance may be as much as 5%
larger or smaller than the amount presented in this Prospectus Supplement.
(2) Notional Amount. The Class X Certificates will not have a Certificate
Balance.
(3) The Pass-Through Rate shown above for the Class X Certificates is the rate
applicable for the Distribution Date in July 1999. The Pass-Through Rate for
the Class X Certificates is variable and will be calculated pursuant to a
formula described under "--Distributions--Calculations of Pass-Through
Rates" below.
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<PAGE>
PRIVATE CERTIFICATES(1)
<TABLE>
<CAPTION>
INITIAL APPROXIMATE
CERTIFICATE INITIAL
CLASS DESIGNATION BALANCE(2) CREDIT SUPPORT PASS-THROUGH RATE
- -------------------------------------------------------- --------------------- --------------- -----------------
<S> <C> <C> <C>
Class F.................................................
Class G.................................................
Class H.................................................
Class J.................................................
Class K.................................................
Class L.................................................
Class M.................................................
</TABLE>
- ------------------------
(1) The Private Certificates will also include the Class R-I, Class R-II and
Class R-III Certificates. However, the Class R-I, Class R-II and Class R-III
Certificates do not have Certificate Balances, Notional Amounts or
Pass-Through Rates.
(2) The actual initial Certificate Balance of any Class of Private Certificates
at the date of issuance may be larger or smaller than the amount shown
above, depending on the actual size of the Initial Pool Balance. The actual
size of the Initial Pool Balance may be as much as 5% larger or smaller than
the amount presented in this Prospectus Supplement.
The "Certificate Balance" of any Class of Principal Balance Certificates
will represent the aggregate distributions of principal to which the Holders of
such Certificates are entitled over time out of payments (or Advances in lieu
thereof) and other collections on the assets of the Trust. On each Distribution
Date, the Certificate Balance of each Class of Principal Balance Certificates
will be permanently reduced by any distributions of principal actually made with
respect to such Class of Certificates on such Distribution Date. On any
particular Distribution Date, the Certificate Balance of a Class of Principal
Balance Certificates may also be permanently reduced as and to the extent
described under "--Allocation of Realized Losses and Certain Other Shortfalls
and Expenses" below, in connection with Realized Losses and Additional Trust
Fund Expenses (each as defined in such section).
The Class X Certificates will not have a Certificate Balance or entitle the
holders thereof to receive distributions of principal. The "Notional Amount" of
the Class X Certificates will represent the principal amount on which interest
will accrue in respect of such Class from time to time. The Notional Amount of
the Class X Certificates will equal the aggregate of the Certificate Balances of
the respective Classes of Principal Balance Certificates outstanding from time
to time. Each such Certificate Balance will constitute a separate component (a
"Component") of the Class Notional Amount of the Class X Certificates (such
Component to have the same alphabetical and/or numerical designation as the
alphabetical and/or numerical Class designation for the related Class of
Principal Balance Certificates (E.G., the Certificate Balance of the Class A-1
Certificates outstanding from time to time will constitute Component A-1 of the
Notional Amount of the Class X Certificates)).
A Class of Offered Certificates will be considered to be outstanding until
its Certificate Balance or Notional Amount, as the case may be, is reduced to
zero. Under very limited circumstances, however, the prior Holders thereof may
thereafter be entitled to certain payments in reimbursement of any reductions
made in the Certificate Balance, if any, of such Class of Certificates as
described under "--Allocation of Realized Losses and Certain Other Shortfalls
and Expenses" below, in connection with Realized Losses and Additional Trust
Fund Expenses.
As described under "Federal Income Tax Consequences" in this Prospectus
Supplement, the Class R-I, Class R-II and Class R-III Certificates will
constitute REMIC residual interests and are referred to in this Prospectus
Supplement as the "Residual Interest Certificates". The remaining Certificates
will
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evidence REMIC regular interests and are referred to in this Prospectus
Supplement as the "Regular Interest Certificates".
The Depositor is only offering the Offered Certificates pursuant to this
Prospectus Supplement and the accompanying Prospectus. The Private Certificates
have not been registered under the Securities Act and are not being offered to
you. Accordingly, to the extent that this Prospectus Supplement contains
information regarding the terms of the Private Certificates, the Depositor has
provided such information because of its potential relevance to you as a
prospective purchaser of Offered Certificates.
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be issued in book-entry form in original
denominations of:
- in the case of the Class X Certificates, $250,000 initial notional amount
and in any whole dollar denomination in excess thereof; and
- in the case of the other Offered Certificates, $10,000 initial principal
amount and in any whole dollar denomination in excess thereof.
Each Class of Offered Certificates will initially be represented by one or
more Certificates registered in the name of the Cede & Co., as nominee of DTC.
You will NOT be entitled to receive a fully registered physical certificate
(a "Definitive Certificate") representing your interest in the Offered
Certificates, except under the limited circumstances described under
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates" in the Prospectus. Unless and until Definitive Certificates are
issued in respect of the Offered Certificates, beneficial ownership interests in
such Certificates will be maintained and transferred on the book-entry records
of DTC and its participating organizations (the "DTC Participants").
All references in this Prospectus Supplement to actions by Holders of the
Offered Certificates will refer to actions taken by DTC upon instructions
received from the related beneficial owners through their respective DTC
Participants in accordance with DTC procedures. In addition, all references in
this Prospectus Supplement to payments, notices, reports and statements to
Holders of the Offered Certificates will refer to payments, notices, reports and
statements to DTC or Cede & Co., as the registered holder thereof, for
distribution to the related beneficial owners through their respective DTC
Participants in accordance with DTC procedures.
As a result of the foregoing, you may experience certain delays in the
receipt of payments on your Certificates and may have difficulty in pledging
your Certificates. See "Description of the Securities-- Book-Entry Registration"
in the Prospectus.
The Trustee will initially serve as registrar (in such capacity, the
"Certificate Registrar") for purposes of providing for the registration of the
Offered Certificates and, if and to the extent Definitive Certificates are
issued in respect thereof, the registration of transfers and exchanges of the
Offered Certificates.
COLLECTION ACCOUNT
GENERAL. The Trustee will be required to establish and maintain one or more
accounts (collectively, the "Collection Account") for the distribution of
payments to the Certificateholders. Each such account is to be an Eligible
Account. The funds held in the Collection Account may be invested at the
direction of the Master Servicer (or as otherwise provided in the Pooling
Agreement) in Permitted Investments.
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<PAGE>
DEPOSITS. On or before the business day prior to each Distribution Date,
the Master Servicer will be required to deliver to the Trustee, for deposit in
the Collection Account, in immediately available funds, the amounts described in
clause (i) under "Servicing of the Mortgage Loans--Custodial Account--
Withdrawals". In addition, the Master Servicer will be required, as and when
provided in the Pooling Agreement, to deliver to the Trustee for deposit in the
Collection Account, any P&I Advances and/or Compensating Interest Payment with
respect to each Distribution Date. Furthermore, during March of each year, the
Trustee will transfer Interest Reserve Amounts in respect of the Actual/360
Mortgage Loans from the Interest Reserve Account to the Collection Account as
described under "--Distributions-- Interest Reserve Account" below.
WITHDRAWALS. The Trustee may, from time to time, make withdrawals from the
Collection Account for any of the following purposes, among others:
1. to make distributions to the Certificateholders on each Distribution
Date;
2. to pay itself the Trustee Fee (as defined under "--The Trustee" below)
each month;
3. to reimburse and/or indemnify itself and certain related persons as
described under "--The Trustee" below;
4. to pay the Master Servicer, as additional servicing compensation,
interest and other investment income earned in respect of amounts held in
the Collection Account;
5. to pay for the cost of certain opinions of counsel required under the
Pooling Agreement;
6. to pay any federal, state and local taxes imposed on the Trust, its
assets and/or transactions, together with all incidental costs and
expenses, to the extent required to be borne by the Trust Fund, all as
described under "Federal Income Tax Consequences--Possible Taxes on
Income from Foreclosure Property and Other Taxes" and "Servicing of the
Mortgage Loans--REO Properties" in this Prospectus Supplement and as
provided in the Pooling Agreement;
7. to transfer, during January (except in a leap year) and February of each
calendar year, Interest Reserve Amounts in respect of the Actual/360
Mortgage Loans to the Interest Reserve Account as described under
"--Distributions--Interest Reserve Account" below; and
8. to clear and terminate the Collection Account upon termination of the
Trust.
SENIORITY
The following chart sets forth the relative seniority of the respective
Classes of Certificates for purposes of--
- making distributions of interest and, if and when applicable,
distributions of principal, and
- allocating Realized Losses, Additional Trust Fund Expenses and Net
Aggregate Prepayment Interest Shortfalls.
In general, each identified Class of Certificates will, for the
above-specified purposes, be subordinate to each other Class of Certificates, if
any, listed above it in the following chart.
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EXPANDED SENIORITY CHART
[LOGO]
THE ONLY FORM OF CREDIT SUPPORT FOR ANY CLASS OF OFFERED CERTIFICATES WILL
BE THE ABOVE-REFERENCED SUBORDINATION OF THE OTHER CLASSES OF CERTIFICATES
LISTED BELOW IT IN THE EXPANDED SENIORITY CHART, INCLUDING ALL OF THE PRIVATE
CERTIFICATES.
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<PAGE>
CERTAIN RELEVANT CHARACTERISTICS OF THE MORTGAGE LOANS
The following characteristics of the Mortgage Loans are, in addition to
those described elsewhere in this Prospectus Supplement, relevant to the
following discussions in this "Description of the Offered Certificates" section.
MORTGAGE PASS-THROUGH RATE. The "Mortgage Pass-Through Rate" in respect of
any Mortgage Loan for any Distribution Date will, in general, equal--
- in the case of each 30/360 Mortgage Loan, the Mortgage Rate for such
Mortgage Loan as of the Cut-off Date (without regard to any subsequent
modifications, waivers or amendments of such Mortgage Loan) minus the
Administrative Cost Rate for such Mortgage Loan, and
- in the case of each Actual/360 Mortgage Loan, an annual rate generally
equal to (a) a fraction (expressed as a percentage), the numerator of
which is twelve (12) times the aggregate amount of interest accrued (or,
in the event of prepayments, that would have accrued) in respect of such
Mortgage Loan during the calendar month immediately preceding the month in
which such Distribution Date occurs at the Mortgage Rate for such Mortgage
Loan as of the Cut-off Date (without regard to any subsequent
modifications, waivers or amendments of such Mortgage Loan), and the
denominator of which is the Stated Principal Balance of such Mortgage Loan
immediately prior to such Distribution Date, minus (b) the Administrative
Cost Rate for such Mortgage Loan; provided that the numerator of the
fraction described in clause (a) above will, when the accrual of interest
occurs during the calendar months of December (except in a year preceding
a leap year) and January, be decreased by the amount of any Interest
Reserve Amount transferred from the Collection Account to the Interest
Reserve Account in respect of such Mortgage Loan in the following calendar
month and will, when the accrual of interest occurs during the calendar
month of February, be increased by the Interest Reserve Amounts to be
transferred from the Interest Reserve Account to the Collection Account in
respect of such Mortgage Loan in the following calendar month. See
"--Distributions--Interest Reserve Account" below.
STATED PRINCIPAL BALANCE. The "Stated Principal Balance" of each Mortgage
Loan will initially equal its Cut-off Date Balance and will permanently be
reduced on each Distribution Date (to not less than zero) by--
- that portion, if any, of the Principal Distribution Amount for such
Distribution Date that is attributable to such Mortgage Loan (see
"--Distributions--Calculation of the Principal Distribution Amount"
below), and
- the principal portion of any Realized Loss incurred in respect of such
Mortgage Loan during the related Collection Period (see "--Allocation of
Realized Losses and Certain Other Shortfalls and Expenses" below).
DISTRIBUTIONS
GENERAL. Subject to available funds, the Trustee will, in general, make all
distributions required to be made on the Certificates on each Distribution Date
to the Certificateholders of record as of the close of business on the related
Record Date. Notwithstanding the foregoing, the final distribution of principal
and/or interest on any Regular Interest Certificate will be made only upon
presentation and surrender of such Certificate at the location that will be
specified in a notice of the pendency of such final distribution.
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In order to receive its distributions by wire transfer, a Certificateholder
must provide the Trustee with written wiring instructions no less than five
business days prior to the related Record Date. Otherwise, such
Certificateholder will receive its distributions by check mailed to it.
Until Definitive Certificates are issued, Cede & Co. will be the registered
holder of your Certificates, and you will receive distributions on your
Certificates through your DTC Participant. See "--Registration and
Denominations" above.
THE AVAILABLE DISTRIBUTION AMOUNT. The aggregate amount available to make
distributions of interest and principal on the Certificates on each Distribution
Date is referred to in this Prospectus Supplement as the "Available Distribution
Amount". The Available Distribution Amount for any Distribution Date will
include--
(a) all payments and other collections on the Mortgage Loans and any REO
Properties that are on deposit in the Collection Account, the Custodial
Account and the REO Account as of the close of business on the related
Determination Date, EXCLUSIVE of any portion thereof that represents one
or more of the following:
(i) Scheduled P&I Payments due on a Due Date subsequent to the end of
the related Collection Period;
(ii) Prepayment Premiums, Yield Maintenance Charges and Additional
Interest (which are separately distributable on the Certificates
(or, in the case of Additional Interest, solely on the Class M
Certificates) as described below in this Prospectus Supplement);
(iii) all amounts that are payable or reimbursable to any person other
than the Certificateholders as described under"--Collection
Account--Withdrawals" above and "Servicing of the Mortgage
Loans--Custodial Account--Withdrawals" and "--REO Properties" in
this Prospectus Supplement.
(iv) if such Distribution Date occurs during February of any year or
during January of any year that is not a leap year, the Interest
Reserve Amounts with respect to the Actual/360 Mortgage Loans that
are to be transferred from the Custodial Account to the Interest
Reserve Account during such month and held for future distribution;
and
(v) amounts deposited in the Collection Account, the Custodial Account
and/or the REO Account in error;
(b) any P&I Advances and Compensating Interest Payments made with respect to
such Distribution Date; and
(c) if such Distribution Date occurs during March of any year, the Interest
Reserve Amounts with respect to the Actual/360 Mortgage Loans that are
transferred from the Interest Reserve Account to the Collection Account
during such month.
See "--Distributions--Interest Reserve Account" and "--Allocation of
Realized Losses and Certain Other Shortfalls and Expenses" below.
INTEREST RESERVE ACCOUNT. The Trustee will establish and maintain an
"Interest Reserve Account" in its name for the benefit of the
Certificateholders. During January (except in a leap year) and February of each
calendar year, beginning in 2000, the Trustee will, on or before the
Distribution Date in such month, withdraw from the Collection Account and
deposit in the Interest Reserve Account the Interest Reserve Amount with respect
to each Actual/360 Mortgage Loan as to which the Scheduled P&I Payment due in
such month was either received or advanced. The "Interest Reserve Amount" in
respect of any such Mortgage Loan for either such month will, in general, equal
one day's interest accrued at the related
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Mortgage Rate on the Stated Principal Balance of such Mortgage Loan immediately
following the Distribution Date in the preceding calendar month. During March of
each calendar year, beginning in 2000, the Trustee will, on or before the
Distribution Date in such month, withdraw from the Interest Reserve Account and
deposit in the Collection Account any and all Interest Reserve Amounts then on
deposit in the Interest Reserve Account with respect to the Actual/360 Mortgage
Loans. All such Interest Reserve Amounts that are so transferred from the
Interest Reserve Account to the Collection Account will be included in the
Available Distribution Amount for the Distribution Date during the month of
transfer.
CALCULATIONS OF INTEREST. Each Class of Regular Interest Certificates will
bear interest, such interest to accrue during each Interest Accrual Period based
upon--
- the Pass-Through Rate for such Class for the related Distribution Date;
- the Certificate Balance or Notional Amount, as the case may be, of such
Class outstanding immediately prior to the related Distribution Date; and
- the assumption that each year consists of twelve 30-day months;
The total amount of interest accrued from time to time with respect to each
Class of Regular Interest Certificates is referred to in this Prospectus
Supplement as "Accrued Certificate Interest". However, less than the full amount
of Accrued Certificate Interest in respect of any Class of Regular Interest
Certificates for any Interest Accrual Period may be distributable thereon as a
result of the allocation of any Net Aggregate Prepayment Interest Shortfall for
the related Distribution Date. The portion of the Accrued Certificate Interest
in respect of any Class of Regular Interest Certificates for any Interest
Accrual Period that is actually distributable thereon is referred to in this
Prospectus Supplement as the "Distributable Certificate Interest" for such
Class. The Distributable Certificate Interest in respect of any Class of Regular
Interest Certificates for any Interest Accrual Period will equal the Accrued
Certificate Interest in respect of such Class for such Interest Accrual Period,
reduced (to not less than zero) by any portion of the Net Aggregate Prepayment
Interest Shortfall for the related Distribution Date that has been allocated to
such Class as described under "--Allocation of Realized Losses and Certain Other
Shortfalls and Expenses" below.
CALCULATION OF PASS-THROUGH RATES. The Pass-Through Rate for each Class of
Principal Balance Certificates will be fixed at the rate per annum set forth
with respect to such Class in the tables under "--General" above.
The Pass-Through Rate applicable to the Class X Certificates for each
subsequent Distribution Date will equal the weighted average of the then
applicable Class X Strip Rates for the respective Components of the Class
Notional Amount of the Class X Certificates (weighted on the basis of the
relative sizes of such Components immediately prior to such Distribution Date).
The "Class X Strip Rate" in respect of any Component of the Class Notional
Amount of the Class X Certificates for any Distribution Date will equal the
excess, if any, of (i) the Weighted Average Mortgage Pass-Through Rate for such
Distribution Date, over (ii) the Pass-Through Rate then applicable to the Class
of Principal Balance Certificates whose Class Principal Balance constitutes such
Component.
The Residual Interest Certificates will not have Pass-Through Rates.
The "Weighted Average Mortgage Pass-Through Rate" for each Distribution Date
will, in general, equal the weighted average of the Mortgage Pass-Through Rates
in effect for all the Mortgage Loans for such Distribution Date (weighted on the
basis of such Mortgage Loans' respective Stated Principal Balances immediately
prior to such Distribution Date).
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CALCULATION OF THE PRINCIPAL DISTRIBUTION AMOUNT. The "Principal
Distribution Amount" for any Distribution Date represents the maximum amount of
principal distributable in respect of the Principal Balance Certificates for
such Distribution Date. The Principal Distribution Amount for any Distribution
Date will, in general, equal the aggregate (without duplication) of the
following:
(a) the aggregate of all payments of principal (other than voluntary
principal prepayments) received on the Mortgage Loans during the related
Collection Period, in each case net of any portion of the particular payment
that represents a late collection of principal for which a P&I Advance was
previously made for a prior Distribution Date or that represents the
principal portion of a Scheduled P&I Payment due on or before the Cut-off
Date or on a Due Date subsequent to the end of the related Collection
Period;
(b) the aggregate of the principal portions of all Scheduled P&I
Payments due in respect of the Mortgage Loans for their respective Due Dates
occurring during the related Collection Period, that were received prior to
the related Collection Period;
(c) the aggregate of all voluntary principal prepayments received on the
Mortgage Loans during the related Collection Period;
(d) the aggregate of all other collections (including Liquidation
Proceeds, Condemnation Proceeds and Insurance Proceeds) that were received
on or in respect of the Mortgage Loans during the related Collection Period
and that were identified and applied by the Master Servicer as recoveries of
principal thereof, in each case net of any portion of the particular
collection that represents a late collection of principal due on or before
the Cut-off Date or for which a P&I Advance was previously made for a prior
Distribution Date; and
(e) the aggregate of the principal portions of all P&I Advances made in
respect of the Mortgage Loans for such Distribution Date.
PRIORITY OF PAYMENTS.
GENERAL. In general, distributions of interest and principal are to be made
to the Holders of the various Classes of Regular Interest Certificates
sequentially based on their relative seniority as depicted in the Expanded
Seniority Chart under "--Seniority" above. Accordingly, the Trustee will make
distributions of interest and principal on the Senior Certificates (that is, the
Class A-1, Class A-2 and Class X Certificates) prior to making such
distributions in respect of any other Class of Regular Interest Certificates.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL ON THE SENIOR CERTIFICATES. On each
Distribution Date, the Trustee will apply the Available Distribution Amount for
such date for the following purposes and in the following order of priority:
(1) to pay interest to the Holders of the respective Classes of Senior
Certificates, up to an amount equal to, and PRO RATA as among such Classes
in accordance with, all unpaid Distributable Certificate Interest accrued in
respect of each such Class of Certificates through the end of the related
Interest Accrual Period;
(2) to pay principal to the Holders of the Class A-1 and Class A-2
Certificates (allocable between such two Classes of Certificateholders as
described below), up to an amount equal to the lesser of (a) the aggregate
of the then outstanding Certificate Balances of such Classes of Certificates
and (b) the Principal Distribution Amount for such Distribution Date; and
(3) if applicable, to reimburse the Holders of the Class A-1 and Class
A-2 Certificates, up to an amount equal to, and PRO RATA as among such two
Classes of Certificateholders in accordance with, the aggregate of all
unreimbursed reductions, if any, made to the Certificate Balance of each
such Class of
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Certificates as described under "--Allocation of Realized Losses and Certain
Other Shortfalls and Expenses" below in connection with Realized Losses and
Additional Trust Fund Expenses.
In general, all distributions of principal on the Class A-1 and Class A-2
Certificates on any Distribution Date will be distributable, FIRST, to the
Holders of the Class A-1 Certificates, until the Certificate Balance of the
Class A-1 Certificates is reduced to zero, and THEREAFTER, to the Holders of the
Class A-2 Certificates. However, on each Distribution Date coinciding with or
following the occurrence of a Class A Principal Distribution Cross-Over Date,
all distributions of principal in respect of the Class A-1 and Class A-2
Certificates will be made on a PRO RATA basis in accordance with the respective
Certificate Balances of such Certificates. Similarly, all distributions of
principal, if any, in respect of the Class A-1 and Class A-2 Certificates on the
final Distribution Date in connection with a termination of the Trust will be
made on the same PRO RATA basis.
The "Class A Principal Distribution Cross-Over Date" will be the first
Distribution Date as of the commencement of business on which (i) both the Class
A-1 Certificates and the Class A-2 Certificates remain outstanding and (ii) the
Certificate Balances of all the Classes of the Subordinate Principal Balance
Certificates have previously been reduced to zero as described under
"--Allocation of Realized Losses and Certain Other Shortfalls and Expenses"
below.
All Certificates, other than the Senior Certificates, collectively
constitute the "Subordinate Certificates". The portion, if any, of the Available
Distribution Amount for any Distribution Date that remains after the foregoing
distributions on the Senior Certificates is referred to in this Prospectus
Supplement as the "Subordinate Available Distribution Amount". The Subordinate
Available Distribution Amount for each Distribution Date will be applied to make
distributions on the Subordinate Certificates as described below.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL ON THE SUBORDINATE CERTIFICATES. On
each Distribution Date, the Trustee will apply the Subordinate Available
Distribution Amount for such date for the following purposes and in the
following order of priority:
(1) to pay interest to the Holders of the Class B Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued in
respect of such Class of Certificates through the end of the related
Interest Accrual Period;
(2) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to the
Holders of the Class B Certificates, up to an amount equal to the lesser of
(a) the then outstanding Certificate Balance of such Class of Certificates
and (b) the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(3) if applicable, to reimburse the Holders of the Class B Certificates,
up to an amount equal to the aggregate of all unreimbursed reductions, if
any, previously made to the Certificate Balance of such Class of
Certificates as described under "--Allocation of Realized Losses and Certain
Other Shortfalls and Expenses" below in connection with Realized Losses and
Additional Trust Fund Expenses;
(4) to pay interest to the Holders of the Class C Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued in
respect of such Class of Certificates through the end of the related
Interest Accrual Period;
(5) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to the
Holders of the Class C Certificates, up to an amount equal to the lesser of
(a) the then outstanding Certificate Balance of such Class of Certificates
and (b) the remaining portion of the Principal Distribution Amount for such
Distribution Date;
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(6) if applicable, to reimburse the Holders of the Class C Certificates,
up to an amount equal to the aggregate of all unreimbursed reductions, if
any, previously made to the Certificate Balance of such Class of
Certificates as described under "--Allocation of Realized Losses and Certain
Other Shortfalls and Expenses" below in connection with Realized Losses and
Additional Trust Fund Expenses;
(7) to pay interest to the Holders of the Class D Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued in
respect of such Class of Certificates through the end of the related
Interest Accrual Period;
(8) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to the
Holders of the Class D Certificates, up to an amount equal to the lesser of
(a) the then outstanding Certificate Balance of such Class of Certificates
and (b) the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(9) if applicable, to reimburse the Holders of the Class D Certificates,
up to an amount equal to the aggregate of all unreimbursed reductions, if
any, previously made to the Certificate Balance of such Class of
Certificates as described under "--Allocation of Realized Losses and Certain
Other Shortfalls and Expenses" below in connection with Realized Losses and
Additional Trust Fund Expenses;
(10) to pay interest to the Holders of the Class E Certificates, up to
an amount equal to all unpaid Distributable Certificate Interest accrued in
respect of such Class of Certificates through the end of the related
Interest Accrual Period;
(11) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to the
Holders of the Class E Certificates, up to an amount equal to the lesser of
(a) the then outstanding Certificate Balance of such Class of Certificates
and (b) the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(12) if applicable, to reimburse the Holders of the Class E
Certificates, up to an amount equal to the aggregate of all unreimbursed
reductions, if any, previously made to the Certificate Balance of such Class
of Certificates as described under "--Allocation of Realized Losses and
Certain Other Shortfalls and Expenses" below in connection with Realized
Losses and Additional Trust Fund Expenses;
(13) to pay interest to the Holders of the Class F Certificates, up to
an amount equal to all unpaid Distributable Certificate Interest accrued in
respect of such Class of Certificates through the end of the related
Interest Accrual Period;
(14) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to the
Holders of the Class F Certificates, up to an amount equal to the lesser of
(a) the then outstanding Certificate Balance of such Class of Certificates
and (b) the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(15) if applicable, to reimburse the Holders of the Class F
Certificates, up to an amount equal to the aggregate of all unreimbursed
reductions, if any, previously made to the Certificate Balance of such Class
of Certificates as described under "--Allocation of Realized Losses and
Certain Other Shortfalls and Expenses" below in connection with Realized
Losses and Additional Trust Fund Expenses;
(16) to pay interest to the Holders of the Class G Certificates, up to
an amount equal to all unpaid Distributable Certificate Interest accrued in
respect of such Class of Certificates through the end of the related
Interest Accrual Period;
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(17) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to the
Holders of the Class G Certificates, up to an amount equal to the lesser of
(a) the then outstanding Certificate Balance of such Class of Certificates
and (b) the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(18) if applicable, to reimburse the Holders of the Class G
Certificates, up to an amount equal to the aggregate of all unreimbursed
reductions, if any, previously made to the Certificate Balance of such Class
of Certificates as described under "--Allocation of Realized Losses and
Certain Other Shortfalls and Expenses" below in connection with Realized
Losses and Additional Trust Fund Expenses;
(19) to pay interest to the Holders of the Class H Certificates, up to
an amount equal to all unpaid Distributable Certificate Interest accrued in
respect of such Class of Certificates through the end of the related
Interest Accrual Period;
(20) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to the
Holders of the Class H Certificates, up to an amount equal to the lesser of
(a) the then outstanding Certificate Balance of such Class of Certificates
and (b) the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(21) if applicable, to reimburse the Holders of the Class H
Certificates, up to an amount equal to the aggregate of all unreimbursed
reductions, if any, previously made to the Certificate Balance of such Class
of Certificates as described under "--Allocation of Realized Losses and
Certain Other Shortfalls and Expenses" below in connection with Realized
Losses and Additional Trust Fund Expenses;
(22) to pay interest to the Holders of the Class J Certificates, up to
an amount equal to all unpaid Distributable Certificate Interest accrued in
respect of such Class of Certificates through the end of the related
Interest Accrual Period;
(23) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to the
Holders of the Class J Certificates, up to an amount equal to the lesser of
(a) the then outstanding Certificate Balance of such Class of Certificates
and (b) the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(24) if applicable, to reimburse the Holders of the Class J
Certificates, up to an amount equal to the aggregate of all unreimbursed
reductions, if any, previously made to the Certificate Balance of such Class
of Certificates as described under "--Allocation of Realized Losses and
Certain Other Shortfalls and Expenses" below in connection with Realized
Losses and Additional Trust Fund Expenses;
(25) to pay interest to the Holders of the Class K Certificates, up to
an amount equal to all unpaid Distributable Certificate Interest accrued in
respect of such Class of Certificates through the end of the related
Interest Accrual Period;
(26) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to the
Holders of the Class K Certificates, up to an amount equal to the lesser of
(a) the then outstanding Certificate Balance of such Class of Certificates
and (b) the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(27) if applicable, to reimburse the Holders of the Class K
Certificates, up to an amount equal to the aggregate of all unreimbursed
reductions, if any, previously made to the Certificate Balance of such Class
of Certificates as described under "--Allocation of Realized Losses and
Certain Other Shortfalls and Expenses" below in connection with Realized
Losses and Additional Trust Fund Expenses;
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(28) to pay interest to the Holders of the Class L Certificates, up to
an amount equal to all unpaid Distributable Certificate Interest accrued in
respect of such Class of Certificates through the end of the related
Interest Accrual Period;
(29) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to the
Holders of the Class L Certificates, up to an amount equal to the lesser of
(a) the then outstanding Certificate Balance of such Class of Certificates
and (b) the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(30) if applicable, to reimburse the Holders of the Class L
Certificates, up to an amount equal to the aggregate of all unreimbursed
reductions, if any, previously made to the Certificate Balance of such Class
of Certificates as described under "--Allocation of Realized Losses and
Certain Other Shortfalls and Expenses" below in connection with Realized
Losses and Additional Trust Fund Expenses;
(31) to pay interest to the Holders of the Class M Certificates, up to
an amount equal to all unpaid Distributable Certificate Interest accrued in
respect of such Class of Certificates through the end of the related
Interest Accrual Period;
(32) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to the
Holders of the Class M Certificates, up to an amount equal to the lesser of
(a) the then outstanding Certificate Balance of such Class of Certificates
and (b) the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(33) if applicable, to reimburse the Holders of the Class M
Certificates, up to an amount equal to the aggregate of all unreimbursed
reductions, if any, previously made to the Certificate Balance of such Class
of Certificates as described under "--Allocation of Realized Losses and
Certain Other Shortfalls and Expenses" below in connection with Realized
Losses and Additional Trust Fund Expenses; and
(34) to pay to the Holders of the Residual Interest Certificates, the
balance, if any, of the Subordinate Available Distribution Amount for such
Distribution Date;
provided that, on the final Distribution Date in connection with a termination
of the Trust, the distributions of principal to be made pursuant to clauses (2),
(5), (8), (11), (14), (17), (20), (23), (26), (29) and (32) above shall, in each
case, subject to the then remaining portion of the Subordinate Available
Distribution Amount for such date, be made to the Holders of the relevant Class
of Principal Balance Certificates otherwise entitled to distributions of
principal pursuant to such clause in an amount equal to the entire then
remaining Certificate Balance of such Class of Certificates outstanding
immediately prior to such final Distribution Date (and without regard to the
Principal Distribution Amount for such Distribution Date).
DISTRIBUTIONS OF PREPAYMENT PREMIUMS AND YIELD MAINTENANCE CHARGES. On each
Distribution Date, any Prepayment Consideration (whether in the form of a
Prepayment Premium or a Yield Maintenance Charge), or specified portions thereof
collected on a Mortgage Loan during the related Collection Period, net of any
Workout Fees and Liquidation Fees payable therefrom, will be distributed to the
Holders of the respective Classes of Principal Balance Certificates senior to
the Class G Certificates and then entitled to distributions of principal on such
Distribution Date, up to their respective Prepayment Consideration Entitlements
in connection with such particular Prepayment Consideration or specified portion
thereof.
The "Prepayment Consideration Entitlement" of the Holders of any Class of
Principal Balance Certificates senior to the Class G Certificates with respect
to any Prepayment Consideration, or specified portion thereof, net of Workout
Fees and Liquidation Fees payable therefrom, for any Distribution Date on which
such Class of Certificates is entitled to distributions of principal, will be an
amount equal to
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(a) such Prepayment Consideration (net of any portion thereof payable as a
Workout Fee or Liquidation Fee), multiplied by (b) a fraction (which in no event
may be greater than 1.0), the numerator of which is equal to the excess, if any,
of the Pass-Through Rate for such Class of Principal Balance Certificates over
the relevant Discount Rate (as defined below), and the denominator of which is
equal to the excess, if any, of the Mortgage Rate of the prepaid Mortgage Loan
over the relevant Discount Rate, and further multiplied by (c) a fraction, the
numerator of which is equal to the amount of principal distributable to such
Class of Principal Balance Certificates on such Distribution Date, and the
denominator of which is the Principal Distribution Amount for such Distribution
Date. If there is more than one Class of Principal Balance Certificates senior
to the Class G Certificates and entitled to distributions of principal on any
particular Distribution Date on which any Prepayment Consideration is
distributable, the aggregate amount of such Prepayment Consideration (net of any
portion thereof payable as a Workout Fee or Liquidation Fee) will be allocated
among all such Classes up to, and on a PRO RATA basis in accordance with, their
respective Prepayment Consideration Entitlements.
The "Discount Rate" applicable to any Class of Principal Balance
Certificates with respect to any prepaid Mortgage Loan will equal the yield
(when compounded monthly) on the U.S. Treasury issue (primary issue) with a
maturity date closest to the maturity date for the prepaid Mortgage Loan. In the
event that there are two such U.S. Treasury issues (a) with the same coupon, the
issue with the lower yield will be utilized, and (b) with maturity dates equally
close to the maturity date for the prepaid Mortgage Loan, the issue with the
earliest maturity date will be utilized.
The portion of any Prepayment Premium and/or Yield Maintenance Charge (net
of any portion thereof payable as a Workout Fee or Liquidation Fee) remaining
after distribution of the amounts calculated as described above to the Holders
of the respective Classes of Principal Balance Certificates senior to the Class
G Certificates will be distributed to the Holders of the Class X Certificates.
After the Distribution Date on which the Certificate Balances of all Classes of
Principal Balance Certificates senior to the Class G Certificates have been
reduced to zero, any Prepayment Premium and/or Yield Maintenance Charge
collected on the Mortgage Loans (net of any portion thereof payable as a Workout
Fee or Liquidation Fee) will be distributable entirely to the Holders of the
Class X Certificates.
The Depositor makes no representation as to the enforceability of the
provision of any Mortgage Note requiring the payment of a Prepayment Premium
and/or Yield Maintenance Charge or of the collectability of any Prepayment
Premium or Yield Maintenance Charge. See "Description of the Mortgage
Pool--Certain Terms and Conditions of the Mortgage Loans--Prepayment Provisions"
and "Risk Factors--Risks Related to the Mortgage Loans--Limitations on
Enforceability and Collectability of Prepayment Premiums and Yield Maintenance
Charges" in this Prospectus Supplement.
TREATMENT OF REO PROPERTIES. Notwithstanding that any Mortgaged Property
may be acquired as part of the Trust Fund through foreclosure, deed in lieu of
foreclosure or otherwise, the related Mortgage Loan will be treated, for
purposes of, determining distributions on the Certificates, allocations of
Realized Losses and Additional Trust Fund Expenses to the Certificates, and the
amount of all fees payable under the Pooling Agreement, as having remained
outstanding until such REO Property is liquidated. The Mortgage Loan will be
taken into account when determining the Weighted Average Mortgage Pass-Through
Rate and the Principal Distribution Amount for each Distribution Date. Operating
revenues and other proceeds derived from such REO Property (after application
thereof to pay certain costs and taxes, including certain reimbursements payable
to the Master Servicer, the Special Servicer and/or the Trustee, incurred in
connection with the operation and disposition of such REO Property) will be
"applied" by the Master Servicer as principal, interest and other amounts "due"
on such Mortgage Loan. As and to the extent described under "--P&I Advances"
below, the Master Servicer and the Trustee will
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be required to make P&I Advances in respect of such Mortgage Loan, in all cases
as if such Mortgage Loan had remained outstanding.
DISTRIBUTIONS OF ADDITIONAL INTEREST. On each Distribution Date, any
Additional Interest collected on an ARD Loan during the related Collection
Period will be distributed to the Holders of the Class M Certificates. There can
be no assurance as to what extent Additional Interest will accrue or be
collected on the ARD Loans, if at all.
ALLOCATION OF REALIZED LOSSES AND CERTAIN OTHER SHORTFALLS AND EXPENSES
If Realized Losses and Additional Trust Fund Expenses are incurred, the
aggregate Stated Principal Balance of the Mortgage Pool may decline below the
aggregate Certificate Balance of the Principal Balance Certificates, thereby
resulting in a Mortgage Pool Deficit equal to the difference between such
aggregate balances. In general, if a Mortgage Pool Deficit exists following the
distributions made to Certificateholders on any Distribution Date, then the
respective Certificate Balances of the various Classes of Principal Balance
Certificates will be successively reduced, in reverse order of seniority as
depicted on the Expanded Seniority Chart under "--Seniority" above, until such
Mortgage Pool Deficit is eliminated. The first such Certificate Balance to be
reduced would be that of the most subordinate Class of Principal Balance
Certificates then outstanding, and no such reduction would be made to the
Certificate Balance of any Class of Principal Balance Certificates until the
Certificate Balance of each more subordinate Class of Principal Balance
Certificates, if any, is reduced to zero. If a Mortgage Pool Deficit exists at
any time after the Certificate Balances of the Class B, Class C, Class D, Class
E, Class F, Class G, Class H, Class J, Class K, Class L and Class M Certificates
have all been reduced to zero, the Certificate Balances of the Class A-1 and
Class A-2 Certificates will be reduced on a PRO RATA basis in accordance with
the relative sizes of the Certificate Balances of such Classes of Certificates,
until such Mortgage Pool Deficit is eliminated.
The foregoing reductions in the Certificate Balances of the respective
Classes of the Principal Balance Certificates will effectively constitute an
allocation of the Realized Losses and/or Additional Trust Fund Expenses that
caused any Mortgage Pool Deficit. Any such reduction in the Certificate Balance
of a Class of Principal Balance Certificates will result in a corresponding
reduction in the Notional Amount of the Class X Certificates.
"Realized Losses" are losses on or in respect of the Mortgage Loans arising
from the inability of the Master Servicer and/or the Special Servicer to collect
all amounts due and owing under any such Mortgage Loan, including by reason of
the fraud or bankruptcy of a Borrower or, to the extent not covered by
insurance, a casualty of any nature at a Mortgaged Property. The Realized Loss
in respect of a liquidated Mortgage Loan (or related REO Property) is an amount
generally equal to the excess, if any, of (a) the outstanding principal balance
of such Mortgage Loan as of the date of liquidation, together with (i) all
accrued and unpaid interest thereon to but not including the Due Date in the
Collection Period in which the liquidation occurred (exclusive, however, of any
such accrued and unpaid interest that constitutes Default Interest or Additional
Interest) and (ii) all related unreimbursed Servicing Advances and unpaid
liquidation expenses, over (b) the aggregate amount of Liquidation Proceeds, if
any, recovered in connection with such liquidation. If any portion of the debt
due under a Mortgage Loan is forgiven, whether in connection with a
modification, waiver or amendment granted or agreed to by the Master Servicer or
the Special Servicer or in connection with the bankruptcy or similar proceeding
involving the related Borrower, the amount so forgiven (other than Default
Interest and Additional Interest) also will be treated as a Realized Loss.
An "Additional Trust Fund Expense" is, in general, an expense of the Trust
that arises out of a default on a Mortgage Loan or an otherwise unanticipated
event and that is not covered by a Servicing Advance or
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a corresponding collection from the related Borrower. Some examples of
Additional Trust Fund Expenses are:
- any Special Servicing Fees, Workout Fees and Liquidation Fees paid to the
Special Servicer;
- any interest paid to the Master Servicer, the Special Servicer and/or the
Trustee in respect of unreimbursed Advances;
- certain servicing and administrative expenses that have not been the
subject of Servicing Advances (including the costs of certain required
opinions of counsel);
- certain unanticipated, non-Mortgage Loan specific expenses of the Trust,
including certain reimbursements and indemnifications to the Trustee as
described under "--The Trustee" in this Prospectus Supplement, certain
reimbursements to the Master Servicer, the Special Servicer and the
Depositor as described under "Servicing of the Mortgage Loans--Certain
Matters Regarding the Depositor, the Master Servicer and the Special
Servicer" in this Prospectus Supplement and certain federal, state and
local taxes, and certain tax-related expenses, payable out of the Trust
Fund as described under "Federal Income Tax Consequences--Possible Taxes
on Income From Foreclosure Property and Other Taxes" and "Servicing of the
Mortgage Loans--REO Properties" in this Prospectus Supplement; and
- any amounts expended on behalf of the Trust to remediate an adverse
environmental condition at any Mortgaged Property securing a defaulted
Mortgage Loan (see "Servicing of the Mortgage Loans--Realization Upon
Defaulted Mortgage Loans; Sale of Defaulted Mortgage Loans and REO
Properties" in this Prospectus Supplement.
The Net Aggregate Prepayment Interest Shortfall, if any, for each
Distribution Date will be allocated on such Distribution Date among the
respective Classes of Regular Interest Certificates (other than the Senior
Certificates) sequentially in reverse order of their seniority as depicted on
the Expanded Seniority Chart under "--Seniority" above, in each case up to an
amount equal to the lesser of any remaining unallocated portion of such Net
Aggregate Prepayment Interest Shortfall and any Accrued Certificate Interest in
respect of the particular Class of Certificates for the related Interest Accrual
Period. If and to the extent that the Net Aggregate Prepayment Interest
Shortfall for any Distribution Date exceeds the aggregate Accrued Certificate
Interest in respect of the Subordinate Certificates for the related Interest
Accrual Period, such portion will be allocated among the respective Classes of
Senior Certificates, up to, and PRO RATA in accordance with, the respective
amounts of Accrued Certificate Interest for each such Class of Senior
Certificates for the related Interest Accrual Period.
P&I ADVANCES
The Master Servicer will be required to make for each Distribution Date
(either out of its own funds or, subject to the replacement thereof as and to
the extent provided in the Pooling Agreement, funds held in the Custodial
Account that are not required to be part of the Available Distribution Amount
for such Distribution Date) an aggregate amount of P&I Advances generally equal
to all Scheduled P&I Payments (other than Balloon Payments) and any Assumed P&I
Payments, in each case net of related Master Servicing Fees and Workout Fees,
that (a) were due or deemed due, as the case may be, in respect of the Mortgage
Loans during the related Collection Period and (b) were not paid by or on behalf
of the related Borrowers or otherwise collected as of the close of business on
the related Determination Date. Notwithstanding the foregoing, if it is
determined that an Appraisal Reduction Amount (as defined below) exists with
respect to any Required Appraisal Mortgage Loan (also as defined below), then
the Master Servicer will reduce the interest portion (but not the principal
portion) of each P&I Advance that it must make in respect of such Required
Appraisal Loan during the period that such Appraisal Reduction Amount exists.
The interest portion of any P&I Advance required to be made in respect of a
Required Appraisal Loan, as
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to which there exists an Appraisal Reduction Amount, will equal the product of
(i) the amount of the interest portion of such P&I Advance that would otherwise
be required to be made for such Distribution Date without regard to this
sentence and the prior sentence, multiplied by (ii) a fraction, the numerator of
which is equal to the Stated Principal Balance of such Mortgage Loan, net of
such Appraisal Reduction Amount, and the denominator of which is equal to the
Stated Principal Balance of such Mortgage Loan. See "--Appraisal Reductions"
below.
If the Master Servicer fails to make a required P&I Advance, the Trustee
will be obligated to make such Advance. See "--The Trustee" below.
The Master Servicer and the Trustee will each be entitled to recover any P&I
Advance made by it out of its own funds from Related Proceeds. NEITHER THE
MASTER SERVICER NOR THE TRUSTEE WILL BE OBLIGATED TO MAKE ANY P&I ADVANCE THAT,
IN ITS REASONABLE GOOD FAITH JUDGMENT, WOULD NOT BE ULTIMATELY RECOVERABLE OUT
OF RELATED PROCEEDS (ANY P&I ADVANCE NOT SO RECOVERABLE, A "NONRECOVERABLE P&I
ADVANCE"). IF THE MASTER SERVICER OR THE TRUSTEE MAKES ANY P&I ADVANCE THAT IT
SUBSEQUENTLY DETERMINES IS A NONRECOVERABLE P&I ADVANCE, IT MAY OBTAIN
REIMBURSEMENT FOR SUCH P&I ADVANCE OUT OF GENERAL FUNDS ON DEPOSIT IN THE
CUSTODIAL ACCOUNT. SEE "SERVICING OF THE MORTGAGE LOANS--CUSTODIAL ACCOUNT" IN
THIS PROSPECTUS SUPPLEMENT.
The Master Servicer and the Trustee will each be entitled to receive
interest on P&I Advances made thereby. Such interest will accrue on the amount
of each P&I Advance for so long as it is outstanding at a rate per annum equal
to the "prime rate" as published in the "Money Rates" section of The Wall Street
Journal, as such "prime rate" may change from time to time. Interest so accrued
with respect to any P&I Advance will be payable--
- out of Default Interest and late payment charges collected on the related
Mortgage Loan during the Collection Period in which such P&I Advance is
reimbursed, and
- if such P&I Advance has been reimbursed, then (to the extent that the
Default Interest and late payment charges described in the prior bullet
point were insufficient) out of any amounts then on deposit in the
Custodial Account.
Any delay between a Sub-Servicer's receipt of a late collection of a
Scheduled P&I Payment as to which a P&I Advance was made and the forwarding of
such late collection to the Master Servicer will increase the amount of interest
accrued and payable to the Master Servicer or the Trustee, as the case may be,
on such P&I Advance. To the extent not offset by Default Interest and/or late
payment charges accrued and actually collected as described above, interest
accrued on outstanding P&I Advances will result in a reduction in amounts
payable on the Certificates.
An "Assumed P&I Payment" is an amount deemed due in respect of:
- each Mortgage Loan that is delinquent in respect of its Balloon Payment
beyond the first Determination Date that follows its most recent maturity
date and as to which no arrangements have been made for collection of the
delinquent amounts, including an extension of maturity; and
- each Mortgage Loan as to which the related Mortgaged Property has become
an REO Property.
The Assumed P&I Payment deemed due on any such Mortgage Loan that is delinquent
as to its Balloon Payment, for its stated maturity date and for each successive
Due Date that it remains outstanding, will equal the Scheduled P&I Payment that
would have been due on the Mortgage Loan on such date if the related Balloon
Payment had not come due (but instead the Mortgage Loan had continued to
amortize and accrue interest in accordance with its terms in effect prior to
such maturity date). The Assumed P&I Payment deemed due on any such Mortgage
Loan as to which the related Mortgaged Property has become
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an REO Property, for each Due Date that such REO Property remains part of the
Trust Fund, will equal the Scheduled P&I Payment (or, in the case of a Mortgage
Loan delinquent in respect of its Balloon Payment, the Assumed P&I Payment) due
on the last Due Date prior to the acquisition of such REO Property. Assumed P&I
Payments for ARD Loans do not include Additional Interest or Accelerated
Amortization Payments.
APPRAISAL REDUCTIONS
Within 60 days after the date on which any of the following events (each, an
"Appraisal Trigger Event") has occurred with respect to any Mortgage Loan (upon
the occurrence of any such event, a "Required Appraisal Loan"), the Special
Servicer must obtain an appraisal of the related Mortgaged Property from an
independent appraiser meeting certain specified qualifications (any such
appraisal, a "Required Appraisal"), unless such an appraisal had previously been
obtained within the prior twelve months--
- Such Mortgage Loan is 60 days delinquent in respect of any Scheduled P&I
Payment.
- Such Mortgage Loan is modified by the Special Servicer to reduce the
amount of any Scheduled P&I Payment (other than a Balloon Payment).
- A Balloon Payment with respect to any Mortgage Loan has not been paid
within 20 days following its most recent scheduled maturity date.
- A receiver is appointed and continues in such capacity in respect of the
Mortgaged Property securing such Mortgage Loan.
- The related Borrower becomes the subject of bankruptcy, insolvency or
similar proceedings.
- The Mortgaged Property securing such Mortgage Loan becomes an REO
Property.
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As a result of any such appraisal, it may be determined that an Appraisal
Reduction Amount exists with respect to the related Required Appraisal Loan. The
"Appraisal Reduction Amount" for any Required Appraisal Loan will, in general,
be an amount (determined upon the first Determination Date following the later
of the occurrence of the Appraisal Trigger Event (if no new appraisal is
required) and the receipt of a new appraisal (if one is required)) equal to the
excess, if any, of "x" over "y" where--
- "x" is equal to the sum of:
(i) the Stated Principal Balance of such Required Appraisal Loan;
(ii) to the extent not previously advanced by or on behalf of the Master
Servicer or the Trustee, all unpaid interest on the Required
Appraisal Loan through the most recent Due Date prior to the date of
calculation (net of related Master Servicing Fees, and exclusive of
any portion of such accrued and unpaid interest that constitutes
Additional Interest and/or Default Interest);
(iii) all accrued but unpaid Master Servicing Fees and Special Servicing
Fees in respect of such Required Appraisal Loan;
(iv) all related unreimbursed Advances made by or on behalf of the Master
Servicer, the Special Servicer or the Trustee with respect to such
Required Appraisal Loan, together with interest thereon;
(v) any other unpaid Additional Trust Fund Expenses in respect of such
Required Appraisal Loan; and
(vi) all currently due and unpaid real estate taxes and assessments,
insurance premiums and, if applicable, ground rents, and any unfunded
improvement or other applicable reserves, in respect of the related
Mortgaged Property (net of any escrow reserves held by the Master
Servicer or Special Servicer to cover any such item); and
- "y" is equal to 90% of the resulting appraised value of the related
Mortgaged Property or REO Property (as such appraised value may be reduced
(to not less than zero) by the amount of any obligations secured by liens
on such property that are prior to the lien of the Required Appraisal Loan
and estimated liquidation expenses).
With respect to each Required Appraisal Loan (unless such Mortgage Loan has
become a Corrected Mortgage Loan and has remained current for at least twelve
consecutive Scheduled P&I Payments, and no other Servicing Transfer Event has
occurred during the preceding twelve months), the Special Servicer is required,
within 30 days of each anniversary of such loan's becoming a Required Appraisal
Loan, to order an updated appraisal. Based upon such update, the Special
Servicer must redetermine and report to the Trustee the new Appraisal Reduction
Amount, if any, with respect to such Mortgage Loan.
The cost of each Required Appraisal (and any update thereof) will be
advanced by the Special Servicer and will be reimbursable thereto as a Servicing
Advance.
If an Appraisal Reduction Amount exists with respect to any Required
Appraisal Loan, the Controlling Class Representative will be entitled to obtain
and deliver to the Master Servicer and the Trustee an appraisal meeting the
requirements for a Required Appraisal and, further, will be entitled to request
that the Appraisal Reduction Amount for such Required Appraisal Loan be
recalculated based upon such new appraisal.
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REPORTS TO CERTIFICATEHOLDERS; CERTAIN AVAILABLE INFORMATION
CERTIFICATEHOLDER REPORTS. Based on information provided in monthly reports
prepared by the Master Servicer and the Special Servicer and delivered to the
Trustee, the Trustee will be required to prepare (or, if not prepared by the
Trustee, to forward) and provide or make available electronically or by first
class mail on each Distribution Date to the Holders of each Class of Offered
Certificates (and to each beneficial owner of an Offered Certificate held in
book-entry form that is identified to the reasonable satisfaction of the
Trustee):
(1) A "Distribution Date Statement" setting forth, among other things:
- the amount of distributions, if any, made on such Distribution Date to
the Holders of each Class of Principal Balance Certificates and applied
to reduce the respective Certificate Balances thereof;
- the amount of distributions, if any, made on such Distribution Date to
the Holders of each Class of Regular Interest Certificates allocable to
Distributable Certificate Interest, Prepayment Consideration and
Additional Interest, respectively;
- the Available Distribution Amount for such Distribution Date;
- the aggregate amount of P&I Advances made in respect of the immediately
preceding Distribution Date;
- the aggregate amount of (i) unreimbursed P&I Advances (and the
aggregate amount of interest accrued and payable thereon) as of the
close of business on the related Determination Date and (ii)
unreimbursed Servicing Advances (and the aggregate amount of interest
accrued and payable thereon) outstanding as of the close of business on
the related Determination Date;
- the aggregate unpaid principal balance of the Mortgage Pool outstanding
as of the close of business on the related Determination Date;
- the number, aggregate unpaid principal balance, weighted average
remaining term to maturity and weighted average Mortgage Rate of the
Mortgage Loans (other than REO Mortgage Loans) as of the close of
business on the related Determination Date;
- the number, aggregate unpaid principal balance (as of the close of
business on the related Determination Date) and aggregate Stated
Principal Balance (immediately after such Distribution Date) of
Mortgage Loans (i) delinquent one month, (ii) delinquent two months,
(iii) delinquent three or more months, (iv) as to which foreclosure
proceedings have been commenced, and (v) as to which bankruptcy
proceedings have commenced in respect of the related Borrower;
- as to each Mortgage Loan referred to in the preceding bullet point, (i)
the loan number thereof, (ii) the Stated Principal Balance thereof
immediately following such Distribution Date, (iii) whether the
delinquency is in respect of its Balloon Payment, (iv) whether a notice
of acceleration has been sent to the related Borrower and, if so, the
date of such notice, (v) whether a "Phase I" environmental assessment
of the related Mortgaged Property has been performed as contemplated by
the Pooling Agreement and (vi) a brief description of the status of any
foreclosure or bankruptcy proceedings or any workout or loan
modification negotiations with the related Borrower;
- with respect to any Mortgage Loan as to which a liquidation event
occurred during the related Collection Period (other than a payment in
full), (i) the loan number thereof, (ii) the nature of the liquidation
event and, in the case of a determination by the Special Servicer with
respect to any defaulted Mortgage Loan or REO Property that there has
been a recovery of all Insurance Proceeds, Condemnation Proceeds,
Liquidation Proceeds and other payments or recoveries that the Special
Servicer has determined in accordance with the Servicing Standard, will
be ultimately recoverable (a "Final Recovery Determination"), a brief
description of the basis for such Final Recovery Determination, (iii)
the aggregate of all Liquidation Proceeds and other
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amounts received in connection with such liquidation event (separately
identifying the portion thereof allocable to distributions on the
Certificates) and (iv) the amount of any Realized Loss in connection
with such liquidation event;
- with respect to any REO Property included in the Trust Fund as of the
close of business on the related Determination Date, the loan number of
the related Mortgage Loan, the book value of such REO Property and the
amount of income and other amounts, if any, received with respect to
such REO Property during the related Collection Period (separately
identifying the portion thereof allocable to distributions on the
Certificates), and, if available, the appraised value of such REO
Property as expressed in the most recent appraisal thereof and the date
of such appraisal;
- with respect to any Mortgage Loan as to which the related Mortgaged
Property became an REO Property during the related Collection Period,
the loan number of such Mortgage Loan and the Stated Principal Balance
of such Mortgage Loan as of the related acquisition date of such REO
Property;
- with respect to any REO Property included in the Trust Fund as to which
a Final Recovery Determination was made during the related Collection
Period, (i) the loan number of the related Mortgage Loan, (ii) a brief
description of the basis for the Final Recovery Determination, (iii)
the aggregate of all Liquidation Proceeds and other amounts received in
connection with such Final Recovery Determination (separately
identifying the portion thereof allocable to distributions on the
Certificates), (iv) the amount of any Realized Loss in respect of the
related REO Property in connection with such Final Recovery
Determination, and (v), if available, the appraised value of such REO
Property as expressed in the most recent appraisal thereof and the date
of such appraisal;
- the Accrued Certificate Interest and Distributable Certificate Interest
in respect of each Class of Regular Interest Certificates for the
related Interest Accrual Period;
- any unpaid Distributable Certificate Interest in respect of each Class
of Regular Interest Certificates after giving effect to the
distributions made on such Distribution Date, and if the full amount of
the Principal Distribution Amount was not distributed on such
Distribution Date, the portion of the shortfall affecting each Class of
Principal Balance Certificates;
- the Pass-Through Rate for each Class of Regular Interest Certificates
for such Distribution Date;
- the Principal Distribution Amount for such Distribution Date, in each
such case separately identifying the respective components thereof
(and, in the case of any principal prepayment or other unscheduled
collection of principal received during the related Collection Period,
the loan number for the related Mortgage Loan and the amount of such
prepayment or other collection of principal);
- the aggregate of all Realized Losses incurred during the related
Collection Period and, aggregated by type, all Additional Trust Fund
Expenses incurred during the related Collection Period and from the
Closing Date;
- the Certificate Balance of each Class of Principal Balance Certificates
and the Notional Amount of the Class X Certificates immediately before
and immediately after such Distribution Date, separately identifying
any reduction therein due to the allocation of Realized Losses and
Additional Trust Fund Expenses on such Distribution Date;
- the aggregate amount of interest on Advances paid to the Master
Servicer, the Special Servicer and the Trustee during the related
Collection Period;
- the loan number for each Required Appraisal Loan and any related
Appraisal Reduction Amount (including an itemized calculation thereof)
as of the related Determination Date;
- the original and then current credit support levels for each Class of
Regular Interest Certificates;
- the original and then current ratings for each Class of Regular
Interest Certificates;
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- the aggregate amount of Prepayment Premiums and Yield Maintenance
Charges collected (i) during the related Collection Period and (ii)
since the Closing Date;
- the aggregate amount of servicing compensation (separately identifying
the amount of each category of compensation) paid to the Master
Servicer, the Special Servicer and, if payable directly out of the
Trust Fund without a reduction in the servicing compensation otherwise
payable to the Master Servicer or the Special Servicer, to each
sub-servicer, during the related Collection Period; and
- such other information as the Trustee is required by the Code or other
applicable law to furnish to enable Certificateholders to prepare their
tax returns.
(2) A "CSSA Loan Periodic Update File" and a "CSSA Property File" setting
forth certain information with respect to the Mortgage Loans and the
Mortgaged Properties, respectively.
(3) A "Mortgage Pool Data Update Report" (which may be included as part of
the Distribution Date Statement) containing information regarding the
Mortgage Loans as of the end of the related Collection Period, which
report is to contain substantially the categories of information
regarding the Mortgage Loans set forth on Annexes A-1 and A-2 to this
Prospectus Supplement (calculated, where applicable, on the basis of the
most recent relevant information provided by the Borrowers to the Master
Servicer or the Special Servicer, as the case may be, and by the Master
Servicer or the Special Servicer, as the case may be, to the Trustee),
which information is to be presented in tabular format substantially
similar to the format utilized on such annexes and shall also include a
loan-by-loan listing showing loan number, property type, location, unpaid
principal balance, Mortgage Rate, paid-through date, maturity date, net
interest portion of the monthly payment, principal portion of the monthly
payment, and any Prepayment Consideration received.
The Master Servicer or the Special Servicer (as specified in the Pooling
Agreement) is required to deliver to the Trustee monthly (and, on the first
Distribution Date following its receipt thereof, the Trustee is required to
provide or make electronically available to each person that was provided a
Distribution Date Statement) a copy of each of the following reports
(collectively with the Distribution Date Statement, the "Certificateholder
Reports"):
(a) A "Delinquent Loan Status Report" containing substantially the
information set forth in Annex D attached hereto and including, among
other things, those Mortgage Loans which, as of the Determination Date
immediately preceding the preparation of such report, were delinquent
30-59 days, delinquent 60-89 days, delinquent 90 days or more, current
but specially serviced, or in foreclosure but not REO Property.
(b) An "Historical Loan Modification Report" containing substantially the
information set forth in Annex E attached hereto and including, among
other things, those Mortgage Loans which, as of the close of business on
the Determination Date immediately preceding the preparation of such
report, have been modified pursuant to the Pooling Agreement (i) during
the Collection Period ending on such Determination Date and (ii) since
the Cut-off Date, showing the original and the revised terms thereof.
(c) An "Historical Loss Estimate Report" containing substantially the
information set forth in Annex F attached hereto and including, among
other things, as of the close of business on the Determination Date
immediately preceding the preparation of such report, (i) the aggregate
amount of Liquidation Proceeds received, and liquidation expenses
incurred, both during the Collection Period ending on such Determination
Date and historically, and (ii) the amount of Realized Losses occurring
during such Collection Period and historically, set forth on a Mortgage
Loan-by-Mortgage Loan basis.
(d) An "REO Status Report" containing substantially the information set
forth in Annex G attached hereto and including, among other things, with
respect to each REO Property that was included
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in the Trust Fund as of the close of business on the Determination Date
immediately preceding the preparation of such report (i) the acquisition
date of such REO Property, (ii) the amount of income collected with
respect to such REO Property (net of related expenses) and other amounts,
if any, received on such REO Property during the Collection Period ending
on such Determination Date and (iii) the value of the REO Property based
on the most recent appraisal or other valuation thereof available to the
Special Servicer as of such Determination Date (including any prepared
internally by the Special Servicer).
(e) A "Watch List Report" containing substantially the content set forth in
Annex H attached hereto, prepared by the Master Servicer and identifying
each Mortgage Loan that is not a Specially Serviced Mortgage Loan (i)
with a debt service coverage ratio of less than 1.05x, (ii) that has a
stated maturity date occurring in the next sixty days, (iii) that is
delinquent in respect of its real estate taxes, (iv) for which any
outstanding Advances exist, (v) that has been a Specially Serviced
Mortgage Loan in the past 90 days, (vi) for which the debt service
coverage ratio has decreased by more than 10% in the prior 12 months,
(vii) for which any lease relating to more than 25% of the related
Mortgaged Property has expired, been terminated, is in default or will
expire within the next three months, (viii) that is late in making its
Scheduled P&I Payment three or more times in the preceding 12 months,
(ix) with material deferred maintenance at the related Mortgaged Property
or (x) that is 30 or more days delinquent.
(f) A "Loan Payoff Notification Report" setting forth, among other things,
for each Mortgage Loan where written notice of anticipated payoff has
been received as of the Determination Date immediately preceding the
preparation of such report, the control number, the property name, the
amount of principal expected to be paid, the expected date of payment and
the estimated amount of Yield Maintenance Charges or Prepayment Premium
due.
(g) A "Comparative Financial Status Report" containing substantially the
information set forth in Annex K attached hereto and including, among
other things, the occupancy, revenue, net operating income and debt
service coverage ratio for each Mortgage Loan or related Mortgaged
Property, as applicable, as of the end of the calendar month immediately
preceding the preparation of such report, and the revenue and net
operating income for each of the following three periods (to the extent
such information is in the Master Servicer's or the Special Servicer's
possession): (i) the most current available year-to-date, (ii) each of
the previous two full fiscal years stated separately; and (iii) the "base
year" (representing the original analysis of information used as of the
Cut-off Date).
In addition, upon the request of any Holder or, to the extent identified to
the reasonable satisfaction of the Trustee, beneficial owner of an Offered
Certificate, the Trustee will be required to request from the Master Servicer,
and, upon receipt, make available, during normal business hours at the offices
of the Trustee, to the requesting party, copies of the following reports
required to be prepared and maintained by the Master Servicer and/or Special
Servicer:
(x) with respect to any Mortgaged Property or REO Property, an "Operating
Statement Analysis" (containing substantially the information set forth
in Annex I), together with copies of the subject annual operating
statements attached thereto as an exhibit), and presenting the
computations made in accordance with the methodology described in the
Pooling Agreement to "normalize" the full year net operating income and
debt service coverage numbers used by the Master Servicer or Special
Servicer in the other reports referenced above; and
(y) with respect to any Mortgaged Property or REO Property, an "NOI
Adjustment Worksheet" containing substantially the content set forth in
Annex J for such property (with the related annual operating statements
attached thereto as an exhibit), presenting the computations made in
accordance with the methodology described in the Pooling Agreement to
"normalize" the full
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year net operating income and debt service coverage numbers used by the
Master Servicer or Special Servicer in the other reports referenced
above.
The reports identified in clauses (a), (b), (c), (d), and (f) above are
referred to in this Prospectus Supplement as the "Unrestricted Master Servicer
Reports", and the reports identified in clauses (e), (g), (x) and (y) above are
referred to in this Prospectus Supplement as the "Restricted Master Servicer
Reports".
INFORMATION AVAILABLE ELECTRONICALLY. The Trustee will make available each
month, to any interested party, the Distribution Date Statement via the
Trustee's Internet Website, electronic bulletin board and its fax-on-demand
service. In addition, the Trustee will make available each month the
Unrestricted Servicer Reports on the Trustee's Internet Website. The Trustee's
Internet Website will initially be located at www.ctslink.com/cmbs. The
Trustee's electronic bulletin board may be accessed by calling (301) 815-6620,
and its fax-on-demand service may be accessed by calling (301) 815-6610. For
assistance with the above mentioned services, investors may call (301) 815-6600.
In addition, the Trustee will also make Mortgage Loan information as presented
in the CSSA loan setup file and CSSA Loan Periodic Update File available each
month to any Certificateholder, any Certificate Owner, the Rating Agencies, or
any other interested party via the Trustee's Internet Website. In addition,
pursuant to the Pooling Agreement, the Trustee will make available, as a
convenience for interested parties (and not in furtherance of the distribution
of the Prospectus or the Prospectus Supplement under the securities laws), the
Pooling Agreement, the Prospectus and the Prospectus Supplement via the
Trustee's Internet Website. The Trustee will make no representations or
warranties as to the accuracy or completeness of such documents and will assume
no responsibility therefor. In addition, the Trustee may disclaim responsibility
for any information distributed by the Trustee for which it is not the original
source.
The Trustee will make available each month, the Restricted Servicer Reports
and the CSSA Property File, to any Holder or Certificate Owner of an Offered
Certificate or any person identified to the Trustee by any such Holder or
Certificate Owner as a prospective transferee of an Offered Certificate or any
interest therein, to the Rating Agencies, to the Underwriters and to any of the
parties to the Pooling Agreement via the Trustee's Internet Website with the use
of a password provided by the Trustee to such person upon receipt by the Trustee
from such person of a certification in the form attached to the Pooling
Agreement; provided, however, that the Rating Agencies, the Underwriters and the
parties to the Pooling Agreement will not be required to provide such
certification.
In addition, the Master Servicer may (with the consent of the Depositor and
the Underwriters) make available each month to any interested party, via the
Master Servicer's Internet Website, initially located at "www.firstunion.com",
the Unrestricted Master Servicer Reports, the Distribution Date Statement, the
CSSA loan setup file, the CSSA Loan Periodic Update File, the Prospectus and the
Prospectus Supplement. For assistance with the Master Servicer's Internet
Website, investors may call (800) 326-1334.
Within a reasonable period of time after the end of each calendar year, the
Trustee is required to send to each person who at any time during the calendar
year was a Certificateholder of record, a report summarizing on an annual basis
(if appropriate) certain items of the monthly Distribution Date Statements
relating to amount distributed to such Certificateholder and such other
information as may be required to enable such Certificateholder to prepare its
federal income tax returns. Such information is required to include the amount
of original issue discount accrued on each Class of Certificates and information
regarding the expenses of the Trust Fund. Such requirements shall be deemed to
have been satisfied to the extent such information is provided from time to time
pursuant to the applicable requirements of the Code.
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The information that pertains to Specially Serviced Assets reflected in
reports will be based solely upon the reports delivered by the Special Servicer
(directly or through the Master Servicer) to the Trustee prior to the related
Distribution Date. Absent manifest error, none of the Master Servicer, the
Special Servicer or the Trustee will be responsible for the accuracy or
completeness of any information supplied to it by a Borrower or third party that
is included in any reports, statements, materials or information prepared or
provided by the Master Servicer, the Special Servicer or the Trustee, as
applicable.
OTHER INFORMATION. The Pooling Agreement will obligate the Trustee to make
available at its Corporate Trust Office (as defined below) (or, with respect to
the Mortgage Files, at its office in Minneapolis, Minnesota), during normal
business hours, for review by any Holder or beneficial owner of an Offered
Certificate or any person identified to the Trustee as a prospective transferee
of an Offered Certificate or any interest therein, originals or copies of, among
other things, the following items:
- this Prospectus Supplement, the Prospectus and any other disclosure
document relating to the Offered Certificates and the Private
Certificates, in the form most recently provided to the Trustee by the
Depositor or by any person designated by the Depositor;
- the Pooling and Servicing Agreement, each sub-servicing agreement
delivered to the Trustee since the Closing Date and any amendments
thereto;
- all reports delivered to Certificateholders since the Closing Date as
described under "--Reports to Certificateholders; Certain Available
Information--Certificateholder Reports" above;
- all annual performance certifications delivered by the Master Servicer and
the Special Servicer, respectively, to the Trustee since the Closing Date
as described under "Servicing of the Mortgage Loans--Evidence as to
Compliance" in this Prospectus Supplement;
- all annual accountants' reports caused to be delivered by the Master
Servicer and the Special Servicer, respectively, to the Trustee since the
Closing Date as described under "Servicing of the Mortgage Loans--Evidence
as to Compliance" in this Prospectus Supplement;
- the most recent inspection report prepared by the Master Servicer or
Special Servicer, as applicable, and delivered to the Trustee in respect
of each Mortgaged Property as described under "Servicing of the Mortgage
Loans--Inspections; Collection of Operating Information" in this
Prospectus Supplement;
- any and all notices and reports delivered to the Trustee with respect to
any Mortgaged Property as to which the environmental testing described
under "Servicing of the Mortgage Loans--Realization Upon Defaulted
Mortgage Loan; Sale of Defaulted Mortgage Loans and REO Properties" in
this Prospectus Supplement revealed that both of the conditions set forth
therein were not satisfied;
- each of the Mortgage Files, including any and all modifications, waivers
and amendments of the terms of a Mortgage Loan entered into or consented
to by the Special Servicer and delivered to the Trustee;
- the most recent appraisal for each Mortgaged Property that has been
delivered to the Trustee by either the Master Servicer or the Special
Servicer; and
- any and all officer's certificates and other evidence delivered to or by
the Trustee to support its, the Master Servicer's or the Special
Servicer's, as the case may be, determination that any Advance was (or, if
made, would be) a Nonrecoverable Advance.
Copies of any and all of the foregoing items will be available from the
Trustee upon written request; however, the Trustee will be permitted to require
payment of a sum sufficient to cover the reasonable costs and expenses of
providing such information, including, without limitation, copy charges and
reasonable fees for employee time and for space.
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In connection with providing access to the items described above, the
Trustee will require:
(A) in the case of a beneficial owner of a Certificate held in book-entry
form, a written confirmation executed by the requesting person or entity,
in a form reasonably acceptable to the Trustee or Master Servicer, as
applicable, generally to the effect that such person or entity is a
beneficial owner of Offered Certificates and will keep such information
confidential; and
(B) in the case of a prospective purchaser of Certificates or interests
therein, confirmation executed by the requesting person or entity, in a
form reasonably acceptable to the Trustee or Master Servicer, as
applicable, generally to the effect that such person or entity is a
prospective purchaser of Certificates or an interest therein, is
requesting the information for use in evaluating a possible investment in
such Certificates and will otherwise keep such information confidential.
Certificateholders, by the acceptance of their Certificates, will be deemed to
have agreed to keep such information confidential.
BOOK-ENTRY CERTIFICATES. Even if you hold your Certificates in book-entry
from through DTC, you may obtain direct access to Certificateholder Reports and
Operating Statement Analyses as if you were a Certificateholder, provided that
you deliver a written certification to the Trustee confirming your beneficial
ownership in the Offered Certificates. Otherwise, until such time as Definitive
Certificates are issued in respect of your Certificates, the foregoing
information will be available to you only to the extent that it is made
available through DTC and the DTC Participants. Conveyance of notices and other
communications by DTC to the DTC Participants, and by the DTC Participants to
beneficial owners of the Offered Certificates, will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time. The Master Servicer, the Special Servicer, the
Trustee, the Depositor, the REMIC Administrator and the Certificate Registrar
are required to recognize as Certificateholders only those persons in whose
names the Certificates are registered on the books and records of the
Certificate Registrar.
VOTING RIGHTS
At all times during the term of the Pooling Agreement:
- 99% of the voting rights for the Certificates (the "Voting Rights") will
be allocated among the Holders of the various Classes of Principal Balance
Certificates in proportion to the respective Certificate Balances of such
Classes of Certificates; and
- 1% of the Voting Rights will be allocated to the Holders of the Class X
Certificates.
Voting Rights allocated to a Class of Certificateholders will be allocated
among such Certificateholders in proportion to the percentage interests in such
Class evidenced by their respective Certificates. See "Description of the
Certificates--Voting Rights" in the Prospectus.
AMENDMENT
In general, the Pooling Agreement may be amended, under the circumstances
and subject to the conditions described in the Prospectus under "The Trust
Agreement--Amendment of the Trust Agreement". In addition, the Pooling Agreement
may be amended by the parties thereto if--
- the Rating Agencies have confirmed in writing that such amendment will not
result in a qualification, downgrade or withdrawal of any of the ratings
then assigned to the respective Classes of Certificates; and
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- the parties to the Pooling Agreement have obtained the consent of 100% of
the Holders of each Class of non-rated Certificates that may be materially
and adversely affected by such amendment.
TERMINATION
The obligations created by the Pooling Agreement will terminate following
the earliest of:
- the final payment (or advance in respect thereof) or other liquidation of
the last Mortgage Loan or related REO Property remaining in the Trust
Fund; and
- the purchase of all of the Mortgage Loans and REO Properties remaining in
the Trust Fund by (in the following order of priority) the Depositor,
Lehman, the Special Servicer, any Controlling Class Certificateholder
(with priority among such Holders based on size of percentage interest
held in the Controlling Class) or the Master Servicer.
Written notice of termination of the Pooling Agreement will be given to each
Certificateholder, and the final distribution with respect to each Certificate
will be made only upon surrender and cancellation of such Certificate at the
office of the Certificate Registrar or other location specified in such notice
of termination.
Any such purchase by the Depositor, Lehman, the Special Servicer, a
Controlling Class Certificateholder or the Master Servicer of all the Mortgage
Loans and any REO Properties remaining in the Trust Fund is required to be made
at a price equal to (1) the greater of (x) the aggregate Purchase Price of all
the Mortgage Loans and any REO Properties then included in the Trust Fund and
(y) the aggregate fair market value of such Mortgage Loans and REO Properties
then included in the Trust Fund (to be determined as mutually agreed upon by the
Master Servicer, the Special Servicer and the Trustee), minus (2) if the
purchaser is the Master Servicer or the Special Servicer, the aggregate of
amounts payable or reimbursable to such person under the Pooling Agreement. Such
purchase will effect early retirement of the then outstanding Offered
Certificates, but the right of the Depositor, Lehman, the Special Servicer, any
Controlling Class Certificateholder or the Master Servicer to effect such
termination is subject to the requirement that the then aggregate Stated
Principal Balance of the Mortgage Pool be less than 1% of the Initial Pool
Balance.
The purchase price paid in connection with the purchase of all Mortgage
Loans and any REO Properties remaining in the Trust Fund, exclusive of any
portion thereof payable or reimbursable to any person other than the
Certificateholders, will constitute part of the Available Distribution Amount
for the final Distribution Date.
THE TRUSTEE
Norwest Bank Minnesota, National Association ("Norwest Bank"), a national
banking association, will act as Trustee on behalf of the Certificateholders.
Norwest Bank, a direct, wholly-owned subsidiary of Wells Fargo & Company, was
originally chartered in 1872 and is engaged in a wide range of activities
typical of a national bank. Norwest Bank maintains an office at Norwest Center,
Sixth and Marquette, Minneapolis, Minnesota 55479-0113. Certificate transfer
services are conducted at Norwest Bank's offices in Minneapolis. Norwest Bank
otherwise conducts its trustee and securities administration services at its
offices in Columbia, Maryland (the "Corporate Trust Office"). Its address there
is 11000 Broken Land Parkway, Columbia, Maryland 21044-3562. In addition,
Norwest Bank maintains a trust office in New York located at 3 New York Plaza,
New York, New York 10004. Certificateholders and other interested parties should
direct their inquiries to the New York office. The telephone number is (212)
515-5240. See "The Trust Agreement--The Trustee", "--Duties of the Trustee" and
"--Resignation of the Trustee" in the
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Prospectus. As compensation for its services, the Trustee will be entitled to
receive monthly, from general funds on deposit in the Collection Account, the
Trustee Fee. The "Trustee Fee" for each Mortgage Loan (including each REO
Mortgage Loan) for any Distribution Date will equal one month's interest for the
most recently ended calendar month (calculated on a 30/360 Basis), accrued at
the per annum rate (the "Trustee Fee Rate") set forth in the Pooling Agreement
on the Stated Principal Balance of such Mortgage Loan outstanding immediately
following the prior Distribution Date (or, in the case of the initial
Distribution Date, as of the Closing Date).
The Trustee and any director, officer, employee or agent thereof will be
entitled to indemnification, from amounts held in the Trust Fund, for any loss,
liability or reasonable "out-of-pocket" expense arising in respect of the
Pooling Agreement or the Certificates; except that such indemnification will not
extend to any expense specifically required to be borne by the Trustee pursuant
to the terms of the Pooling Agreement, or to any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence on the part
of the Trustee in the performance of its obligations and duties thereunder.
The Trustee will also have certain duties with respect to REMIC
administration. See "Federal Income Tax Consequences--REMICs--Reporting and
Other Administrative Matters" in this Prospectus Supplement.
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YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
GENERAL. The yield on any Offered Certificate will depend on (a) the price
at which such Certificate is purchased by an investor and (b) the rate, timing
and amount of distributions on such Certificate. The rate, timing and amount of
distributions on any Offered Certificate will in turn depend on:
- the Pass-Through Rate for such Certificate;
- the rate and timing of principal payments (including principal
prepayments) and other principal collections on or in respect of the
Mortgage Loans and the extent to which such amounts are to be applied or
otherwise result in reduction of the Certificate Balance or Notional
Amount of the Class of Certificates to which such Certificate belongs;
- the rate, timing and severity of Realized Losses, Additional Trust Fund
Expenses and Net Aggregate Prepayment Interest Shortfalls and the extent
to which such losses, expenses and reductions result in the nonpayment or
deferred payment of interest on, or reduction of the Certificate Balance
or Notional Amount of, the Class of Certificates to which such Certificate
belongs; and
- the extent to which Prepayment Premiums, Yield Maintenance Charges and
Additional Interest are collected on the Mortgage Loans and, in turn,
distributed on the Class of Certificates to which such Certificate
belongs.
PASS-THROUGH RATES. The Pass-Through Rates for the respective Classes of
the Principal Balance Certificates are, in each case, fixed. However, the
Pass-Through Rate applicable to the Class X Certificates will be variable and
will be calculated based in part on the Weighted Average Mortgage Pass-Through
Rate from time to time. Accordingly, the yield on such Certificates will be
sensitive to changes in the relative composition of the Mortgage Pool as a
result of scheduled amortization, voluntary prepayments and liquidations of
Mortgage Loans following default. In addition, the Pass-Through Rate for the
Class X Certificates will vary with changes in the relative sizes of the
Certificate Balances of the respective Classes of Principal Balance
Certificates. The Weighted Average Pass-Through Rate and the Pass-Through Rate
for the Class X Certificates will not be affected by modifications, waivers and
amendments in respect of the Mortgage Loans.
See "Description of the Offered Certificates--Distributions--Calculation of
Pass-Through Rates" and "Description of the Mortgage Pool" in this Prospectus
Supplement and "--Rate and Timing of Principal Payments" below.
RATE AND TIMING OF PRINCIPAL PAYMENTS. The yield to maturity on the Class X
Certificates will be extremely sensitive to, and the yield to maturity on any
other Class of Offered Certificates purchased at a discount or premium will be
affected by, the rate and timing of reductions of the Certificate Balance or
Notional Amount, as the case may be, of such Class of Certificates. As described
in this Prospectus Supplement, the Principal Distribution Amount for each
Distribution Date will be distributable entirely in respect of the Class A-1
and/or Class A-2 Certificates until the related Certificate Balances thereof are
reduced to zero. Following retirement of the Class A-1 and Class A-2
Certificates, the Principal Distribution Amount for each Distribution Date will
be distributable entirely in respect of the other Classes of Principal Balance
Certificates, sequentially based on their relative seniority, in each such case
until the related Certificate Balance is reduced to zero. The Notional Amount of
the Class X Certificates will equal the aggregate of the Certificate Balances of
all the Classes of Principal Balance Certificates outstanding from time to time.
Consequently, the rate and timing of reductions of the Certificate Balance or
Notional Amount, as the case may be, of each Class of Offered Certificates will
depend on the rate and timing of principal payments on or in respect of the
Mortgage Loans, which will in turn be affected by the amortization schedules
thereof, the respective dates on which any Balloon Payments are due, the
respective Anticipated Repayment Dates for the ARD Loans and the rate and timing
of principal
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prepayments and other unscheduled collections thereon (including for this
purpose, collections made in connection with liquidations of Mortgage Loans due
to defaults, casualties or condemnations affecting the Mortgaged Properties, or
purchases of Mortgage Loans out of the Trust Fund).
Prepayments and, assuming the respective stated maturity dates therefor have
not occurred, liquidations of the Mortgage Loans will result in distributions on
the Principal Balance Certificates of amounts that would otherwise be
distributed over the remaining terms of the Mortgage Loans and will tend to
shorten the weighted average lives of those Certificates. Defaults on the
Mortgage Loans, particularly in the case of Balloon Loans at or near their
stated maturity dates, may result in significant delays in payments of principal
on the Mortgage Loans (and, accordingly, on the Principal Balance Certificates)
while workouts are negotiated or foreclosures are completed, and such delays
will tend to lengthen the weighted average lives of those Certificates. Failure
of the Borrower under any ARD Loan to repay its Mortgage Loan by or shortly
after the related Anticipated Repayment Date, for whatever reason, will also
tend to lengthen the weighted average lives of the Principal Balance
Certificates. Although each ARD Loan includes incentives for the related
Borrower to repay the Mortgage Loan by its Anticipated Repayment Date (E.G., an
increase in the rate at which interest accrues and the application of all excess
cash (net of the minimum required debt service, approved property expenses and
any required reserves) from the related Mortgaged Property to pay down the
Mortgage Loan, in each case following the passage of such date), there can be no
assurance that the related Borrower will want or be able to repay the Mortgage
Loan in full. See "Servicing of the Mortgage Loans--Modifications, Waivers,
Amendments and Consents" and "--Realization Upon Defaulted Mortgage Loans; Sale
of Defaulted Mortgage Loans and REO Properties" in this Prospectus Supplement
and "Certain Legal Aspects of Mortgage Loans-- Foreclosure" in the Prospectus.
The extent to which the yield to maturity of any Class of Offered
Certificates may vary from the anticipated yield will depend upon the degree to
which such Certificates are purchased at a discount or premium and when, and to
what degree, payments of principal on or in respect of the Mortgage Loans are
distributed or otherwise result in a reduction of the Certificate Balance or
Notional Amount of such Certificates. If you purchase your Offered Certificates
at a discount, you should consider the risk that a slower than anticipated rate
of principal payments on the Mortgage Loans could result in an actual yield to
you that is lower than your anticipated yield. If you purchase a Class X
Certificate or if you purchase any other Offered Certificate at a premium, you
should consider the risk that a faster than anticipated rate of principal
payments on the Mortgage Loans could result in an actual yield to you that is
lower than your anticipated yield.
In general, assuming you purchased your Certificates at a discount or
premium, the earlier a payment of principal on or in respect of the Mortgage
Loans is distributed or otherwise results in reduction of the principal balance
or notional amount of your Certificates, the greater will be the effect on your
yield to maturity. As a result, the effect on your yield of principal payments
occurring at a rate higher (or lower) than you anticipated during any particular
period may not be fully offset by a subsequent like reduction (or increase) in
the rate of principal payments.
If you are considering the purchase of Class X Certificates, you should
fully consider the risk that an extremely rapid rate of principal payments on
the Mortgage Loans could result in your failure to recoup fully your initial
investment.
Because the rate of principal payments on or in respect of the Mortgage
Loans will depend on future events and a variety of factors (as described more
fully below), no assurance can be given as to such rate or the rate of principal
prepayments in particular. The Depositor is not aware of any relevant publicly
available or authoritative statistics with respect to the historical prepayment
experience of a large group of mortgage loans comparable to the Mortgage Loans.
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Even if they are available and distributable on your Certificates,
Prepayment Premiums and Yield Maintenance Charges may not be sufficient to
offset fully any loss in yield on your Certificates attributable to the related
prepayments of the Mortgage Loans.
DELINQUENCIES AND DEFAULTS ON THE MORTGAGE LOANS. The rate and timing of
delinquencies and defaults on the Mortgage Loans will affect the amount of
distributions on your Certificates, the yield to maturity of your Certificates,
the rate of principal payments on your Certificates and the weighted average
life of your Certificates. Delinquencies on the Mortgage Loans, unless covered
by P&I Advances, may result in shortfalls in distributions of interest and/or
principal on your Certificates for the current month. Although any such
shortfalls may be made up on future Distribution Dates, no interest would accrue
on any such shortfalls. Thus, any such shortfalls would adversely affect the
yield to maturity of your Certificates.
If you calculate the anticipated yield to maturity for your Certificates
based on an assumed rate of default and amount of losses on the Mortgage Loans
that is lower than the default rate and amount of losses actually experienced
and such additional losses result in a reduction of the distributions on or the
aggregate principal balance or notional amount of your Certificates, your actual
yield to maturity will be lower than you calculated and could, under certain
scenarios, be negative. The timing of any loss on a liquidated Mortgage Loan
that results in a reduction of the distributions on or the aggregate principal
balance or notional amount of your Certificates will also affect the actual
yield to maturity of your Certificates, even if the rate of defaults and
severity of losses are consistent with your expectations. In general, the
earlier your loss occurs, the greater the effect on your yield to maturity.
Even if losses on the Mortgage Loans do not result in a reduction of the
distributions on or the aggregate principal balance or notional amount of your
Certificates, such losses may still affect the timing of distributions on (and,
accordingly, the weighted average life and yield to maturity of) your
Certificates.
CERTAIN RELEVANT FACTORS. The rate and timing of principal payments and
defaults and the severity of losses on or in respect of the Mortgage Loans may
be affected by a number of factors, including:
- prevailing interest rates;
- the terms of the Mortgage Loans (for example, provisions requiring
Prepayment Consideration and/or Lockout Periods and amortization terms
that require Balloon Payments);
- the demographics and relative economic vitality of the areas in which the
Mortgaged Properties are located;
- the general supply and demand for retail shopping space, rental
apartments, office space, hotel and motel rooms, industrial space, health
care facility beds or manufactured housing community pads, as the case may
be, in such areas;
- the quality of management of the Mortgaged Properties;
- the servicing of the Mortgage Loans;
- possible changes in tax laws; and
- other opportunities for investment.
See "Risk Factors--Risks Related to the Mortgage Loans", "Description of the
Mortgage Pool" and "Servicing of the Mortgage Loans" in this Prospectus
Supplement and "Yield and Prepayment Considerations" in the Prospectus.
The rate of prepayment on the Mortgage Loans is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below the Mortgage
Rate (or, in the case of an ARD Loan after its Anticipated Repayment Date, the
Revised Rate) at which a Mortgage Loan accrues interest, a Borrower may have an
increased incentive to refinance such Mortgage Loan. Conversely, to the extent
prevailing market interest rates exceed the
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applicable Mortgage Rate (or, for an ARD Loan after its Anticipated Repayment
Date, the Revised Rate) for any Mortgage Loan, such Mortgage Loan may be less
likely to prepay (other than, in the case of an ARD Loan, out of certain net
cash flow from the related Mortgaged Property). Assuming prevailing market
interest rates exceed the related Revised Rate, the primary incentive to prepay
an ARD Loan on or before its Anticipated Repayment Date is to give the Borrower
access to excess cash flow, all of which (net of the minimum required debt
service, approved property expenses and any required reserves) must be applied
to pay down principal of the Mortgage Loan. Accordingly, there can be no
assurance that any ARD Loan will be prepaid on or before its Anticipated
Repayment Date or on any other date prior to maturity.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some Borrowers may sell
Mortgaged Properties in order to realize their equity therein, to meet cash flow
needs or to make other investments. In addition, some Borrowers may be motivated
by federal and state tax laws (which are subject to change) to sell Mortgaged
Properties prior to the exhaustion of tax depreciation benefits.
If a Mortgage Loan is not in a Lockout Period, any Prepayment Premium in
respect of such Mortgage Loan may not be sufficient economic disincentive to
prevent the related Borrower from voluntarily prepaying the loan as part of a
refinancing thereof or a sale of the related Mortgaged Property. See
"Description of the Mortgage Pool--Certain Terms and Conditions of the Mortgage
Loans" in this Prospectus Supplement.
The Depositor makes no representation or warranty as to the particular
factors that will affect the rate and timing of prepayments and defaults on the
Mortgage Loans, as to the relative importance of such factors, as to the
percentage of the principal balance of the Mortgage Loans that will be prepaid
or as to which a default will have occurred as of any date or as to the overall
rate of prepayment or default on the Mortgage Loans.
UNPAID DISTRIBUTABLE CERTIFICATE INTEREST. If the portion of the Available
Distribution Amount distributable in respect of interest on your Certificates on
any Distribution Date is less than the Distributable Certificate Interest then
payable to you, the shortfall will be distributable to you on subsequent
Distribution Dates, to the extent of available funds. Any such shortfall will
not bear interest, however, and will therefore negatively affect the yield to
maturity on your Certificates for so long as it is outstanding. See "Description
of the Offered Certificates--Distributions--Priority of Payments" in this
Prospectus Supplement.
DELAY IN PAYMENT OF DISTRIBUTIONS. Because monthly distributions will not
be made on the Certificates until several days after the Due Dates for the
Mortgage Loans during the related Collection Period, your effective yield will
be lower than the yield that would otherwise be produced by your Pass-Through
Rate and purchase price (assuming such price did not account for such delay).
PRICE/YIELD TABLES
The tables on Annex C-1 hereto (the "Yield Tables") show the pre-tax
corporate bond equivalent ("CBE") yield to maturity, modified duration (except
in the case of the Class X Certificates), weighted average life, first
Distribution Date on which principal is to be paid ("First Principal Payment
Date") and final Distribution Date on which principal is to be paid ("Last
Principal Payment Date") with respect to each Class of Offered Certificates,
prepared using the Modeling Assumptions (as described below) and, where
applicable, the specified assumed purchase prices (which prices do not include
accrued interest). Assumed purchase prices are expressed in 32nds (E.G.,
means /32%) as a percentage of the initial Certificate Balance
or Notional Amount of each Class of Offered Certificates. For purposes of the
Yield Tables relating to the Class X Certificates, the information therein
relating to weighted average life, First Principal Payment Date and Last
Principal Payment Date is being calculated in respect of the Notional Amount of
Class X Certificates (as if it were a Certificate Balance).
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The yields set forth in the Yield Tables were calculated by determining the
monthly discount rates which, when applied to the assumed stream of cash flows
to be paid on each Class of Offered Certificates, would cause the discounted
present value of such assumed stream of cash flows to equal the assumed purchase
prices, plus accrued interest from and including June 1, 1999 to but excluding
the Assumed Settlement Date (as defined below), and by converting such monthly
rates to semi-annual corporate bond equivalent rates. Such calculation does not
take into account variations that may occur in the interest rates at which
investors may be able to reinvest funds received by them as distributions on the
Offered Certificates and consequently does not purport to reflect the return on
any investment in such Classes of Offered Certificates when such reinvestment
rates are considered.
For purposes of the Yield Tables (except in the case of the Class X
Certificates), "modified duration" has been calculated using the modified
Macaulay Duration as specified in the "PSA Standard Formulas". The Macaulay
Duration is calculated as the present value weighted average time to receive
future payments of principal and interest, and the PSA Standard Formula modified
duration is calculated by dividing the Macaulay Duration by the appropriate
semi-annual compounding factor. The duration of a security may be calculated
according to various methodologies. Accordingly, no representation is made by
the Depositor or any other person that the "modified duration" approach used in
this Prospectus Supplement is appropriate. Duration, like yield, will be
affected by the prepayment rate of the Mortgage Loans and extensions in respect
of Balloon Payments that actually occur during the life of the Class A-1, Class
A-2, Class B, Class C, Class D and Class E Certificates and by the actual
performance of the Mortgage Loans, all of which may differ, and may differ
significantly, from the assumptions used in preparing the Yield Tables.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the "Constant Prepayment
Rate" or "CPR" model. The CPR model represents an assumed constant annual rate
of prepayment each month, expressed as a per annum percentage of the then
scheduled principal balance of one or more mortgage loans.
The Yield Tables were derived from calculations based on the following
assumptions (collectively, the "Modeling Assumptions"):
- the Mortgage Loans have the characteristics set forth on Annex A-1 and the
Initial Pool Balance is approximately $1,746,894,129;
- the initial Certificate Balance or Notional Amount, as the case may be, of
each Class of Regular Interest Certificates is as described in this
Prospectus Supplement;
- the Pass-Through Rate for each Class of Regular Interest Certificates is
as described in this Prospectus Supplement.
- there are no delinquencies or losses in respect of the Mortgage Loans,
there are no modifications, extensions, waivers or amendments affecting
the payment by Borrowers of principal or interest on the Mortgage Loans,
there are no Appraisal Reduction Amounts with respect to the Mortgage
Loans and there are no casualties or condemnations affecting the Mortgaged
Properties;
- scheduled interest and principal payments on the Mortgage Loans are timely
received;
- all Mortgage Loans have Due Dates on the first day of each month the
payments are due and accrue interest on the respective basis described in
this Prospectus Supplement (I.E., a 30/360 Basis or an Actual/360 Basis);
- all prepayments are assumed to be accompanied by a full month's interest;
- there are no breaches of the Depositor's representations and warranties
regarding the Mortgage Loans;
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- Scheduled P&I Payments on the Mortgage Loans are timely received on the
first day of each month;
- no voluntary or involuntary prepayments are received as to any Mortgage
Loan during such Mortgage Loan's Lockout Period ("LOP"), yield maintenance
period ("YMP") or declining premium period ("Declining Premium"), in each
case if any; each ARD Loan is paid in full on its Anticipated Repayment
Date; and, otherwise, prepayments are made on each of the Mortgage Loans
at the indicated CPRs set forth in the tables (without regard to any
limitations in such Mortgage Loans on partial voluntary principal
prepayments);
- no person or entity entitled thereto exercises its right of optional
termination described in this Prospectus Supplement under "Description of
the Offered Certificates--Termination";
- no Mortgage Loan is required to be repurchased by the Depositor;
- no Prepayment Interest Shortfalls are incurred and no Prepayment Premiums
or Yield Maintenance Charges are collected;
- there are no Additional Trust Fund Expenses;
- distributions on the Offered Certificates are made on the 15th day of each
month, commencing in July 1999; and
- the Offered Certificates are settled on June 10, 1999 (the "Assumed
Settlement Date").
The characteristics of the Mortgage Loans differ in certain respects from
those assumed in preparing the Yield Tables, and the Yield Tables are presented
for illustrative purposes only. In particular, none of the Mortgage Loans permit
voluntary partial prepayments. Thus, neither the Mortgage Pool nor any Mortgage
Loan will prepay at any constant rate, and it is unlikely that the Mortgage
Loans will prepay in a manner consistent with any designated scenario for the
Yield Tables. In addition, there can be no assurance the Mortgage Loans will
prepay at any particular rate, that the Mortgage Loans will not prepay
(involuntarily or otherwise) during Lockout Periods, yield maintenance periods
and/or declining premium periods, that the ARD Loans will be paid in full on
their respective Anticipated Repayment Dates, that the actual pre-tax yields on,
or any other payment characteristics of, any Class of Offered Certificates will
correspond to any of the information shown in the Yield Tables, or that the
aggregate purchase prices of the Offered Certificates will be as assumed.
Accordingly, investors must make their own decisions as to the appropriate
assumptions (including prepayment assumptions) to be used in deciding whether to
purchase the Offered Certificates. For purposes of the Modeling Assumptions, a
"yield maintenance period" is any period during which a Mortgage Loan provides
that voluntary prepayments be accompanied by a Yield Maintenance Charge, and a
"declining premium period" is any period during which a Mortgage Loan provides
that voluntary prepayments be accompanied by a Prepayment Premium calculated as
a declining percentage of the principal amount prepaid.
WEIGHTED AVERAGE LIVES
The weighted average life of any Offered Certificate (other than a Class X
Certificate) refers to the average amount of time that will elapse from the date
of its issuance until each dollar to be applied in reduction of the principal
balance of such Certificate is distributed to the investor. For purposes of this
Prospectus Supplement, the weighted average life of any such Offered Certificate
is determined as follows:
- multiply the amount of each principal distribution on such Certificate by
the number of years from the Assumed Settlement Date to the related
Distribution Date;
- sum the results; and
- divide the sum by the aggregate amount of the reductions in the principal
balance of such Certificate.
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Accordingly, the weighted average life of any such Offered Certificate will be
influenced by, among other things, the rate at which principal of the Mortgage
Loans is paid or otherwise collected or advanced and the extent to which such
payments, collections and/or advances of principal are in turn applied in
reduction of the Certificate Balance of the Class of Certificates to which such
Offered Certificate belongs.
As described in this Prospectus Supplement, the Principal Distribution
Amount for each Distribution Date will be distributable first in respect of the
Class A-1 and/or Class A-2 Certificates until the Certificate Balances thereof
are reduced to zero, and will thereafter be distributable entirely in respect of
the other Classes of Principal Balance Certificates, sequentially based upon
their relative seniority, in each such case until the related Certificate
Balance is reduced to zero. As a consequence of the foregoing, the weighted
average lives of the Class A-1 and Class A-2 Certificates may be shorter, and
the weighted average lives of the other Classes of Principal Balance
Certificates may be longer, than would otherwise be the case if the Principal
Distribution Amount for each Distribution Date was being distributed on a PRO
RATA basis among the respective Classes of Principal Balance Certificates.
The tables (the "Decrement Tables") set forth in Annex C-2 show with respect
to each Class of Offered Certificates (other than the Class X Certificates) the
weighted average life thereof, and the percentage of the initial related
Certificate Balance that would be outstanding after each of the specified dates,
based upon each of the indicated levels of CPR and the Modeling Assumptions.
As used in each of the Decrement Tables, the column headed "0%" assumes that
none of the Mortgage Loans is prepaid before maturity (except that each ARD Loan
is paid in full on its Anticipated Repayment Date). The columns headed "10%",
"20%", "30%" and "50%" assume that no prepayments are made on any Mortgage Loan
during such Mortgage Loan's Lockout Period, yield maintenance period or
declining premium period, in each case if any, and are otherwise made on each of
the Mortgage Loans at the indicated CPRs (except that each ARD Loan is paid in
full on its Anticipated Repayment Date). There is no assurance, however, that
prepayments of the Mortgage Loans (whether or not in a Lockout Period, a yield
maintenance period or a declining premium period) will conform to any particular
CPR, and no representation is made that the Mortgage Loans will prepay in
accordance with the assumptions set forth in this Prospectus Supplement at any
of the CPRs shown or at any other particular prepayment rate, that all the
Mortgage Loans will prepay in accordance with the assumptions set forth in this
Prospectus Supplement at the same rate or that Mortgage Loans that are in a
Lockout Period, a yield maintenance period or declining premium period will not
prepay as a result of involuntary liquidations upon default or otherwise.
To the extent that the Mortgage Loans have characteristics that differ from
those assumed in preparing the Decrement Tables, the Class A-1, Class A-2, Class
B, Class C, Class D and/or Class E Certificates may mature earlier or later than
indicated by such tables. It is highly unlikely that the Mortgage Loans will
prepay in accordance with the Modeling Assumptions at any of the specified CPRs
until maturity or that the Mortgage Loans will all prepay at the same rate. In
addition, variations in the actual prepayment experience and the balance of the
Mortgage Loans that prepay may increase or decrease the percentages of initial
Certificate Balances (and weighted average lives) shown in the Decrement Tables.
Such variations may occur even if the average prepayment experience of the
Mortgage Loans were to conform to the assumptions and be equal to any of the
specified CPRs. You are urged to conduct your own analyses of the rates at which
the Mortgage Loans may be expected to prepay.
USE OF PROCEEDS
Substantially all of the proceeds from the sale of the Offered Certificates
will be used by the Depositor to purchase the Mortgage Loans and to pay certain
expenses in connection with the issuance of the Certificates.
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FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The Pooling Agreement will require the Trustee, as REMIC Administrator, to
make elections to treat designated portions of the Trust Fund as three separate
REMICs, with the designations "REMIC I", "REMIC II" and "REMIC III",
respectively. Upon the issuance of the Certificates, Sidley & Austin, counsel to
the Depositor, will deliver its opinion generally to the effect that, assuming
compliance with the Pooling Agreement, REMIC I, REMIC II, and REMIC III,
respectively, will each qualify as a REMIC under the Code. For federal income
tax purposes, (i) the separate non-certificated regular interests in REMIC I
will be "regular interests" in REMIC I and will constitute the assets of REMIC
II, (ii) the Class R-I Certificates will evidence the sole class of "residual
interests" in REMIC I, (iii) the separate non-certificated regular interests in
REMIC II will be "regular interests" in REMIC II and will constitute the assets
of REMIC III, (iv) the Class R-II Certificates will evidence the sole class of
"residual interests" in REMIC II, (v) the Regular Interest Certificates will
evidence the "regular interests" in, and generally will be treated as debt
obligations of, REMIC III, and (vi) the Class R-III Certificates will evidence
the sole class of residual interests in REMIC III.
For federal income tax purposes the Class X Certificates will evidence
multiple "regular interests" in REMIC III. See "Federal Income Tax
Considerations" in the Prospectus. The Class M Certificates will represent
undivided beneficial interests in the portion of the Trust Fund consisting of
any Additional Interest collected on the ARD Loans, and such portion will be
treated as part of a grantor trust for federal income tax purposes.
DISCOUNT AND PREMIUM; PREPAYMENT PREMIUMS
For federal income tax reporting purposes, it is anticipated that the Class
and Class X Certificates will, and the other Classes of Offered
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 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 not prepay (that is, a CPR of 0%), except that the ARD
Loans will be repaid in full on their respective Anticipated Repayment Dates.
There can be no assurance, however, that the Mortgage Loans will not prepay or
that, if they do, they will prepay at any particular rate. See "Federal Income
Tax Considerations" in the Prospectus.
The Internal Revenue Service (the "IRS") has issued regulations (the "OID
Regulations") under Sections 1271 to 1275 of the Internal Revenue Code of 1986
(the "Code") generally addressing the treatment of debt instruments issued with
original issue discount. You should be aware, however, that the OID Regulations
and Section 1272(a)(6) of the Code do not adequately address certain issues
relevant to, or are not applicable to, prepayable securities such as the Offered
Certificates. It is recommended that you consult your own tax advisor concerning
the tax treatment of your Certificates.
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period, a possibility of
particular relevance to the Class X Certificates, the amount of original issue
discount allocable to such period would be zero and such Certificateholders will
be permitted to offset such negative amount only against future original issue
discount (if any) attributable to such Certificate. Although the matter is not
free from doubt, a Holder of a Class X Certificate may be permitted to deduct a
loss to the extent that his or her respective remaining basis in such
Certificate exceeds the maximum amount of future payments to which such
Certificateholder is entitled, assuming no further prepayments of the Mortgage
Loans. Any such loss might be treated as a capital loss.
The OID regulations provide in general that original issue discount with
respect to debt instruments issued in connection with the same or related
transactions are treated as a single debt instrument for purposes of computing
the accrual of original issue discount with respect to such debt instruments.
This aggregation rule ordinarily is only to be applied when single debt
instruments are issued by a single issuer to a single holder. Although it is not
clear that this aggregation rule technically applies to REMIC regular interests
or other instruments subject to Section 1272(a)(6) of the Code, information
reports or returns sent to Certificateholders and the IRS with respect to the
Class X Certificates, which evidence the
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ownership of multiple regular interests, will be based on such aggregate method
of computing the yield on the related regular interests. If you are
contemplating the purchase of Class X Certificates, it is recommended that you
consult your own tax advisor about the use of this methodology and the potential
consequences of being required to report original issue discount separately with
respect to each of the regular interests evidenced by the Class X Certificates.
Certain Classes of the Offered Certificates may be treated for federal
income tax purposes as having been issued at a premium. Whether any Holder of
such a Class of Certificates will be treated as holding a Certificate with
amortizable bond premium will depend on such Certificateholder's purchase price
and the distributions remaining to be made on such Certificate at the time of
its acquisition by such Certificateholder. If you acquire an interest in any
such Class of Certificates, it is recommended that you consult your own tax
advisor regarding the possibility of making an election to amortize such
premium. See "Federal Income Tax Considerations--Taxation of Regular Interest
Securities--Market Discount and Premium" in the Prospectus.
Prepayment Premiums and Yield Maintenance Charges actually collected on the
Mortgage Loans will be distributed to the Holders of each Class of Certificates
entitled thereto as described in this Prospectus Supplement. It is not entirely
clear under the Code when the amount of a Prepayment Premium or Yield
Maintenance Charge should be taxed to the Holder of a Class of Certificates
entitled thereto. For federal income tax reporting purposes, a Prepayment
Premium or Yield Maintenance Charge will be treated as income to the Holders of
a Class of Certificates entitled thereto only after the Master Servicer's actual
receipt of such Prepayment Premium or Yield Maintenance Charge. The Internal
Revenue Service may nevertheless seek to require that an assumed amount of
Prepayment Premiums and Yield Maintenance Charges be included in distributions
projected to be made on the Certificates and that taxable income be reported
based on the projected constant yield to maturity of the Certificates, including
such projected Prepayment Premiums and Yield Maintenance Charges prior to their
actual receipt. In the event that such projected Prepayment Premiums and Yield
Maintenance Charges were not actually received, presumably the Holder of a
Certificate would be allowed to claim a deduction or reduction in gross income
at the time such unpaid Prepayment Premiums and Yield Maintenance Charges had
been projected to be received. Moreover, it appears that Prepayment Premiums and
Yield Maintenance Charges are to be treated as ordinary income rather than
capital gain. The correct characterization of such income is not entirely clear,
however, and it is recommended that you consider consulting your own tax advisor
concerning the treatment of Prepayment Premiums and Yield Maintenance Charges.
CONSTRUCTIVE SALES OF CLASS X CERTIFICATES
The Taxpayer Relief Act of 1997 added a provision to the Code that requires
the recognition of gain upon the "constructive sale of an appreciated financial
position". A constructive sale of a financial position occurs if a taxpayer
enters into certain transactions or series of such transactions that have the
effect of substantially eliminating the taxpayer's risk of loss and opportunity
for gain with respect to the financial instrument. Debt instruments that (i)
entitle the Holder to a specified principal amount, (ii) pay interest at a fixed
or variable rate and (iii) are not convertible into the stock of the issuer or a
related party, cannot be the subject of a constructive sale for this purpose.
Accordingly, only Class X Certificates, which do not have a principal balance,
could be subject to this provision if a Holder of a Class X Certificate were to
engage in a constructive sale transaction.
CHARACTERIZATION OF INVESTMENTS IN OFFERED CERTIFICATES
Generally, except to the extent noted below, the Offered Certificates will
be "real estate assets" within the meaning of Section 856(c)(5)(B) of the Code
in the same proportion that the assets of the Trust would be so treated. In
addition, interest (including original issue discount, if any) on the Offered
Certificates will be interest described in Section 856(c)(3)(B) of the Code to
the extent that such Certificates are treated as "real estate assets" within the
meaning of Section 856(c)(5)(B) of the Code.
Most of the Mortgage Loans are not secured by real estate used for
residential or certain other purposes prescribed in Section 7701(a)(19)(c) of
the Code, and consequently the Regular Interest
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Certificates will be treated as assets qualifying under that section to only a
limited extent. Accordingly, investment in the Regular Interest Certificates may
not be suitable for thrift institutions seeking to be treated as a "domestic
building and loan association" under Section 7701(a)(19)(C) of the Code.
The Offered Certificates will be treated as "qualified mortgages" for
another REMIC under Section 860G(a)(3)(C) of the Code and "permitted assets" for
a "financial asset securitization investment trust" under Section 860L(c) of the
Code. To the extent an Offered Certificate represents ownership of an interest
in any Mortgage Loan that is secured in part by the related Borrower's interest
in an account containing any holdback of loan proceeds, a portion of such
Certificate may not represent ownership of assets described in Section
7701(a)(19)(C) of the Code and "real estate assets" under Section 856(c)(5)(B)
of the Code and the interest thereon may not constitute "interest on obligations
secured by mortgages on real property" within the meaning of Section
856(c)(3)(B) of the Code. See "Description of the Mortgage Pool" in this
Prospectus Supplement.
POSSIBLE TAXES ON INCOME FROM FORECLOSURE PROPERTY AND OTHER TAXES
In general, the Special Servicer will be obligated to operate and manage any
Mortgaged Property acquired as REO Property in a manner that would, to the
extent commercially reasonable, maximize the Trust's net after-tax proceeds from
such property. After the Special Servicer reviews the operation of such property
and consults with the REMIC Administrator to determine the Trust's federal
income tax reporting position with respect to income it is anticipated that the
Trust would derive from such property, the Special Servicer could determine that
it would not be commercially reasonable to manage and operate such property in a
manner that would avoid the imposition of a tax on "net income from foreclosure
property" (generally, income not derived from renting or selling real property)
within the meaning of the REMIC Provisions or a tax on "prohibited transactions"
under Section 860F of the Code. To the extent that income the Trust receives
from an REO Property is subject to (i) a tax on "net income from foreclosure
property", such income would be subject to federal tax at the highest marginal
corporate tax rate (currently 35%) and (ii) a tax on "prohibited transactions",
such income would be subject to federal tax at a 100% rate. The determination as
to whether income from an REO Property would be subject to an REO Tax will
depend on the specific facts and circumstances relating to the management and
operation of each REO Property. Generally, income from an REO Property that is
directly operated by the Special Servicer would be apportioned and classified as
"service" or "non-service" income. The "service" portion of such income could be
subject to federal tax either at the highest marginal corporate tax rate or at
the 100% rate on "prohibited transactions", and the "non-service" portion of
such income could be subject to federal tax at the highest marginal corporate
tax rate or, although it appears unlikely, at the 100% rate applicable to
"prohibited transactions". These considerations will be of particular relevance
with respect to any health care facilities or hotels that become REO Property.
However, unless otherwise required by expressly applicable authority, it is
anticipated that the Trust will take the position that no income from
foreclosure property will be subject to the 100% "prohibited transactions" tax.
Any REO Tax imposed on the Trust's income from an REO Property would reduce the
amount available for distribution to Certificateholders.
To the extent permitted by then applicable laws, any tax on "prohibited
transactions", tax on non-permitted contributions or tax on "net income from
foreclosure property" that may be imposed on any of REMIC I, REMIC II or REMIC
III will be borne by the REMIC Administrator, the Trustee, the Master Servicer
or the Special Servicer, in any case out of its own funds, if (but only if)--
- such person has sufficient assets to do so, and
- such tax arises out of a breach of such person's obligations under certain
specified sections of the Pooling Agreement.
Any such tax not borne by the REMIC Administrator, the Trustee, the Master
Servicer or the Special Servicer will be charged against the Trust resulting in
a reduction in amounts available for distribution to the Certificateholders. See
"Material Federal Income Tax Consequences--REMICs--Prohibited Transactions Tax
and Other Taxes" in the Prospectus.
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It is possible that a Puerto Rican withholding tax may be imposed at a rate
of 29% on interest payments received by the REMIC on a Mortgage Loan secured by
Mortgaged Property located in Puerto Rico if a Certificateholder owns more than
50% of the related Borrower. In such a case, the withholding tax imposed on the
REMIC would be specially allocated to the Certificateholder owning more than 50%
of the Borrower, with the amount of tax treated as distributed to such holder.
The Certificateholder would not be entitled to claim foreign tax credits for
federal income tax purposes with respect to any such Puerto Rican withholding
tax imposed on the REMIC. Accordingly, investment in the Certificates may not be
suitable for investors that own more than 50% of a Borrower under a Mortgage
Loan secured by Mortgaged Property located in Puerto Rico.
REPORTING AND OTHER ADMINISTRATIVE MATTERS
Reporting of interest income, including original issue discount, if any,
with respect to Regular Interest Certificates is required annually, and may be
required more frequently under Treasury regulations. These information reports
generally are required to be sent to individual Holders of Regular Interest
Certificates and the IRS; Holders of Regular Interest Certificates that are
corporations, trusts, securities dealers and certain other non-individuals will
be provided interest and original issue discount income information and the
information set forth in the following paragraph upon request in accordance with
the requirements of the applicable regulations. The information must be provided
by the later of 30 days after the end of the quarter for which the information
was requested, or two weeks after the receipt of the request. The related REMIC
must also comply with rules requiring a Regular Interest Certificate issued with
original issue discount to disclose on its face the amount of original issue
discount and the issue date, and requiring such information to be reported to
the IRS. Reporting with respect to the Residual Interest Certificates, including
income, excess inclusions, investment expenses and relevant information
regarding qualification of the related REMIC's assets will be made as required
under the Treasury regulations, generally on a quarterly basis.
As applicable, the Regular Interest Certificate information reports will
include a statement of the adjusted issue price of the Regular Interest
Certificate at the beginning of each accrual period. In addition, the reports
will include information required by regulations with respect to computing the
accrual of any market discount. Because exact computation of the accrual of
market discount on a constant yield method would require information relating to
a particular Holder's purchase price that the REMIC Administrator may not have,
such regulations only require that information pertaining to the appropriate
proportionate method of accruing market discount be provided.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "Federal Income Tax Considerations"
in the Prospectus.
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CERTAIN ERISA CONSIDERATIONS
A fiduciary of any employee benefit plan or other retirement plan or
arrangement, including individual retirement accounts and annuities, Keogh plans
and collective investment funds and separate accounts in which such plans,
accounts or arrangements are invested, including insurance company general
accounts, that is subject to Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or Section 4975 of the Code (each, a "Plan")
should carefully review with its legal advisors whether the purchase or holding
of Offered Certificates could constitute or give rise to a transaction that is
prohibited or is not otherwise permitted either under ERISA or Section 4975 of
the Code or whether there exists any statutory or administrative exemption
applicable thereto. Certain fiduciary and prohibited transaction issues arise
only if the assets of the Trust constitute "plan assets" for purposes of Part 4
of Title I of ERISA and Section 4975 of the Code ("Plan Assets"). Whether the
assets of the Trust will constitute Plan Assets at any time will depend on a
number of factors, including the portion of any Class of Certificates that is
held by "benefit plan investors" (as defined in U.S. Department of Labor
Regulation Section 2510.3-101).
The U.S. Department of Labor has issued an individual prohibited transaction
exemption (a "PTE") to Lehman (PTE 91-14). Subject to the satisfaction of
certain conditions set forth therein, PTE 91-14 (the "Exemption") generally
exempts from the application of the prohibited transaction provisions of
Sections 406(a) and (b) and 407(a) of ERISA, and the excise taxes imposed on
such prohibited transactions pursuant to Sections 4975(a) and (b) of the Code,
certain transactions relating to, among other things, the servicing and
operation of mortgage pools, such as the Mortgage Pool, and the purchase, sale
and holding of mortgage pass-through certificates, such as the Senior
Certificates, that are underwritten by one of the following parties
(collectively, the "Exemption Favored Parties")--
(a) Lehman,
(b) any person directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with Lehman, and
(c) any member of the underwriting syndicate or selling group of which a
person described in (a) or (b) is a manager or co-manager with respect to
the Offered Certificates.
The Exemption sets forth six general conditions which must be satisfied for
a transaction involving the purchase, sale and holding of a Senior Certificate
to be eligible for exemptive relief thereunder. The conditions are as follows:
- FIRST, the acquisition of such Senior Certificate by a Plan must be on
terms that are at least as favorable to the Plan as they would be in an
arm's-length transaction with an unrelated party;
- SECOND, the rights and interests evidenced by such Senior Certificate must
not be subordinated to the rights and interests evidenced by the other
Certificates;
- THIRD, at the time of its acquisition by the Plan such Senior Certificate
must be rated in one of the three highest generic rating categories by
Moody's, Standard & Poor's Ratings Services, a Division of the McGraw-Hill
Companies, Inc. ("S&P"), Fitch IBCA, Inc. ("Fitch") or DCR.
- FOURTH, the Trustee cannot be an affiliate of any other member of the
"Restricted Group", which (in addition to the Trustee) consists of the
Exemption-Favored Parties, the Depositor, the Trustee, the Master
Servicer, the Special Servicer, any sub-servicers, the Originator, each
Borrower, if any, with respect to Mortgage Loans constituting more than 5%
of the aggregate unamortized principal balance of the Mortgage Loans as of
the date of initial issuance of the Certificates and any and all
affiliates of any of the aforementioned persons;
- FIFTH, the sum of all payments made to and retained by the
Exemption-Favored Parties must represent not more than reasonable
compensation for underwriting the Senior Certificates; the sum
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of all payments made to and retained by the Depositor pursuant to the
assignment of the Mortgage Loans to the Trust must represent not more than
the fair market value of such obligations; and the sum of all payments
made to and retained by the Master Servicer, the Special Servicer and any
sub-servicer must represent not more than reasonable compensation for such
person's services under the Pooling Agreement and reimbursement of such
person's reasonable expenses in connection therewith; and
- SIXTH, the investing Plan must be an accredited investor as defined in
Rule 501(a)(1) of Regulation D of the SEC under the Securities Act.
Because the Senior Certificates are not subordinated to any other Class of
Certificates, the second general condition set forth above is satisfied with
respect to such Certificates. It is a condition of their issuance that the Class
A-1 and Class A-2 Certificates be rated not lower than "Aaa" by Moody's and
"AAA" by DCR and that the Class X Certificates be rated not lower than "Aaa" by
Moody's and "AAA" by DCR. Furthermore, upon initial issuance of the
Certificates, the Trustee will not be affiliated with any other member of the
Restricted Group. Accordingly, as of the Closing Date, the third and fourth
general conditions set forth above will be satisfied with respect to the Senior
Certificates. A fiduciary of a Plan contemplating purchasing a Senior
Certificate in the secondary market must make its own determination that, at the
time of such purchase, such Certificate continues to satisfy the second, third
and fourth general conditions set forth above. A fiduciary of a Plan
contemplating purchasing a Senior Certificate, whether in the initial issuance
of such Certificate or in the secondary market, must make its own determination
that the first, fifth and sixth general conditions set forth above will be
satisfied with respect to such Certificate as of the date of such purchase. A
PLAN'S AUTHORIZING FIDUCIARY WILL BE DEEMED TO MAKE A REPRESENTATION REGARDING
SATISFACTION OF THE SIXTH GENERAL CONDITION SET FORTH ABOVE IN CONNECTION WITH
THE PURCHASE OF A SENIOR CERTIFICATE.
The Exemption also requires that the Trust meet the following requirements:
- the Trust Fund must consist solely of assets of the type that have been
included in other investment pools;
- certificates evidencing interests in such other investment pools must have
been rated in one of the three highest generic categories of Moody's,
Fitch, DCR or S&P for at least one year prior to the Plan's acquisition of
Senior Certificates and
- certificates evidencing interests in such other investment pools must have
been purchased by investors other than Plans for at least one year prior
to any Plan's acquisition of Senior Certificates.
The Depositor has confirmed to its satisfaction that such requirements have been
satisfied as of the date of this Prospectus Supplement.
If the general conditions of the Exemption are satisfied, the Exemption may
provide an exemption from the restrictions imposed by Sections 406(a) and 407(a)
of ERISA, as well as the excise taxes imposed by Sections 4975(a) and (b) of the
Code by reason of Sections 4975(c)(1)(A) through (D) of the Code, in connection
with--
(i) the direct or indirect sale, exchange or transfer of Senior Certificates
in the initial issuance of Certificates between the Depositor or an
Exemption-Favored Party and a Plan when the Depositor, an
Exemption-Favored Party, the Trustee, the Master Servicer, the Special
Servicer, a sub-servicer, the Originator, or a Borrower is a party in
interest (within the meaning of Section 3(14) of ERISA) or a
disqualified person (within the meaning of Section 4975(e)(2) of the
Code) (a "Party in Interest") with respect to the investing Plan;
(ii) the direct or indirect acquisition or disposition in the secondary
market of Senior Certificates by a Plan; and
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(iii) the continued holding of Senior Certificates by a Plan.
However, no exemption is provided from the restrictions of Sections
406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of a
Senior Certificate on behalf of an Excluded Plan (as defined in the next
sentence) by any person who has discretionary authority or renders investment
advice with respect to the assets of such Excluded Plan. For purposes of this
Prospectus Supplement, an "Excluded Plan" is a Plan sponsored by any member of
the Restricted Group.
In addition, if the general conditions of the Exemption, as well as certain
other specific conditions set forth in the Exemption, are satisfied, the
Exemption may also provide an exemption from the restrictions imposed by
Sections 406(b)(1) and (b)(2) of ERISA, and the excise taxes imposed by Sections
4975(a) and (b) of the Code by reason of Section 4975(c)(1)(E) of the Code, in
connection with--
(1) the direct or indirect sale, exchange or transfer of Senior Certificates
in the initial issuance of Certificates between the Depositor or an
Exemption-Favored Party and a Plan when the person who has discretionary
authority or renders investment advice with respect to the investment of
Plan assets in such Certificates is--
(a) a Mortgagor with respect to 5% or less of the fair market value of
the Mortgage Loans; or
(b) an affiliate of such a person;
(2) the direct or indirect acquisition or disposition in the secondary
market of Senior Certificates by a Plan; and
(3) the continued holding of Senior Certificates by a Plan.
Further, if the general conditions of the Exemption, as well as certain
other conditions set forth in the Exemption, are satisfied, the Exemption may
provide an exemption from the restrictions imposed by Sections 406(a), 406(b)
and 407(a) of ERISA, and the taxes imposed by Sections 4975(a) and (b) of the
Code by reason of Section 4975(c) of the Code, for transactions in connection
with the servicing, management and operation of the Trust Fund.
Lastly, if the general conditions of the Exemption are satisfied, the
Exemption also may provide an exemption from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA, and the taxes imposed by Sections 4975(a)
and (b) of the Code by reason of Sections 4975(c)(1) (A) through (D) of the
Code, if such restrictions are deemed to otherwise apply merely because a person
is deemed to be a Party in Interest with respect to an investing Plan by virtue
of providing services to the Plan (or by virtue of having certain specified
relationships to such a person) solely as a result of the Plan's ownership of
Senior Certificates.
Before purchasing a Senior Certificate, a fiduciary of a Plan should itself
confirm that:
- the Senior Certificates constitute "certificates" for purposes of the
Exemption; and
- the specific and general conditions and the other requirements set forth
in the Exemption would be satisfied at the time of such purchase.
In addition to determining the availability of the exemptive relief provided
in the Exemption, a Plan fiduciary should consider the availability of any other
prohibited transaction class exemptions. See "ERISA Considerations" in the
Prospectus. There can be no assurance that any such class exemptions will apply
with respect to any particular Plan investment in the Senior Certificates or,
even if it were deemed to apply, that any exemption would apply to all
transactions that may occur in connection with such investment. A purchaser of a
Senior Certificate should be aware, however, that even if the conditions
specified in one or more exemptions are satisfied, the scope of relief provided
by an exemption may not cover all acts which might be construed as prohibited
transactions.
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THE CHARACTERISTICS OF THE CLASS B, CLASS C, CLASS D AND CLASS E
CERTIFICATES DO NOT MEET THE REQUIREMENTS OF THE EXEMPTION. AS A RESULT, NO
TRANSFER OF A CLASS B, CLASS C, CLASS D OR CLASS E CERTIFICATE OR ANY INTEREST
THEREIN MAY BE MADE TO A PLAN OR TO ANY PERSON WHO IS DIRECTLY OR INDIRECTLY
PURCHASING SUCH CERTIFICATE OR INTEREST THEREIN ON BEHALF OF, AS NAMED FIDUCIARY
OF, AS TRUSTEE OF, OR WITH ASSETS OF A PLAN UNLESS THE PURCHASE AND HOLDING OF
SUCH CERTIFICATE OR INTEREST THEREIN IS EXEMPT FROM THE PROHIBITED TRANSACTION
PROVISIONS OF SECTION 406 OF ERISA AND SECTION 4975 OF THE CODE UNDER SECTIONS I
AND III OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60, WHICH PROVIDES AN
EXEMPTION FROM THE PROHIBITED TRANSACTION RULES FOR CERTAIN TRANSACTIONS
INVOLVING AN INSURANCE COMPANY GENERAL ACCOUNT. ANY PERSON TO WHOM A TRANSFER OF
ANY SUCH CERTIFICATE OR INTEREST THEREIN IS MADE WILL BE DEEMED TO HAVE
REPRESENTED TO THE DEPOSITOR, THE UNDERWRITERS, THE MASTER SERVICER, THE SPECIAL
SERVICER, THE TRUSTEE, ANY SUB-SERVICER AND ANY MORTGAGOR WITH RESPECT TO THE
MORTGAGE LOANS, THAT EITHER (I) IT IS NOT A PLAN AND IS NOT DIRECTLY OR
INDIRECTLY PURCHASING SUCH CERTIFICATE OR INTEREST THEREIN ON BEHALF OF, AS
NAMED FIDUCIARY OF, OR WITH ASSETS OF A PLAN OR (II) THE PURCHASE AND HOLDING OF
SUCH CERTIFICATE OR INTEREST THEREIN IS SO EXEMPT ON THE BASIS OF PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60.
Section III of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")
exempts from the application of the prohibited transaction provisions of
Sections 406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code
transactions in connection with the servicing, management and operation of a
trust (such as the Trust) in which an insurance company general account has an
interest as a result of its acquisition of certificates issued by the trust,
provided that certain conditions are satisfied. If these conditions are met,
insurance company general accounts would be allowed to purchase certain Classes
of Certificates (such as the Class B, Class C, Class D and Class E Certificates)
that do not meet the requirements of the Exemption solely because they (a) are
subordinated to other Classes of Certificates in the Trust or (b) have not
received a rating at the time of the purchase in one of the three highest rating
categories from Moody's, Fitch, DCR and S&P. All other conditions of the
Exemption would have to be satisfied in order for PTCE 95-60 to be available.
Before purchasing Class B, Class C, Class D and Class E Certificates, an
insurance company general account seeking to rely on Section III of PTCE 95-60
should itself confirm that all applicable conditions and other requirements have
been satisfied.
A governmental plan as defined in Section 3(32) of ERISA is not subject to
Title I of ERISA or Section 4975 of the Code. However, such a governmental plan
may be subject to a federal, state or local law which is, to a material extent,
similar to the foregoing provisions of ERISA or the Code ("Similar Law"). A
fiduciary of a governmental plan should make its own determination as to the
need for and the availability of any exemptive relief under Similar Law.
Any Plan fiduciary considering whether to purchase an Offered Certificate on
behalf of a Plan should consult with its counsel regarding the applicability of
the fiduciary responsibility and prohibited transaction provisions of ERISA and
the Code to such investment.
The sale of Offered Certificates to a Plan is in no respect a representation
or warranty by the Depositor or the Underwriters that this investment meets all
relevant legal requirements with respect to investments by Plans generally or by
any particular Plan, or that this investment is appropriate for Plans generally
or for any particular Plan.
LEGAL INVESTMENT
Upon issuance, the Senior Certificates and Class B Certificates
(collectively, the "SMMEA Certificates") will constitute "mortgage related
securities" for purposes of SMMEA. However, in order to remain "mortgage related
securities", the SMMEA Certificates must, among other things, continue to be
rated in one of the two highest rating categories by at least one nationally
recognized statistical rating organization. In addition, the SMMEA Certificates
will constitute "mortgage related securities" in part because they evidence
interest in notes secured by first (or effectively first) mortgage liens on one
or more parcels of real estate upon which is located a residential, commercial
or mixed residential and commercial structure.
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THE CLASS C, CLASS D AND CLASS E CERTIFICATES WILL NOT UPON ISSUANCE BE
"MORTGAGE RELATED SECURITIES" FOR PURPOSES OF SMMEA. As a result, the
appropriate characterization of such Offered Certificates under various legal
investment restrictions, and thus the ability of investors subject to these
restrictions to purchase such Offered Certificates, is subject to significant
interpretive uncertainties.
The Depositor makes no representation as to the ability of particular
investors to purchase the Offered Certificates under applicable legal investment
or other restrictions. All institutions whose investment activities are subject
to legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the Offered Certificates constitute legal
investments for them or are subject to investment, capital or other
restrictions.
All depository institutions considering an investment in the Offered
Certificates should review the Federal Financial Institutions Examination
Council's Supervisory Policy Statement on the Selection of Securities Dealers
and Unsuitable Investment Practices (to the extent adopted by their respective
regulatory authorities), setting forth, in relevant part, certain investment
practices deemed to be unsuitable for an institution's investment portfolio, as
well as guidelines for investing in certain types of mortgage related
securities.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits and provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying".
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Offered Certificates or to
purchase Offered Certificates representing more than a specified percentage of
the investor's assets. Investors should consult their own legal advisors in
determining whether and to what extent the Offered Certificates constitute legal
investments for such investors.
See "Legal Investment" in the Prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting Agreement
dated as of the date of this Prospectus Supplement (the "Underwriting
Agreement"), between the Depositor and the Underwriters, the Depositor has
agreed to sell to the Underwriters, and the Underwriters have agreed to purchase
all of the Offered Certificates. Proceeds to the Depositor from the sale of the
Offered Certificates, before deducting expenses payable by the Depositor, will
be an amount equal to approximately % of the initial aggregate
Certificate Balance of the Class A-1, Class A-2, Class B, Class C, Class D and
Class E Certificates, plus accrued interest on all the Offered Certificates from
the Cut-off Date.
Distribution of the Offered Certificates will be made by the Underwriters
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. The Underwriters may effect such transactions
by selling the Offered Certificates to or through dealers, and such dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Underwriters. In connection with the purchase and sale of
the Offered Certificates, the Underwriters may be deemed to have received
compensation from the Depositor in the form of underwriting discounts. The
Underwriters and any dealers that participate with the Underwriters in the
distribution of the Offered Certificates may be deemed to be underwriters and
any profit on the resale of the Offered Certificates positioned by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Purchasers of the Offered Certificates, including dealers, may, depending on
the facts and circumstances of such purchases, be deemed to be "underwriters"
within the meaning of the Securities Act in
S-149
<PAGE>
connection with reoffers and sales by them of Offered Certificates. You should
consult with your legal advisors in this regard prior to any such reoffer or
sale.
The Underwriters have advised the Depositor that they, through one or more
of their respective affiliates, presently intend to make a market in the Offered
Certificates, but have no obligation to do so. Any market making may be
discontinued at any time, and there can be no assurance that an active public
market for the Offered Certificates will develop. See "Risk Factors--Risks
Related to the Offered Certificates--Risks Associated with Liquidity and Market
Value" in this Prospectus Supplement and "Risk Factors--Limited Liquidity" in
the Prospectus.
The Depositor has agreed to indemnify the Underwriters and each person, if
any, who controls each Underwriter within the meaning of Section 15 of the
Securities Act against, or to make contributions to the Underwriters and each
such controlling person with respect to, certain liabilities, including certain
liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and the
Underwriters by Sidley & Austin, New York, New York.
RATINGS
It is a condition to their issuance that the respective Classes of Offered
Certificates be rated as follows:
<TABLE>
<CAPTION>
CLASS MOODY'S DCR
- --------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Class A-1.................................................................. Aaa AAA
Class A-2.................................................................. Aaa AAA
Class B.................................................................... Aa2 AA
Class C.................................................................... A2 A
Class D.................................................................... Baa2 BBB
Class E.................................................................... Baa3 BBB-
Class X.................................................................... Aaa AAA
</TABLE>
The ratings of the Offered Certificates address the likelihood of the timely
receipt by Holders thereof of all payments of interest to which they are
entitled on each Distribution Date and, except in the case of the Class X
Certificates, the ultimate receipt by Holders thereof of all payments of
principal to which they are entitled by the Rated Final Distribution Date. The
ratings take into consideration the credit quality of the Mortgage Pool,
structural and legal aspects associated with the Offered Certificates, and the
extent to which the payment stream from the Mortgage Pool is adequate to make
payments of principal and/or interest, as applicable, required under the Offered
Certificates. The ratings of the Offered Certificates do not, however, represent
any assessments of:
- the tax attributes of the Offered Certificates or of the Trust;
- the likelihood or frequency of voluntary or involuntary principal
prepayments on the Mortgage Loans;
- the degree to which such prepayments might differ from those originally
anticipated;
- whether and to what extent Prepayment Premiums and Yield Maintenance
Charges will be collected on the Mortgage Loans in connection with such
prepayments or the corresponding effect on yield to investors; or
- whether and to what extent Additional Interest will accrue or be collected
on the ARD Loans.
S-150
<PAGE>
Also, a security rating does not represent any assessment of the yield to
maturity that you may experience or, if you are purchasing Class X Certificates,
the possibility that you might not fully recover your investment in the event of
rapid prepayments and/or other liquidations of the Mortgage Loans (including
both voluntary and involuntary prepayments).
In general, the ratings on the Offered Certificates address credit risk and
not prepayment risk. As described in this Prospectus Supplement, the amounts
payable with respect to the Class X Certificates do not include principal. Thus,
if the Mortgage Pool were to prepay in the initial month, the Holders of the
Class X Certificates would receive only a single month's interest. Although such
Holders may have suffered a nearly complete loss of their investment, such
result is consistent with the ratings received on the Class X Certificates
because all amounts "due" to such Certificateholders would have been paid. The
Notional Amount upon which interest is calculated with respect to the Class X
Certificates is subject to reduction in connection with each reduction in the
Certificate Balance of a Class of Principal Balance Certificates, whether as a
result of principal payments or in connection with Realized Losses and
Additional Trust Fund Expenses. The ratings on the Class X Certificates do not
address the timing or magnitude of any reduction of such Notional Amount, but
only the obligation to pay interest timely on such Notional Amount as so reduced
from time to time. Accordingly, the ratings on the Class X Certificates should
be evaluated independently from similar ratings on other types of securities.
There is no assurance that any rating assigned to the Offered Certificates
by a Rating Agency will not be downgraded, qualified or withdrawn by such Rating
Agency, if, in its judgment, circumstances so warrant. There can be no assurance
as to whether any rating agency not requested to rate the Offered Certificates
will nonetheless issue a rating to any Class thereof and, if so, what such
rating would be. A rating assigned to any Class of Offered Certificates by a
rating agency that has not been requested by the Depositor to do so may be lower
than the ratings assigned thereto by Moody's and/or DCR.
The ratings on the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating agency. See "Risk
Factors--Limited Nature of Credit Ratings" in the Prospectus.
S-151
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
30/360 Basis............................. S-51
30/360 Mortgage Loans.................... S-51
Accelerated Amortization Payments........ S-52
Accrued Certificate Interest............. S-113
Actual/360 Basis......................... S-51
Actual/360 Mortgage Loans................ S-51
Additional Interest...................... S-51
Additional Interest Rate................. S-51
Additional Rights........................ S-57
Additional Trust Fund Expense............ S-120
Administrative Cost Rate................. S-63
Advances................................. S-21
Anchor Tenant............................ S-36
Anticipated Repayment Date............... S-28
Appraisal Reduction Amount............... S-123
Appraisal Trigger Event.................. S-122
Appraisal Trigger Events................. S-21
ARD...................................... S-28
ARD Loan................................. S-51
ARD Loans................................ S-28
Assumed Final Distribution Date.......... S-10
Assumed P&I Payment...................... S-122
Assumed Settlement Date.................. S-138
Available Distribution Amount............ S-112
Balloon Loan............................. S-28, S-52
Balloon Payment.......................... S-28
Bond-Type Leases......................... S-57
Borrower................................. S-22
Capital Imp. Reserve..................... S-64
Casualty or Condemnation Rights.......... S-57
Century City Shopping Center Loan........ S-65
Century City Shopping Center Property.... S-65
CERCLA................................... S-43
Certificate Balance...................... S-107
Certificate Registrar.................... S-108
Certificateholder Reports................ S-126
Certificateholders....................... S-8
Certificates............................. S-8
Class.................................... S-8
Class A Principal Distribution Cross-Over
Date................................... S-115
Class X Strip Rate....................... S-113
Closing Date............................. S-9
Code..................................... S-140
Collection Account....................... S-108
Collection Period........................ S-10
<CAPTION>
PAGE
-----------
<S> <C>
Comparative Financial Status Report...... S-127
Compensating Interest Payment............ S-87
Component................................ S-107
Condemnation Proceeds.................... S-93
Constant Prepayment Rate................. S-137
Controlling Class........................ S-95
Controlling Class Representative......... S-88
Controlling Class Certificateholder...... S-88
Corporate Trust Office................... S-131
Corrected Mortgage Loan.................. S-85
CPR...................................... S-137
Credit Lease............................. S-39
Credit Lease Default..................... S-57
Credit Lease Guarantor................... S-39
Credit Lease Loan........................ S-39
Credit Lease Loans....................... S-28
Credit Tenant............................ S-39
Cross-Collateralized Mortgage Loans...... S-45, S-55
CSSA Loan Periodic Update File........... S-126
CSSA Property File....................... S-126
Custodial Account........................ S-92
Cut-off Date............................. S-9
Cut-off Date Balance..................... S-49
Cut-off Date DSC Ratio................... S-61
Cut-off Date Loan-to-Value Ratio......... S-63
Cut-off Date LTV Ratio................... S-63
DCR...................................... S-3
Debt Service Coverage Ratio.............. S-61
Declining Premium........................ S-138
Decrement Tables......................... S-139
Default Interest......................... S-86
Defeasance Collateral.................... S-54
Defeasance Loan.......................... S-54
Definitive Certificate................... S-108
Delinquent Loan Status Report............ S-126
Depositor................................ S-1
Determination Date....................... S-10
Discount Rate............................ S-119
Distributable Certificate Interest....... S-113
Distribution Date........................ S-9
Distribution Date Statement.............. S-124
Double Net Leases........................ S-57
DSC Ratio................................ S-61
DTC...................................... S-13
DTC Participants......................... S-108
Due Date................................. S-28
</TABLE>
S-152
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
EAB Plaza Loan........................... S-70
EAB Plaza Property....................... S-70
Eligible Account......................... S-92
Enhancement Insurer...................... S-58
ERISA.................................... S-144
Events of Default........................ S-103
Excluded Plan............................ S-146
Exemption................................ S-144
Exemption Favored Parties................ S-144
Final Recovery Determination............. S-124
First Principal Payment Date............. S-136
Fully Amortizing Loan.................... S-52
Fully Amortizing Loans................... S-29
FUNB..................................... S-85
GMACCM................................... S-85
Grantor Trust............................ S-13
Ground Lease............................. S-71
Historical Loan Modification Report...... S-126
Historical Loss Estimate Report.......... S-126
Holders.................................. S-8
Hospitality Properties................... S-37
Initial Pool Balance..................... S-1
Insurance Proceeds....................... S-93
Interest Accrual Period.................. S-10
Interest Reserve Account................. S-112
Interest Reserve Amount.................. S-112
IRS...................................... S-140
Last Principal Payment Date.............. S-136
Lease Enhancement Policy................. S-57
Lehman................................... S-1
Liquidation Fee.......................... S-88
Liquidation Fee Rate..................... S-88
Liquidation Proceeds..................... S-93
Loan Payoff Notification Report.......... S-127
Lockbox Account.......................... S-52
Lockout Period........................... S-53
LOP...................................... S-138
LUSTs.................................... S-44
Maintenance Rights....................... S-57
Master Servicer.......................... S-8
Master Servicing Fee..................... S-87
Master Servicing Fee Rate................ S-86
Material Breach.......................... S-82
Material Document Defect................. S-80
Maturity Loan-to-Value Ratio............. S-63
Maturity LTV Ratio....................... S-63
Merill................................... S-1
Modeling Assumptions..................... S-137
Moody's.................................. S-3
<CAPTION>
PAGE
-----------
<S> <C>
Mortgage................................. S-49
Mortgage File............................ S-80
Mortgage Loan Deficit.................... S-20
Mortgage Loan Schedule................... S-80
Mortgage Loans........................... S-8
Mortgage Note............................ S-49
Mortgage Pass-Through Rate............... S-111
Mortgage Pool............................ S-22
Mortgage Rate............................ S-28
Mortgaged Property....................... S-22
Multifamily Rental Properties............ S-38
NAP...................................... S-65
NAV...................................... S-65
Net Aggregate Prepayment Interest
Shortfall.............................. S-87
Net Cash Flow............................ S-61
Non-REMIC Assets......................... S-13
Nonrecoverable Advance................... S-94
Nonrecoverable P&I Advance............... S-121
Nonrecoverable Servicing Advance......... S-89
Norwest Bank............................. S-131
Notional Amount.......................... S-107
Occupancy Percentage..................... S-64
Occupancy Rate........................... S-64
Offered Certificates..................... S-1
Office Properties........................ S-37
OID Regulations.......................... S-140
Open Period.............................. S-53
Operating Statement Analysis............. S-127
Original Amortization Term............... S-63
Original Interest-Only Period............ S-65
Original Term to Maturity................ S-64
Originator............................... S-50
P&I Advance.............................. S-21
Party in Interest........................ S-145
Pass-Through Rate........................ S-11
Penn Square Mall Loan.................... S-75
Penn Square Mall Property................ S-76
Permitted Investments.................... S-86
Plan..................................... S-144
Plan Assets.............................. S-144
Pooling Agreement........................ S-8
Prepayment Consideration................. S-45
Prepayment Consideration Period.......... S-53
Prepayment Interest Excess............... S-86
Prepayment Interest Shortfall............ S-86
Prepayment Premium....................... S-45
Primary Term............................. S-55
Principal Balance Certificates........... S-18
Principal Distribution Amount............ S-113
</TABLE>
S-153
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Private Certificates..................... S-1
Prospectus............................... S-3
Prospectus Supplement.................... S-3
PTCE..................................... S-32
PTCE 95-60............................... S-147
PTE...................................... S-144
Purchase Price........................... S-82
Qualified Insurers....................... S-102
Rated Final Distribution Date............ S-10
Rating Agencies.......................... S-3
Realized Losses.......................... S-120
Record Date.............................. S-9
Regular Interest Certificates............ S-108
Related Proceeds......................... S-89
Remaining Amortization Term.............. S-64
Remaining Interest-Only Period........... S-65
Remaining Term to Maturity............... S-64
REMIC.................................... S-13
REMIC Administrator...................... S-9
REMIC I.................................. S-140
REMIC II................................. S-140
REMIC III................................ S-140
Rental Property.......................... S-62
REO Account.............................. S-100
REO Extension............................ S-99
REO Mortgage Loan........................ S-86
REO Property............................. S-84
REO Status Report........................ S-127
REO Tax.................................. S-99
Replacement Reserve...................... S-64
Required Appraisal....................... S-122
Required Appraisal Loan.................. S-122
Residual Interest Certificates........... S-107
Restricted Group......................... S-144
Restricted Master Servicer Reports....... S-128
Retail Properties........................ S-35
Revised Rate............................. S-51
Scheduled P&I Payments................... S-28
SEC...................................... S-3
Securities Act........................... S-3
Senior Certificates...................... S-17
Servicing Advance........................ S-21
Servicing Standard....................... S-83
Servicing Transfer Event................. S-84
<CAPTION>
PAGE
-----------
<S> <C>
Shadow................................... S-65
Similar Law.............................. S-147
SMMEA.................................... S-15
SMMEA Certificates....................... S-147
Special Servicer......................... S-8
Special Servicing Fee.................... S-87
Special Servicing Fee Rate............... S-87
Specially Serviced Assets................ S-84
Specially Serviced Mortgage Loan......... S-84
Starwood Financial-Promus Loan........... S-68
Starwood Financial-Promus Properties..... S-68
Stated Principal Balance................. S-111
Subordinate Available Distribution
Amount................................. S-115
Subordinate Certificates................. S-115
Subordinate Principal Balance
Certificates........................... S-19
TI/LC Reserve............................ S-64
Triple Net Leases........................ S-57
Trust.................................... S-8
Trust Fund............................... S-8
Trustee.................................. S-9
Trustee Fee.............................. S-131
Trustee Fee Rate......................... S-131
Underwriters............................. S-1
Underwriting Agreement................... S-148
Underwriting Reserves.................... S-63
Unrestricted Master Servicer Reports..... S-128
Voting Rights............................ S-130
Watch List Report........................ S-127
Weighted Average......................... S-63
Weighted Average Mortgage Pass-Through
Rate................................... S-113
Woodland Hills Mall Loan................. S-73
Woodland Hills Mall Property............. S-73
Workout Fee.............................. S-88
Workout Fee Rate......................... S-88
Year Built/Renovated..................... S-63
Yield Maintenance Charge................. S-45
Yield Tables............................. S-136
YMP...................................... S-138
</TABLE>
S-154
<PAGE>
Lehman Brothers Commercial Mortgage Trust 99 - C1
ITALICS indicate mortgage loans secured by multiple properties.
<TABLE>
<CAPTION>
Control No. Property Name Address
====================================================================================================================================
<S> <C> <C>
1 Century City 10250 Santa Monica Boulevard
2 Starwood Financial Various
2a DoubleTree Hotel - Sonoma County 1 Doubletree Drive
- ------------------------------------------------------------------------------------------------------------------------------------
2b DoubleTree Hotel - San Diego 7450 Hazard Center Drive
2c DoubleTree Hotel - Kelso 510 Kelso Drive
2d DoubleTree Hotel - Medford 200 North Riverside Avenue
2e DoubleTree Hotel - Durango 501 Camino Del Rio
2f Red Lion Inn - Eugene 205 Coburg Road
- ------------------------------------------------------------------------------------------------------------------------------------
2g DoubleTree Hotel at the Quay - Vancouver 100 Columbia Street
2h Red Lion Inn - Sacramento 1401 Arden Way
2i Red Lion Inn - Astoria 400 Industry Street
2j DoubleTree Hotel - Wenatchee 1225 North Wenatchee Avenue
2k DoubleTree Hotel - Seattle Airport 18740 International Boulevard
- ------------------------------------------------------------------------------------------------------------------------------------
2l Red Lion Inn - Bend 1415 NE Third Street
2m Red Lion Inn - Coos Bay 1313 North Bayside Drive
2n DoubleTree Hotel - Pendleton 304 South East Nye Avenue
2o Red Lion Inn - Missoula 700 West Broadway Street
2p DoubleTree Hotel - Salt Lake City 255 South West Temple Street
- ------------------------------------------------------------------------------------------------------------------------------------
2q DoubleTree Hotel - Boise 1800 Fairview Avenue
3 EAB Plaza Glenn Curtis Blvd & Hempstead Turnpike
4 Woodland Hills Mall 7021 S. Memorial Drive
5 Penn Square Mall 1901 Northwest Expressway
- ------------------------------------------------------------------------------------------------------------------------------------
6 Grand Central Mall 100 Grand Central Mall
7 Crossroads Mall 6650 South Westnedge Avenue
8 Natomas Corporate Center 1740, 1750, 1760 Creekside Oaks Drive and 2485,
2495, 2525 Natomas Park Drive
9 Carmel Plaza Ocean Avenue at Mission Street
10 Boston Design Center One Design Center Place
- ------------------------------------------------------------------------------------------------------------------------------------
11 Corporetum Office Campus 550, 650, 850, 950, 1050 Warrenville Road
12 Tropicana Centre 3055, 3335, 3365 E. Tropicana Avenue
13 Hickory Point Mall NWC of I-72 & US 51
14 Pacific Park Plaza 711 Kapiolani Boulevard
- ------------------------------------------------------------------------------------------------------------------------------------
15 Arden Various
15a Arden - Panorama Corporate Center 5251 & 5271 Viewridge Court
15b Arden - Grand Avenue Plaza 1970 & 1990 East Grand Avenue
15c Arden - Clarendon Crest 22144 Clarendon Street
- ------------------------------------------------------------------------------------------------------------------------------------
16 Westland Promenade 3890 West 18th Avenue
17 Forest Plaza 2040-2060 Forest Avenue
18 Wal-Mart (Loan Level) Various
18a Wal-Mart Plaza (Champaign - Prop Level) 1006 West Anthony
- ------------------------------------------------------------------------------------------------------------------------------------
18b Wal-Mart Plaza (Benton - Prop Level) 1350-1396 Mall Drive
18c Wal-Mart Plaza (Chanute - Prop Level) 2510 South Santa Fe Ave.
18d Wal-Mart Plaza (ElDorado - Prop Level) 2730 West Central
18e Wal-Mart Plaza (Malan - Prop Level) 519-625 North 13th Street
18f Wal-Mart Plaza (Huntington - Prop Level) 234-240 Hauenstein
- ------------------------------------------------------------------------------------------------------------------------------------
18g Wal-Mart Plaza (Jacksonville - Prop Level) 1221 W. Morton Avenue
18h Wal-Mart Plaza (Little Falls - Prop Level) 1900 - 1906 State Highway 27
18i Wal-Mart Plaza(Ontario - Prop Level) 329 Lexington-Springmill Rd.
18j Wal-Mart (Malan - Prop Level) 1561-1695 M-21
18k Wal-Mart Plaza (Sturgis - Prop Level) NWC-M 66 & US 12
- ------------------------------------------------------------------------------------------------------------------------------------
18l Wal-Mart Plaza (Crawfordsville - Prop Level) 1611 US 231South
<CAPTION>
% of
Aggregate
Cross Cut-off Cumulative
Zip Collateralized Origial Cut-Off Date Date % of Initial
Control No. City State Codes Groups Balance ($) Balance ($) Balance Pool Balance
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Los Angeles CA 90067 No 160,000,000 160,000,000 9.16 9.16
2 Various VAR Various LB99C1-1 155,400,000 154,954,659 8.87 18.03
2a Rohnert Park CA 94928
- -----------------------------------------------------------------------------------------------------------------------------------
2b San Diego CA 92108
2c Kelso WA 98626
2d Medford OR 97501
2e Durango CO 81301
2f Eugene OR 97401
- -----------------------------------------------------------------------------------------------------------------------------------
2g Vancouver WA 98660
2h Sacramento CA 95815
2i Astoria OR 97103
2j Wenatchee WA 98801
2k Seattle WA 98188
- -----------------------------------------------------------------------------------------------------------------------------------
2l Bend OR 97701
2m Coos Bay OR 97420
2n Pendleton OR 97801
2o Missoula MT 59802
2p Salt Lake City UT 84101
- -----------------------------------------------------------------------------------------------------------------------------------
2q Boise ID 83702
3 Uniondale NY 11553 No 139,804,231 139,367,162 7.98 26.01
4 Tulsa OK 74133 No 90,000,000 89,644,244 5.13 31.14
5 Oklahoma City OK 73118 No 75,000,000 74,844,822 4.28 35.42
- -----------------------------------------------------------------------------------------------------------------------------------
6 Parkersburg WV 26101 No 52,500,000 52,332,103 3.00 38.42
7 Portage MI 49024 No 45,000,000 45,000,000 2.58 41.00
8 Sacramento CA 95833 No 38,000,000 37,874,599 2.17 43.16
9 Carmel CA 93923 No 29,000,000 28,984,263 1.66 44.82
10 Boston MA 02210 No 29,000,000 28,957,613 1.66 46.48
- -----------------------------------------------------------------------------------------------------------------------------------
11 Lisle IL 60532 No 26,000,000 25,914,201 1.48 47.96
12 Paradise NV 89120 No 25,250,000 25,208,339 1.44 49.41
13 Forsyth IL 62535 No 24,500,000 24,478,946 1.40 50.81
14 Honolulu HI 96813 No 23,300,000 23,261,111 1.33 52.14
- -----------------------------------------------------------------------------------------------------------------------------------
15 Various CA Various LB99C1-4 22,525,000 22,525,000 1.29 53.43
15a San Diego CA 92123
15b El Segundo CA 90245
15c Woodland Hills CA 91367
- -----------------------------------------------------------------------------------------------------------------------------------
16 Hialeah FL 33012 No 21,500,000 21,489,417 1.23 54.66
17 Staten Island NY 10303 No 19,250,000 19,240,492 1.10 55.76
18 Various VAR Various LB99C1-6 17,702,261 17,677,473 1.01 56.77
18a Champaign IL 61820
- -----------------------------------------------------------------------------------------------------------------------------------
18b Benton Township MI 49022
18c Chanute KS 66720
18d El Dorado KS 67042
18e Decatur IN 46733
18f Huntington IN 46750
- -----------------------------------------------------------------------------------------------------------------------------------
18g Jacksonville IL 62650
18h Little Falls MN 56345
18i Ontario OH 44906
18j Owosso MI 48867
18k Sturgis MI 49091
- -----------------------------------------------------------------------------------------------------------------------------------
18l Crawfordsville IN 47933
<CAPTION>
Original Remaining Original
Interest Interest- Interest- Term to
Mortgage Administrative Accrual Only Period Only Period Maturity
Control No. Rate (%) Cost Rate (%) Method Amortization Type (Mos.) (Mos.) (Mos.)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1 7.250 0.102 Act/360 Interest Only..ARD 12 12 120
2 7.438 0.102 Act/360 ARD 120
2a
- -----------------------------------------------------------------------------------------------------------------------------------
2b
2c
2d
2e
2f
- -----------------------------------------------------------------------------------------------------------------------------------
2g
2h
2i
2j
2k
- -----------------------------------------------------------------------------------------------------------------------------------
2l
2m
2n
2o
2p
- -----------------------------------------------------------------------------------------------------------------------------------
2q
3 7.330 0.102 Act/360 ARD 120
4 7.000 0.102 Act/360 ARD 120
5 7.025 0.102 Act/360 ARD 120
- -----------------------------------------------------------------------------------------------------------------------------------
6 7.180 0.102 Act/360 Balloon 120
7 7.400 0.102 Act/360 ARD 120
8 7.020 0.102 Act/360 Balloon 120
9 7.450 0.102 Act/360 Balloon 120
10 7.770 0.102 Act/360 Balloon 120
- -----------------------------------------------------------------------------------------------------------------------------------
11 7.020 0.102 Act/360 Balloon 120
12 7.850 0.102 Act/360 Balloon 84
13 7.850 0.102 Act/360 Balloon 180
14 7.810 0.102 Act/360 Balloon 120
- -----------------------------------------------------------------------------------------------------------------------------------
15 7.540 0.102 Act/360 Balloon 119
15a
15b
15c
- -----------------------------------------------------------------------------------------------------------------------------------
16 7.740 0.102 Act/360 Balloon 120
17 7.730 0.102 Act/360 Balloon 120
18 7.430 0.127 Act/360 ARD 170
18a
- -----------------------------------------------------------------------------------------------------------------------------------
18b
18c
18d
18e
18f
- -----------------------------------------------------------------------------------------------------------------------------------
18g
18h
18i
18j
18k
- -----------------------------------------------------------------------------------------------------------------------------------
18l
<CAPTION>
Remaining Maturity or
Term to Original Remaining Anticipated
Maturity Amortization Amortization Origination Repayment Balloon
Control No. (Mos.) Term (Mos.) Term (Mos.) Date Date Balance ($)
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1 120 360 360 5/14/99 6/1/09 143,104,942
2 118 262 260 3/5/99 4/1/09 115,499,999
2a
- -------------------------------------------------------------------------------------------------------------------------------
2b
2c
2d
2e
2f
- -------------------------------------------------------------------------------------------------------------------------------
2g
2h
2i
2j
2k
- -------------------------------------------------------------------------------------------------------------------------------
2l
2m
2n
2o
2p
- -------------------------------------------------------------------------------------------------------------------------------
2q
3 117 300 297 2/26/99 3/1/09 113,034,478
4 115 360 355 12/21/98 1/1/09 78,487,430
5 117 360 357 2/19/99 3/1/09 65,481,201
- -------------------------------------------------------------------------------------------------------------------------------
6 116 360 356 1/21/99 2/1/09 45,994,165
7 120 360 360 4/14/99 6/1/09 39,666,549
8 116 360 356 1/4/99 2/1/09 33,151,731
9 119 360 359 4/30/99 5/1/09 25,599,547
10 118 336 334 4/1/99 4/1/09 25,100,259
- -------------------------------------------------------------------------------------------------------------------------------
11 116 360 356 1/4/99 2/1/09 22,682,818
12 81 360 357 2/24/99 3/1/06 23,571,279
13 179 300 299 4/12/99 5/1/14 16,218,173
14 117 360 357 2/12/99 3/1/09 20,753,834
- -------------------------------------------------------------------------------------------------------------------------------
15 119 360 360 4/30/99 4/29/09 19,986,814
15a
15b
15c
- -------------------------------------------------------------------------------------------------------------------------------
16 119 360 359 4/21/99 5/1/09 19,117,026
17 119 360 359 4/16/99 5/1/09 17,112,192
18 168 351 349 4/15/99 6/11/13 13,906,412
18a
- -------------------------------------------------------------------------------------------------------------------------------
18b
18c
18d
18e
18f
- -------------------------------------------------------------------------------------------------------------------------------
18g
18h
18i
18j
18k
- -------------------------------------------------------------------------------------------------------------------------------
18l
<CAPTION>
DSCR
Annual Net
Property Prepayment Debt Net Cash Cash
Control No. Type Provisions Service ($) Flow ($) Flow (x)
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
1 Retail L(2),D(8) 13,097,785 18,606,954 1.42
2 Hotel L(2.167),D(7.708),O(.125) 14,414,196 30,487,802 2.12
2a
- ----------------------------------------------------------------------------------------------------------------------------------
2b
2c
2d
2e
2f
- ----------------------------------------------------------------------------------------------------------------------------------
2g
2h
2i
2j
2k
- ----------------------------------------------------------------------------------------------------------------------------------
2l
2m
2n
2o
2p
- ----------------------------------------------------------------------------------------------------------------------------------
2q
3 Office L(2.25),D(7.75) 12,212,777 21,820,182 1.79
4 Retail L(2.417),D(7.583) 7,185,264 11,988,694 1.67
5 Retail L(2.25),D(7.75) 6,002,844 10,007,307 1.67
- ----------------------------------------------------------------------------------------------------------------------------------
6 Retail L(2.333),D(7.667) 4,267,824 6,563,976 1.54
7 Retail L(2),D(7.75),O(.25) 3,738,852 6,003,854 1.61
8 Office L(2.333),D(7.667) 3,039,912 6,321,870 2.08
9 Retail L(2),D(8) 2,421,360 3,331,218 1.38
10 Office L(2.167),D(7.833) 2,544,202 3,620,693 1.42
- ----------------------------------------------------------------------------------------------------------------------------------
11 Office L(2.333),D(7.667) 2,079,936 4,452,109 2.14
12 Retail L(2.25),D(4.75) 2,191,705 3,180,854 1.45
13 Retail L(4),D(10.917),O(.083) 2,240,004 2,979,379 1.33
14 Office L(4),D(6) 2,014,694 2,621,713 1.30
- ----------------------------------------------------------------------------------------------------------------------------------
15 Office L(2),D(7.917) 1,897,386 2,884,544 1.52
15a
15b
15c
- ----------------------------------------------------------------------------------------------------------------------------------
16 Retail L(2.083),D(7.917) 1,846,561 2,345,200 1.27
17 Retail L(4),D(5.917),O(.083) 1,651,721 2,310,836 1.40
18 Retail L(4),D(9.917),O(.25) 1,485,380 2,388,260 1.61
18a
- ----------------------------------------------------------------------------------------------------------------------------------
18b
18c
18d
18e
18f
- ----------------------------------------------------------------------------------------------------------------------------------
18g
18h
18i
18j
18k
- ----------------------------------------------------------------------------------------------------------------------------------
18l
<CAPTION>
Scheduled Underwritten
Cut-off Maturity/AR Hospitality
Appraised Appraisal Date Date LTV Average Daily Year
Control No. Value ($) Date LTV (%) (%) Rate ($) Year Built Renovated
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1 272,000,000 58.8 52.6 1963, 1985 1993
2 336,250,000 46.1 34.3 83.39 Various Various
2a 19,600,000 8/6/98 94.68 1987
- ----------------------------------------------------------------------------------------------------------------------------------
2b 42,000,000 8/1/98 105.73 1990
2c 6,400,000 8/9/98 65.63 1970, 1977
2d 7,800,000 8/9/98 65.36 1960-1970s 1993
2e 13,400,000 8/1/98 97.32 1986 1996
2f 6,700,000 8/21/98 63.31 1965 1998
- ----------------------------------------------------------------------------------------------------------------------------------
2g 11,400,000 8/7/98 77.84 1950, 1980s
2h 27,100,000 8/6/98 69.76 1958, 1979, 1987 1995
2i 2,500,000 8/7/98 67.90 1967, 1977 1997-1998
2j 3,900,000 8/21/98 49.38 1973, 1976 1995
2k 101,200,000 8/20/98 95.01 1968 1995-1996
- ----------------------------------------------------------------------------------------------------------------------------------
2l 2,300,000 8/21/98 55.32 1971 1994
2m 6,600,000 8/21/98 58.52 1950s, 1970s 1998
2n 6,000,000 8/21/98 62.86 1973, 1978 1992-1993
2o 3,450,000 8/1/98 48.13 1972 1993
2p 68,000,000 8/1/98 108.62 1984 1997
- ----------------------------------------------------------------------------------------------------------------------------------
2q 7,900,000 8/1/98 56.17 1960 1994
3 280,000,000 2/12/99 49.8 40.4 1985
4 171,600,000 52.2 45.7 1976-1982 1996
5 135,000,000 2/2/99 55.4 48.5 1960 1981, 1988
- ----------------------------------------------------------------------------------------------------------------------------------
6 80,000,000 12/29/98 65.4 57.5 1972 1994-1998
7 68,500,000 1/27/99 65.7 57.9 1980, 1988
8 81,000,000 1/15/99 46.8 40.9 1985-1991
9 45,400,000 3/29/99 63.8 56.4 1974 1986
10 44,000,000 12/14/98 65.8 57.0 1918 1985, 1999
- ----------------------------------------------------------------------------------------------------------------------------------
11 54,000,000 1/7/99 48.0 42.0 1984-1987
12 42,300,000 1/6/99 59.6 55.7 1979 1991
13 34,000,000 10/4/98 72.0 47.7 1978 1998
14 40,000,000 7/9/98 58.2 51.9 1989
- ----------------------------------------------------------------------------------------------------------------------------------
15 35,700,000 63.1 56.0 Various
15a 21,000,000 3/18/99 1990
15b 9,500,000 3/11/99 1980
15c 5,200,000 3/16/99 1990
- ----------------------------------------------------------------------------------------------------------------------------------
16 27,000,000 3/1/99 79.6 70.8 1990
17 25,300,000 3/2/99 76.0 67.6 1994
18 28,365,000 62.3 49.0 1993-1998
18a 1,200,000 6/3/98 1994
- ----------------------------------------------------------------------------------------------------------------------------------
18b 1,250,000 6/9/98 1995
18c 1,150,000 6/22/98 1996
18d 1,540,000 6/23/98 1996
18e 3,000,000 6/19/98 1995
18f 1,200,000 6/24/98 1996
- ----------------------------------------------------------------------------------------------------------------------------------
18g 4,875,000 6/24/98 1995
18h 1,100,000 6/24/98 1996
18i 5,100,000 6/15/98 1993 1998
18j 4,800,000 6/19/98 1993-1996
18k 1,000,000 6/10/98 1995
- ----------------------------------------------------------------------------------------------------------------------------------
18l 2,150,000 6/24/98 1996
<CAPTION>
Largest
Tenant
Occupancy Area
Sq. Ft., Bed, Pad Loan Per Percentage Rent Roll Leased
Control No. or Room Unit (%) Date Largest Tenant Name (Sq.Ft.)
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1 784,002 Sq Feet 204 96.1 5/1/99 Bloomingdale's 222,000
2 3,988 Rooms 38,967 71.6 12/31/98
2a 245 Rooms 64.9 12/31/98
- ----------------------------------------------------------------------------------------------------------------------------------
2b 300 Rooms 81.1 12/31/98
2c 162 Rooms 53.9 12/31/98
2d 186 Rooms 63.8 12/31/98
2e 159 Rooms 66.8 12/31/98
2f 137 Rooms 59.3 12/31/98
- ----------------------------------------------------------------------------------------------------------------------------------
2g 160 Rooms 65.2 12/31/98
2h 376 Rooms 80.3 12/31/98
2i 124 Rooms 46.9 12/31/98
2j 149 Rooms 74.8 12/31/98
2k 850 Rooms 76.7 12/31/98
- ----------------------------------------------------------------------------------------------------------------------------------
2l 75 Rooms 61.1 12/31/98
2m 143 Rooms 65.3 12/31/98
2n 168 Rooms 59.2 12/31/98
2o 76 Rooms 74.1 12/31/98
2p 496 Rooms 79.6 12/31/98
- ----------------------------------------------------------------------------------------------------------------------------------
2q 182 Rooms 78.7 12/31/98
3 1,083,511 Sq Feet 129 94.2 1/6/99 ABN Amro Bank 702,721
4 1,093,514 Sq Feet 82 96.9 3/5/99 Dillard's (shadow) 274,128
5 1,074,994 Sq Feet 70 98.5 1/15/99 Dillard's 240,925
- ----------------------------------------------------------------------------------------------------------------------------------
6 961,919 Sq Feet 55 91.1 3/23/99 JC Penney 130,682
7 765,453 Sq Feet 59 98.5 4/12/99 Sears (Shadow) 152,754
8 559,998 Sq Feet 68 90.9 3/31/99 MCI Telecommunications 151,349
9 115,215 Sq Feet 252 97.1 2/28/99 Saks Fifth Avenue 17,971
10 544,648 Sq Feet 53 97.0 3/31/99 Ingalls, Quinn and Johnson 43,750
- ----------------------------------------------------------------------------------------------------------------------------------
11 321,828 Sq Feet 81 91.7 3/31/99 Platinum Technology 175,248
12 567,950 Sq Feet 44 80.5 1/31/99 Sam's Wholesale Club #8177 132,980
13 397,733 Sq Feet 62 85.0 1/1/99 Bergner's (shadow) 125,455
14 253,875 Sq Feet 92 93.9 2/1/99 Kaiser Foundation Health 40,174
- ----------------------------------------------------------------------------------------------------------------------------------
15 260,712 Sq Feet 86 98.1 2/1/99 Community Healthcare Alliance 133,149
15a 133,149 Sq Feet 100.0 2/1/99 Community Healthcare Alliance 133,149
15b 84,500 Sq Feet 97.0 2/1/99 Advanced Hi-Tech Corp. 40,449
15c 43,063 Sq Feet 95.7 2/1/99 Greater California Dental 14,000
- ----------------------------------------------------------------------------------------------------------------------------------
16 326,128 Sq Feet 66 85.4 4/21/99 Winn-Dixie Stores, Inc. 57,307
17 165,158 Sq Feet 117 98.7 2/28/99 A&P 52,020
18 328,696 Sq Feet 54 96.1
18a 11,458 Sq Feet 100.0 3/12/99 Samuel Music 6,525
- ----------------------------------------------------------------------------------------------------------------------------------
18b 14,280 Sq Feet 100.0 3/12/99 Dollar Tree 5,120
18c 15,447 Sq Feet 92.2 3/12/99 On Cue 5,400
18d 20,000 Sq Feet 84.0 3/12/99 Maurices 5,000
18e 36,300 Sq Feet 100.0 3/12/99 On-Cue Records 6,000
18f 12,485 Sq Feet 100.0 3/12/99 On Cue 5,300
- ----------------------------------------------------------------------------------------------------------------------------------
18g 52,880 Sq Feet 100.0 3/12/99 Fashion Bug 12,000
18h 12,456 Sq Feet 100.0 3/12/99 Maurices 4,856
18i 55,316 Sq Feet 94.3 3/12/99 Fashion Bug 12,000
18j 60,324 Sq Feet 0.0 3/12/99 Fashion Bug 13,200
18k 12,000 Sq Feet 100.0 3/12/99 Mammoth Video 5,000
- ----------------------------------------------------------------------------------------------------------------------------------
18l 25,750 Sq Feet 79.8 3/12/99 Maurices, Inc. 4,950
<CAPTION>
2nd
Largest 2nd
Largest Tenant Largest
Lease Area Lease
Exp. Leased Exp.
Control No. Date 2nd Largest Tenant Name (Sq. Ft.) Date 3rd Largest Tenant Name
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
1 11/7/11 Macy's 135,000 10/31/11 AMC Cinema
2
2a
- ------------------------------------------------------------------------------------------------------------------------------------
2b
2c
2d
2e
2f
- ------------------------------------------------------------------------------------------------------------------------------------
2g
2h
2i
2j
2k
- ------------------------------------------------------------------------------------------------------------------------------------
2l
2m
2n
2o
2p
- ------------------------------------------------------------------------------------------------------------------------------------
2q
3 1/31/20 Rivkin, Radler and Kramer 79,125 6/30/08 Del Laboratories, Inc.
4 1/31/37 Sears (shadow) 156,166 1/31/37 Foley's (shadow)
5 3/31/03 Montgomery Ward 163,893 10/31/01 Foley's (Pad Lease)
- ------------------------------------------------------------------------------------------------------------------------------------
6 9/30/02 Sears 110,258 9/25/02 Elder Beerman
7 JC Penney (Shadow) 146,206 JL Hudson (Shadow)
8 5/31/01 CH2M Hill 45,806 12/15/99 University of Phoenix
9 1/31/07 Saks Fifth Avenue 17,802 12/20/03 Ann Taylor
10 6/30/06 Masco Home Furnishings 41,195 6/30/01 Fitch, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
11 10/1/03 Rykoff-Sexton 54,445 5/31/02 ABB Combustion Engineering
12 5/26/11 Wal-Mart Stores, Inc. #1560 114,513 1/28/11 Sears, Roebuck and Co.
13 3/4/09 J.C. Penney 100,659 10/31/03 Sears (shadow)
14 5/31/03 City and County of Honolulu 28,838 1/31/02 Office/Hawaiian Affairs
- ------------------------------------------------------------------------------------------------------------------------------------
15 8/31/03 Advanced Hi-Tech Corp. 40,449 5/14/05 Media One
15a 8/31/03
15b 5/14/05 Media One 18,622 8/31/02 Summit Commercial Properties
15c 4/30/01 ACR Systems, Inc. 8,441 7/31/01 Perry, Hay & Chu, LLP
- ------------------------------------------------------------------------------------------------------------------------------------
16 11/30/14 The Sports Authority, Inc. 40,040 8/31/00 Ross Stores, Inc.
17 2/28/14 Jack LaLanne Fitness Centers, Inc. 25,000 10/31/14 Joanne Fabrics
18
18a 7/31/02 Casual Male 2,833 1/31/04 Supercuts
- ------------------------------------------------------------------------------------------------------------------------------------
18b 1/31/04 Rent Way 3,819 2/28/01 Vivian Nguyen
18c 1/31/01 Maurices 5,000 1/31/03 Subway
18d 1/31/04 Colortyme 3,200 6/30/01 Jocks Nitch
18e 1/31/01 Autoworks 6,000 9/16/06 Maurice's
18f 1/31/01 Maurices 4,800 1/31/03 Chicago 29, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
18g 1/31/01 Famous Footwear 6,000 9/30/00 On Cue
18h 1/31/04 Dollar Tree 4,000 1/31/02 Only Kids
18i 1/31/04 Famous Footwear 5,000 7/31/03 Rent Way
18j 1/31/05 Toyworks 12,000 1/31/06 On Cue
18k 8/31/99 Maurices 4,600 1/31/02 Rent Way
- ------------------------------------------------------------------------------------------------------------------------------------
18l 1/31/03 American Rentals 3,500 11/30/01 Mancino's
<CAPTION>
3rd
Largest 3rd
Tenant Largest
Area Lease
Leased Exp. Control
Control No. (Sq. Ft.) Date No.
===================================================================
<S> <C> <C> <C>
1 50,000 9/30/07 1
2 2
2a 2a
- -------------------------------------------------------------------
2b 2b
2c 2c
2d 2d
2e 2e
2f 2f
- -------------------------------------------------------------------
2g 2g
2h 2h
2i 2i
2j 2j
2k 2k
- -------------------------------------------------------------------
2l 2l
2m 2m
2n 2n
2o 2o
2p 2p
- -------------------------------------------------------------------
2q 2q
3 45,824 12/31/04 3
4 152,820 1/31/37 4
5 160,000 9/30/60 5
- -------------------------------------------------------------------
6 105,823 1/31/33 6
7 122,000 7
8 35,872 11/20/03 8
9 6,455 1/31/06 9
10 26,734 4/30/06 10
- -------------------------------------------------------------------
11 19,097 1/31/03 11
12 40,000 1/31/02 12
13 100,149 9/30/28 13
14 23,214 2/5/01 14
- -------------------------------------------------------------------
15 18,622 8/31/02 15
15a 15a
15b 14,127 5/31/02 15b
15c 5,560 11/30/02 15c
- -------------------------------------------------------------------
16 25,200 1/1/01 16
17 18,250 1/31/04 17
18 18
18a 1,200 11/30/00 18a
- -------------------------------------------------------------------
18b 1,581 5/31/02 18b
18c 1,367 11/14/00 18c
18d 2,500 8/31/00 18d
18e 5,000 1/31/02 18e
18f 1,275 11/12/05 18f
- -------------------------------------------------------------------
18g 5,760 2/28/03 18g
18h 1,527 1/31/01 18h
18i 3,200 5/31/03 18i
18j 5,500 2/28/02 18j
18k 2,400 7/31/99 18k
- -------------------------------------------------------------------
18l 2,500 1/30/01 18l
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Control No. Property Name Address
====================================================================================================================================
<S> <C> <C>
19 Trujillo Alto Shopping Center Trujillo Alto Plaza Kilometer 3.4
20 Casa Del Monte 6151 Forest Hill Boulevard
21 Grand Traverse Crossing Airport Road at Day Drive
- ------------------------------------------------------------------------------------------------------------------------------------
22 607 South Hill Street 607 South Hill Street
23 Denton Center Shopping Center 500-1042 West University Drive
24 Pleasure Cove and Plantation Manor 3030 and 3200 S. US Highway 1
25 175 Pinelawn Road 175 Pinelawn Road
26 Westheimer Park/ Terrace Apartments 9235/9407 Westheimer Road
- ------------------------------------------------------------------------------------------------------------------------------------
27 Toll House Hotel 140 S. Santa Cruz Avenue
28 San Felipe Court Apartments 2007 Mid Lane Road
29 Tides/Kent Hotel Package 1220 Ocean Drive & 1131 Collins Avenue
30 Hickory Hills- MHP 121 Hickory Hills Drive
31 Indian Springs Apartments 2662 Trader Court
- ------------------------------------------------------------------------------------------------------------------------------------
32 Cypress Parke Apartments 990 Cypress Station
33 Conyers Plaza 1370-1426 Dogwood Drive
34 Best Western Rochester 214 Fourth Street, SW & 401 6th Street, SW
35 Sierra Vista Apartments 615 South Hardy Drive
36 Woodholme Center Office Building 1829 Reistertown Road
- ------------------------------------------------------------------------------------------------------------------------------------
37 Holiday Inn Express - Birmingham 34952 Woodward Avenue
38 Steger Towne Crossing I I-30 and Ridge Road
39 Birnam Wood Apartments 2505 King Lear Drive
40 Glasshouse Square Shopping Center 3104, 3146 Sports Arena Boulevard
41 Twinsburg Town Center 8922-72 Darrow Road / S.R. 91
- ------------------------------------------------------------------------------------------------------------------------------------
42 Post Oak Apartments 705 Ridgecrest Court
43 Tierra Verde Plaza Northwest Corner of Deer Valley Road & 67th Avenue
44 LBJ Oates/Summit Shopping Center 1900 Oates Drive
45 Normandy Square Apartments 5095 Bennington Drive
46 Carrier Town Crossing NWC of I-20 and Carrier Parkway
- ------------------------------------------------------------------------------------------------------------------------------------
47 Camelot Arms Apartments 855 King Arthur Drive
48 Gaitherstowne Plaza 206-300 North Frederick Road
49 Eastgate Plaza Shopping Center 1725 West Carson Street
50 Canfield Business Park 111-117 Canfield Avenue
51 Hampton Woods Apartments 3001 Oak Tree Avenue
- ------------------------------------------------------------------------------------------------------------------------------------
52 Kohl's Shopping Center 11530-11560 Kingston Pike
53 Industrial Bldg 1-24 SW/c of Sam Ridley Parkway and I-24
54 Hancock Plaza 1513-1537 Hancock Street
55 Washington Place Shopping Center 10105-19121 & 10203-10263 E. Washington Street
56 9797 S. Frontage Rd. 9797 S. Frontage Rd.
- ------------------------------------------------------------------------------------------------------------------------------------
57 Courtyard Plaza Shopping Center 101-185 Interstate 35
58 Owens - Crenshaw State Route 219
59 Best Western Truckee 11331 Brockway Road
60 Owens-Tracy 15000 West Schulte Road
- ------------------------------------------------------------------------------------------------------------------------------------
61 SecureCare Portfolio Various
61a SecureCare - South Mingo Self Storage 5815 South Mingo Road
61b SecureCare - Storage Inn Mini Storage 6308 South Mingo Road
61c SecureCare - Garnett 61 Mini Storage Facility 11122 East 61st Street
61d SecureCare - South College Self Storage 2306 South College Avenue
- ------------------------------------------------------------------------------------------------------------------------------------
61e SecureCare - Baker Avenue Self Storage 1213 Baker Avenue Self Storage
61f SecureCare - 3007 Longmire Self Storage 3007 Longmire Drive
61g SecureCare - South Graham Self Storage 625 South Graham Road
61h SecureCare - Netherlin Self Storage 4018 Texas Avenue South
- ------------------------------------------------------------------------------------------------------------------------------------
62 Fidelity Office Building 2300 Litton Lane
63 Village at Loch Katrine Apartments 16545 Loch Katrine Lane
64 Terra Vista Business Park - Loan Level 10707 Town Center Drive, 14120 Live Oak Avenue
65 The Hills Apartments 3101 W. Normandale
66 Bed Bath & Beyond/ Babies 'R Us 4901 28th Street SE
- ------------------------------------------------------------------------------------------------------------------------------------
67 Vineyard Apartments 1625 Richland Avenue
68 Atelier District Office 240, 262, 278 N. 5th Street, 225, 251 N. Neilston Street
<CAPTION>
% of
Aggregate
Cross Cut-off Cumulative
Zip Collateralized Origial Cut-Off Date Date % of Initial
Control No. City State Codes Groups Balance ($) Balance ($) Balance Pool Balance
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
19 Trujillo Alto PR 00760 No 15,900,000 15,833,272 0.91 57.68
20 West Palm Beach FL 33401 No 15,750,000 15,741,509 0.90 58.58
21 Garfield MI 49684 No 14,652,034 14,544,278 0.83 59.41
- -----------------------------------------------------------------------------------------------------------------------------------
22 Los Angeles CA 90014 No 13,400,000 13,379,960 0.77 60.18
23 Denton TX 76201 No 13,097,346 13,034,012 0.75 60.92
24 Fort Pierce FL 34982 No 13,065,000 12,968,214 0.74 61.67
25 Melville NY 11747 No 12,100,000 12,060,459 0.69 62.36
26 Houston TX 77063 No 11,400,000 11,385,399 0.65 63.01
- -----------------------------------------------------------------------------------------------------------------------------------
27 Los Gatos CA 95030 No 11,200,000 11,181,855 0.64 63.65
28 Houston TX 77207 No 11,144,412 11,130,676 0.64 64.29
29 Miami Beach FL 33139 LB99C1-10 10,600,000 10,592,291 0.61 64.89
30 Bath PA 18014 No 10,400,000 10,368,401 0.59 65.49
31 South Bend IN 46628 No 10,000,000 9,987,387 0.57 66.06
- -----------------------------------------------------------------------------------------------------------------------------------
32 Houston TX 77090 No 9,200,000 9,168,088 0.52 66.58
33 Conyers GA 30012 No 9,000,000 8,995,180 0.51 67.10
34 Rochester MN 55902 No 8,875,000 8,860,352 0.51 67.60
35 Tempe AZ 85281 No 8,883,358 8,836,455 0.51 68.11
36 Baltimore MD 21209 No 8,600,000 8,595,693 0.49 68.60
- -----------------------------------------------------------------------------------------------------------------------------------
37 Birmingham MI 48009 No 8,500,000 8,448,774 0.48 69.09
38 Rockwall TX 75087 LB99C1-8 8,500,000 8,393,839 0.48 69.57
39 Monroeville PA 15146 No 8,400,000 8,305,516 0.48 70.04
40 San Diego CA 92110 No 8,200,000 8,168,291 0.47 70.51
41 Twinsburg OH 44087 No 8,066,526 8,038,124 0.46 70.97
- -----------------------------------------------------------------------------------------------------------------------------------
42 Norman OK 73072 No 8,000,000 7,989,754 0.46 71.43
43 Glendale AZ 85310 No 7,951,842 7,917,344 0.45 71.88
44 Mesquite TX 75150 No 7,935,143 7,897,942 0.45 72.33
45 Saginaw MI 48603 No 7,900,000 7,890,363 0.45 72.78
46 Grand Prairie TX 75052 No 7,895,990 7,865,213 0.45 73.23
- -----------------------------------------------------------------------------------------------------------------------------------
47 Fayetteville NC 28314 No 7,300,000 7,285,730 0.42 73.65
48 Gaithersburg MD 20877 No 6,900,000 6,892,159 0.39 74.05
49 Torrance CA 90501 No 6,900,000 6,874,220 0.39 74.44
50 Randolph NJ 07869 No 6,900,000 6,871,442 0.39 74.83
51 Norman OK 73072 No 6,700,000 6,691,419 0.38 75.22
- -----------------------------------------------------------------------------------------------------------------------------------
52 Farragut TN 37922 No 6,244,001 6,223,242 0.36 75.57
53 Smyrna TN 37167 No 6,200,000 6,197,248 0.35 75.93
54 Quincy MA 02169 No 6,200,000 6,188,707 0.35 76.28
55 Indianapolis IN 46229 No 6,050,000 6,043,432 0.35 76.63
56 Yuma AZ 85365 No 6,050,000 5,970,782 0.34 76.97
- -----------------------------------------------------------------------------------------------------------------------------------
57 New Braunfels TX 78130 No 5,950,000 5,939,636 0.34 77.31
58 Crenshaw PA 15824 LB99C1-5 5,810,000 5,794,833 0.33 77.64
59 Truckee CA 96161 No 5,800,000 5,790,407 0.33 77.97
60 Tracy CA 95376 LB99C1-5 5,650,000 5,635,251 0.32 78.30
- -----------------------------------------------------------------------------------------------------------------------------------
61 Various VAR Various LB99C1-7 5,650,000 5,634,047 0.32 78.62
61a Tulsa OK 74133
61b Tulsa OK 74133
61c Tulsa OK 74133
61d Bryan TX 77802
- -----------------------------------------------------------------------------------------------------------------------------------
61e Bryan TX 77803
61f College Station TX 77845
61g College Station TX 77845
61h College Station TX 77845
- -----------------------------------------------------------------------------------------------------------------------------------
62 Hebron KY 41048 No 5,650,000 5,619,231 0.32 78.94
63 Houston TX 77084 No 5,479,039 5,457,828 0.31 79.25
64 Rancho Cucamonga, Baldwin Park CA 91730 No 5,200,000 5,177,161 0.30 79.55
65 Fort Worth TX 76116 No 5,111,032 5,084,744 0.29 79.84
66 Cascade MI 49512 No 5,016,500 5,000,043 0.29 80.13
- -----------------------------------------------------------------------------------------------------------------------------------
67 Ceres CA 95307 No 5,000,000 4,993,629 0.29 80.41
68 Columbus OH 43215 No 5,000,000 4,985,017 0.29 80.70
<CAPTION>
Original Remaining Original
Interest Interest- Interest- Term to
Mortgage Administrative Accrual Only Period Only Period Maturity
Control No. Rate (%) Cost Rate (%) Method Amortization Type (Mos.) (Mos.) (Mos.)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
19 7.400 0.102 Act/360 Balloon 120
20 7.470 0.102 Act/360 Balloon 60
21 7.420 0.102 30/360 Step 172
- -----------------------------------------------------------------------------------------------------------------------------------
22 8.120 0.102 Act/360 Balloon 120
23 8.060 0.102 Act/360 Balloon 105
24 7.120 0.177 Act/360 ARD 120
25 7.070 0.152 Act/360 Balloon 120
26 7.500 0.102 Act/360 Balloon 84
- -----------------------------------------------------------------------------------------------------------------------------------
27 8.760 0.102 Act/360 Balloon 84
28 7.650 0.102 Act/360 Balloon 108
29 8.530 0.102 Act/360 Balloon 120
30 7.440 0.102 Act/360 Balloon 60
31 7.560 0.102 Act/360 Balloon 84
- -----------------------------------------------------------------------------------------------------------------------------------
32 7.500 0.102 Act/360 Balloon 84
33 7.490 0.102 Act/360 Balloon 120
34 8.670 0.152 Act/360 Balloon 120
35 7.090 0.177 30/360 ARD 109
36 7.690 0.102 Act/360 Balloon 120
- -----------------------------------------------------------------------------------------------------------------------------------
37 7.943 0.177 Act/360 ARD 103
38 7.080 0.102 Act/360 Balloon 121
39 6.750 0.102 Act/360 Balloon 120
40 7.750 0.102 Act/360 Balloon 84
41 6.890 0.102 Act/360 Balloon 114
- -----------------------------------------------------------------------------------------------------------------------------------
42 7.500 0.102 Act/360 Balloon 84
43 7.627 0.177 Act/360 ARD 109
44 8.200 0.102 Act/360 Balloon 105
45 7.690 0.102 Act/360 Balloon 120
46 7.750 0.102 Act/360 Balloon 118
- -----------------------------------------------------------------------------------------------------------------------------------
47 7.240 0.102 Act/360 Balloon 120
48 7.960 0.102 Act/360 Balloon 120
49 8.625 0.102 Act/360 Balloon 120
50 7.460 0.102 Act/360 Balloon 120
51 7.500 0.102 Act/360 Balloon 84
- -----------------------------------------------------------------------------------------------------------------------------------
52 7.296 0.152 Act/360 Balloon 231
53 8.030 0.102 Act/360 Balloon 120
54 7.500 0.102 Act/360 Balloon 120
55 8.130 0.122 Act/360 Balloon 120
56 6.950 0.177 Act/360 ARD 120
- -----------------------------------------------------------------------------------------------------------------------------------
57 7.660 0.102 Act/360 Balloon 120
58 8.210 0.102 Act/360 Balloon 60
59 8.660 0.102 Act/360 Balloon 84
60 8.210 0.102 Act/360 Balloon 60
- -----------------------------------------------------------------------------------------------------------------------------------
61 7.835 0.152 Act/360 Balloon 60
61a
61b
61c
61d
- -----------------------------------------------------------------------------------------------------------------------------------
61e
61f
61g
61h
- -----------------------------------------------------------------------------------------------------------------------------------
62 7.000 0.102 Act/360 Balloon 120
63 7.300 0.102 Act/360 Balloon 114
64 7.950 0.102 Act/360 Balloon 120
65 7.669 0.102 Act/360 Balloon 72
66 7.050 0.102 Act/360 Balloon 120
- -----------------------------------------------------------------------------------------------------------------------------------
67 7.520 0.102 Act/360 Balloon 84
68 7.510 0.102 Act/360 Balloon 120
<CAPTION>
Remaining Maturity or
Term to Original Remaining Anticipated
Maturity Amortization Amortization Origination Repayment Balloon
Control No. (Mos.) Term (Mos.) Term (Mos.) Date Date Balance ($)
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
19 114 360 354 11/4/98 12/1/08 14,012,896
20 59 360 359 4/9/99 5/1/04 15,003,494
21 163 280 271 9/1/98 1/1/13 9,118,261
- -------------------------------------------------------------------------------------------------------------------------------
22 118 324 322 3/17/99 4/1/09 11,519,109
23 98 345 338 10/30/98 8/1/07 11,808,352
24 110 360 350 7/21/98 8/11/08 11,432,227
25 116 360 356 1/14/99 2/1/09 10,570,129
26 82 360 358 3/24/99 4/1/06 10,581,964
- -------------------------------------------------------------------------------------------------------------------------------
27 82 300 298 3/5/99 4/1/06 10,135,498
28 106 360 358 3/24/98 4/1/08 10,060,398
29 119 300 299 4/16/99 5/1/09 8,874,511
30 56 360 356 1/5/99 2/1/04 9,899,195
31 82 360 358 3/24/99 4/1/06 9,291,435
- -------------------------------------------------------------------------------------------------------------------------------
32 82 360 358 3/25/99 4/1/06 8,506,029
33 119 360 359 4/19/99 5/1/09 7,952,726
34 118 300 298 3/25/99 4/1/09 7,457,594
35 103 349 343 11/2/98 1/1/08 7,709,424
36 119 360 359 4/7/99 5/1/09 7,637,379
- -------------------------------------------------------------------------------------------------------------------------------
37 97 300 294 12/4/98 7/11/07 7,286,255
38 104 360 343 12/31/97 2/1/08 7,425,226
39 111 300 291 8/24/98 9/1/08 6,666,747
40 78 360 354 11/23/98 12/1/05 7,641,000
41 110 354 350 1/25/99 8/1/08 7,039,221
- -------------------------------------------------------------------------------------------------------------------------------
42 82 360 358 3/26/99 4/1/06 7,425,940
43 103 349 343 12/24/97 1/1/08 7,089,276
44 98 345 338 10/30/98 8/1/07 7,174,980
45 118 360 358 4/1/99 4/1/09 7,014,763
46 112 359 353 9/17/98 10/1/08 7,033,557
- -------------------------------------------------------------------------------------------------------------------------------
47 117 360 357 2/12/99 3/1/09 6,409,573
48 118 360 358 4/1/99 4/1/09 6,167,263
49 113 360 353 10/27/98 11/1/08 6,260,275
50 114 360 354 11/5/98 12/1/08 6,090,321
51 82 360 358 3/26/99 4/1/06 6,219,225
- -------------------------------------------------------------------------------------------------------------------------------
52 227 351 347 1/14/99 5/1/18 3,906,201
53 119 360 359 4/9/99 5/1/09 5,551,728
54 117 360 357 2/9/99 3/1/09 5,480,095
55 118 360 358 3/25/99 4/1/09 5,429,463
56 109 300 289 7/6/98 7/11/08 4,833,618
- -------------------------------------------------------------------------------------------------------------------------------
57 117 360 357 2/4/99 3/1/09 5,280,245
58 57 300 297 2/26/99 3/1/04 5,417,293
59 82 300 298 3/5/99 4/1/06 5,239,650
60 57 300 297 2/26/99 3/1/04 5,268,107
- -------------------------------------------------------------------------------------------------------------------------------
61 57 300 297 2/8/99 3/1/04 5,243,398
61a
61b
61c
61d
- -------------------------------------------------------------------------------------------------------------------------------
61e
61f
61g
61h
- -------------------------------------------------------------------------------------------------------------------------------
62 113 360 353 10/23/98 11/1/08 4,927,418
63 109 354 349 12/21/98 7/1/08 4,831,137
64 113 360 353 10/16/98 11/1/08 4,644,835
65 65 348 341 10/30/97 11/1/04 4,789,788
66 116 360 356 1/29/99 2/1/09 4,379,935
- -------------------------------------------------------------------------------------------------------------------------------
67 82 360 358 3/16/99 4/1/06 4,642,717
68 116 360 356 1/28/99 2/1/09 4,417,369
<CAPTION>
DSCR
Annual Net
Property Prepayment Debt Net Cash Cash
Control No. Type Provisions Service ($) Flow ($) Flow (x)
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
19 Retail L(4),D(5.75),O(.25) 1,321,061 1,668,301 1.26
20 Multi-Family L(4),D(.917),O(.083) 1,317,635 1,589,579 1.21
21 Retail YM1%(13.833),O(.5) 1,227,339 1,634,888 1.33
- ----------------------------------------------------------------------------------------------------------------------------------
22 Retail L(4),D(6) 1,225,972 1,630,063 1.33
23 Retail L(3.5),D(4.75),O(.5) 1,172,042 1,520,910 1.30
24 Multi-Family L(4),D(5.75),O(.25) 1,055,727 1,568,531 1.49
25 Office L(4),D(5.75),O(.25) 972,855 1,309,420 1.35
26 Multi-Family L(4),D(2.917),O(.083) 956,525 1,186,021 1.24
- ----------------------------------------------------------------------------------------------------------------------------------
27 Hotel L(2.167),D(4.583),O(.25) 1,105,874 1,549,571 1.40
28 Multi-Family L(3),D(5.75),O(.25) 948,854 1,183,794 1.25
29 Hotel L(4),D(6) 1,026,822 1,498,192 1.46
30 Multi-Family L(4),D(1) 867,498 1,090,349 1.26
31 Multi-Family L(4),D(2.75),O(.25) 843,993 1,026,259 1.22
- ----------------------------------------------------------------------------------------------------------------------------------
32 Multi-Family L(4),D(2.917),O(.083) 771,933 971,380 1.26
33 Retail L(4),D(5.917),O(.083) 754,412 989,359 1.31
34 Hotel L(4),D(6) 869,802 1,215,070 1.40
35 Multi-Family L(3.083),YM1%(4),2(1),O(1) 722,259 962,035 1.33
36 Office L(4),D(5.75),O(.25) 735,063 947,528 1.29
- ----------------------------------------------------------------------------------------------------------------------------------
37 Hotel L(4),D(4.333),O(.25) 783,405 1,191,339 1.52
38 Retail L(4.08),D(5.5),O(.5) 684,098 868,396 1.27
39 Multi-Family L(4),D(5.75),O(.25) 696,439 861,112 1.24
40 Retail L(3),D(4) 704,950 920,242 1.31
41 Retail L(4.5),D(4.75),O(.25) 640,107 876,433 1.37
- ----------------------------------------------------------------------------------------------------------------------------------
42 Multi-Family L(4),D(2.917),O(.083) 671,246 858,768 1.28
43 Retail L(3.083),YM1%(5.75),O(.25) 681,119 884,850 1.30
44 Retail L(3.5),D(4.75),O(.5) 719,318 915,939 1.27
45 Multi-Family L(4),D(5.833),O(.167) 675,232 833,969 1.24
46 Retail L(4.833),D(4.75),O(.25) 679,293 856,216 1.26
- ----------------------------------------------------------------------------------------------------------------------------------
47 Multi-Family L(4),D(5.917),0(.083) 596,992 780,840 1.31
48 Retail L(4),D(5.75),O(.25) 605,250 802,757 1.33
49 Retail L(4),D(6) 644,010 867,077 1.35
50 Industrial/Warehouse L(3),D(6.75),O(.25) 576,683 731,614 1.27
51 Multi-Family L(4),D(2.917),O(.083) 562,168 702,421 1.25
- ----------------------------------------------------------------------------------------------------------------------------------
52 Retail L(11.167),D(7.833),O(.25) 517,173 645,046 1.25
53 Industrial/Warehouse L(2.083),D(7.917) 547,478 691,260 1.26
54 Office L(4),D(5.75),O(.25) 520,216 662,060 1.27
55 Retail L(4),D(5.917),O(.083) 539,307 684,283 1.27
56 Multi-Family L(4),D(5.75),O(.25) 510,808 631,161 1.24
- ----------------------------------------------------------------------------------------------------------------------------------
57 Retail L(4),D(6) 507,085 660,908 1.30
58 Industrial/Warehouse L(2.25),D(2.5),O(.25) 547,845 709,754 1.30
59 Hotel L(2.167),D(4.583),O(.25) 567,962 802,653 1.41
60 Industrial/Warehouse L(2.25),D(2.5),O(.25) 532,758 685,638 1.29
- ----------------------------------------------------------------------------------------------------------------------------------
61 Self Storage L(3),D(1.917),O(.083) 515,902 711,556 1.38
61a
61b
61c
61d
- ----------------------------------------------------------------------------------------------------------------------------------
61e
61f
61g
61h
- ----------------------------------------------------------------------------------------------------------------------------------
62 Office L(4),D(5.917),O(.083) 451,075 646,081 1.43
63 Multi-Family L(2.5),D(6.75),O(.25) 452,883 569,874 1.26
64 Mixed Use L(4),D(5.917),O(.083) 455,696 742,085 1.63
65 Multi-Family L(3),D(2.75),O(.25) 439,900 529,015 1.20
66 Retail L(4),D(5.75),O(.25) 402,522 541,487 1.35
- ----------------------------------------------------------------------------------------------------------------------------------
67 Multi-Family L(4),D(2.917),O(.083) 420,351 512,554 1.22
68 Office L(4),D(6) 419,940 675,549 1.61
<CAPTION>
Scheduled Underwritten
Cut-off Maturity/AR Hospitality
Appraised Appraisal Date Date LTV Average Daily Year
Control No. Value ($) Date LTV (%) (%) Rate ($) Year Built Renovated
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
19 22,000,000 7/24/98 72.0 63.7 1979
20 21,000,000 3/16/99 75.0 71.4 1974
21 19,650,000 6/24/98 74.0 46.4 1996
- ----------------------------------------------------------------------------------------------------------------------------------
22 20,750,000 2/3/99 64.5 55.5 1910 1969-1999
23 18,900,000 8/19/98 69.0 62.5 1960 1978, 1999
24 16,600,000 6/19/98 78.1 68.9 1974
25 16,900,000 3/3/98 71.4 62.5 1990
26 14,800,000 2/2/99 76.9 71.5 1968 1998
- ----------------------------------------------------------------------------------------------------------------------------------
27 19,000,000 10/12/98 58.9 53.3 127.72 1985 1990
28 14,850,000 2/15/99 75.0 67.7 1957 1998
29 17,600,000 4/1/99 60.2 50.4 239.28 1936/1939 1997/1995
30 13,000,000 11/23/98 79.8 76.1 1971
31 12,500,000 8/27/98 79.9 74.3 1972-1979 1996
- ----------------------------------------------------------------------------------------------------------------------------------
32 11,900,000 2/2/99 77.0 71.5 1979 1998
33 12,000,000 3/4/99 75.0 66.3 1997
34 12,000,000 3/1/99 73.8 62.1 66.48 1965-1987 1980
35 11,200,000 8/13/98 78.9 68.8 1971 1997
36 11,600,000 2/11/99 74.1 65.8 1989
- ----------------------------------------------------------------------------------------------------------------------------------
37 12,450,000 1/1/99 67.9 58.5 114.89 1958, 1963 1995, 1998
38 11,000,000 2/10/99 76.3 67.5 1991, 1997
39 10,700,000 6/23/98 77.6 62.3 1964-1967 1997
40 13,100,000 8/30/98 62.4 58.3 1981
41 10,200,000 1/7/99 78.8 69.0 1997
- ----------------------------------------------------------------------------------------------------------------------------------
42 10,000,000 2/3/99 79.9 74.3 1985 1996
43 10,475,000 9/21/98 75.6 67.7 1997-1998
44 11,000,000 6/10/98 71.8 65.2 1986
45 10,000,000 2/8/99 78.9 70.1 1973
46 10,300,000 9/8/98 76.4 68.3 1998
- ----------------------------------------------------------------------------------------------------------------------------------
47 9,125,000 10/1/98 79.8 70.2 1985-95
48 9,600,000 2/19/99 71.8 64.2 1972 1997
49 10,800,000 9/18/98 63.7 58.0 1990
50 9,000,000 8/25/98 76.3 67.7 1989-1994
51 8,400,000 2/3/99 79.7 74.0 1985 1996
- ----------------------------------------------------------------------------------------------------------------------------------
52 8,250,000 3/13/98 75.4 47.3 1998
53 7,950,000 1/29/99 78.0 69.8 1997
54 8,400,000 12/1/98 73.7 65.2 1930 1988
55 7,700,000 2/9/99 78.5 70.5 1988
56 8,900,000 6/17/98 67.1 54.3 1996
- ----------------------------------------------------------------------------------------------------------------------------------
57 8,100,000 1/16/99 73.3 65.2 1981-1984
58 8,200,000 3/1/99 70.7 66.1 1991
59 8,800,000 10/15/98 65.8 59.5 57.27 1984 1997
60 9,600,000 3/15/99 58.7 54.9 1988
- ----------------------------------------------------------------------------------------------------------------------------------
61 8,060,000 69.9 65.1 Various
61a 1,200,000 11/17/98 1984
61b 1,500,000 11/17/98 1984
61c 1,800,000 11/17/98 1994
61d 590,000 11/17/98 1985
- ----------------------------------------------------------------------------------------------------------------------------------
61e 370,000 11/17/98 1985
61f 1,100,000 11/17/98 1985
61g 480,000 11/17/98 1985
61h 1,020,000 11/17/98 1985
- ----------------------------------------------------------------------------------------------------------------------------------
62 8,170,000 10/12/98 68.8 60.3 1986 1996
63 6,900,000 6/15/98 79.1 70.0 1982
64 11,800,000 6/1/98 43.9 39.4 1985, 1990
65 6,650,000 9/18/98 76.5 72.0 1979 1997-1998
66 6,350,000 12/8/98 78.7 69.0 1996-1998
- ----------------------------------------------------------------------------------------------------------------------------------
67 6,600,000 1/12/99 75.7 70.3 1979 1998
68 8,500,000 8/26/98 58.6 52.0 1908-1968 1988-1995
<CAPTION>
Largest
Tenant
Occupancy Area
Sq. Ft., Bed, Pad Loan Per Percentage Rent Roll Leased
Control No. or Room Unit (%) Date Largest Tenant Name (Sq.Ft.)
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
19 205,541 Sq Feet 77 100.0 9/16/98 K-Mart 80,100
20 657 Pads 23,973 95.6 3/1/99
21 260,765 Sq Feet 56 95.5 2/15/99 Home Depot 111,847
- ----------------------------------------------------------------------------------------------------------------------------------
22 136,155 Sq Feet 98 93.8 3/17/99 Oruncakciel-Suri-Minassian 3,299
23 314,654 Sq Feet 42 97.1 10/13/98 Kroger Co. 62,640
24 585 Pads 22,333 94.7 12/31/98
25 99,508 Sq Feet 122 93.1 10/30/98 Continental Casualty Co. 69,737
26 491 Pads 23,218 95.5 2/28/99
- ----------------------------------------------------------------------------------------------------------------------------------
27 97 Rooms 115,464 88.1 10/31/98
28 305 Units 36,539 93.8 3/10/99
29 99 Rooms 107,071 65.2 2/28/99
30 352 Pads 29,545 97.2 11/1/98
31 568 Units 17,606 92.5 2/26/99
- ----------------------------------------------------------------------------------------------------------------------------------
32 345 Units 26,667 94.5 2/28/99
33 119,695 Sq Feet 75 100.0 3/26/99 Rhodes Furniture 42,600
34 238 Rooms 37,290 56.7 12/31/98
35 228 Units 38,962 93.9 9/25/98
36 72,809 Sq Feet 118 100.0 2/1/99 ExecuTrain 10,896
- ----------------------------------------------------------------------------------------------------------------------------------
37 126 Rooms 67,460 66.7 2/28/99
38 82,715 Sq Feet 103 96.9 4/16/99 Lowe's (Shadow)
39 337 Units 24,926 92.3 6/25/98
40 92,909 Sq Feet 88 93.4 11/19/98 Staples 27,848
41 113,648 Sq Feet 71 93.4 12/2/98 Giant Eagle 60,400
- ----------------------------------------------------------------------------------------------------------------------------------
42 304 Pads 26,316 99.3 2/28/99
43 88,679 Sq Feet 90 100.0 12/16/98 Bashas' Inc. 51,500
44 118,283 Sq Feet 67 90.1 10/15/98 Albertson's 47,165
45 283 Units 27,915 90.3 3/11/99
46 45,614 Sq Feet 173 95.6 9/9/98 Don Pablo's 73,834
- ----------------------------------------------------------------------------------------------------------------------------------
47 265 Units 27,547 83.4 1/19/99
48 71,460 Sq Feet 97 93.7 4/1/99 Rugged Warehouse 12,000
49 57,342 Sq Feet 120 97.9 10/23/98 Jeans Pacific, Inc. 9,414
50 139,442 Sq Feet 49 100.0 11/2/98 Cirrus Diagnostics 38,500
51 248 Units 27,016 95.6 2/28/99
- ----------------------------------------------------------------------------------------------------------------------------------
52 101,964 Sq Feet 61 92.9 12/1/98 Kohl's 86,584
53 267,183 Sq Feet 23 100.0 1/11/99 Hills Pet Nutrition Sales, Inc. 267,183
54 123,737 Sq Feet 50 97.7 2/5/99 Department of Transitional Asst. 22,092
55 102,678 Sq Feet 59 96.9 3/11/99 Circuit City 48,400
56 1,083 Pads 5,586 44.0 12/31/98
- ----------------------------------------------------------------------------------------------------------------------------------
57 190,417 Sq Feet 31 91.5 1/20/99 Hobby Lobby 45,280
58 291,800 Sq Feet 20 100.0 2/23/99 Owens - Brockway Glass Container, Inc. 291,800
59 100 Rooms 58,000 76.0 10/31/98
60 300,000 Sq Feet 19 100.0 2/23/99 Owens-Brockway Glass Container, Inc. 300,000
- ----------------------------------------------------------------------------------------------------------------------------------
61 301,580 Sq Feet 19 87.1
61a 42,700 Sq Feet 86.4 12/1/98
61b 44,890 Sq Feet 93.7 12/31/98
61c 53,500 Sq Feet 81.7 12/31/98
61d 28,110 Sq Feet 80.0 6/5/98
- ----------------------------------------------------------------------------------------------------------------------------------
61e 15,450 Sq Feet 89.8 6/5/98
61f 48,575 Sq Feet 83.7 11/5/98
61g 33,550 Sq Feet 88.9 6/5/98
61h 34,805 Sq Feet 87.7 7/16/98
- ----------------------------------------------------------------------------------------------------------------------------------
62 81,744 Sq Feet 69 100.0 9/11/98 Fidelity Properties, Inc. 81,744
63 216 Units 25,366 94.0 10/31/98
64 168,506 Sq Feet 31 94.2 3/23/99 24 Hour Fitness 18,300
65 264 Units 19,360 97.0 10/22/98
66 73,821 Sq Feet 68 100.0 1/28/99 Bed Bath & Beyond 40,000
- ----------------------------------------------------------------------------------------------------------------------------------
67 212 Units 23,585 92.0 1/31/99
68 116,548 Sq Feet 43 93.7 2/3/99 Midland Mutual Life Insurance Co. 30,680
<CAPTION>
2nd
Largest 2nd
Largest Tenant Largest
Lease Area Lease
Exp. Leased Exp.
Control No. Date 2nd Largest Tenant Name (Sq. Ft.) Date 3rd Largest Tenant Name
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
19 5/31/04 Pueblo International 26,869 2/28/04 Tiendas Capri
20
21 1/31/27 Borders 28,146 1/31/27 Toys R Us
- ------------------------------------------------------------------------------------------------------------------------------------
22 2/28/01 Henry Deguchi DBA Shima Pear 3,233 12/31/02 Apik Jewelry
23 2/28/17 Drug Emporium 27,800 2/28/02 Russell's Dept. Store
24
25 12/31/00 General Services Admin. 17,720 9/30/02 Jamko Service Corporation
26
- ------------------------------------------------------------------------------------------------------------------------------------
27
28
29
30
31
- ------------------------------------------------------------------------------------------------------------------------------------
32
33 11/30/11 PetSmart 26,115 9/30/12 Goody's Family Clothing
34
35
36 3/31/03 Jacor Radio 9,354 4/30/01 Snyder, Weiner, Weltchek
- ------------------------------------------------------------------------------------------------------------------------------------
37
38 Target (Shadow) Albertsons (Shadow)
39
40 8/31/06 U.A. Theatres 21,295 7/31/01 Blockbuster Music
41 6/30/16 Medic Drug 11,700 10/31/07 Video Update
- ------------------------------------------------------------------------------------------------------------------------------------
42
43 11/5/17 About Furniture 4,630 9/30/03 Streets of New York
44 10/31/06 Eckerd Drugs 8,640 8/31/06 Books & Closeouts
45
46 4/30/08 Taco Cabana 44,388 6/14/13 Chick-Fil-A
- ------------------------------------------------------------------------------------------------------------------------------------
47
48 4/30/08 Minnesota Fabrics 11,950 3/31/01 Old Country Buffet
49 11/30/00 ASA USA, Inc. 4,876 4/30/02 Jong Hoon Cho/Picnic Garden
50 11/30/02 Troffut & Smith Storage 35,750 8/31/04 Landice
51
- ------------------------------------------------------------------------------------------------------------------------------------
52 3/11/18
53 9/14/03
54 11/30/03 O'Connor & Drew, P.C. 19,678 11/30/03 Blue Cross/Blue Shield
55 1/31/18 Office Depot 25,076 1/31/05 Shoe Carnival
56
- ------------------------------------------------------------------------------------------------------------------------------------
57 4/30/04 Handy Andy 30,618 1/14/01 Big Lots (Consolidated Stores Corp.)
58 2/28/09
59
60 2/28/09
- ------------------------------------------------------------------------------------------------------------------------------------
61
61a
61b
61c
61d
- ------------------------------------------------------------------------------------------------------------------------------------
61e
61f
61g
61h
- ------------------------------------------------------------------------------------------------------------------------------------
62 4/30/07
63
64 4/30/01 Water of Life Community Church 12,991 7/12/99 Central School District
65
66 1/31/14 Babies R Us 33,821 1/31/14
- ------------------------------------------------------------------------------------------------------------------------------------
67
68 12/31/02 Intermedia Communications 14,195 6/30/08 ICG Access Services
<CAPTION>
3rd
Largest 3rd
Tenant Largest
Area Lease
Leased Exp. Control
Control No. (Sw. Ft.) Date No.
===================================================================
<S> <C> <C> <C>
19 12,300 3/31/05 19
20 20
21 27,443 1/31/12 21
- -------------------------------------------------------------------
22 2,502 9/30/03 22
23 27,792 9/30/01 23
24 24
25 4,639 12/31/99 25
26 26
- -------------------------------------------------------------------
27 27
28 28
29 29
30 30
31 31
- -------------------------------------------------------------------
32 32
33 24,920 9/30/09 33
34 34
35 35
36 8,889 9/30/07 36
- -------------------------------------------------------------------
37 37
38 38
39 39
40 14,425 10/31/04 40
41 4,928 4/30/03 41
- -------------------------------------------------------------------
42 42
43 3,360 11/30/02 43
44 6,750 4/30/00 44
45 45
46 38,202 7/31/13 46
- -------------------------------------------------------------------
47 47
48 10,000 12/31/11 48
49 4,500 1/31/08 49
50 22,000 1/31/02 50
51 51
- -------------------------------------------------------------------
52 52
53 53
54 18,009 6/30/02 54
55 11,800 7/31/07 55
56 56
- -------------------------------------------------------------------
57 27,000 1/31/02 57
58 58
59 59
60 60
- -------------------------------------------------------------------
61 61
61a 61a
61b 61b
61c 61c
61d 61d
- -------------------------------------------------------------------
61e 61e
61f 61f
61g 61g
61h 61h
- -------------------------------------------------------------------
62 62
63 63
64 10,384 6/30/02 64
65 65
66 66
- -------------------------------------------------------------------
67 67
68 11,040 8/31/04 68
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Control No. Property Name Address
====================================================================================================================================
<S> <C> <C>
69 Equitable Federal Building 11501 Georgia Avenue & 2413 Blueridge Avenue
70 Kmart - San Diego 5405 University Avenue
71 Bed, Bath & Beyond 12220 Jefferson Avenue
- ------------------------------------------------------------------------------------------------------------------------------------
72 Owens-Volney Great Bear Road
73 Ridgegate Apartments 9737 Forest Lane
74 Depot Plaza 999 East Ridge Road
75 Hampton Inn - Virginia Beach 5793 Greenwich Road
76 Sportmart Plaza 3201 East Lincoln Highway
- ------------------------------------------------------------------------------------------------------------------------------------
77 University Plaza Shopping Center 2400 North University Drive
78 Lincoln Way East Shopping Center 1660-1710 US Route 30 East
79 600 Blair Road 600 Blair Road
80 Madison Woods Apartments 3939 Madison Avenue
81 French Mountain Commons Outlet Center 1439 State Route 9
- ------------------------------------------------------------------------------------------------------------------------------------
82 Anacota Plaza 602 Anacapa Street
83 357-363 West Erie 357-363 West Erie Street
84 Orange Tree Plaza 23532 El Toro Road
85 San Marin Shopping Center 101-270 San Marin Drive
86 Magnolia Station Apartments 1607 Lyte Street
- ------------------------------------------------------------------------------------------------------------------------------------
87 Piqua Plaza Shopping Center 1923-1947 Covington Road
88 Sagetree Village (Farris Prop Level) 3524 East Avenue R
89 Beverly Center 8181 South 48th Street
90 Walgreen - Riverview 17071 Fort Street
91 Parker Street Industrial 918 Parker Street
- ------------------------------------------------------------------------------------------------------------------------------------
92 Winn Dixie 2126 Collier Parkway
93 Hampton Inn - Chesapeake 701A Woodlake Drive
94 Branford Commerce Center 30-36 East Industrial Road
95 3 Roads Shopping Center 1029-1055 Route 112
96 Office Depot Building 1090 W Hampden Avenue
- ------------------------------------------------------------------------------------------------------------------------------------
97 Glendale Shopping Center SW Corner of Glendale and 43rd Avenues
98 Five Points Plaza 1030-1060 152nd Street
99 Eckerd - Baton Rouge SWC Government Street & Acadian Thruway
100 Cascade Park Apartments 4232, 4242, 4252, 4th St. S.E. & 4281 and 4291 6th St. S.E.
101 Kmart - Cincinnati 5500 Ridge Road
- ------------------------------------------------------------------------------------------------------------------------------------
102 Blue Garden Apartments 330 Hubbard Court
103 Regency Square 101 Rohrerstown Road
104 Executive Quarters Office Building 2790 Skypark Drive
105 Eckerd - Arlington 831 E. Park Row
106 Pfizer Building 194 Howard Street
- ------------------------------------------------------------------------------------------------------------------------------------
107 Eckerd - Shreveport 6935 Pines Road
108 Washington Shores Plaza 2108-2200 Bruton Blvd.
109 Market Place Shopping Center 2225-2625 West New Haven Avenue
110 Wal-Mart Plaza 4224 N. Prospect Street
111 Bullfrog Shopping Center US Highway 51 @ Goodman Rd
- ------------------------------------------------------------------------------------------------------------------------------------
112 Royal Orleans Apartments 1540 Chenault Street
113 Pondview Plaza 100-300 Overlook Drive
114 Eckerd - Waxahachie 701 Ferris Avenue
115 1200 Route 9 1200 Route 9
116 Delchamps Plaza 2025 East Madison Avenue
- ------------------------------------------------------------------------------------------------------------------------------------
117 Steger Towne Crossing II 2845 Ridge Road
118 Liberty Plaza Mall State Route 52 East
119 Spalding Centre Shopping Center 6315 Spalding Drive
120 Autumnwood 1802 Chartwell Drive
121 Camelot Manufactured Housing Community 1935 Lor Ray Drive
- ------------------------------------------------------------------------------------------------------------------------------------
122 Marshall Mall 1300 Pinecrest Drive East
123 Metro Center 3333 Brea Canyon Road
124 Owens - Midway 9698 Old US 52
125 URS Building 33 North High Street
126 Brendonwood Park Apartments 1004 Fayette Drive
- ------------------------------------------------------------------------------------------------------------------------------------
127 Town and Country Shopping Center 1100 North Carbon Street
128 Woodlake Professional Building 3900 Woodlake Boulevard
<CAPTION>
% of
Aggregate
Cross Cut-off Cumulative
Zip Collateralized Origial Cut-Off Date Date % of Initial
Control No. City State Codes Groups Balance ($) Balance ($) Balance Pool Balance
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
69 Wheaton VA 20902 No 5,000,000 4,969,444 0.28 80.98
70 San Diego CA 92105 No 4,875,876 4,875,876 0.28 81.26
71 Newport News VA 23602 No 4,856,566 4,809,593 0.28 81.54
- -----------------------------------------------------------------------------------------------------------------------------------
72 Volney NY 13069 LB99C1-5 4,710,000 4,697,705 0.27 81.80
73 Dallas TX 75243 No 4,600,000 4,594,793 0.26 82.07
74 Irondequoit NY 14609 No 4,600,000 4,592,167 0.26 82.33
75 Virginia Beach VA 23462 No 4,500,000 4,489,417 0.26 82.59
76 Hobart IN 46410 No 4,425,000 4,423,043 0.25 82.84
- -----------------------------------------------------------------------------------------------------------------------------------
77 Sunrise FL 33322 No 4,400,000 4,394,986 0.25 83.09
78 Chambersburg PA 17201 No 4,400,000 4,392,761 0.25 83.34
79 Carteret NJ 07008 No 4,325,000 4,322,973 0.25 83.59
80 Sacramento CA 95660 No 4,300,000 4,294,493 0.25 83.84
81 Queensbury NY 12845 No 4,300,000 4,283,917 0.25 84.08
- -----------------------------------------------------------------------------------------------------------------------------------
82 Santa Barbara CA 93101 No 4,200,000 4,198,132 0.24 84.32
83 Chicago IL 60610 No 4,200,000 4,188,471 0.24 84.56
84 Lake Forest CA 92630 No 4,100,000 4,098,325 0.23 84.80
85 Novato CA 94945 No 4,100,000 4,097,933 0.23 85.03
86 Dallas TX 75201 No 4,000,000 3,998,119 0.23 85.26
- -----------------------------------------------------------------------------------------------------------------------------------
87 Piqua OH 45356 No 4,000,000 3,993,247 0.23 85.49
88 Palmdale CA 93550 LB99C1-9 4,000,000 3,948,820 0.23 85.71
89 Phoenix AZ 85044 No 3,926,083 3,923,504 0.22 85.94
90 Riverview MI 48192 No 3,964,649 3,918,245 0.22 86.16
91 Berkeley CA 94710 No 3,900,000 3,860,637 0.22 86.38
- -----------------------------------------------------------------------------------------------------------------------------------
92 Land O' Lakes FL 34639 No 3,902,356 3,815,935 0.22 86.60
93 Chesapeake VA 23320 No 3,800,000 3,791,064 0.22 86.82
94 Branford CT 06405 No 3,800,000 3,769,127 0.22 87.04
95 Port Jefferson Station NY 11776 No 3,700,000 3,687,920 0.21 87.25
96 Englewood CO 80110 No 3,686,054 3,673,591 0.21 87.46
- -----------------------------------------------------------------------------------------------------------------------------------
97 Glendale AZ 85301 No 3,600,000 3,595,643 0.21 87.66
98 Cleveland OH 44110 No 3,600,000 3,582,463 0.21 87.87
99 Baton Rouge LA 70805 No 3,562,078 3,531,717 0.20 88.07
100 Washington DC 20032 No 3,520,000 3,514,040 0.20 88.27
101 Cincinnati OH 45213 No 3,500,000 3,500,000 0.20 88.47
- -----------------------------------------------------------------------------------------------------------------------------------
102 Westland MI 48186 No 3,400,000 3,374,783 0.19 88.67
103 East Hempfield PA 17603 No 3,400,000 3,373,536 0.19 88.86
104 Torrance CA 90505 No 3,193,276 3,182,835 0.18 89.04
105 Arlington TX 76010 No 3,158,059 3,145,029 0.18 89.22
106 New London CT 06320 No 3,150,000 3,139,882 0.18 89.40
- -----------------------------------------------------------------------------------------------------------------------------------
107 Shreveport (Pines) LA 71129 No 3,134,994 3,110,478 0.18 89.58
108 Orlando FL 32811 No 3,100,000 3,089,583 0.18 89.76
109 Melbourne FL 32904 No 3,075,000 3,061,393 0.18 89.93
110 Decatur IL 62526 LB99C1-6 3,000,000 2,998,623 0.17 90.10
111 Horn Lake MS 38637 No 3,000,000 2,991,049 0.17 90.27
- -----------------------------------------------------------------------------------------------------------------------------------
112 Dallas TX 75228 No 3,000,000 2,990,675 0.17 90.44
113 Monroe NJ 08512 No 2,947,653 2,938,034 0.17 90.61
114 Waxahachie TX 75165 No 2,958,202 2,933,907 0.17 90.78
115 Woodbridge NJ 07095 No 2,925,000 2,921,346 0.17 90.95
116 Bastrop LA 71220 No 2,925,000 2,916,273 0.17 91.11
- -----------------------------------------------------------------------------------------------------------------------------------
117 Rockwall TX 75032 LB99C1-8 2,900,000 2,898,651 0.17 91.28
118 Liberty NY 12754 No 2,850,000 2,839,005 0.16 91.44
119 Norcross GA 30092 No 2,850,000 2,813,068 0.16 91.60
120 Fort Wayne IN 46816 No 2,800,000 2,791,442 0.16 91.76
121 North Mankato MN 56003 No 2,800,000 2,790,060 0.16 91.92
- -----------------------------------------------------------------------------------------------------------------------------------
122 Marshall TX 75670 No 2,750,000 2,742,913 0.16 92.08
123 Diamond Bar CA 91765 No 2,700,000 2,686,149 0.15 92.23
124 Midway NC 27292 LB99C1-5 2,660,000 2,653,056 0.15 92.39
125 Columbus OH 43215 No 2,650,000 2,641,095 0.15 92.54
126 Fort Wayne IN 46816 No 2,600,000 2,592,053 0.15 92.69
- -----------------------------------------------------------------------------------------------------------------------------------
127 Marion IL 62959 No 2,575,000 2,563,153 0.15 92.83
128 Greenacres FL 33463 No 2,560,000 2,556,157 0.15 92.98
<CAPTION>
Original Remaining Original
Interest Interest- Interest- Term to
Mortgage Administrative Accrual Only Period Only Period Maturity
Control No. Rate (%) Cost Rate (%) Method Amortization Type (Mos.) (Mos.) (Mos.)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
69 6.990 0.102 Act/360 Balloon 120
70 7.100 0.062 30/360 Interest Only...Step 60 53 240
71 7.360 0.062 30/360 Interest Only...Step 7 0 258
- -----------------------------------------------------------------------------------------------------------------------------------
72 8.210 0.102 Act/360 Balloon 60
73 7.975 0.152 Act/360 Balloon 120
74 7.740 0.102 Act/360 Balloon 120
75 8.690 0.102 Act/360 Balloon 120
76 8.040 0.102 Act/360 Balloon 120
- -----------------------------------------------------------------------------------------------------------------------------------
77 7.950 0.122 Act/360 Balloon 120
78 7.860 0.102 Act/360 Balloon 120
79 7.880 0.102 Act/360 Balloon 60
80 7.500 0.102 Act/360 Balloon 84
81 7.890 0.102 Act/360 Balloon 60
- -----------------------------------------------------------------------------------------------------------------------------------
82 8.025 0.102 Act/360 Balloon 120
83 7.950 0.102 Act/360 Balloon 84
84 8.250 0.102 Act/360 Balloon 120
85 7.670 0.102 Act/360 Balloon 120
86 7.870 0.152 Act/360 Balloon 60
- -----------------------------------------------------------------------------------------------------------------------------------
87 7.770 0.102 Act/360 Balloon 84
88 7.080 0.177 Act/360 ARD 120
89 7.066 0.152 Act/360 Balloon 112
90 6.530 0.062 30/360 Balloon 240
91 6.640 0.102 Act/360 Balloon 120
- -----------------------------------------------------------------------------------------------------------------------------------
92 6.910 0.062 30/360 Step 240
93 8.690 0.102 Act/360 Balloon 120
94 7.080 0.102 Act/360 Balloon 120
95 7.880 0.102 Act/360 Balloon 120
96 7.102 0.152 Act/360 Balloon 54
- -----------------------------------------------------------------------------------------------------------------------------------
97 7.720 0.102 Act/360 Balloon 120
98 7.500 0.102 Act/360 Balloon 84
99 6.890 0.062 30/360 Balloon 239
100 7.760 0.102 Act/360 Balloon 120
101 7.100 0.062 30/360 Interest Only..Balloon 60 53 240
- -----------------------------------------------------------------------------------------------------------------------------------
102 6.710 0.177 Act/360 ARD 120
103 7.260 0.102 Act/360 Balloon 120
104 7.206 0.102 Act/360 Balloon 116
105 8.190 0.062 30/360 Balloon 238
106 7.940 0.122 Act/360 Balloon 84
- -----------------------------------------------------------------------------------------------------------------------------------
107 6.730 0.062 30/360 Balloon 236
108 7.750 0.102 Act/360 Balloon 120
109 7.750 0.102 Act/360 Balloon 120
110 8.245 0.127 Act/360 ARD 169
111 8.280 0.102 Act/360 Balloon 120
- -----------------------------------------------------------------------------------------------------------------------------------
112 7.325 0.152 Act/360 Balloon 120
113 8.170 0.102 Act/360 Balloon 112
114 6.890 0.062 30/360 Balloon 237
115 8.750 0.102 Act/360 Balloon 120
116 8.280 0.102 Act/360 Balloon 120
- -----------------------------------------------------------------------------------------------------------------------------------
117 7.900 0.102 Act/360 Balloon 105
118 7.760 0.102 Act/360 Balloon 84
119 7.490 0.102 30/360 Fully Amortizing 300
120 7.410 0.102 Act/360 Balloon 120
121 7.500 0.177 Act/360 ARD 84
- -----------------------------------------------------------------------------------------------------------------------------------
122 8.270 0.102 Act/360 Balloon 120
123 7.270 0.102 Act/360 Balloon 120
124 8.210 0.102 Act/360 Balloon 60
125 7.750 0.102 Act/360 Balloon 84
126 7.410 0.102 Act/360 Balloon 120
- -----------------------------------------------------------------------------------------------------------------------------------
127 7.750 0.102 Act/360 Balloon 120
128 8.170 0.102 Act/360 Balloon 120
<CAPTION>
Remaining Maturity or
Term to Original Remaining Anticipated
Maturity Amortization Amortization Origination Repayment Balloon
Control No. (Mos.) Term (Mos.) Term (Mos.) Date Date Balance ($)
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
69 112 360 352 9/3/98 10/1/08 4,360,021
70 233 180 180 10/26/98 11/1/18 0
71 248 298 295 8/21/98 2/10/20 1,417,642
- -------------------------------------------------------------------------------------------------------------------------------
72 57 300 297 2/26/99 3/1/04 4,391,643
73 118 360 358 3/12/99 4/1/09 4,112,988
74 117 360 357 2/19/99 3/1/09 4,090,291
75 117 300 297 2/2/99 3/1/09 3,784,324
76 119 360 359 4/19/99 5/1/09 3,963,267
- -------------------------------------------------------------------------------------------------------------------------------
77 118 360 358 3/31/99 4/1/09 3,931,801
78 117 360 357 2/25/99 3/1/09 3,923,961
79 59 360 359 4/6/99 5/1/04 4,138,224
80 82 360 358 3/18/99 4/1/06 3,991,443
81 54 360 354 11/13/98 12/1/03 4,113,229
- -------------------------------------------------------------------------------------------------------------------------------
82 119 360 359 4/6/99 5/1/09 3,760,398
83 80 360 356 1/6/99 2/1/06 3,924,990
84 119 360 359 4/12/99 5/1/09 3,690,429
85 119 360 359 4/19/99 5/1/09 3,639,272
86 59 360 359 4/26/99 5/1/04 3,826,859
- -------------------------------------------------------------------------------------------------------------------------------
87 81 360 357 2/26/99 3/1/06 3,729,392
88 109 300 289 6/18/98 7/11/08 3,208,775
89 111 352 351 4/20/99 9/1/08 3,449,918
90 233 270 263 10/29/98 11/1/18 754,715
91 112 300 292 9/2/98 10/1/08 3,084,791
- -------------------------------------------------------------------------------------------------------------------------------
92 229 240 229 6/29/98 7/1/18 0
93 117 300 297 2/2/99 3/1/09 3,195,652
94 109 360 349 6/18/98 7/1/08 3,322,098
95 115 360 355 12/23/98 1/1/09 3,299,289
96 50 354 350 7/17/98 8/1/03 3,508,812
- -------------------------------------------------------------------------------------------------------------------------------
97 118 360 358 3/2/99 4/1/09 3,198,968
98 77 360 353 10/20/98 11/1/05 3,340,981
99 234 260 255 12/18/98 12/1/18 500,002
100 117 360 357 2/22/99 3/1/09 3,131,502
101 233 180 180 10/23/98 11/1/18 0
- -------------------------------------------------------------------------------------------------------------------------------
102 111 360 351 8/27/98 9/11/08 2,942,217
103 109 360 349 6/8/98 7/1/08 2,986,403
104 112 356 352 1/26/99 10/1/08 2,805,363
105 235 263 260 2/11/99 1/1/19 599,939
106 82 240 238 3/15/99 4/1/06 2,579,451
- -------------------------------------------------------------------------------------------------------------------------------
107 231 274 269 12/15/98 9/1/18 763,704
108 115 360 355 12/21/98 1/1/09 2,755,556
109 115 324 319 12/16/98 1/1/09 2,615,966
110 168 350 349 4/15/99 6/11/13 2,437,088
111 115 360 355 12/31/98 1/1/09 2,700,489
- -------------------------------------------------------------------------------------------------------------------------------
112 116 360 356 1/29/99 2/1/09 2,638,052
113 107 352 347 12/3/98 5/1/08 2,654,396
114 232 264 259 12/3/98 10/1/18 545,404
115 117 360 357 2/16/99 3/1/09 2,663,050
116 115 360 355 12/31/98 1/1/09 2,632,976
- -------------------------------------------------------------------------------------------------------------------------------
117 104 360 359 4/27/99 2/1/08 2,643,391
118 78 360 354 11/24/98 12/1/05 2,656,130
119 289 300 289 6/23/98 7/1/23 0
120 116 360 356 1/14/99 2/1/09 2,467,507
121 79 360 355 12/22/98 1/11/06 2,598,485
- -------------------------------------------------------------------------------------------------------------------------------
122 117 300 297 2/12/99 3/1/09 2,285,727
123 113 360 353 10/15/98 11/1/08 2,371,356
124 57 300 297 2/26/99 3/1/04 2,480,206
125 79 360 355 12/10/98 1/1/06 2,469,092
126 116 360 356 1/13/99 2/1/09 2,291,258
- -------------------------------------------------------------------------------------------------------------------------------
127 113 360 353 10/22/98 11/1/08 2,288,977
128 117 360 357 2/25/99 3/1/09 2,300,035
<CAPTION>
DSCR
Annual Net
Property Prepayment Debt Net Cash Cash
Control No. Type Provisions Service ($) Flow ($) Flow (x)
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
69 Office L(4),D(6) 398,779 585,731 1.47
70 Credit Tenant Lease L(4),D(16) 346,187 347,122 NAP
71 Credit Tenant Lease L(3.75),D(17.75) 424,193 436,382 NAP
- ----------------------------------------------------------------------------------------------------------------------------------
72 Industrial/Warehouse L(2.25),D(2.5),O(.25) 444,122 578,840 1.30
73 Multi-Family L(4),D(6) 404,076 510,452 1.26
74 Retail L(4),D(5.75),O(.25) 395,078 500,985 1.27
75 Hotel L(4),D(5.75),O(.25) 441,758 641,614 1.45
76 Retail L(4),D(6) 391,111 556,435 1.42
- ----------------------------------------------------------------------------------------------------------------------------------
77 Retail L(4),D(6) 385,589 534,868 1.39
78 Retail L(2.25),D(7.667),O(.083) 382,287 527,811 1.38
79 Industrial/Warehouse L(3),D(1.917),O(.083) 376,491 467,924 1.24
80 Multi-Family L(4),D(2.917),O(.083) 360,795 444,663 1.23
81 Retail L(4),D(.75),O(.25) 374,673 503,549 1.34
- ----------------------------------------------------------------------------------------------------------------------------------
82 Mixed Use L(4),D(6) 370,696 466,678 1.26
83 Office L(4),D(3) 368,062 521,324 1.42
84 Retail L(4),D(6) 369,623 497,915 1.35
85 Retail L(4),D(6) 349,759 443,196 1.27
86 Multi-Family L(3),D(1.917),O(.083) 347,867 433,114 1.25
- ----------------------------------------------------------------------------------------------------------------------------------
87 Retail L(4),D(3) 344,541 451,780 1.31
88 Multi-Family L(4),D(5.75),O(.25) 341,708 456,551 1.34
89 Office L(2.083),D(7),O(.25) 317,622 428,485 1.35
90 Credit Tenant Lease L(4),D(16) 337,152 344,907 NAP
91 Industrial/Warehouse L(4),D(6) 320,103 417,432 1.30
- ----------------------------------------------------------------------------------------------------------------------------------
92 Credit Tenant Lease L(5),D(15) 361,248 373,572 NAP
93 Hotel L(4),D(5.75),O(.25) 373,040 539,452 1.45
94 Industrial/Warehouse L(4),D(5.75),O(.25) 305,832 432,740 1.41
95 Retail L(4),D(5.75),O(.25) 322,085 429,004 1.33
96 Retail L(2.5),D(1.75),O(.25) 298,773 400,258 1.34
- ----------------------------------------------------------------------------------------------------------------------------------
97 Retail L(4),D(6) 308,595 416,138 1.35
98 Retail L(4),D(2.75),O(.25) 302,061 402,597 1.33
99 Credit Tenant Lease L(4),D(15.917) 317,463 318,415 NAP
100 Multi-Family L(4),D(6) 302,904 387,436 1.28
101 Credit Tenant Lease L(4),D(16) 248,500 241,448 NAP
- ----------------------------------------------------------------------------------------------------------------------------------
102 Multi-Family L(4),D(5.75),O(.25) 263,544 412,236 1.56
103 Retail L(4),D(5.75),O(.25) 278,605 397,853 1.43
104 Office L(3.667),D(6) 261,082 362,872 1.39
105 Credit Tenant Lease L(4),D(15.83) 310,412 311,343 NAP
106 Office L(2.167),D(4.75),O(.083) 314,764 460,624 1.46
- ----------------------------------------------------------------------------------------------------------------------------------
107 Credit Tenant Lease L(4),D(15.667) 269,167 269,974 NAP
108 Retail L(4),D(5.917),O(.083) 266,505 344,707 1.29
109 Retail L(4),D(6) 272,112 393,719 1.45
110 Retail L(4),D(9.833),O(.25) 272,121 364,358 1.34
111 Retail L(4),D(5.917),O(.083) 271,216 356,772 1.32
- ----------------------------------------------------------------------------------------------------------------------------------
112 Multi-Family L(4),D(6) 247,417 338,119 1.37
113 Retail L(3.33),D(5.75),O(.25) 265,177 327,437 1.23
114 Credit Tenant Lease L(4),D(15.75) 261,462 262,246 NAP
115 Retail L(4),D(6) 276,132 353,170 1.28
116 Retail L(4),D(5.917),O(.083) 264,435 341,465 1.29
- ----------------------------------------------------------------------------------------------------------------------------------
117 Retail L(4),D(4.75) 252,928 355,914 1.41
118 Retail L(4),D(2.75),O(.25) 245,249 325,374 1.33
119 Retail L(12),D(12.75),O(.25) 252,513 359,455 1.42
120 Multi-Family L(4),D(6) 232,869 316,989 1.36
121 Multi-Family L(4),D(2.75),O(.25) 234,936 284,885 1.21
- ----------------------------------------------------------------------------------------------------------------------------------
122 Retail L(4),D(5.917),O(.083) 260,630 340,039 1.30
123 Office L(4),D(5.75),O(.25) 221,465 296,118 1.34
124 Industrial/Warehouse L(2.25),D(2.5),O(.25) 250,821 323,614 1.29
125 Office L(4),D(3) 227,819 291,732 1.28
126 Multi-Family L(4),D(6) 216,235 283,463 1.31
- ----------------------------------------------------------------------------------------------------------------------------------
127 Retail L(4),D(5.917),O(.083) 221,371 294,287 1.33
128 Office L(2.25),D(7.667),O(.083) 229,064 302,698 1.32
<CAPTION>
Scheduled Underwritten
Cut-off Maturity/AR Hospitality
Appraised Appraisal Date Date LTV Average Daily Year
Control No. Value ($) Date LTV (%) (%) Rate ($) Year Built Renovated
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
69 7,200,000 8/7/98 69.0 60.6 1963, 81
70 4,980,000 4/14/98 NAP NAP 1968 1997
71 5,260,000 5/22/98 NAP NAP 1998
- ----------------------------------------------------------------------------------------------------------------------------------
72 6,500,000 3/17/99 72.3 67.6 1985
73 5,800,000 2/3/99 79.2 70.9 1983
74 6,100,000 8/18/98 75.3 67.1 1960 1993
75 6,300,000 12/23/98 71.3 60.1 65.00 1990 1997
76 5,900,000 9/28/98 75.0 67.2 1977 1994
- ----------------------------------------------------------------------------------------------------------------------------------
77 5,925,000 2/3/99 74.2 66.4 1973 1997
78 5,900,000 11/12/98 74.5 66.5 1963 1998
79 5,500,000 11/1/98 78.6 75.2 1987
80 5,400,000 1/27/99 79.5 73.9 1986, 1988
81 6,200,000 9/3/98 69.1 66.3 1988, 1989
- ----------------------------------------------------------------------------------------------------------------------------------
82 5,800,000 1/1/99 72.4 64.8 1988
83 6,000,000 12/3/98 69.8 65.4 1924 1990
84 7,300,000 7/17/98 56.1 50.6 1978
85 6,010,000 3/8/99 68.2 60.6 1980
86 5,300,000 2/19/99 75.4 72.2 1911-1919 1993
- ----------------------------------------------------------------------------------------------------------------------------------
87 5,200,000 11/15/98 76.8 71.7 1980
88 5,700,000 5/8/98 69.3 56.3 1970/1981
89 5,400,000 3/24/99 72.7 63.9 1998
90 3,965,000 10/21/98 NAP NAP 1998
91 5,350,000 8/6/98 72.2 57.7 1905,1940s 1996-1997
- ----------------------------------------------------------------------------------------------------------------------------------
92 4,270,000 6/1/98 NAP NAP 1998
93 5,500,000 12/14/98 68.9 58.1 57.00 1990 1996, 1997
94 5,350,000 5/11/98 70.5 62.1 1987-90
95 5,400,000 8/11/98 68.3 61.1 1976
96 5,500,000 11/1/98 66.8 63.8 1987
- ----------------------------------------------------------------------------------------------------------------------------------
97 4,755,000 12/30/98 75.6 67.3 1970
98 4,800,000 8/7/98 74.6 69.6 1965 1997
99 3,675,000 11/30/98 NAP NAP 1998
100 4,400,000 1/1/99 79.9 71.2 1951 1994-1995
101 3,500,000 3/26/98 NAP NAP 1967
- ----------------------------------------------------------------------------------------------------------------------------------
102 5,175,000 6/18/98 65.2 56.9 1968 1998
103 4,500,000 10/1/98 75.0 66.4 1990
104 4,950,000 9/15/98 64.3 56.7 1985
105 3,585,000 2/1/99 NAP NAP 1999
106 5,600,000 2/22/99 56.1 46.1 1984-85 1998-99
- ----------------------------------------------------------------------------------------------------------------------------------
107 3,150,000 11/6/98 NAP NAP 1998
108 3,950,000 1/1/99 78.2 69.8 1997
109 4,100,000 9/1/98 74.7 63.8 1985
110 4,225,000 3/16/99 71.0 57.7 1992 1998/99
111 4,100,000 10/13/98 73.0 65.9 1988
- ----------------------------------------------------------------------------------------------------------------------------------
112 4,000,000 12/16/98 74.8 66.0 1985
113 4,170,000 10/26/98 70.5 63.7 1997
114 2,980,000 11/3/98 NAP NAP 1998
115 4,000,000 1/31/99 73.0 66.6 1993
116 3,800,000 10/13/98 76.7 69.3 1987
- ----------------------------------------------------------------------------------------------------------------------------------
117 4,400,000 2/10/99 65.9 60.1 1998
118 3,800,000 10/1/98 74.7 69.9 1978, 1992 1997
119 5,380,000 9/1/98 52.3 0.0 1988
120 3,500,000 12/1/98 79.8 70.5 1970
121 3,875,000 10/15/98 72.0 67.1 1970-1980
- ----------------------------------------------------------------------------------------------------------------------------------
122 4,200,000 12/15/98 65.3 54.4 1980 1996-97
123 3,800,000 9/16/98 70.7 62.4 1983
124 3,700,000 3/8/99 71.7 67.0 1986
125 3,900,000 10/5/98 67.7 63.3 1905 1983
126 3,300,000 12/1/98 78.5 69.4 1969
- ----------------------------------------------------------------------------------------------------------------------------------
127 4,100,000 8/1/98 62.5 55.8 1972 1982
128 3,500,000 1/22/99 73.0 65.7 1987
<CAPTION>
Largest
Tenant
Occupancy Area
Sq. Ft., Bed, Pad Loan Per Percentage Rent Roll Leased
Control No. or Room Unit (%) Date Largest Tenant Name (Sq.Ft.)
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
69 72,217 Sq Feet 69 92.3 12/31/98 Equitable Federal Savings Bank 24,035
70 104,000 Sq Feet 47 100.0 10/26/98 Kmart Corporation 104,000
71 43,092 Sq Feet 113 100.0 7/2/98 Bed, Bath & Beyond, Inc. 43,092
- ----------------------------------------------------------------------------------------------------------------------------------
72 200,000 Sq Feet 24 100.0 2/23/99 Owens-Brockway Glass Container, Inc. 200,000
73 270 Units 17,037 88.5 1/29/99
74 176,134 Sq Feet 26 97.0 1/4/99 Kmart 108,580
75 122 Rooms 36,885 63.0 10/31/98
76 84,048 Sq Feet 53 100.0 6/8/98 Sportmart 50,000
- ----------------------------------------------------------------------------------------------------------------------------------
77 71,860 Sq Feet 61 94.3 3/24/98 Harrison's Market 10,500
78 102,276 Sq Feet 43 98.4 10/15/98 Dunham Sports 20,000
79 108,900 Sq Feet 40 100.0 2/28/99 Paragon Packing 63,000
80 116 Units 37,069 96.6 1/31/99
81 45,823 Sq Feet 94 100.0 11/12/98 The GAP 8,600
- ----------------------------------------------------------------------------------------------------------------------------------
82 31,705 Sq Feet 132 100.0 2/1/99 Siesta Sleep Center 14,750
83 111,050 Sq Feet 38 92.7 1/11/99 Space LLC 24,150
84 69,303 Sq Feet 59 100.0 3/23/99 Denny's 6,470
85 70,483 Sq Feet 58 84.4 4/9/99 Apple Market 27,549
86 70 Units 57,143 94.3 3/22/99
- ----------------------------------------------------------------------------------------------------------------------------------
87 135,631 Sq Feet 29 100.0 2/19/99 Kmart 72,897
88 330 Pads 12,121 67.4 12/31/98
89 43,013 Sq Feet 91 100.0 4/16/99 Ticketmaster Corporation, Inc. 29,352
90 13,905 Sq Feet 285 100.0 12/15/97 Walgreen Co. 13,905
91 38,087 Sq Feet 102 100.0 7/22/98 The Roda Group 9,600
- ----------------------------------------------------------------------------------------------------------------------------------
92 48,466 Sq Feet 81 100.0 6/29/98 Winn Dixie 48,466
93 119 Rooms 31,933 69.0 10/31/98
94 120,984 Sq Feet 31 94.9 10/2/98 Rosta Tool Co. Inc. 24,000
95 64,965 Sq Feet 57 90.8 11/5/98 Grand Union 28,000
96 119,965 Sq Feet 31 91.3 1/10/99 Office Depot 102,900
- ----------------------------------------------------------------------------------------------------------------------------------
97 81,176 Sq Feet 44 100.0 2/25/99 Basha's Food City 29,435
98 71,258 Sq Feet 51 92.6 9/15/98 Eagle Supermarket 18,500
99 10,908 Sq Feet 327 100.0 4/23/98 Eckerd Corporation 10,908
100 132 Units 26,667 87.1 1/31/99
101 105,624 Sq Feet 33 100.0 10/23/98 Kmart Corporation 105,624
- ----------------------------------------------------------------------------------------------------------------------------------
102 172 Units 19,767 95.9 12/31/98
103 53,783 Sq Feet 63 100.0 9/30/98 North's Star Buffet 10,000
104 61,952 Sq Feet 52 89.8 1/15/99 Social Vocational Service 10,741
105 12,738 Sq Feet 248 100.0 3/16/98 Eckerd Corporation 12,738
106 46,000 Sq Feet 68 100.0 2/19/99 Pfizer 46,000
- ----------------------------------------------------------------------------------------------------------------------------------
107 10,908 Sq Feet 287 100.0 3/19/98 Eckerd Corporation 10,908
108 46,711 Sq Feet 66 95.6 12/3/98 Premier Foods of Bruton, Inc. 34,000
109 49,428 Sq Feet 62 94.8 9/15/98 Water Bedroom Land, Inc. 10,702
110 45,114 Sq Feet 67 100.0 3/12/99 Jo-Ann Fabrics 15,580
111 67,004 Sq Feet 45 96.9 11/9/98 Big Star-Fleming Co. 31,842
- ----------------------------------------------------------------------------------------------------------------------------------
112 134 Units 22,388 99.3 12/30/98
113 29,999 Sq Feet 98 100.0 12/21/98 St. Peter's Day Care 14,482
114 10,908 Sq Feet 271 100.0 4/6/98 Eckerd Corporation 10,908
115 27,083 Sq Feet 108 100.0 2/16/99 Today's Man 27,083
116 66,694 Sq Feet 44 100.0 11/4/98 Delchamps #301 42,057
- ----------------------------------------------------------------------------------------------------------------------------------
117 25,551 Sq Feet 114 100.0 4/22/99 Lowe's (Shadow)
118 112,643 Sq Feet 25 100.0 10/5/98 Ames 57,420
119 58,973 Sq Feet 48 66.1 4/23/99 Frugal Fabrics 12,880
120 209 Units 13,397 97.6 12/11/98
121 230 Pads 12,174 100.0 3/6/99
- ----------------------------------------------------------------------------------------------------------------------------------
122 195,412 Sq Feet 14 89.9 2/8/99 Blue Cross/ Blue Shield 60,842
123 40,142 Sq Feet 67 97.4 9/17/98 Gould Pumps, Inc. 3,033
124 154,000 Sq Feet 17 100.0 2/23/99 Owens - Brockway Glass Container, Inc. 154,000
125 65,118 Sq Feet 41 99.1 12/10/98 URS 36,394
126 211 Units 12,322 95.3 12/11/98
- ----------------------------------------------------------------------------------------------------------------------------------
127 98,019 Sq Feet 26 92.6 7/15/98 Ben Franklin #1 & #2 15,379
128 43,620 Sq Feet 59 96.6 1/12/99 State Farm Mutual 7,796
<CAPTION>
2nd
Largest 2nd
Largest Tenant Largest
Lease Area Lease
Exp. Leased Exp.
Control No. Date 2nd Largest Tenant Name (Sq. Ft.) Date 3rd Largest Tenant Name
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
69 1/31/10 Montgomery Pediatrics 4,074 11/30/06 U.S. Capital Associates
70 10/31/18
71 1/31/20
- ------------------------------------------------------------------------------------------------------------------------------------
72 2/28/09
73
74 10/31/03 Save-A-Lot 19,406 10/30/03 Monroe Muffler
75
76 1/31/11 Best Buy 28,048 1/31/08 PetCare Plus
- ------------------------------------------------------------------------------------------------------------------------------------
77 1/31/03 Kroger & Co. (Spa Lady) 10,110 8/18/02 Discount Auto Parts
78 1/31/05 Aldi Food Store 16,632 9/30/03 Joann Fabrics
79 2/3/03 Jazz Photo Corp. 23,100 3/31/02 Buffalino Shoes
80
81 7/26/03 Osh Kosh B'Gosh 6,000 8/30/99 Fieldcrest Cannon
- ------------------------------------------------------------------------------------------------------------------------------------
82 9/30/12 Sprint Communications 743 2/28/01
83 12/31/13 John Hart Fine Wine 10,500 2/28/03 Coco Company
84 9/30/99 Bigshot Billiards 6,192 4/30/01 Nickel Nickel 5 Cent Games
85 9/1/10 Tuesday Morning 4,797 7/15/03 Mary's Pizza Shack
86
- ------------------------------------------------------------------------------------------------------------------------------------
87 11/30/05 Kroger 41,584 10/31/00 Dollar Tree
88
89 4/16/08 Outsourcing Solutions, Inc. 8,350 8/25/05 Netshield
90 10/31/58
91 10/14/00 York & Smith 9,000 12/31/01 Wave Research
- ------------------------------------------------------------------------------------------------------------------------------------
92 6/28/18
93
94 1/31/04 Probot Inc. 21,174 2/28/03 Lexitech Inc.
95 11/30/06 Lisa Cosmetics 4,750 6/30/06 Active Door & Wind
96 1/31/02 Coleman Spas 6,610 3/31/01
- ------------------------------------------------------------------------------------------------------------------------------------
97 4/30/13 Walgreen's 16,000 10/31/02 Peter Piper Pizza
98 4/30/00 OK Sportswear 8,060 1/31/02 Key Bank
99 12/2/18
100
101 10/31/18
- ------------------------------------------------------------------------------------------------------------------------------------
102
103 8/31/03 Goodwill Store 9,720 12/31/01 Gardner's Bedrooms
104 8/31/01 ACTA 6,981 6/1/02 Cal-Surance Group Benefits
105 1/12/19
106 7/14/03
- ------------------------------------------------------------------------------------------------------------------------------------
107 9/17/18
108 11/19/17 Dong Y. Choe 2,268 Buddie's Hair Care, Inc.
109 7/5/99 Ritz Camera Centers, Inc. 7,612 10/10/07 Shaw Carpet and Floor Center
110 12/31/09 Pet Care 7,400 1/31/02 Play It Again Sports
111 5/23/08 Super D Drugs-M & H Drugs #46 7,442 5/23/98 Nutrition Plus
- ------------------------------------------------------------------------------------------------------------------------------------
112
113 5/31/07 JFK Rehabilitation 3,896 5/31/07 Provident Savings Bank
114 10/6/18
115 1/31/04
116 8/31/07 Dollar General 8,450 8/31/99 Hibbett Sporting Goods, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
117 Target (Shadow) Albertsons (Shadow)
118 5/30/03 Shop Rite / Big V Supermarkets 36,140 5/31/03 Dollar Tree Stores
119 1/31/08 Tuesday Morning 7,500 1/31/06 Lamp/Shades
120
121
- ------------------------------------------------------------------------------------------------------------------------------------
122 9/14/04 J.C. Penney 34,364 4/30/05 Bealls
123 1/31/01 Tower Temps 2,199 6/30/99 E5, Inc.
124 2/28/09
125 12/31/00 OMA Service Corp. 12,904 11/30/07 Thompson-Meier-Dersom
126
- ------------------------------------------------------------------------------------------------------------------------------------
127 12/31/99 Dollar General 14,925 4/30/99 Ace Hardware
128 8/31/99 Washington Mutual, F.A. 6,235 6/30/03 Landata of Florida, Inc.
<CAPTION>
3rd
Largest 3rd
Tenant Largest
Area Lease
Leased Exp. Control
Control No. (Sq. Ft.) Date No.
===================================================================
<S> <C> <C> <C>
69 3,509 6/30/02 69
70 70
71 71
- -------------------------------------------------------------------
72 72
73 73
74 6,250 4/30/13 74
75 75
76 6,000 6/18/04 76
- -------------------------------------------------------------------
77 8,100 10/31/01 77
78 12,432 1/31/01 78
79 22,800 12/31/03 79
80 80
81 5,000 6/16/99 81
- -------------------------------------------------------------------
82 82
83 9,850 5/31/04 83
84 6,000 4/30/03 84
85 4,144 4/11/04 85
86 86
- -------------------------------------------------------------------
87 7,000 6/30/99 87
88 88
89 5,311 4/30/04 89
90 90
91 4,100 2/14/99 91
- -------------------------------------------------------------------
92 92
93 93
94 12,847 5/1/04 94
95 3,500 7/31/03 95
96 96
- -------------------------------------------------------------------
97 8,500 12/9/03 97
98 5,588 12/31/01 98
99 99
100 100
101 101
- -------------------------------------------------------------------
102 102
103 7,916 1/31/03 103
104 6,040 11/30/00 104
105 105
106 106
- -------------------------------------------------------------------
107 107
108 2,265 3/31/03 108
109 5,120 9/30/02 109
110 4,000 4/30/04 110
111 5,700 12/31/99 111
- -------------------------------------------------------------------
112 112
113 2,354 5/31/02 113
114 114
115 115
116 5,700 5/31/05 116
- -------------------------------------------------------------------
117 117
118 5,760 6/30/03 118
119 3,300 9/30/01 119
120 120
121 121
- -------------------------------------------------------------------
122 25,632 7/31/08 122
123 2,237 6/30/99 123
124 124
125 3,030 10/31/99 125
126 126
- -------------------------------------------------------------------
127 13,200 5/30/03 127
128 4,972 11/30/02 128
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Control No. Property Name Address
====================================================================================================================================
<S> <C> <C>
129 Castleton Shoppes Shopping Center 6024-6066 East 82nd Street
130 Corn Exchange Building 123-129 Chestnut Street
131 Rite Aid - Waterford 4390 Dixie Highway
- ------------------------------------------------------------------------------------------------------------------------------------
132 Mountain Springs Mobile Home Estates (Farris Prop Level) 3800 W. Wilson Avenue
133 Forest Grove 6747 West Par Lane
134 Park Forest Shopping Center 9702-9712 Greenwell Springs Road
135 Hampton Hills Apartments 715 Washington Drive
136 Wynforest Apartments 1794 James Ray Drive
- ------------------------------------------------------------------------------------------------------------------------------------
137 855 Plaza 855 South Federal Highway
138 Thorndale Business Park 1230-1300 Mark Street
139 Mini Masters Storage Facility 6900 West Craig Road
140 Kmart Plaza - Bellflower 10400-10460 Rosencrans Avenue
141 Eckerd - Rotterdam 1409 Altamont Avenue
- ------------------------------------------------------------------------------------------------------------------------------------
142 Owens - Lakeland 2222 West Bella Vista Street
143 Greengate East Shopping Center Route 30 West
144 Greenwich Court 275-295 Greenwich Avenue
145 849 Delaware Avenue 849 Delaware Avenue
146 Willow Wood Apartments 3215 Baird Avenue North
- ------------------------------------------------------------------------------------------------------------------------------------
147 Walgreens - South Elgin 1201 Spring Street
148 Center Hill Business Park 5836 & 5845 Highland Ridge Drive
149 Yarbrough Office Park SWC Old Bridge & Occoquan Roads
150 Riverview Commons MHC RD 2, Box 170-150
151 Office Max - Grand Forks 3225 30th Avenue South
- ------------------------------------------------------------------------------------------------------------------------------------
152 Trinity Business Plaza 2025 Irving Boulevard
153 5575 E. Winnemucca Blvd. 5575 E. Winnemucca Blvd.
154 Adirondack Industrial Park 527-559 Queensbury Avenue and 80 Industrial Park Road
155 180 West Washington 180 West Washington Street
156 Santiago Creek MHP 3000 S. Chester Avenue
- ------------------------------------------------------------------------------------------------------------------------------------
157 Burke Commons Center 9409-9413 Old Burke Lake Road
158 Countryside Estates Manufactured Home Park 569 E. 10th Street
159 CVS - Statesville 215 North Center Street
160 Office Max - Minot 825 20th Avenue SW
161 CVS - Mooresville 247 North Main Street
- ------------------------------------------------------------------------------------------------------------------------------------
162 Riverdale Commons 3516-3548 Main Street
163 Quail Valley Shopping Center 2600 Cartwright Rd.
164 Southern Pavilion Mini Storage 7110 E. Southern Avenue
165 Hampton Place Shopping Center 460 Gilmer Avenue
166 CVS - Port Royal Ribaut Road and Waddell Road
- ------------------------------------------------------------------------------------------------------------------------------------
167 Commons at Kings Crossing 2710 West Lake Houston Parkway
168 Primrose Business Complex 911 South Primrose Avenue
169 Southlake Shopping Center 2301 East Southlake Boulevard
170 Sylmar Mobile Home Park 12365 County Road 2
171 Central Self Storage - Vallejo 1080 Magazine Street
- ------------------------------------------------------------------------------------------------------------------------------------
172 Washington Plaza Shopping Center 900 West National Road
173 Michigan MHP Portfolio (Loan Level) Various
173a Country Meadows(Kostishak - Prop Level) 1249 116th (M-222)
173b Maple Knoll( Kostishak Prop Level) 1716 Lansing Avenue
- ------------------------------------------------------------------------------------------------------------------------------------
174 CVS - Greensboro 309 East Cornwallis Street
175 Bayshore Plaza 6351 Bayshore Road
176 CVS - Newton US Hwy 321 at Radio Station Road
177 CVS - Bessemer City 902 Gastonia Hwy
- ------------------------------------------------------------------------------------------------------------------------------------
178 Rite Aid - Sterling Heights 13500 19 Mile Road
179 Twin Lakes Mobile Home Estates 3304 Shasta Dam Boulevard
180 Northbrook Estates 774 135th Avenue
181 Northwood Village 6250 NW 23rd Street
182 Lexington Place Apartments 1130 Felder Street
- ------------------------------------------------------------------------------------------------------------------------------------
183 4545 Groves Road Industrial Building 4545 Groves Road
<CAPTION>
% of
Aggregate
Cross Cut-off Cumulative
Zip Collateralized Origial Cut-Off Date Date % of Initial
Control No. City State Codes Groups Balance ($) Balance ($) Balance Pool Balance
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
129 Indianapolis IN 46250 No 2,500,000 2,497,359 0.14 93.12
130 Philadelphia PA 19106 No 2,500,000 2,491,220 0.14 93.26
131 Waterford Township MI 48329 No 2,500,000 2,475,182 0.14 93.41
- -----------------------------------------------------------------------------------------------------------------------------------
132 Banning CA 92220 LB99C1-9 2,500,000 2,468,013 0.14 93.55
133 Wichita KS 67212 No 2,450,000 2,445,684 0.14 93.69
134 Baton Rouge LA 70814 No 2,450,000 2,442,437 0.14 93.83
135 Arlington TX 76011 No 2,450,000 2,440,804 0.14 93.97
136 Marietta GA 30060 No 2,400,000 2,392,385 0.14 94.10
- -----------------------------------------------------------------------------------------------------------------------------------
137 Boca Raton FL 33431 No 2,400,000 2,391,306 0.14 94.24
138 Bensenville IL 60106 No 2,400,000 2,387,814 0.14 94.38
139 Las Vegas NV 89109 No 2,400,000 2,376,980 0.14 94.51
140 Bellflower CA 90706 No 2,350,000 2,342,936 0.13 94.65
141 Rotterdam NY 12303 No 2,278,694 2,265,847 0.13 94.78
- -----------------------------------------------------------------------------------------------------------------------------------
142 Lakeland FL 33802 LB99C1-5 2,270,000 2,264,074 0.13 94.91
143 Hempfield PA 15601 No 2,250,000 2,247,795 0.13 95.04
144 New York NY 10007 No 2,250,000 2,245,760 0.13 95.16
145 Buffalo NY 14209 No 2,200,000 2,197,392 0.13 95.29
146 Lakeland FL 33805 No 2,200,000 2,191,752 0.13 95.42
- -----------------------------------------------------------------------------------------------------------------------------------
147 South Elgin IL 60177 No 2,200,000 2,188,989 0.13 95.54
148 Cincinnati OH 45232 No 2,200,000 2,175,986 0.12 95.67
149 Woodbridge VA 22192 No 2,100,000 2,095,466 0.12 95.79
150 Richmond VT 05477 No 2,100,000 2,078,208 0.12 95.90
151 Grand Forks ND 58201 No 2,060,000 2,051,133 0.12 96.02
- -----------------------------------------------------------------------------------------------------------------------------------
152 Dallas TX 75207 No 2,000,000 1,998,281 0.11 96.14
153 Winnemucca NV 89445 No 2,000,000 1,995,700 0.11 96.25
154 Queensbury/Kingsbury NY 12804 No 2,000,000 1,994,576 0.11 96.36
155 Chicago IL 60606 No 2,000,000 1,991,666 0.11 96.48
156 Bakersfield CA 93304 No 2,000,000 1,986,364 0.11 96.59
- -----------------------------------------------------------------------------------------------------------------------------------
157 Burke VA 22015 No 1,975,000 1,969,792 0.11 96.71
158 Marysville OH 43040 No 1,925,000 1,912,124 0.11 96.81
159 Statesville NC 28677 No 1,900,000 1,896,552 0.11 96.92
160 Minot ND 58701 No 1,896,000 1,890,113 0.11 97.03
161 Mooresville NC 28115 No 1,850,000 1,846,561 0.11 97.14
- -----------------------------------------------------------------------------------------------------------------------------------
162 Coon Rapids MN 55433 No 1,800,000 1,793,369 0.10 97.24
163 Missouri City TX 77459 No 1,748,099 1,743,719 0.10 97.34
164 Mesa AZ 85208 No 1,741,446 1,737,789 0.10 97.44
165 Tallassee AL 36078 No 1,700,000 1,698,114 0.10 97.54
166 Port Royal SC 29935 No 1,700,000 1,693,318 0.10 97.63
- -----------------------------------------------------------------------------------------------------------------------------------
167 Houston TX 77345 No 1,700,000 1,685,936 0.10 97.73
168 Monrovia CA 91016 No 1,675,000 1,669,556 0.10 97.83
169 Southlake TX 76092 No 1,625,000 1,617,138 0.09 97.92
170 Brighton CO 80601 No 1,615,000 1,597,614 0.09 98.01
171 Vallejo CA 94591 No 1,600,000 1,588,194 0.09 98.10
- -----------------------------------------------------------------------------------------------------------------------------------
172 Washington IN 47501 No 1,550,000 1,544,035 0.09 98.19
173 Various MI Various LB99C1-3 1,540,000 1,537,421 0.09 98.28
173a Martin MI 49070
173b Charlotte MI 48813
- -----------------------------------------------------------------------------------------------------------------------------------
174 Greensboro NC 27408 No 1,511,434 1,502,428 0.09 98.36
175 Fort Meyers FL 33917 No 1,500,000 1,495,682 0.09 98.45
176 Newton NC 28658 No 1,500,000 1,494,423 0.09 98.53
177 Bessemer City NC 28016 No 1,500,000 1,494,259 0.09 98.62
- -----------------------------------------------------------------------------------------------------------------------------------
178 Sterling Heights MI 48313 No 1,475,841 1,452,137 0.08 98.70
179 Shasta Lake CA 96019 No 1,375,000 1,370,772 0.08 98.78
180 Wayland MI 49348 No 1,365,000 1,363,662 0.08 98.86
181 Gainesville FL 32653 No 1,350,000 1,347,955 0.08 98.94
182 Americus GA 31709 No 1,325,000 1,323,400 0.08 99.01
- -----------------------------------------------------------------------------------------------------------------------------------
183 Columbus OH 43232 No 1,300,000 1,294,669 0.07 99.09
<CAPTION>
Original Remaining Original
Interest Interest- Interest- Term to
Mortgage Administrative Accrual Only Period Only Period Maturity
Control No. Rate (%) Cost Rate (%) Method Amortization Type (Mos.) (Mos.) (Mos.)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
129 8.230 0.122 Act/360 Balloon 120
130 8.150 0.102 Act/360 Balloon 84
131 6.880 0.062 30/360 Fully Amortizing 239
- -----------------------------------------------------------------------------------------------------------------------------------
132 7.080 0.177 Act/360 ARD 120
133 7.620 0.102 Act/360 Balloon 120
134 8.130 0.102 Act/360 Balloon 120
135 7.875 0.152 Act/360 Balloon 120
136 7.220 0.102 Act/360 Balloon 84
- -----------------------------------------------------------------------------------------------------------------------------------
137 8.750 0.102 Act/360 Balloon 120
138 6.550 0.102 Act/360 Balloon 120
139 7.710 0.182 Act/360 Balloon 120
140 8.770 0.102 Act/360 Balloon 120
141 7.210 0.062 Act/360 Step 239
- -----------------------------------------------------------------------------------------------------------------------------------
142 8.210 0.102 Act/360 Balloon 60
143 8.500 0.102 Act/360 Balloon 120
144 8.010 0.102 Act/360 Balloon 84
145 7.800 0.102 Act/360 Balloon 84
146 7.880 0.102 Act/360 Balloon 120
- -----------------------------------------------------------------------------------------------------------------------------------
147 7.380 0.102 Act/360 Balloon 120
148 7.180 0.152 Act/360 Balloon 120
149 6.860 0.122 Act/360 Balloon 120
150 7.220 0.177 Act/360 ARD 120
151 7.290 0.102 Act/360 Balloon 180
- -----------------------------------------------------------------------------------------------------------------------------------
152 7.850 0.122 Act/360 Balloon 120
153 9.085 0.177 Act/360 Balloon 120
154 8.010 0.102 Act/360 Balloon 120
155 8.130 0.102 Act/360 Balloon 120
156 7.090 0.177 Act/360 ARD 120
- -----------------------------------------------------------------------------------------------------------------------------------
157 8.150 0.102 Act/360 Balloon 120
158 7.360 0.177 Act/360 ARD 120
159 7.460 0.062 30/360 Fully Amortizing 240
160 7.330 0.102 Act/360 Balloon 180
161 7.460 0.062 30/360 Fully Amortizing 237
- -----------------------------------------------------------------------------------------------------------------------------------
162 8.130 0.152 Act/360 Balloon 120
163 8.445 0.177 Act/360 ARD 119
164 7.280 0.177 Act/360 Balloon 110
165 8.050 0.102 Act/360 Balloon 84
166 6.830 0.062 30/360 Fully Amortizing 240
- -----------------------------------------------------------------------------------------------------------------------------------
167 7.710 0.152 Act/360 Balloon 120
168 7.900 0.152 Act/360 Balloon 120
169 7.530 0.102 Act/360 Balloon 120
170 8.020 0.177 Act/360 ARD 120
171 7.750 0.102 Act/360 Balloon 120
- -----------------------------------------------------------------------------------------------------------------------------------
172 7.770 0.102 Act/360 Balloon 120
173 8.600 0.177 Act/360 Balloon 120
173a
173b
- -----------------------------------------------------------------------------------------------------------------------------------
174 7.790 0.062 30/360 Step 225
175 7.713 0.102 Act/360 Balloon 120
176 7.420 0.062 30/360 Fully Amortizing 238
177 7.050 0.062 30/360 Fully Amortizing 240
- -----------------------------------------------------------------------------------------------------------------------------------
178 6.750 0.062 30/360 Fully Amortizing 223
179 7.380 0.102 Act/360 Balloon 84
180 8.500 0.177 Act/360 Balloon 120
181 8.140 0.102 Act/360 Balloon 120
182 7.730 0.102 Act/360 Balloon 120
- -----------------------------------------------------------------------------------------------------------------------------------
183 7.500 0.102 Act/360 Balloon 120
<CAPTION>
Remaining Maturity or
Term to Original Remaining Anticipated
Maturity Amortization Amortization Origination Repayment Balloon
Control No. (Mos.) Term (Mos.) Term (Mos.) Date Date Balance ($)
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
129 118 360 358 3/25/99 4/1/09 2,248,853
130 78 360 354 11/9/98 12/1/05 2,343,899
131 234 239 234 12/4/98 12/1/18 0
- -------------------------------------------------------------------------------------------------------------------------------
132 109 300 289 6/18/98 7/11/08 2,005,484
133 117 360 357 2/16/99 3/1/09 2,172,055
134 115 360 355 12/31/98 1/1/09 2,197,703
135 114 360 354 12/1/98 12/1/08 2,184,799
136 80 360 356 1/20/99 2/1/06 2,216,834
- -------------------------------------------------------------------------------------------------------------------------------
137 113 360 353 10/20/98 11/1/08 2,183,528
138 114 360 354 11/9/98 12/1/08 2,067,871
139 105 360 345 2/26/98 3/1/08 2,132,293
140 114 360 354 11/3/98 12/1/08 2,139,358
141 235 273 269 1/12/99 1/1/19 599,941
- -------------------------------------------------------------------------------------------------------------------------------
142 57 300 297 2/26/99 3/1/04 2,116,567
143 118 360 358 3/10/99 4/1/09 2,036,596
144 82 300 298 3/15/99 4/1/06 2,009,026
145 82 360 358 3/25/99 4/1/06 2,051,920
146 114 360 354 11/30/98 12/1/08 1,962,098
- -------------------------------------------------------------------------------------------------------------------------------
147 113 360 353 10/29/98 11/1/08 1,937,663
148 105 360 345 2/19/98 3/1/08 1,928,484
149 117 360 357 2/8/99 3/1/09 1,825,394
150 111 300 291 8/26/98 9/11/08 1,691,311
151 174 360 354 11/10/98 12/1/13 1,596,839
- -------------------------------------------------------------------------------------------------------------------------------
152 119 300 299 4/13/99 5/1/09 1,642,295
153 117 300 297 3/10/99 3/11/09 1,699,962
154 116 360 356 1/29/99 2/1/09 1,788,621
155 116 300 296 1/11/99 2/1/09 1,654,138
156 111 360 351 8/14/98 9/11/08 1,748,418
- -------------------------------------------------------------------------------------------------------------------------------
157 116 360 356 2/1/99 2/1/09 1,772,101
158 114 300 294 11/19/98 12/11/08 1,557,154
159 239 240 239 6/6/98 5/1/19 0
160 176 360 356 1/28/99 2/1/14 1,471,350
161 236 237 236 7/6/98 2/1/19 0
- -------------------------------------------------------------------------------------------------------------------------------
162 117 264 261 2/12/99 3/1/09 1,376,461
163 116 299 296 4/5/99 2/11/09 1,461,978
164 107 350 347 2/23/99 5/11/08 1,539,829
165 82 360 358 3/24/99 4/1/06 1,591,694
166 238 240 238 8/17/98 4/1/19 0
- -------------------------------------------------------------------------------------------------------------------------------
167 107 360 347 4/21/98 5/1/08 1,510,323
168 115 360 355 12/17/98 1/1/09 1,494,317
169 113 360 353 10/22/98 11/1/08 1,436,656
170 109 300 289 7/8/98 7/11/08 1,332,515
171 113 300 293 10/19/98 11/1/08 1,309,207
- -------------------------------------------------------------------------------------------------------------------------------
172 114 360 354 11/16/98 12/1/08 1,378,696
173 118 300 298 3/17/99 4/11/09 1,291,563
173a
173b
- -------------------------------------------------------------------------------------------------------------------------------
174 222 225 222 2/8/99 12/1/17 0
175 116 360 356 1/27/99 2/1/09 1,331,875
176 236 238 236 6/30/98 2/1/19 0
177 238 240 238 9/10/98 4/1/19 0
- -------------------------------------------------------------------------------------------------------------------------------
178 216 223 216 10/27/98 6/1/17 0
179 80 360 356 1/25/99 2/1/06 1,273,429
180 118 360 358 3/17/99 4/11/09 1,235,535
181 117 360 357 2/4/99 3/1/09 1,212,051
182 118 360 358 3/31/99 4/1/09 1,177,687
- -------------------------------------------------------------------------------------------------------------------------------
183 114 360 354 11/25/98 12/1/08 1,148,609
<CAPTION>
DSCR
Annual Net
Property Prepayment Debt Net Cash Cash
Control No. Type Provisions Service ($) Flow ($) Flow (x)
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
129 Retail L(4),D(5.917),O(.083) 224,958 347,761 1.55
130 Office L(4),D(2.917),O(.083) 223,274 295,430 1.32
131 Credit Tenant Lease L(4),D(15.917) 230,883 260,227 NAP
- ----------------------------------------------------------------------------------------------------------------------------------
132 Multi-Family L(4),D(5.75),O(.25) 213,567 264,032 1.24
133 Multi-Family L(4),D(6) 207,990 288,706 1.39
134 Retail L(4),D(5.917),O(.083) 218,397 278,497 1.28
135 Multi-Family L(4),D(5.917),O(.083) 213,170 280,798 1.32
136 Multi-Family L(4),D(3) 195,881 256,924 1.31
- ----------------------------------------------------------------------------------------------------------------------------------
137 Office L(2.583),D(7.167),O(.25) 226,570 303,385 1.34
138 Office L(4),D(5.75),O(.25) 182,984 272,403 1.49
139 Self Storage L(4),D(5.75),O(.25) 205,531 266,099 1.29
140 Retail L(4),D(5.75),O(.25) 222,252 278,192 1.25
141 Credit Tenant Lease L(4),D(15.917) 202,448 209,128 NAP
- ----------------------------------------------------------------------------------------------------------------------------------
142 Industrial/Warehouse L(2.25),D(2.5),O(.25) 214,046 286,256 1.34
143 Retail L(4),D(6) 207,607 314,711 1.52
144 Retail L(4),D(3) 208,569 276,077 1.32
145 Multi-Family L(4),D(2.917),O(.083) 190,046 282,828 1.49
146 Multi-Family L(4),D(5.75),O(.25) 191,510 243,540 1.27
- ----------------------------------------------------------------------------------------------------------------------------------
147 Retail L(4),D(5.75),O(.25) 182,428 218,921 1.20
148 Industrial/Warehouse L(4),D(5.5),O(.5) 178,843 231,719 1.30
149 Office L(4),D(5.5),O(.5) 165,294 264,152 1.60
150 Multi-Family L(4),D(5.75),O(.25) 181,661 259,685 1.43
151 Retail L(4),D(10.75),O(.25) 169,305 222,679 1.32
- ----------------------------------------------------------------------------------------------------------------------------------
152 Industrial/Warehouse L(4),D(5.917),O(.083) 182,857 242,051 1.32
153 Multi-Family L(4),D(5.75),O(.25) 202,806 256,604 1.27
154 Industrial/Warehouse L(4),D(6) 176,271 248,010 1.41
155 Office L(4),D(5.75),O(.25) 187,308 236,672 1.26
156 Multi-Family L(4),D(5.75),O(.25) 161,126 219,889 1.36
- ----------------------------------------------------------------------------------------------------------------------------------
157 Retail L(4),D(6) 176,387 235,660 1.34
158 Multi-Family L(4),D(5.75),O(.25) 168,609 257,131 1.53
159 Credit Tenant Lease L(10),D(10) 183,118 205,032 NAP
160 Retail L(4),D(10.75),O(.25) 156,445 203,192 1.30
161 Credit Tenant Lease L(10),D(9.75) 179,281 187,718 NAP
- ----------------------------------------------------------------------------------------------------------------------------------
162 Retail L(4),D(6) 175,933 223,398 1.27
163 Retail L(4),D(5.667),O(.25) 168,302 216,364 1.29
164 Self Storage L(2.167),D(6.75),O(.25) 144,131 232,918 1.62
165 Retail L(4),D(2.917),O(.083) 150,400 194,656 1.29
166 Credit Tenant Lease L(8),D(12) 156,086 177,491 NAP
- ----------------------------------------------------------------------------------------------------------------------------------
167 Retail L(4),D(5.75),O(.25) 145,585 225,326 1.55
168 Industrial/Warehouse L(4),D(6) 146,088 187,619 1.28
169 Retail L(4),D(5.75),O(.25) 136,748 187,619 1.37
170 Multi-Family L(4),D(5.75),O(.25) 149,835 211,171 1.41
171 Self Storage L(4),D(5.75),O(.25) 145,023 196,085 1.35
- ----------------------------------------------------------------------------------------------------------------------------------
172 Retail L(4),D(5.75),O(.25) 133,510 171,914 1.29
173 Multi-Family L(4),D(5.75),O(.25) 150,053 192,757 1.28
173a
173b
- ----------------------------------------------------------------------------------------------------------------------------------
174 Credit Tenant Lease L(10),D(8.75) 153,532 158,138 NAP
175 Mixed Use L(2.333),D(7.667) 128,488 168,825 1.31
176 Credit Tenant Lease L(10),D(9.833) 144,657 174,555 NAP
177 Credit Tenant Lease L(10),D(10) 140,095 157,039 NAP
- ----------------------------------------------------------------------------------------------------------------------------------
178 Credit Tenant Lease L(4),D(14.583) 139,573 140,000 NAP
179 Multi-Family L(4),D(2.917),O(.083) 114,018 149,667 1.31
180 Multi-Family L(4),D(5.75),O(.25) 125,948 173,897 1.38
181 Retail L(4),D(5.917),O(.083) 120,455 157,016 1.30
182 Multi-Family L(4),D(5.917),O(.083) 113,690 142,456 1.25
- ----------------------------------------------------------------------------------------------------------------------------------
183 Industrial/Warehouse L(3),D(7) 109,077 173,519 1.59
<CAPTION>
Scheduled Underwritten
Cut-off Maturity/AR Hospitality
Appraised Appraisal Date Date LTV Average Daily Year
Control No. Value ($) Date LTV (%) (%) Rate ($) Year Built Renovated
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
129 3,800,000 2/9/99 65.7 59.2 1981
130 3,500,000 10/1/98 71.2 67.0 1901-30 1977, 1989
131 3,000,000 8/18/98 NAP NAP 1998
- ----------------------------------------------------------------------------------------------------------------------------------
132 3,400,000 5/7/98 72.6 59.0 1989
133 3,100,000 8/30/98 78.9 70.1 1982
134 3,100,000 10/15/98 78.8 70.9 1986
135 3,200,000 10/1/98 76.3 68.3 1978
136 3,000,000 12/23/98 79.7 73.9 1965 1997
- ----------------------------------------------------------------------------------------------------------------------------------
137 3,500,000 9/8/98 68.3 62.4 1962 1988
138 3,250,000 10/1/98 73.5 63.6 1979
139 3,750,000 12/29/97 63.4 56.9 1992
140 5,500,000 6/29/98 42.6 38.9 1976
141 2,475,000 12/16/98 NAP NAP 1998
- ----------------------------------------------------------------------------------------------------------------------------------
142 3,300,000 3/8/99 68.6 64.1 1988
143 3,500,000 8/26/98 64.2 58.2 1980
144 5,200,000 8/18/98 43.2 38.6 1987
145 2,880,000 9/18/98 76.3 71.2 1963
146 3,000,000 9/4/98 73.1 65.4 1974-1975 1993
- ----------------------------------------------------------------------------------------------------------------------------------
147 2,765,000 9/15/98 79.2 70.1 1998
148 2,950,000 4/19/99 73.8 65.4 1986
149 3,850,000 9/1/98 54.4 47.4 1960-1986
150 2,750,000 6/5/98 75.6 61.5 1965 1993-1997
151 2,650,000 9/1/98 77.4 60.3 1998
- ----------------------------------------------------------------------------------------------------------------------------------
152 3,000,000 2/5/99 66.6 54.7 1983
153 3,200,000 1/6/99 62.4 53.1 1983/1988
154 2,700,000 10/1/98 73.9 66.2 1988
155 2,800,000 9/25/98 71.1 59.1 1927
156 3,000,000 7/3/98 66.2 58.3 1978
- ----------------------------------------------------------------------------------------------------------------------------------
157 2,700,000 9/11/98 73.0 65.6 1980
158 2,650,000 10/15/98 72.2 58.8 1960, 1972
159 2,300,000 3/23/98 NAP NAP 1998
160 2,400,000 12/1/98 78.8 61.3 1998
161 2,100,000 3/23/98 NAP NAP 1998
- ----------------------------------------------------------------------------------------------------------------------------------
162 2,400,000 10/1/98 74.7 57.4 1997
163 3,200,000 10/5/98 54.5 45.7 1979, 1980
164 2,900,000 1/29/99 59.9 53.1 1997
165 2,230,000 1/7/99 76.1 71.4 1990
166 1,900,000 1/12/99 NAP NAP 1998
- ----------------------------------------------------------------------------------------------------------------------------------
167 2,900,000 2/13/98 58.1 52.1 1996
168 2,505,000 9/1/98 66.6 59.7 1998
169 2,500,000 9/2/98 64.7 57.5 1997
170 2,100,000 4/8/98 76.1 63.5 1968 1997
171 2,180,000 8/19/98 72.9 60.1 1989
- ----------------------------------------------------------------------------------------------------------------------------------
172 2,500,000 9/15/98 61.8 55.1 1971 1998
173 2,045,000 75.2 63.2 Various
173a 1,120,000 1/1/99 1964
173b 925,000 1/1/99 1948
- ----------------------------------------------------------------------------------------------------------------------------------
174 1,775,000 9/25/98 NAP NAP 1997
175 2,250,000 12/2/98 66.5 59.2 1984
176 2,791,500 12/15/98 NAP NAP 1998
177 1,800,000 5/6/98 NAP NAP 1998
- ----------------------------------------------------------------------------------------------------------------------------------
178 1,625,000 9/15/98 NAP NAP 1998
179 2,780,000 8/24/98 49.3 45.8 1978, 1993
180 1,725,000 1/1/99 79.1 71.6 1974
181 1,975,000 11/13/98 68.3 61.4 1989
182 1,660,000 2/23/99 79.7 70.9 1998
- ----------------------------------------------------------------------------------------------------------------------------------
183 3,400,000 8/26/98 38.1 33.8 1973
<CAPTION>
Largest
Tenant
Occupancy Area
Sq. Ft., Bed, Pad Loan Per Percentage Rent Roll Leased
Control No. or Room Unit (%) Date Largest Tenant Name (Sq.Ft.)
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
129 31,300 Sq Feet 80 96.2 3/11/99 Woodcraft Supply 6,400
130 48,365 Sq Feet 52 85.8 10/15/98 Metroweek Corp. 9,421
131 11,180 Sq Feet 224 100.0 9/27/97 Rite Aid of Michigan, Inc. 11,180
- ----------------------------------------------------------------------------------------------------------------------------------
132 193 Pads 12,953 64.7 12/31/98
133 132 Units 18,561 92.4 12/21/98
134 54,022 Sq Feet 45 100.0 11/4/98 Winn Dixie 35,922
135 144 Units 17,014 92.4 9/25/98
136 92 Units 26,087 97.8 11/23/98
- ----------------------------------------------------------------------------------------------------------------------------------
137 31,775 Sq Feet 76 98.2 9/23/98 Conference Call USA 5,515
138 53,371 Sq Feet 45 88.8 11/1/98 Innovative Marketing Solutions 8,089
139 128,695 Sq Feet 19 63.2 3/22/99
140 124,005 Sq Feet 19 100.0 10/22/98 Kmart 116,805
141 10,908 Sq Feet 209 100.0 5/13/98 Fay's Inc. 10,908
- ----------------------------------------------------------------------------------------------------------------------------------
142 151,200 Sq Feet 15 100.0 2/23/99 Owens - Brockway Glass Container, Inc. 151,200
143 71,576 Sq Feet 31 90.6 12/30/98 Big Lots 28,175
144 17,843 Sq Feet 126 90.6 2/1/99 Gee Whiz Coffee Shop 1,994
145 48 Units 45,833 98.1 12/31/98
146 120 Units 18,333 96.7 11/30/98
- ----------------------------------------------------------------------------------------------------------------------------------
147 13,833 Sq Feet 159 100.0 10/2/98 Walgreen Co. 13,833
148 86,645 Sq Feet 25 90.1 4/12/99 Iron Mountain 33,986
149 80,035 Sq Feet 26 84.8 12/21/98 Minnieland 6,000
150 148 Pads 14,189 99.3 12/31/98
151 23,500 Sq Feet 88 100.0 8/30/97 Officemax Inc. 23,500
- ----------------------------------------------------------------------------------------------------------------------------------
152 71,078 Sq Feet 28 94.3 4/20/99 Regency Printing 14,076
153 228 Pads 8,772 100.0 3/1/99
154 89,685 Sq Feet 22 97.1 12/17/98 Monahan Metals Inc. 21,000
155 40,310 Sq Feet 50 86.6 12/4/98 MI-TE Printing & Records 11,894
156 117 Pads 17,094 96.6 1/1/99
- ----------------------------------------------------------------------------------------------------------------------------------
157 21,750 Sq Feet 91 100.0 1/31/99 Burke Family Practice 3,950
158 161 Pads 11,957 90.7 12/31/98
159 10,125 Sq Feet 188 100.0 3/26/98 Revco Discount Drug Centers, Inc. 10,125
160 23,500 Sq Feet 81 100.0 1/5/99 OfficeMax, Inc. 23,500
161 10,125 Sq Feet 183 100.0 3/26/98 Revco Discount Drug Centers, Inc. 10,125
- ----------------------------------------------------------------------------------------------------------------------------------
162 10,757 Sq Feet 167 100.0 12/1/98 Freedom Fuel 3,982
163 60,538 Sq Feet 29 94.6 2/10/99 Fleming Co. d/b/a Foodarama 27,451
164 49,518 Sq Feet 35 93.8 3/1/99
165 43,027 Sq Feet 40 100.0 3/12/99 Bruno's 26,627
166 10,125 Sq Feet 168 100.0 4/28/98 Revco Discount Drug Centers, Inc. 10,125
- ----------------------------------------------------------------------------------------------------------------------------------
167 22,147 Sq Feet 77 89.5 5/1/99 Klein Pools 3,262
168 28,376 Sq Feet 59 100.0 10/7/98 Discount Craft Warehouse 7,280
169 14,172 Sq Feet 115 100.0 9/22/98 Leslie's Pool Supply 3,498
170 103 Pads 15,680 99.0 12/30/98
171 41,825 Sq Feet 38 88.1 7/31/98
- ----------------------------------------------------------------------------------------------------------------------------------
172 91,364 Sq Feet 17 90.7 11/17/98 Buehler's Foods, Inc. 28,664
173 113 Pads 13,628 92.9
173a 63 Pads 92.1 3/2/99
173b 50 Pads 94.0 3/2/99
- ----------------------------------------------------------------------------------------------------------------------------------
174 10,722 Sq Feet 141 100.0 12/1/97 Revco Discount Drug Centers, Inc. 10,722
175 77,373 Sq Feet 19 82.6 12/21/98 PPG/ Lynx Ind 58,614
176 10,125 Sq Feet 148 100.0 9/16/97 Revco Discount Drug Centers, Inc. 10,125
177 10,125 Sq Feet 148 100.0 4/24/98 Revco Discount Drug Centers, Inc. 10,125
- ----------------------------------------------------------------------------------------------------------------------------------
178 10,686 Sq Feet 138 100.0 3/28/97 Rite Aid of Michigan, Inc. 10,686
179 110 Pads 12,500 92.7 12/31/98
180 102 Pads 13,382 98.0 3/2/99
181 30,350 Sq Feet 44 82.5 12/16/98 Gresham Drugs 8,450
182 36 Units 36,806 97.9 3/31/99
- ----------------------------------------------------------------------------------------------------------------------------------
183 158,400 Sq Feet 8 63.7 11/16/98 Chad Supply, Inc. 50,400
<CAPTION>
2nd
Largest 2nd
Largest Tenant Largest
Lease Area Lease
Exp. Leased Exp.
Control No. Date 2nd Largest Tenant Name (Sq. Ft.) Date 3rd Largest Tenant Name
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
129 9/30/01 Bedroom One/ Waterbed Warehouse 4,800 3/31/02 Catherines
130 3/31/04 123 Concepts, Inc. 8,403 7/31/06 The Plough & The Stars
131 11/30/18
- ------------------------------------------------------------------------------------------------------------------------------------
132
133
134 1/1/06 Dollar General 9,100 12/31/99 Life Changers Christian Center
135
136
- ------------------------------------------------------------------------------------------------------------------------------------
137 1/31/99 Your Discount Broker 2,693 3/31/99 Valentine, K.D. Inc.
138 12/31/99 Micro Products Co. 4,850 7/31/06 Lowery McDonnell Co.
139
140 11/30/02 Dr. David N. Stein Optometry Office 1,800 1/31/99 Avelino Lopez Mexican Food
141 1/31/19
- ------------------------------------------------------------------------------------------------------------------------------------
142 2/28/09
143 1/31/04 Woodworkers Warehouse 4,940 10/30/03 Golf Day
144 1/31/05 Taco Togo 1,955 9/30/03 F. R. Pizza corp.
145
146
- ------------------------------------------------------------------------------------------------------------------------------------
147 3/31/58
148 9/30/06 National Cinema Supply 14,820 12/31/03 Harmon Glass
149 6/30/07 Special Oper. 4,500 2/14/07 Hope Aglow
150
151 9/20/13
- ------------------------------------------------------------------------------------------------------------------------------------
152 10/31/02 Monarch Paper 11,059 4/30/01 U.S. Post Office
153
154 11/21/99 Tenneco / Astro Valcour 20,000 10/31/00 Angiodynamics
155 1/31/02 Simon, McCloskey, & Scovell 3,090 3/31/99 Tishman Midwest Management
156
- ------------------------------------------------------------------------------------------------------------------------------------
157 4/30/03 L.A. Dance 3,000 7/31/01 7-11/ Southland Corp.
158
159 1/31/20
160 12/31/13
161 1/31/19
- ------------------------------------------------------------------------------------------------------------------------------------
162 9/30/17 Einstein Bros. Bagel 2,225 8/30/07 Byte, Inc. DBA Comp Renaissance
163 4/22/03 Tuesday Morning 6,900 1/15/04 Video Plus
164
165 1/1/10 Big B Drugs 8,250 7/31/05 Movie Gallery
166 1/31/20
- ------------------------------------------------------------------------------------------------------------------------------------
167 10/31/01 Apple Tree Kids 3,065 2/28/00 Learning Tools
168 4/1/01 S & K Engineering 4,316 3/1/01 United Computer Service
169 1/31/03 Alpha Graphics 2,927 12/4/02 Stewart Title Co.
170
171
- ------------------------------------------------------------------------------------------------------------------------------------
172 6/30/01 Specialty Retailers, Inc. 16,160 1/31/09 Dollar General
173
173a
173b
- ------------------------------------------------------------------------------------------------------------------------------------
174 11/30/17
175 4/30/03 Ellie's Restaurant 2,600 10/31/06 New England Deli
176 1/31/19
177 1/31/20
- ------------------------------------------------------------------------------------------------------------------------------------
178 5/31/17
179
180
181 3/31/03 Beauty Max 3,600 10/31/03 Video Gallery
182
- ------------------------------------------------------------------------------------------------------------------------------------
183 12/31/01 J.C. Penney 28,800 7/31/03 Discount Furniture
<CAPTION>
3rd
Largest 3rd
Tenant Largest
Area Lease
Leased Exp. Control
Control No. (Sq. Ft.) Date No.
===================================================================
<S> <C> <C> <C>
129 3,600 4/1/04 129
130 4,442 4/30/02 130
131 131
- -------------------------------------------------------------------
132 132
133 133
134 2,400 7/31/00 134
135 135
136 136
- -------------------------------------------------------------------
137 2,183 5/31/99 137
138 4,835 3/31/00 138
139 139
140 1,800 1/31/99 140
141 141
- -------------------------------------------------------------------
142 142
143 4,300 10/30/03 143
144 1,934 144
145 145
146 146
- -------------------------------------------------------------------
147 147
148 12,003 12/31/98 148
149 4,500 1/31/00 149
150 150
151 151
- -------------------------------------------------------------------
152 4,890 6/30/02 152
153 153
154 10,000 5/31/99 154
155 3,090 10/31/03 155
156 156
- -------------------------------------------------------------------
157 2,400 4/30/00 157
158 158
159 159
160 160
161 161
- -------------------------------------------------------------------
162 2,100 5/31/05 162
163 5,040 11/14/00 163
164 164
165 3,600 3/31/00 165
166 166
- -------------------------------------------------------------------
167 2,200 6/30/01 167
168 3,840 5/1/01 168
169 2,922 4/30/01 169
170 170
171 171
- -------------------------------------------------------------------
172 13,240 5/31/03 172
173 173
173a 173a
173b 173b
- -------------------------------------------------------------------
174 174
175 1,500 12/31/03 175
176 176
177 177
- -------------------------------------------------------------------
178 178
179 179
180 180
181 3,250 4/30/03 181
182 182
- -------------------------------------------------------------------
183 21,750 7/31/03 183
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Control No. Property Name Address
====================================================================================================================================
<S> <C> <C>
184 10775 Applewood Drive & 3825 S. Huron Street 10775 Applewood Drive, 3825 South Huron Road
184a 3825 South Huron Road (Property Level) 3825 South Huron Road
184b 10775 Applewood Drive (Property Level) 10775 Applewood Drive Northeast
- ------------------------------------------------------------------------------------------------------------------------------------
185 Lincoln Park Mobile Home Village 3075 Dix Highway
186 Burke Self Storage 1009 Burke Road
187 Meadows Shopping Center 234 & 250 South Clayton Street
188 Hunter's Mill Shoppes 5444 Virginia Beach Boulevard
- ------------------------------------------------------------------------------------------------------------------------------------
189 Ashford Shopping Center 12500 Briar Forest Drive
190 Victorville Shopping Center 12555 Mariposa Road
191 Sun Plaza 2074-2130 North University
192 Mulberry Atrium 2133-41 Arch Street
193 Ames Plaza 670 Bath Road
- ------------------------------------------------------------------------------------------------------------------------------------
194 Amoco NW 87th Avenue and 17th Street
195 Shangrai-La Blue Star Hwy. at 62nd Avenue
196 275 North Saguaro Drive 275 North Saguaro Drive
197 Aspen Office Building 3075 West Oakland Park Boulevard
198 Angleton Mobile Home Park 2645 Shanks Road
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of
Aggregate
Cross Cut-off Cumulative
Zip Collateralized Origial Cut-Off Date Date % of Initial
Control No. City State Codes Groups Balance ($) Balance ($) Balance Pool Balance
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
184 Sparta, Standish MI Various LB99C1-2 1,247,000 1,239,316 0.07 99.16
184a Standish MI 48658
184b Sparta MI 49345
- -----------------------------------------------------------------------------------------------------------------------------------
185 Lincoln Park MI 48146 No 1,250,000 1,238,687 0.07 99.23
186 Pasadena TX 77506 No 1,210,000 1,209,032 0.07 99.30
187 Lawrenceville GA 30045 No 1,200,000 1,193,465 0.07 99.37
188 Virginia Beach VA 23462 No 1,200,000 1,187,348 0.07 99.43
- -----------------------------------------------------------------------------------------------------------------------------------
189 Houston TX 77082 No 1,185,000 1,180,435 0.07 99.50
190 Victorville CA 92392 No 1,150,000 1,144,709 0.07 99.57
191 Sunrise FL 33322 No 1,150,000 1,144,504 0.07 99.63
192 Philadelphia PA 19103 No 1,100,000 1,093,617 0.06 99.69
193 Wiscasset ME 04578 No 1,025,000 1,022,097 0.06 99.75
- -----------------------------------------------------------------------------------------------------------------------------------
194 Miami FL 33172 No 988,232 972,782 0.06 99.81
195 Saugatuck MI 49453 No 850,000 849,131 0.05 99.86
196 Apache Junction AZ 85220 No 850,000 848,518 0.05 99.91
197 Overland Park FL 33310 No 850,000 847,800 0.05 99.95
198 Angleton TX 77515 No 800,000 795,220 0.05 100.00
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Original Remaining Original
Interest Interest- Interest- Term to
Mortgage Administrative Accrual Only Period Only Period Maturity
Control No. Rate (%) Cost Rate (%) Method Amortization Type (Mos.) (Mos.) (Mos.)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
184 7.820 0.102 Act/360 Balloon 180
184a
184b
- -----------------------------------------------------------------------------------------------------------------------------------
185 7.400 0.177 Act/360 Balloon 120
186 8.150 0.122 Act/360 Balloon 120
187 7.000 0.102 Act/360 Balloon 120
188 7.530 0.102 Act/360 Balloon 180
- -----------------------------------------------------------------------------------------------------------------------------------
189 8.500 0.102 Act/360 Balloon 120
190 7.750 0.152 Act/360 Balloon 120
191 8.380 0.102 Act/360 Balloon 120
192 8.150 0.102 Act/360 Balloon 84
193 7.820 0.102 Act/360 Balloon 120
- -----------------------------------------------------------------------------------------------------------------------------------
194 6.500 0.062 30/360 Step 168
195 8.350 0.177 Act/360 Balloon 120
196 8.400 0.177 Act/360 Balloon 120
197 8.250 0.102 Act/360 Balloon 120
198 7.990 0.177 Act/360 ARD 120
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Remaining Maturity or
Term to Original Remaining Anticipated
Maturity Amortization Amortization Origination Repayment Balloon
Control No. (Mos.) Term (Mos.) Term (Mos.) Date Date Balance ($)
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
184 174 300 294 11/17/98 12/1/13 823,350
184a
184b
- -------------------------------------------------------------------------------------------------------------------------------
185 115 240 235 12/22/98 1/11/09 863,082
186 119 300 299 4/15/99 5/1/09 1,002,248
187 113 360 353 10/23/98 11/1/08 1,046,532
188 174 240 234 11/13/98 12/1/13 513,065
- -------------------------------------------------------------------------------------------------------------------------------
189 113 360 353 10/23/98 11/1/08 1,072,121
190 113 360 353 10/30/98 11/1/08 1,022,262
191 115 300 295 12/23/98 1/1/09 958,070
192 78 300 294 11/9/98 12/1/05 984,557
193 117 300 297 2/12/99 3/1/09 840,969
- -------------------------------------------------------------------------------------------------------------------------------
194 162 168 162 11/24/98 12/1/12 0
195 118 360 358 3/17/99 4/11/09 766,743
196 118 300 298 4/9/99 4/11/09 708,927
197 117 300 297 2/5/99 3/1/09 706,096
198 114 300 294 12/1/98 12/11/08 659,297
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
DSCR
Annual Net
Property Prepayment Debt Net Cash Cash
Control No. Type Provisions Service ($) Flow ($) Flow (x)
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
184 Retail L(4),D(10.917),O(.083) 113,716 147,850 1.30
184a
184b
- ----------------------------------------------------------------------------------------------------------------------------------
185 Multi-Family L(4),D(5.75),O(.25) 119,923 269,259 2.25
186 Self Storage L(4),D(5.917),O(.083) 113,514 148,346 1.31
187 Retail L(4),D(5.75),O(.25) 95,804 152,220 1.59
188 Retail L(7),D(7.75),O(.25) 116,270 149,642 1.29
- ----------------------------------------------------------------------------------------------------------------------------------
189 Retail L(4),D(5.75),O(.25) 109,339 136,546 1.25
190 Retail L(4),D(5.917),O(.083) 98,865 136,693 1.38
191 Retail L(4),D(6) 110,008 153,781 1.40
192 Office L(4),D(2.917),O(.083) 103,195 163,503 1.58
193 Retail L(4),D(5.75),O(.25) 93,471 120,326 1.29
- ----------------------------------------------------------------------------------------------------------------------------------
194 Credit Tenant Lease L(4),D(10) 94,720 95,004 NAP
195 Multi-Family L(4),D(5.75),O(.25) 77,347 114,885 1.49
196 Multi-Family L(4),D(5.75),O(.25) 81,447 101,616 1.25
197 Office L(4),D(5.917),O(.083) 80,422 102,544 1.28
198 Multi-Family L(4),D(5.75),O(.25) 74,031 112,451 1.52
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Scheduled Underwritten
Cut-off Maturity/AR Hospitality
Appraised Appraisal Date Date LTV Average Daily Year
Control No. Value ($) Date LTV (%) (%) Rate ($) Year Built Renovated
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
184 1,800,000 68.9 45.7 1987
184a 1,100,000 7/10/98 1987
184b 700,000 7/10/98 1987
- ----------------------------------------------------------------------------------------------------------------------------------
185 2,725,000 10/27/98 45.5 31.7 1950
186 1,740,000 2/24/99 69.5 57.6 1977 1998
187 1,710,000 9/3/98 69.8 61.2 1978
188 1,700,000 8/24/98 69.8 30.2 1987
- ----------------------------------------------------------------------------------------------------------------------------------
189 1,600,000 8/21/98 73.8 67.0 1998
190 1,585,000 6/22/98 72.2 64.5 1988
191 1,750,000 10/3/98 65.4 54.7 1977
192 1,800,000 10/2/98 60.8 54.7 1908 1980s
193 1,450,000 1/7/99 70.5 58.0 1987 1990s
- ----------------------------------------------------------------------------------------------------------------------------------
194 1,200,000 10/8/98 NAP NAP
195 1,150,000 1/1/99 73.8 66.7 1983
196 1,135,000 2/19/99 74.8 62.5 1972, 1978
197 1,350,000 12/16/98 62.8 52.3 1975
198 1,825,000 11/5/98 43.6 36.1 1985
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Largest
Tenant
Occupancy Area
Sq. Ft., Bed, Pad Loan Per Percentage Rent Roll Leased
Control No. or Room Unit (%) Date Largest Tenant Name (Sq.Ft.)
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
184 75,040 Sq Feet 17 100.0 9/18/98 Pamida Inc. 75,040
184a 37,900 Sq Feet 100.0 9/18/98 Pamida Inc., Standish 37,900
184b 37,140 Sq Feet 100.0 9/18/98 Pamida Inc., Sparta 37,140
- ----------------------------------------------------------------------------------------------------------------------------------
185 178 Pads 7,022 96.6 12/31/98
186 48,725 Sq Feet 25 87.4 3/5/99
187 50,544 Sq Feet 24 82.9 10/23/98 Big Lots 27,104
188 22,827 Sq Feet 53 100.0 9/14/98 Taylor Rental 5,040
- ----------------------------------------------------------------------------------------------------------------------------------
189 9,600 Sq Feet 123 87.8 8/23/98 $1.35 Family Cleaner 2,560
190 25,653 Sq Feet 45 89.3 9/15/98 Oak Express 9,480
191 21,487 Sq Feet 54 84.5 12/1/98 Eastern Holdings, Inc. 2,409
192 33,821 Sq Feet 33 100.0 10/7/98 School District of Philadelphia 19,667
193 43,200 Sq Feet 24 100.0 1/4/99 Ames #0257 43,200
- ----------------------------------------------------------------------------------------------------------------------------------
194 44,954 Sq Feet 22 100.0 4/14/97 Amoco 44,954
195 66 Pads 12,879 97.0 3/2/99
196 76 Pads 11,184 100.0 2/15/99
197 19,392 Sq Feet 44 92.0 12/1/98 Staff Builders 5,655
198 250 Pads 3,200 72.0 1/27/99
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2nd
Largest 2nd
Largest Tenant Largest
Lease Area Lease
Exp. Leased Exp.
Control No. Date 2nd Largest Tenant Name (Sq. Ft.) Date 3rd Largest Tenant Name
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
184 4/30/09
184a 4/30/09
184b 4/30/09
- ------------------------------------------------------------------------------------------------------------------------------------
185
186
187 1/31/00 Network Rental 4,000 5/31/00 Gwinnett Florist
188 11/23/01 Asia Grocery 3,426 12/31/01 7-Eleven
- ------------------------------------------------------------------------------------------------------------------------------------
189 9/30/03 Wolf Camera 2,048 9/30/03 Papa John's Pizza
190 1/14/03 Carpet Club 5,977 9/12/01 Remax
191 12/31/01 British Swim Centers, Inc. 2,250 11/30/01 CCS Fiancial Services, nc
192 12/31/00 Articus, Ltd. 6,823 11/2/02 Advance Office Environment
193 1/31/11
- ------------------------------------------------------------------------------------------------------------------------------------
194 12/10/12
195
196
197 7/31/03 Staff Builders National 1,895 7/31/03 Comedy Traffic School
198
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
3rd
Largest 3rd
Tenant Largest
Area Lease
Leased Exp. Control
Control No. (Sq. Ft.) Date No.
===================================================================
<S> <C> <C> <C>
184 184
184a 184a
184b 184b
- -------------------------------------------------------------------
185 185
186 186
187 3,200 1/31/02 187
188 3,141 7/31/02 188
- -------------------------------------------------------------------
189 1,408 8/31/03 189
190 2,696 6/30/01 190
191 2,217 6/30/01 191
192 3,300 12/31/02 192
193 193
- -------------------------------------------------------------------
194 194
195 195
196 196
197 1,822 7/31/07 197
198 198
- -------------------------------------------------------------------
</TABLE>
<PAGE>
Lehman Brothers Commercial Mortgage Trust 99 - C1 Annex A-2- 1
<TABLE>
<CAPTION>
Original Remaining
Interest-Only Interest-Only
Control. Periods Period Amortization Cut-Off Date Monthly
No. Property Name (months) (months) Type Balance ($) P&I ($)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1 Century City 12 12 ARD 160,000,000 1,091,482
2 Starwood Financial ARD 154,954,659 1,201,183
3 EAB Plaza ARD 139,367,162 1,017,731
4 Woodland Hills Mall ARD 89,644,244 598,772
5 Penn Square Mall ARD 74,844,822 500,237
6 Grand Central Mall Balloon 52,332,103 355,652
7 Crossroads Mall ARD 45,000,000 311,571
8 Natomas Corporate Center Balloon 37,874,599 253,326
9 Carmel Plaza Balloon 28,984,263 201,780
10 Boston Design Center Balloon 28,957,613 212,017
11 Corporetum Office Campus Balloon 25,914,201 173,328
12 Tropicana Centre Balloon 25,208,339 182,642
13 Hickory Point Mall Balloon 24,478,946 186,667
14 Pacific Park Plaza Balloon 23,261,111 167,891
15 Arden Balloon 22,525,000 158,115
16 Westland Promenade Balloon 21,489,417 153,880
17 Forest Plaza Balloon 19,240,492 137,643
18 Wal-Mart (Loan Level) ARD 17,677,473 123,782
19 Trujillo Alto Shopping Center Balloon 15,833,272 110,088
20 Casa Del Monte Balloon 15,741,509 109,803
21 Grand Traverse Crossing Balloon 14,544,278 Step*
22 607 South Hill Street Balloon 13,379,960 102,164
23 Denton Center Shopping Center Balloon 13,034,012 97,670
24 Pleasure Cove and Plantation Manor ARD 12,968,214 87,977
25 175 Pinelawn Road Balloon 12,060,459 81,071
26 Westheimer Park/ Terrace Apartments Balloon 11,385,399 79,710
27 Toll House Hotel Balloon 11,181,855 92,156
28 San Felipe Court Apartments Balloon 11,130,676 79,071
29 Tides/Kent Hotel Package Balloon 10,592,291 85,568
30 Hickory Hills- MHP Balloon 10,368,401 72,292
31 Indian Springs Apartments Balloon 9,987,387 70,333
32 Cypress Parke Apartments Balloon 9,168,088 64,328
33 Conyers Plaza Balloon 8,995,180 62,868
34 Best Western Rochester Balloon 8,860,352 72,483
35 Sierra Vista Apartments ARD 8,836,455 60,188
36 Woodholme Center Office Building Balloon 8,595,693 61,255
37 Holiday Inn Express - Birmingham ARD 8,448,774 65,284
38 Steger Towne Crossing I Balloon 8,393,839 57,008
39 Birnam Wood Apartments Balloon 8,305,516 58,037
40 Glasshouse Square Shopping Center Balloon 8,168,291 58,746
41 Twinsburg Town Center Balloon 8,038,124 53,342
42 Post Oak Apartments Balloon 7,989,754 55,937
43 Tierra Verde Plaza ARD 7,917,344 56,760
44 LBJ Oates/Summit Shopping Center Balloon 7,897,942 59,943
45 Normandy Square Apartments Balloon 7,890,363 56,269
46 Carrier Town Crossing Balloon 7,865,213 56,608
47 Camelot Arms Apartments Balloon 7,285,730 49,749
48 Gaitherstowne Plaza Balloon 6,892,159 50,437
49 Eastgate Plaza Shopping Center Balloon 6,874,220 53,667
50 Canfield Business Park Balloon 6,871,442 48,057
51 Hampton Woods Apartments Balloon 6,691,419 46,847
52 Kohl's Shopping Center Balloon 6,223,242 43,098
53 Industrial Bldg 1-24 Balloon 6,197,248 45,623
54 Hancock Plaza Balloon 6,188,707 43,351
55 Washington Place Shopping Center Balloon 6,043,432 44,942
56 9797 S. Frontage Rd. ARD 5,970,782 42,567
57 Courtyard Plaza Shopping Center Balloon 5,939,636 42,257
58 Owens - Crenshaw Balloon 5,794,833 45,654
59 Best Western Truckee Balloon 5,790,407 47,330
60 Owens-Tracy Balloon 5,635,251 44,397
61 SecureCare Portfolio Balloon 5,634,047 42,992
<CAPTION>
Remaining Cut-off Cut-off Scheduled
Original term to ARD Remaining Date Date Maturity
Control Balloon/ARD Mortgage Amortization Seasoning or Maturity Lockout DSCR LTV or ARD Date
No. Balance ($) ARD Maturity Rate (%) Term (months) (months) (months) Months (x) (%) LTV (%)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 143,104,942 6/1/09 6/1/29 7.25000 360 0 120 24 1.42 58.8 52.6
2 115,499,999 4/1/09 12/31/20 7.43800 262 2 118 24 2.12 46.1 34.3
3 113,034,478 3/1/09 3/1/24 7.33000 300 3 117 24 1.79 49.8 40.4
4 78,487,430 1/1/09 1/1/29 7.00000 360 5 115 24 1.67 52.2 45.7
5 65,481,201 3/1/09 3/1/29 7.02500 360 3 117 24 1.67 55.4 48.5
6 45,994,165 2/1/09 7.18000 360 4 116 24 1.54 65.4 57.5
7 39,666,549 6/1/09 6/1/29 7.40000 360 0 120 24 1.61 65.7 57.9
8 33,151,731 2/1/09 7.02000 360 4 116 24 2.08 46.8 40.9
9 25,599,547 5/1/09 7.45000 360 1 119 23 1.38 63.8 56.4
10 25,100,259 4/1/09 7.77000 336 2 118 24 1.42 65.8 57.0
11 22,682,818 2/1/09 7.02000 360 4 116 24 2.14 48.0 42.0
12 23,571,279 3/1/06 7.85000 360 3 81 24 1.45 59.6 55.7
13 16,218,173 5/1/14 7.85000 300 1 179 47 1.33 72.0 47.7
14 20,753,834 3/1/09 7.81000 360 3 117 45 1.30 58.2 51.9
15 19,986,814 4/29/09 7.54000 360 0 119 24 1.52 63.1 56.0
16 19,117,026 5/1/09 7.74000 360 1 119 24 1.27 79.6 70.8
17 17,112,192 5/1/09 7.73000 360 1 119 47 1.40 76.0 67.6
18 13,906,412 6/11/13 6/11/28 7.43000 351 2 168 46 1.61 62.3 49.0
19 14,012,896 12/1/08 7.40000 360 6 114 42 1.26 72.0 63.7
20 15,003,494 5/1/04 7.47000 360 1 59 47 1.21 75.0 71.4
21 9,118,261 1/1/13 7.42000 280 9 163 0 1.33 74.0 46.4
22 11,519,109 4/1/09 8.12000 324 2 118 46 1.33 64.5 55.5
23 11,808,352 8/1/07 8.06000 345 7 98 35 1.30 69.0 62.5
24 11,432,227 8/11/08 8/11/28 7.12000 360 10 110 38 1.49 78.1 68.9
25 10,570,129 2/1/09 7.07000 360 4 116 44 1.35 71.4 62.5
26 10,581,964 4/1/06 7.50000 360 2 82 46 1.24 76.9 71.5
27 10,135,498 4/1/06 8.76000 300 2 82 24 1.40 58.9 53.3
28 10,060,398 4/1/08 7.65000 360 2 106 34 1.25 75.0 67.7
29 8,874,511 5/1/09 8.53000 300 1 119 47 1.46 60.2 50.4
30 9,899,195 2/1/04 7.44000 360 4 56 44 1.26 79.8 76.1
31 9,291,435 4/1/06 7.56000 360 2 82 46 1.22 79.9 74.3
32 8,506,029 4/1/06 7.50000 360 2 82 46 1.26 77.0 71.5
33 7,952,726 5/1/09 7.49000 360 1 119 47 1.31 75.0 66.3
34 7,457,594 4/1/09 8.67000 300 2 118 46 1.40 73.8 62.1
35 7,709,424 1/1/08 1/1/28 7.09000 349 6 103 31 1.33 78.9 68.8
36 7,637,379 5/1/09 7.69000 360 1 119 47 1.29 74.1 65.8
37 7,286,255 7/11/07 12/11/23 7.94300 300 6 97 42 1.52 67.9 58.5
38 7,425,226 2/1/08 7.08000 360 17 104 32 1.27 76.3 67.5
39 6,666,747 9/1/08 6.75000 300 9 111 39 1.24 77.6 62.3
40 7,641,000 12/1/05 7.75000 360 6 78 30 1.31 62.4 58.3
41 7,039,221 8/1/08 6.88963 354 4 110 50 1.37 78.8 69.0
42 7,425,940 4/1/06 7.50000 360 2 82 46 1.28 79.9 74.3
43 7,089,276 1/1/08 1/1/28 7.62700 349 6 103 31 1.30 75.6 67.7
44 7,174,980 8/1/07 8.20000 345 7 98 35 1.27 71.8 65.2
45 7,014,763 4/1/09 7.69000 360 2 118 46 1.24 78.9 70.1
46 7,033,557 10/1/08 7.75000 359 6 112 52 1.26 76.4 68.3
47 6,409,573 3/1/09 7.24000 360 3 117 45 1.31 79.8 70.2
48 6,167,263 4/1/09 7.96000 360 2 118 46 1.33 71.8 64.2
49 6,260,275 11/1/08 8.62500 360 7 113 41 1.35 63.7 58.0
50 6,090,321 12/1/08 7.46000 360 6 114 30 1.27 76.3 67.7
51 6,219,225 4/1/06 7.50000 360 2 82 46 1.25 79.7 74.0
52 3,906,201 5/1/18 7.29610 351 4 227 130 1.25 75.4 47.3
53 5,551,728 5/1/09 8.03000 360 1 119 24 1.26 78.0 69.8
54 5,480,095 3/1/09 7.50000 360 3 117 45 1.27 73.7 65.2
55 5,429,463 4/1/09 8.13000 360 2 118 46 1.27 78.5 70.5
56 4,833,618 7/11/08 7/11/23 6.95000 300 11 109 37 1.24 67.1 54.3
57 5,280,245 3/1/09 7.66000 360 3 117 45 1.30 73.3 65.2
58 5,417,293 3/1/04 8.21000 300 3 57 24 1.30 70.7 66.1
59 5,239,650 4/1/06 8.66000 300 2 82 24 1.41 65.8 59.5
60 5,268,107 3/1/04 8.21000 300 3 57 24 1.29 58.7 54.9
61 5,243,398 3/1/04 7.83500 300 3 57 33 1.38 69.9 65.1
</TABLE>
<PAGE>
Lehman Brothers Commercial Mortgage Trust 99 - C1 Annex A-2- 2
<TABLE>
<CAPTION>
Original Remaining
Interest-Only Interest-Only
Control. Periods Period Amortization Cut-Off Date Monthly
No. Property Name (months) (months) Type Balance ($) P&I ($)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
62 Fidelity Office Building Balloon 5,619,231 37,590
63 Village at Loch Katrine Apartments Balloon 5,457,828 37,740
64 Terra Vista Business Park - Loan Level Balloon 5,177,161 37,975
65 The Hills Apartments Balloon 5,084,744 36,658
66 Bed Bath & Beyond/ Babies 'R Us Balloon 5,000,043 33,544
67 Vineyard Apartments Balloon 4,993,629 35,029
68 Atelier District Office Balloon 4,985,017 34,995
69 Equitable Federal Building Balloon 4,969,444 33,232
70 Kmart - San Diego 60 53 Fully Amortizing 4,875,876 Step*
71 Bed, Bath & Beyond 7 0 Balloon 4,809,593 Step*
72 Owens-Volney Balloon 4,697,705 37,010
73 Ridgegate Apartments Balloon 4,594,793 33,673
74 Depot Plaza Balloon 4,592,167 32,923
75 Hampton Inn - Virginia Beach Balloon 4,489,417 36,813
76 Sportmart Plaza Balloon 4,423,043 32,593
77 University Plaza Shopping Center Balloon 4,394,986 32,132
78 Lincoln Way East Shopping Center Balloon 4,392,761 31,857
79 600 Blair Road Balloon 4,322,973 31,374
80 Madison Woods Apartments Balloon 4,294,493 30,066
81 French Mountain Commons Outlet Center Balloon 4,283,917 31,223
82 Anacota Plaza Balloon 4,198,132 30,891
83 357-363 West Erie Balloon 4,188,471 30,672
84 Orange Tree Plaza Balloon 4,098,325 30,802
85 San Marin Shopping Center Balloon 4,097,933 29,147
86 Magnolia Station Apartments Balloon 3,998,119 28,989
87 Piqua Plaza Shopping Center Balloon 3,993,247 28,712
88 Sagetree Village (Farris Prop Level) ARD 3,948,820 28,476
89 Beverly Center Balloon 3,923,504 26,468
90 Walgreen - Riverview Balloon 3,918,245 28,096
91 Parker Street Industrial Balloon 3,860,637 26,675
92 Winn Dixie Fully Amortizing 3,815,935 Step*
93 Hampton Inn - Chesapeake Balloon 3,791,064 31,087
94 Branford Commerce Center Balloon 3,769,127 25,486
95 3 Roads Shopping Center Balloon 3,687,920 26,840
96 Office Depot Building Balloon 3,673,591 24,898
97 Glendale Shopping Center Balloon 3,595,643 25,716
98 Five Points Plaza Balloon 3,582,463 25,172
99 Eckerd - Baton Rouge Balloon 3,531,717 26,455
100 Cascade Park Apartments Balloon 3,514,040 25,242
101 Kmart - Cincinnati 60 53 Fully Amortizing 3,500,000 20,708
102 Blue Garden Apartments ARD 3,374,783 21,962
103 Regency Square Balloon 3,373,536 23,217
104 Executive Quarters Office Building Balloon 3,182,835 21,757
105 Eckerd - Arlington Balloon 3,145,029 25,868
106 Pfizer Building Balloon 3,139,882 26,230
107 Eckerd - Shreveport Balloon 3,110,478 22,431
108 Washington Shores Plaza Balloon 3,089,583 22,209
109 Market Place Shopping Center Balloon 3,061,393 22,676
110 Wal-Mart Plaza ARD 2,998,623 22,677
111 Bullfrog Shopping Center Balloon 2,991,049 22,601
112 Royal Orleans Apartments Balloon 2,990,675 20,618
113 Pondview Plaza Balloon 2,938,034 22,098
114 Eckerd - Waxahachie Balloon 2,933,907 21,788
115 1200 Route 9 Balloon 2,921,346 23,011
116 Delchamps Plaza Balloon 2,916,273 22,036
117 Steger Towne Crossing II Balloon 2,898,651 21,077
118 Liberty Plaza Mall Balloon 2,839,005 20,437
119 Spalding Centre Shopping Center Fully Amortizing 2,813,068 21,043
120 Autumnwood Balloon 2,791,442 19,406
121 Camelot Manufactured Housing Community ARD 2,790,060 19,578
122 Marshall Mall Balloon 2,742,913 21,719
<CAPTION>
Remaining Cut-off Cut-off Scheduled
Original term to ARD Remaining Date Date Maturity
Control Balloon/ARD Mortgage Amortization Seasoning or Maturity Lockout DSCR LTV or ARD Date
No. Balance ($) ARD Maturity Rate (%) Term (months) (months) (months) Months (x) (%) LTV (%)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
62 4,927,418 11/1/08 7.00000 360 7 113 41 1.43 68.8 60.3
63 4,831,137 7/1/08 7.30000 354 5 109 25 1.26 79.1 70.0
64 4,644,835 11/1/08 7.95000 360 7 113 41 1.63 43.9 39.4
65 4,789,788 11/1/04 7.66930 348 7 65 29 1.20 76.5 72.0
66 4,379,935 2/1/09 7.05000 360 4 116 44 1.35 78.7 69.0
67 4,642,717 4/1/06 7.52000 360 2 82 46 1.22 75.7 70.3
68 4,417,369 2/1/09 7.51000 360 4 116 44 1.61 58.6 52.0
69 4,360,021 10/1/08 6.99000 360 8 112 40 1.47 69.0 60.6
70 NAP 11/1/18 7.10000 180 7 233 41 NAP NAP NAP
71 1,417,642 2/10/20 7.36000 298 10 248 35 NAP NAP NAP
72 4,391,643 3/1/04 8.21000 300 3 57 24 1.30 72.3 67.6
73 4,112,988 4/1/09 7.97500 360 2 118 46 1.26 79.2 70.9
74 4,090,291 3/1/09 7.74000 360 3 117 45 1.27 75.3 67.1
75 3,784,324 3/1/09 8.69000 300 3 117 45 1.45 71.3 60.1
76 3,963,267 5/1/09 8.04000 360 1 119 47 1.42 75.0 67.2
77 3,931,801 4/1/09 7.95000 360 2 118 46 1.39 74.2 66.4
78 3,923,961 3/1/09 7.86000 360 3 117 24 1.38 74.5 66.5
79 4,138,224 5/1/04 7.88000 360 1 59 35 1.24 78.6 75.2
80 3,991,443 4/1/06 7.50000 360 2 82 46 1.23 79.5 73.9
81 4,113,229 12/1/03 7.89000 360 6 54 42 1.34 69.1 66.3
82 3,760,398 5/1/09 8.02500 360 1 119 47 1.26 72.4 64.8
83 3,924,990 2/1/06 7.95000 360 4 80 44 1.42 69.8 65.4
84 3,690,429 5/1/09 8.25000 360 1 119 47 1.35 56.1 50.6
85 3,639,272 5/1/09 7.67000 360 1 119 47 1.27 68.2 60.6
86 3,826,859 5/1/04 7.87000 360 1 59 35 1.25 75.4 72.2
87 3,729,392 3/1/06 7.77000 360 3 81 45 1.31 76.8 71.7
88 3,208,775 7/11/08 7/11/23 7.08000 300 11 109 37 1.34 69.3 56.3
89 3,449,918 9/1/08 7.06600 352 1 111 24 1.35 72.7 63.9
90 754,715 11/1/18 6.53000 270 7 233 41 NAP NAP NAP
91 3,084,791 10/1/08 6.64000 300 8 112 40 1.30 72.2 57.7
92 NAP 7/1/18 6.91000 240 11 229 49 NAP NAP NAP
93 3,195,652 3/1/09 8.69000 300 3 117 45 1.45 68.9 58.1
94 3,322,098 7/1/08 7.08000 360 11 109 37 1.41 70.5 62.1
95 3,299,289 1/1/09 7.88000 360 5 115 43 1.33 68.3 61.1
96 3,508,812 8/1/03 7.10180 354 4 50 26 1.34 66.8 63.8
97 3,198,968 4/1/09 7.72000 360 2 118 46 1.35 75.6 67.3
98 3,340,981 11/1/05 7.50000 360 7 77 41 1.33 74.6 69.6
99 500,002 12/1/18 6.89000 260 5 234 43 NAP NAP NAP
100 3,131,502 3/1/09 7.76000 360 3 117 45 1.28 79.9 71.2
101 NAP 11/1/18 7.10000 180 7 233 41 NAP NAP NAP
102 2,942,217 9/11/08 9/11/28 6.71000 360 9 111 39 1.56 65.2 56.9
103 2,986,403 7/1/08 7.26000 360 11 109 37 1.43 75.0 66.4
104 2,805,363 10/1/08 7.20563 356 4 112 40 1.39 64.3 56.7
105 599,939 1/1/19 8.19000 263 3 235 45 NAP NAP NAP
106 2,579,451 4/1/06 7.94000 240 2 82 24 1.46 56.1 46.1
107 763,704 9/1/18 6.73000 274 5 231 43 NAP NAP NAP
108 2,755,556 1/1/09 7.75000 360 5 115 43 1.29 78.2 69.8
109 2,615,966 1/1/09 7.75000 324 5 115 43 1.45 74.7 63.8
110 2,437,088 6/11/13 6/11/28 8.24500 350 1 168 47 1.34 71.0 57.7
111 2,700,489 1/1/09 8.28000 360 5 115 43 1.32 73.0 65.9
112 2,638,052 2/1/09 7.32500 360 4 116 44 1.37 74.8 66.0
113 2,654,396 5/1/08 8.17000 352 5 107 35 1.23 70.5 63.7
114 545,404 10/1/18 6.89000 264 5 232 43 NAP NAP NAP
115 2,663,050 3/1/09 8.75000 360 3 117 45 1.28 73.0 66.6
116 2,632,976 1/1/09 8.28000 360 5 115 43 1.29 76.7 69.3
117 2,643,391 2/1/08 7.90000 360 1 104 47 1.41 65.9 60.1
118 2,656,130 12/1/05 7.76000 360 6 78 42 1.33 74.7 69.9
119 NAP 7/1/23 7.49000 300 11 289 133 1.42 52.3 0.0
120 2,467,507 2/1/09 7.41000 360 4 116 44 1.36 79.8 70.5
121 2,598,485 1/11/06 1/11/29 7.50000 360 5 79 43 1.21 72.0 67.1
122 2,285,727 3/1/09 8.27000 300 3 117 45 1.30 65.3 54.4
</TABLE>
<PAGE>
Lehman Brothers Commercial Mortgage Trust 99 - C1 Annex A-2- 3
<TABLE>
<CAPTION>
Original Remaining
Interest-Only Interest-Only
Control. Periods Period Amortization Cut-Off Date Monthly
No. Property Name (months) (months) Type Balance ($) P&I ($)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
123 Metro Center Balloon 2,686,149 18,455
124 Owens - Midway Balloon 2,653,056 20,902
125 URS Building Balloon 2,641,095 18,985
126 Brendonwood Park Apartments Balloon 2,592,053 18,020
127 Town and Country Shopping Center Balloon 2,563,153 18,448
128 Woodlake Professional Building Balloon 2,556,157 19,089
129 Castleton Shoppes Shopping Center Balloon 2,497,359 18,747
130 Corn Exchange Building Balloon 2,491,220 18,606
131 Rite Aid - Waterford Fully Amortizing 2,475,182 19,240
132 Mountain Springs Mobile Home Estates (Farris Prop Level) ARD 2,468,013 17,797
133 Forest Grove Balloon 2,445,684 17,333
134 Park Forest Shopping Center Balloon 2,442,437 18,200
135 Hampton Hills Apartments Balloon 2,440,804 17,764
136 Wynforest Apartments Balloon 2,392,385 16,323
137 855 Plaza Balloon 2,391,306 18,881
138 Thorndale Business Park Balloon 2,387,814 15,249
139 Mini Masters Storage Facility Balloon 2,376,980 17,128
140 Kmart Plaza - Bellflower Balloon 2,342,936 18,521
141 Eckerd - Rotterdam Balloon 2,265,847 Step*
142 Owens - Lakeland Balloon 2,264,074 17,837
143 Greengate East Shopping Center Balloon 2,247,795 17,301
144 Greenwich Court Balloon 2,245,760 17,381
145 849 Delaware Avenue Balloon 2,197,392 15,837
146 Willow Wood Apartments Balloon 2,191,752 15,959
147 Walgreens - South Elgin Balloon 2,188,989 15,202
148 Center Hill Business Park Balloon 2,175,986 14,904
149 Yarbrough Office Park Balloon 2,095,466 13,774
150 Riverview Commons MHC ARD 2,078,208 15,138
151 Office Max - Grand Forks Balloon 2,051,133 14,109
152 Trinity Business Plaza Balloon 1,998,281 15,238
153 5575 E. Winnemucca Blvd. Balloon 1,995,700 16,900
154 Adirondack Industrial Park Balloon 1,994,576 14,689
155 180 West Washington Balloon 1,991,666 15,609
156 Santiago Creek MHP ARD 1,986,364 13,427
157 Burke Commons Center Balloon 1,969,792 14,699
158 Countryside Estates Manufactured Home Park ARD 1,912,124 14,051
159 CVS - Statesville Fully Amortizing 1,896,552 15,260
160 Office Max - Minot Balloon 1,890,113 13,037
161 CVS - Mooresville Fully Amortizing 1,846,561 14,940
162 Riverdale Commons Balloon 1,793,369 14,661
163 Quail Valley Shopping Center ARD 1,743,719 14,025
164 Southern Pavilion Mini Storage Balloon 1,737,789 12,011
165 Hampton Place Shopping Center Balloon 1,698,114 12,533
166 CVS - Port Royal Fully Amortizing 1,693,318 13,007
167 Commons at Kings Crossing Balloon 1,685,936 12,132
168 Primrose Business Complex Balloon 1,669,556 12,174
169 Southlake Shopping Center Balloon 1,617,138 11,396
170 Sylmar Mobile Home Park ARD 1,597,614 12,486
171 Central Self Storage - Vallejo Balloon 1,588,194 12,085
172 Washington Plaza Shopping Center Balloon 1,544,035 11,126
173 Michigan MHP Portfolio (Loan Level) Balloon 1,537,421 12,504
174 CVS - Greensboro Fully Amortizing 1,502,428 Step*
175 Bayshore Plaza Balloon 1,495,682 10,707
176 CVS - Newton Fully Amortizing 1,494,423 12,055
177 CVS - Bessemer City Fully Amortizing 1,494,259 11,675
178 Rite Aid - Sterling Heights Fully Amortizing 1,452,137 11,631
179 Twin Lakes Mobile Home Estates Balloon 1,370,772 9,501
180 Northbrook Estates Balloon 1,363,662 10,496
181 Northwood Village Balloon 1,347,955 10,038
182 Lexington Place Apartments Balloon 1,323,400 9,474
183 4545 Groves Road Industrial Building Balloon 1,294,669 9,090
<CAPTION>
Remaining Cut-off Cut-off Scheduled
Original term to ARD Remaining Date Date Maturity
Control Balloon/ARD Mortgage Amortization Seasoning or Maturity Lockout DSCR LTV or ARD Date
No. Balance ($) ARD Maturity Rate (%) Term (months) (months) (months) Months (x) (%) LTV (%)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
123 2,371,356 11/1/08 7.27000 360 7 113 41 1.34 70.7 62.4
124 2,480,206 3/1/04 8.21000 300 3 57 24 1.29 71.7 67.0
125 2,469,092 1/1/06 7.75000 360 5 79 43 1.28 67.7 63.3
126 2,291,258 2/1/09 7.41000 360 4 116 44 1.31 78.5 69.4
127 2,288,977 11/1/08 7.75000 360 7 113 41 1.33 62.5 55.8
128 2,300,035 3/1/09 8.17000 360 3 117 24 1.32 73.0 65.7
129 2,248,853 4/1/09 8.23000 360 2 118 46 1.55 65.7 59.2
130 2,343,899 12/1/05 8.15000 360 6 78 42 1.32 71.2 67.0
131 NAP 12/1/18 6.88000 239 5 234 43 NAP NAP NAP
132 2,005,484 7/11/08 7/11/23 7.08000 300 11 109 37 1.24 72.6 59.0
133 2,172,055 3/1/09 7.62000 360 3 117 45 1.39 78.9 70.1
134 2,197,703 1/1/09 8.13000 360 5 115 43 1.28 78.8 70.9
135 2,184,799 12/1/08 7.87500 360 6 114 42 1.32 76.3 68.3
136 2,216,834 2/1/06 7.22000 360 4 80 44 1.31 79.7 73.9
137 2,183,528 11/1/08 8.75000 360 7 113 24 1.34 68.3 62.4
138 2,067,871 12/1/08 6.55000 360 6 114 42 1.49 73.5 63.6
139 2,132,293 3/1/08 7.71000 360 15 105 33 1.29 63.4 56.9
140 2,139,358 12/1/08 8.77000 360 6 114 42 1.25 42.6 38.9
141 599,941 1/1/19 7.21000 273 4 235 44 NAP NAP NAP
142 2,116,567 3/1/04 8.21000 300 3 57 24 1.34 68.6 64.1
143 2,036,596 4/1/09 8.50000 360 2 118 46 1.52 64.2 58.2
144 2,009,026 4/1/06 8.01000 300 2 82 46 1.32 43.2 38.6
145 2,051,920 4/1/06 7.80000 360 2 82 46 1.49 76.3 71.2
146 1,962,098 12/1/08 7.88000 360 6 114 42 1.27 73.1 65.4
147 1,937,663 11/1/08 7.38000 360 7 113 41 1.20 79.2 70.1
148 1,928,484 3/1/08 7.18000 360 15 105 33 1.30 73.8 65.4
149 1,825,394 3/1/09 6.86000 360 3 117 45 1.60 54.4 47.4
150 1,691,311 9/11/08 9/11/23 7.22000 300 9 111 39 1.43 75.6 61.5
151 1,596,839 12/1/13 7.29000 360 6 174 42 1.32 77.4 60.3
152 1,642,295 5/1/09 7.85000 300 1 119 47 1.32 66.6 54.7
153 1,699,962 3/11/09 9.08500 300 3 117 45 1.27 62.4 53.1
154 1,788,621 2/1/09 8.01000 360 4 116 44 1.41 73.9 66.2
155 1,654,138 2/1/09 8.13000 300 4 116 44 1.26 71.1 59.1
156 1,748,418 9/11/08 9/11/28 7.09000 360 9 111 39 1.36 66.2 58.3
157 1,772,101 2/1/09 8.15000 360 4 116 44 1.34 73.0 65.6
158 1,557,154 12/11/08 12/11/23 7.36000 300 6 114 42 1.53 72.2 58.8
159 NAP 5/1/19 7.46000 240 1 239 119 NAP NAP NAP
160 1,471,350 2/1/14 7.33000 360 4 176 44 1.30 78.8 61.3
161 NAP 2/1/19 7.46000 237 1 236 119 NAP NAP NAP
162 1,376,461 3/1/09 8.13000 264 3 117 45 1.27 74.7 57.4
163 1,461,978 2/11/09 2/11/24 8.44500 299 3 116 45 1.29 54.5 45.7
164 1,539,829 5/11/08 7.28000 350 3 107 23 1.62 59.9 53.1
165 1,591,694 4/1/06 8.05000 360 2 82 46 1.29 76.1 71.4
166 NAP 4/1/19 6.83000 240 2 238 94 NAP NAP NAP
167 1,510,323 5/1/08 7.71000 360 13 107 35 1.55 58.1 52.1
168 1,494,317 1/1/09 7.90000 360 5 115 43 1.28 66.6 59.7
169 1,436,656 11/1/08 7.53000 360 7 113 41 1.37 64.7 57.5
170 1,332,515 7/11/08 7/11/23 8.02000 300 11 109 37 1.41 76.1 63.5
171 1,309,207 11/1/08 7.75000 300 7 113 41 1.35 72.9 60.1
172 1,378,696 12/1/08 7.77000 360 6 114 42 1.29 61.8 55.1
173 1,291,563 4/11/09 8.60000 300 2 118 46 1.28 75.2 63.2
174 NAP 12/1/17 7.79000 225 3 222 117 NAP NAP NAP
175 1,331,875 2/1/09 7.71250 360 4 116 24 1.31 66.5 59.2
176 NAP 2/1/19 7.42000 238 2 236 118 NAP NAP NAP
177 NAP 4/1/19 7.05000 240 2 238 118 NAP NAP NAP
178 NAP 6/1/17 6.75000 223 7 216 41 NAP NAP NAP
179 1,273,429 2/1/06 7.38000 360 4 80 44 1.31 49.3 45.8
180 1,235,535 4/11/09 8.50000 360 2 118 46 1.38 79.1 71.6
181 1,212,051 3/1/09 8.14000 360 3 117 45 1.30 68.3 61.4
182 1,177,687 4/1/09 7.73000 360 2 118 46 1.25 79.7 70.9
183 1,148,609 12/1/08 7.50000 360 6 114 30 1.59 38.1 33.8
</TABLE>
<PAGE>
Lehman Brothers Commercial Mortgage Trust 99 - C1 Annex A-2- 4
<TABLE>
<CAPTION>
Original Remaining
Interest-Only Interest-Only
Control. Periods Period Amortization Cut-Off Date Monthly
No. Property Name (months) (months) Type Balance ($) P&I ($)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
184 10775 Applewood Drive & 3825 S. Huron Street Balloon 1,239,316 9,476
185 Lincoln Park Mobile Home Village Balloon 1,238,687 9,994
186 Burke Self Storage Balloon 1,209,032 9,460
187 Meadows Shopping Center Balloon 1,193,465 7,984
188 Hunter's Mill Shoppes Balloon 1,187,348 9,689
189 Ashford Shopping Center Balloon 1,180,435 9,112
190 Victorville Shopping Center Balloon 1,144,709 8,239
191 Sun Plaza Balloon 1,144,504 9,167
192 Mulberry Atrium Balloon 1,093,617 8,600
193 Ames Plaza Balloon 1,022,097 7,789
194 Amoco Fully Amortizing 972,782 Step*
195 Shangrai-La Balloon 849,131 6,446
196 275 North Saguaro Drive Balloon 848,518 6,787
197 Aspen Office Building Balloon 847,800 6,702
198 Angleton Mobile Home Park ARD 795,220 6,169
<CAPTION>
Remaining Cut-off Cut-off Scheduled
Original term to ARD Remaining Date Date Maturity
Control Balloon/ARD Mortgage Amortization Seasoning or Maturity Lockout DSCR LTV or ARD Date
No. Balance ($) ARD Maturity Rate (%) Term (months) (months) (months) Months (x) (%) LTV (%)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
184 823,350 12/1/13 7.82000 300 6 174 42 1.30 68.9 45.7
185 863,082 1/11/09 7.40000 240 5 115 43 2.25 45.5 31.7
186 1,002,248 5/1/09 8.15000 300 1 119 47 1.31 69.5 57.6
187 1,046,532 11/1/08 7.00000 360 7 113 41 1.59 69.8 61.2
188 513,065 12/1/13 7.53000 240 6 174 78 1.29 69.8 30.2
189 1,072,121 11/1/08 8.50000 360 7 113 41 1.25 73.8 67.0
190 1,022,262 11/1/08 7.75000 360 7 113 41 1.38 72.2 64.5
191 958,070 1/1/09 8.38000 300 5 115 43 1.40 65.4 54.7
192 984,557 12/1/05 8.15000 300 6 78 42 1.58 60.8 54.7
193 840,969 3/1/09 7.82000 300 3 117 45 1.29 70.5 58.0
194 NAP 12/1/12 6.50000 168 6 162 42 NAP NAP NAP
195 766,743 4/11/09 8.35000 360 2 118 46 1.49 73.8 66.7
196 708,927 4/11/09 8.40000 300 2 118 46 1.25 74.8 62.5
197 706,096 3/1/09 8.25000 300 3 117 45 1.28 62.8 52.3
198 659,297 12/11/08 12/11/23 7.99000 300 6 114 42 1.52 43.6 36.1
</TABLE>
*Refer to the sheet "Step" in the file named LB99C1.XLS contained in the back
cover of the Prospectus Supplement for detailed information on Monthly Payments
for the Mortgage Loan
<PAGE>
Annex A-3- 1
Lehman Brothers Commercial Mortgage Trust 99 -C1
Reserve Account (All Mortgage Loans)
<TABLE>
<CAPTION>
Initial
Deposit
Capital
Control Improvement
No. Property Name Property Type Account ($)
========================================================================================================================
<S> <C> <C> <C>
1 Century City Retail - Regional Mall -
2 Starwood Financial Hotel - Full Service -
3 EAB Plaza Office -
4 Woodland Hills Mall Retail - Super Regional Mall -
5 Penn Square Mall Retail - Super Regional Mall -
6 Grand Central Mall Retail - Regional Mall 225,000
7 Crossroads Mall Retail - Regional Mall -
8 Natomas Corporate Center Office -
9 Carmel Plaza Retail - Anchored -
10 Boston Design Center Office 2,400,000
11 Corporetum Office Campus Office -
12 Tropicana Centre Retail - Anchored 13,875
13 Hickory Point Mall Retail - Anchored -
14 Pacific Park Plaza Office 750,000
15 Arden Office 44,481
16 Westland Promenade Retail - Anchored 3,750
17 Forest Plaza Retail - Anchored -
18 Wal-Mart (Loan Level) Retail - Anchored 56,155
19 Trujillo Alto Shopping Center Retail - Anchored 1,875
20 Casa Del Monte Multi-Family - Manufactured Housing 2,188
21 Grand Traverse Crossing Retail - Anchored -
22 607 South Hill Street Retail - Unanchored -
23 Denton Center Shopping Center Retail - Anchored 271,113
24 Pleasure Cove and Plantation Manor Multi-Family - Manufactured Housing -
25 175 Pinelawn Road Office -
26 Westheimer Park/ Terrace Apartments Multi-Family - Conventional 16,856
27 Toll House Hotel Hotel - Full Service -
28 San Felipe Court Apartments Multi-Family - Conventional 307,500
29 Tides/Kent Hotel Package Hotel - Full Service 78,063
30 Hickory Hills- MHP Multi-Family - Manufactured Housing 9,375
31 Indian Springs Apartments Multi-Family - Conventional -
32 Cypress Parke Apartments Multi-Family - Conventional 1,125
33 Conyers Plaza Retail - Anchored 1,250
34 Best Western Rochester Hotel - Full Service 68,342
35 Sierra Vista Apartments Multi-Family - Conventional 114,219
36 Woodholme Center Office Building Office -
37 Holiday Inn Express - Birmingham Hotel - Limited Service 753,021
38 Steger Towne Crossing I Retail - Anchored -
39 Birnam Wood Apartments Multi-Family - Conventional 228,209
40 Glasshouse Square Shopping Center Retail - Anchored 26,344
41 Twinsburg Town Center Retail - Anchored 17,000
42 Post Oak Apartments Multi-Family - Conventional 19,938
43 Tierra Verde Plaza Retail - Anchored -
44 LBJ Oates/Summit Shopping Center Retail - Anchored 31,729
45 Normandy Square Apartments Multi-Family - Conventional 7,406
46 Carrier Town Crossing Retail - Anchored -
47 Camelot Arms Apartments Multi-Family - Conventional 25,250
48 Gaitherstowne Plaza Retail - Unanchored 32,500
49 Eastgate Plaza Shopping Center Retail - Unanchored 11,312
50 Canfield Business Park Industrial -
51 Hampton Woods Apartments Multi-Family - Conventional 26,781
52 Kohl's Shopping Center Retail - Anchored -
53 Industrial Bldg 1-24 Industrial 1,512
54 Hancock Plaza Office 36,563
55 Washington Place Shopping Center Retail - Anchored 2,031
56 9797 S. Frontage Rd. Multi-Family - Manufactured Housing -
57 Courtyard Plaza Shopping Center Retail - Unanchored 22,500
58 Owens - Crenshaw Industrial -
59 Best Western Truckee Hotel - Full Service 3,375
60 Owens-Tracy Industrial 3,312
61 SecureCare Portfolio Self-Storage 290,875
62 Fidelity Office Building Office 5,250
63 Village at Loch Katrine Apartments Multi-Family - Conventional 3,750
64 Terra Vista Business Park - Loan Level Mixed Use 2,675
65 The Hills Apartments Multi-Family - Conventional 500,000
66 Bed Bath & Beyond/ Babies 'R Us Retail - Anchored -
67 Vineyard Apartments Multi-Family - Conventional 151,716
68 Atelier District Office Office 93,019
<CAPTION>
Annual
Deposit to Annual Current
Replacement Deposit to Balance As of Date
Control Reserve TILC TILC Reserve
No. Account ($) Account ($) Account ($) Accounts
====================================================================
<S> <C> <C> <C> <C>
1 - - - 5/6/99
2 - - - 3/1/99
3 200,000 900,000 150,000 3/1/99
4 - - - 5/5/99
5 - - - 2/25/99
6 180,000 550,000 341,667 5/5/99
7 - - - 5/6/99
8 57,000 - - 5/5/99
9 17,282 - - 4/30/99
10 81,778 380,000 760,000 4/27/99
11 32,004 - - 5/5/99
12 85,188 85,188 371,298 4/27/99
13 59,616 159,040 - 5/5/99
14 38,081 250,000 20,833 4/27/99
15 625,000 - - 5/3/99
16 79,962 94,572 - 4/30/99
17 16,516 62,821 250,000 4/27/99
18 - - - 4/11/99
19 30,828 60,000 25,000 4/27/99
20 1,290 - - 4/27/99
21 11,306 - - 4/30/99
22 20,423 125,441 10,453 4/27/99
23 89,089 111,057 223,534 4/29/99
24 - - - 4/11/99
25 19,361 200,000 150,986 5/5/99
26 108,020 - - 4/27/99
27 215,892 - - 4/27/99
28 82,620 - - 4/27/99
29 327,523 - - 4/27/99
30 17,600 - - 4/27/99
31 142,000 - - 4/27/99
32 77,280 - - 4/27/99
33 11,970 11,970 997 4/27/99
34 - - - 5/5/99
35 28,876 - - 5/5/99
36 10,921 100,000 8,333 4/27/99
37 - - - 4/11/99
38 8,271 38,352 45,261 4/30/99
39 67,400 - - 4/27/99
40 24,010 100,000 41,667 4/30/99
41 11,317 2,150 5,803 4/29/99
42 66,576 - - 4/27/99
43 8,490 30,000 30,562 5/5/99
44 31,219 42,682 85,914 4/29/99
45 71,882 - - 4/27/99
46 6,840 20,400 11,900 4/27/99
47 66,252 - - 4/27/99
48 10,719 18,000 1,500 4/27/99
49 11,179 49,783 4,149 4/27/99
50 13,944 40,008 20,004 4/27/99
51 62,248 - - 4/27/99
52 17,699 8,963 - 5/5/99
53 13,356 40,080 3,340 4/27/99
54 18,828 98,990 8,249 4/27/99
55 14,543 25,200 - 5/5/99
56 - - - 4/11/99
57 43,368 92,433 300,000 4/27/99
58 26,472 33,099 2,758 4/27/99
59 96,996 - - 4/27/99
60 27,392 34,240 2,853 4/27/99
61 42,864 - - 5/5/99
62 35,212 30,484 12,702 4/27/99
63 43,200 - - 4/29/99
64 23,506 - - 4/27/99
65 52,800 - - 4/30/99
66 11,073 18,455 3,076 4/27/99
67 42,400 - - 4/27/99
68 37,191 70,942 17,735 4/27/99
</TABLE>
<PAGE>
Annex A-3- 2
<TABLE>
<CAPTION>
Initial
Deposit
Capital
Control Improvement
No. Property Name Property Type Account ($)
========================================================================================================================
<S> <C> <C> <C>
69 Equitable Federal Building Office 10,944
70 Kmart - San Diego CTL -
71 Bed, Bath & Beyond CTL -
72 Owens-Volney Industrial 12,875
73 Ridgegate Apartments Multi-Family - Conventional 604,836
74 Depot Plaza Retail - Anchored 3,413
75 Hampton Inn - Virginia Beach Hotel - Limited Service -
76 Sportmart Plaza Retail - Anchored 8,562
77 University Plaza Shopping Center Retail - Unanchored 250
78 Lincoln Way East Shopping Center Retail - Unanchored 1,000
79 600 Blair Road Industrial 11,063
80 Madison Woods Apartments Multi-Family - Conventional 21,488
81 French Mountain Commons Outlet Center Retail - Anchored 875
82 Anacota Plaza Mixed Use -
83 357-363 West Erie Office 9,562
84 Orange Tree Plaza Retail - Unanchored 14,000
85 San Marin Shopping Center Retail - Anchored 5,300
86 Magnolia Station Apartments Multi-Family - Conventional 18,750
87 Piqua Plaza Shopping Center Retail - Anchored 33,625
88 Sagetree Village (Farris Prop Level) Multi-Family - Manufactured Housing -
89 Beverly Center Office -
90 Walgreen - Riverview CTL -
91 Parker Street Industrial Industrial -
92 Winn Dixie CTL -
93 Hampton Inn - Chesapeake Hotel - Limited Service -
94 Branford Commerce Center Industrial 36,625
95 3 Roads Shopping Center Retail - Anchored 26,894
96 Office Depot Building Retail - Anchored 18,461
97 Glendale Shopping Center Retail - Anchored -
98 Five Points Plaza Retail - Anchored 1,844
99 Eckerd - Baton Rouge CTL -
100 Cascade Park Apartments Multi-Family - Conventional 22,750
101 Kmart - Cincinnati CTL -
102 Blue Garden Apartments Multi-Family - Conventional 67,863
103 Regency Square Retail - Unanchored -
104 Executive Quarters Office Building Office 31,725
105 Eckerd - Arlington CTL -
106 Pfizer Building Office 22,385
107 Eckerd - Shreveport CTL -
108 Washington Shores Plaza Retail - Anchored -
109 Market Place Shopping Center Retail - Anchored 10,563
110 Wal-Mart Plaza Retail - Anchored -
111 Bullfrog Shopping Center Retail - Anchored 19,500
112 Royal Orleans Apartments Multi-Family - Conventional 35,750
113 Pondview Plaza Retail - Unanchored -
114 Eckerd - Waxahachie CTL -
115 1200 Route 9 Retail - Anchored 2,176
116 Delchamps Plaza Retail - Anchored 3,875
117 Steger Towne Crossing II Retail - Anchored -
118 Liberty Plaza Mall Retail - Anchored 15,875
119 Spalding Centre Shopping Center Retail - Unanchored 4,375
120 Autumnwood Multi-Family - Conventional 26,168
121 Camelot Manufactured Housing Community Multi-Family - Manufactured Housing 11,671
122 Marshall Mall Retail - Anchored 1,837
123 Metro Center Office 15,563
124 Owens - Midway Industrial 10,312
125 URS Building Office 30,625
126 Brendonwood Park Apartments Multi-Family - Conventional 24,331
127 Town and Country Shopping Center Retail - Unanchored 45,188
128 Woodlake Professional Building Office 13,750
129 Castleton Shoppes Shopping Center Retail - Unanchored 4,850
130 Corn Exchange Building Office 1,688
131 Rite Aid - Waterford CTL -
132 Mountain Springs Mobile Home Estates (Farris Prop Level) Multi-Family - Manufactured Housing -
133 Forest Grove Multi-Family - Conventional 74,250
134 Park Forest Shopping Center Retail - Anchored 6,000
135 Hampton Hills Apartments Multi-Family - Conventional 76,225
136 Wynforest Apartments Multi-Family - Conventional 1,250
137 855 Plaza Office 2,188
138 Thorndale Business Park Office 23,219
139 Mini Masters Storage Facility Self-Storage -
<CAPTION>
Annual
Deposit to Annual Current
Replacement Deposit to Balance As of Date
Control Reserve TILC TILC Reserve
No. Account ($) Account ($) Account ($) Accounts
====================================================================
<S> <C> <C> <C> <C>
69 14,443 39,008 95,712 4/27/99
70 - - - 4/27/99
71 - - - 4/16/99
72 18,261 22,827 24,729 4/27/99
73 47,250 - - 5/5/99
74 29,772 38,532 6,422 4/27/99
75 74,824 - - 4/27/99
76 12,607 35,300 2,942 4/27/99
77 11,431 30,000 - 5/5/99
78 15,360 73,726 12,295 5/5/99
79 16,332 18,300 1,525 4/27/99
80 24,824 - - 4/27/99
81 6,873 - - 4/27/99
82 6,982 12,500 - 4/27/99
83 22,210 71,296 17,846 4/27/99
84 12,460 42,586 3,549 4/27/99
85 10,572 18,000 1,500 4/27/99
86 16,320 - - 4/27/99
87 20,345 19,492 3,249 4/27/99
88 - - - 4/11/99
89 4,452 21,576 12,665 5/5/99
90 2,781 - - 4/27/99
91 3,804 32,376 18,886 4/27/99
92 - - - 4/16/99
93 70,673 - - 4/27/99
94 18,017 17,095 2,850 4/29/99
95 24,687 28,802 7,210 4/27/99
96 11,989 20,000 115,221 5/5/99
97 12,176 20,000 1,667 4/27/99
98 10,836 33,060 16,530 4/27/99
99 - - - 4/27/99
100 33,000 - - 4/27/99
101 - - - 4/27/99
102 - - - 4/11/99
103 8,866 35,451 4,468 4/29/99
104 12,396 66,912 22,722 4/27/99
105 - - - 4/27/99
106 4,600 50,000 2,000,000 5/5/99
107 - - - 4/27/99
108 7,014 6,250 1,563 4/27/99
109 11,437 - - 4/27/99
110 - - - 4/11/99
111 14,580 8,496 2,128 5/5/99
112 33,714 - - 5/5/99
113 4,500 10,000 10,001 4/29/99
114 - - - 4/27/99
115 4,059 21,858 3,643 4/27/99
116 14,184 14,700 3,682 5/5/99
117 2,556 7,680 640 4/30/99
118 16,896 24,525 12,285 4/27/99
119 10,980 10,425 7,871 5/5/99
120 42,000 - - 4/27/99
121 - - - 4/11/99
122 30,732 75,000 130,118 5/5/99
123 11,477 30,000 42,500 4/27/99
124 14,061 17,577 1,465 4/27/99
125 13,141 39,424 16,453 4/27/99
126 42,201 - - 4/27/99
127 14,587 30,146 17,585 4/27/99
128 6,543 - - 4/27/99
129 5,072 28,000 - 5/5/99
130 7,255 33,092 11,056 5/5/99
131 2,683 - - 4/27/99
132 - - - 4/11/99
133 30,756 - - 4/27/99
134 13,560 10,200 2,555 5/5/99
135 36,120 - - 5/5/99
136 16,100 - - 4/27/99
137 5,231 28,065 11,732 5/5/99
138 12,653 32,000 10,692 5/5/99
139 8,832 - - 3/12/98
</TABLE>
<PAGE>
Annex A-3- 3
<TABLE>
<CAPTION>
Initial
Deposit
Capital
Control Improvement
No. Property Name Property Type Account ($)
========================================================================================================================
<S> <C> <C> <C>
140 Kmart Plaza - Bellflower Retail - Anchored 65,400
141 Eckerd - Rotterdam CTL -
142 Owens - Lakeland Industrial 4,875
143 Greengate East Shopping Center Retail - Anchored 2,187
144 Greenwich Court Retail - Unanchored -
145 849 Delaware Avenue Multi-Family - Conventional 62,369
146 Willow Wood Apartments Multi-Family - Conventional 8,595
147 Walgreens - South Elgin Retail - Anchored -
148 Center Hill Business Park Industrial 6,125
149 Yarbrough Office Park Office -
150 Riverview Commons MHC Multi-Family - Manufactured Housing -
151 Office Max - Grand Forks Retail - Anchored -
152 Trinity Business Plaza Industrial 4,400
153 5575 E. Winnemucca Blvd. Multi-Family - Manufactured Housing 3,219
154 Adirondack Industrial Park Industrial 2,813
155 180 West Washington Office -
156 Santiago Creek MHP Multi-Family - Manufactured Housing -
157 Burke Commons Center Retail - Unanchored 3,500
158 Countryside Estates Manufactured Home Park Multi-Family - Manufactured Housing 6,219
159 CVS - Statesville CTL -
160 Office Max - Minot Retail - Anchored -
161 CVS - Mooresville CTL -
162 Riverdale Commons Retail - Unanchored -
163 Quail Valley Shopping Center Retail - Anchored 8,038
164 Southern Pavilion Mini Storage Self-Storage 2,327
165 Hampton Place Shopping Center Retail - Anchored 9,656
166 CVS - Port Royal CTL -
167 Commons at Kings Crossing Retail - Unanchored 1,563
168 Primrose Business Complex Industrial -
169 Southlake Shopping Center Retail - Unanchored -
170 Sylmar Mobile Home Park Multi-Family - Manufactured Housing 130,695
171 Central Self Storage - Vallejo Self-Storage -
172 Washington Plaza Shopping Center Retail - Anchored 7,580
173 Michigan MHP Portfolio (Loan Level) Multi-Family - Manufactured Housing 162,376
174 CVS - Greensboro CTL -
175 Bayshore Plaza Mixed Use -
176 CVS - Newton CTL -
177 CVS - Bessemer City CTL -
178 Rite Aid - Sterling Heights CTL -
179 Twin Lakes Mobile Home Estates Multi-Family - Manufactured Housing 20,313
180 Northbrook Estates Multi-Family - Manufactured Housing 76,600
181 Northwood Village Retail - Unanchored 52,500
182 Lexington Place Apartments Multi-Family - Conventional -
183 4545 Groves Road Industrial Building Industrial 7,875
184 10775 Applewood Drive & 3825 S. Huron Street Retail - Anchored 25,625
185 Lincoln Park Mobile Home Village Multi-Family - Manufactured Housing 17,188
186 Burke Self Storage Self-Storage -
187 Meadows Shopping Center Retail - Anchored 1,125
188 Hunter's Mill Shoppes Retail - Unanchored 12,250
189 Ashford Shopping Center Retail - Unanchored 6,250
190 Victorville Shopping Center Retail - Unanchored 1,625
191 Sun Plaza Retail - Unanchored 1,250
192 Mulberry Atrium Office -
193 Ames Plaza Retail - Anchored 750
194 Amoco CTL -
195 Shangrai-La Multi-Family - Manufactured Housing -
196 275 North Saguaro Drive Multi-Family - Manufactured Housing -
197 Aspen Office Building Office 6,875
198 Angleton Mobile Home Park Multi-Family - Manufactured Housing -
<CAPTION>
Annual
Deposit to Annual Current
Replacement Deposit to Balance As of Date
Control Reserve TILC TILC Reserve
No. Account ($) Account ($) Account ($) Accounts
======================================================================
<S> <C> <C> <C> <C>
140 18,600 13,644 4,556 4/27/99
141 2,182 - - 4/27/99
142 13,806 17,257 18,695 4/27/99
143 12,168 48,197 - 4/27/99
144 4,284 17,304 1,442 4/27/99
145 12,000 - - 5/5/99
146 27,600 - - 5/5/99
147 1,380 - - 4/27/99
148 12,996 12,000 136,250 5/5/99
149 7,427 34,908 45,341 5/5/99
150 - - - 4/11/99
151 - 4,728 1,578 4/27/99
152 16,344 37,356 3,113 5/5/99
153 - - - 4/11/99
154 13,452 23,484 5,871 4/27/99
155 6,047 54,349 13,587 4/27/99
156 - - - 4/11/99
157 5,371 17,140 4,285 4/27/99
158 - - - 4/11/99
159 2,531 - - 4/27/99
160 - 8,225 1,371 4/27/99
161 2,129 - - 4/27/99
162 1,100 3,710 309 5/5/99
163 - 51,460 8,576 4/11/99
164 - - - 4/11/99
165 6,454 9,500 792 4/27/99
166 2,734 - - 4/27/99
167 3,324 22,020 31,241 6/26/98
168 1,419 21,170 5,293 5/5/99
169 1,417 12,188 4,063 4/27/99
170 - - - 4/11/99
171 8,400 - - 4/27/99
172 13,705 20,000 8,353 4/27/99
173 - - - 4/11/99
174 2,359 - - 4/27/99
175 14,700 23,004 5,756 4/27/99
176 2,633 - - 4/27/99
177 2,430 - - 4/27/99
178 - - - 4/27/99
179 3,288 - - 4/27/99
180 - - - 4/11/99
181 5,846 15,125 3,781 4/27/99
182 7,200 - - 4/27/99
183 23,760 30,000 40,000 4/27/99
184 - - - 4/27/99
185 - - - 4/11/99
186 7,308 - - 5/5/99
187 10,950 16,305 8,179 5/5/99
188 3,603 12,000 4,000 5/5/99
189 800 - 25,000 4/27/99
190 3,444 11,268 4,714 5/5/99
191 11,818 12,000 - 4/27/99
192 5,073 25,366 211,620 5/5/99
193 12,960 7,376 1,229 4/27/99
194 - - - 4/27/99
195 - - - 4/11/99
196 - - - 4/11/99
197 3,563 9,996 1,666 4/27/99
198 - - - 4/11/99
</TABLE>
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Annex B
LB Commercial Mortgage Trust
Commercial Mortgage Pass-Through Certificates
Series 1999-C1
$1,600,000,000
(Approximate)
Offered Certificates
[GRAPHIC OMITTED]
% of Initial Pool by Cut-off Date Balance
LEHMAN BROTHERS
Merrill Lynch & Co.
Page 1 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
LB Commercial Mortgage Trust
Commercial Mortgage Pass-Through Certificates
Series 1999-C1
-------------------------------------
Class A-1 Class X
-------------------------------------
Class A-2
-------------------------------------
Class B
-------------------------------------
Class C
-------------------------------------
Class D
-------------------------------------
Class E
-------------------------------------
Class F
-------------------------------------
Class G
-------------------------------------
Class H
-------------------------------------
Class J
-------------------------------------
Class K
-------------------------------------
Class L
-------------------------------------
Class M
-------------------------------------
================================================================================
Avg
Original Life(2) Principal Legal
Class Face ($) Rating(1) Description Coupon (years) Window(2) Status
- --------------------------------------------------------------------------------
A-1 Aaa/AAA Fixed Public
- --------------------------------------------------------------------------------
A-2 Aaa/AAA Fixed Public
- --------------------------------------------------------------------------------
X Aaa/AAA WAC I/O (4) Public
- --------------------------------------------------------------------------------
B Aa2/AA Fixed Public
- --------------------------------------------------------------------------------
C A2/A Fixed Public
- --------------------------------------------------------------------------------
D Baa2/BBB Fixed Public
- --------------------------------------------------------------------------------
E Baa3/BBB- Fixed Public
- --------------------------------------------------------------------------------
F (5) Fixed Private 144A
- --------------------------------------------------------------------------------
G (5) Fixed Private 144A
- --------------------------------------------------------------------------------
H (5) Fixed Private 144A
- --------------------------------------------------------------------------------
J (5) Fixed Private 144A
- --------------------------------------------------------------------------------
K (5) Fixed Private 144A
- --------------------------------------------------------------------------------
L (5) Fixed Private 144A
- --------------------------------------------------------------------------------
M (5) Fixed Private 144A
- --------------------------------------------------------------------------------
Total -- -- -- -- -- --
================================================================================
(1) Anticipated ratings of Moody's and Duff & Phelps.
(2) Assuming among other things, 0% CPR, no losses and that ARD loans pay off
on their Anticipated Repayment Date.
(3) Represents notional amount on Class X.
(4) Represents average life of notional amount of Class X.
(5) Not offered hereby.
Page 2 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Certain Offering Points
o Newly Originated Collateral. The collateral consists of 198 Mortgage
Loans with a principal balance (as of the Cut-off Date) of
approximately $1.75 billion. All the Mortgage Loans were
originated by affiliates of Lehman Brothers or its approved
conduit originators.
o Call Protection. 100% of the Mortgage Loans contain call protection
provisions. As of the Cut-off Date, 99.17% of the Mortgage
Loans provide for initial lockout period. The weighted average
lockout and defeasance period for all loans is 117 months. The
Mortgage Loans are generally prepayable without penalty
between zero to three months from Mortgage Loan maturity or
Anticipated Repayment Date ("ARD"), with a weighted average
open period of 1 month.
o Weighted average lock-out and treasury defeasance of 9.75 years.
o No loan delinquent 30 days or more as of the Cut-off Date.
o $8,822,698 average loan balance as of the Cut-off Date.
o 1.53x Weighted Average Debt Service Coverage Ratio ("DSCR") as of
the Cut-off Date.(1)
o 62.7% Weighted Average Loan to Value ("LTV") as of the Cut-off
Date.(1)
54.3% Weighted Average Loan to Value ("LTV") at Balloon.
o Property Type Diversification. 47.9% Retail (40.5% Anchored,
19.7% Super Regional Mall, 30.8% Regional Mall, and 9.0%
Unanchored), 20.4% Office, 12.4% Multifamily, 11.9% Hotel,
3.2% Industrial/Warehouse, 2.9% Credit Tenant Lease ("CTL"),
0.7% Self Storage, 0.6% Other.
o Geographic Distribution. The properties are distributed throughout
38 states, Washington D.C. (0.2%) and Puerto Rico (0.9%).
California (22.9%); New York (11.4%); Oklahoma (10.4%); Texas
(7.1%); Michigan (5.9%); Florida (5.2%), all other states less
than 5% each.
o Monthly Investor Reporting. Updated collateral summary information
will be part of the monthly remittance report in addition to
detailed P&I payment and delinquency information. Quarterly
NOI and Occupancy information to the extent delivered by
borrowers, will be available to Certificate- holders.
o Cash Flows will be Modeled on BLOOMBERG.
(Except as otherwise indicated, percentages (%) represent the principal amount
of loan or loans as of the Cut-off Date (as to each loan the "Cut-off Date
Balance") compared to aggregate pool balance as of the Cut-off Date (the
"Initial Pool Balance"); weighted averages are weighted using Cut-off Date
Balance; loans with properties in multiple states have been allocated to certain
states based upon "allocated loan amounts" or appraisal amount if the loan did
not have allocated loan amounts.)
(1) Weighted Averages for Cut-off Date LTV and DSC Ratio do not include Credit
Tenant Lease Loans.
Page 3 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Priority and Timing of Cash Flows*
[Intentionally Left Blank]
Assuming 0% Cpr and No Losses
Rating Agencies: Moody's Investor Services, Inc. and Duff & Phelps Credit
Rating Co.
Trustee: Norwest Minnesota Bank, National Association
Master Servicer: First Union National Bank
Special Servicer: GMAC Commercial Mortgage Corporation
Co-manager: Merrill Lynch
Closing Date: On or about June 10, 1999.
Cut-off Date: June 1, 1999 (or for loans with due dates other than the
first, their due date).
ERISA: Classes A-1, A-2, and X are expected to be eligible for
Lehman's individual prohibited transaction exemption.
SMMEA: Classes A-1, A-2, B and X are "mortgage related
securities" for purposes of SMMEA.
Payment: Pays on 15th of each month or, if such date is not a
business day, then the following business day,
commencing July 15, 1999.
Class X: The Class X is comprised of multiple components, one
relating to each class of Principal Balance
Certificates.
Optional Call: 1% Clean-up Call.
Mortgage Loans: The mortgage loans were originated by an affiliate of
Lehman Brothers, or its approved conduit originators. As
of the Cut-off Date, the Mortgage Loans have a weighted
average coupon ("WAC") of 7.477% and a remaining
weighted average maturity ("WAM") of 117 months
(assuming that the ARD loans mature on their ARD date).
See the Collateral Overview Tables at the end of this
memo for more Mortgage Loan details.
Credit Enhancement: Credit enhancement for each class of Certificates will
be provided by the classes of Certificates which are
subordinate in priority with respect to payments of
interest and principal.
Page 4 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Distributions: Principal and interest payments will generally be made
to Certificateholders in the following order:
1) Interest to the A Classes and X Class pro rata,
2) Principal to the A-1 Class until all Class A-1
Certificates are retired,
3) After the A-1 Class is retired Principal to the
Class A-2 until all Class A-2 Certificates are
retired,
4) Interest to Class B, then Principal to Class B
until such Class is retired,
5) Interest to Class C, then Principal to Class C
until such Class is retired,
6) Interest to Class D, then Principal to Class D
until such Class is retired,
7) Interest to Class E, then Principal to Class E
until such Class is retired,
8) Interest and Principal to the Private Classes,
sequentially.
*Pro rata if Classes B through M are retired.
Realized Losses: Realized Losses from any Mortgage Loan will be allocated
in reverse sequential order (i.e. Classes M, L, K, J, H,
G, F, E, D, C and B, in that order). If Classes B
through M have been retired by losses, Realized Losses
shall be applied to the then existing A Classes
pro-rata.
Appraisal
Reductions: With respect to certain specially serviced Mortgage
Loans as to which an appraisal is required; (including
any Mortgage Loan that becomes 60 days delinquent), an
Appraisal Reduction Amount may be created, generally in
the amount, if any, by which the Stated Principal
Balance of such Mortgage Loan, together with unadvanced
interest, unreimbursed P&I advances and certain other
items, exceeds 90% of the appraised value of the related
Mortgaged Property. The Appraisal Reduction Amount will
reduce proportionately the interest portion of any P&I
Advance for such loan, which reduction may result in a
shortfall of interest to the most subordinate class of
Principal Balance Certificates outstanding. The
Appraisal Reduction Amount will be reduced to zero as of
the date the related Mortgage Loan has been brought
current for twelve months, paid in full, repurchased or
otherwise liquidated, and any shortfalls borne by the
subordinate classes may be paid from amounts recovered
from the related borrower.
Minimum Denominations:
Minimum Increments
Classes Denomination Thereafter Delivery
- --------------------------------------------------------------------------------
A-1, A-2, B, C, D, and E $10,000 $1 DTC
- --------------------------------------------------------------------------------
X $250,000 $1 DTC
Page 5 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Prepayment Premiums*
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
============================================================================================================================
Prepayment
Premium 6/1/99 6/1/00 6/1/01 6/1/02 6/1/03 6/1/04 6/1/05 6/1/06 6/1/07 6/1/08 6/1/09 6/1/10
- ----------------------------------------------------------------------------------------------------------------------------
Lock-out/Def. 99.17 99.17 99.17 98.21 98.00 98.14 98.15 97.98 96.05 94.47 88.46 88.52
- ----------------------------------------------------------------------------------------------------------------------------
YM 0.83 0.83 0.83 1.79 1.79 1.86 1.85 1.45 1.44 0.95 11.54 11.48
============================================================================================================================
Sub Total: 100.0% 100.0% 100.0% 100.0% 99.79% 100.0% 100.0% 99.43% 97.49% 95.41% 100.00% 100.00%
============================================================================================================================
============================================================================================================================
5% - - - - - - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------
4% - - - - - - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------
3% - - - - - - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------
2% - - - - - - - 0.57 - - - -
- ----------------------------------------------------------------------------------------------------------------------------
1% - - - - - - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------
Open - - - - 0.21 - - - 2.51 4.59 - -
============================================================================================================================
Total: 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 99.43% 97.49% 95.41% 100.00% 100.00%
============================================================================================================================
</TABLE>
* % represents % of then outstanding balance as of the date shown utilizing
Cut-off Date balances.
Open Prepayment Period at end of Loan (i.e. Prior to Maturity Date or ARD, as
applicable):
================================================================================
Open Period at End % of Initial
Of Loan* Number of Loans Pool Balance
================================================================================
None 72 54.4%
1 Month 41 20.4%
2 Months 1 0.5%
- --------------------------------------------------------------------------------
3 Months 77 21.5%
- --------------------------------------------------------------------------------
6 Months 6 2.8%
- --------------------------------------------------------------------------------
12 Months 1 0.5%
================================================================================
Total: 198 100.00%
================================================================================
* Weighted average open period at end of loan is 1 month.
Page 6 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Credit Tenant Lease Loans:
Credit Tenant Lease Loans are secured by mortgages on properties which
are leased (each a "Credit Tenant Lease") to a tenant which
possesses (or whose parent or other affiliate which guarantees the
lease obligation possesses) the rating indicated in the following
table. Scheduled monthly rent payments under the Credit Tenant
Leases are generally sufficient to pay in full and on a timely basis
all interest and principal scheduled to be paid with respect to the
related Credit Tenant Lease Loans.
The Credit Tenant Lease Loans generally provide that the Tenant is
responsible for all costs and expenses incurred in connection with
the maintenance and operation of the related Credit Tenant Lease
property and that, in the event of a casualty or condemnation of a
material portion of the related Mortgaged Property:
(i) the Tenant is obligated to continue making payments;
(ii) the Tenant must make an offer to purchase the applicable
property subject to the Credit Tenant Lease for an
amount not less than the unpaid principal balance plus
accrued interest on the related Credit Tenant Lease
Loan; or
(iii) the Trustee on behalf of the Certificate holders will
have the benefit of certain non-cancelable credit lease
enhancement policies obtained to cover certain casualty
and/or condemnation risks.
Approximately 2.9% of the Mortgage Loans are Credit Tenant Lease Loans.
Credit Tenant Lease Loans:
================================================================================
Credit
Number of Cut-off Date Lease Credit Rating Rating
Tenant/Guarantor Loans Balance ($) Type(4) (Moody's) (S&P)
================================================================================
Eckerd (1) 5 $14,986,978 NN/NNN A3 A
- --------------------------------------------------------------------------------
CVS 6 9,927,541 NN A3 A
- --------------------------------------------------------------------------------
Kmart 2 8,375,876 NNN Ba1 BB+
- --------------------------------------------------------------------------------
Bed, Bath &
Beyond 1 4,809,593 B NR BBB-(2)
- --------------------------------------------------------------------------------
Rite Aid 2 3,927,320 NN/NNN Baa1 BBB+
- --------------------------------------------------------------------------------
Walgreen 1 3,918,245 NN Aa3 A+(2)
- --------------------------------------------------------------------------------
Winn Dixie 1 3,815,935 NNN P2(3) A2(3)
- --------------------------------------------------------------------------------
Amoco 1 972,782 NNN Aa1 AA+
================================================================================
Total: 19 $50,734,269 -- -- --
================================================================================
(1) Based upon the rating of Eckerd's parent, JC Penney Corporation, although
it has made no explicit guaranty of Eckerd's obligations.
(2) Issuer Credit Rating.
(3) Commercial paper rating.
(4) "NNN" means triple net lease; "NN" means double net lease; and "B" means
bond-type lease.
Page 7 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Reserves:
The below table relates only to conventional Conduit loans and excludes
all CTL loans as well as the loans originated by Lehman's Large Loan
Program.
================================================================================
% of Conduit Loans Current
w/Annual Escrows Balance Annual Deposit
- --------------------------------------------------------------------------------
Replacement Reserves 94.27% $3,087,467 $4,513,880
- --------------------------------------------------------------------------------
Taxes 98.56% $5,215,693 $14,612,689
- --------------------------------------------------------------------------------
Insurance 91.62% $2,090,563 $2,185,376
- --------------------------------------------------------------------------------
T1 & LC (Retail) 81.91% $1,891,707 $2,100,926
- --------------------------------------------------------------------------------
TI & LC (Office) 83.58% $3,492,432 $1,666,407
- --------------------------------------------------------------------------------
TI & LC (Industrial/Warehouse) 100.00% $287,632 $396,869
================================================================================
Cash Management: Mortgage Loans representing 95.54% of the Initial Pool Balance
employ cash management systems.
=======================================================
Mortgage Pool
-------------------------------------------------------
Hard Lockbox 27.29% of Initial Pool Balance
-------------------------------------------------------
Springing Lockbox 68.25% of Initial Pool Balance
-------------------------------------------------------
N/A 4.46% of Initial Pool Balance
=======================================================
Page 8 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Significant
Mortgage Loans: There are 5 loans with a Cut-off Date principal balance in
excess of $60 million. The following table provides a summary
of the 5 largest loans:
<TABLE>
<CAPTION>
============================================================================================================
Mortgage Property # of Cut-off Date Term to Amortization
Loan Type Properties Balance Coupon ARD Term DSCR LTV
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Century City Regional 1 $160,000,000 7.250% 120 360 1.42x 58.8%
Mall
- ------------------------------------------------------------------------------------------------------------
Starwood Hotels 17 $154,954,659 7.438% 120 262 2.12x 46.1%
Financial-
Promus Loan
EAB Plaza Office 1 $139,367,162 7.330% 120 300 1.79x 49.8%
- ------------------------------------------------------------------------------------------------------------
Woodland Super 1 $89,644,244 7.000% 120 360 1.67x 52.2%
Hills Regional Mall
- ------------------------------------------------------------------------------------------------------------
Penn Square Super 1 $74,844,822 7.025% 120 360 1.67x 55.4%
Regional Mall
============================================================================================================
Total/
Weighted Ave.: -- 21 $618,810,886 7.252% 120 322 1.74x 52.2%
============================================================================================================
</TABLE>
Century City Shopping Center and Marketplace:
================================================================================
Cut-Off Date Balance: $160,000,000
- --------------------------------------------------------------------------------
Coupon: 7.250% (anticipated)
- --------------------------------------------------------------------------------
Term/Am: 10 years/First year IO then amortization on a 30 year
schedule.
- --------------------------------------------------------------------------------
Sponsors: Urban Shopping Centers, Inc. & Eagle Investment
Management Company (advised by Lend Lease Real Estate
Investments, Inc.)
- --------------------------------------------------------------------------------
Property: 784,002 SF regional mall
- --------------------------------------------------------------------------------
Anchors: Bloomingdale's and Macy's
- --------------------------------------------------------------------------------
In-Line Sales: $588 per square foot
- --------------------------------------------------------------------------------
Cost of Occupancy: 15.2%
- --------------------------------------------------------------------------------
Location: Los Angeles, California
- --------------------------------------------------------------------------------
Value: $272 million based upon May 1999 purchase price
- --------------------------------------------------------------------------------
LTV: 58.8%
- --------------------------------------------------------------------------------
DSCR: 1.42x
- --------------------------------------------------------------------------------
Lockbox: Springing lockbox based upon the maintenance of a
minimum 1.25x DSCR
- --------------------------------------------------------------------------------
Reserves: Springing reserves based upon the maintenance of a
minimum 1.25x DSCR
================================================================================
Page 9 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Starwood Financial-Promus Loan:
================================================================================
Cut-Off Date Balance: $154,954,659
- --------------------------------------------------------------------------------
Coupon: 7.438%
- --------------------------------------------------------------------------------
Term/Am: 10 years/21 years and 10 months (co-terminous with
master lease to Promus Hotel Corporation)
- --------------------------------------------------------------------------------
Sponsor: Starwood Financial Trust
- --------------------------------------------------------------------------------
Flag: Double Tree and Red Lion
- --------------------------------------------------------------------------------
Properties: 17 full and limited service hotels with a total of 3,988
rooms master leased to Promus Hotel Corporation
(Baa2/BBB+)
- --------------------------------------------------------------------------------
Location: California, Oregon, Washington, Colorado, Utah, Idaho,
and Montana.
- --------------------------------------------------------------------------------
Appraised Value: $336.3 million
- --------------------------------------------------------------------------------
LTV: 46.1%
- --------------------------------------------------------------------------------
DSCR: 2.12x
- --------------------------------------------------------------------------------
Lockbox: Hard lockbox for master lease rent payments
================================================================================
EAB Plaza:
================================================================================
Cut-Off Date Balance: $139,367,162
- --------------------------------------------------------------------------------
Coupon: 7.330%
- --------------------------------------------------------------------------------
Term/Am: 10 years/25 year amortization schedule
- --------------------------------------------------------------------------------
Sponsors: ABN-AMRO Bank, N.V. and The DeMatteis Organization
- --------------------------------------------------------------------------------
Property: Twin tower suburban office building, 64.9% leased to ABN
AMRO Bank, N.V.
- --------------------------------------------------------------------------------
Size: 1,083,511 square feet
- --------------------------------------------------------------------------------
Location: Uniondale, New York
- --------------------------------------------------------------------------------
Appraised Value: $280 million
- --------------------------------------------------------------------------------
LTV: 49.8%
- --------------------------------------------------------------------------------
DSCR: 1.79x
- --------------------------------------------------------------------------------
Lockbox: Hard lockbox
================================================================================
Page 10 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Woodland Hills:
================================================================================
Cut-Off Date Balance: $89,644,244
- --------------------------------------------------------------------------------
Coupon: 7.000%
- --------------------------------------------------------------------------------
Term/Am: 10 years/30 years
- --------------------------------------------------------------------------------
Sponsors: Urban Shopping Centers, Inc. and J.P. Morgan Investment
Management Inc.
- --------------------------------------------------------------------------------
Anchors: Dillard's, Sears, Foley's, and JC Penney
- --------------------------------------------------------------------------------
In-Line Sales: $378 per square foot
- --------------------------------------------------------------------------------
Cost of Occupancy: 12.0%
- --------------------------------------------------------------------------------
Property: 1,093,514 square foot super-regional mall
- --------------------------------------------------------------------------------
Location: Tulsa, Oklahoma
- --------------------------------------------------------------------------------
Value: $171.6 million based upon December 1998 purchase price
- --------------------------------------------------------------------------------
LTV: 52.2%
- --------------------------------------------------------------------------------
DSCR: 1.67x
- --------------------------------------------------------------------------------
Lockbox: Springing lockbox based upon the maintenance of a
minimum 1.25x DSCR
================================================================================
Penn Square Mall:
================================================================================
Cut-Off Date Balance: $74,844,822
- --------------------------------------------------------------------------------
Coupon: 7.025%
- --------------------------------------------------------------------------------
Term/Am: 10 years/30 years
- --------------------------------------------------------------------------------
Sponsor: Urban Shopping Centers, Inc.
- --------------------------------------------------------------------------------
Anchors: Dillard's, Foley's, JC Penney and Montgomery Ward
- --------------------------------------------------------------------------------
In-Line Sales: $398 per square foot
- --------------------------------------------------------------------------------
Cost of Occupancy: 10.2%
- --------------------------------------------------------------------------------
Property: 1,074,994 super-regional mall
- --------------------------------------------------------------------------------
Location: Oklahoma City, Oklahoma
- --------------------------------------------------------------------------------
Appraised Value: $135 million
- --------------------------------------------------------------------------------
LTV: 55.4%
- --------------------------------------------------------------------------------
DSCR: 1.67x
- --------------------------------------------------------------------------------
Lockbox Springing lockbox based upon the maintenance of a
minimum 1.25x DSCR
================================================================================
Page 11 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Anticipated Repayment Date Loans:
Mortgage Loans representing 43.01% of the Initial Pool
Balance provided that if the unamortized principal
amount thereof is not repaid on a date (the "Anticipated
Repayment Date") set forth in the related Mortgage Note,
the Mortgage Loan will accrue additional interest at the
rate set forth therein and the borrower will be required
to apply excess monthly cash flow generated by the
Mortgaged Property (as determined in the related
Mortgage) to the repayment of principal outstanding on
the Mortgage Loan. With respect to such Mortgage Loans,
no Prepayment Premiums or Yield Maintenance Charges will
be due in connection with any principal prepayment on or
after the Anticipated Repayment Date. For purposes of
analysis and presentation, such loans are assumed to pay
off at the ARD and are treated like balloon loans that
mature on the ARD.
Detailed Monthly Investor Reporting:
Updated collateral summary information will be a part of
the monthly remittance report in addition to detailed
P&I payment and delinquency information. Quarterly NOI
and Occupancy data, to the extent delivered by the
borrowers, will be available to Certificate holders
through the Trustee. The following is a list of all the
reports that will be available to Certificate holders:
Name of Report Description (information provided)
- --------------------------------------------------------------------------------
1 Remittance Report Principal and interest distributions, principal balances
- --------------------------------------------------------------------------------
2 Mortgage Loan
Status Report Portfolio stratifications
- --------------------------------------------------------------------------------
3 Comparative
Financial
Status Report Revenue, NOI, DSCR to the extent available
- --------------------------------------------------------------------------------
4 Delinquent Loan
Status Report Listing of delinquent mortgage loans
- --------------------------------------------------------------------------------
5 Historical Loan
Modification Report Information on modified mortgage loans
- --------------------------------------------------------------------------------
6 Historical Loss
Estimate Report Liquidation proceeds, expenses, and realized losses
- --------------------------------------------------------------------------------
7 REO Status Report NOI and value of REO
- --------------------------------------------------------------------------------
8 Watch List Listing of loans in jeopardy of becoming Specially
Serviced
- --------------------------------------------------------------------------------
9 Loan Payoff Listing of loans where borrower has
Notification Report requested a pay-off statement
Advancing: The Master Servicer will be obligated to make advances
of scheduled principal and interest payments
(excluding balloon payments and subject to
reduction for Appraisal Reduction Amounts) and
certain servicing expenses ("Advances"), to the
extent that such Advances are deemed to be
recoverable out of collections on the related
loan. If the Master Servicer fails to make a
required Advance, the Trustee will be obligated
to make such advances.
Controlling Class: A majority of Certificate holders of the Controlling
Class, which will generally be the most
subordinate class with a Certificate Balance
outstanding that is at least 25% of the initial
Certificate Balance of such Class will, subject
to certain limitations, be entitled to replace
the Special Servicer.
Page 12 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Special Servicer The Pooling and Servicing Agreement will generally
Flexibility: permit the Special Servicer to modify, waive or amend
any term of any Mortgage Loan if (a) it determines, in
accordance with the servicing standard, that it is
appropriate to do so and (b) among other things, such
modification, waiver or amendment will not, subject to
certain exceptions:
(i) affect the amount or timing of any scheduled
payments of principal, interest or other amount
(including Prepayment Premiums and Yield
Maintenance Charges) payable under the Mortgage
Loan;
(ii) affect the obligation of the related borrower to
pay a Prepayment Premium or Yield Maintenance
Charge or permit a principal prepayment during the
applicable Lockout Period;
(iii) except as expressly provided by the related
Mortgage or in connection with a material adverse
environmental condition at the related Mortgaged
Property, result in a release of the lien of the
related Mortgage on any material portion of such
Mortgaged Property without a corresponding
principal prepayment, or;
(iv) in the judgment of the Special Servicer,
materially impair the security for the Mortgage
Loan or reduce the likelihood of timely payment of
amounts due thereon.
Page 13 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
General Characteristics Property Types
========================================== ===============================
% of Initial
Property Pool
Characteristics Types Balance
========================================== ===============================
Initial Pool Balance $1,746,894,129 Retail 47.87%
- ------------------------------------------ -------------------------------
Number of Loans 198 Office 20.38%
- ------------------------------------------ -------------------------------
Gross WAC 7.477% Multifamily* 12.43%
- ------------------------------------------ -------------------------------
Original WAM 120 months Hotel 11.91%
- ------------------------------------------ -------------------------------
Remaining WAM 117 months Industrial/Warehouse 3.16%
- ------------------------------------------ -------------------------------
Avg. Loan Balance $8,822,698 CTL 2.90%
- ------------------------------------------ -------------------------------
WA DSCR* 1.53x Self Storage 0.72%
- ------------------------------------------ -------------------------------
WA Cut-off Date LTV Ratio* 62.68% Other 0.62%
- ------------------------------------------ -------------------------------
Balloon or ARD Loans 98.29% Total: 100.00%
========================================== ===============================
* Excludes CTL loans * Includes Manufactured Housing
<TABLE>
<CAPTION>
DEAL SUMMARY BY PROPERTY TYPE
==============================================================================================================================
% of Average
Aggregate Initial Cut-off Gross Rem. WA WA
# of Cut-off Date Pool Date WAC WAC LTV WA Occupancy Balloon
Property Type Loans Balance ($) Balance Balance ($) (%) (mos) Ratio(1) DSCR(1) Rate(%)(2) %
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Retail 76 $836,321,363 47.9% $11,004,228 7.452% 120 64.24% 1.45x 95.14% 99.66%
- ------------------------------------------------------------------------------------------------------------------------------
Anchored 49 $339,026,051 19. 4% $6,918,899 7.688% 121 70.97% 1.35x 93.91% 100.00%
- ------------------------------------------------------------------------------------------------------------------------------
Regional Mall 3 $257,332,103 14.7% $85,777,368 7.262% 119 61.37% 1.48x 95.50% 100.00%
- ------------------------------------------------------------------------------------------------------------------------------
Super Regn'l
Mall 2 $164,489,065 9.4% $82,244,533 7.011% 116 53.70% 1.67x 97.65% 100.00%
- ------------------------------------------------------------------------------------------------------------------------------
Unanchored 22 $75,474,144 4.3% $3,430,643 8.000% 122 66.80% 1.35x 93.98% 96.27%
- ------------------------------------------------------------------------------------------------------------------------------
Office 26 $355,935,220 20.4% $13,689,816 7.384% 115 56.22% 1.68x 94.32% 100.00%
- ------------------------------------------------------------------------------------------------------------------------------
Multifamily 46 $217,178,025 12.4% $4,721,261 7.454% 95 76.19% 1.29x 92.12% 100.00%
- ------------------------------------------------------------------------------------------------------------------------------
Manuf'd
Housing 19 $71,829,221 4.1% $3,780,485 7.430% 90 73.16% 1.33x 88.89% 100.00%
- ------------------------------------------------------------------------------------------------------------------------------
Conventional 27 $145,348,804 8.3% $5,383,289 7.466% 97 77.68% 1.27x 93.72% 100.00%
- ------------------------------------------------------------------------------------------------------------------------------
Hotel 8 $208,108,820 11.9% $26,013,602 7.721% 114 51.06% 1.94x NAP 100.00%
- ------------------------------------------------------------------------------------------------------------------------------
Full Service 5 $191,379,564 11.0% $38,275,913 7.670% 115 49.49% 1.98x NAP 100.00%
- ------------------------------------------------------------------------------------------------------------------------------
Limited
Service 3 $16,729,255 1.0% $5,576,418 8.313% 107 69.02% 1.49x NAP 100.00%
- ------------------------------------------------------------------------------------------------------------------------------
Industrial/W'hse 15 $55,199,415 3.2% $3,679,961 7.797% 88 70.99% 1.31x 98.09% 100.00%
- ------------------------------------------------------------------------------------------------------------------------------
CTL 19 $50,734,269 2.9% $2,670,225 7.103% 233 NAP NAP 100.00% 46.74%
- ------------------------------------------------------------------------------------------------------------------------------
Self Storage 5 $12,546,042 0.7% $2,509,208 7.754% 86 67.62% 1.39x 83.66% 100.00%
- ------------------------------------------------------------------------------------------------------------------------------
Other(3) 3 $10,870,976 0.6% $3,623,659 7.946% 116 57.99% 1.44x 94.85% 100.00%
==============================================================================================================================
Total / Avg /
Wtd.Avg: 198 $1,746,894,12 100.0% $8,822,698 7.477% 117 62.68% 1.53x 94.70% 98.29%
==============================================================================================================================
</TABLE>
(1) Excludes credit tenant lease loans.
(2) Excludes hotels.
(3) Includes Office/Industrial, Office/Retail, and Mixed Use
Page 14 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Loan Size Distribution
=================================================================
Cut-off Date Balance Ranges # of % of Initial
($) Loans Pool Balance
=================================================================
0.01-2,000,000 47 3.98%
- -----------------------------------------------------------------
2,000,001-4,000,000 66 10.99%
- -----------------------------------------------------------------
4,000,001-6,000,000 30 8.40%
- -----------------------------------------------------------------
6,000,001-8,000,000 14 5.66%
- -----------------------------------------------------------------
8,000,001-10,000,000 11 5.48%
- -----------------------------------------------------------------
10,000,001-12,000,000 5 3.13%
- -----------------------------------------------------------------
12,000,001-14,000,000 4 2.94%
- -----------------------------------------------------------------
14,000,001-16,000,000 3 2.64%
- -----------------------------------------------------------------
16,000,001-18,000,000 1 1.01%
- -----------------------------------------------------------------
18,000,001-20,000,000 1 1.10%
- -----------------------------------------------------------------
20,000,001-22,000,000 1 1.23%
- -----------------------------------------------------------------
22,000,001-24,000,000 2 2.62%
- -----------------------------------------------------------------
24,000,001-26,000,000 3 4.33%
- -----------------------------------------------------------------
28,000,001-30,000,000 2 3.32%
- -----------------------------------------------------------------
36,000,001-38,000,000 1 2.17%
- -----------------------------------------------------------------
44,000,001-46,000,000 1 2.58%
- -----------------------------------------------------------------
52,000,001-54,000,000 1 3.00%
- -----------------------------------------------------------------
74,000,001-76,000,000 1 4.28%
- -----------------------------------------------------------------
88,000,001-90,000,000 1 5.13%
- -----------------------------------------------------------------
138,000,001-140,000,000 1 7.98%
- -----------------------------------------------------------------
154,000,001-156,000,000 1 8.87%
- -----------------------------------------------------------------
158,000,001-160,000,000 1 9.16%
=================================================================
Total: 198 100.00%
=================================================================
Min.: $795,220
Max.: $160,000,000
Avg.: $8,822,698
Gross Rate Distribution
===================================
Gross Rate Ranges % of Initial
Balance Pool Balance
===================================
6.251-6.500 0.06%
- -----------------------------------
6.501-6.750 1.51%
- -----------------------------------
6.751-7.000 7.56%
- -----------------------------------
7.001-7.250 25.60%
- -----------------------------------
7.251-7.500 32.23%
- -----------------------------------
7.501-7.750 10.55%
- -----------------------------------
7.751-8.000 11.16%
- -----------------------------------
8.001-8.250 6.71%
- -----------------------------------
8.251-8.500 1.03%
- -----------------------------------
8.501-8.750 2.70%
- -----------------------------------
8.751-9.000 0.77%
- -----------------------------------
9.001-9.250 0.11%
===================================
Total: 100.00%
===================================
Min.: 6.500%
Max.: 9.085%
Wtd. Avg.: 7.477%
Page 15 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Remaining Term to Maturity (1)
==============================
% of Initial
Months Pool Balance
==============================
49-60 3.95%
- ------------------------------
61-72 0.29%
- ------------------------------
73-84 8.10%
- ------------------------------
97-108 4.55%
- ------------------------------
109-120 75.90%
- ------------------------------
157-168 2.07%
- ------------------------------
169-180 1.77%
- ------------------------------
205-216 0.08%
- ------------------------------
217-228 0.44%
- ------------------------------
229-240 2.40%
- ------------------------------
241-252 0.28%
- ------------------------------
289-300 0.16%
==============================
Total: 100.00%
==============================
(1) Assumes ARD Loans payoff on their Anticipated Repayment Date
Min.: 50
Max.: 289
Wtd. Avg.: 117
Remaining Amortization Term(1)
==============================
% of Initial
Months Pool Balance
==============================
157-168 0.06%
- ------------------------------
169-180 0.48%
- ------------------------------
205-216 0.08%
- ------------------------------
217-228 0.09%
- ------------------------------
229-240 1.16%
- ------------------------------
253-264 9.75%
- ------------------------------
265-276 1.14%
- ------------------------------
289-300 17.49%
- ------------------------------
313-324 0.94%
- ------------------------------
325-336 1.66%
- ------------------------------
337-348 3.91%
- ------------------------------
349-360 63.25%
==============================
Total: 100.00%
==============================
(1) Assumes ARD Loans payoff on their Anticipated Repayment Date
Min.: 162
Max.: 360
Wtd. Avg.: 332
Debt Service Coverage Ratios (DSCR)(1)
======================================
Cut-off Date % of Initial
DSCR Ranges (x) Pool Balance
======================================
1.20-1.24 6.98%
- --------------------------------------
1.25-1.29 13.43%
- --------------------------------------
1.30-1.34 14.03%
- --------------------------------------
1.35-1.39 5.88%
- --------------------------------------
1.40-1.44 14.48%
- --------------------------------------
1.45-1.49 3.94%
- --------------------------------------
1.50-1.54 5.45%
- --------------------------------------
1.55-1.59 0.53%
- --------------------------------------
1.60-1.64 4.40%
- --------------------------------------
1.65-1.69 9.70%
- --------------------------------------
1.75-1.84 8.22%
- --------------------------------------
2.05-2.20 12.90%
- --------------------------------------
2.21-2.24 0.07%
======================================
Total: 100.00%
======================================
(1) Excludes CTL Loans
Min.: 1.20x
Max.: 2.25x
Wtd. Avg.: 1.53x
Loan To Value Ratios (LTV)(1)
==================================
Cut-Off Date % of Initial
LTV Ranges (%) Pool Balance
==================================
35.01-40.00 0.08%
- ----------------------------------
40.01-45.00 0.62%
- ----------------------------------
45.01-50.00 21.27%
- ----------------------------------
50.01-55.00 5.68%
- ----------------------------------
55.01-60.00 18.62%
- ----------------------------------
60.01-65.00 7.41%
- ----------------------------------
65.01-70.00 13.96%
- ----------------------------------
70.01-75.00 15.18%
- ----------------------------------
75.01-80.00 17.19%
==================================
Total: 100.00%
==================================
(1) Excludes CTL Loans
Min.: 38.08%
Max.: 79.90%
Wtd. Avg.: 62.68%
Page 16 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
LBCMT 1999-C1 Structural and Collateral Term Sheet (continued):
Geographic Distribution
==================================== =====================================
% of Initial % of Initial
State Pool Balance State Pool Balance
==================================== =====================================
California 22.86% Puerto Rico 0.91%
- ------------------------------------ -------------------------------------
New York 11.42% Maryland 0.89%
- ------------------------------------ -------------------------------------
Oklahoma 10.44% Oregon 0.84%
- ------------------------------------ -------------------------------------
Texas 7.09% Minnesota 0.80%
- ------------------------------------ -------------------------------------
Michigan 5.88% Tennessee 0.71%
- ------------------------------------ -------------------------------------
Florida 5.17% Louisiana 0.69%
- ------------------------------------ -------------------------------------
Illinois 4.04% Colorado 0.66%
- ------------------------------------ -------------------------------------
Washington 3.24% Connecticut 0.40%
- ------------------------------------ -------------------------------------
West Virginia 3.00% Kentucky 0.32%
- ------------------------------------ -------------------------------------
Pennsylvania 2.18% Kansas 0.24%
- ------------------------------------ -------------------------------------
Ohio 2.05% North Dakota 0.23%
- ------------------------------------ -------------------------------------
Massachusetts 2.01% Idaho 0.21%
- ------------------------------------ -------------------------------------
Indiana 1.91% Washington D.C. 0.20%
- ------------------------------------ -------------------------------------
Arizona 1.88% Mississippi 0.17%
- ------------------------------------ -------------------------------------
Utah 1.79% Vermont 0.12%
- ------------------------------------ -------------------------------------
Nevada 1.69% Alabama 0.10%
- ------------------------------------ -------------------------------------
Virginia 1.33% South Carolina 0.10%
- ------------------------------------ -------------------------------------
Hawaii 1.33% Montana 0.09%
- ------------------------------------ -------------------------------------
North Carolina 1.04% Maine 0.06%
- ------------------------------------ =====================================
New Jersey 0.98% Total: 100.00%
- ------------------------------------ =====================================
Georgia 0.96%
====================================
===================================
% of Initial
Loan Type Pool Balance
===================================
Balloon 55.28%
-----------------------------------
Fully Amortizing 1.71%
-----------------------------------
ARD Loan 43.01%
===================================
Total: 100.00%
===================================
Page 17 of 17
THIS INFORMATION DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN. OFFERS TO SELL AND
SOLICITATIONS OF OFFERS TO BUY SECURITIES ARE MADE ONLY BY, AND THIS INFORMATION
MUST BE READ IN CONJUNCTION WITH, THE FINAL PROSPECTUS SUPPLEMENT AND THE
RELATED PROSPECTUS OR, IF NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, THE
FINAL OFFERING MEMORANDUM (THE "OFFERING DOCUMENT"). INFORMATION CONTAINED
HEREIN DOES NOT PURPORT TO BE COPMPLETE AND IS SUBJECT TO THE SAME
QUALIFICATIONS AND ASSUMPTIONS, AND SHOULD BE CONSIDERED BY INVESTORS ONLY IN
THE LIGHT OF THE SAME WARNINGS, LACK OF ASSURANCES AND REPRESENTATIONS AND OTHER
PRECAUTIONARY MATTERS, AS DISCLOSED IN THE OFFERING DOCUMENT. INFORMATION
REGARDING THE UNDERLYING ASSETS HAS BEEN PROVIDED BY THE ISSUER OF THE
SECURITIES OR AN AFFILIATE THEREOF AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
THE UNDERWRITERS OR THEIR RESPECTIVE AFFILIATES. THE ANALYSES CONTAINED HEREIN
HAVE BEEN PREPARED AND DISSEMINATED BY THE UNDERWRITERS. THIS INFORMATION WAS
PREPARED ON THE BASIS OF CERTAIN ASSUMPTIONS (INCLUDING, IN CERTAIN CASES,
ASSUMPTIONS SPECIFIED BY THE RECIPIENT HEREOF) REGARDING PAYMENTS, INTEREST
RATES, WEIGHTED AVERAGE LIVES AND WEIGHTED AVERAGE LOAN AGE, LOSS AND OTHER
MATTERS, INCLUDING, BUT NOT LIMITED TO, THE ASSUMPTIONS DESCRIBED IN THE
OFFERING DOCUMENT. NEITHER THE UNDERWRITERS, NOR ANY OF THEIR AFFILIATES MAKE
ANY REPRESENTATION OR WARRANTY AS TO THE ACTUAL RATE OR TIMING OF PAYMENTS ON
ANY OF THE UNDERLYING ASSETS OR THE PAYMENTS OR YIELD ON THE SECURITIES. THIS
INFORMATION SUPERSEDES ANY PRIOR VERSIONS HEREOF AND WILL BE DEEMED TO BE
SUPERSEDED BY ANY SUBSEQUENT VERSIONS (INCLUDING, WITH RESPECT TO ANY
DESCRIPTION OF THE SECURITIES OR THE UNDERLYING ASSETS, THE INFORMATION
CONTAINED IN THE OFFERING DOCUMENT).
<PAGE>
Annex D
LB Commercial Mortgage Trust Series 1999-C1
DELINQUENT LOAN STATUS REPORT
as of ___________
<TABLE>
<CAPTION>
====================================================================================================================================
S62 or
S4 S55 S61 S57 S58 S63 P8 P7 P37 P39 P38
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d)
- ------------------------------------------------------------------------------------------------------------------------------------
Other
Short Name Sq Ft Paid Scheduled Total P&I Total Advances
(When Property or Thru Loan Advances Expenses (Taxes &
Prospectus ID Appropriate) Type City State Units Date Balance To Date To Date Escrow)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOANS IN FORECLOSURE
90 + DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FCL - Foreclosure
- ------------------------------------------------------------------------------------------------------------------------------------
LTM - Latest 12 Months either Last Annual or Trailing 12 months
====================================================================================================================================
* Workout Strategy should match the CSSA Loan file using abreviated words in place of a code number such as (FCL - In
Foreclosure, MOD - Modification, DPO - Discount Payoff, NS - Note Sale, BK - Bankrupcy, PP - Payment Plan, TBD - To Be
Determined etc...) It is possible to combine the status codes if the loan is going in more than one direction. (i.e. FCL/Mod,
BK/Mod, BK/FCL/DPO)
- ------------------------------------------------------------------------------------------------------------------------------------
** App - Appraisal, BPO - Broker opinion, Int. - Internal Value
- ------------------------------------------------------------------------------------------------------------------------------------
*** How to determine the cap rate is agreed upon by Underwriter and special servicer - to be provided by a third party.
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
===================================================================================================================
S4 P25 P10 P11 P58 P54 P55 P81
- -------------------------------------------------------------------------------------------------------------------
(e)=a+b+c+d (f)=P38/P81
- -------------------------------------------------------------------------------------------------------------------
Value
Current Current LTM ***Cap using
Total Monthly Interest Maturity NOI LTM LTM Rate NOI &
Prospectus ID Exposure P&I Rate Date Date NOI DSCR Assigned Cap Rate
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
90 + DAYS DELINQUENT
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
Annex E
LB Commercial Mortgage Trust Series 1999-C1
HISTORICAL LOAN MODIFICATION REPORT
as of _________________
<TABLE>
<CAPTION>
=========================================================================================================================
S4 S57 S58 P49 P48 P7* P7* P50*
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Extension Balance Balance at
Mod / per Docs When Sent the Effective # Mths
Prospectus Extension or Effect to Special Date of for Rate
ID City State Flag Servicer Date Servicer Rehabilitation Old Rate Change
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
THIS REPORT IS HISTORICAL
- -------------------------------------------------------------------------------------------------------------------------
Information is as of modification. Each line it should not change in the future. Only new modifications should be added.
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
=========================================================================================================================
Total For All Loans:
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Total For Loans in Current Month:
- -------------------------------------------------------------------------------------------------------------------------
# of Loans $ Balance
- -------------------------------------------------------------------------------------------------------------------------
Modifications:
- -------------------------------------------------------------------------------------------------------------------------
Maturity Date Extentions:
- -------------------------------------------------------------------------------------------------------------------------
Total:
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=================================================================================================
S4 P50* P25* P25* P11* P11* P47
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Future
Interest
Total # (1) Loss to
Mths for Realized Trust $
Prospectus New Old New Old New Change Loss to (Rate
ID Rate P&I P&I Maturity Maturity of Mod Trust $ Reduction) COMMENT
=================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
=================================================================================================
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
* The information in these columns is from a particular point in time and
should not change on this report once assigned.
- -------------------------------------------------------------------------------------------------
(1) Actual principal loss taken by bonds
- -------------------------------------------------------------------------------------------------
(2) Expected future loss due to a rate reduction. This is just an estimate
calculated at the time of the modification.
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
Annex F
LB Commercial Mortgage Trust Series 1999-C1
HISTORICAL LOSS ESTIMATE REPORT (RE0-SOLD or DISCOUNTED PAYOFF)
as of _________________
<TABLE>
<CAPTION>
====================================================================================================================================
S4 S55 S61 S57 S58 P45/P7 P75 P45 P7 P37
- ------------------------------------------------------------------------------------------------------------------------------------
(c)=b/a (a) (b) (d) (e) (f)
- ------------------------------------------------------------------------------------------------------------------------------------
Latest
Short Name Appraisal Effect Net Amt Total
Prospectus (When Property % Received or Brokers Date of Sales Received Scheduled P&I
ID Appropriate) Type City State From Sale Opinion Sale Price from Sale Balance Advanced
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
THIS REPORT IS HISTORICAL
- ------------------------------------------------------------------------------------------------------------------------------------
All information is from the liquidation date and does not need to be updated.
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
Total all Loans:
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current Month Only:
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=============================================================================================================================
S4 P39+P38
- -----------------------------------------------------------------------------------------------------------------------------
(g) (h) (i)=d-(f+g+h) (k)=i-e (m) (n)=k+m (o)=n/e
- -----------------------------------------------------------------------------------------------------------------------------
Servicing Actual Minor Total Loss %
Prospectus Total Fees Losses Date Loss Adj to Minor Adj Loss with of Scheduled
ID Expenses Expense Net Proceeds Passed thru Passed thru Trust Passed thru Adjustment Balance
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
=============================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
=============================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
Annex G
LB Commercial Mortgage Trust Series 1999-C1
REO STATUS REPORT
as of ___________
<TABLE>
<CAPTION>
===========================================================================================================================
S62 or
S4 S55 S61 S57 S58 S63 P8 P7 P37 P39 P38
- ---------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d)
- ---------------------------------------------------------------------------------------------------------------------------
Other
Short Name Sq Ft Paid Scheduled Total P&I Total Advances
(When Property or Thru Loan Advances Expenses (Taxes &
Prospectus ID Appropriate) Type City State Units Date Balance To Date To Date Escrow)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
(1) Use the following codes; App. - Appraisal, BPO - Brokers Opinion, Int - Internal Value
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=============================================================================================================================
S4 P25 P11 P58 P54 P81 P74 P75
- -----------------------------------------------------------------------------------------------------------------------------
(e)=a+b+c+d (k) (j) (f)=(k/j) (g) (h)=(.92*g)
- -----------------------------------------------------------------------------------------------------------------------------
Value Appraisal Loss
Current LTM LTM Cap using BPO or using 92%
Total Monthly Maturity NOI NOI/ Rate Valuation NOI & Internal Appr. or
Prospectus ID Exposure P&I Date Date DSC Assigned Date Cap Rate Value** BPO (f)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
===============================================================================================================
S4 P35 P77 P82 P79
- ---------------------------------------------------------------------------------------------------------------
(i)=(g/a)
- ---------------------------------------------------------------------------------------------------------------
Total Appraisal REO Pending
Estimated Reduction Transfer Acquisition Resolution
Prospectus ID Recovery % Realized Date Date Date Comments
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
Annex H
LB Commercial Mortgage Trust Series 1999-C1
SERVICER WATCH LIST
as of ___________
<TABLE>
<CAPTION>
====================================================================================================================================
S4 S55 S61 S57 S58 P7 P8 P11 P54
- ------------------------------------------------------------------------------------------------------------------------------------
Short Name Scheduled Paid
Prospectus (When Property Loan Thru Maturity LTM Comment / Reason on Watch List
ID Appropriate) Type City State Balance Date Date DSCR
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
List all loans on watch list and reason sorted in decending balance order.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total: $
- ------------------------------------------------------------------------------------------------------------------------------------
* LTM - Last 12 months either trailing or last annual
====================================================================================================================================
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
Annex I
LB Commercial Mortgage Trust Series 1999-C1
OPERATING STATEMENT ANALYSIS REPORT
as of _____________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW
---------------
LB Control Number
-----------------------------
Current Balance/Paid to Date
------------------------------------------------------------------------------------------
Property Name
------------------------------------------------------------------------------------------
Property Type
------------------------------------------------------------------------------------------
Property Address, City, State
------------------------------------------------------------------------------------------
Net Rentable Square Feet
-----------------------------
Year Built/Year Renovated
------------------------------------------------------------------
Year of Operations Underwriting 1994 1995 1996 Trailing
------------------------------------------------------------------
Occupancy Rate *
------------------------------------------------------------------
Average Rental Rate
------------------------------------------------------------------
* Occupancy rates are year end or the ending date of the financial statement for the
period.
<CAPTION>
INCOME: No. of Mos.
-------------
Number of Mos. Prior Year Current Yr.
------------------------------------------------------------------------------------------
Period Ended Underwriting 1994 1995 1996 97 Trailing** 1996-Base 1996-1995
Statement Classification Base Line Normalized Normalized Normalized as of / /97 Variance Variance
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
Rental Income (Category 1)
------------------------------------------------------------------------------------------
Rental Income (Category 2)
------------------------------------------------------------------------------------------
Rental Income (Category 3)
------------------------------------------------------------------------------------------
Pass Through/Escalations
------------------------------------------------------------------------------------------
Other Income
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Effective Gross Income $0.00 $0.00 $0.00 $0.00 $0.00 % %
------------------------------------------------------------------------------------------
Normalized - Full year Financial statements that have been reviewed by the underwriter or
Servicer
** Servicer will not be expected to "Normalize" these YTD numbers.
OPERATING EXPENSES:
------------------------------------------------------------------------------------------
Real Estate Taxes
------------------------------------------------------------------------------------------
Property Insurance
------------------------------------------------------------------------------------------
Utilities
------------------------------------------------------------------------------------------
General & Administration
------------------------------------------------------------------------------------------
Repairs and Maintenance
------------------------------------------------------------------------------------------
Management Fees
------------------------------------------------------------------------------------------
Payroll & Benefits Expense
------------------------------------------------------------------------------------------
Advertising & Marketing
------------------------------------------------------------------------------------------
Professional Fees
------------------------------------------------------------------------------------------
Other Expenses
------------------------------------------------------------------------------------------
Ground Rent
------------------------------------------------------------------------------------------
Total Operating Expenses $0.00 $0.00 $0.00 $0.00 $0.00 % %
------------------------------------------------------------------------------------------
Operating Expense Ratio
------------------------------------------------------------------------------------------
Net Operating Income $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
Leasing Commissions
------------------------------------------------------------------------------------------
Tenant Improvements
------------------------------------------------------------------------------------------
Replacement Reserve
------------------------------------------------------------------------------------------
Total Capital Items $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
N.O.I. After Capital Items $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Debt Service (per Servicer) $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
Cash Flow after debt service $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
(1) DSCR: (NOI/Debt Service)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
DSCR: (after reserves\Cap exp.)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Source of Financial Data:
------------------------------------------------------------------------------------------
(ie. operating statements, financial statements, tax return, other)
</TABLE>
Notes and Assumptions:
================================================================================
The years shown above will roll always showing a three year history. 1996 is the
current year financials; 1995 is the prior year financials.
This report may vary depending on the property type and because of the way
information may vary in each borrowers statement.
Rental Income needs to be broken down, differently whenever possible for each
property type as follows: Retail: 1) Base Rent 2) Percentage rents on cashflow
Hotel: 1) Room Revenue 2) Food/Beverage Nursing Home: 1) Private 2) Medicaid
3) Medicare
Income: Comment
Expense: Comment
Capital Items: Comment
(1) Used in the Comparative Financial Status Report
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
LB Commercial Mortgage Trust Series 1999-C1
Form of NOI ADJUSTMENT WORKSHEET for "year" Annex J
as of _____________
PROPERTY OVERVIEW
--------
LB Control Number
----------------------
Current Balance/Paid to Date
---------------------------------------------
Property Name
---------------------------------------------
Property Type
---------------------------------------------
Property Address, City, State
---------------------------------------------
Net Rentable Square Feet
----------------------
Year Built/Year Renovated
---------------------------------------
Year of Operations Borrower Adjustment Normalized
---------------------------------------
Occupancy Rate *
---------------------------------------
Average Rental Rate
---------------------------------------
*Occupancy rates are year end or the ending
date of the financial statement for the
period.
INCOME:
Number of Mos.Annualized "Year"
---------------------------------------------
Period Ended Borrower Adjustment Normalized
Statement Classification Actual
---------------------------------------------
Rental Income (Category 1)
---------------------------------------------
Rental Income (Category 2)
---------------------------------------------
Rental Income (Category 3)
---------------------------------------------
Pass Throughs/Escalations
---------------------------------------------
Other Income
---------------------------------------------
---------------------------------------------
Effective Gross Income $0.00 $0.00 $0.00
---------------------------------------------
Normalized - Full year financial statements
that have been reviewed by the Servicer.
OPERATING EXPENSES:
---------------------------------------------
Real Estate Taxes
---------------------------------------------
Property Insurance
---------------------------------------------
Utilities
---------------------------------------------
General & Administration
---------------------------------------------
Repairs and Maintenance
---------------------------------------------
Management Fees
---------------------------------------------
Payroll & Benefits Expense
---------------------------------------------
Advertising & Marketing
---------------------------------------------
Professional Fees
---------------------------------------------
Other Expenses
---------------------------------------------
Ground Rent
---------------------------------------------
Total Operating Expenses $0.00 $0.00 $0.00
---------------------------------------------
---------------------------------------------
Operating Expense Ratio
---------------------------------------------
---------------------------------------------
Net Operating Income $0.00 $0.00 $0.00
---------------------------------------------
---------------------------------------------
Leasing Commissions
Tenant Improvements
---------------------------------------------
Replacement Reserve
---------------------------------------------
Total Capital Items $0.00 $0.00 $0.00
---------------------------------------------
---------------------------------------------
N.O.I. After Capital Items $0.00 $0.00 $0.00
---------------------------------------------
---------------------------------------------
Debt Service (per Servicer) $0.00 $0.00 $0.00
---------------------------------------------
Cash Flow after debt service $0.00 $0.00 $0.00
---------------------------------------------
---------------------------------------------
(1)DSCR: (NOI/Debt Service)
---------------------------------------------
---------------------------------------------
DSCR: (after reserves\Cap exp.)
---------------------------------------------
---------------------------------------------
Source of Financial Data:
---------------------------------------------
(ie. operating statements, financial
statements, tax return, other)
Notes and Assumptions:
================================================================================
This report should be completed by the Servicer for any "Normalization" of the
Borrower's numbers.
The "Normalized" column is used in the Operating Statement Analysis Report.
This report may vary depending on the property type and because of the way
information may vary in each borrower's statement.
Income: Comments
Expense: Comments
Capital Items: Comments
(1) Used in the Comparative Financial Status Report.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
Annex K
LB Commercial Mortgage Trust Series 1999-C1
COMPARATIVE FINANCIAL STATUS REPORT
as of _______________
<TABLE>
<CAPTION>
============================================================================================================================
S4 S57 S58 P7 P8 P57 S72 S69 S70 S65 S66
- ----------------------------------------------------------------------------------------------------------------------------
Original Underwriting
- ----------------------------------------------------------------------------------------------------------------------------
Information
- ----------------------------------------------------------------------------------------------------------------------------
Basis Year
- ----------------------------------------------------------------------------------------------------------------------------
Last Current Financial
Property Allocated Paid Allocated Info
Inspect Loan Thru Debt as of % Total % (1)
Prospectus ID City State Date Amount Date Service Date Occ Revenue NOI DSCR
- ----------------------------------------------------------------------------------------------------------------------------
yy/mm yy/mm
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
List all properties currently in deal with or without information largest to smallest loan
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total: $ $ WA $ $ WA
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
============================================================================================================================
Received
- ----------------------------------------------------------------------------------------------------------------------------
Financial Information: Loans Balance
- ----------------------------------------------------------------------------------------------------------------------------
# % $ %
- ----------------------------------------------------------------------------------------------------------------------------
Current Full Year:
- ----------------------------------------------------------------------------------------------------------------------------
Current Full Yr. received with DSC < 1:
- ----------------------------------------------------------------------------------------------------------------------------
Prior Full Year:
- ----------------------------------------------------------------------------------------------------------------------------
Prior Full Yr. received with DSC < 1:
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
(1) DSCR should match to Operating Statement and is normally calculated using
NOI / Debt Service.
- ----------------------------------------------------------------------------------------------------------------------------
(2) Net change should compare the latest year to the underwriting year
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
================================================================================================================================
S4 P65 P64 P59 P61 P63 P58 P57 P52 P54 P56 P72 P73 P66 P68 P70
- --------------------------------------------------------------------------------------------------------------------------------
2nd Preceding Annual Operating Preceding Annual Operating Most Recent Financial
- --------------------------------------------------------------------------------------------------------------------------------
Information Information Information
- --------------------------------------------------------------------------------------------------------------------------------
as of _______ Normalized as of _______ Normalized Month Reported Actual
- --------------------------------------------------------------------------------------------------------------------------------
Financial Financial
Info Info FS FS
as of % Total $ (1) as of % Total $ (1) Start End % Total $ (%)
Prospectus ID Date Occ Revenue NOI DSCR Date Occ Revenue NOI DSCR Date Date Occ Revenue NOI DSCR
- --------------------------------------------------------------------------------------------------------------------------------
yy/mm yy/mm yy/mm yy/mm
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Total: WA $ $ WA WA $ $ WA WA $ $ WA
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
================================================================================================================================
Required
- --------------------------------------------------------------------------------------------------------------------------------
Financial Infor Loans Balance
- --------------------------------------------------------------------------------------------------------------------------------
# % $ %
- --------------------------------------------------------------------------------------------------------------------------------
Current Full Year:
- --------------------------------------------------------------------------------------------------------------------------------
Current Full Yr. received with DSC < 1:
- --------------------------------------------------------------------------------------------------------------------------------
Prior Full Year:
- --------------------------------------------------------------------------------------------------------------------------------
Prior Full Yr. received with DSC < 1:
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
(1) DSCR should match to Operating Statement and is normally calculated using
NOI / Debt Service.
- --------------------------------------------------------------------------------------------------------------------------------
(2) Net change should compare the latest year to the underwriting year
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=============================================================
S4 (2)
- -------------------------------------------------------------
Net Change
- -------------------------------------------------------------
- -------------------------------------------------------------
Preceding & Basis
- -------------------------------------------------------------
%
% Total (1)
Prospectus ID Occ Revenue DSC
- -------------------------------------------------------------
- -------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
Total: WA $ WA
- -------------------------------------------------------------
- -------------------------------------------------------------
=============================================================
- -------------------------------------------------------------
(1) DSCR should match to Operating Statement and is normally
calculated using NOI / Debt Service times the allocated
loan percentage.
- -------------------------------------------------------------
(2) Net change should compare the latest year to the
underwriting year
- -------------------------------------------------------------
- -------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
PROSPECTUS
Structured Asset Securities Corporation
Mortgage-Backed Securities, Issuable in Series
This Prospectus relates to Collateralized Mortgage Obligations (the
"Bonds") and Mortgage-Backed Certificates (the "Certificates," together with the
Bonds, the "Securities") which may be issued from time to time in one or more
series ("Series") under this Prospectus and the supplements hereto (each, a
"Prospectus Supplement"). As specified in the related Prospectus Supplement, the
Securities of each Series will be either Bonds issued pursuant to an Indenture
and representing indebtedness of Structured Asset Securities Corporation (the
"Company") or an owner trust (the "Owner Trust") established by it, or
Certificates which will evidence a beneficial ownership interest in assets
deposited into a trust (a "Trust Fund") by the Company as depositor pursuant to
a Trust Agreement, as described herein. The issuer (the "Issuer") with respect
to a Series of Bonds will be the Company or the Owner Trust established to issue
such Bonds, and, with respect to a Series of Certificates, will be the Trust
Fund established in respect of such Certificates. Capitalized terms not
otherwise defined herein or the related Prospectus Supplement have the meanings
specified in the Glossary attached hereto.
The Securities will be sold from time to time under this Prospectus on
terms determined for each Series at the time of the sale and as described in the
related Prospectus Supplement. Each Series will consist of one or more Classes,
one or more of which may be Compound Interest Securities, Variable Interest
Securities, Individual Investor Securities, Planned Amortization Class ("PAC")
Securities, Zero Coupon Securities, Principal Only Securities, Interest Only
Securities, Participating Securities or another particular Class of Securities,
if any, included in such Series of Securities. Zero Coupon Securities and
Principal Only Securities will not accrue and will not be entitled to receive
any interest. Payments or distributions of interest on each Class of Securities,
other than Zero Coupon Securities, Principal Only Securities and Compound
Interest Securities will be made on each Payment Date or Distribution Date as
specified in the related Prospectus Supplement. Interest will not be paid or
distributed on Compound Interest Securities on a current basis until all
Securities of the related Series having a Stated Maturity or Final Scheduled
Distribution Date prior to the Stated Maturity or Final Scheduled Distribution
Date of such Class of Compound Interest Securities have been paid in full or
until such other date or period as may be specified in the related Prospectus
Supplement. Prior to such time, interest on such Class of Compound Interest
Securities will accrue and the amount of interest so accrued will be added to
the principal thereof on each Payment Date or Distribution Date. The amount of
principal and interest available and payable on each Series on each Payment Date
or Distribution Date will be applied to the Classes of such Series in the order
and as otherwise specified in the related Prospectus Supplement. Principal
payments or distributions on each Class of a Series will be made on either a pro
rata or a random lot basis among Securities of such Class, as specified in the
related Prospectus Supplement Any Series may include one or more Classes of
"Subordinate Securities," which are subordinated in right and priority to the
extent described in the related Prospectus Supplement to payment of principal
and interest, and may be allocated losses and shortfalls prior to the allocation
thereof to all other Classes of Securities of such Series (the "Senior
Securities"). Securities of a Series will be subject to redemption or repurchase
only under the circumstances and according to the priorities described herein
and in the related Prospectus Supplement.
Each Series will be secured by or offer a beneficial interest in one or
more types of mortgage assets ("Mortgage Assets") and other assets, including
any reserve funds established with respect to such Series, insurance policies or
other enhancement described in the related Prospectus Supplement. The Mortgage
Assets may consist of a pool of multifamily or commercial mortgage loans or
participation interests therein (collectively, "Mortgage Loans") and may include
FHA Loans. Mortgage Assets may also consist of mortgage participations or
pass-through certificates or collateralized mortgage obligations ("Private
Mortgage-Backed Securities") issued with respect to or secured by a pool of
Mortgage Loans. The Private Mortgage-Backed Securities and Mortgage Loans
securing a Series will not be guaranteed or insured by any agency or
instrumentality of the United States Government unless otherwise stated in the
related Prospectus Supplement. Some Mortgage Loans comprising or underlying the
Mortgage Assets may be delinquent or non-performing as specified in the related
Prospectus
<PAGE>
Supplement. The Mortgage Assets securing a Series or comprising the Trust Fund
may consist of a single Mortgage Loan or obligations of a single obligor or
related obligors as specified in the related Prospectus Supplement. The Mortgage
Loans underlying or comprising the Mortgage Assets may be originated by or
acquired from an affiliate of the Issuer and an affiliate of the Issuer may be
an obligor with respect to any such Mortgage Loans. See "SECURITY FOR THE BONDS
AND CERTIFICATES."
Bonds of a Series constitute non-recourse obligations of the Issuer, and
Certificates of a Series evidence an interest in the related Trust Fund only.
Neither the Bonds or Certificates of a Series are insured or guaranteed by any
governmental agency or instrumentality, by any person or entity affiliated with
the Company or Issuer, or, unless otherwise specified in the related Prospectus
Supplement, by any other person or entity. The Issuer has no significant assets
other than the Mortgage Assets and certain other assets pledged to secure the
Bonds or in which the Certificates represent a beneficial interest. See "RISK
FACTORS."
An election may be made, with respect to any Series of Securities, to
treat all or a specified portion of the assets securing such Series or
comprising the Trust Fund as a "real estate mortgage investment conduit" (a
"REMIC"), or an election may be made to treat the arrangement by which a Series
of Securities is issued as a REMIC. If such an election is made, each Class of
Securities of a Series will be either Regular Interest or Residual Interest, as
specified in the related Prospectus Supplement. See "FEDERAL INCOME TAX
CONSIDERATIONS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Securities offered by this Prospectus and by the related Prospectus
Supplement are offered by Lehman Brothers and the other underwriters, if any,
subject to prior sale, to withdrawal, cancellation or modification of the offer
without notice, to delivery to and acceptance by Lehman Brothers and the other
underwriters, if any, and certain further conditions. Retain this Prospectus for
future reference. This Prospectus may not be used to consummate sales of the
securities offered hereby unless accompanied by a Prospectus Supplement.
Lehman Brothers
November 17, 1998
<PAGE>
PROSPECTUS
STRUCTURED ASSET SECURITIES CORPORATION
MORTGAGE-BACKED SECURITIES, ISSUABLE IN SERIES
This Prospectus relates to Collateralized Mortgage Obligations (the "Bonds")
and Mortgage-Backed Certificates (the "Certificates," together with the Bonds,
the "Securities") which may be issued from time to time in one or more series
("Series") under this Prospectus and the supplements hereto (each, a "Prospectus
Supplement"). As specified in the related Prospectus Supplement, the Securities
of each Series will be either Bonds issued pursuant to an Indenture and
representing indebtedness of Structured Asset Securities Corporation (the
"Company") or an owner trust (the "Owner Trust") established by it, or
Certificates which will evidence a beneficial ownership interest in assets
deposited into a trust (a "Trust Fund") by the Company as depositor pursuant to
a Trust Agreement, as described herein. The issuer (the "Issuer") with respect
to a Series of Bonds will be the Company or the Owner Trust established to issue
such Bonds, and, with respect to a Series of Certificates, will be the Trust
Fund established in respect of such Certificates. Capitalized terms not
otherwise defined herein or the related Prospectus Supplement have the meanings
specified in the Glossary attached hereto.
The Securities will be sold from time to time under this Prospectus on terms
determined for each Series at the time of the sale and as described in the
related Prospectus Supplement. Each Series will consist of one or more Classes,
one or more of which may be Compound Interest Securities, Variable Interest
Securities, Individual Investor Securities, Planned Amortization Class ("PAC")
Securities, Zero Coupon Securities, Principal Only Securities, Interest Only
Securities, Participating Securities or another particular Class of Securities,
if any, included in such Series of Securities. Zero Coupon Securities and
Principal Only Securities will not accrue and will not be entitled to receive
any interest. Payments or distributions of interest on each Class of Securities,
other than Zero Coupon Securities, Principal Only Securities and Compound
Interest Securities will be made on each Payment Date or Distribution Date as
specified in the related Prospectus Supplement. Interest will not be paid or
distributed on Compound Interest Securities on a current basis until all
Securities of the related Series having a Stated Maturity or Final Scheduled
Distribution Date prior to the Stated Maturity or Final Scheduled Distribution
Date of such Class of Compound Interest Securities have been paid in full or
until such other date or period as may be specified in the related Prospectus
Supplement. Prior to such time, interest on such Class of Compound Interest
Securities will accrue and the amount of interest so accrued will be added to
the principal thereof on each Payment Date or Distribution Date. The amount of
principal and interest available and payable on each Series on each Payment Date
or Distribution Date will be applied to the Classes of such Series in the order
and as otherwise specified in the related Prospectus Supplement. Principal
payments or distributions on each Class of a Series will be made on either a pro
rata or a random lot basis among Securities of such Class, as specified in the
related Prospectus Supplement Any Series may include one or more Classes of
"Subordinate Securities," which are subordinated in right and priority to the
extent described in the related Prospectus Supplement to payment of principal
and interest, and may be allocated losses and shortfalls prior to the allocation
thereof to all other Classes of Securities of such Series (the "Senior
Securities"). Securities of a Series will be subject to redemption or repurchase
only under the circumstances and according to the priorities described herein
and in the related Prospectus Supplement.
Each Series will be secured by or offer a beneficial interest in one or more
types of mortgage assets ("Mortgage Assets") and other assets, including any
reserve funds established with respect to such Series, insurance policies or
other enhancement described in the related Prospectus Supplement. The Mortgage
Assets may consist of a pool of multifamily or commercial mortgage loans or
participation interests therein (collectively, "Mortgage Loans") and may include
FHA Loans. Mortgage Assets may also consist of mortgage participations or
pass-through certificates or collateralized mortgage obligations ("Private
Mortgage-Backed Securities") issued with respect to or secured by a pool of
Mortgage Loans. The Private Mortgage-Backed Securities and Mortgage Loans
securing a Series will not be guaranteed or insured by any agency or
instrumentality of the United States Government unless otherwise stated in the
related Prospectus Supplement. Some Mortgage Loans comprising or underlying the
Mortgage Assets may be delinquent or non-performing as specified in the related
Prospectus Supplement. The Mortgage Assets
<PAGE>
securing a Series or comprising the Trust Fund may consist of a single Mortgage
Loan or obligations of a single obligor or related obligors as specified in the
related Prospectus Supplement. The Mortgage Loans underlying or comprising the
Mortgage Assets may be originated by or acquired from an affiliate of the Issuer
and an affiliate of the Issuer may be an obligor with respect to any such
Mortgage Loans. See "SECURITY FOR THE BONDS AND CERTIFICATES."
Bonds of a Series constitute non-recourse obligations of the Issuer, and
Certificates of a Series evidence an interest in the related Trust Fund only.
Neither the Bonds or Certificates of a Series are insured or guaranteed by any
governmental agency or instrumentality, by any person or entity affiliated with
the Company or Issuer, or, unless otherwise specified in the related Prospectus
Supplement, by any other person or entity. The Issuer has no significant assets
other than the Mortgage Assets and certain other assets pledged to secure the
Bonds or in which the Certificates represent a beneficial interest. See "RISK
FACTORS."
An election may be made, with respect to any Series of Securities, to treat
all or a specified portion of the assets securing such Series or comprising the
Trust Fund as a "real estate mortgage investment conduit" (a "REMIC"), or an
election may be made to treat the arrangement by which a Series of Securities is
issued as a REMIC. If such an election is made, each Class of Securities of a
Series will be either Regular Interest or Residual Interest, as specified in the
related Prospectus Supplement. See "FEDERAL INCOME TAX CONSIDERATIONS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Securities offered by this Prospectus and by the related Prospectus
Supplement are offered by Lehman Brothers and the other underwriters, if any,
subject to prior sale, to withdrawal, cancellation or modification of the offer
without notice, to delivery to and acceptance by Lehman Brothers and the other
underwriters, if any, and certain further conditions. Retain this Prospectus for
future reference. This Prospectus may not be used to consummate sales of the
securities offered hereby unless accompanied by a Prospectus Supplement.
LEHMAN BROTHERS
November 17, 1998
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TABLE OF CONTENTS
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PROSPECTUS SUPPLEMENT...................................................................................... 6
ADDITIONAL INFORMATION..................................................................................... 6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ 7
SUMMARY OF TERMS........................................................................................... 8
RISK FACTORS............................................................................................... 28
DESCRIPTION OF THE SECURITIES.............................................................................. 35
General.............................................................................................. 35
The Bonds--General................................................................................... 35
The Certificates--General............................................................................ 36
Bearer Securities and Registered Securities.......................................................... 37
Book-Entry Registration.............................................................................. 38
Valuation of Mortgage Assets......................................................................... 39
Payments or Distributions of Interest................................................................ 40
Payments or Distributions of Principal............................................................... 41
Special Redemption................................................................................... 42
Optional Redemption.................................................................................. 43
Mandatory Redemption................................................................................. 43
Optional Termination................................................................................. 43
Optional Repurchase of Certificates.................................................................. 43
Other Repurchases.................................................................................... 43
YIELD AND PREPAYMENT CONSIDERATIONS........................................................................ 44
Timing of Payment or Distribution of Interest and Principal.......................................... 44
Principal Prepayments................................................................................ 44
Prepayments and Weighted Average Life................................................................ 45
Other Factors Affecting Weighted Average Life........................................................ 46
SECURITY FOR THE BONDS AND CERTIFICATES.................................................................... 48
General.............................................................................................. 48
Mortgage Loans....................................................................................... 48
Private Mortgage-Backed Securities................................................................... 52
Substitution of Mortgage Assets...................................................................... 54
Collection Account................................................................................... 54
Other Funds or Accounts.............................................................................. 55
Investment of Funds.................................................................................. 55
Guaranteed Investment Contract....................................................................... 55
Enhancement.......................................................................................... 55
SERVICING OF MORTGAGE LOANS................................................................................ 56
General.............................................................................................. 56
Collection Procedures................................................................................ 57
Payments on Mortgage Loans; Deposits to Custodial Accounts........................................... 57
Advances............................................................................................. 58
Maintenance of Insurance Policies and Other Servicing Procedures..................................... 58
Enforcement of Due-On Sale Clauses................................................................... 59
Modification; Waivers................................................................................ 59
Servicing Compensation and Payment of Expenses....................................................... 59
Evidence as to Compliance............................................................................ 60
Certain Matters Regarding the Master Servicer and Special Servicer................................... 60
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ENHANCEMENT................................................................................................ 61
General.............................................................................................. 61
Subordinate Securities............................................................................... 61
Cross-Support Features............................................................................... 62
Insurance on the Mortgage Loans...................................................................... 62
Letter of Credit..................................................................................... 62
Bond Guarantee Insurance............................................................................. 63
Reserve Funds........................................................................................ 63
DESCRIPTION OF INSURANCE ON THE MORTGAGE LOANS............................................................. 63
General.............................................................................................. 64
Hazard Insurance on the Mortgage Loans............................................................... 64
FHA Insurance........................................................................................ 65
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS.................................................................... 65
Mortgages............................................................................................ 65
Interest in Real Property............................................................................ 65
Junior Mortgages; Rights of Senior Mortgages or Beneficiaries........................................ 65
Foreclosure of Mortgage.............................................................................. 67
Leasehold Risks...................................................................................... 69
Rights of Redemption................................................................................. 70
Environmental Matters................................................................................ 70
Certain Laws and Regulations......................................................................... 72
Leases and Rents..................................................................................... 72
Personalty........................................................................................... 73
Anti-Deficiency Legislation and Other Limitations on Lenders......................................... 73
Federal Bankruptcy and Other Laws Affecting Creditors' Rights........................................ 73
Due On-Sale Clauses in Mortgage Loans................................................................ 75
Enforceability of Prepayment and Late Payment Fees................................................... 76
Equitable Limitations on Remedies.................................................................... 76
Applicability of Usury Laws.......................................................................... 76
Alternative Mortgage Instruments..................................................................... 77
Secondary Financing; Due-On-Encumbrance Provisions................................................... 77
Americans With Disabilities Act...................................................................... 78
Soldiers' and Sailors' Civil Relief Act of 1940...................................................... 78
Forfeitures in Drug and RICO Proceedings............................................................. 78
THE INDENTURE.............................................................................................. 79
Certain Covenants.................................................................................... 79
Modification of Indenture............................................................................ 79
Events of Default.................................................................................... 80
Authentication and Delivery of Bonds................................................................. 82
Satisfaction and Discharge of the Indenture.......................................................... 82
Issuer's Annual Compliance Statement................................................................. 82
List of Bondholders.................................................................................. 83
Meetings of Bondholders.............................................................................. 83
Fiscal Year.......................................................................................... 83
Trustee's Annual Report.............................................................................. 83
The Trustee.......................................................................................... 83
THE TRUST AGREEMENT........................................................................................ 84
Assignment of Mortgage Assets........................................................................ 84
Repurchase of Non-Conforming Loans................................................................... 84
Reports to Certificateholders........................................................................ 85
Event of Default..................................................................................... 86
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Rights Upon Event of Default......................................................................... 87
The Trustee.......................................................................................... 87
Duties of the Trustee................................................................................ 88
Resignation of Trustee............................................................................... 88
Amendment of Trust Agreement......................................................................... 88
Voting Rights........................................................................................ 89
List of Certificateholders........................................................................... 89
REMIC Administrator.................................................................................. 89
Termination.......................................................................................... 89
THE ISSUER................................................................................................. 90
The Company.......................................................................................... 90
Owner Trust.......................................................................................... 90
Administrator........................................................................................ 91
USE OF PROCEEDS............................................................................................ 91
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES............................................................... 92
FEDERAL INCOME TAX CONSIDERATIONS.......................................................................... 92
General.............................................................................................. 92
Characterization of Securities....................................................................... 93
Taxation of Regular Interest Securities.............................................................. 94
Sale or Exchange of Regular Interest Securities...................................................... 98
REMIC Expenses....................................................................................... 99
Taxation of the REMIC................................................................................ 99
Taxation of Holders of Residual Interest Securities.................................................. 101
Excess Inclusion Income.............................................................................. 102
Restrictions on Ownership and Transfer of Residual Interest Securities............................... 102
Administrative Matters............................................................................... 103
Tax Status as a Grantor Trust........................................................................ 103
Miscellaneous Tax Aspects............................................................................ 107
Tax Treatment of Foreign Investors................................................................... 107
STATE AND LOCAL TAX CONSIDERATIONS......................................................................... 108
ERISA CONSIDERATIONS....................................................................................... 109
LEGAL INVESTMENT........................................................................................... 113
PLAN OF DISTRIBUTION....................................................................................... 115
LEGAL MATTERS.............................................................................................. 116
GLOSSARY................................................................................................... 117
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PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series to be offered thereby and
hereby will, among other things, set forth with respect to such Series: (a)
whether such Securities are Bonds or Certificates, (b) the initial aggregate
principal amount, the Bond Interest Rate or Certificate Interest Rate (or method
for determining it) and authorized denominations of each Class of such Series;
(c) certain information concerning the Primary Assets securing such Series or
assets comprising the Trust Fund, including the principal amount, type and
characteristics of the Primary Assets securing such Bonds or assets comprising
the Trust Fund on the date of issue, and, if applicable, the amount of any
Reserve Funds for such Series; (d) in the case of Mortgage Assets consisting in
whole or in part of Private Mortgage-Backed Securities, information concerning
the issuer thereof or sponsor thereof, the PMBS Trustee, the Master Servicer, if
any, and the Underlying Collateral; (e) the circumstances, if any, under which
the Securities of such Series are subject to redemption prior to maturity or
repurchase prior to the Final Scheduled Distribution Date; (f) the Stated
Maturity of each Class of Bonds or Final Scheduled Distribution Date of the
Certificates; (g) the method used to calculate the aggregate amount of principal
available and required to be applied to the Securities of such Series on each
Payment Date or Distribution Date, as applicable, the timing of the application
of principal and the order of priority of the application of such principal to
the respective classes and the allocation of the principal to be so applied; (h)
the extent of subordination of any Subordinate Securities; (i) the identity of
each Class of Compound Interest Securities, Variable Interest Securities,
Planned Amortization Class Securities, Subordinate Securities, Individual
Investor Securities, Zero Coupon Securities, Principal Only Securities, Interest
Only Securities and Participating Securities included in such Series, if any, or
such other type of Class of Securities; (j) the principal amount of each Class
of such Series that would be outstanding on specified Payment Dates or
Distribution Dates, if the Mortgage Loans underlying or comprising the Mortgage
Assets pledged as security for such Series or comprising the Trust Fund were
prepaid at various assumed rates; (k) the Payment Dates or Distribution Dates,
as applicable for the respective Classes; (l) the Assumed Reinvestment Rate, if
any, and (if applicable) the percentage of Excess Cash Flow to be applied to
payments of principal of the Series; (m) relevant financial information with
respect to the Mortgagor(s) and the Mortgaged Property underlying the Mortgage
Assets, if applicable; (n) information with respect to any required Insurance
Policies relating to any Mortgage Loans comprising Mortgage Assets or Underlying
Collateral; (o) additional information with respect to any Enhancement,
Guaranteed Investment Contract or other agreement relating to the Series; (p)
the plan of distribution of such Series; and (q) whether the Securities are to
be issuable in registered form or bearer form or both, and if bearer securities
are issued, whether bearer securities may be exchanged for registered securities
and the circumstances and places for such exchange, if permitted.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Securities. This Prospectus, which forms a part of
the Registration Statement, omits certain information contained in such
Registration Statement pursuant to the Rules and Regulations of the Commission.
The Registration Statement and the exhibits thereto can be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at certain of its Regional Offices
located as follows: Chicago Regional Office, Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and New York
Regional Office, 75 Park Place, 14th Floor, New York, New York 10007. Copies of
such material can also be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Issuer and Company do not intend to send any financial reports to holders of
Securities.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities offered hereby shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any and all of the documents incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to the office of the Secretary, Structured Asset Securities
Corporation, 200 Vesey Street, New York, New York 10285, telephone number (212)
526-5594.
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SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the Prospectus
Supplement with respect to the Series offered thereby and to the Trust Indenture
(the "Trust Indenture") or Trust Agreement (the "Trust Agreement"), as
applicable, and the supplemental or terms indenture or agreement with respect to
such Series (the "Series Supplement") between the Company or a trust established
by the Company and LaSalle National Bank, a national banking association, or
Marine Midland Bank, N.A., a national banking association (or another bank or
trust company qualified under the TIA and named in the Prospectus Supplement for
the related Series), as trustee (the "Trustee") or a Trust and the Trustee
(collectively, the Trust Indenture and any Series Supplement relating to Bonds
are sometimes referred to as the "Indenture," and the Trust Agreement and any
Series Supplement relating to Certificates are sometimes referred to as the
"Trust Agreement").
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SECURITIES OFFERED
A. THE BONDS........................ Collateralized Mortgage Obligations (the "Bonds").
The Bonds may be issued from time to time in
separately secured Series pursuant to the Indenture
and a related Series Supplement. Each Series will
consist of one or more Classes, one or more of which
may be Classes of Compound Interest Securities,
Planned Amortization Class ("PAC") Securities,
Variable Interest Securities, Zero Coupon Securities,
Principal Only Securities, Interest Only Securities,
Participating Securities, Senior Securities or
Subordinate Securities. Each Class may differ in,
among other things, the amounts allocated to and the
priority of principal and interest payments, maturity
date, Payment Dates and Bond Interest Rate.
Additionally, one or more Classes may consist of
Subordinate Securities which are subordinated to
other Classes of Bonds with respect to the right to
receive payments of principal, interest, or both, and
may be allocated losses and shortfalls prior to the
allocation thereof to other Classes of Bonds under
the circumstances and in such amounts as described
herein and in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus
Supplement, the Bonds of each Class will be issued in
fully registered form in the minimum denominations
specified in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, the
Bonds or certain Classes of such Bonds offered
thereby may be available in book-entry form only. The
Bonds may be issued in registered form or bearer form
with coupons attached. Bonds in bearer form will be
offered only outside the United States to non-United
States persons and to offices located outside the
United States of certain United States financial
institutions. See "DESCRIPTION OF THE SECURITIES--The
Bonds-- General" and "ENHANCEMENT--Subordinate
Securities."
B. THE CERTIFICATES................. Mortgage-Backed Certificates (the "Certificates").
The Certificates are issuable from time to time in
separate Series pursuant to separate Trust Agreements
and a related Series Supplement. Each Certificate of
a Series will evidence a
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beneficial ownership interest in the Trust Fund for
such Series. Each Series of Certificates will consist
of one or more Classes of Certificates, one or more
of which may be Classes of Compound Interest
Securities, PAC Securities, Variable Interest
Securities, Zero Coupon Securities, Principal Only
Securities, Interest Only Securities, Participating
Securities, Subordinate Securities or Senior
Securities. If a Series consists of multiple Classes,
the respective Classes may differ with respect to the
amount, percentage and timing of distributions of
principal, interest or both. Additionally, one or
more Classes may consist of Subordinate Securities
which are subordinated to other Classes of
Certificates with respect to the right to receive
distributions of principal, interest, or both under
the circumstances and in such amounts as described
herein and in the related Prospectus Supplement. The
Certificates will be issuable in fully registered
form in the authorized minimum denominations and
multiples thereof specified in the related Prospectus
Supplement. If so specified in the related Prospectus
Supplement, the Certificates or certain Classes of
such Certificates offered thereby may be available in
book-entry form only.
ISSUER.............................. The Issuer with respect to a Series of Bonds will be
Structured Asset Securities Corporation (the
"Company") or an owner trust established by it
("Owner Trust") for the purpose of issuing one or
more Series of Bonds. Each such Owner Trust will be
created by an agreement (the "Deposit Trust
Agreement") between the Company, acting as depositor,
and a bank, trust company or other fiduciary, acting
as owner trustee (the "Owner Trustee"). The Bonds
will be non-recourse obligations of the Issuer. The
Series Supplement for a particular Series of Bonds
may permit the assets pledged to secure the related
Bonds to be transferred by the Issuer to a trust or
other limited purpose affiliate of the Company,
subject to the obligations of the Bonds of such
Series, thereby relieving the Issuer of its
obligations with respect to such Bonds.
The Issuer with respect to a Series of Certificates
will be a trust fund (the "Trust Fund") established
by the Company for the purpose of issuing one or more
Series of Certificates. Such Trust Fund will be
created by an agreement (the "Trust Agreement")
between the Company, acting as depositor, and a bank,
trust company or other fiduciary, acting as trustee
(the "Trustee").
The Issuer will not have, nor be expected in the
future to have, any significant assets available for
payments on a Series of Bonds or distributions on a
Series of Certificates, other than the assets pledged
as security for a specific Series of Bonds issued by
it, or assets deposited into a Trust Fund, the
Certificates issued by such Trust Fund as Issuer
representing a
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beneficial ownership interest in such assets. Unless
otherwise specified in the related Prospectus
Supplement, (i) each Series of Bonds will be
separately secured and no Series of Bonds will have
any claim against or security interest in the assets
pledged to secure any other Series, and (ii) no
Series of Certificates will have a beneficial
ownership interest in any other Series.
The Company, a Delaware corporation, is a
limited-purpose finance subsidiary organized for the
purpose of issuing one or more Series and other
similar obligations directly or through one or more
Trust Funds established by it. Although all of the
outstanding capital stock of the Company is owned by
Lehman Commercial Paper Inc. ("LCPI"), a wholly owned
subsidiary of Lehman Brothers Inc. ("Lehman
Brothers"), neither LCPI nor Lehman Brothers nor any
of their affiliates has guaranteed or is otherwise
obligated with respect to any Series, except with
respect to any representations and warranties given
by any such affiliate as originator, seller or
servicer of Mortgage Assets relating to a Series.
The Company's principal office is located at 200
Vesey Street, New York, New York 10285 and its
telephone number is (212) 526-5594. See "RISK
FACTORS" and "THE ISSUER."
INTEREST PAYMENTS ON THE BONDS...... Each Class of a Series of Bonds (other than a Class
of Zero Coupon Securities or Principal Only
Securities) will accrue interest at the rate set
forth in (or, in the case of Variable Interest
Securities, as determined by the method described in)
the related Prospectus Supplement (the "Bond Interest
Rate"). Interest on all Bonds which bear interest,
other than Compound Interest Securities, will be due
and payable on the Payment Dates specified in the
related Prospectus Supplement. However, failure to
pay interest on a current basis may not necessarily
be an Event of Default with respect to a particular
Series of Bonds. Payments of interest on a Class of
Variable Interest Securities will be made on the
dates set forth in the related Prospectus Supplement
(the "Variable Interest Payment Dates"). Interest on
any Class of Compound Interest Securities will not be
paid currently, but will accrue and the amount of
interest so accrued will be added to the principal
thereof on each Payment Date through the Accrual
Termination Date specified in the related Prospectus
Supplement. Following the applicable Accrual
Termination Date, interest payments on such Bonds
will be made on the Compound Value thereof. Interest
Only Bonds may be assigned a "Notional Amount" which
is used solely for convenience in expressing the
calculation of interest and for certain other
purposes. Unless otherwise specified in the related
Prospectus Supplement, the Notional Amount will be
determined at the time of issuance of such Bonds
based on the principal balances or Bond Value of the
Mortgage Loans
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attributable to the Bonds of a Series entitled to
receive principal, and will be adjusted monthly over
the life of the Bonds based upon adjustments to the
Bond Value of such Mortgage Loans. Reference to the
Notional Amount is solely for convenience in certain
calculations and does not represent the right to
receive any distributions allocable to principal.
Zero Coupon Securities and Principal Only Securities
will not accrue, and will not be entitled to receive,
any interest.
Each payment of interest on each Class of Bonds (or
addition to principal of a Class of Compound Interest
Securities) on a Payment Date will include all
interest accrued during the Interest Accrual Period
specified in the related Prospectus Supplement
preceding such Payment Date. If the Interest Accrual
Period for a Series ends on a date other than a
Payment Date for such Series, the yield realized by
the Holders of such Bonds may be lower than the yield
that would result if the Interest Accrual Period
ended on such Payment Date. Additionally, if so
specified in the related Prospectus Supplement,
interest accrued for an Interest Accrual Period for
one or more Classes may be calculated on the
assumption that principal payments (and additions to
principal of the Bonds), and allocations of losses on
the Mortgage Assets (if so specified in the related
Prospectus Supplement), are made on the first day of
the preceding Interest Accrual Period and not on the
Payment Date for such preceding Interest Accrual
Period when actually made or added. Such method would
produce a lower effective yield than if interest were
calculated on the basis of the actual principal
amount outstanding. See "YIELD AND PREPAYMENT
CONSIDERATIONS."
With respect to any Class of Variable Interest
Securities, the related Prospectus Supplement will
set forth: (a) the initial Bond Interest Rate (or the
manner of determining the initial Bond Interest
Rate); (b) the formula, index or other method by
which the Bond Interest Rate will be determined from
time to time; (c) the periodic intervals at which
such determination will be made; (d) the interest
rate cap (the "Maximum Variable Interest Rate") or
the interest rate floor (the "Minimum Variable
Interest Rate") on the Bond Interest Rate, if any,
for such Variable Interest Securities; and (e) the
Variable Interest Period and any other terms relevant
to such Class of Bonds. See "DESCRIPTION OF THE
SECURITIES--Payments or Distributions of Interest."
INTEREST DISTRIBUTIONS ON THE
CERTIFICATES...................... Interest distributions on the Certificates of a
Series (other than Certificates that are Zero Coupon
Securities or Principal Only Securities) will be made
from amounts available therefor on each Distribution
Date at the applicable rate specified in (or
determined in the manner set forth in) the related
Prospectus Supplement. The interest rate on
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Certificates of a Series may be variable or change
with changes in the mortgage rates or annual
percentage rates of the Mortgage Assets included in
the related Trust Fund and/ or as prepayments occur
with respect to such Mortgage Assets. Zero Coupon
Securities and Principal Only Securities may not be
entitled to receive any interest distributions or may
be entitled to receive only nominal interest
distributions. Compound Interest Securities will not
receive distributions of interest but accrued
interest will be added to the principal balance
thereof on each Distribution Date until the Accrual
Termination Date. Following the Accrual Termination
Date, interest distributions with respect to such
Compound Interest Securities will be made on the
basis of their Compound Value.
PRINCIPAL PAYMENTS ON THE BONDS..... All payments of principal of a Series will be
allocated among the Classes of such Series in the
order and amounts, and will be applied either on a
pro rata or a random lot basis among all Bonds of any
such Class, as specified in the related Prospectus
Supplement.
Except with respect to Zero Coupon Securities,
Compound Interest Securities and Interest Only
Securities, unless specified otherwise in the related
Prospectus Supplement, on each Payment Date principal
payments will be made on the Bonds of each Series in
an amount (the "Principal Payment Amount") as
determined by a formula specified in the related
Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, if the Series of
Bonds has a Class of Compound Interest Securities,
additional principal payments on the Bonds will be
made on each Payment Date in an amount equal to the
interest accrued, but not then payable, on such Bonds
for the related Interest Accrual Period. If the
Series of Bonds has a Class of PAC Securities, such
PAC Securities will have certain priorities of
payment with respect to principal to the extent of
certain targeted amounts with respect to each Payment
Date, as set forth in the related Prospectus
Supplement.
PRINCIPAL DISTRIBUTIONS ON THE
CERTIFICATES...................... Principal distributions on the Certificates of a
Series will be made from amounts available therefor
on each Distribution Date, unless otherwise specified
in the related Prospectus Supplement, in an aggregate
amount determined as set forth in the related
Prospectus Supplement and will be allocated among the
respective Classes of a Series of Certificates at the
times, in the manner and in the priority (which may,
in certain cases, include allocation by random lot)
set forth in the related Prospectus Supplement.
Except with respect to Zero Coupon Securities,
Compound Interest Securities and Interest Only
Securities, unless specified otherwise in the related
Prospectus Supplement, on
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each Distribution Date principal payments will be
made on the Certificates of each Series in the
Principal Payment Amount as determined by a formula
specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus
Supplement, if the Series of Certificates has a Class
of Compound Interest Securities, additional principal
payments on the Certificates will be made on each
Distribution Date in an amount equal to the interest
accrued, but not then payable, on such Certificates
for the related Interest Accrual Period. If the
Series of Certificates has a Class of PAC Securities,
such PAC Securities will have certain priorities of
distribution with respect to principal to the extent
of certain targeted amounts with respect to each
Distribution Date, as set forth in the related
Prospectus Supplement.
ALLOCATION OF LOSSES................ If so specified in the related Prospectus Supplement,
on any Payment Date or Distribution Date, as
applicable, on which the principal balance of the
Mortgage Assets is reduced due to losses on the
Mortgage Assets, (i) the amount of such losses will
be allocated first, to reduce the Aggregate
Outstanding Principal of the Subordinate Securities
or other subordination, if any, and, thereafter, to
reduce the Aggregate Outstanding Principal of the
remaining Securities in the priority and manner
specified in such Prospectus Supplement until the
Aggregate Outstanding Principal of each Class of
Securities so specified has been reduced to zero or
paid in full, thus reducing the amount of principal
payable or distributable on each such Class of
Securities or (ii) such losses may be allocated in
any other manner set forth in the related Prospectus
Supplement. Unless otherwise specified in the related
Prospectus Supplement, such reductions of principal
of a Class or Classes of Securities shall be
allocated to the Holders of the Securities of such
Class or Classes pro rata in the proportion which the
outstanding principal of each Bond or Certificate of
such Class or Classes bears to the Aggregate
Outstanding Principal of all Securities of such
Class. See "DESCRIPTION OF THE SECURITIES-- Payments
or Distributions of Principal."
STATED MATURITY OF THE BONDS........ The "Stated Maturity" for each Class of a Series is
the date specified in the related Prospectus
Supplement no later than which all the Bonds of such
Class will be fully paid, calculated on the basis of
the assumptions set forth in the related Prospectus
Supplement. However, the actual maturity of the Bonds
is likely to occur earlier and may occur
significantly earlier than their Stated Maturity. The
rate of prepayments on the Mortgage Assets pledged as
security for any Series will depend on a variety of
factors, including the characteristics of the
Mortgage Loans underlying or comprising the Mortgage
Assets and the prevailing level of interest rates
from time to time, as well as on a variety of
economic, demographic, geographic, tax, legal and
other factors. No assurance can be
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given as to the actual prepayment experience of such
Mortgage Assets. See "YIELD AND PREPAYMENT
CONSIDERATIONS."
FINAL SCHEDULED DISTRIBUTION DATE OF
THE CERTIFICATES.................. The Final Scheduled Distribution Date for each Class
of Certificates of a Series is the date after which
no Certificates of such Class will remain
outstanding, assuming timely payments or
distributions are made on the Mortgage Assets in the
related Trust Fund in accordance with their terms.
The Final Scheduled Distribution Date of a Class may
equal the maturity date of the Mortgage Asset in the
related Trust Fund which has the latest stated
maturity or will be determined as described herein
and in the related Prospectus Supplement.
The actual maturity date of the Certificates of a
Series will depend primarily upon the level of
prepayments with respect to the Mortgage Loans
comprising the Mortgage Assets in the related Trust
Fund. The actual maturity of any Certificate is
likely to occur earlier and may occur substantially
earlier than its Final Scheduled Distribution Date as
a result of the application of prepayments to the
reduction of the principal balances of the
Certificates. The rate of prepayments on the Mortgage
Loans comprising Mortgage Assets in the Trust Fund
for a Series will depend on a variety of factors,
including certain characteristics of such Mortgage
Loans and the prevailing level of interest rates from
time to time, as well as on a variety of economic,
demographic, tax, legal, social and other factors. No
assurance can be given as to the actual prepayment
experience with respect to a Series. See "RISK
FACTORS" and "YIELD AND PREPAYMENT
CONSIDERATIONS--Prepayments and Weighted Average"
herein.
REDEMPTION OF BONDS................. The Bonds will be redeemable only as follows:
A. SPECIAL REDEMPTION
If specified in the related Prospectus Supplement,
Bonds of a Series will be subject to special
redemption, in whole or in part, if, as a result of
principal payments on the Mortgage Assets securing
such Series or low reinvestment yields or both, the
Trustee determines (based on assumptions, if any,
specified in the Indenture and after giving effect to
the amounts, if any, available to be withdrawn from
any Reserve Fund for such Series) that the amount
anticipated to be available in the Collection Account
for such Series on the date specified in the related
Prospectus Supplement will be insufficient to meet
debt service requirements on any portion of the
Bonds. Any such redemption would be limited to the
aggregate amount of all scheduled principal payments
and prepayments on the Mortgage Assets received since
the last Payment Date or Special Redemption Date,
whichever is
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later, and may shorten the maturity of any Bond so
redeemed by no more than the period between the date
of such special redemption and the next Payment Date.
Unless otherwise specified in the related Prospectus
Supplement, special redemptions of Bonds of a Series
will be made in the same priority and manner as
principal payments are made on a Payment Date. Bonds
subject to special redemption shall be redeemed on
the applicable Special Redemption Date at 100% of
their unpaid principal amount plus accrued interest
on such principal to the date specified in the
related Prospectus Supplement. To the extent
described in the related Prospectus Supplement, Bonds
of a Series may be subject to special redemption in
whole or in part following certain defaults under an
Enhancement Agreement or other agreement, and in
certain other events at the Redemption Price. See
"DESCRIPTION OF THE SECURITIES-- Special Redemption."
B. OPTIONAL REDEMPTION
To the extent specified in the related Prospectus
Supplement, one or more Classes of any Series may be
redeemed in whole, or in part, at, unless otherwise
specified in the related Prospectus Supplement, the
Issuer's option on any Payment Date on or after the
date specified in the related Prospectus Supplement
and at the Redemption Price. See "DESCRIPTION OF THE
SECURITIES--Optional Redemption."
C. MANDATORY REDEMPTION
If specified in the related Prospectus Supplement for
a Series, the Bonds of one or more Classes
("Individual Investor Bonds") may be subject to
mandatory redemptions by lot or by such other method
set forth in the Prospectus Supplement. The related
Prospectus Supplement relating to a Series of Bonds
with Individual Investor Securities will set forth
Class priorities, if any, and conditions with respect
to redemptions. Individual Investor Securities to be
redeemed shall be selected by random lot in $1,000
units, after making all permitted redemptions
requested by holders of Individual Investor
Securities or by such other method set forth in the
Prospectus Supplement. See "DESCRIPTION OF THE
SECURITIES--Mandatory Redemption."
OPTIONAL TERMINATION OF TRUST If so specified in the related Prospectus Supplement,
FUND.............................. the Company, as depositor of the Primary Assets into
the Trust Fund (acting in such capacity, and in such
capacity in respect of an Owner Trust, the
"Depositor"), the Servicer, or such other entity that
is specified in the related Prospectus Supplement,
may, at its option, cause an early termination of the
related Trust Fund by repurchasing all of the Primary
Assets remaining in the Trust Fund on or after a
specified
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date, or on or after such time as the aggregate
principal balance of the Certificates of any Class of
the Series is less than the amount or percentage
specified in the related Prospectus Supplement. See
"DESCRIPTION OF THE SECURITIES--Optional
Termination."
REPURCHASES OF CERTIFICATES......... If so specified in the related Prospectus Supplement,
one or more classes of the Certificates of such
Series may be repurchased, in whole or in part, at
the option of the Depositor, at such times and under
the circumstances specified in such Prospectus
Supplement and at the repurchase price set forth
therein. See "DESCRIPTION OF THE SECURITIES--Optional
Repurchase of Certificates" herein.
If so specified in the related Prospectus Supplement,
any Class of the Certificates may be subject to
repurchase at the request of the holders of such
Class or to mandatory repurchase by the Depositor
(including by random lot). See "DESCRIPTION OF THE
SECURITIES--Other Repurchases" herein.
SECURITY FOR THE BONDS,
OR THE TRUST FUND FOR THE
CERTIFICATES...................... Each Series of Bonds will be separately secured by
Primary Assets consisting of one or more of the
assets described below, as specified in the
Prospectus Supplement. The Trust Fund for a Series of
Certificates will consist of one or more of the
assets described below, as specified in the related
Prospectus Supplement.
A. MORTGAGE ASSETS
The Primary Assets for a Series may consist of any
combination of the following, to the extent and as
specified in the related Prospectus Supplement:
(1) Mortgage Loans
Mortgage Assets for a Series may consist, in whole or
in part, of Mortgage Loans, including participation
interests therein owned by the Issuer. Some Mortgage
Loans or Mortgage Loans underlying such participation
interests may be delinquent or non-performing as
specified in the related Prospectus Supplement. The
Mortgage Assets may consist of a single Mortgage Loan
or obligations of a single obligor or related
obligors as specified in the related Prospectus
Supplement. Mortgage Loans comprising or underlying
the Mortgage Assets may be originated by or acquired
from an affiliate of the Issuer and an affiliate of
the Issuer may be an obligor with respect to any such
Mortgage Loan. Payments on such Mortgage Loans will
be collected by the Trustee or by the Servicer or
Master Servicer with respect to a Series and
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remitted to the Trustee as described in the related
Prospectus Supplement and will be available in the
priority described in the related Prospectus
Supplement to make payments on the Bonds of that
Series. To the extent specified in the related
Prospectus Supplement, Mortgage Loans owned by the
Issuer will be serviced by Servicers, and, if
applicable, a Master Servicer, either of which may be
affiliates or shareholders of the Issuer.
Mortgaged Properties securing Mortgage Loans may
consist of multifamily residential rental property or
cooperatively owned multifamily property consisting
of five or more dwelling units, mixed
multifamily/commercial property or commercial
property. Mortgage Loans secured by Multifamily
Property may consist of FHA Loans. Mortgage Loans
may, as specified in the related Prospectus
Supplement, have various payment characteristics and
may consist of fixed rate loans or ARMs or Mortgage
Loans having balloon or other irregular payment
features. Unless otherwise specified in the related
Prospectus Supplement, the Mortgage Loans will be
secured by first mortgages or deeds of trust or other
similar security instruments creating a first lien on
Mortgaged Property. If so specified in the related
Prospectus Supplement, Mortgage Loans relating to
real estate projects under construction may be
included in the Mortgage Assets for a Series. The
related Prospectus Supplement will describe certain
characteristics of the Mortgage Loans comprising the
Mortgage Assets for a Series, including, without
limitation, (a) the aggregate unpaid principal
balance of the Mortgage Loans comprising the Mortgage
Assets; (b) the weighted average Mortgage Rate on the
Mortgage Loans, and, in the case of adjustable
Mortgage Rates, the weighted average of the current
adjustable Mortgage Rates, the minimum and maximum
permitted adjustable Mortgage Rates, if any, and the
weighted average thereof; (c) the average outstanding
principal balance of the Mortgage Loans; (d) the
weighted average remaining scheduled term to maturity
of the Mortgage Loans and the range of remaining
scheduled terms to maturity; (e) the range of
Loan-to-Value Ratios of the Mortgage Loans; (f) the
relative percentage (by principal balance as of the
Cut-off Date) of Mortgage Loans that are ARMs, fixed
interest rate, FHA Loans or other types of Mortgage
Loans; (g) any enhancement relating to the Mortgage
Assets; (h) the relative percentage (by principal
balance as of the Cut-Off Date) of Mortgage Loans
that are secured by Multifamily Property or
Commercial Property; (i) the geographic dispersion of
Mortgaged Properties securing the Mortgage Loans; and
(j) the use or type of each Mortgaged Property
securing a Mortgage Loan.
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If permitted by applicable law, the Mortgage Pool may
also include Mortgaged Properties acquired by
foreclosure or by deed-in-lieu of foreclosure ("REO
Property"). To the extent specified in the related
Prospectus Supplement, the Servicer or the Master
Servicer or the Special Servicer, if any, may
establish and maintain a trust account or accounts to
be used in connection with REO Properties and other
Mortgaged Properties being operated by it or on its
behalf on behalf of the Trust Estate, by the
mortgagor as debtor-in-possession or otherwise. See
"SECURITY FOR THE BONDS AND CERTIFICATES--Mortgage
Loans" and "SERVICING OF MORTGAGE LOANS--Maintenance
of Insurance Policies and Other Servicing
Procedures--Presentation of Claims; Realization Upon
Defaulted Mortgage Loans."
(2) Private Mortgage-Backed Securities
Private Mortgage-Backed Securities may include (a)
mortgage participations or pass-through certificates
representing beneficial interests in certain Mortgage
Loans, (b) debt obligations interest payments on
which may be tax-exempt in whole or in part secured
by mortgages or (c) participations or other interests
in any of the foregoing. Although individual Mortgage
Loans underlying a Private Mortgage-Backed Security
may be insured or guaranteed by the United States or
an agency or instrumentality thereof, they need not
be, and the Private Mortgage-Backed Securities
themselves will not be, so insured or guaranteed.
Unless otherwise specified in the Prospectus
Supplement relating to a Series, payments on the
Private Mortgage-Backed Securities will be
distributed directly to the Trustee (on behalf of the
Trust Estate) as registered owner of such Private
Mortgage-Backed Securities. Unless otherwise
specified in the Prospectus Supplement relating to a
Series, if payments with respect to interest on the
underlying obligations are tax-exempt, such
Prospectus Supplement will disclose the relevant
federal income tax characteristics relating to the
tax-exempt status of such obligations.
The related Prospectus Supplement for a Series will
specify, to the extent applicable, (i) the aggregate
approximate principal amount and type of any Private
Mortgage-Backed Securities to be included in the
Trust Estate or Trust Fund for such Series; (ii)
certain characteristics of the Mortgage Loans,
participations or other interests which comprise the
underlying assets for the Private Mortgage-Backed
Securities including (A) the payment features of such
Mortgage Loans, participations or other interests
(i.e., whether they are fixed interest rate or
adjustable rate and whether they provide for fixed
level payments, negative amortization, or other
payment features), (B) the approximate aggregate
principal amount, if known, of the underlying
Mortgage Loans, participations or
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other interests which are insured or guaranteed by a
governmental entity, (C) the servicing fee or range
of servicing fees with respect to the Mortgage Loans,
and (D) the stated maturities of the Mortgage Loans,
participations or other interests at origination;
(iii) the maximum original term-to-stated maturity of
the Private Mortgage-Backed Securities; (iv) the
weighted average term-to-stated maturity of the
Private Mortgage-Backed Securities; (v) the pass-
through or bond rate or ranges thereof for the
Private Mortgage-Backed Securities or formula
therefor; (vi) the weighted average pass-through or
certificate rate of the Private Mortgage-Backed
Securities or formula therefor; (vii) the issuer of
the Private Mortgage-Backed Securities (the "PMBS
Issuer"), the Servicer or Master Servicer of the
Private Mortgage-Backed Securities and the trustee of
the Private Mortgage-Backed Securities (the "PMBS
Trustee"); (viii) certain characteristics of credit
support, if any, such as reserve funds, insurance
policies, letters of credit, guarantees or
overcollateralization, relating to the Mortgage Loans
underlying the Private Mortgage-Backed Securities, or
to such Private Mortgage-Backed Securities
themselves; (ix) the terms on which underlying
Mortgage Loans, participations or other interests for
such Private Mortgage-Backed Securities or the
Private Mortgage-Backed Securities themselves may, or
are required to, be repurchased prior to maturity;
and (x) the terms on which substitute Mortgage Loans,
participations or other interests may be delivered to
replace those initially deposited with the PMBS
Trustee.
(3) Determination of Asset Value
If provided in the applicable Prospectus Supplement,
each item of Mortgage Assets for a Series will be
assigned an Asset Value. Unless otherwise specified
in the related Prospectus Supplement, the aggregate
of the Asset Values of the Primary Assets securing a
Series of Bonds or comprising a Trust Fund will equal
not less than the original Aggregate Outstanding
Principal of such Series. The Asset Value of an item
of Primary Assets securing any Series of Bonds or
comprising a Trust Fund is intended to represent the
principal amount of Securities of such Series that,
based on certain assumptions stated in the related
Series Supplement, can be supported by payments on
such item of Primary Assets, irrespective of
prepayments thereon, together with, depending on the
type of Primary Assets and method used to determine
its Asset Value, reinvestment earnings at the related
Assumed Reinvestment Rate, if any, and amounts in any
Reserve Fund established for that Series. In such a
case, the related Prospectus Supplement will set
forth the method or methods and related assumptions
used to determine Asset Value, if such method is
used, for the Primary Assets securing the
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related Series. See "DESCRIPTION OF THE
SECURITIES--Valuation of Mortgage Assets."
B. COLLECTION ACCOUNT
Unless otherwise provided in the related Prospectus
Supplement, all payments on the Primary Assets
pledged as security for a Series or comprising the
assets of a Trust Fund will be remitted to a
Collection Account to be established with the
Trustee, or if the Trustee is not also the Paying
Agent, with the Paying Agent, for such Series. Unless
otherwise provided in the related Prospectus
Supplement, such payments, together with the
Reinvestment Income thereon, if any, the amount of
cash, if any, initially deposited in the Collection
Account by the Issuer together with Reinvestment
Income thereon, if any, and any amounts withdrawn
from any Reserve Fund established for such Series,
will be available to make payments or distributions
of principal of and interest on such Series on the
next Payment Date or Distribution Date, as
applicable. Any funds remaining in the Collection
Account for a Series immediately following a Payment
Date or Distribution Date, as applicable (unless
required to be deposited into one or more Reserve
Funds, as described below, or applied to pay certain
expenses or other payments provided for in the
Indenture or Trust Agreement, as applicable) will be
promptly paid as provided in the Indenture or Trust
Agreement to the Issuer or, in certain circumstances,
to owners of residual interests and, upon such
payment, will be released from the lien of the
Indenture or Trust Agreement, as applicable. See
"SECURITY FOR THE BONDS AND CERTIFICATES-- Collection
Account."
C. GUARANTEED INVESTMENT CONTRACTS AND OTHER
AGREEMENTS
The Issuer may obtain and deliver to the Trustee
Guaranteed Investment Contracts pursuant to which
moneys held in the funds and accounts established for
such Series will be invested at a specified rate for
the Series. The Issuer may also obtain and deliver to
the Trustee certain other agreements such as interest
rate swap agreements, interest rate cap or floor
agreements or similar agreements issued by a bank,
insurance company, savings bank, savings and loan
association or other entity which reduce the effects
of interest rate fluctuations on the Mortgage Assets
or the Securities. The principal terms of any such
Guaranteed Investment Contract or other agreement,
including, without limitation, provisions relating to
the timing, manner and amount of payments thereunder
and provisions relating to the termination thereof,
will be described in the Prospectus Supplement for
the related Series. Additionally, the related
Prospectus Supplement will provide certain
information with
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respect to the issuer of such Guaranteed Investment
Contract or other agreement.
ENHANCEMENT......................... Enhancement in the form of reserve funds,
subordination, overcollateralization, insurance
policies, letters of credit or other types of credit
support may be provided with respect to the Mortgage
Assets or with respect to one or more Classes of
Securities of a Series. If the Mortgage Assets are
divided into separate Mortgage Groups, each securing
or supporting a separate Class or Classes of a
Series, credit support may be provided by a
cross-support feature which requires that
distributions be made with respect to Securities
secured by one Mortgage Group prior to distributions
to Subordinate Securities secured by another Mortgage
Group within the Trust Estate or Trust Fund.
The type, characteristics and amount of enhancement
will be determined based on the characteristics of
the Mortgage Loans underlying or comprising the
Mortgage Assets and other factors and will be
established on the basis of requirements of each
Rating Agency rating the Securities of such Series.
If so specified in the related Prospectus Supplement,
any such enhancement may apply only in the event of
certain types of losses or delinquencies and the
protection against losses or delinquencies provided
by such enhancement will be limited. See
"ENHANCEMENT" and "RISK FACTORS" herein.
A. SUBORDINATE SECURITIES
A Series of Securities may include one or more
Classes of Subordinate Securities. The rights of
holders of such Subordinate Securities to receive
distributions on any Payment Date or Distribution
Date, as applicable, will be subordinate in right and
priority to the rights of holders of Senior
Securities of the Series, but only to the extent
described in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement,
subordination may apply only in the event of certain
types of losses not covered by other enhancement.
Unless otherwise specified in the related Prospectus
Supplement, such subordination will be in lieu of
providing insurance policies or other credit support
with respect to losses arising from such events.
Unless otherwise specified in the related Prospectus
Supplement, the related Series Supplement may require
a trustee that is not the Trustee to be appointed to
act on behalf of holders of Subordinate Securities.
The related Prospectus Supplement will set forth
information concerning the amount of subordination of
a Class or Classes of Subordinate Securities in a
Series, the circumstances in which such subordination
will be applicable, the manner, if any, in which the
amount of subordination will decrease over
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time, the manner of funding any related Reserve Fund
and the conditions under which amounts in any related
Reserve Fund will be used to make distributions to
holders of Senior Securities and/or to holders of
Subordinate Securities or be released from the
related Trust Estate or Trust Fund. If cash flows
otherwise distributable to holders of Subordinate
Securities secured by a Mortgage Group will be used
as credit support for Senior Securities secured by
another Mortgage Group within the Trust Estate or
Trust Fund, the related Prospectus Supplement will
specify the manner and conditions for applying such a
cross-support feature. See "ENHANCEMENT--Subordinate
Securities."
B. INSURANCE
If so specified in the related Prospectus Supplement,
certain insurance policies will be required to be
maintained with respect to the Mortgage Loans
included in the Trust Estate or Trust Fund for a
Series. Such insurance policies may include, but are
not limited to, a standard hazard insurance policy
or, with respect to FHA Loans, FHA Insurance. See
"ENHANCEMENT" and "DESCRIPTION OF INSURANCE ON THE
MORTGAGE LOANS" herein. The Prospectus Supplement for
a Series will provide information concerning any such
insurance policies, including (a) the types of
coverage provided by each, (b) the amount of such
coverage and (c) conditions to payment under each. To
the extent described in the related Prospectus
Supplement, certain insurance policies to be
maintained with respect to the Mortgage Loans may be
terminated, reduced or replaced following the
occurrence of certain events affecting the authority
or creditworthiness of the insurer. Additionally,
such insurance policies may be terminated, reduced or
replaced by the Servicer or Master Servicer, if any,
provided that no rating assigned to Securities of the
related Series offered hereby and by the related
Prospectus Supplement is adversely affected and such
insurance policies may apply only in the event of
certain types of losses, all as set forth in the
related Prospectus Supplement.
C. LETTER OF CREDIT
If so specified in the related Prospectus Supplement,
credit support may be provided by one or more letters
of credit. A letter of credit may provide limited
protection against certain losses in addition to or
in lieu of other credit support. The issuer of the
letter of credit (the "L/C Bank") will be obligated
to honor demands with respect to such letter of
credit, to the extent of the amount available
thereunder, to provide funds under the circumstances
and subject to such conditions as are specified in
the related Prospectus Supplement. The liability of
the L/C Bank under its letter of
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credit may be reduced by the amount of unreimbursed
payments thereunder.
The maximum liability of an L/C Bank under its letter
of credit will be an amount equal to a percentage
specified in the related Prospectus Supplement of the
initial aggregate outstanding principal balance of
the Mortgage Loans in the Trust Estate or Trust Fund
or one or more Classes of Securities of the related
Series (the "L/C Percentage"). The maximum amount
available at any time to be paid under a letter of
credit will be determined in the manner specified
therein and in the related Prospectus Supplement. See
"ENHANCEMENT--Letter of Credit."
D. BOND GUARANTEE INSURANCE
If so specified in the related Prospectus Supplement,
credit support for a Series may be provided by an
insurance policy (the "Bond Guarantee Insurance")
issued by one or more insurance companies. Such Bond
Guarantee Insurance may guarantee timely
distributions of interest and full distributions of
principal on the basis of a schedule of principal
distributions set forth in or determined in the
manner specified in the related Prospectus
Supplement. See "ENHANCEMENT--Bond Guarantee
Insurance."
E. RESERVE FUNDS
The Issuer may deposit in one or more reserve funds
(collectively, the "Reserve Funds") for any Series
cash, Eligible Investments, demand notes or a
combination thereof in the aggregate amount, if any,
specified in the related Prospectus Supplement. Any
Reserve Funds for a Series may also be funded over
time through application of a specified amount of
cash flow, to the extent described in the related
Prospectus Supplement. Such a Reserve Fund may be
established to increase the likelihood of the timely
distributions on the Securities of such Series or to
reduce the likelihood of a special redemption with
respect to any Series. Reserve Funds may be
established to provide protection against certain
losses or delinquencies in addition to or in lieu of
other credit support. Amounts on deposit in the
Reserve Funds for a Series, together with (unless
otherwise specified in the related Prospectus
Supplement) the reinvestment income thereon, if any,
will be applied for the purposes, in the manner and
to the extent provided by the related Prospectus
Supplement.
On each Payment Date or Distribution Date, as
applicable, for a Series, all amounts on deposit in
any Reserve Funds for the Series in excess of the
amounts required to be maintained therein by the
related Indenture or Trust Agreement, as applicable,
and specified in the related Prospectus Supplement
may be released from the Reserve Funds and will
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not be available for future payments or distributions
on the Securities of such Series.
Additional information concerning any Reserve Funds,
including whether any such Reserve Fund is a part of
the Trust Estate or Trust Fund, the circumstances
under which moneys therein will be applied to make
distributions to Bondholders or Certificateholders,
the balance required to be maintained in such Reserve
Funds, the manner in which such required balance will
decrease over time and the manner of funding any such
Reserve Fund, will be set forth in the related
Prospectus Supplement. See "ENHANCEMENT--Reserve
Funds."
F. OVERCOLLATERALIZATION
To the extent applicable and as specified in the
related Prospectus Supplement, a Series may be
structured such that the outstanding principal
balances or Aggregate Asset Value of the Mortgage
Assets securing a Series may exceed the Aggregate
Outstanding Principal of such Series, thereby
resulting in overcollateralization. See "DESCRIPTION
OF THE SECURITIES--Valuation of Mortgage Assets."
SERVICING AGREEMENTS................ Various Servicers will perform certain servicing
functions with respect to any Mortgage Loans
comprising Mortgage Assets or Underlying Collateral
for a Series. In addition, if so specified in the
related Prospectus Supplement, a Master Servicer
identified in the related Prospectus Supplement may
service Mortgage Loans directly or administer and
supervise the performance by the Servicers of their
duties and responsibilities under separate servicing
agreements. Each Servicer must meet the requirements
of the Master Servicer, if any, and be approved by
the Issuer, and, if specified in the related
Prospectus Supplement, the Master Servicer and each
Servicer must be approved by either FNMA or FHLMC as
a seller-servicer of mortgage loans and, in the case
of FHA Loans, by HUD as an FHA mortgagee. Each
Servicer will be obligated under a servicing
agreement to perform customary servicing functions
and may be obligated to advance funds to cover
certain payments not made by the Mortgagors to the
extent described herein and in the related Prospectus
Supplement. The Master Servicer, if any, may, if so
specified in the related Prospectus Supplement, be
obligated to advance funds to cover any required
Advances not made by the Servicers to the extent
that, in the judgment of the Master Servicer, such
Advances are recoverable under the Insurance
Policies, any Enhancement or from the proceeds of
liquidation of the Mortgage Loans or as provided in
the related Prospectus Supplement. The related
Prospectus Supplement will specify the conditions to
and any limitations on such Advances and the
conditions under which such Advances will be
recoverable. With respect to any such Series,
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the Issuer may (i) enter into a standby agreement
with an independent standby Servicer acceptable to
each Rating Agency rating such Securities providing
that such standby Servicer will assume the Servicer's
or Master Servicer's obligations in the event of a
default by the Master Servicer or Servicer or (ii)
obtain a servicer performance bond acceptable to each
Rating Agency rating such Securities that will
guarantee certain of the Servicer's or Master
Servicer's obligations. The Issuer will assign to the
Trustee its rights under any Master Servicing
Agreement and any servicing agreements so provided
with respect to a Series as security for the Series.
See "SERVICING OF MORTGAGE LOANS" and "SECURITY FOR
THE BONDS AND CERTIFICATES--Mortgage Loans" herein.
SPECIAL SERVICER.................... If so specified in the related Prospectus Supplement,
to the extent a Mortgage Loan on or after the Closing
Date meets certain criteria set forth in the related
Prospectus Supplement, (i) all or a portion of the
servicing responsibilities with respect to such
Mortgage Loan may be transferred to a Special
Servicer or (ii) the Special Servicer will provide
advisory services with respect to the servicing of
such Mortgage Loan. See "SERVICING OF MORTGAGE LOANS"
herein.
FEDERAL INCOME TAX CONSIDERATIONS... Unless otherwise stated in the applicable Prospectus
Supplement, a real estate mortgage investment conduit
(a "REMIC") election will be made with respect to
each Series of Securities. Securities of such Series
will be designated as "regular interests" in a REMIC
("Regular Interest Securities") or as "residual
interests" in a REMIC ("Residual Interest
Securities").
If the applicable Prospectus Supplement so specifies
with respect to a Series of Securities, the
Securities of such Series will not be treated as
regular or residual interests in a REMIC for federal
income tax purposes but instead will be treated as
(i) indebtedness of the Issuer, (ii) an undivided
beneficial ownership interest in the Mortgage Loans
(and the arrangement pursuant to which the Mortgage
Loans will be held and the Securities will be issued
will be treated as a grantor trust under Subpart E,
part I of subchapter J of the Code and not as an
association taxable as a corporation for federal
income tax purposes); (iii) equity interests in an
association that will satisfy the requirements for
qualification as a real estate investment trust; (iv)
interests in an entity that will be treated as a
partnership for federal income tax purposes; or (v)
interests in an entity or a pool of assets that will
satisfy the requirements for qualification as a
financial asset securitization investment trust (a
"FASIT") for federal income tax purposes. Federal
income tax consequences to
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Bondholders or Certificateholders of any such Series
will be described in the applicable Prospectus
Supplement.
Compound Interest Securities, Interest Weighted
Securities and Zero Coupon Securities will, and
certain other Classes of Securities may, be issued
with original issue discount that is not DE MINIMIS.
In such cases, the Bondholder or Certificateholder
will be required to include the original issue
discount in gross income as it accrues, which may be
prior to the receipt of cash attributable to such
income. If a Security is issued at a premium, the
holder will be entitled to make an election to
amortize such premium on a constant yield method.
Securities constituting regular or residual interests
in a REMIC will generally represent "loans secured by
an interest in real property" for domestic building
and loan associations and "real estate assets" for
real estate investment trusts to the extent that the
underlying mortgage loans and interest thereon
qualify for such treatment. Non-REMIC Securities
(other than interests in grantor trusts and certain
interests in a FASIT) will not qualify for such
treatment.
A holder of a Residual Interest Security will be
required to include in its income its pro rata share
of the taxable income of the REMIC. In certain
circumstances, the holder of a Residual Interest
Security may have REMIC taxable income or tax
liability attributable to REMIC taxable income for a
particular period in excess of cash distributions for
such period or have an after-tax return that is less
than the after-tax return on comparable debt
instruments. Accordingly, a Residual Interest
Security may have a negative "value". In addition, a
portion (or all) of the income from a Residual
Interest Security (i) is not subject to offset by
losses from other activities, (ii) for a holder that
is subject to tax under the Code on unrelated
business taxable income, is treated as unrelated
business taxable income and (iii) for a foreign
holder, does not qualify for exemption from or
reduction of withholding. Further, individual holders
are subject to limitations on the deductibility of
expenses of the REMIC. See "FEDERAL INCOME TAX
CONSIDERATIONS."
ERISA CONSIDERATIONS................ A fiduciary of any employee benefit plan or other
retirement arrangement subject to Title I of the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Code,
should carefully review with its own legal advisors
whether the purchase or holding of Securities could
give rise to a transaction prohibited or otherwise
impermissible under ERISA or the Code. See "ERISA
CONSIDERATIONS."
LEGAL INVESTMENT.................... The related Prospectus Supplement will specify
whether any Class of the Securities of the particular
Series offered by this Prospectus and the related
Prospectus Supplement will constitute "mortgage
related securities" under the Secondary
</TABLE>
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<TABLE>
<S> <C>
Mortgage Market Enhancement Act of 1984, as amended
("SMMEA"). Investors whose investment authority is
subject to legal restrictions should consult their
own legal advisors to determine whether and to what
extent the Securities constitute legal investments
for them. See "LEGAL INVESTMENT."
The Issuer will use the net proceeds from the sale of
each Series to (i) purchase Mortgage Loans and/or
Private Mortgage-Backed Securities comprising the
Mortgage Assets securing such Securities, (ii) repay
indebtedness which has been incurred to acquire
Mortgage Assets to be pledged by the Issuer as
security for the Bonds or to be deposited into a
Trust Fund, (iii) establish any Reserve Funds
described in the related Prospectus Supplement, or
(iv) pay costs of structuring, guaranteeing and
issuing such Securities. If so specified in the
related Prospectus Supplement, the purchase of the
Mortgage Assets for a Series may be effected by an
exchange of Securities with the seller of such
Mortgage Assets. See "USE OF PROCEEDS."
RATINGS............................. It will be a condition to the issuance of any
Securities offered by this Prospectus and the related
Prospectus Supplement that they be rated in one of
the four highest applicable rating categories by at
least one Rating Agency. The rating or ratings
applicable to Securities of each Series will be as
set forth in the related Prospectus Supplement.
A security rating should be evaluated independently
of similar ratings of different types of securities.
A security rating does not address the effect that
the rate of prepayment on Mortgage Loans comprising
or underlying the Mortgage Assets or the effect that
reinvestment rates may have on the yield to investors
in the Securities. A 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 rating should be evaluated
independently of any other rating. See "RISK
FACTORS."
</TABLE>
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RISK FACTORS
Investors should consider, among other things, the following factors in
connection with the purchase of the Securities.
LIMITED LIQUIDITY. There can be no assurance that a secondary market for
the Securities of any Series will develop or, if it does develop, that it will
provide holders with liquidity of investment or will continue while Securities
of such Series remain outstanding. The market value of Securities will fluctuate
with changes in prevailing rates of interest. Consequently, sale of the
Securities by a holder in any secondary market which may develop may be at a
discount from par value or from their purchase price. Furthermore, secondary
purchasers may look only to the Prospectus Supplement attached hereto and to the
reports to Bondholders or Certificateholders, as applicable, delivered pursuant
to the Indenture or Trust Agreement, as applicable and as described herein under
the heading "DESCRIPTION OF THE SECURITIES-- General," "--The Bonds--General,"
and "--The Certificates--General" for information concerning the Securities.
Except to the extent described in the related Prospectus Supplement, Bondholders
or Certificateholders, as applicable, will have no optional redemption or early
termination rights, respectively. The Bonds are subject to redemption, and the
Certificates are subject to early termination or repurchase, by the Issuer only
under certain specified circumstances described herein and in the related
Prospectus Supplement. See "DESCRIPTION OF THE SECURITIES--Special Redemption,"
"--Optional Redemption," "--Optional Termination," "--Optional Repurchase of
Certificates," and "--Other Repurchases." Lehman Brothers Inc. ("Lehman
Brothers"), through one or more of its affiliates, and the other underwriters,
if any, presently expect to make a secondary market in the Securities, but have
no obligation to do so.
LIMITED ASSETS. The Issuer will not have, nor be expected in the future to
have, any significant assets available for payments on a Series of Securities
other than the assets pledged as security or deposited into a Trust Fund for a
specific Series. The Bonds will be non-recourse obligations of the Issuer and
each Series of Bonds will be separately secured. Unless otherwise specified in
the related Prospectus Supplement, no Series will have any claim against or
security interest in the Primary Assets pledged to secure any other Series. If
the Primary Assets securing a Series of Bonds is insufficient to make payments
on such Bonds, no other assets of the Issuer will be available for payment of
the deficiency.
Unless otherwise set forth in the Prospectus Supplement for a Series of
Certificates, the Trust Fund for such Series will be the only available source
of funds to make distributions on the Certificates of such Series. The only
obligations, if any, of the Depositor with respect to the Certificates of any
Series will be pursuant to certain representation and warranties. The Depositor
does not have, and is not expected in the future to have, any significant assets
with which to meet any obligation to repurchase Mortgage Assets with respect to
which there has been a breach of any representation or warranty. If, for
example, the Depositor were required to repurchase a Mortgage Loan which
constitutes a Mortgage Asset, its only sources of funds to make such repurchase
would be from funds obtained from the enforcement of a corresponding obligation,
if any, on the part of the originator of the Mortgage Loans or the Servicer, as
the case may be, or from a reserve fund established to provide funds for such
repurchases.
Additionally, certain amounts remaining in certain funds or accounts,
including the Collection Account and any Reserve Funds, may be withdrawn under
certain conditions and circumstances described in the related Prospectus
Supplement. In the event of such withdrawal, such amounts will not be pledged
to, or available for, future payment or distribution of principal of or interest
on the Securities. If so specified in the related Prospectus Supplement, on any
Payment Date or Distribution Date on which the principal balance of the Mortgage
Assets is reduced due to losses on the Mortgage Assets, (i) the amount of such
losses will be allocated first, to reduce the Aggregate Outstanding Principal of
the Subordinate Securities or other subordination, if any, and, thereafter, to
reduce the Aggregate Outstanding Principal of the remaining Securities in the
priority and manner specified in such Prospectus Supplement until the Aggregate
Outstanding Principal of each Class of Securities so specified has been reduced
to zero or paid
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in full, thus, reducing the amount of principal payable on each such Class of
Securities or (ii) such losses may be allocated in any other manner set forth in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, such reductions of principal of a Class or Classes of
Securities shall be allocated to the Holders of the Securities of such Class or
Classes pro rata in the proportion which the outstanding principal of each
Security of such Class or Classes bears to the Aggregate Outstanding Principal
of all Securities of such Class.
YIELD AND PREPAYMENT CONSIDERATIONS. Prepayments on the Mortgage Loans
comprising or underlying the Mortgage Assets securing a Series or deposited into
a Trust Fund, as the case may be, generally will result in a faster rate of
principal payments on such Securities than if payments on such Mortgage Assets
were made as scheduled. Thus, the prepayment experience on the Mortgage Loans
comprising or underlying the Mortgage Assets will affect the average life of
each Class secured thereby and the extent to which each such Class is paid prior
to its Stated Maturity or Final Scheduled Distribution Date. The rate of
principal payments on pools of mortgage loans varies between pools and from time
to time is influenced by a variety of economic, demographic, geographic, social,
tax, legal and other factors. There can be no assurance as to the rate of
prepayment on the Mortgage Assets securing any Series of Bonds or deposited into
a Trust Fund, as the case may be, or that the rate of payments will conform to
any model described herein or in any Prospectus Supplement. If prevailing
interest rates fall significantly below the applicable mortgage rates, principal
prepayments are likely to be higher than if prevailing rates remain at or above
the rates borne by the Mortgage Loans comprising or underlying the Primary
Assets securing a Series of Bonds or deposited into a Trust Fund, as the case
may be. As a result, the actual maturity of or final distribution on any Class
could occur significantly earlier than its Stated Maturity or Final Scheduled
Distribution Date. The actual maturity of the Bonds or final distribution on the
Certificates will also be affected by the extent to which Excess Cash Flow is
applied to payments or distributions of principal on the Securities. A Series of
Securities may include Classes of PAC Securities or other Securities with
priorities of payment and, as a result, yields on other Classes of Securities of
such Series may be more sensitive to prepayments on Mortgage Loans. A Series may
include a Class offered at a significant premium or discount. Yields on such
Class of Securities will be sensitive, and in some cases extremely sensitive, to
prepayments on Mortgage Loans and, in the case of a premium Class, where the
amount of interest payable with respect to such Class is extremely
disproportionate to principal, a holder might, in some prepayment scenarios,
fail to recoup its original investment. See "YIELD AND PREPAYMENT
CONSIDERATIONS."
LIMITED NATURE OF RATING. Any rating assigned to the Securities by a Rating
Agency will reflect such Rating Agency's assessment solely of the likelihood
that holders of such Securities will receive payments required to be made under
the Indenture or Trust Agreement, as the case may be. Such rating will not
constitute an assessment of the likelihood that principal prepayments on the
Mortgage Loans underlying or comprising the Mortgage Assets will be made by
Mortgagors or of the degree to which the rate of such prepayments might differ
from that originally anticipated. Such rating will not address the possibility
that prepayment at higher or lower rates than anticipated by an investor may
cause such investor to experience a lower than anticipated yield or that
investors purchasing a Security at a significant premium might fail to recoup
their initial investment under certain prepayment scenarios.
The amount of Primary Assets, including any applicable Enhancement, required
to support a Series of Securities will be determined on the basis of criteria
established by each Rating Agency rating such Series. Such criteria are
sometimes based upon actuarial analysis of the behavior of mortgage loans in a
larger group. Such analysis is often the basis upon which each Rating Agency
determines the amount of Enhancement required with respect to each Series of
Securities. There can be no assurance that the historical data supporting such
actuarial analysis will accurately reflect future experience generally nor any
assurance that the data derived from a large pool of mortgages will accurately
predict the delinquency, foreclosure or loss experience of any particular pool
of Mortgage Loans. In other cases, such analysis may be based upon the value of
the property underlying the Mortgage Assets. There can be no assurance that
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such value will accurately reflect the future value of the property and,
therefore, whether or not the Securities will be paid in full.
CERTAIN MORTGAGE LOANS AND MORTGAGED PROPERTY; OBLIGOR DEFAULT. Mortgage
Loans made with respect to Multifamily or Commercial Property may entail risks
of loss in the event of delinquency and foreclosure that are greater than
similar risks associated with traditional single-family property. Many of the
Mortgage Loans may be nonrecourse loans as to which, in the event of an obligor
default, recourse may be had only against the specific Commercial or Multifamily
Property and such limited other assets as have been pledged to secure such
Mortgage Loan, and not against the obligor's other assets. Furthermore, the
repayment of loans secured by income producing properties is typically dependent
upon the successful operation of the related real estate project rather than
upon the liquidation value of the underlying real estate. If the net operating
income from the project is reduced (for example, if rental or occupancy rates
decline or real estate and personal property tax rates or other operating
expenses increase), the obligor's ability to repay the loan may be impaired. A
number of the Mortgage Loans may be secured by owner-occupied Mortgaged
Properties or Mortgaged Properties leased to a single tenant. Accordingly, a
decline in the financial condition of the obligor or single tenant, as
applicable, may have a disproportionately greater effect on the net operating
income from such Mortgaged Properties than would be the case with respect to
Mortgaged Properties with multiple tenants. Furthermore, the liquidation value
of any Mortgaged Property may be adversely affected by risks generally incident
to interests in real property, including changes in general or local economic
conditions and/or specific industry segments; declines in real estate values;
declines in rental or occupancy rates; increases in interest rates, real estate
and personal property tax rates and other operating expenses including energy
costs; changes in governmental rules, regulations and fiscal policies, including
environmental legislation; acts of God; and other factors which are beyond the
Master Servicer's or the Special Servicer's, if any, control. Although the
Servicer or the Master Servicer is obligated to cause standard hazard insurance
to be maintained with respect to each Mortgage Loan, insurance with respect to
extraordinary hazards such as earthquakes and floods is generally not required
to be maintained, and insurance is not available with respect to many of the
other risks listed above.
Certain of the Mortgage Loans as of the Cut-Off Date may not be fully
amortizing over their terms to maturity, and, thus, will have substantial
principal balances due at their stated maturity. Mortgage Loans with balloon
payments involve a greater degree of risk because the ability of an obligor to
make a balloon payment typically will depend upon its ability either to
refinance the loan or to sell the related Mortgaged Property. The ability of an
obligor to accomplish either of these goals will be affected by a number of
factors, including the level of available mortgage rates at the time of sale or
refinancing, the obligor's equity in the related Mortgaged Property, the
financial condition and operating history of the obligor and the related
Mortgaged Property, tax laws, prevailing general economic conditions and the
availability of credit for commercial or multifamily, as the case may be, real
estate projects generally.
If so specified in the related Prospectus Supplement, in order to maximize
recoveries on defaulted Mortgage Loans, the Special Servicer, if any, will have
considerable flexibility under the Special Servicing Agreement to extend and
modify Mortgage Loans which are in default or as to which a payment default is
reasonably foreseeable, including in particular with respect to balloon
payments. In addition, the Special Servicer may receive a workout fee based on
receipts from or proceeds of such Mortgage Loans. While the Special Servicer
generally will be required to determine that any such extension or modification
is likely to produce a greater recovery on a present value basis than
liquidation, there can be no assurance that such flexibility with respect to
extensions or modifications or payment of a workout fee to the Special Servicer
will increase the present value of receipts from or proceeds of Mortgage Loans
which are in default or as to which a default is reasonably foreseeable. To the
extent losses on such Mortgage Loans exceed levels of available enhancement, the
Holders of the Bonds of a Series may experience a loss. See "SERVICING OF
MORTGAGE LOANS--Maintenance of Insurance Policies and Other Servicing
Procedures" and "ENHANCEMENT."
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ENHANCEMENT LIMITATIONS. The amount, type and nature of Insurance Policies,
subordination, Bond Guarantee Insurance, letters of credit,
overcollateralization, Reserve Funds and other enhancement, if any, required
with respect to a Series will be determined on the basis of criteria established
by each Rating Agency rating such Series. Such criteria are sometimes based upon
an actuarial analysis of the behavior of mortgage loans in a larger group. Such
analysis is often the basis upon which each Rating Agency determines the amount
of Enhancement required with respect to each Series of Securities. There can be
no assurance that the historical data supporting any such actuarial analysis
will accurately reflect future experience nor any assurance that the data
derived from a large pool of mortgage loans accurately predicts the delinquency,
foreclosure or loss experience of any particular pool of Mortgage Loans.
In addition, if principal payments on Securities of a Series are made in a
specified order of priority, any limits with respect to the aggregate amount of
claims under any related insurance policy, letters of credit or other
enhancement may be exhausted before the principal of the lower priority Classes
has been repaid. As a result, the impact of significant losses on the Mortgage
Loans may bear primarily upon the Securities of the later maturing Classes.
The Prospectus Supplement for a Series will describe any Reserve Funds,
Insurance Policies, letter of credit, subordination, Bond Guarantee Insurance,
over collateralization or other credit support relating to the Mortgage Assets
or to the Securities of such Series. Use of such Reserve Funds and payments
under such Insurance Policies, Bond Guarantee Insurance, letter of credit or
other third-party credit support will be subject to the conditions and
limitations described herein and in the related Prospectus Supplement. Moreover,
such Reserve Funds, Insurance Policies, letter of credit or other credit support
may not cover all potential losses or risks; for example, Enhancement may or may
not cover fraud or negligence by the Issuer, the Master Servicer or other
parties. Moreover, if a form of enhancement covers more than one Series of
Securities (each, a "Covered Trust"), holders of Securities issued by any of
such Covered Trusts will be subject to the risk that such credit support will be
exhausted by the claims of other Covered Trusts prior to such Covered Trust
receiving any of its intended share of such coverage. The obligations of the
issuers of any credit support will not be guaranteed or insured by the United
States, or by any agency or instrumentality thereof. A Series of Bonds may
include a Class or multiple Classes of Subordinate Securities to the extent
described in the related Prospectus Supplement. Although such subordination is
intended to reduce the risk of delinquent distributions or ultimate losses to
Holders of Senior Securities, the amount of subordination will be limited and
will decline under certain circumstances and any related Reserve Fund could be
depleted in certain circumstances. See "DESCRIPTION OF THE SECURITIES,"
"SECURITY FOR THE BONDS AND CERTIFICATES" and "ENHANCEMENT."
OVERCOLLATERALIZATION AND SUBORDINATION. To provide Bondholders and
Certificateholders with a degree of protection against loss, Mortgage Assets
having an Asset Value in excess of the aggregate principal amount of the
Securities may be pledged to secure a Series or deposited into the related Trust
Fund, as the case may be, or Excess Cash Flow may be applied to create
overcollateralization. Alternatively, a Series of Securities may include one or
more Classes of Subordinate Securities to the extent described in the related
Prospectus Supplement. Such overcollateralization or subordination will be at
amounts established by the Rating Agency rating the Series based on an assumed
level of defaults, delinquencies, other losses, application of Excess Cash Flow
or other factors. There can, however, be no assurance that the loss experience
on the Mortgage Assets securing the Securities will not exceed such assumed
levels, adversely affecting the ability of the Issuer to meet debt service or
distribution requirements on the Securities.
Although overcollateralization and subordination are intended to reduce the
risk of delinquent payments or losses to holders of Senior Securities, the
amount of overcollateralization or subordination, as the case may be, will be
limited and will decline under certain circumstances and any related Reserve
Fund could be depleted in certain circumstances.
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DELINQUENT AND NON-PERFORMING MORTGAGE LOANS. As set forth in the related
Prospectus Supplement, the Mortgage Pool for a particular Series may include, as
of the Cut-Off Date, REO Properties or Mortgage Loans that are past due or are
non-performing. If so specified in the related Prospectus Supplement, management
of such REO Properties or servicing with respect to such Mortgage Loans will be
transferred to the Special Servicer as of the Closing Date. Enhancement provided
with respect to a particular Series may not cover all losses related to such
delinquent or non-performing Mortgage Loans or to such REO Properties. Investors
should consider the risk that the inclusion of such Mortgage Loans or such REO
Properties in the Mortgage Pool may affect the rate of defaults and prepayments
on such Mortgage Pool and the yield on the Securities of such Series. See
"SECURITY FOR THE BONDS AND CERTIFICATES--Mortgage Loans."
REMEDIES FOLLOWING DEFAULT. The market value of the Mortgage Assets
securing a Series will fluctuate as general interest rates fluctuate. Following
an Event of Default with respect to a Series of Bonds, there is no assurance
that the market value of the Mortgage Assets securing the Series, will be equal
to or greater than the unpaid principal and accrued interest due on the Bonds of
such Series, together with any other expenses or liabilities payable thereon. If
the Mortgage Assets securing a Series are sold by the Trustee following an Event
of Default, the proceeds of such sale may be insufficient to pay in full the
principal of and interest on such Bonds. However, in certain events the Trustee
may be restricted from selling the Mortgage Assets securing a Series. See "THE
INDENTURE--Events of Default."
In addition, upon an Event of Default with respect to a Series and a
resulting sale of the Mortgage Assets securing such Bonds, unless otherwise
specified in the related Prospectus Supplement, the proceeds of such sale will
be applied, first, to the payment of certain amounts due to the Trustee, second,
to the payment of accrued interest on, and then to the payment of the then
Aggregate Outstanding Principal of, such Bonds (including interest on and the
Aggregate Outstanding Principal of any Residual Interest Bond) (as specified in
the related Prospectus Supplement), third, to the payment of the remaining
Administration Fee, if any, and, fourth, to the payment of any additional
amounts due the Issuer or to the holders of the Residual Interest Bonds as
applicable. Consequently, in the event of any such Event of Default and sale of
Mortgage Assets, any Classes on which principal payments have previously been
made may have, in the aggregate, a greater proportion of their principal repaid
than will Classes on which principal payments have not previously been made.
In the event the principal of the Securities of a Series is declared due and
payable, the holders of any such Securities issued at a discount from par
("original issue discount") may be entitled, under applicable provisions of the
federal Bankruptcy Code, to receive no more than an amount equal to the unpaid
principal amount thereof less unamortized original issue discount ("accreted
value"). There is no assurance as to how such accreted value would be determined
if such event occurred.
ENFORCEABILITY. As specified in the related Prospectus Supplement, the
Mortgages may contain due-on-sale clauses, which permit the lender to accelerate
the maturity of the Mortgage Loan if the borrower sells, transfers or conveys
the related Mortgaged Property or its interest in the Mortgaged Property. Such
clauses are generally enforceable subject to certain exceptions.
As specified in the related Prospectus Supplement, the Mortgage Loans may
include a debt-acceleration clause, which permits the lender to accelerate the
debt upon a monetary or non-monetary default of the borrower. The courts of all
states will enforce clauses providing for acceleration in the event of a
material payment default. The equity courts of any state, however, may refuse to
foreclose a mortgage or deed of trust when an acceleration of the indebtedness
would be inequitable or unjust or the circumstances would render the
acceleration unconscionable.
To the extent specified in the related Prospectus Supplement, the Mortgage
Loans will be secured by an assignment of leases and rents pursuant to which the
obligor typically assigns its right, title and interest as landlord under the
leases on the related Mortgaged Property and the income derived therefrom to the
lender as further security for the related Mortgage Loan, while retaining a
license to collect rents for so
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long as there is no default. In the event the obligor defaults, the license
terminates and the lender is entitled to collect rents. Such assignments must
usually be recorded to be perfected as security interests. In addition, some
state laws require that the lender take possession of the Mortgaged Property
and/or obtain a judicial appointment of a receiver before becoming entitled to
collect the rents. See also "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Anti-Deficiency Legislation and Other Limitations on Lenders."
ENVIRONMENTAL RISKS. Real property pledged as security to a lender may be
subject to certain environmental risks. Under the laws of certain states,
contamination of a property may give rise to a lien on the property to assure
the costs of clean-up. In several states, such a lien has priority over the lien
of an existing mortgage against such property. In addition, under the laws of
some states and under the federal Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA"), a lender may be liable, as
an "owner" or "operator," for costs of addressing releases or threatened
releases of hazardous substances that require remedy at a property, if agents or
employees of the lender have become sufficiently involved in the operations of
the borrower, regardless of whether or not the environmental damage or threat
was actually caused or exacerbated by the lender's agents or employees. A lender
also risks such liability on and following foreclosure of the Mortgaged
Property. Unless otherwise specified in the related Prospectus Supplement, the
Servicing Agreement, Master Servicing Agreement or Special Servicing Agreement,
as applicable, provides that the Servicer, the Master Servicer or the Special
Servicer, as applicable, acting on behalf of the Trust Estate, may not acquire
title to a Mortgaged Property underlying a Mortgage Loan or take over its
operation unless the Servicer, the Master Servicer or the Special Servicer, as
applicable, has previously determined, based upon a report prepared by a person
who regularly conducts environmental audits, that (i) the Mortgaged Property is
in compliance with applicable environmental laws and regulations or, if not,
that taking such actions as are necessary to bring the Mortgaged Property in
compliance therewith is reasonably likely to produce a greater recovery on a
present value basis than not taking such actions and (ii) there are no
circumstances or conditions present that have resulted in any contamination or
if such circumstances or conditions are present for which sch action could be
required, taking such actions with respect to the affected Mortgaged Property is
reasonably likely to produce a greater recovery on a present value basis than
not taking such actions. See "CERTAIN LEGAL ASPECTS OF MORTGAGE
LOANS--Environmental Matters."
ERISA CONSIDERATIONS. Generally, ERISA applies to investments made by
employee benefit plans and transactions involving the assets of such plans. Due
to the complexity of regulations which govern such plans, prospective investors
that are subject to ERISA are urged to consult their own counsel regarding
consequences under ERISA of acquisition, ownership and disposition of the
Securities of any Series. See "ERISA CONSIDERATIONS."
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING RESIDUAL INTEREST BONDS AND
RESIDUAL INTEREST CERTIFICATES. Holders of Residual Interest Bonds and Residual
Interest Certificates will be required to report on their federal income tax
returns as ordinary income their pro rata share of the taxable income of the
REMIC regardless of the amount or timing of their receipt of cash payments as
described in "FEDERAL INCOME TAX CONSIDERATIONS--Taxation of Holders of Residual
Interest Securities." Accordingly, under certain circumstances, holders of
Securities which constitute Residual Interest Bonds and Residual Interest
Certificates may have taxable income and tax liabilities arising from such
investment during a taxable year in excess of the cash received during such
period. The requirement that holders of Residual Interest Bonds and Residual
Interest Certificates report their pro rata share of the taxable income and net
loss of the REMIC will continue until the principal balances of all Classes of
Bonds or Certificates of the related Series have been reduced to zero, even
though holders of Residual Interest Bonds and Residual Interest Certificates
have received full payment of their stated interest and principal (if any). A
portion (or all) of a holder of a Residual Interest Bond's or Residual Interest
Certificate's share of the REMIC taxable income may be treated as "excess
inclusion" income to such holder which (i) generally, will not be subject to
offset by losses from other activities, (ii) for a tax-exempt holder, will be
treated as unrelated business
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taxable income and (iii) for a foreign holder, will not qualify for exemption
from withholding tax. Individual holders of Securities constituting Residual
Interest Bonds and Residual Interest Certificates may be limited in their
ability to deduct servicing fees and other expenses of the REMIC. In addition,
Residual Interest Bonds and Residual Interest Certificates are subject to
certain restrictions on transfer. Because of the special tax treatment of
Residual Interest Bonds and Residual Interest Certificates, the taxable income
arising in a given year on a Residual Interest Bond or a Residual Interest
Certificate will not be equal to the taxable income associated with investment
in a corporate bond or stripped instrument having similar cash flow
characteristics and pre-tax yield. Therefore, the after-tax yield on the
Residual Interest Bond and Residual Interest Certificates may be significantly
less than that of a corporate bond or stripped instrument having similar cash
flow characteristics, or may be negative.
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DESCRIPTION OF THE SECURITIES
GENERAL
The following summaries describe certain provisions common to each Series.
The summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, the provisions of the Indenture or
Trust Agreement and the Prospectus Supplement relating to each Series. When
particular provisions or terms used in the Indenture or Trust Agreement are
referred to, such provisions or terms shall be as specified in the Indenture or
Trust Agreement.
THE BONDS--GENERAL
The Bonds will be issued in Series pursuant to a Trust Indenture between the
Company and LaSalle National Bank (or another bank or trust company qualified
under the TIA and named in the related Prospectus Supplement for a Series), as
Trustee, or a Trust and the Trustee, each as supplemented by or as incorporated
by reference by a Series Supplement with respect to each Series. A copy of the
form of Trust Indenture has been filed with the Commission as an exhibit to the
Registration Statement of which the Prospectus forms a part. A copy of the
Series Supplement for a Series, if any, will be filed with the Commission as an
exhibit to a Current Report on Form 8-K to be filed with the Commission within
15 days of issuance of the Bonds of the related Series.
The Indenture does not limit the amount of Bonds that can be issued
thereunder and provides that any Series may be issued thereunder up to the
aggregate principal amount specified in the related Series Supplement that may
be authorized from time to time by the Issuer. Each Series will consist of one
or more Classes, one or more of which may be Compound Interest Securities,
Variable Interest Securities, Individual Investor Securities, Planned
Amortization Class Securities, Zero Coupon Securities, Principal Only
Securities, Interest Only Securities or Participating Securities. A Series may
also include one or more Classes of Subordinate Securities. If so specified in
related Prospectus Supplement, such Subordinate Securities may be offered hereby
and by the related Prospectus Supplement. Each Class of a Series will be issued
in registered or bearer form, as designated in the related Prospectus Supplement
for a Series, in the minimum denominations specified in the related Prospectus
Supplement. See "--Bearer Securities and Registered Securities." Bonds of a
Series may be issued in whole or part in book-entry form. The transfer of the
Bonds may be registered and the Bonds may be exchanged without the payment of
any service charge payable in connection with such registration of transfer or
exchange.
Payments of principal of and interest on the Bonds which are registered
securities will be made by the Trustee, or if the Trustee is not the paying
agent, the Paying Agent. Payments of principal of and interest on a Series will
be made on the Payment Dates specified in the related Prospectus Supplement, to
Bondholders of such Series registered as such on the close of business on the
record date specified in the related Prospectus Supplement at their addresses
appearing on the Bond Register. All payments will be made by check mailed to the
Bondholder or by wire transfer to accounts maintained by such Bondholder as
specified in the related Prospectus Supplement, except that final payments of
principal in retirement of each Bond will be made only upon presentation and
surrender of such Bond at the office of the New York Presenting Agent. Notice
will be mailed to the holder of such Bond before the Payment Date on which the
final principal payment in retirement of the Bond is expected to be made.
The Trustee will include with each payment on a Bond a statement showing
among other things, the allocation of such payment to interest, if any, and
principal, if any, and the remaining unpaid principal amount of a Bond of each
Class having the minimum denomination for Bonds of such Class of that Series,
the amount of Advances made by the Primary Servicer, the amount of servicing
compensation paid with respect to the Mortgage Assets, the aggregate principal
balance of delinquent, foreclosed Mortgage Loans and REO Property, the realized
losses for the Mortgage Assets, if applicable, the number and aggregate
principal balance of Deleted and Substitute Mortgage Loans, and on each Payment
Date prior to the commencement of principal payments on a Class of Compound
Interest Bonds, the aggregate unpaid
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principal amount of each Class of Bonds, the interest accrued since the prior
Payment Date and added to the principal of a Compound Interest Bond having the
minimum denomination for Bonds of such Class and the new principal balance of
such Bond.
THE CERTIFICATES--GENERAL
The Certificates will be issued in Series pursuant to separate Trust
Agreements between the Depositor and LaSalle National Bank (or another bank or
trust company named in the related Prospectus Supplement). A form of Trust
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. The Trust Agreement relating to each Series of
Certificates will be filed as an exhibit to a report on Form 8-K to be filed
with the Commission within 15 days following the issuance of such Series of
Certificates. The following summaries describe certain provisions common to each
Series of Certificates. The summaries do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, the provisions
of the Trust Agreement and the Prospectus Supplement relating to each Series of
Certificates. When particular provisions or terms used in the Trust Agreement
are referred to, such provisions or terms shall be as specified in the Trust
Agreement.
Each Series of Certificates will consist of one or more Classes, one or more
of which may consist of Compound Interest Securities, Variable Interest
Securities, Interest Only Certificates, Principal Only Certificates, Zero Coupon
Securities or Planned Amortization Class Securities ("PACs"). A Series of
Certificates may also include one or more Classes of Subordinate Securities.
Each Series will be issued in fully registered form or bearer form, in the
minimum original amount or notional amount for Certificates of each Class
specified in the related Prospectus Supplement. The transfer of the Certificates
may be registered, and the Certificates may be exchanged, without the payment of
any service charge payable in connection with such registration of transfer or
exchange. If specified in the related Prospectus Supplement, one or more Classes
of a Series may be available in book-entry form only. See "--Bearer Securities
and Registered Securities."
Commencing on the date specified in the related Prospectus Supplement,
distributions of principal and interest on the Certificates will be made on each
Distribution Date as set forth in the related Prospectus Supplement.
Distributions of principal of and interest on Certificates of a Series in
registered form will be made by check mailed to Certificateholders of such
Series registered as such on the close of business on the record date specified
in the related Prospectus Supplement at their addresses appearing on the
Certificate Register, except that (a) distributions may be made by wire transfer
(at the expense of the Certificateholder requesting payment by wire transfer) in
certain circumstances described in the related Prospectus Supplement and (b) the
final distribution in retirement of a Certificate will be made only upon
presentation and surrender of such Certificate at the corporate trust office of
the Trustee for such Series or such other office of the Trustee as specified in
the Prospectus Supplement. Notice of the final distribution on a Certificate
will be mailed to the Holder of such Certificate before the Distribution Date on
which such final distribution in retirement of the Certificate is expected to be
made.
The Trustee will include with each distribution on a Certificate a statement
showing among other things, the allocation of such payment to interest, if any,
and principal, if any, and the remaining unpaid principal amount of a
Certificate of each Class having the minimum denomination for Certificates of
such Class of that Series, the amount of Advances made by the Primary Servicer,
the amount of servicing compensation paid with respect to the Mortgage Assets,
the aggregate principal balance of delinquent, foreclosed Mortgage Loans and REO
Property, the realized losses for the Mortgage Assets, if applicable, the number
and aggregate principal balance of Deleted and Substitute Mortgage Loans, and on
each Distribution Date prior to the commencement of principal payments on a
Class of Compound Interest Securities, the aggregate unpaid principal amount of
each Class of Certificates, the interest accrued since the prior Distribution
Date and added to the principal of a Compound Interest Certificate having the
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minimum denomination for Certificates of such Class and the new principal
balance of such Certificate. See "THE TRUST AGREEMENT--Reports to
Certificateholders."
BEARER SECURITIES AND REGISTERED SECURITIES
Unless otherwise provided with respect to a Series of Securities, the
Securities will be issuable as registered securities without coupons. If so
provided with respect to a Series of Securities, Securities of such Series will
be issuable solely as bearer securities with coupons attached or as both
registered securities and bearer securities. Any such bearer securities will be
issued in accordance with U.S. tax and securities laws then applicable to the
sale of such securities.
Unless applicable law at the time of issuance of any bearer securities
provides otherwise, in connection with the sale during the "restricted period"
as defined in Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury
Regulations (generally, the first 40 days after the Closing Date and, with
respect to unsold allotments, until sold) no bearer security shall be mailed or
otherwise delivered to any location in the United States (as defined under
"LIMITATIONS ON ISSUANCE OF BEARER SECURITIES"). A bearer security in definitive
form may be delivered only if the Person entitled to receive such bearer
security furnishes written certification, in the form required by the Indenture,
to the effect that such bearer security is not owned by or on behalf of a United
States person (as defined under "LIMITATIONS ON ISSUANCE OF BEARER SECURITIES"),
or, if a beneficial interest in such bearer security is owned by or on behalf of
a United States person, that such United States person (i) acquired and holds
the bearer security through a foreign branch of a United States financial
institution, (ii) is a foreign branch of a United States financial institution
purchasing for its own account or resale (and in either case (i) or (ii), such
financial institution agreed to comply with the requirements of Section
165(j)(3)(A), (B), or (C) of the Internal Revenue Code of 1986, as amended, and
the regulations thereunder) or (iii) is a financial institution purchasing for
resale during the restricted period only to non-United States persons outside
the United States. See "LIMITATIONS ON ISSUANCE OF BEARER SECURITIES."
Registered securities of any Series (other than in book-entry form) will be
exchangeable for other registered securities of the same Series and of a like
aggregate principal amount and tenor but of different authorized denominations.
In addition, if specified in the related Prospectus Supplement, if Securities of
any Series are issuable as both registered securities and as bearer securities,
at the option of the Holder, upon request confirmed in writing, and subject to
the terms of the Indenture or Trust Agreement, as the case may be, bearer
securities (with all unmatured coupons, except as provided below, and all
matured coupons in default) of such Series will be exchangeable into registered
securities of the same Series of any authorized denominations and of a like
aggregate principal amount and tenor. Unless otherwise indicated in an
applicable Prospectus Supplement, any bearer security surrendered in exchange
for a registered security between the relevant record date and the relevant date
for payment of interest shall be surrendered without the coupon relating to such
date for payment of interest and interest will not be payable in respect of the
registered security issued in exchange for such bearer security, but will be
payable only to the holder of such coupon when due in accordance with the terms
of the Indenture or Trust Agreement, as the case may be. Except as provided in
an applicable Prospectus Supplement, bearer securities will not be issued in
exchange for registered securities. If Securities of a Series are issuable as
bearer securities, the Issuer will be required to maintain a transfer agent for
such Series outside the United States.
Unless otherwise indicated in an applicable Prospectus Supplement, payment
or distribution of principal of and interest on bearer securities will be
payable or distributable, subject to any applicable laws and regulations, at the
offices of such Paying Agents outside the United States as the Issuer may
designate from time to time by check or by wire transfer, at the option of the
holder, to an account maintained by the payee with a bank located outside the
United States. Unless otherwise indicated in an applicable Prospectus
Supplement, payment or distribution of interest on bearer securities on any
Payment Date or Distribution Date, as applicable, will be made only against
surrender of the coupon relating to such
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Payment Date or Distribution Date, as applicable. No payment or distribution of
interest on a bearer security will be made unless on the earlier of the date of
the first such payment by the Paying Agent or the delivery by the Issuer of the
bearer security in definitive form (the "Certification Date"), a written
certificate in the form and to the effect described above is provided to the
Issuer. No payment or distribution with respect to any bearer security will be
made at any office or agency in the United States or by check mailed to any
address in the United States or by transfer to an account maintained with a bank
located in the United States. Notwithstanding the foregoing, payment or
distribution of principal of and interest on bearer securities denominated and
payable in U.S. dollars will be made at the office of the Issuer's Paying Agent
in the Borough of Manhattan, The City of New York if, and only if, payment of
the full amount thereof in U.S. dollars at all offices or agencies outside the
United States is illegal or effectively precluded by exchange controls or other
similar restrictions.
BOOK-ENTRY REGISTRATION
If so specified in the related Prospectus Supplement, the Securities will be
issued in book-entry form in the minimum denominations specified in such
Prospectus Supplement and integral multiples thereof, and each Class will be
represented by one or more single Securities registered in the name of the
nominee of the depository, The Depository Trust Company ("DTC"), a
limited-purpose trust company organized under the laws of the State of New York.
Unless otherwise specified in the related Prospectus Supplement, no person
acquiring an interest in book-entry Securities (a "Securities Owner") will be
entitled to receive Securities representing such person's interest in the
Securities except in the event that Definitive Securities (as defined herein)
are issued under the limited circumstances set forth below. Unless and until
Definitive Securities are issued, it is anticipated that the only holder of
book-entry Securities will be Cede & Co., as nominee of DTC. Securities Owners
will not be "Holders," "Bondholders" or "Certificateholders" under the Indenture
or Trust Agreement, as applicable, and Securities Owners will only be permitted
to exercise the rights of Bondholders or Certificateholders, as applicable,
indirectly through DTC and its Participants.
DTC was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of its Participants. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system also is available
to entities that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Securities Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of book-entry
Securities may do so only through Participants and Indirect Participants.
Because DTC can only act on behalf of Participants and Indirect Participants,
the ability of a Securities Owner to pledge such owner's interest in a
book-entry Security to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interest in a book-entry
Security, may be limited. In addition, under a book-entry format, Securities
Owners may experience some delay in their receipt of principal and interest
distributions with respect to the book-entry Securities since such distributions
will be forwarded to DTC and DTC will then forward such distributions to its
Participants which in turn will forward them to Indirect Participants or
Securities Owners.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the book-entry Securities
and is required to receive and transmit principal and interest distributions and
other distributions with respect to the book-entry Securities. Participants and
Indirect Participants with which Securities Owners have accounts with respect to
book-entry Securities similarly are required to make book-entry transfers and
receive and transmit such distributions on behalf of their respective Securities
Owners. Accordingly, although Securities Owners will not possess book-entry
Securities, the Rules provide a mechanism by which Securities Owners will
receive distributions and will be able to transfer their interests.
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The Issuer understands that DTC will take any action permitted to be taken
by a Bondholder or Certificateholder under the Indenture or Trust Agreement, as
applicable, only at the direction of one or more Participants to whose account
with DTC ownership of the book-entry Securities is credited. Additionally, the
Issuer understands that DTC will take such actions with respect to Securities
Owners who are holders of a certain specified interest in book-entry Securities
or holders having a certain specified voting interest only at the direction of
and on behalf of Participants whose holdings represent that specified interest
or voting interest. DTC may take conflicting actions with respect to other
Securities Owners to the extent that such actions are taken on behalf of
Participants whose holdings represent that specified interest or voting
interest.
Unless otherwise specified in the related Prospectus Supplement, Securities
of a Series issued initially in book-entry form only will be issued in fully
registered, certificated form ("Definitive Securities") to Securities Owners,
rather than to DTC, only if (i) DTC advises the Trustee in writing that DTC is
no longer willing or able properly to discharge its responsibilities as
depository with respect to the Securities, and the Issuer is unable to locate a
qualified successor, (ii) the Issuer, at its sole option, elects to terminate
the book-entry system through DTC or (iii) after the occurrence of an Event of
Default under the Indenture or Trust Agreement, as applicable, Securities Owners
representing a majority of the aggregate outstanding principal amount of the
Securities advise DTC through Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interests of Securities Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Securities. Upon surrender by DTC of the
Securities registered in the name of its nominee and instructions for
registration, the Trustee will issue all, but not less than all, of the
principal amount of the formerly DTC-held Securities then outstanding in the
form of Definitive Securities, and thereafter the Trustee will recognize the
holders of such Definitive Securities as Bondholders under the Indenture, or
Certificateholders under the Trust Agreement, as applicable.
VALUATION OF MORTGAGE ASSETS
If stated in the applicable Prospectus Supplement, each item of Mortgage
Assets securing a Series, or comprising the Trust Fund, as the case may be, will
be assigned an initial Asset Value determined in the manner and subject to the
assumptions specified in the related Prospectus Supplement. If so specified in
the related Prospectus Supplement, the aggregate of the Asset Values of the
Mortgage Assets pledged to secure a Series or comprising the Trust Fund, as the
case may be, will not be less than the initial Aggregate Outstanding Principal
of the related Series at the date of issuance thereof.
With respect to the Mortgage Assets pledged to collateralize the Bonds of a
Series, or comprising the Trust Fund, as the case may be, as of any date, the
Aggregate Asset Value, unless otherwise specified in the related Prospectus
Supplement, shall be equal to the aggregate of the Asset Values for each
Mortgage Loan or Private Mortgage-Backed Security or other Mortgage Assets in
the Trust Estate or Trust Fund, as applicable, for a Series of Securities plus
the amount, if any, remaining in the Collection Account and any other Pledged
Fund or Account subsequent to an initial deposit therein on the Delivery Date,
together with Reinvestment Income thereon, if any, at the Assumed Reinvestment
Rate, if any.
There are a number of alternative means of determining Asset Value of the
Mortgage Assets, including determinations based on the discounted present value
of the remaining scheduled payments on such Mortgage Assets, determinations
based on the relationship between the interest rate borne by such Mortgage
Assets and the Bond Interest Rate or Rates or Certificate Interest Rate or Rates
for the related Classes of Securities, or based upon the aggregate outstanding
principal balances of the Mortgage Assets. If applicable, the Prospectus
Supplement for a Series will specify the method or methods and summarize
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the related assumptions used to determine the Asset Values of the Mortgage
Assets for such Series of Securities.
The Assumed Reinvestment Rate, if any, for a Series will be the rate on
which amounts deposited in the Collection Account will be assumed to accrue
interest or a rate insured or guaranteed by means of a surety bond, Guaranteed
Investment Contract, or similar arrangement. If the Assumed Reinvestment Rate is
insured or guaranteed, the related Prospectus Supplement will set forth the
terms of such arrangement.
PAYMENTS OR DISTRIBUTIONS OF INTEREST
Each Class of a Series (other than a Class of Zero Coupon Securities or
Principal Only Securities) will accrue interest at the rate per annum specified,
or in the manner determined and set forth, in the related Prospectus Supplement
(calculated on the basis of a 360-day year of twelve 30-day months, unless
otherwise specified in the related Prospectus Supplement). Interest on all
Securities which accrue interest, other than Compound Interest Securities, will
be due and payable on the Payment Dates or Distribution Dates specified in the
related Prospectus Supplement. However, failure to pay interest on a current
basis may not necessarily be an Event of Default with respect to a particular
Series of Securities. Unless otherwise specified in the related Prospectus
Supplement, payment of interest on a Class of Compound Interest Securities will
commence only following the Accrual Termination Date. Prior to such time,
interest on such Class of Compound Interest Securities will accrue and the
amount of interest so accrued will be added to the principal thereof on each
Payment Date or Distribution Date. Following the applicable Accrual Termination
Date, interest payments will be made on such Class on the Compound Value of such
Class. The Compound Value of a Class of Compound Interest Securities equals the
original principal amount of the Class, plus accrued and unpaid interest added
to such Class through the immediately preceding Payment Date or Distribution
Date, less any principal payments previously made on that Class, and if
specified in the related Prospectus Supplement, losses allocable thereto. Each
payment of interest on each Class of Securities (or addition to principal of a
Class of Compound Interest Securities) on a Payment Date or Distribution Date
will include all interest accrued during the related Interest Accrual Period
preceding such Payment Date or Distribution Date, which Interest Accrual Period
will end on the day preceding each Payment Date or Distribution Date or such
earlier date as may be specified in the related Prospectus Supplement. If the
Interest Accrual Period for a Series ends on a date other than a Payment Date or
Distribution Date for such Series, the yield realized by the holders of such
Securities may be lower than the yield that would result if the Interest Accrual
Period ended on such Payment Date or Distribution Date. Additionally, if so
specified in the related Prospectus Supplement, interest accrued for an Interest
Accrual Period for one or more Classes may be calculated on the assumption that
principal payments (and additions to principal of the Securities), and
allocations of losses on the Primary Assets (if so specified in the related
Prospectus Supplement), are made on the first day of the preceding Interest
Accrual Period and not on the Payment Date or Distribution Date for such
preceding Interest Accrual Period when actually made or added. Such method would
produce a lower effective yield than if interest were calculated on the basis of
the actual principal amount outstanding.
To the extent provided in the related Prospectus Supplement, a Series may
include one or more Classes of Variable Interest Securities. The Variable
Interest Rate of Variable Interest Securities will be a variable or adjustable
rate, subject to a Maximum Variable Interest Rate and a Minimum Variable
Interest Rate. It is the Issuer's present intention, subject to changing market
conditions, that the Variable Interest Rate formula or index be based on an
established financial index in the national or international financial markets.
The Variable Interest Payment Dates or Variable Interest Distribution Dates, as
applicable, for Variable Interest Securities will be set forth in the related
Prospectus Supplement and need not be the same as the Payment Dates or
Distribution Dates for other Securities in such Series, but may be either more
or less frequent. Unless otherwise specified in the related Prospectus
Supplement or herein, references to Payment Date or Distribution Dates include
Variable Interest Payment Dates or Variable Interest Distribution Dates, as
applicable. For each Class of Variable Interest Securities, the related
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Prospectus Supplement will set forth the initial Bond Interest Rate or
Certificate Interest Rate, as applicable, (or the method of determining it), the
Variable Interest Period and the formula, index or other method by which the
Bond Interest Rate or Certificate Interest Rate, as applicable, for each
Variable Interest Period will be determined.
Interest Only Securities or Interest Weighted Securities, among others, may
be assigned a "Notional Amount" which is used solely for convenience in
expressing the calculation of interest and for certain other purposes. Unless
otherwise specified in the related Prospectus Supplement, the Notional Amount
will be determined at the time of issuance of such Securities based on the
principal balances or Bond Value of the Mortgage Loans attributable to the
Securities of a Series entitled to receive principal, and will be adjusted
monthly over the life of the Securities based upon adjustments to the Asset
Value or principal amounts of such Mortgage Loans. Reference to the Notional
Amount is solely for convenience in certain calculations and does not represent
the right to receive any distributions allocable to principal.
If so specified in the related Prospectus Supplement, if funds in the
Collection Account are insufficient to make required payments of interest to
Bondholders or Certificateholders on any Payment Date or Distribution Date, as
applicable, amounts available for payment to the Bondholders or
Certificateholders of each Class will be allocated pro rata in the proportion in
which the outstanding principal balance of each Bond or Certificate bears to the
aggregate outstanding principal balance of all Bonds or Certificates of such
Class, except that Subordinate Bondholders or Subordinate Certificateholders, if
any, will not, unless otherwise specified in the related Prospectus Supplement,
receive any payments of interest on the Subordinate Bonds or Subordinate
Certificates until Senior Bondholders or Senior Certificateholders receive
payments of interest due them (in each case as described in the related
Prospectus Supplement).
PAYMENTS OR DISTRIBUTIONS OF PRINCIPAL
On each Payment Date or Distribution Date for a Series, the Issuer will make
principal payments to the holders of the Securities of such Series on which
principal is then due and payable. Payments of principal on a Series will be
allocated among Classes of such Series in the order of priority and amounts
specified in the related Prospectus Supplement. All payments or distributions of
principal of Securities of a Class will be applied either on a pro rata or
random lot basis, as specified in the related Prospectus Supplement.
Except as specified otherwise in the related Prospectus Supplement, the
total amount of principal payments or distributions required to be made on the
Securities of any Series on a Payment Date or Distribution Date (the "Principal
Payment Amount") will be determined as specified in the related Prospectus
Supplement. If the Series of Bonds has a Class of PAC Securities, such PAC
Securities will have certain priorities of payment with respect to principal to
the extent of certain targeted amounts with respect to each Payment Date or
Distribution Date, as set forth in the related Prospectus Supplement. There can
be no assurance that the Principal Payment Amount on any Payment Date or
Distribution Date will be sufficient to pay in full the PAC Amount payable on
such Payment Date or Distribution Date. The failure to pay in full the PAC
Amount payable on a Payment Date or Distribution Date shall not constitute an
Event of Default under the Indenture or Trust Agreement.
If so specified in the related Prospectus Supplement, on any Payment Date or
Distribution Date on which the principal balance of the Mortgage Assets is
reduced due to losses on the Mortgage Assets, (i) the amount of such losses will
be allocated first, to reduce the Aggregate Outstanding Principal of the
Subordinate Bonds or Subordinate Certificates or other subordination, if any,
and, thereafter, to reduce the Aggregate Outstanding Principal of the remaining
Securities in the priority and manner specified in such Prospectus Supplement
until the Aggregate Outstanding Principal of each Class of Securities so
specified has been reduced to zero or paid in full, thus, reducing the amount of
principal payable on each such Class of Securities or (ii) such losses may be
allocated in any other manner set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, such reductions
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of principal of a Class or Classes of Securities shall be allocated to the
holders of the Securities of such Class or Classes pro rata in the proportion
which the outstanding principal of each Security of such Class or Classes bears
to the Aggregate Outstanding Principal of all Securities of such Class.
One or more Classes of a Series may consist of Subordinate Bonds or
Subordinate Certificates. Subordinate Bonds or Subordinate Certificates may be
included in a Series to provide credit support as described herein under
"ENHANCEMENT" in lieu of or in addition to other forms of credit support. The
extent of subordination of a Class of Subordinate Bonds or Subordinate
Certificates may be limited as described in the related Prospectus Supplement.
See "ENHANCEMENT." If the Mortgage Assets are divided into separate Mortgage
Groups securing separate Classes of a Series, credit support may be provided by
a cross-support feature which requires that distributions be made to Senior
Bonds or Senior Certificates secured by one Mortgage Group prior to making
distributions on Subordinate Bonds or Senior Certificates secured by another
Mortgage Group within the Trust Estate or Trust Fund. Subordinate Bonds or
Subordinate Certificates will be offered hereby and by the related Prospectus
Supplement so long as such Bonds or Certificates are rated in one of the four
highest rating categories by at least one Rating Agency.
SPECIAL REDEMPTION
If specified in the related Prospectus Supplement, the Bonds of a Series may
be subject to special redemption on the day of any month specified therein if,
as a result of the prepayment experience on the Mortgage Assets securing such
Bonds or the low yield available for reinvestment or both, the Trustee
determines (based on assumptions specified in the Indenture and after giving
effect to the amounts, if any, available to be withdrawn from any Reserve Fund
for such Series) that the amount anticipated to be available in the Collection
Account on the date specified in the related Prospectus Supplement for such
Series, is anticipated to be insufficient to pay debt service on the Bonds of
such Series on such Payment Date. The principal amount of Bonds of such Series
required to be so redeemed will not exceed the Principal Payment Amount
otherwise required to be paid on the next Payment Date. Therefore, the primary
result of such a special redemption of Bonds is payment of principal prior to
the next scheduled Payment Date.
To the extent described in the related Prospectus Supplement, Bonds of a
Series may be subject to special redemption in whole or in part following
certain defaults under an Enhancement Agreement and, in certain other events, at
the Redemption Price.
All payments of principal pursuant to any special redemption will be made in
the order of priority and in the manner specified in the related Prospectus
Supplement. Notice of any special redemption will be mailed by the Issuer or the
Trustee prior to the Special Redemption Date. Unless otherwise specified in the
related Prospectus Supplement, the Redemption Price for any Bonds so redeemed
will be equal to 100% of the principal amount of such Bonds (or 100% of the
Compound Value of any Compound Interest Securities) or portions thereof so
redeemed, together with interest accrued thereon to the date specified in the
related Prospectus Supplement.
In the event that Mortgage Assets having an Aggregate Bond Value at least
equal to the original Aggregate Outstanding Principal of a Series is not pledged
and delivered to the Trustee on the related Closing Date, the Issuer will
deposit cash or Eligible Investments on an interim basis with the Trustee on
such Closing Date in lieu of such Undelivered Mortgage Assets. If Mortgage
Assets are not subsequently delivered within 90 days of issuance of the Bonds,
the amount of such deposit corresponding to principal may be used to pay a
corresponding amount of principal of the Bonds to the extent set forth, and on
the Payment Dates specified, in the Prospectus Supplement.
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OPTIONAL REDEMPTION
The Issuer, or such other Person specified in the related Prospectus
Supplement, may, at its option and if so specified in the related Prospectus
Supplement, redeem, in whole or in part, one or more Classes of any Series on
any Payment Date for such Series on or after the dates, if any, specified in
such Prospectus Supplement. Notice of such redemption will be given by the
Issuer or Trustee prior to the Redemption Date. In the case of a REMIC, the
Issuer may effect an optional redemption only if it qualifies as a "qualified
liquidation" under Section 860F of the Code. The Redemption Price for any Bond
so redeemed will be equal to 100% of the outstanding principal amount of such
Bond, together with interest accrued thereon to the date specified in the
related Prospectus Supplement.
MANDATORY REDEMPTION
If specified in the related Prospectus Supplement, Bonds of one or more
Classes of a Series ("Individual Investor Bonds") may be subject to mandatory
redemption by lot or by such other method set forth in the Prospectus
Supplement. Except as otherwise specified in the related Prospectus Supplement,
no Bonds of a particular Class will be redeemed until all Bonds in each Class
having a higher priority of redemption have been paid in full. Residual Interest
Bonds will not be redeemed except in connection with the liquidation of the
applicable REMIC, in which event the Residual Interest Bonds of the applicable
Series will be redeemed in full.
Individual Investor Bonds within a Class will be selected for redemption by
random lot in $1,000 units after all redemptions requested by holders of
Individual Investor Bonds in the Class have been made or by such other method
set forth in the Prospectus Supplement. Procedures relating to optional
redemptions requested by holders of Individual Investor Bonds and to mandatory
redemptions by the Issuer of Individual Investor Bonds, and the Class
priorities, if any, and conditions with respect to such redemptions, will be
described in the related Prospectus Supplement.
OPTIONAL TERMINATION
If so specified in the related Prospectus Supplement for a Series, the
Depositor, the Servicer, or another entity designated in the related Prospectus
Supplement may, at its option, cause an early termination of a Trust Fund by
repurchasing all of the Mortgage Assets from such Trust Fund on or after a date
specified in the related Prospectus Supplement, or on or after such time as the
aggregate outstanding principal amount of the Certificates is less than a
specified percentage of their initial aggregate principal amount. In the case of
a Trust Fund for which one or more REMIC elections have been made, the Trustee
must conduct the optional termination so as to constitute a "qualified
liquidation" under Section 860F of the Code. See "THE TRUST
AGREEMENT--Termination."
OPTIONAL REPURCHASE OF CERTIFICATES
If so specified in the related Prospectus Supplement for a Series, one or
more Classes of the Certificates of such Series may be repurchased, in whole or
in part, at the option of the Depositor, at such times and under the
circumstances specified in such Prospectus Supplement. Notice of any such
repurchase must be given by the Trustee prior to the optional repurchase date,
as specified in the related Prospectus Supplement. The repurchase price for any
Certificate so repurchased will be set forth in the related Prospectus
Supplement.
OTHER REPURCHASES
If so specified in the related Prospectus Supplement for a Series, any Class
of the Certificates of such Series may be subject to repurchase at the request
of the holders of such Class or to mandatory repurchase by the Depositor. Any
such redemption at the request of holders or mandatory repurchase with respect
to a Class of a Series of the Certificates will be described in the related
Prospectus Supplement and will be on such terms and conditions as described
therein.
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YIELD AND PREPAYMENT CONSIDERATIONS
TIMING OF PAYMENT OR DISTRIBUTION OF INTEREST AND PRINCIPAL
Each payment or distribution of interest on the Securities (or addition to
principal of a Class of Compound Interest Securities) on a Payment Date or
Distribution Date will include all interest accrued during the Interest Accrual
Period specified in the related Prospectus Supplement preceding such Payment
Date or Distribution Date. If the Interest Accrual Period for a Series ends on a
date other than a Payment Date or Distribution Date for such Series, the yield
realized by the holders of such Securities may be lower than the yield that
would result if the Interest Accrual Period ended on such Payment Date or
Distribution Date. Additionally, if so specified in the related Prospectus
Supplement, interest accrued for an Interest Accrual Period for one or more
Classes may be calculated on the assumption that principal payments or
distributions (and additions to principal of the Securities) and allocations of
losses on the Mortgage Assets are made on the first day of the preceding
Interest Accrual Period and not on the Payment Date or Distribution Date with
respect to such preceding Interest Accrual Period. Such method would produce a
lower effective yield than if interest were calculated on the basis of the
actual principal amount outstanding during such Interest Accrual Period.
PRINCIPAL PREPAYMENTS
The yield to maturity or final distribution on the Securities will be
affected by the rate of principal payments on the Mortgage Loans (including
principal prepayments resulting from both voluntary prepayments by the
Mortgagors and involuntary liquidations). The rate at which principal
prepayments occur on the Mortgage Loans will be affected by a variety of
factors, including, without limitation, the terms of the Mortgage Loans, the
level of prevailing interest rates, the availability of mortgage credit and
economic, tax, legal and other factors. The rate of principal payments or
distributions on the Securities will correspond to the rate of principal
payments on the Mortgage Assets. Principal prepayments on the Mortgage Assets
are likely to be affected by the existence of provisions prohibiting prepayment
of a Mortgage Loan underlying or comprising the Mortgage Assets for a defined
period of time (a "Lock-Out Period") or provisions requiring the payment of a
prepayment premium in the event of a prepayment (a "Yield Maintenance Payment"),
and by the extent to which the Primary Servicer is able to enforce such
provisions. Mortgage Loans with a Lock-Out Period or a Yield Maintenance
Payment, to the extent enforceable, generally would be expected to experience a
lower rate of principal prepayments than otherwise identical Mortgage Loans
without such provisions, with shorter Lock-Out Periods or with lower Yield
Maintenance Payments.
If the purchaser of a Security offered at a discount calculates its
anticipated yield to maturity or final distribution based on an assumed rate of
distributions of principal that is faster than that actually experienced on the
Mortgage Loans, the actual yield to maturity or final distribution will be lower
than that so calculated. Conversely, if the purchaser of a Security offered at a
premium calculates its anticipated yield to maturity or final distribution based
on an assumed rate of distributions of principal that is slower than that
actually experienced on the Mortgage Loans, the actual yield to maturity or
final distribution will be lower than that so calculated.
The timing of changes in the rate of principal prepayments on the Mortgage
Loans may significantly affect an investor's actual yield to maturity, even if
the average rate of distributions of principal is consistent with an investor's
expectation. In general, the earlier a principal prepayment is received on the
Mortgage Loans and paid on an investor's Securities, the greater the effect on
such investor's yield to maturity or final distribution. The effect on an
investor's yield of principal payments or distributions occurring at a rate
higher (or lower) than the rate anticipated by the investor during a given
period may not be offset by a subsequent like decrease (or increase) in the rate
of principal payments or distributions.
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PREPAYMENTS AND WEIGHTED AVERAGE LIFE
The Stated Maturity for a Class is the date specified in the related
Prospectus Supplement, calculated on the basis of the assumptions applicable to
such Series set forth therein, no later than which the entire Aggregate
Outstanding Principal thereof will be fully paid.
The rate of return on reinvestment of distributions of principal and
interest on the Mortgage Assets securing a Series, the rates at which principal
payments are received on such Mortgage Assets and the rate at which payments are
made from any Reserve Fund or other Enhancement for such Series may affect the
ultimate maturity of each Class of such Series. Prepayments on the Mortgage
Assets will accelerate the rate at which principal is paid or distributed on the
Securities. High reinvestment rates tend to increase the amount of Excess Cash
Flow, which, to the extent applied to principal payments or distributions on the
Securities, will accelerate principal payments or distributions on such
Securities.
"Weighted average life" refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
such security will be repaid to the investor. The weighted average life of the
Securities of a Series will be influenced by the rate at which principal on the
Mortgage Loans comprising or underlying the Mortgage Assets pledged as security
for such Bonds, or deposited in the Trust Fund, as the case may be, is paid,
which may be in the form of scheduled amortization or prepayments (for this
purpose, the term "prepayment" includes prepayments, in whole or in part, and
liquidations due to default).
The rate of principal prepayments on pools of mortgages is influenced by a
variety of economic, demographic, geographic, tax, legal and other factors. The
rate of prepayments of housing loans has fluctuated significantly in recent
years. In general, however, if prevailing interest rates fall significantly
below the interest rates on the Mortgage Loans comprising or underlying the
Mortgage Assets pledged as security for a Series, such Mortgage Loans are likely
to be the subject of higher principal prepayments than if prevailing rates
remain at or above the rates borne by such mortgages. In this regard, it should
be noted that certain Mortgage Assets pledged as security for a Series may be
backed by Mortgage Loans with different interest rates and the stated
pass-through or pay-through interest rate of certain Mortgage Assets may be a
number of percentage points less than the underlying Mortgage Loans. In
addition, the weighted average life of the Securities may be affected by the
varying maturities of the Mortgage Loans comprising or underlying the Mortgage
Assets. If any Mortgage Loans comprising or underlying the Mortgage Assets for a
Series have actual terms to maturity of less than those assumed in calculating
Stated Maturity or the Final Scheduled Distribution Date, one or more Classes of
the Series may be fully paid prior to their respective Stated Maturities or the
Final Scheduled Distribution Dates, even in the absence of prepayments and a
reinvestment return higher than the Assumed Reinvestment Rate, if any.
Accordingly, the prepayment experience of the Mortgage Assets will, to some
extent, be a function of the mix of interest rates and maturities of the
Mortgage Loans comprising or underlying such Mortgage Assets. See "SECURITY FOR
THE BONDS AND CERTIFICATES."
Prepayments on loans are also commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ("CPR") prepayment model
or the Standard Prepayment Assumption ("SPA") prepayment model, each as
described below. CPR represents a constant assumed rate of prepayment each month
relative to the then outstanding principal balance of a pool of loans for the
life of such loans. SPA represents an assumed rate of prepayment each month
relative to the then outstanding principal balance of a pool of loans. A
prepayment assumption of 100% of SPA assumes prepayment rates of 0.2% per annum
of the then outstanding principal balance of such loans in the first month of
the life of the loans and an additional 0.2% per annum in each month thereafter
until the thirtieth month. Beginning in the thirtieth month and in each month
thereafter during the life of the loans, 100% of SPA assumes a constant
prepayment rate of 6% per annum each month.
Neither CPR nor SPA nor any other prepayment model or assumption purports to
be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of
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loans, including the Mortgage Loans underlying or comprising the Mortgage
Assets. Thus, it is likely that prepayment of any Mortgage Loans comprising or
underlying the Mortgage Assets for any Series will not conform to any particular
level of CPR or SPA.
The Issuer is not aware of any publicly available statistics that set forth
prepayment experience or prepayment forecasts of commercial or multifamily
mortgage loans over an extended period of time.
Except with respect to Interest Only Securities, the Prospectus Supplement
will contain tables setting forth the projected weighted average life of each
Class of such Series and the percentage of the original principal amount of each
Class of such Series that would be outstanding on specified Payment Dates or
Distribution Dates for such Series based on the assumptions stated in such
Prospectus Supplement, including assumptions that prepayments on the Mortgage
Loans comprising or underlying the related Mortgage Assets are made at rates
corresponding to various percentages of CPR, SPA or at such other rates
specified in such Prospectus Supplement. Such tables and assumptions are
intended to illustrate the sensitivity of weighted average life of the
Securities to various prepayment rates and will not be intended to predict or to
provide information which will enable investors to predict the actual weighted
average life of the Securities or prepayment rates of the Mortgage Loans
comprising or underlying the related Mortgage Assets. It is unlikely that
prepayment of any Mortgage Loans comprising or underlying the Mortgage Assets
for any Series will conform to any particular level of CPR, SPA or any other
rate specified in the related Prospectus Supplement.
OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
TYPE OF MORTGAGE LOAN. Mortgage Loans comprising or underlying the Mortgage
Assets may consist of ARMs. The rate of principal prepayments with respect to
ARMs has fluctuated in recent years. ARMs may be subject to a greater rate of
principal prepayments in a declining interest rate environment. For example, if
prevailing interest rates fall significantly below the then current mortgage
interest rates on the Mortgage Loans, the rate of prepayment on the Mortgage
Loans would be expected to increase. Conversely, if prevailing interest rates
rise significantly above the then current mortgage interest rates on the
Mortgage Loans, the rate of prepayment on the Mortgage Loans would be expected
to decrease. No assurances can be given as to the rate of prepayments on the
Mortgage Loans in stable or changing interest rate environments.
A number of Mortgage Loans may have balloon payments due at maturity, and
because the ability of a borrower to make a balloon payment typically will
depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a risk that a number of Mortgage Loans having
balloon payments may default at maturity, or that the Servicer, the Master
Servicer or the Special Servicer, if any, may extend the maturity of such a
Mortgage Loan in connection with a workout. In the case of defaults, recovery of
proceeds may be delayed by, among other things, bankruptcy of the borrower or
adverse conditions in the market where the property is located. In order to
minimize losses on defaulted Mortgage Loans, the Servicer, the Master Servicer
or the Special Servicer, if any, may, to the extent and under the circumstances
set forth in the related Prospectus Supplement, be given considerable
flexibility to modify Mortgage Loans which are in default or as to which a
default is reasonably foreseeable. Any defaulted balloon payment or modification
which extends the maturity of a Mortgage Loan will tend to extend the weighted
average life of the Securities thereby lengthening the period of time elapsed
from the date of issuance of a Security until each dollar of principal will be
repaid or distributed to the investor.
FORECLOSURES AND PAYMENT PLANS. The number of foreclosures and the
principal amount of the Mortgage Loans comprising or underlying the Mortgage
Assets which are foreclosed in relation to the number of Mortgage Loans which
are repaid in accordance with their terms will affect the weighted average life
of the Mortgage Loans comprising or underlying the Mortgage Assets and that of
the related Series of Securities. Servicing decisions made with respect to the
Mortgage Loans, including the use of payment plans prior to a demand for
acceleration and the restructuring of Mortgage Loans in bankruptcy
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proceedings, may also have an impact upon the payment patterns of particular
Mortgage Loans. The return to Holders of Securities may be adversely affected by
servicing policies and decisions relating to foreclosures.
DUE ON SALE CLAUSES. Acceleration of mortgage payments as a result of
certain transfers of underlying Mortgaged Property is another factor affecting
prepayment rates that may not be reflected in the prepayment standards or models
used in the relevant Prospectus Supplement. A number of the Mortgage Loans
underlying Private Mortgage-Backed Securities and Mortgage Loans in a Mortgage
Pool may include "due-on-sale" clauses which allow the holder of the Mortgage
Loans to demand payment in full of the remaining principal balance of the
Mortgage Loans upon sale or certain other transfers of the underlying Mortgaged
Property. Except as otherwise described in the Prospectus Supplement for a
Series, the Primary Servicer of Mortgage Loans comprising or underlying Mortgage
Assets securing such Series will not exercise its right to enforce any
"due-on-sale" clause applicable to the related Mortgage Loan so long as the new
mortgagor satisfies the applicable underwriting criteria for similar loans
serviced by the Primary Servicer. The Primary Servicer will not enforce such
clause to the extent enforcement would be unlawful or would prejudice recovery
under any applicable Insurance Policy. If the Primary Servicer determines not to
enforce such "due-on-sale" clause, it will enter into an assumption and
modification agreement with the person to whom the Mortgaged Property is to be
conveyed. FHA Loans are not permitted to contain "due-on-sale" clauses and are
freely assumable by qualified persons.
SINGLE MORTGAGE LOAN OR SINGLE OBLIGOR. The Mortgage Assets securing a
Series may consist of a single Mortgage Loan or obligations of a single obligor
or related obligors as specified in the related Prospectus Supplement.
Assumptions used with respect to the prepayment standards or models based upon
analysis of the behavior of mortgage loans in a larger group will not
necessarily be relevant in determining prepayment experience on a single
Mortgage Loan or with respect to a single obligor.
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SECURITY FOR THE BONDS AND CERTIFICATES
GENERAL
Each Series of Bonds will be secured by a pledge by the Issuer to the
Trustee of all right, title and interest of the Issuer in the Primary Assets for
such Series, and each Series of Certificates will represent a beneficial
interest in a Trust Fund comprised of Primary Assets transferred to the Trustee
by the Depositor. The Primary Assets may include (a) Mortgage Assets directly
owned by the Issuer, (b) amounts payable under the Mortgage Assets, (c) funds,
instruments or securities deposited or held from time to time in any Reserve
Fund, (d) funds, instruments or securities initially deposited in the Collection
Account for such Series, (e) an assignment of leases and rents, if any, (f)
reinvestment income, if any, on moneys deposited in any Pledged Fund or Account,
(g) Enhancement Agreements, if any, (h) Servicing Agreements, if any, related to
the Mortgage Loans of such Series, and (i) other funds, instruments or
securities specified as Primary Assets in the related Prospectus Supplement.
To the extent specified in the related Prospectus Supplement, certain
amounts received by the Trustee or a Servicer with respect to a Private
Mortgage-Backed Security or Mortgage Loan securing a Series may not be pledged
as Mortgage Assets for such Series or deposited into the Trust Fund for such
Series, as the case may be, but will be payable to the seller of such Private
Mortgage-Backed Security or Mortgage Loan or to a Servicer free and clear of the
lien of the Indenture, or interest granted under the Trust Agreement.
Mortgage Assets for a Series may consist of any combination of the following
to the extent and as specified in the related Prospectus Supplement: (a)
Mortgage Loans or participation interests therein and (b) Private
Mortgage-Backed Securities. Mortgage Loans for a Series will be purchased by the
Issuer directly or through an affiliate in the open market or in privately
negotiated transactions. Private Mortgage-Backed Securities will in turn be
secured by Underlying Collateral which will consist of Mortgage Loans.
Participation interests pledged as Mortgage Assets for a Series may be acquired
by the Issuer pursuant to a Participation Agreement or may be purchased in the
open market.
The Trustee or its agents or nominees will have possession of any Mortgage
Loans constituting Mortgage Assets and will be the registered owner of any
Private Mortgage-Backed Security which constitutes Mortgage Assets. The Trustee
will not, unless otherwise specified in the related Prospectus Supplement, be in
possession of or be the registered owner of any Underlying Collateral for any
Private Mortgage-Backed Security. See "--Private Mortgage-Backed Securities"
below.
Unless otherwise specified in the related Prospectus Supplement for a
Series, scheduled distributions of principal of and interest on the Mortgage
Assets pledged to secure a Series or deposited into the Trust Fund for such
Series, as the case may be, the amounts available to be withdrawn from any
related Reserve Fund, the amount of cash, if any, initially deposited in the
related Collection Account and any other Mortgage Assets pledged to secure such
Series or deposited into the Trust Fund for such Series, as the case may be,
together with the Reinvestment Income thereon at the Assumed Reinvestment Rate,
if any, will be sufficient irrespective of the rate of prepayments on the
Mortgage Assets to make required payments of interest on the Securities of such
Series and to retire each Class of such Series not later than its Stated
Maturity or Final Scheduled Distribution Date, as applicable. See "YIELD AND
PREPAYMENT CONSIDERATIONS." The Mortgage Assets for a Series will equally and
ratably secure each Class of such Series, or will represent beneficial interest
in the Trust Fund, as the case may be, without priority of one Class over the
other (subject to any subordination of Subordinate Securities of a Series as set
forth in the related Prospectus Supplement), and the Mortgage Assets securing
each Series, or comprising the Trust Fund, will serve as Mortgage Assets only
for that Series.
MORTGAGE LOANS
GENERAL. Mortgage Loans for a Series may consist of Mortgage Loans or
participation interests therein. Mortgage Loans comprising the Mortgage Assets,
Mortgage Loans in which participation interests
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are conveyed to the Trustee, and Mortgage Loans underlying Private
Mortgage-Backed Securities are referred to herein as the "Mortgage Loans." Some
of the Mortgage Loans may have been originated by or acquired from an affiliate
of the Issuer and an affiliate of the Issuer may be an obligor with respect to a
Mortgage Loan. Mortgage Loans may, as specified in the related Prospectus
Supplement, consist of fixed rate, level payment, fully amortizing Mortgage
Loans, ARMs or Mortgage Loans having balloon or other payment characteristics as
described in the related Prospectus Supplement. ARMs may have a feature which
permits the borrower to convert the rate thereon to a fixed rate. Unless
otherwise specified in the applicable Prospectus Supplement, the Mortgage Loans
will be secured by first mortgages or deeds of trust or other similar security
instruments creating a first lien on Mortgaged Property.
The Mortgaged Properties may include Multifamily Property (i.e., multifamily
residential rental properties or cooperatively owned properties consisting of
five or more dwelling units) or Commercial Property. Multifamily Property may
include mixed commercial and residential structures and may consist of property
securing FHA-insured Mortgage Loans made by private lending institutions to help
finance construction or substantial rehabilitation of the related multifamily
rental or cooperative housing for moderate-income or displaced families. See
"DESCRIPTION OF INSURANCE ON THE MORTGAGE LOANS--Hazard Insurance on the
Mortgage Loans--FHA Insurance."
Each Mortgaged Property will be located on land owned in fee simple by the
Mortgagor or on land leased by the Mortgagor for a term at least two years
greater than the term of the related Mortgage Loan. Unless otherwise specified
in the related Prospectus Supplement, the fee interest in leased land will be
subject to the lien securing the related Mortgage Loan. Mortgage Loans secured
by Multifamily Property or Commercial Property will generally also be secured by
an assignment of leases and rents and/or operating or other cash flow guarantees
relating to the Mortgage Loan.
If so specified in the related Prospectus Supplement, Mortgage Loans
relating to real estate projects under construction may be included in the
Mortgage Assets for a Series. The related Prospectus Supplement will set forth
the procedures and timing for making disbursements from construction reserve
funds as portions of the related real estate project are completed. If permitted
by applicable law, the Mortgage Pool may also include Mortgaged Properties
acquired by foreclosure or by deed-in-lieu of foreclosure ("REO Property"). To
the extent specified in the related Prospectus Supplement, the Servicer, the
Master Servicer or the Special Servicer, if any, may establish and maintain a
trust account or accounts to be used in connection with REO Properties and other
Mortgaged Properties being operated by it or on its behalf on behalf of the
Trust Estate or the Trust Fund, as the case may be, by the mortgagor as
debtor-in-possession or otherwise. See "SERVICING OF MORTGAGE LOANS--Maintenance
of Insurance Policies and Other Servicing Procedures--Presentation of Claims;
Realization Upon Defaulted Mortgage Loans." In addition, the Mortgage Pool for a
particular Series may include Mortgage Loans which consist of cash flow
mortgages, installment contracts, mortgage loans with equity features or other
mortgage loans described in the related Prospectus Supplement.
The related Prospectus Supplement for each Series will provide information
with respect to the Mortgage Pool as of the Cut-Off Date, including, among other
things, (a) the aggregate unpaid principal balance of the Mortgage Loans
comprising the Mortgage Pool; (b) the weighted average Mortgage Rate on the
Mortgage Loans, and, in the case of adjustable Mortgage Rates, the weighted
average of the current adjustable Mortgage Rates, the minimum and maximum
permitted adjustable Mortgage Rates, if any, and the weighted average thereof;
(c) the average outstanding principal balance of the Mortgage Loans; (d) the
weighted average remaining scheduled term to maturity of the Mortgage Loans and
the range of remaining scheduled terms to maturity; (e) the range of
Loan-to-Value Ratios of the Mortgage Loans; (f) the relative percentage (by
principal balance as of the Cut-Off Date) of Mortgage Loans that are ARMs, fixed
interest rate, FHA Loans or other types of Mortgage Loans; (g) any Enhancement
relating to the Mortgage Pool; (h) the relative percentage (by principal balance
as of the Cut-Off Date) of Mortgage Loans that are secured by Multifamily
Property or Commercial Property; (i) the geographic dispersion of Mortgaged
Properties securing the Mortgage Loans; and (j) the use or type of each
Mortgaged Property securing a
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Mortgage Loan. The related Prospectus Supplement will also specify other
characteristics of Mortgage Loans which may be included in the Mortgage Pool for
a Series. If Private Mortgage-Backed Securities representing ownership interests
in multiple mortgage pools constitute Mortgage Assets for a Series, the
Prospectus Supplement will set forth, to the extent available, the
above-specified information on an aggregate basis for the respective mortgage
pools. If specific information respecting the Mortgage Loans is not known to the
Issuer at the time the related Series is initially offered, more general
information of the nature described above will be provided in the Prospectus
Supplement, and final specific information will be set forth in a Current Report
on Form 8-K to be available to investors on the date of issuance of the Series
and to be filed with the Commission within 15 days after the initial issuance of
such Series.
If so specified in the related Prospectus Supplement, the terms of a
Mortgage Loan may provide that upon the sale of the Mortgaged Property, the
obligor may, in lieu of the payment in full of the amount of principal and
interest then outstanding or accrued on the related Mortgage Loan, irrevocably
deposit cash or other specified obligations into an account with the Trustee in
an amount which, together with interest thereon, will be sufficient to make
timely payments or distributions of principal and interest on the Mortgage Loan
and, therefore, on the Securities according to their terms.
The characteristics of the Mortgage Loans comprising or underlying the
Mortgage Assets may affect the rate of prepayment of Securities and the risk of
delinquencies, foreclosures and losses. See "RISK FACTORS" and "YIELD AND
PREPAYMENT CONSIDERATIONS."
MORTGAGE UNDERWRITING STANDARDS AND PROCEDURES. The underwriting procedures
and standards for Mortgage Loans included in a Mortgage Pool will be specified
in the related Prospectus Supplement to the extent such procedures and standards
are known or available. Such Mortgage Loans may be originated in contemplation
of the transactions contemplated by this Prospectus and the related Prospectus
Supplement. If stated in the related Prospectus Supplement, the originator of
the Mortgage Loans (or another entity specified in the related Prospectus
Supplement) will make representations and warranties concerning compliance with
such underwriting procedures and standards.
Except as otherwise set forth in the related Prospectus Supplement for a
Series, the originator of a Mortgage Loan will have applied underwriting
procedures intended to evaluate, among other things, the income derived from the
Mortgaged Property, the capabilities of the management of the project, including
a review of management's past performance record, its management reporting and
control procedures (to determine its ability to recognize and respond to
problems) and its accounting procedures to determine cash management ability,
the obligor's credit standing and repayment ability and the value and adequacy
of the Mortgaged Property as collateral. FHA Loans will have been originated by
mortgage lenders which are approved by HUD as an FHA mortgagee in the ordinary
course of their real estate lending activities and will comply with the
underwriting policies of FHA. Except as described below or in the related
Prospectus Supplement, the Issuer believes that underwriting procedures used
were consistent with those utilized by mortgage lenders generally during the
period of origination.
Unless otherwise specified in the related Prospectus Supplement, the
adequacy of a Mortgaged Property as security for repayment will generally have
been determined by appraisal by appraisers selected in accordance with
pre-established guidelines established by or acceptable to the loan originator
for appraisers. Unless otherwise specified in the related Prospectus Supplement,
the appraiser must personally inspect the property and verify that it was in
good condition and that construction, if new, has been completed. Unless
otherwise stated in the applicable Prospectus Supplement, the appraisal will
have been based upon a cash flow analysis or a market data analysis of recent
sales of comparable properties and, when deemed applicable, a replacement cost
analysis based on the current cost of constructing or purchasing a similar
property.
No assurance can be given that values of the Mortgaged Properties have
remained or will remain at their levels on the dates of origination of the
related Mortgage Loans. Further, there is no assurance that appreciation of real
estate values generally will limit loss experiences on Commercial Property or on
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non-traditional housing such as Multifamily Property. If the residential real
estate market should experience an overall decline in property values such that
the outstanding balances of the Mortgage Loans and any additional financing on
the Mortgaged Properties in a particular Mortgage Pool become equal to or
greater than the value of the Mortgaged Properties, the actual rates of
delinquencies, foreclosures and losses could be higher than those now generally
experienced in the mortgage lending industry. To the extent that such losses are
not covered by the methods of Enhancement or the insurance policies described
herein, the ability of the Issuer to pay principal of and interest on the
Securities may be adversely affected. Even where credit support covers all
losses resulting from defaults and foreclosure, the effect of defaults and
foreclosures may be to increase prepayment experience on the Mortgage Assets,
thus shortening weighted average life and affecting yield to maturity. See
"YIELD AND PREPAYMENT CONSIDERATIONS."
DETERMINATION OF COMPLIANCE WITH POOL REQUIREMENTS AND UNDERWRITING
PROCEDURES. As more specifically set forth in the related Prospectus
Supplement, the Issuer will represent and warrant, upon pledge of the Mortgage
Loans to the Trustee under the Indenture or deposit of such Mortgage Loans into
the Trust Fund, as applicable, among other things, as to the accuracy of the
information in the related Mortgage Loan Schedule. If specified in the related
Prospectus Supplement, the originator of a Mortgage Loan may make
representations and warranties with respect to such Mortgage Loan. If so
specified in the related Prospectus Supplement, the Issuer will assign its
rights and the seller's obligations under the agreement pursuant to which the
Issuer acquired the Mortgage Assets for the related Series to the Trustee.
If so specified in the related Prospectus Supplement, upon the discovery of
the breach of certain representations or warranties made by the Issuer in
respect of a Mortgage Loan that materially and adversely affects the interests
of the Bondholders or Certificateholders of the related Series, the Issuer will
be obligated to cause the seller of such Mortgage Loans to repurchase such
Mortgage Loan or deliver a substitute conforming Mortgage Loan as described
below under "Repurchase and Substitution of Non-Conforming Mortgage Loans." The
Trustee will be required to enforce this obligation for the benefit of the
Bondholders or Certificateholders, following the practices it would employ in
its good faith business judgment were it the owner of such Mortgage Loan. If so
specified in the related Prospectus Supplement, the Master Servicer, if any, may
be obligated to enforce such obligations rather than the Trustee.
REPURCHASE AND SUBSTITUTION OF NON-CONFORMING MORTGAGE LOANS. The Trustee,
or if so specified in the related Prospectus Supplement, a custodian, will
review Mortgage Loan documents after receipt thereof. Unless otherwise provided
in the related Prospectus Supplement, if any such document is found to be
defective in any material respect, or if it is determined that the Issuer has
breached any representation or warranty, the Trustee or the custodian shall
immediately notify the Issuer and the Master Servicer, if any, and the Trustee,
if the custodian. Unless otherwise specified in the related Prospectus
Supplement, if the Issuer cannot cure such defect thereafter, the Issuer will be
obligated to cause the seller of such Mortgage Loan to repurchase within 90 days
of the execution of the related Series Supplement, or within such other period
specified in the related Prospectus Supplement, the related Mortgage Loan or any
property acquired in respect thereof from the Trustee at a purchase price
generally equal to the unpaid principal balance of the Mortgage Loan (or, in the
case of a foreclosed Mortgage Loan, the unpaid principal balance of such
Mortgage Loan immediately prior to foreclosure) plus accrued interest.
Unless otherwise provided in the related Prospectus Supplement, the Issuer
may, rather than cause the repurchase of the Mortgage Loan as described above,
remove such Mortgage Loan from the Trust Estate (a "Deleted Mortgage Loan") or
Trust Fund, as applicable, and substitute in its place one or more other
Mortgage Loans (each, a "Substitute Mortgage Loan"); provided, however with
respect to a Series for which no REMIC election is made, such substitution must
be effected within the period specified in the related Prospectus Supplement.
Any Substitute Mortgage Loan will, on the date of substitution, have the
characteristics specified in the related Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, this repurchase or substitution
obligation constitutes the sole remedy available to the Bondholders,
Certificateholders or the Trustee for a material defect in a Mortgage Loan
document or
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for breach of representations and warranties with respect to any Mortgage Loan.
With respect to Mortgage Loans underlying Private Mortgage-Backed Securities,
the PMBS Agreement may have terms relating to the repurchase or substitution
obligations which differ from those set forth above.
The Master Servicer, if any, may also make certain warranties with respect
to the Mortgage Loans comprising the Mortgage Pool for a Series. See "SERVICING
OF MORTGAGE LOANS--Certain Matters Regarding the Master Servicer and Special
Servicer." Upon a breach of any such warranty that materially and adversely
affects the interests of Bondholders or Certificateholders of the related
Series, the related Mortgage Loan will be required to be repurchased, subject to
the conditions described in the preceding paragraph and in the related
Prospectus Supplement. If the Master Servicer fails to repurchase such a
Mortgage Loan, payments to Bondholders or Certificateholders could be reduced to
the extent payments are not made on the Mortgage Loan.
Various Servicers will provide certain customary servicing functions with
respect to any Mortgage Loans pursuant to servicing agreements. Such Servicers
may include affiliates of the Issuer. If so specified in the related Prospectus
Supplement, a Master Servicing Agreement may be entered into between the Issuer
and a Master Servicer. The Master Servicer will supervise the performance by the
Servicers of their duties and responsibilities under the servicing agreements
with respect to Mortgage Loans for the related Series. Alternatively, if so
specified in the related Prospectus Supplement, the Master Servicer may be
obligated to service Mortgage Loans directly or through one or more Servicers.
In such a case, the Master Servicer will be primarily responsible for servicing
of the Mortgage Loans. The specific duties to be performed by any Servicers and
Master Servicer, if any, with respect to the Mortgage Loans of a particular
Series will be set forth in the Prospectus Supplement to the extent they differ
from the servicing obligations described herein under "SERVICING OF THE MORTGAGE
LOANS." Servicers and the Master Servicer, if any, may be required to advance
funds to cover delinquent payments on Mortgage Loans, to the extent specified in
the related Prospectus Supplement. The Prospectus Supplement also will specify
criteria to be met by each Servicer and the Master Servicer. Such criteria will
be determined by the Issuer consistent with the requirements of each Rating
Agency rating such Series. See "SERVICING OF MORTGAGE LOANS."
PRIVATE MORTGAGE-BACKED SECURITIES
GENERAL. Private Mortgage-Backed Securities may consist of (a) mortgage
participations and pass-through certificates, evidencing an undivided interest
in a pool of Mortgage Loans, (b) debt obligations (interest payments on which
may be tax-exempt in whole or in part), secured by mortgages or (c)
participations or other interests in any of the foregoing. Private
Mortgage-Backed Securities will have been issued pursuant to a pooling and
servicing agreement, an indenture or similar agreement, or a participation
agreement or similar agreement (a "PMBS Agreement"). The seller or servicer of
the underlying Mortgage Loans will have entered into the PMBS Agreement with the
trustee under such PMBS Agreement (the "PMBS Trustee"). The PMBS Trustee or its
agent, or a custodian, will possess the Mortgage Loans, participations or other
interest, underlying such Private Mortgage-Backed Security. Mortgage Loans
underlying a Private Mortgage-Backed Security will be serviced by the Master
Servicer directly or by one or more Servicers who may be subject to the
supervision of the Master Servicer. Unless otherwise specified in the Prospectus
Supplement relating to a Series, if payments with respect to interest on the
underlying obligations are tax-exempt, such Prospectus Supplement will disclose
the relevant federal tax characteristics relating to the tax-exempt status of
such obligations.
The issuer of the Private Mortgage-Backed Securities (the "PMBS Issuer") may
be a financial institution or other entity engaged generally in the business of
mortgage lending, a public agency or instrumentality of a state, local or
federal government or a limited purpose corporation organized for the purpose
of, among other things, establishing trusts and acquiring and selling housing
loans to such trusts, and selling beneficial interests in such trusts. If so
specified in the Prospectus Supplement, the PMBS Issuer may be an affiliate of
the Issuer. The obligations of the PMBS Issuer will generally be limited to
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certain representations and warranties with respect to the assets conveyed by it
to the related trust. Unless otherwise specified in the related Prospectus
Supplement, the PMBS Issuer will not have guaranteed any of the assets conveyed
to the related trust or any of the Private Mortgage-Backed Securities issued
under the PMBS Agreement. Additionally, although the Mortgage Loans,
participations or other interest, underlying the Private Mortgage-Backed
Securities may be guaranteed by an agency or instrumentality of the United
States, the Private Mortgage-Backed Securities themselves will not be so
guaranteed.
Distributions of principal and interest will be made on the Private
Mortgage-Backed Securities on the dates specified in the related Prospectus
Supplement. The Private Mortgage-Backed Securities may be entitled to receive
nominal or no principal distributions or nominal or no interest distributions.
Principal and interest distributions will be made on the Private Mortgage-Backed
Securities by the PMBS Trustee or the Servicer. The PMBS Issuer or the Servicer
or another person specified in the related Prospectus Supplement may have the
right or obligation to repurchase or substitute assets underlying the Private
Mortgage-Backed Securities after a certain date or under other circumstances
specified in the related Prospectus Supplement.
UNDERLYING MORTGAGE LOANS. The Mortgage Loans underlying the Private
Mortgage-Backed Securities may consist of fixed rate, level payment, fully
amortizing Mortgage Loans, ARMs, or Mortgage Loans having balloon or other
special payment features. Mortgage Loans underlying the Private Mortgage-Backed
Securities will be secured primarily by Multifamily Property or Commercial
Property. Unless otherwise stated in the related Prospectus Supplement, the
underwriting procedures set forth above will also apply to Underlying Mortgage
Loans.
ENHANCEMENT RELATING TO PRIVATE MORTGAGE-BACKED SECURITIES. Enhancement in
the form of reserve funds, subordination of other private mortgage certificates
issued under the PMBS Agreement, letters of credit, insurance policies or other
types of credit support may be provided with respect to the Mortgage Loans,
participations or other interest, underlying the Private Mortgage-Backed
Securities or with respect to the Private Mortgage-Backed Securities themselves.
The type, characteristics and amount of enhancement, if any, will be a function
of certain characteristics of the Mortgage Loans, participations or other
interest, and other factors and will have been established for the Private
Mortgage-Backed Securities on the basis of requirements of the Rating Agency
which assigned a rating to the Private Mortgage-Backed Securities.
ADDITIONAL INFORMATION. The Prospectus Supplement for a Series which
includes Private Mortgage-Backed Securities will specify, to the extent
available, (i) the aggregate approximate principal amount and type of the
Private Mortgage-Backed Securities to be included in the Trust Estate or Trust
Fund, as applicable, (ii) certain characteristics of the Mortgage Loans,
participations or other interests which comprise the underlying assets for the
Private Mortgage-Backed Securities including (A) the payment features of such
Mortgage Loans, participations or other interests (i.e., whether they are fixed
rate or adjustable rate and whether they provide for fixed level payments,
adjustable payments or other payment features), (B) the approximate aggregate
principal balance, if known, of Underlying Mortgage Loans, participations or
other interests insured or guaranteed by a governmental entity, (C) the
servicing fee or range of servicing fees with respect to the Mortgage Loans, and
(D) the minimum and maximum stated maturities of the underlying Mortgage Loans,
participations or other interests at origination, (iii) the maximum original
term-to-stated maturity of the Private Mortgage-Backed Securities, (iv) the
weighted average pass-through or bond rate of the Private Mortgage-Backed
Securities or formula therefor, (v) the pass-through or bond rate or ranges
thereof for the Private Mortgage-Backed Securities or formula therefor, (vi) the
PMBS Issuer, Master Servicer and the PMBS Trustee for such Private
Mortgage-Backed Securities, (vii) certain characteristics of enhancement, if
any, such as subordination, reserve funds, insurance policies, letters of credit
or guarantees relating to the Mortgage Loans, participations or other interests
underlying the Private Mortgage-Backed Securities or to such Private
Mortgage-Backed Securities themselves, (viii) the terms on which the Underlying
Mortgage Loans, participations or other interests
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for such Private Mortgage-Backed Securities or the Private Mortgage-Backed
Securities may, or are required to, be purchased prior to their maturity or the
maturity of the Private Mortgage-Backed Securities and (ix) the terms on which
Mortgage Loans, participations or other interests may be substituted for those
originally underlying the Private Mortgage-Backed Securities.
SUBSTITUTION OF MORTGAGE ASSETS
Unless otherwise provided in the related Prospectus Supplement, subject to
the limitations set forth in the Indenture or Trust Agreement for a Series, the
Issuer or Depositor may deliver to the Trustee other Mortgage Assets in
substitution for any Mortgage Assets originally pledged as security for a
Series, or deposited in the Trust Fund for a Series, as the case may be. Any
such Substitute Mortgage Assets will have an outstanding principal balance or
Asset Value (determined in a manner consistent with the Mortgage Assets for
which it is substituted) that is less than or equal to the outstanding principal
balance or Aggregate Asset Value of the Mortgage Assets for which it is
substituted, unless otherwise specified in the related Prospectus Supplement,
and will otherwise have such characteristics as shall be necessary to cause the
Mortgage Assets, upon such substitution, to conform more fully to the
description thereof set forth in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, (1) no substitution
will be permitted which would delay the Stated Maturity or Final Scheduled
Distribution Date, of any Class of Securities of the related Series, (2) no more
than 40% of the Mortgage Assets (including any cash deposited on the Closing
Date) securing a Series may be substituted for, (3) only like kind Mortgage
Assets may be substituted for Mortgage Assets (or, with respect to a
substitution for cash deposited in any Pledged Fund or Account on the Closing
Date, the Substitute Mortgage Assets must be of like kind as the Mortgage Assets
securing the related Series) and (4) there can be no substitutions for
Substitute Mortgage Assets. No substitution may be made (1) if such substitution
would result in the Issuer becoming required to register as an "Investment
Company" for purposes of the Investment Company Act of 1940, (2) if the Rating
Agencies will, as a result of such substitution, downgrade the rating on the
related Series of Securities or any Class thereof or (3) in the event that the
Issuer has elected to be treated as a REMIC and such substitution would cause
the REMIC to lose its status as a REMIC or result in a tax on "prohibited
contributions" to or "prohibited transactions" of the REMIC.
If the Issuer elects to treat the Mortgage Assets securing a Series of
Bonds, or deposited into the Trust Fund, as a REMIC or an election is made to
treat the arrangement by which a Series of Securities is issued as a REMIC, no
Substitute Mortgage Assets may be pledged by the Issuer (a) in the case of the
substitution for a "defective obligation" (within the meaning of Section
860G(a)(4)(B) of the Code), more than two years after the "Start Up Day" (as
defined in Section 860G(a)(9) of the Code) of the REMIC, or (b) in the case of
any other Mortgage Assets, more than three months after the Start Up Day.
COLLECTION ACCOUNT
Unless otherwise provided in the related Series Supplement, a separate
Collection Account for each Series will be established by the Trustee, or if the
Trustee is not also the Paying Agent, by the Paying Agent, for receipt of all
monthly principal and interest payments on the Primary Assets securing such
Series and the amount of cash, if any, to be initially deposited therein by the
Issuer, Reinvestment Income, if any, thereon and any amounts withdrawn from any
Reserve Funds for such Series. If specified in the related Prospectus
Supplement, Reinvestment Income, if any, or other gain from investments of
moneys in the Collection Account will be credited to the Collection Account for
such Series and any loss resulting from such investments will be charged to such
Collection Account. Funds on deposit in the Collection Account will be available
for application to the payment of principal of and interest on the Securities of
the related Series and for certain other payments provided for in the Indenture
or Trust Agreement and described in the related Prospectus Supplement. To the
extent that amounts remaining on deposit in the Collection Account on each
Payment Date or Distribution Date represent Excess Cash Flow not required to be
applied to such payments or distributions, unless otherwise specified in the
related Prospectus Supplement,
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such amounts may be paid as provided in the Indenture or Trust Agreement to the
Issuer (or, in the case of a REMIC, to the holder of the residual interest
therein).
OTHER FUNDS OR ACCOUNTS
A Series may also be secured by certain other funds and accounts for the
purpose of, among other things, (i) paying certain administrative fees and
operating expenses and (ii) accumulating funds that are credited to the Issuer's
account pending their distribution to the Issuer. See "--Enhancement."
INVESTMENT OF FUNDS
The Collection Account, Servicing Accounts and certain other funds and
accounts for a Series are to be invested by the Trustee or the Paying Agent, as
directed by the Issuer, in certain Eligible Investments acceptable to each
Rating Agency rating such Series, which may include, without limitation, (a)
direct obligations of, and obligations fully guaranteed by, the United States of
America, FHLMC, FNMA or any agency or instrumentality of the United States of
America, the obligations of which are backed by the full faith and credit of the
United States of America, (b) demand and time deposits, certificates of deposit
or bankers' acceptances, (c) repurchase obligations pursuant to a written
agreement with respect to (1) any security described in clause (a) above or (2)
any other security issued or guaranteed by an agency or instrumentality of the
United States of America, (d) securities bearing interest or sold at a discount
issued by any corporation incorporated under the laws of the United States of
America or any state, (e) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand or on a
specified date not more than one year after the date of issuance thereof), (f) a
Guaranteed Investment Contract, (g) certificates or receipts representing
ownership interests in future interest or principal payments on obligations
described in clause (a) above, and (h) any other demand, money market or time
deposit obligation, security or investment acceptable to the Rating Agencies.
Eligible Investments with respect to a Series will include only obligations
or securities that mature on or before the date on which the Collection Account
or any other Pledged Fund or Account for such Series are required or may be
anticipated to be required to be applied for the benefit of the holders of such
Series. Any gain or loss from such investments for a Series will be credited or
charged to the appropriate fund or account for such Series unless otherwise
specified in the related Prospectus Supplement.
GUARANTEED INVESTMENT CONTRACT
If specified in the related Prospectus Supplement, on or prior to the
Delivery Date the Issuer and the Trustee will enter into a Guaranteed Investment
Contract with a guarantor acceptable to the Rating Agencies rating the
Securities (the "Guarantor"), pursuant to which all distributions on the
Mortgage Assets will be invested by the Trustee with the Guarantor, and the
Guarantor will pay to the Trustee interest at the rate per annum set forth in
such Guaranteed Investment Contract on all amounts invested. Whenever funds are
required under the Indenture to be paid to Bondholders or under the Trust
Agreement to be paid to the Certificateholders, the Guarantor, upon the request
of the Trustee, will remit such funds to the Trustee.
ENHANCEMENT
Enhancement may be provided with respect to a Series, or with respect to any
Mortgage Loans or Private Mortgage-Backed Securities securing a Series. See
"ENHANCEMENT."
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SERVICING OF MORTGAGE LOANS
GENERAL
The servicing obligations with respect to a particular Series may be
performed by various Servicers or by the Trustee. If so specified in the related
Prospectus Supplement, a Master Servicer or a Special Servicer may be appointed.
The related Prospectus Supplement for each Series will describe the extent, if
any, such rights, duties and obligations vary or differ with respect to such
Series from those described herein.
If so specified in the related Prospectus Supplement, pursuant to a Master
Servicing Agreement or Trust Agreement, customary servicing functions with
respect to Mortgage Loans which comprise Mortgage Assets for a Series, or which
constitute Underlying Collateral for a Private Mortgage-Backed Security will be
provided by the Master Servicer directly or by one or more Servicers subject to
supervision by the Master Servicer. To the extent specified in the related
Prospectus Supplement, a special servicer (the "Special Servicer") may be
appointed. The related Prospectus Supplement will describe the duties and
obligations of such Special Servicer. To the extent specified in the related
Prospectus Supplement, the Master Servicer or Special Servicer, if any, may have
the authority to sell or otherwise dispose of Mortgage Loans or the related REO
Property in order to maximize the value of such Mortgage Loans or property. The
entity which has primary liability for servicing Mortgage Loans directly is
sometimes referred to herein as the "Primary Servicer." If the Master Servicer
is not required under the Master Servicing Agreement, Trust Agreement or PMBS
Agreement, as applicable, to act as Primary Servicer, then the Master Servicer,
if any, will (i) administer and supervise the performance by the Servicers (who
will act as Primary Servicers) of their servicing responsibilities under the
Servicing Agreements, (ii) to the extent not maintained by a Primary Servicer,
maintain any insurance policy required for the related Mortgage Pool and (iii)
advance funds as described below under "Advances" and in the related Prospectus
Supplement. If a Master Servicer undertakes to service Mortgage Loans directly
it may do so through Servicers as its agents. In such case, the Master Servicer
will be responsible for all aspects of the servicing of the related Mortgage
Loans notwithstanding such use of Servicers. The Master Servicer or a Servicer
may be an affiliate of the Issuer. Unless otherwise specified in the related
Prospectus Supplement, in the case of FHA Loans, the Master Servicer and each
Servicer will be required to be approved by HUD as an FHA mortgagee. The Master
Servicer will only be responsible for the duties and obligations of the Special
Servicer to the extent set forth in the related Prospectus Supplement.
To the extent applicable, Master Servicing Agreements (direct or
supervisory), Servicing Agreements and Special Servicing Agreements, if any,
with respect to a Series will be filed as exhibits to a Current Report on Form
8-K within 15 days following the issuance of the Securities of a Series.
The Master Servicer will be paid a servicing fee for the performance of its
services and duties under each Master Servicing Agreement, as specified in the
related Prospectus Supplement. Each Servicer, if any, will be entitled to
receive a servicing fee. The Special Servicer, if any, will also be entitled to
a servicing fee. In addition, the Master Servicer, Special Servicer or Servicer
may be entitled to retain late charges, assumption fees and similar charges to
the extent collected from Mortgagors. If a Servicer or the Special Servicer is
terminated by the Master Servicer, the servicing function of the Servicer or the
Special Servicer will be either transferred to a substitute Servicer or Special
Servicer, as the case may be, or performed by the Master Servicer. The Master
Servicer will be entitled to retain the portion of the Servicing Fee paid to a
Servicer, under a terminated Servicing Agreement, or the Special Servicer, under
the Special Servicing Agreement, if the Master Servicer elects to perform such
servicing functions itself. See "--Servicing Compensation and Payment of
Expenses" below.
COLLECTION PROCEDURES
The Primary Servicer or, if so specified in the related Prospectus
Supplement, the Trustee, will make reasonable efforts to collect all payments
called for under the Mortgage Loans and will follow such
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collection procedures as it follows with respect to mortgage loans serviced by
it that are comparable to the Mortgage Loans.
Unless otherwise specified in the related Prospectus Supplement, the Primary
Servicer, to the extent permitted by law and the terms of the related Mortgage
Loans, will establish and maintain an escrow account (the "Escrow Account") in
which payments by Mortgagors to pay taxes, assessments, mortgage and hazard
insurance premiums, and other comparable items will be deposited. Withdrawals
from the Escrow Account are to be made to effect timely payment of taxes,
assessments and hazard insurance premiums, to refund to Mortgagors amounts
determined to be overages, to pay interest to Mortgagors on balances in the
Escrow Account to the extent required by law, to repair or otherwise protect the
Mortgaged Property and to clear and terminate such account. Alternatively, the
terms of the related Mortgage Loan may require, upon the occurrence of a
delinquency or default by the obligor, an impound account ("Impound Account") to
be established and maintained and into which payments by Mortgagors to pay
taxes, assessments, mortgage and hazard insurance premiums and other comparable
items will be deposited pending distribution of such items. The Primary Servicer
will be responsible for the administration of the Escrow Account or the Impound
Account and may be obligated to make escrow or impound advances to the relevant
account when a deficiency exists therein if so specified in the related
Prospectus Supplement.
PAYMENTS ON MORTGAGE LOANS; DEPOSITS TO CUSTODIAL ACCOUNTS
With respect to any Series, the Master Servicer, if any, will establish an
account (the "Custodial Account") in the name of the Trustee, unless otherwise
specified in the related Prospectus Supplement. The Custodial Account will be
established so as to comply with the standards of each Rating Agency rating the
Securities of a Series. Amounts to be remitted to the Trustee shall be remitted
by the Master Servicer to the Trustee from the Custodial Account for deposit in
the Collection Account for the related Series.
In those cases where a Servicer is servicing Mortgage Loans pursuant to a
Servicing Agreement, the Servicer will establish and maintain an account (the
"Servicing Account") that will comply with the standards set forth below for the
Custodial Account and that is otherwise acceptable to the Master Servicer, if
any. The Servicer will be required to deposit into the Servicing Account on a
daily basis (or upon identification) all mortgage related receipts received by
it with respect to Mortgage Loans serviced by such Servicer subsequent to the
Cut-Off Date less its servicing fee and certain other amounts specified in the
Servicing Agreement. On each Servicer Remittance Date, the Servicer shall remit
all funds held in the Servicing Account (other than payments due on or before
the Cut-Off Date and other amounts permitted to be withdrawn from or held in the
Servicing Account pursuant to the Servicing Agreement) with respect to each
Mortgage Loan together with any Advances made by such Servicer for deposit to
the Custodial Account, or if a Custodial Account has not been established,
directly to the Collection Account. See "--Advances" below.
If so specified in the related Prospectus Supplement, the Custodial Account
and each Servicing Account may be maintained as an interest-bearing account, or
the funds held therein may be invested pending remittance to the Trustee in
Eligible Investments. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer or the Servicer will be entitled to receive any
such interest or other income earned on funds in the Custodial Account or
Servicing Account as additional compensation.
The Master Servicer will deposit in the Custodial Account on a daily basis
all mortgage related receipts (including amounts remitted by the Servicer)
received by it subsequent to the Cut-off Date (other than payments of principal
and interest due on or before the Cut-off Date).
With respect to any other type of Mortgage Loan which provides for payments
other than on the basis of level payments, an account may be established as
described in the related Prospectus Supplement.
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ADVANCES
GENERAL. To the extent provided in the related Prospectus Supplement, the
Primary Servicer may make periodic advances of cash ("Advances") from its own
funds or, if so specified in the related Prospectus Supplement, from excess
funds in the Custodial Account or Servicing Account, but only to the extent such
Advances are, in the good faith business judgment of the Servicer or the Master
Servicer, as the case may be, ultimately recoverable from future payments and
collections on the Mortgage Loans or otherwise. Neither the Master Servicer nor
the Servicers will be required to make such Advances, unless otherwise specified
in the related Prospectus Supplement. The Master Servicer's obligation to make
Advances, if any, may, as specified in the related Prospectus Supplement, be
limited in amount or may be limited to Advances received from Servicers. If so
specified in the related Prospectus Supplement, the Master Servicer will not be
obligated to make Advances until all or a specified portion of a Reserve Fund is
depleted. Advances are intended to enable the Issuer to make timely payment of
the scheduled principal and interest payments or distributions on the Securities
of such Series, not to guarantee or insure against losses. Accordingly, any
funds so advanced are recoverable by the Servicer or the Master Servicer, as the
case may be, out of amounts received on particular Mortgage Loans which
represent late recoveries of principal or interest respecting which any such
Advance was made. If an Advance is made and subsequently determined to be
nonrecoverable from late collections, Insurance Proceeds or Liquidation Proceeds
from the related Mortgage Loans, or any other source described in the related
Prospectus Supplement, the Servicer or Master Servicer will be entitled to
reimbursements from other funds in the Custodial Account or Servicing Account,
as applicable.
ADJUSTMENTS TO SERVICING FEE OR ADVANCES IN CONNECTION WITH PREPAID MORTGAGE
LOANS. With respect to each Mortgage Pool, if an obligor makes a principal
prepayment between scheduled payment dates, the obligor may be required to pay
interest on the principal balance only to the date of prepayment in full. If and
to the extent provided in the related Prospectus Supplement, the amount of the
servicing fee may be reduced, or the Primary Servicer may be otherwise obligated
to advance moneys from its own funds or any reserve maintained for such purpose,
to the extent necessary to include an amount equal to a full month's interest
payment at the applicable Mortgage Rate. Partial principal prepayments may be
treated as having been received on the next Due Date, and, if so, no reduction
in interest remitted for deposit to the Collection Account will occur. See
"YIELD AND PREPAYMENT CONSIDERATIONS."
MAINTENANCE OF INSURANCE POLICIES AND OTHER SERVICING PROCEDURES
GENERAL. To the extent specified in the related Prospectus Supplement and
the Servicing Agreement, the Primary Servicer will be required to cause to be
maintained a standard hazard insurance policy with respect to each Mortgaged
Property. In addition, all or a portion of the Mortgage Loans comprising a
Mortgage Pool or constituting Underlying Collateral may be insured by the FHA.
The Primary Servicer will be required to take such steps as are reasonably
necessary to keep such insurance in full force and effect. See "DESCRIPTION OF
INSURANCE ON THE MORTGAGE LOANS."
PRESENTATION OF CLAIMS; REALIZATION UPON DEFAULTED MORTGAGE LOANS. The
market value of any property obtained in foreclosure or by deed in lieu of
foreclosure may be based substantially on the operating income obtained by
renting the applicable property. As a default on a Mortgage Loan secured by
Multifamily Property or Commercial Property is likely to have occurred because
operating income, net of expenses, is insufficient to make debt service payments
on the related Mortgage Loan, it can be anticipated that the market value of
such property generally will be less than anticipated when such Mortgage Loan
was originated. To the extent that equity does not cushion the loss in market
value upon any liquidation and such loss is not covered by other credit support,
a loss may be experienced by the related Bondholders or Certificateholders, as
applicable.
The Primary Servicer, on behalf of itself, the Trustee, the Bondholders or
Certificateholders, as applicable, and the Issuer, will be required to present,
or cause to be presented, claims with respect to any
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insurance policy. The Primary Servicer will be required to present claims and
take such reasonable steps as are necessary to permit recovery under any FHA
insurance respecting defaulted Mortgage Loans.
The Primary Servicer may foreclose upon or otherwise comparably convert the
ownership of properties securing such of the related Mortgage Loans as come into
and continue in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments. In connection with such foreclosure or
other conversion, the Primary Servicer will generally follow such practices and
procedures as it shall deem necessary or advisable and as shall be normal and
usual in its general mortgage servicing activities, subject to the express
provisions of the related Servicing Agreement.
ENFORCEMENT OF DUE-ON SALE CLAUSES
Unless otherwise specified in the related Prospectus Supplement, when any
Mortgaged Property is about to be conveyed by the Mortgagor, the Primary
Servicer will not exercise its rights to accelerate the maturity of such
Mortgage Loan under the applicable "due-on-sale" clause, if any, so long as the
new mortgagor satisfies the applicable underwriting criteria for similar loans
serviced by the Primary Servicer. If such conditions are met or the Primary
Servicer reasonably believes enforcement of a due-on-sale clause will not be
enforceable, the Primary Servicer is authorized to take or enter into an
assumption agreement from or with the person to whom such Mortgaged Property has
been or is about to be conveyed, pursuant to which such person becomes liable
under the Mortgage Note and pursuant to which the original Mortgagor is released
from liability and such person is substituted as Mortgagor and becomes liable
under the Mortgage Note. Unless otherwise specified in the related Prospectus
Supplement, any fee collected in connection with an assumption will be retained
as additional servicing compensation.
MODIFICATION; WAIVERS
As set forth in the related Prospectus Supplement, the Master Servicer or
Special Servicer, if any, may have the discretion, subject to certain conditions
set forth therein, to modify, waive or amend the terms of any Mortgage Loan
without the consent of the Trustee, or any Bondholder or Certificateholders, as
applicable.
Unless otherwise specified in the related Prospectus Supplement, the Master
Servicer or the Special Servicer, if any, will not agree to any modification,
waiver or amendment of the payment terms of a Mortgage Loan unless the Master
Servicer or the Special Servicer, if any, has determined that such modification,
waiver or amendment is reasonably likely to produce a greater recovery on a
present value basis than liquidation of the Mortgage Loan.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicer, the Special Servicer, if any, and each Servicer will be
entitled to a servicing fee in an amount specified or to be calculated in a
manner described in the related Prospectus Supplement. The servicing fee may be
fixed or variable, as specified in the related Prospectus Supplement. In
addition, unless otherwise specified in the related Prospectus Supplement, the
Master Servicer, the Special Servicer, if any, or a Servicer will be entitled to
additional servicing compensation in the form of assumption fees, late payment
charges and modification fees.
The Primary Servicer will be entitled to reimbursement for certain expenses
incurred by it in connection with the liquidation of defaulted Mortgage Loans.
The ability of the Issuer of the related Series to pay principal of and interest
on the Securities will not be affected to the extent claims are paid under the
related insurance policies. If claims are either not made or paid under such
insurance policies or if coverage thereunder has ceased or is insufficient, the
ability of the Issuer to meet debt service requirements on the related Series
may be adversely affected. In addition, the Primary Servicer will be entitled to
reimbursement of expenditures incurred by it in connection with the restoration
of Mortgaged Property,
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such right of reimbursement being prior to the rights of the Bondholders to
receive any related Insurance Proceeds or Liquidation Proceeds.
EVIDENCE AS TO COMPLIANCE
The Master Servicer and the Special Servicer, if any, will deliver to the
Trustee, on or before 120 days after the end of each fiscal year of the Master
Servicer and the Special Servicer, if applicable, an officer's certificate
stating that (i) a review of the activities of the Master Servicer, the Special
Servicer and the Servicers during the preceding calendar year and of performance
under the Master Servicing Agreement, Special Servicing Agreement, if
applicable, and the Servicing Agreements has been made under the supervision of
such officer and (ii) the Master Servicer and the Special Servicer, if
applicable, has fulfilled all its obligations under the Master Servicing
Agreement and Special Servicing Agreement, if applicable, throughout such year,
and, to the best of such officer's knowledge, based on such review, each
Servicer has fulfilled its obligations under the related Servicing Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof. Such officer's certificate shall be accompanied by a
statement of a firm of independent public accountants to the effect that, on the
basis of an examination of certain documents and records relating to servicing
of the Mortgage Loans, conducted in accordance with generally accepted
accounting principles in the mortgage banking industry, the Master Servicer's
and the Special Servicer's, if applicable, duties and duties of the Servicers
have been conducted in compliance with the provisions of the applicable
agreement, except for (i) such exceptions as such firm believes to be immaterial
and (ii) such other exceptions as are set forth in such statement. Copies of the
annual officer's certificate and accountants' statement may be obtained without
charge upon written request to the Trustee.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND SPECIAL SERVICER
The Master Servicer and any Special Servicer for each Series will be
specified in the related Prospectus Supplement. The Master Servicer and any
Special Servicer may be an affiliate of the Issuer and may have other business
relationships with the Issuer and its affiliates.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer may not resign from its obligations and duties except with the consent
of the Trustee or upon a determination that its duties thereunder are no longer
permissible under applicable law. No such resignation will become effective
until the Trustee or a successor servicer has assumed the Master Servicer's
obligations and duties under such Master Servicing Agreement.
Unless otherwise specified in the related Prospectus Supplement, each Master
Servicing Agreement will also provide that neither the Master Servicer, nor any
director, officer, employee or agent of the Master Servicer, will be under any
liability to the Bondholders or Certificateholders for any action taken or for
refraining from the taking of any action in good faith pursuant to the Master
Servicing Agreement, or for errors in judgment; provided, however, that neither
the Master Servicer nor any such person will be protected against any liability
which would otherwise be imposed by reason of failure to perform its obligations
in compliance with the standards of care set forth in the Master Servicing
Agreement. The Master Servicer may, in its discretion, undertake any such action
which it may deem necessary or desirable with respect to the rights and duties
of the parties to the Master Servicing Agreement and the interests of the
Bondholders, or Certificateholders thereunder. In such event, the Master
Servicer will be entitled to be reimbursed for legal expenses and costs of such
action out of the related Custodial Account.
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ENHANCEMENT
GENERAL
For any Series, Enhancement may be provided with respect to one or more
Classes thereof or the related Mortgage Assets. Enhancement may be in the form
of a letter of credit, the subordination of one or more Classes of the
Securities of such Series, the establishment of one or more reserve funds,
overcollateralization, guarantee insurance, the use of cross-support features or
another method of Enhancement described in the related Prospectus Supplement, or
any combination of the foregoing. If so specified in the related Prospectus
Supplement, any form of Enhancement (including but not limited to insurance,
letters of credit or guarantee insurance) may be structured so as to be drawn
upon by more than one Series to the extent described therein.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Enhancement will not provide protection against all risks of loss
and will not guarantee repayment of the entire principal balance of the
Securities and interest thereon. If losses occur which exceed the amount covered
by Enhancement or which are not covered by the Enhancement, Bondholders or
Certificateholders, as applicable will bear their allocable share of
deficiencies. Moreover, if a form of Enhancement covers more than one Series of
Securities (each, a "Covered Trust"), holders of Securities issued by any of
such Covered Trusts will be subject to the risk that such Enhancement will be
exhausted by the claims of other Covered Trusts prior to such Covered Trust
receiving any of its intended share of such coverage.
If Enhancement is provided with respect to a Series, or the related Mortgage
Assets, the related Prospectus Supplement will include a description of (a) the
amount payable under such Enhancement, (b) any conditions to payment thereunder
not otherwise described herein, (c) the conditions (if any) under which the
amount payable under such Enhancement may be reduced and under which such
Enhancement may be terminated or replaced and (d) the material provisions of any
agreement relating to such Enhancement. Additionally, the related Prospectus
Supplement will set forth certain information with respect to the issuer of any
third-party Enhancement, including (i) a brief description of its principal
business activities, (ii) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to do
business, (iii) if applicable, the identity of regulatory agencies which
exercise primary jurisdiction over the conduct of its business and (iv) its
total assets, and its stockholders' or policyholders' surplus, if applicable, as
of the date specified in the Prospectus Supplement.
SUBORDINATE SECURITIES
If so specified in the related Prospectus Supplement, one or more Classes of
a Series may be Subordinate Securities. If so specified in the related
Prospectus Supplement, the rights of the Holders of Subordinate Securities to
receive distributions of principal and interest from the Collection Account on
any Payment Date or Distribution Date will be subordinated to such rights of the
Holders of Senior Securities to the extent specified in the related Prospectus
Supplement. Unless otherwise provided in the Prospectus Supplement, the amount
of subordination will decrease whenever amounts otherwise payable to the Holder
of Subordinate Securities are paid to the Holders of Senior Securities
(including amounts withdrawn from any related Reserve Fund and paid to the
Holders of Senior Securities), and will (unless otherwise specified in the
related Prospectus Supplement) increase whenever there is distributed to the
Holders of Subordinate Securities amounts in respect of which subordination
payments have previously been paid to the Holders of Senior Securities. Unless
otherwise specified in the related Prospectus Supplement, the related Series
Supplement may require a trustee that is not the Trustee to be appointed to act
on behalf of Holders of Subordinate Securities.
A Series may include one or more Classes of Subordinate Securities entitled
to receive cash flows remaining after distributions are made to all other
Classes designated as being senior thereto. Such right will effectively be
subordinate to the rights of other Holders of Senior Securities, but will be not
be limited to a specified dollar amount of subordination. If so specified in the
related Prospectus Supplement, the
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subordination of a Class may apply only in the event of (or may be limited to)
certain types of losses not covered by Insurance Policies or other credit
support, such as losses arising from damage to property securing a Mortgage Loan
not covered by standard hazard insurance policies.
The related Prospectus Supplement will set forth information concerning the
amount of subordination of a Class or Classes of Subordinate Securities in a
Series, the circumstances in which such subordination will be applicable, the
manner, if any, in which the amount of subordination will decrease over time,
the manner of funding any related Reserve Fund and the conditions under which
amounts in any related Reserve Fund will be used to make distributions to
Holders of Senior Securities and/or to Holders of Subordinate Securities or be
released from the related Trust Estate or Trust Fund. If cash flows otherwise
distributable to holders of Subordinate Securities secured by a Mortgage Group
will be used as credit support for Senior Securities secured by another Mortgage
Group within the Trust Estate or Trust Fund, the related Prospectus Supplement
will specify the manner and conditions for applying such a cross-support
feature.
CROSS-SUPPORT FEATURES
If the Mortgage Assets for a Series are divided into separate Mortgage
Groups, each securing a separate Class or Classes of a Series, credit support
may be provided by a cross-support feature which requires that distributions be
made on Senior Securities secured by one Mortgage Group prior to distributions
on Subordinate Securities secured by another Mortgage Group within the Trust
Estate or Trust Fund. The related Prospectus Supplement for a Series which
includes a cross-support feature will describe the manner and conditions for
applying such cross-support feature.
INSURANCE ON THE MORTGAGE LOANS
Credit support with respect to a Series may be provided by insurance
policies that include standard hazard insurance and may, if specified in the
related Prospectus Supplement, include FHA Insurance. See "DESCRIPTION OF
INSURANCE ON THE MORTGAGE LOANS."
LETTER OF CREDIT
The letter of credit, if any, with respect to a Series of Securities will be
issued by the bank or financial institution specified in the related Prospectus
Supplement (the "L/C Bank"). Under the letter of credit, the L/C Bank will be
obligated to honor drawings thereunder in an aggregate fixed dollar amount, net
of unreimbursed payments thereunder, equal to the percentage specified in the
related Prospectus Supplement of the aggregate principal balance of the Mortgage
Loans on the related Cut-Off Date or of one or more Classes of Securities (the
"L/C Percentage"). If so specified in the related Prospectus Supplement, the
letter of credit may permit drawings in the event of losses not covered by
insurance policies or other credit support, such as losses arising from damage
not covered by standard hazard insurance policies. The amount available under
the letter of credit will, in all cases, be reduced to the extent of the
unreimbursed payments thereunder. The obligations of the L/C Bank under the
letter of credit for each Series of Securities will expire at the earlier of the
date specified in the related Prospectus Supplement or the termination of the
Trust Estate or Trust Fund, as applicable. A copy of the letter of credit for a
Series, if any, will be filed with the Commission as an exhibit to a Current
Report on Form 8-K to be filed within 15 days of issuance of the Securities of
the related Series.
BOND GUARANTEE INSURANCE
Bond guarantee insurance, if any, with respect to a Series of Bonds will be
provided by one or more insurance companies. Such bond guarantee insurance will
guarantee, with respect to one or more Classes of Bonds of the related Series,
timely distributions of interest and full distributions of principal on the
basis of a schedule of principal distributions set forth in or determined in the
manner specified in the related
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Prospectus Supplement. If so specified in the related Prospectus Supplement, the
bond guarantee insurance will also guarantee against any payment made to a
Bondholder which is subsequently recovered as a "voidable preference" payment
under the Bankruptcy Code. A copy of the bond guarantee insurance for a Series,
if any, will be filed with the Commission as an exhibit to a Current Report on
Form 8-K to be filed with the Commission within 15 days of issuance of the Bonds
of the related Series.
RESERVE FUNDS
One or more Reserve Funds may be established with respect to a Series, in
which cash, a letter of credit, Eligible Investments, a demand note or a
combination thereof, in the amounts, if any, so specified in the related
Prospectus Supplement will be deposited. The Reserve Funds for a Series may also
be funded over time by depositing therein a specified amount of the
distributions received on the related Mortgage Assets as specified in the
related Prospectus Supplement.
Amounts on deposit in any Reserve Fund for a Series, together with the
reinvestment income thereon, if any, will be applied by the Trustee for the
purposes, in the manner, and to the extent specified in the related Prospectus
Supplement. A Reserve Fund may be provided to increase the likelihood of timely
payments or distributions of principal of and interest on the Securities, if
required as a condition to the rating of such Series by each Rating Agency, or
to reduce the likelihood of special redemptions with respect to any Series. If
so specified in the related Prospectus Supplement, Reserve Funds may be
established to provide limited protection, in an amount satisfactory to each
Rating Agency, against certain types of losses not covered by Insurance Policies
or other credit support, such as losses arising from damage not covered by
standard hazard insurance policies. Following each Payment Date or Distribution
Date amounts in such Reserve Fund in excess of any amount required to be
maintained therein may be released from the Reserve Fund under the conditions
and to the extent specified in the related Prospectus Supplement and will not be
available for further application by the Trustee.
Moneys deposited in any Reserve Funds will be invested in Eligible
Investments, except as otherwise specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, any
reinvestment income or other gain from such investments will be credited to the
related Reserve Fund for such Series, and any loss resulting from such
investments will be charged to such Reserve Fund. However, such income may be
payable to the Master Servicer or a Servicer as additional servicing
compensation. See "SERVICING OF MORTGAGE LOANS". The Reserve Fund, if any, for a
Series will not be a part of the Trust Estate or Trust Fund, as applicable,
unless otherwise specified in the related Prospectus Supplement.
Additional information concerning any Reserve Fund will be set forth in the
related Prospectus Supplement, including the initial balance of such Reserve
Fund, the balance required to be maintained in the Reserve Fund, the manner in
which such required balance will decrease over time, the manner of funding such
Reserve Fund, the purposes for which funds in the Reserve Fund may be applied to
make payments or distributions to Bondholders or Certificateholders and use of
investment earnings from the Reserve Fund, if any.
DESCRIPTION OF INSURANCE ON THE MORTGAGE LOANS
The following descriptions of standard hazard insurance policies and FHA
insurance and the respective coverages thereunder are general descriptions only
and do not purport to be complete.
GENERAL
Each Mortgaged Property will be covered by a standard hazard insurance
policy, as described in the related Prospectus Supplement. The coverage under
standard hazard insurance policies will be subject to conditions and limitations
described in the Prospectus Supplement and under "Hazard Insurance on the
Mortgage Loans" below. Certain hazard risks will, therefore, not be insured and
the occurrence of such
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hazards could adversely affect payments or distributions to Holders.
Additionally, to the extent that losses on a defaulted or foreclosed Mortgage
Loan are not covered by other credit support for such Series, such losses, if
any, would affect payments or distributions to Holders.
HAZARD INSURANCE ON THE MORTGAGE LOANS
The standard hazard insurance policies will provide for coverage at least
equal to the applicable state standard form of fire insurance policy with
extended coverage. In general, the standard form of fire and extended coverage
policy will cover physical damage to or destruction of, the improvements on the
Mortgaged Property caused by fire, lightning, explosion, smoke, windstorm, hail,
riot, strike and civil commotion, subject to the conditions and exclusions
particularized in each policy. Because the standard hazard insurance policies
relating to the Mortgage Loans will be underwritten by different insurers and
will cover Mortgaged Properties located in various states, such policies will
not contain identical terms and conditions. The basic terms, however, generally
will be determined by state law and generally will be similar. Most such
policies typically will not cover any physical damage resulting from war,
revolution, governmental actions, floods and other water-related causes, earth
movement (including earthquake, landslides, and mudflows), nuclear reaction, wet
or dry rot, vermin, rodents, insects or domestic animals, theft and, in certain
cases, vandalism. The foregoing list is merely indicative of certain kinds of
uninsured risks and is not intended to be all-inclusive. Uninsured risks not
covered by a special hazard insurance policy or other form of credit support may
adversely affect the ability of the Issuer to make payments of principal or
interest on the Bonds. When a Mortgaged Property is located in a flood area
identified in the Federal Register by the Flood Emergency Management Agency, the
Master Servicer or the Servicer will be required to cause flood insurance to be
maintained with respect to such Mortgaged Property.
The standard hazard insurance policies covering Mortgaged Properties
securing Mortgage Loans typically will contain a "coinsurance" clause which will
require the insured at all times to carry hazard insurance of a specified
percentage (generally 80% to 90%) of the actual cash value of the improvements
on the Mortgaged Property in order to recover the full amount of any partial
loss. If the insured's coverage falls below this specified percentage, such
clause will provide that the hazard insurer's liability in the event of partial
loss will not exceed the greater of (i) the actual cash value (the replacement
cost less physical depreciation) of the improvements damaged or destroyed or
(ii) such proportion of the loss as the amount of insurance carried bears to the
specified percentage of the actual cash value of such improvements.
In the event of partial loss, hazard insurance proceeds may be insufficient
to restore fully the damaged property. Under the terms of the Mortgage Loans,
Mortgagors are required to present claims to insurers under hazard insurance
policies maintained on the Mortgaged Properties. The Primary Servicer, on behalf
of the Trustee, Bondholders, and Certificateholders, is obligated to present or
cause to be presented claims under any blanket insurance policy insuring against
hazard losses on Mortgaged Properties; however, the ability of the Primary
Servicer to present or cause to be presented such claims is dependent upon the
extent to which information in this regard is furnished to the Primary Servicer
by Mortgagors.
FHA INSURANCE
The FHA is responsible for administering various federal programs, including
mortgage insurance, authorized under the Housing Act, as amended, and the United
States Housing Act of 1937, as amended. To the extent specified in the related
Prospectus Supplement, all or a portion of the Mortgage Loans may be insured by
the FHA. The Primary Servicer will be required to take such steps as are
reasonably necessary to keep such insurance in full force and effect.
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CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans that are general in nature. Because such legal aspects are
governed by applicable state law (which laws may differ substantially), the
summaries do not purport to be complete nor to reflect the laws of any
particular state, nor to encompass the laws of all states in which the Mortgaged
Properties are situated. The summaries are qualified in their entirety by
reference to the applicable federal and state laws governing the Mortgage Loans.
MORTGAGES
Each Mortgage Loan will be secured by a mortgage, a deed of trust or a deed
to secure debt, depending upon the prevailing practice and law in the state in
which the related Mortgaged Property is located. The filing of a mortgage, deed
of trust or deed to secure debt creates a lien upon, or grants a title interest
in, the real property covered by such instrument and represents the security for
the repayment of an obligation that is customarily evidenced by a promissory
note. The lien of the mortgage is generally subordinate to the lien for real
estate taxes and assessments or other charges imposed under governmental police
powers. The priority of the lien with respect to such mortgage depends on its
terms, the knowledge of the parties to the mortgage and generally on the order
of recording the mortgage with the applicable public recording office.
There are two parties to a mortgage: the mortgagor, who is the owner of the
property and usually the borrower, and the mortgagee, who is the lender. In the
case where the borrower is a land trust, there are three parties because title
to the property is held by a land trustee under a land trust agreement of which
the borrower is the beneficiary at origination of a mortgage loan involving a
land trust, the borrower executes a separate undertaking to make payments on the
mortgage note. A deed of trust has three parties: the owner of the property and
usually the borrower, called the trustor (similar to a mortgagor), a lender,
called the beneficiary (similar to the mortgagee), and a third-party grantee,
called the trustee. Under a deed of trust, the borrower grants the property,
irrevocably until the debt is paid, in trust, generally with a power of sale, to
the trustee to secure payment of the mortgage loan. The trustee's authority
under a deed of trust and the mortgagee's authority under a mortgage are
governed by the express provisions of the deed of trust or mortgage, the law of
the state in which the related Mortgaged Property is located and, in some cases,
in deed of trust transactions, the directions of the beneficiary. Some states
use a security deed or deed to secure debt which is similar to a deed of trust
except it has only two parties: a grantor (similar to a mortgagor) and a grantee
(similar to a mortgagee).
INTEREST IN REAL PROPERTY
The real property covered by a mortgage, deed of trust, security deed or
deed to secure debt is most often the fee estate in land and improvements.
However, such an instrument may encumber other interests in real property such
as a tenant's interest in a lease of land or improvements, or both, and the
leasehold estate created by such lease. An instrument covering an interest in
real property other than the fee estate requires special provisions in the
instrument creating such interest or in the mortgage, deed of trust, security
deed or deed to secure debt, to protect the mortgagee against termination of
such interest before the mortgage, deed of trust, security deed or deed to
secure debt is paid. Unless otherwise specified in the Prospectus Supplement,
the Depositor or the Asset Seller will make certain representations and
warranties in the Agreement with respect to the Mortgage Loans which are secured
by an interest in a leasehold estate. Such representation and warranties will be
set forth in the Prospectus Supplement if applicable.
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGES OR BENEFICIARIES
If specified in the applicable Prospectus Supplement, some of the Mortgage
Loans included in the Mortgage Pool will be secured by junior mortgages or deeds
of trust which are subordinate to senior
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mortgages or deeds of trust held by other lenders or institutional investors.
The rights of the Trust Fund (and therefore the Certificateholders), as
beneficiary under a junior deed of trust or as mortgagee under a junior
mortgage, are subordinate to those of the mortgagee or beneficiary under the
senior mortgage or deed of trust, including the prior rights of the senior
mortgagee or beneficiary to receive rents, hazard insurance and condemnation
proceeds and to cause the property securing the Mortgage Loan to be sold upon
default of the mortgagor or trustor, thereby extinguishing the junior
mortgagee's or junior beneficiary's lien unless the Special Servicer asserts its
subordinate interest in a property in foreclosure litigation or satisfies the
defaulted senior loan. Accordingly, the Trust Fund (and therefore the
Certificateholders), as the holder of the junior lien, bear (i) the risk of
delay in distributions while a deficiency judgement against the borrower is
obtained and (ii) the risk of loss if the deficiency judgement is not realized
upon. Moreover, deficiency judgements may not be available in certain
jurisdictions or the Mortgage Loan may be nonrecourse. As discussed more fully
below, in many states a junior mortgagee or beneficiary may satisfy a defaulted
senior loan in full, or may cure such default and bring the senior loan current,
in either event adding the amounts expended to the balance due on the junior
loan. Absent a provision in the senior mortgage, no notice of default is
required to be given to the junior mortgagee.
The form of the mortgage or deed of trust used by many institutional lenders
confers on the mortgagee or beneficiary the right both to receive all proceeds
collected under any hazard insurance policy and all awards made in connection
with any condemnation proceedings, and to apply such proceeds and awards to any
indebtedness secured by the mortgage or deed of trust, in such order as the
mortgage or beneficiary may determine. Thus, in the event improvements on the
property are damaged or destroyed by fire or other casualty, or in the event the
property is taken by condemnation, the mortgagee or beneficiary under the senior
mortgage or deed of trust will have the prior right to collect any insurance
proceeds payable under a hazard insurance policy and any award of damages in
connection with the condemnation and to apply the same to the indebtedness
secured by the senior mortgage or deed of trust. Proceeds in excess of the
amount of senior mortgage indebtedness will, in most cases, by applied to the
indebtedness of a junior mortgage or trust deed. The laws of certain states may
limit the ability of mortgagees or beneficiaries to apply the proceeds of hazard
insurance and partial condemnation awards to the secured indebtedness. In such
states, the mortgagor or trustor must be allowed to use the proceeds of hazard
insurance to repair the damage unless the security of the mortgagee or
beneficiary has been impaired. Similarly, in certain states, the mortgagee or
beneficiary is entitled to the award for a partial condemnation of the real
property security only to the extent that its security is impaired.
The form of mortgage or deed of trust used by many institutional lenders
typically contains a "future advance" clause, which provides, in essence, that
additional amounts advanced to or on behalf of the mortgagor or trustor by the
mortgagee or beneficiary are to be secured by the mortgage or deed of trust.
While such a clause is valid under the laws of most states, the priority of any
advance made under the clause depends, in some states, on whether the advance
was an "obligatory" or "optional" advance. If the mortgagee or beneficiary is
obligated to advance the additional amounts, the advance may be entitled to
receive the same priority as amounts initially made under the mortgage or deed
of trust, notwithstanding that there may be intervening junior mortgages or
deeds of trust and other liens between the date of recording of the mortgage or
deed of trust and the date of the future advance, and notwithstanding that the
mortgagee or beneficiary had actual knowledge of such intervening junior
mortgages or deeds of trust and other liens at the time of the advance. Where
the mortgagee or beneficiary is not obligated to advance the additional amounts
and has actual knowledge of the intervening junior mortgages or deeds of trust
and other liens, the advance may be subordinate to such intervening junior
mortgages or deeds of trust and other liens. Priority of advances under a
"future advance" clause rests, in many other states, on state law giving
priority to all advances made under the loan agreement up to a "credit limit"
amount stated in the recorded mortgage.
Another provision typically found in the form of the mortgage or deed of
trust used by many institutional lenders obligates the mortgagor or trustor to
pay before delinquency all taxes and assessments
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on the property and, when due, all encumbrances, charges and liens on the
property which appear prior to the mortgage or deed of trust, to provide and
maintain fire insurance on the property, to maintain and repair the property and
not to commit or permit any waste thereof, and to appear in and defend any
action or proceeding purporting to affect the property or the rights of the
mortgagee or beneficiary under the mortgage or deed of trust. Upon a failure of
the mortgagor or trustor to perform any of these obligations, the mortgagee or
beneficiary is given the right under the mortgage or deed of trust to perform
the obligation itself, at its election, with the mortgagor or trustor agreeing
to reimburse the mortgagee or beneficiary for any sums expended by the mortgagee
or beneficiary on behalf of the trustor. All sums so expended by the mortgagee
or beneficiary become part of the indebtedness secured by the mortgage or deed
of trust.
The form of mortgage or deed of trust used by many institutional lenders
typically requires the mortgagor or trustor to obtain the consent of the
mortgagee or beneficiary in respect of actions affecting the mortgaged property,
including, without limitation, leasing activities (including new leases and
termination or modification of existing leases), alterations and improvements to
buildings forming a part of the mortgaged property and management and leasing
agreements for the mortgaged property. Tenants will often refuse to execute a
lease unless the mortgagee or beneficiary executes a written agreement with the
tenant not to disturb the tenant's possession of its premises in the event of a
foreclosure. A senior mortgagee or beneficiary may refuse to consent to matters
approved by a junior mortgagee or beneficiary with the result that the value of
the security for the junior mortgage or deed of trust is diminished. For
example, a senior mortgagee or beneficiary may decide not to approve a lease or
to refuse to grant a tenant a non-disturbance agreement. If, as a result, the
lease is not executed, the value of the mortgaged property may be diminished.
FORECLOSURE OF MORTGAGE
In states permitting nonjudicial foreclosure proceedings, foreclosure of a
deed of trust or deed to secure debt is generally accomplished by a non-judicial
trustee's sale under a specific provision in the deed of trust which authorizes
the trustee to sell the property upon any default by the borrower under the
terms of the note or deed of trust or deed to secure debt. In some states, prior
to such sale, the trustee must record a notice of default and send a copy to the
borrower-trustor and to any person who has recorded a request for a copy of a
notice of default and notice of sale. In addition, the trustee in some states
must provide notice of any other individual having an interest in the real
property, including any junior lienholders. In some states there is a
reinstatement period. The trustor, borrower, or any person having a junior
encumbrance on the real estate may, during a reinstatement period, cure the
default by paying the entire amount in arrears plus the costs and expenses
incurred in enforcing the obligation. In other states, after acceleration of the
debt, the borrower is not provided with a period to reinstate the loan, but has
only the right to pay off the entire debt to prevent the foreclosure sale.
Generally, state law controls the amount of foreclosure expenses and costs,
including attorneys' fees, which may be recovered by a lender. If the deed of
trust is not reinstated, a notice of sale must be posted in a public place and,
in most states, published for a specified period of time in one or more
newspapers. In addition, some state laws require that a copy of the notice of
sale be posted on the property, recorded and sent to all parties having an
interest in the real property. Generally, state law governs the procedure for
public sale, the parties entitled to notice, the method of giving notice and the
applicable time periods.
An action to foreclose a mortgage is an action to recover the mortgage debt
by enforcing the mortgagee's rights under the mortgage. It is regulated by
statutes and rules and subject throughout to the court's equitable powers.
Generally, a borrower is bound by the terms of the mortgage note and the
mortgage and cannot be relieved from his default if the mortgagee has exercised
his rights in a commercially reasonable manner. However, since a foreclosure
action historically was equitable in nature, the court may exercise equitable
powers to relieve a mortgagor of a default and deny the mortgagee foreclosure on
proof that either the mortgagor's default was neither willful nor in bad faith
or the
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mortgagee's action established a waiver, fraud, bad faith, or oppressive or
unconscionable conduct such as to warrant a court of equity refusing affirmative
relief to the mortgagee. Under certain circumstances, a court of equity may
relieve the borrower from an entirely technical default where such default was
not willful.
A foreclosure action is subject to most of the delays and expenses of other
lawsuits if defenses or counterclaims are interposed, sometimes requiring up to
several years to complete. Moreover, a non-collusive, regularly conducted
foreclosure sale may be challenged as a fraudulent conveyance, regardless of the
parties' intent, if a court determines that the sale was for less than fair
consideration and such sale occurred while the mortgagor was insolvent and
within the state statute of limitations (which is tolled by the filing of a
bankruptcy case). Similarly, in some states, a suit against the debtor on the
mortgage note may take several years and, generally, is a remedy alternative to
foreclosure, the mortgagee being precluded from pursuing both at the same time.
In case of foreclosure under either a mortgage or a deed of trust, the sale
by the referee or other designated officer or by the trustee is a public sale.
However, because of the difficulty potential third-party purchasers at the sale
have in determining the exact status of title and because the physical condition
of the property may have deteriorated during the foreclosure proceedings, it is
uncommon for a third party to purchase the property at a foreclosure sale.
Rather, it is common for the lender to purchase the property from the trustee or
referee for an amount which may be equal to the principal amount of the mortgage
or deed of trust plus accrued and unpaid interest and the expenses of
foreclosure, in which event the borrower's debt will be extinguished or the
lender may purchase for a lesser amount in order to preserve its right against a
borrower to seek a deficiency judgment in states where such a judgment is
available. Thereafter, and subject in some states to the right of the borrower
to stay in possession during a redemption period, the lender will assume the
burdens of ownership, including obtaining casualty insurance, paying taxes and
making such repairs at its own expense as are necessary to render the property
suitable for sale. The lender will commonly obtain the services of a real estate
broker and pay the broker's commission in connection with the sale of the
property. Depending upon market conditions, the ultimate proceeds of the sale of
the property may not equal the lender's investment in the property. Moreover, a
lender typically incurs substantial legal fees and court costs in acquiring a
mortgaged property through contested foreclosure. Furthermore, certain states
require that any environmental hazards be eliminated before a property may be
resold. In addition, a lender may be responsible under federal or state law for
the cost of cleaning up a mortgaged property that is environmentally
contaminated. As a result, a lender could realize an overall loss on a mortgage
loan even if the related mortgaged property is sold at foreclosure or resold
after it is acquired through foreclosure for an amount equal to the full
outstanding principal amount of the mortgage loan, plus accrued interest. Any
loss may be reduced by the receipt of any mortgage guaranty insurance proceeds.
The holder of a junior mortgage that forecloses on any Mortgaged Property
does so subject to senior mortgages and any other prior liens, and may be
obliged to keep senior mortgage loans current in order to avoid foreclosure of
its interest in the property. In addition, if the foreclosure of a junior
mortgage triggers the enforcement of a "due-on-sale" clause contained in a
senior mortgage, the junior mortgagee could be required to pay the full amount
of the senior mortgage indebtedness or face foreclosure.
If title to any Mortgaged Property is acquired by the Trustee on behalf of
the Certificateholders, the Master Servicer or any related Sub-servicer or the
Special Servicer, on behalf of such holders, will be required to sell the
Mortgaged Property prior to the close of the third calendar year following the
year of acquisition of such Mortgaged Property by the Trust Fund, unless (i) the
Internal Revenue Service grants an extension of time to sell such property (an
"REO Extension") or (ii) it obtains an opinion of counsel generally to the
effect that the holding of the property for more than two years after its
acquisition will not result in the imposition of a tax on the Trust Fund or
cause any REMIC created pursuant to the Pooling and Servicing Agreement to fail
to qualify as a REMIC under the Code. Subject to the foregoing, the Master
Servicer or any related Sub-servicer or the Special Servicer will generally be
required to solicit bids
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for any Mortgaged Property so acquired in such a manner as will be reasonably
likely to realize a fair price for such property. The Master Servicer or any
related Sub-servicer or the Special Servicer may retain an independent
contractor to operate and manage any REO Property; however, the retention of an
independent contractor will not relieve the Master Servicer or any related
Sub-servicer or the Special Servicer of its obligations with respect to such REO
Property.
In general, the Master Servicer or any related Sub-servicer or the Special
Servicer or an independent contractor employed by the Master Servicer or any
related Sub-servicer or the Special Servicer at the expense of the Trust Fund
will be obligated to operate and manage any Mortgaged Property acquired as REO
Property in a manner that (i) would cause such property to be treated as
"foreclosure property" by any REMIC in which such REO Property is held and (ii)
would, to the extent commercially reasonable and consistent with clause (i),
maximize the Trust Fund's net after-tax proceeds from such property. After the
Master Servicer or any related Sub-servicer or the Special Servicer reviews the
operation of such property and consults with the Trustee to determine the Trust
Fund's federal income tax reporting position with respect to the income it is
anticipated that the Trust Fund would derive from such property, the Master
Servicer or any related Sub-servicer or the Special Servicer could determine
(particularly in the case of an REO Property that is a hospitality property or
residential health care facility) that it would not be commercially feasible to
manage and operate such property in a manner that would avoid the imposition of
a tax on "net income from foreclosure property," within the meaning of Section
857(b)(4)(B) of the Code (an "REO Tax") at the highest marginal corporate tax
rate (currently 35%). The determination as to whether income from an REO
Property would be subject to an REO Tax will depend on the specific facts and
circumstances relating to the management and operation of each REO Property. Any
REO Tax imposed on the Trust Fund's income from an REO Property would reduce the
amount available for distribution to Certificateholders. Certificateholders are
advised to consult their tax advisors regarding the possible imposition of REO
Taxes in connection with the operation of commercial REO Properties by REMICs.
LEASEHOLD RISKS
Mortgage Loans may be secured by a mortgage on a ground lease. Leasehold
mortgages are subject to certain risks not associated with mortgage loans
secured by the fee estate of the mortgagor. The most significant of these risks
is that the ground lease creating the leasehold estate could terminate, leaving
the leasehold mortgagee without its security. The ground lease may terminate if,
among other reasons, the ground lessee breaches or defaults in is obligations
under the ground lease or there is a bankruptcy of the ground lessee or the
ground lessor. This risk may be minimized if the ground lease contains certain
provisions protective of the mortgagee, but the ground leases that secure
Mortgage Loans may not contain some of these protective provisions, and
mortgages may not contain the other protections discussed in the next paragraph.
Protective ground lease provisions include the right of the leasehold mortgagee
to receive notices from the ground lessor of any defaults by the mortgagor; the
right to cure such defaults, with adequate cure periods; if a default is not
susceptible of cure by the leasehold mortgagee, the right to acquire the
leasehold estate through foreclosure or otherwise; the ability of the ground
lease to be assigned to and by the leasehold mortgagee or purchaser at a
foreclosure sale and for the concomitant release of the ground lessee's
liabilities thereunder; and the right of the leasehold mortgagee to enter into a
new ground lease with the ground lessor on the same terms and conditions as the
old ground lease in the event of a termination thereof.
In addition to the foregoing protections, a leasehold mortgagee may require
that the ground lease or leasehold mortgage prohibit the ground lessee from
treating the ground lease as terminated in the event of the ground lessor's
bankruptcy and rejection of the ground lease by the trustee for the
debtor-ground lessor. As further protection, a leasehold mortgage may provide
for the assignment of the debtor-ground lessee's right to reject a lease
pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as amended (Title
11 of the United States Code), although the enforceability of such clause has
not been established.
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Without the protections described above, a leasehold mortgagee may lose the
collateral securing its leasehold mortgage. In addition, terms and conditions of
a leasehold mortgage are subject to the terms and conditions of the ground
lease. Although certain rights given to a ground lessee can be limited by the
terms of a leasehold mortgage, the rights of a ground lessee or a leasehold
mortgagee with respect to, among other things, insurance, casualty and
condemnation will be governed by the provisions of the ground lease.
RIGHTS OF REDEMPTION
In some states, after sale pursuant to a deed of trust or foreclosure of a
mortgage, the trustor or borrower and foreclosed junior lienors are given a
statutory period in which to redeem the property from the foreclosure sale. The
right of redemption should be distinguished from the equity of redemption, which
is a nonstatutory right that must be exercised prior to the foreclosure sale. In
some states, redemption may occur only upon payment of the foreclosure sales
price and expenses of foreclosure. In other states, redemption may be authorized
if the former borrower pays only a portion of the sums due. The effect of a
statutory right of redemption is to diminish the ability of the lender to sell
the foreclosed property. The right of redemption would defeat the title of any
purchaser from the lender subsequent to foreclosure or sale under a deed of
trust. Consequently, the practical effect of a right of redemption is to force
the lender to retain the property and pay expenses of ownership until the
redemption period has run. In some states, there is no right to redeem property
after a trustee's sale under a deed of trust.
Under the REMIC Provisions currently in effect, property acquired by
foreclosure generally must not be held beyond the end of the third taxable year
following the year of acquisition. Unless otherwise provided in the related
Prospectus Supplement, with respect to a series of Certificates for which an
election is made to qualify the Trust Fund or a part thereof as a REMIC, the
Agreement will permit foreclosed property to be held for more than two years if
the Internal Revenue Service grants an extension of time within which to sell
such property or independent counsel renders an opinion to the effect that
holding such property for such additional period is permissible under the REMIC
Provisions.
ENVIRONMENTAL MATTERS
Real property pledged as security to a lender may be subject to
environmental risks. For example, certain environmental liabilities may (1)
cause a diminution in the value of the Mortgaged Property; (2) limit the
lender's foreclosure rights; and (3) subject the lender to liability for
clean-up costs or other remedial actions. Under the laws of many states,
contamination of a property may give rise to a lien on the property to assure
the costs of clean-up. In several states, such a lien has priority over the lien
of an existing mortgage against such property.
The presence of hazardous or toxic substances, or the failure to remediate
such property properly, may adversely affect the market value of the property,
as well as the owner's ability to sell or use the real estate or to borrow using
the real estate as collateral. In addition, certain environmental laws and
common law principles govern the responsibility for the removal, encapsulation
or disturbance of asbestos containing materials ("ACMs") when these ACMs are in
poor condition or when a property with ACMs is undergoing repair, renovation or
demolition. Such laws could also be used to impose liability upon owners and
operators of real properties for release of ACMs into the air that cause
personal injury or other damage. In addition to cleanup and natural resource
damages actions brought by federal, state, and local agencies and private
parties, the presence of hazardous substances on a property may lead to claims
of personal injury, property damage, or other claims by private plaintiffs.
Under the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), and under the laws of certain
states, a secured party which takes a deed-in-lieu of foreclosure, purchases a
mortgaged property at a foreclosure sale, or operates a Mortgaged Property may
become liable in some circumstances either to the government or to private
parties for cleanup costs, even if the lender does not cause or contribute to
the contamination. Liability under some federal or state
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statutes may not be limited to the original or unamortized principal balance of
a loan or to the value of the property securing a loan. CERCLA imposes strict,
as well as joint and several, liability on several classes of potentially
responsible parties, including current owners and operators of the property,
regardless of whether they caused or contributed to the contamination. Many
states have laws similar to CERCLA.
Lenders may be held liable under CERCLA as owners or operators. Excluded
from CERCLA's definition of "owner or operator," however, is a person who
without participating in the management of the facility, holds indicia of
ownership primarily to protect his security interest. This exemption for holders
of a security interest such as a secured lender applies only in circumstances
where the lender acts to protect its security interest in the contaminated
facility or property. Thus, if a lender's activities encroach on the actual
management of such facility or property, the lender faces potential liability as
an "owner or operator" under CERCLA. Similarly, when a lender forecloses and
takes title to a contaminated facility or property (whether it holds the
facility or property as an investment or leases it to a third party), the lender
may incur potential CERCLA liability.
Whether actions taken by a lender would constitute such an encroachment on
the actual management of a facility or property, so as to render the secured
creditor exemption unavailable to the lender has been a matter of judicial
interpretation of the statutory language, and court decisions have historically
been inconsistent.
This ambiguity appears to have been resolved by the enactment of the Asset
Conservation, Lender Liability and Deposit Insurance Protection Act of 1996 (the
"Asset Conservation Act"), signed into law by President Clinton on September 30,
1996, which lists permissible actions that may be undertaken by a lender holding
security in a contaminated facility without exceeding the bounds of the secured
creditor exemption, subject to certain conditions and limitations. The Asset
Conservation Act provides that in order to be deemed to have participated in the
management of a secured property, a lender must actually participate in the
operational affairs of the property or the borrower. The Asset Conservation Act
also provides that a lender will continue to have the benefit of the secured
creditor exemption even if it forecloses on a mortgaged property, purchases it
at a foreclosure sale or accepts a deed-in-lieu of foreclosure provided that the
lender seeks to sell the mortgaged property at the earliest practicable
commercially reasonable time on commercially reasonable terms. In addition to
its application to CERCLA, the Asset Conservation Act applies to determining a
lender's liability as an owner or operator of a petroleum or hazardous substance
underground storage tank ("UST") under the federal Resource Conservation and
Recovery Act ("RCRA").
The secured creditor exemption does not protect a lender from liability
under CERCLA in cases, among others, where the lender arranges for disposal of
hazardous substances or for transportation of hazardous substances. In addition,
the secured creditor exemption does not govern liability for cleanup costs under
federal laws other than CERCLA or the petroleum and hazardous substance UST
provisions of RCRA. For example, under other provisions of RCRA, a past or
present owner or operator of a facility may be ordered to conduct environmental
property remediation in a proceeding brought by the government or by private
citizens. In addition, many states have statutes similar to CERCLA, and not all
those statutes provide for a secured creditor exemption.
In a few states, transfer of some types of properties is conditioned upon
clean up of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed-in-lieu of foreclosure
or otherwise, may be required to cleanup the contamination before selling or
otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law causes
of action (for example, actions based on nuisance or on toxic tort resulting in
death, personal injury or damage to property) related to hazardous environmental
conditions on a property. While it may be more difficult to hold a lender liable
in such cases, unanticipated or uninsurable liabilities of the borrower may
jeopardize the borrower's ability to meet its loan obligations.
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If a lender is or becomes liable, it may bring an action for contribution
against the owner or operator who created the environmental hazard, but that
person or entity may be bankrupt or otherwise judgment proof. It is possible
that cleanup costs could become a liability of the Trust Fund and occasion a
loss to Certificateholders in certain circumstances described above if such
remedial costs were incurred.
Except as otherwise specified in the applicable Prospectus Supplement, at
the time the Mortgage Loans were originated, it is possible that no
environmental assessment or a very limited environmental assessment of the
Mortgaged Properties was conducted.
Unless otherwise specified in the related Prospectus Supplement, the
Servicing Agreement, Master Servicing Agreement or Special Servicing Agreement,
as applicable, provides that the Servicer, the Master Servicer or the Special
Servicer, as applicable, acting on behalf of the Trust Estate or Trust Fund, as
applicable, may not acquire title to a Mortgaged Property underlying a Mortgage
Loan or take over its operation unless the Servicer, the Master Servicer or the
Special Servicer, as applicable, has previously determined, based upon a report
prepared by a person who regularly conducts environmental audits, that (i) the
Mortgaged Property is in compliance with applicable environmental laws and
regulations or, if not, that taking such actions as are necessary to bring the
Mortgaged Property in compliance therewith is reasonably likely to produce a
greater recovery on a present value basis than not taking such actions and (ii)
there are no circumstances or conditions present that have resulted in any
contamination or if such circumstances or conditions are present for which any
action could be required, taking such actions with respect to the affected
Mortgaged Property is reasonably likely to produce a greater recovery on a
present value basis than not taking such actions.
CERTAIN LAWS AND REGULATIONS
The Mortgaged Properties are subject to compliance with various federal,
state and local statutes and regulations. Failure to comply (together with an
inability to remedy any such failure) could result in material diminution in the
value of a Mortgaged Property which could, together with the limited alternative
uses for such Mortgaged Property, result in a failure to realize the full
principal amount of the Mortgage Loans.
For instance, Mortgaged Properties which are hospitals, nursing homes or
convalescent homes may present special risks in large part due to significant
governmental regulation of the operation, maintenance, control and financing of
health care institutions. Mortgaged Properties which are hotels or motels may
present additional risk in that: (i) hotels and motels are typically operated
pursuant to franchise, management and operating agreements which may be
terminable by the operator, and (ii) the transferability of the hotel's
operating, liquor and other licenses to the entity acquiring the hotel either
through purchase or foreclosure is subject to the vagaries of local law
requirements.
LEASES AND RENTS
Multifamily and commercial mortgage loan transactions often provide for an
assignment of the leases and rents pursuant to which the borrower typically
assigns its right, title and interest, as landlord under each lease and the
income derived therefrom, to the lender while either obtaining a license to
collect rents for so long as there is no default or providing for the direct
payment to the lender. The manner of perfecting the mortgagee's interest in
rents may depend on whether the mortgagor's assignment was absolute or one
granted as security for the loan. Failure to properly perfect the mortgagee's
interest in rents may result in the loss of substantial pool of funds, which
could otherwise serve as a source of repayment for such loan. If the mortgagor
defaults, the license terminates and the lender is entitled to collect the
rents. Local law may require that the lender take possession of the property
and/or obtain a court-appointed receiver before becoming entitled to collect the
rents. In most states, hotel and motel room revenues are considered accounts
receivable under the UCC; generally these revenues are either assigned by the
mortgagor, which remains entitled to collect such revenues absent a default, or
pledged by
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the mortgagor, as security for the loan. In general, the lender must file
financing statements in order to perfect its security interest in the revenues
and must file continuation statements, generally every five years, to maintain
perfection of such security interest. Even if the lender's security interest in
room revenues is perfected under the UCC, the lender will generally be required
to commence a foreclosure or otherwise take possession of the property in order
to collect the room revenues after a default.
PERSONALTY
Certain types of Mortgaged Properties, such as hotels, motels and industrial
plants, are likely to derive a significant part of their value from personal
property which does not constitute "fixtures" under applicable state real
property law and, hence, would not be subject to the lien of a mortgage. Such
property is generally pledged or assigned as security to the lender under the
UCC. In order to perfect its security interest therein, the lender generally
must file UCC financing statements and, to maintain perfection of such security
interest, file continuation statements generally every five years.
ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS
Certain states have imposed statutory restrictions that limit the remedies
of a beneficiary under a deed of trust or a mortgagee under a mortgage. In some
states, statutes limit the right of the beneficiary or mortgagee to obtain a
deficiency judgment against the borrower following foreclosure or sale under a
deed of trust. A deficiency judgment is a personal judgment against the former
borrower equal in most cases to the difference between the amount due to the
lender and the net amount realized upon the foreclosure sale. Other statutes may
require the beneficiary or mortgagee to exhaust the security afforded under a
deed of trust or mortgage by foreclosure in an attempt to satisfy the full debt
before bringing a personal action against the borrower. In certain other states,
the lender has the option of bringing a personal action against the borrower on
the debt without first exhausting such security; however, in some of these
states, the lender, following judgment on such personal action, may be deemed to
have elected a remedy and may be precluded from exercising remedies with respect
to the security. Consequently, the practical effect of the election requirement,
when applicable, is that lenders will usually proceed first against the security
rather than bringing personal action against the borrower. Finally, other
statutory provisions may limit any deficiency judgment against the former
borrower following a foreclosure sale to the excess of the outstanding debt over
the fair market value of the property at the time of such sale. The purpose of
these statutes is to prevent a beneficiary or a mortgagee from obtaining a large
deficiency judgment against the former borrower as a result of low or no bids at
the judicial sale. In some states, exceptions to the anti-deficiency statutes
are provided for in certain instances where the value of the lender's security
has been impaired by acts or omissions of the borrower, for example, in the
event of waste of the property.
In addition, substantive requirements are imposed upon lenders in connection
with the origination and the servicing of mortgage loans by numerous federal and
some state consumer protection laws. The laws include the federal
Truth-in-Lending Act, Real Estate Settlement Procedures Act, Equal Credit
Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act and related
statutes and regulations. These federal laws impose specific statutory
liabilities upon lenders who originate loans and who fail to comply with the
provisions of the law. In some cases, this liability may affect assignees of the
loans.
FEDERAL BANKRUPTCY AND OTHER LAWS AFFECTING CREDITORS' RIGHTS
In addition to laws limiting or prohibiting deficiency judgments, numerous
other statutory provisions, including the federal bankruptcy laws (the
"Bankruptcy Code") and state laws affording relief to debtors, may interfere
with or affect the ability of the secured lender to realize upon collateral
and/or enforce a deficiency judgment. For example, with respect to federal
bankruptcy law, the filing of a bankruptcy petition acts as a stay of the
enforcement of remedies (including the right of foreclosure) for collection of a
debt. Also, the filing of a petition in bankruptcy by or on behalf of a junior
lienor may stay a senior lender from taking action to foreclose the junior lien.
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In a Chapter 11 case under the Bankruptcy Code, the lender's lien may be
transferred to other collateral and/or be limited in amount to the value of the
lender's interest in the collateral as of the date of the bankruptcy. The loan
term may be extended, the interest rate may be adjusted to market rates and the
priority of the loan may be subordinated to bankruptcy court-approved financing.
The bankruptcy court can also reinstate accelerated indebtedness and, in effect,
invalidate due-on-sale clauses through confirmed Chapter 11 plans of
reorganization. Under Section 363(b) and (f) of the Bankruptcy Code, a trustee
for a debtor, or a debtor as debtor-in-possession, may, despite the provisions
of the related Mortgage Loan to the contrary, sell its Mortgaged Property free
and clear of all liens, which liens would then attach to the proceeds of such
sale.
The Bankruptcy Code has recently been amended to provide that a lender's
perfected pre-petition security interest in leases, rents and hotel revenues
continues in the post-petition leases, rents and hotel revenues, unless a
bankruptcy court orders to the contrary "based on the equities of the case."
Thus, unless a court orders otherwise, revenues from a Mortgaged Property
generated after the date the bankruptcy petition is filed will constitute "cash
collateral" under the Bankruptcy Code. Debtors may only use cash collateral upon
obtaining the lender's consent or a prior court order finding that the lender's
interest in the Mortgaged Properties and the cash collateral is "adequately
protected" as such term has been interpreted under the Bankruptcy Code. It
should be noted, however, that, in the case of hospitality properties, the court
may find that the lender has no security interest in either pre-petition or
post-petition revenues if the court finds that the loan documents do not contain
language covering accounts, room rents, or other forms of personalty necessary
for a security interest to attach to hotel revenues.
Lessee bankruptcies at the Mortgaged Properties could have an adverse impact
on the Mortgagors' ability to meet their obligations. For example, Section
365(e) of the Bankruptcy Code provides generally that rights and obligations
under an unexpired lease may not be terminated or modified at any time after the
commencement of a case under the Bankruptcy Code solely because of a provision
in the lease conditioned upon the commencement of a case under the Bankruptcy
Code or certain other similar events. In addition, Section 362 of the Bankruptcy
Code operates as an automatic stay of, among other things, any act to obtain
possession of property of or from a debtor's estate, which may delay the
Trustee's exercise of remedies in the event that a lessee becomes the subject of
a proceeding under the Bankruptcy Code.
Section 365(a) of the Bankruptcy Code generally provides that a trustee or a
debtor-in-possession in a case under the Bankruptcy Code has the power to assume
or to reject an executory contract or an unexpired lease of the debtor, in each
case subject to the approval of the bankruptcy court administering such case. If
the trustee or debtor-in-possession rejects an executory contract or an
unexpired lease, such rejection generally constitutes a breach of the executory
contract or unexpired lease immediately before the date of the filing of the
bankruptcy petition. As a consequence, the other party or parties to such
executory contract or unexpired lease, such as the Mortgagor as lessor under a
lease, would have only an unsecured claim against the debtor for damages
resulting from such breach, which could adversely affect the security for the
related Mortgage Loan. Moreover, under Section 502(b)(6) of the Bankruptcy Code,
the claim of a lessor for such damages from the termination of a lease of real
property will be limited to the sum of (i) the rent reserved by such lease,
without acceleration, for the greater of one year or 15 percent, not to exceed
three years, of the remaining term of such lease, following the earlier of the
date of the filing of the petition and the date on which such lender
repossessed, or the lessee surrendered, the leased property, and (ii) any unpaid
rent due under such lease, without acceleration, on the earlier of such dates.
Under Section 365(f) of the Bankruptcy Code, if a trustee or
debtor-in-possession assumes an executory contract or an unexpired lease of the
debtor, the trustee or debtor-in-possession generally may assign such executory
contract or unexpired lease, notwithstanding any provision therein or in
applicable law that prohibits, restricts or conditions such assignment, provided
that "adequate assurance of future performance" by the assignee is provided to
the lessor or contract party. The Bankruptcy Code specifically provides,
however, that adequate assurance of future performance for purposes of a lease
of real property in a shopping center includes adequate assurance of the source
of rent and other consideration due under
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such lease, and in the case of an assignment, that the financial condition and
operating performance of the proposed assignee and its guarantors, if any, shall
be similar to the financial condition and operating performance of the debtor
and its guarantors, if any, as of the time the debtor became the lessee under
the lease, that any percentage rent due under such lease will not decline
substantially, that the assumption and assignment of the lease is subject to all
the provisions thereof, including (but not limited to) provisions such as a
radius location, use or exclusivity provision, and that the assignment will not
breach any such provision contained in any other lease, financing agreement, or
master agreement relating to such shopping center, and that the assumption or
assignment of such lease will not disrupt the tenant mix or balance in such
shopping center. Thus, an undetermined third party may assume the obligations of
the lessee under a lease in the event of commencement of a proceeding under the
Bankruptcy Code with respect to the lessee.
Under Section 365(h) of the Bankruptcy Code, if a trustee for a debtor, or a
debtor as a debtor-in-possession, rejects an unexpired lease of real property as
to which it is the lessor, the lessee may treat such lease as terminated by such
rejection or, in the alternative, may remain in possession of the leasehold for
the balance of such term and for any renewal or extension of such term that is
enforceable by the lessee under applicable nonbankruptcy law. The Bankruptcy
Code provides that if a lessee elects to remain in possession after such a
rejection of a lease, the lessee may offset against rents reserved under the
lease for the balance of the term after the date of rejection of the lease, and
any such renewal or extension thereof, any damages occurring after such date
caused by the nonperformance of any obligation of the lessor under the lease
after such date.
In a bankruptcy or similar proceeding, action may be taken seeking the
recovery as a preferential transfer of any payments made by a mortgagor under
the related Mortgage Loan to the Trust Fund. Such payments may be protected from
recovery as preferences if they are payments in the ordinary course of business
made according to ordinary business terms on debts incurred in the ordinary
course of business. Whether any particular payment would be protected depends
upon the facts specific to the particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect its costs
and expenses in preserving or selling mortgaged property ahead of payment to the
lender. In certain circumstances, a debtor in bankruptcy may have the power to
grant liens senior to the lien of a mortgage, and analogous state statutes and
general principles of equity may also provide a mortgagor with the ability to
halt a foreclosure proceeding or sale and to force a restructuring of a mortgage
loan on terms a lender would not otherwise accept. Moreover, the laws of certain
states also give priority to certain tax liens over the lien of a mortgage or
deed of trust. Under the Bankruptcy Code, if the court finds that actions of the
mortgagee have been unreasonable, the lien of the related mortgage and the claim
of the mortgagee may be subordinated to the claims of unsecured creditors.
DUE ON-SALE CLAUSES IN MORTGAGE LOANS
A note, mortgage or deed of trust relating to the Mortgage Loans generally
contains a "due-on-sale" clause permitting acceleration of the maturity of a
loan if the borrower transfers its interest in the property. In recent years,
court decisions and legislative actions placed substantial restrictions on the
right of lenders to enforce such clauses in many states. By virtue, however, of
the Garn St. Germain Depository Institutions Act of 1982 (the "Garn Act")
effective October 15, 1982 (which purports to preempt state laws which prohibit
the enforcement of due-on-sale clauses by providing among other matters, that
"due-on-sale" clauses in certain loans made after the effective date of the Garn
Act are enforceable, within certain limitations as set forth in the Garn Act and
the regulations promulgated thereunder) the Servicer or the Master Servicer may
nevertheless be able to accelerate many of the Mortgage Loans that contain a
"due-on-sale" provision upon transfer of an interest in the property subject to
the Mortgage Loans, regardless of the Servicer's or the Master Servicer's
ability to demonstrate that a sale threatens its legitimate security interest.
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ENFORCEABILITY OF PREPAYMENT AND LATE PAYMENT FEES
Forms of notes, mortgages and deeds of trust used by lenders may contain
provisions obligating the borrower to pay a late charge if payments are not
timely made, and in some circumstances may provide for prepayment fees or
penalties if the obligation is paid prior to maturity. In certain states, there
are or may be specific limitations upon the late charges which a lender may
collect from a borrower for delinquent payments. Certain states also limit the
amounts that a lender may collect from a borrower as an additional charge if the
loan is prepaid. The enforceability, under the laws of a number of states of
provisions providing for prepayment fees or penalties upon an involuntary
prepayment is unclear, and no assurance can be given that, at the time a
prepayment fee or penalty is required to be made on a Mortgage Loan in
connection with an involuntary prepayment, the obligation to make such payment
will be enforceable under applicable state law. Late charges and prepayment fees
are typically retained by servicers as additional servicing compensation. The
absence of a restraint on prepayment, particularly with respect to Mortgage
Loans having higher mortgage rates, may increase the likelihood of refinancing
or other early retirements of the Mortgage Loans.
EQUITABLE LIMITATIONS ON REMEDIES
In connection with lenders' attempts to realize upon their security, courts
have invoked general equitable principles. The equitable principles are
generally designed to relieve the borrower from the legal effect of his defaults
under the loan documents. Examples of judicial remedies that have been fashioned
include judicial requirements that the lender undertake affirmative and
expensive actions to determine the causes for the borrower's default and the
likelihood that the borrower will be able to reinstate the loan. In some cases,
courts have substituted their judgment for the lender's judgment and have
required that lenders reinstate loans or recast payment schedules in order to
accommodate borrowers who are suffering from temporary financial disability. In
other cases, courts have limited the right of a lender to realize upon his
security if the default under the security agreement is not monetary, such as
the borrower's failure to adequately maintain the property or the borrower's
execution of secondary financing affecting the property. Finally, some courts
have been faced with the issue of whether or not federal or state constitutional
provisions reflecting due process concerns for adequate notice require that
borrowers under security agreements receive notices in addition to the
statutorily prescribed minimums. For the most part, these cases have upheld the
notice provisions as being reasonable or have found that, in cases involving the
sale by a trustee under a deed of trust or by a mortgagee under a mortgage
having a power of sale, there is insufficient state action to afford
constitutional protections to the borrower.
The Mortgage Loans may include a debt-acceleration clause, which permits the
lender to accelerate the debt upon a monetary default of the borrower, after the
applicable cure period. The courts of all states will enforce clauses providing
for acceleration in the event of a material payment default. However, courts of
any state, exercising equity jurisdiction, may refuse to allow a lender to
foreclose a mortgage or deed of trust when an acceleration of the indebtedness
would be inequitable or unjust and the circumstances would render the
acceleration unconscionable.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control Act
of 1980, enacted in March 1980 ("Title V"), provides that state usury
limitations shall not apply to certain types of residential first mortgage loans
originated by certain lenders after March 31, 1980. Similar federal statutes
were in effect with respect to mortgage loans made during the first three months
of 1980. The OTS, as successor to the Federal Home Loan Bank Board, is
authorized to issue rules and regulations and to publish interpretations
governing implementation of Title V. Title V authorizes any state to reimpose
interest rate limits by adopting, before April 1, 1983, a state law, or by
certifying that the voters of such state have voted in favor of any provision,
constitutional or otherwise, which expressly rejects an application of the
federal law. Fifteen states adopted such a law prior to the April 1, 1983
deadline. In addition, even where Title V is
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not so rejected, any state is authorized by the law to adopt a provision
limiting discount points or other charges on mortgage loans covered by Title V.
In any state in which application of Title V has been expressly rejected or
a provision limiting discount points or other charges is adopted, no Mortgage
Loan originated after the date of such state action will be eligible as Mortgage
Assets unless (i) such Mortgage Loan provides for such interest rate, discount
points and charges as are permitted in such state or (ii) such Mortgage Loan
provides that the terms thereof shall be construed in accordance with the laws
of another state under which such interest rate, discount points and charges
would not be usurious and the Mortgagor's counsel has rendered an opinion that
such choice of law provision would be given effect. No Mortgage Loan originated
prior to January 1, 1980 will bear interest or provide for discount points or
charges in excess of permitted levels.
ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including ARMs originated by non-federally
chartered lenders, have historically been subject to a variety of restrictions.
Such restrictions differed from state to state, resulting in difficulties in
determining whether a particular alternative mortgage instrument originated by a
state-chartered lender complied with applicable law. These difficulties were
alleviated substantially as a result of the enactment of Title VIII of the Garn
St. Germain Act ("Title VIII"). Title VIII provides that, notwithstanding any
state law to the contrary, state-chartered banks may originate "alternative
mortgage instruments" (including ARMs) in accordance with regulations
promulgated by the Comptroller of the Currency with respect to origination of
alternative mortgage instruments by national banks; state chartered credit
unions may originate alternative mortgage instruments in accordance with
regulations promulgated by the National Credit Union Administration with respect
to origination of alternative mortgage instruments by federal credit unions and
all other non-federally chartered housing creditors, including state-chartered
savings and loan associations; and state-chartered savings banks and mortgage
banking companies may originate alternative mortgage instruments in accordance
with the regulations promulgated by the Federal Home Loan Bank Board, as
succeeded by the OTS, with respect to origination of alternative mortgage
instruments by federal savings and loan associations. Title VIII provides that
any state may reject applicability of the provisions of Title VIII by adopting,
prior to October 15, 1985, a law or constitutional provision expressly rejecting
the applicability of such provisions. Certain states have taken such action.
SECONDARY FINANCING; DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Mortgage Loans may not restrict secondary financing, thereby
permitting the borrower to use the Mortgaged Property as security for one or
more additional loans. Certain of the Mortgage Loans may preclude secondary
financing (by permitting the first lender to accelerate the maturity of its loan
if the borrower further encumbers the Mortgaged Property or in some other
fashion) or may require the consent of the senior lender to any junior or
substitute financing; however, such provisions may be unenforceable in certain
jurisdictions under certain circumstances.
Where the borrower encumbers the Mortgaged Property with one or more junior
liens, the senior lender is subjected to additional risk. For example, the
borrower may have difficulty servicing and repaying multiple loans or acts of
the senior lender which prejudice the junior lender or impair the junior
lender's security may create a superior equity in favor of the junior lender.
For example, if the borrower and the senior lender agree to an increase in the
principal amount of or the interest rate payable on the senior loan, the senior
lender may lose its priority to the extent any existing junior lender is harmed
or the borrower is additionally burdened. In addition, if the borrower defaults
on the senior loan and/or any junior loan or loans, the existence of junior
loans and actions taken by junior lenders can impair the security available to
the senior lender and can interfere with, delay and in certain circumstances
even prevent the taking of action by the senior lender. In addition, the
bankruptcy of a junior lender may operate to stay foreclosure or similar
proceedings by the senior lender.
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AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which are
structural in nature from existing places of public accommodation to the extent
"readily achievable." In addition, under the ADA, alterations to a place of
public accommodation or a commercial facility are to be made so that, to the
maximum extent feasible, such altered portions are readily accessible to and
usable by disabled individuals. The "readily achievable" standard takes into
account, among other factors, the financial resources of the affected site,
owner, landlord or other applicable person. In addition to imposing a possible
financial burden on the Mortgagor in its capacity as owner or landlord, the ADA
may also impose such requirements on a foreclosing lender who succeeds to the
interest of the Mortgagor as owner or landlord. Furthermore, since the "readily
achievable" standard may vary depending on the financial condition of the owner
or landlord, a foreclosing lender who is financially more capable than the
Mortgagor of complying with the requirements of the ADA may be subject to more
stringent requirements than those to which the Mortgagor is subject.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a mortgagor who enters military service after the
origination of such mortgagor's Mortgage Loan (including a mortgagor who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such mortgagor's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
mortgagors who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to mortgagors
who enter military service (including reservists who are called to active duty)
after origination of the related Mortgage Loan, no information can be provided
as to the number of loans that may be affected by the Relief Act. Application of
the Relief Act would adversely affect, for an indeterminate period of time, the
ability of any servicer to collect full amounts of interest on certain of the
Mortgage Loans. Any shortfalls in interest collections resulting from the
application of the Relief Act would result in a reduction of the amounts
distributable to the holders of the related series of Certificates, and would
not be covered by advances or, unless otherwise specified in the related
Prospectus Supplement, any form of Credit Support provided in connection with
such Certificates. In addition, the Relief Act imposes limitations that would
impair the ability of the servicer to foreclose on an affected Mortgage Loan
during the mortgagor's period of active duty status, and, under certain
circumstances, during an additional three month period thereafter. Thus, in the
event that such a Mortgage Loan goes into default, there may be delays and
losses occasioned thereby.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the "Crime
Control Act"), the government may seize the property even before conviction. The
government must publish notice of the forfeiture proceeding and may give notice
to all parties "known to have an alleged interest in the property," including
the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
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THE INDENTURE
The following summaries describe certain provisions of the Indenture. The
summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the provisions of the Indenture. Where
particular provisions or terms used in the Indenture are referred to, such
provisions or terms are as specified in the Indenture.
CERTAIN COVENANTS
The Issuer may not liquidate or dissolve, without the consent of the holders
of not less than 66 2/3% of the Aggregate Outstanding Principal of each Series.
The Issuer also may not consolidate or merge with or into any other Person or
convey or transfer its properties and assets substantially as an entirety
without the consent of holders of not less than 66 2/3% of the Aggregate
Outstanding Principal of each Series, and unless (a) the Person (if other than
the Issuer) formed or surviving such merger or consolidation or acquiring such
assets is a Person organized under the laws of the United States of America or
any State and shall have expressly assumed, by supplemental indenture in form
satisfactory to the Trustee, the due and punctual payment of principal of and
interest on all Bonds and the performance of every applicable covenant of the
Indenture to be performed, by the Issuer, (b) immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred, and be
continuing, (c) the Trustee shall have received a letter from each Rating Agency
rating any outstanding Bonds to the effect that the rating issued with respect
to such Bonds is confirmed notwithstanding the consummation of such transaction
and (d) the Trustee shall have received from the Issuer an Officers' Certificate
and an Opinion of Counsel, each to the effect that, among other things, such
transaction complies with the foregoing requirements.
The Issuer may incur, assume, have outstanding or guarantee any indebtedness
other than pursuant to the Indenture only subject to certain conditions and
limitations.
MODIFICATION OF INDENTURE
Except as set forth below, with the consent of the holders of not less than
a majority of the then Aggregate Outstanding Principal of each Series or Class
of such Series to be affected, the Trustee and the Issuer may amend the
Indenture or execute a supplemental indenture, to add provisions to or change or
eliminate any provisions of the Indenture or Trust Agreement, as applicable,
relating to such Series, or modify the rights of the holders of the Bonds of
that Series.
Without the consent of the holder of each outstanding Bond affected,
however, except as provided below, no such amendment or supplemental indenture
shall (i) change the Stated Maturity of the principal of or any installment of
principal of or interest on any Bond or reduce the principal amount thereof, the
Bond Interest Rate for any Bond or the Redemption Price with respect thereto, or
change the provisions of the Trust Indenture or the related Series Supplement
relating to the application of the Trust Estate to payment principal of or
interest on the affected Bonds, or change any place of payment where, or the
coin or currency in which, any affected Bond or any interest thereon is payable,
or impair the right to institute suit for the enforcement of the provisions of
the Indenture regarding payment, (ii) reduce the percentage of Aggregate
Outstanding Principal of the Bonds of the affected Series or Class of such
Series, the consent of the holders of which is required for the authorization of
any such amendment or supplemental indenture or for any waiver of compliance
with certain provisions of the Indenture or certain defaults thereunder and
their consequences, (iii) modify or alter the provisions of the Indenture
defining the term "Outstanding," (iv) permit the creation of any lien ranking
prior to or on a parity with the lien of the Indenture with respect to any part
of the property subject to the lien of the Indenture or terminate the lien of
the Indenture on any property at any time subject thereto or deprive the holder
of any Bond of the security afforded by the lien of the Indenture, (v) reduce
the percentage of the Aggregate Outstanding Principal of any Series (or Class of
such Series), the consent of the holders of which is required to direct the
Trustee to liquidate the Mortgage Assets for such Series, (vi) modify any of the
provisions of the
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Indenture if such modification affects the calculation of the amount of any
payment of interest or principal due and payable on any Bond on any Payment Date
or to affect the rights of the holders of Bonds of any Series (or Class of such
Series) to the benefit of any provisions for the mandatory redemption of Bonds
of such Series (or Class of such Series) contained therein or in the related
Series Supplement or (vii) modify the provisions of the Indenture regarding any
modifications of such Indenture requiring consent of the holders of Bonds,
except to increase the percentage or number of holders required to consent to
such modification of such Indenture or Trust Agreement, as applicable, or to
provide that additional provisions of the Indenture cannot be modified or waived
without the consent of the holder of each Bond affected thereby.
The Issuer and the Trustee may also amend the Indenture or enter into
supplemental indentures, without obtaining the consent of holders of any Series,
to cure any ambiguity or to correct or supplement any provision of the Indenture
or any supplemental indenture which may be defective or inconsistent with any
other provision, or to make or to amend any other provisions with respect to
matters or questions arising under the Indenture or any supplemental indenture,
provided that such action shall not materially adversely affect the interests of
the holders of the Bonds. Such amendments may also be made and such supplemental
indentures may also be entered into without the consent of Bondholders or
Certificateholders to set forth the terms of and security for additional Series,
to evidence the succession of another person to the Issuer, to add to the
conditions, limitations and restrictions on certain terms of any Series and to
the covenants of the Issuer, to surrender any right or power conferred upon the
Issuer, to convey, transfer, assign, mortgage or pledge any property to the
Trustee, to correct or amplify the description of any property subject to the
lien of the Indenture to modify the Indenture to the extent necessary to effect
the Trustee's qualification under the TIA or comply with the requirements of the
TIA, to provide for the issuance of Bonds of any Series, to make any amendment
necessary or desirable to maintain the status of a REMIC as a REMIC and to amend
the provisions of the Indenture relating to authentication and delivery of a
Series with respect to which a supplemental indenture has not theretofore been
authorized or to evidence and provide for the acceptance of appointment by a
successor trustee.
EVENTS OF DEFAULT
Unless otherwise stated in the related Prospectus Supplement, an "Event of
Default" with respect to any Series is defined in the Indenture as being: (i) a
continuing default for 5 days in the payment of interest on any Bond of such
Series; (ii) a continuing default for five days in the payment of principal,
when due, of any Bond of such Series; (iii) the impairment of the validity or
effectiveness of the Indenture or any grant thereunder, or the subordination,
termination or discharge of the lien of the Indenture with respect to such
Series, or the release of any Person from any covenants or obligations under the
Indenture with respect to such Series, unless otherwise expressly permitted, or
the creation of any lien, charge, security interest, mortgage or other
encumbrance with respect to any part of the property subject to the lien of the
Indenture, or any interest in or proceeds of such property, or the failure of
the lien of the Indenture to constitute a valid first priority security interest
in the property subject to the lien of the Indenture and the continuation of any
of such defaults for a period of 30 days after notice to the Issuer by the
Trustee or to the Issuer and the Trustee by the Holders of at least 25% of the
then Aggregate Outstanding Principal of such Series; (iv) a default in the
observance of, or breach of, any covenant or negative covenant of the Issuer
made in the Indenture, or a material breach of any representation or warranty of
the Issuer made in the Indenture or in any certificate or other document
delivered pursuant thereto or in connection therewith as of the time when the
same shall have been made, and the continuation of any such default or breach
for a period of 60 days after notice to the Issuer by the Trustee or to the
Issuer and the Trustee by the holders of at least 25% of the then Aggregate
Outstanding Principal of such Series (unless the default or breach is with
respect to certain covenants specified in the Indenture not requiring such
continuation or notice); and (v) certain events of bankruptcy, insolvency,
receivership or reorganization of the Issuer. Notwithstanding the foregoing, if
a Series includes a Class of Subordinate Bonds, the Series Supplement for such a
Series may provide that certain defaults which relate only to such Subordinate
Securities shall
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not constitute an Event of Default with respect to the Bonds, under certain
circumstances, and may limit the rights of holders of Subordinate Securities to
direct the Trustee to pursue remedies with respect to such defaults, or other
Events of Default. Such limitations, if any, will be specified in the related
Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, in case an
Event of Default with respect to any Series should occur and be continuing, the
Trustee may and, upon the written request of the holders of at least 25% of the
then Aggregate Outstanding Principal of such Series shall, declare all Bonds of
such Series to be due and payable, together with accrued and unpaid interest
thereon. Such declaration may under certain circumstances be rescinded by the
holders of a majority of the then Aggregate Outstanding Principal of such
Series.
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of an Event of Default with respect to a Series, mail to the holders
of such Series notice of all uncured or unwaived defaults known to it; provided
that, except in the case of an Event of Default in the payment of the principal
or purchase price of or interest on any Bond, the Trustee shall be protected in
withholding such notice if it determines in good faith that the withholding of
such notice is in the interest of the Bondholders of such Series, and provided,
further, that, in the case of a default specified in clause (iv) of the first
paragraph of this "Events of Default" subsection the Trustee is not required to
give such notice until at least 30 days after the occurrence of such default or
breach and that, in the case of any default or breach specified in clause (v) of
the first paragraph of this "Events of Default" subsection, the Trustee is not
required to give such notice until at least 60 days after the occurrence of such
default or breach.
An Event of Default with respect to one Series will not necessarily be an
Event of Default with respect to any other Series.
Unless otherwise provided in the related Prospectus Supplement, if following
an Event of Default with respect to any Series, the Bonds of such Series have
been declared to be due and payable, the Trustee may, but shall not be obligated
to, in its sole discretion, refrain from liquidating the related Mortgage Assets
if (i) the Trustee determines that the amounts receivable with respect to such
Mortgage Assets and any Enhancement will be sufficient to pay (a) all principal
of and interest on the Bonds in accordance with their terms without regard to
the declaration of acceleration and (b) all sums due the Trustee and any other
administrative amounts required to be paid under the Indenture and (ii) Holders
of the requisite percentage of the Securities of such Series have not directed
the Trustee to sell the related Mortgage Assets as so specified in the
Indenture. In addition, unless otherwise specified in the related Prospectus
Supplement, the Trustee is prohibited from selling the Trust Estate following
certain Events of Default unless (a) the amounts receivable with respect to the
Mortgage Assets and any Enhancement are not sufficient to pay in full the
principal of and accrued interest on the Bonds of such Series and to pay sums
due the Trustee and other administrative expenses specified in the Indenture and
the Trustee obtains the consent of holders of 66 2/3% of the Aggregate
Outstanding Principal of such Series or (b) the Trustee obtains the consent of
100% of the Aggregate Outstanding Principal of such Series, and subject to the
provisions of the related Prospectus Supplement, the obligor under the
Enhancement. Unless otherwise provided in the related Prospectus Supplement, the
proceeds of a sale of Mortgage Assets will be applied to the payment of amounts
due the Trustee and other administrative expenses specified in the Indenture and
then distributed pro rata among the Bondholders of such Series (without regard
to Class, provided that Subordinate Securities will be subordinate to Senior
Securities of the Series to the extent provided in the related Prospectus
Supplement) according to the amounts due and payable on the Bonds for principal
and interest at the time such proceeds are distributed by the Trustee.
The Trustee shall not be deemed to have knowledge of any Event of Default or
Default described in clauses (iv) through (vi) of the first paragraph of this
"Events of Default" subsection unless an officer in the Trustee's corporate
trust department has actual knowledge thereof. Subject to the provisions of the
Indenture relating to the duties of the Trustee, in case an Event of Default
shall occur and be continuing,
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the Trustee will be under no obligation to exercise any of the rights or powers
under the Indenture at the request or direction of any of the Bondholders of a
Series, unless such Bondholders shall have offered to the Trustee reasonable
security or indemnity. Subject to such provisions for indemnification and
certain limitations contained in the Indenture the holders of a majority of the
then Aggregate Outstanding Principal of a Series (or of such Classes specified
in the related Prospectus Supplement) will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee with respect
to the Series. In addition, the Holders of a majority of the then Aggregate
Outstanding Principal of a Series (or of such Classes specified in the related
Prospectus Supplement) may, in certain cases, waive any default with respect to
such Series, except a default in payment of principal or interest or in respect
of a covenant or provision which cannot be modified without the consent of all
Bondholders affected.
Unless otherwise specified in the related Prospectus Supplement, no holder
of Bonds of a Series will have the right to institute any Proceeding with
respect to the Indenture, unless (i) such Holder previously has given to the
Trustee written notice of a continuing Event of Default with respect to such
Series and has offered the Trustee satisfactory indemnity, (ii) the Holders of
not less than 25% of the then Aggregate Outstanding Principal of such Series
have made written request upon the Trustee to institute such Proceeding as
Trustee and have offered satisfactory indemnity, (iii) the Trustee has, for 60
days after receipt of such notice, request and offer of indemnity, failed to
institute any such Proceeding and (iv) no direction inconsistent with such
written request has been given to the Trustee during such 60-day period by the
Holders of a majority of the then Aggregate Outstanding Principal of such
Series; provided, however, that in the event that the Trustee receives
conflicting requests and indemnities from two or more groups of Bondholders,
each representing less than a majority of the Aggregate Outstanding Principal of
such Series, the Trustee may in its sole discretion determine what action with
respect to the Proceeding, if any, shall be taken.
AUTHENTICATION AND DELIVERY OF BONDS
The Issuer may from time to time deliver Bonds executed by it to the Trustee
and order that the Trustee authenticate such Bonds. Upon the receipt of such
Bonds and such order and subject to the Issuer's compliance with certain
conditions specified in the Indenture the Trustee will authenticate and deliver
such Bonds as the Issuer may direct. Unless otherwise specified in the related
Prospectus Supplement, the Trustee will be authorized to appoint an agent for
purposes of authenticating and delivering any Series of Bonds (the
"Authenticating Agent").
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will be discharged as to a Series (except with respect to
certain continuing rights specified in the Indenture or Trust Agreement, as
applicable), (a)(1) upon the delivery to the Trustee for cancellation of all of
the Bonds of such Series other than Bonds which have been mutilated, lost or
stolen and have been replaced or paid and Bonds for which money has been
deposited in trust for the full payment thereof (and thereafter repaid to the
Issuer and discharged from such trust) as provided in of the Indenture, or (2)
at such time as all Bonds of such Series not previously cancelled by the Trustee
have become, or, within one year, will become, due and payable or called for
redemption and the Issuer shall have deposited with the Trustee an amount
sufficient to repay all of the Bonds and (b) the Issuer shall have paid all
other amounts payable under the Indenture or Trust Agreement, as applicable,
with respect to such Series.
ISSUER'S ANNUAL COMPLIANCE STATEMENT
The Issuer will be required to file annually with the Trustee a written
statement as to fulfillment of its obligations under the Indenture.
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LIST OF BONDHOLDERS
Three or more Holders of a Series which have each owned the Bonds for at
least six months may, by written application to the Trustee, request access to
the list maintained by the Trustee of all holders of the same Series or of all
Bonds, as specified in the request, for the purpose of communicating with other
Bondholders with respect to their rights under the Indenture.
MEETINGS OF BONDHOLDERS
Meetings of Bondholders or Certificateholders may be called at any time and
from time to time to (i) give any notice to the Issuer or to the Trustee, give
directions to the Trustee, consent to the waiver of any Default or Event of
Default under the Indenture, or to take any other action authorized to be taken
by Bondholders in connection therewith, (ii) remove the Trustee and to appoint a
successor Trustee, (iii) consent to the execution of supplemental indentures or
(iv) take any other action authorized to be taken by or on behalf of the
Bondholders of any specified percentage of the Aggregate Outstanding Principal
of the Bonds. Such meetings may be called by the Trustee, the Issuer or by the
holders of 10% in Aggregate Outstanding Principal of any such Series.
FISCAL YEAR
The fiscal year of each Issuer ends on December 31.
TRUSTEE'S ANNUAL REPORT
The Trustee will be required to mail each year to all Bondholders a brief
report relating to its eligibility and qualification to continue as the Trustee
under the Indenture any amounts advanced by it under the Indenture which remain
unpaid on the date of the report, the amount, interest rate and maturity date of
certain indebtedness owing by the Issuer (or any other obligor on such Series)
to the Trustee in its individual capacity, the property and funds physically
held by the Trustee as such, any release or release and substitution of property
subject to the lien of the Indenture which has not been previously reported, any
additional issuance of Bonds not previously reported and any action taken by it
which materially affects the Bonds and which has not been previously reported.
THE TRUSTEE
LaSalle National Bank (or another bank or trust company qualified under the
TIA and named in the Prospectus Supplement related to a Series of Bonds) will be
the Trustee under the Indenture for the Bonds. The Issuer may maintain other
banking relationships in the ordinary course of business with the Trustee. If
LaSalle National Bank serves as Trustee, the Trustee's "Corporate Trust Office"
is 135 South LaSalle Street, Suite 1625, Chicago, Illinois 60674, or at such
other addressees as the Trustee may designate from time to time by notice to the
Bondholders and the Issuer. If another bank or trust company serves as Trustee,
the address of its Corporate Trust Office will be specified in the related
Prospectus Supplement. With respect to the presentment and surrender of Bonds
for final payment of principal in retirement thereof on any Payment Date,
Redemption Date, Special Payment Date or Special Redemption Date and, with
respect to any other presentment and surrender of such Bonds and for all other
purposes, unless otherwise specified in the related Prospectus Supplement, such
Bonds may be presented at the Corporate Trust Office of the Trustee or at the
office of the Issuer's agent in the State of New York (the "New York Presenting
Agent"), which will be specified in the related Prospectus Supplement.
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THE TRUST AGREEMENT
The following summaries describe certain provisions of the Trust Agreement.
The summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the provisions of the Trust Agreement. Where
particular provisions or terms used in the Trust Agreement are referred to, such
provisions or terms are as specified in the Trust Agreement.
ASSIGNMENT OF MORTGAGE ASSETS
GENERAL. The Depositor will transfer, convey and assign to the Trustee all
right, title and interest of the Depositor in the Mortgage Assets and other
property to be included in the Trust Fund for a Series. Such assignment will
include all principal and interest due on or with respect to the Mortgage Assets
after the Cut-off Date specified in the related Prospectus Supplement. The
Trustee will, concurrently with such assignment, execute and deliver the
Certificates.
ASSIGNMENT OF MORTGAGE LOANS. The Depositor will, as to each Mortgage Loan,
deliver or cause to be delivered to the Trustee, or, as specified in the related
Prospectus Supplement, the Custodian, the Mortgage Note endorsed without
recourse to the order of the Trustee or in blank, the original Mortgage with
evidence of recording indicated thereon (except for any Mortgage not returned
from the public recording office, in which case a copy of such Mortgage will be
delivered, together with a certificate that the original of such Mortgage was
delivered to such recording office) and an assignment of the Mortgage in
recordable form. The Trustee, or, if so specified in the related Prospectus
Supplement, the Custodian, will hold such documents in trust for the benefit of
the Certificateholders.
If so specified in the related Prospectus Supplement, the Depositor will, at
the time of delivery of the Certificates, cause assignments to the Trustee of
the Mortgage Loans to be recorded in the appropriate public office for real
property records, except in states where, in the opinion of counsel acceptable
to the Trustee, such recording is not required to protect the Trustee's interest
in the Mortgage Loan. If specified in the related Prospectus Supplement, the
Depositor will cause such assignments to be so recorded within the time after
delivery of the Certificates as is specified in the related Prospectus
Supplement, in which event, the Trust Agreement may, as specified in the related
Prospectus Supplement, require the Depositor to repurchase from the Trustee any
Mortgage Loan required to be recorded but not recorded within such time, at the
price described below with respect to repurchase by reason of defective
documentation. Unless otherwise provided in the related Prospectus Supplement,
the enforcement of the repurchase obligation would constitute the sole remedy
available to the Certificateholders or the Trustee for the failure of a Mortgage
Loan to be recorded.
Each Mortgage Loan will be identified in a schedule appearing as an exhibit
to the Trust Agreement (the "Mortgage Loan Schedule"). Such Mortgage Loan
Schedule will specify with respect to each mortgage loan: the original principal
amount and unpaid principal balance as of the Cut-off Date; the current interest
rate; the current Scheduled Payment of principal and interest; the maturity date
of the related mortgage note; if the Mortgage Loan is an adjustable rate
mortgage, the lifetime mortgage rate cap, if any, and the current index; and, if
the Mortgage Loan is a loan with other than fixed Scheduled Payments and level
amortization, the terms thereof.
REPURCHASE OF NON-CONFORMING LOANS
Unless otherwise provided in the related Prospectus Supplement, if any
document in the Mortgage Loan file delivered by the Depositor to the Trustee is
found by the Trustee within 45 days of the execution of the related Trust
Agreement (or promptly after the Trustee's receipt of any document permitted to
be delivered after the Closing Date) to be defective in any material respect and
the Depositor does not cure such defect within 90 days, or within such other
period specified in the related Prospectus Supplement, the Depositor will, not
later than 90 days or within such other period specified in the related
Prospectus Supplement, after the Trustee's notice to the Depositor or the Master
Servicer, as the case may be, of the
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defect, repurchase the related Mortgage Loan or any property acquired in respect
thereof from the Trustee at a price generally equal to (a) the outstanding
principal balance of such Mortgage Loan (or, in the case of a foreclosed
Mortgage Loan, the outstanding principal balance of such Mortgage Loan
immediately prior to foreclosure) and (b), accrued and unpaid interest to the
date of the next scheduled payment on such Mortgage Loan at the related
Certificate Interest Rate (less any unreimbursed Advances respecting such
Mortgage Loan).
Unless otherwise provided in the related Prospectus Supplement, the
above-described repurchase obligation constitutes the sole remedy available to
the Certificateholders or the Trustee for a material defect in a Mortgage Loan
document.
The Depositor or another entity will make representations and warranties
with respect to Mortgage Loans which comprise the Mortgage Assets for a Series.
If the Depositor or such entity cannot cure a breach of any such representations
and warranties in all material respects within 90 days after notification by the
Trustee of such breach, and if such breach is of a nature that materially and
adversely affects the value of such Mortgage Loan, the Depositor or such entity
is obligated to repurchase the affected Mortgaged Loan or, if provided in the
related Prospectus Supplement, provide a Substitute Mortgage Loan therefor,
subject to the same conditions and limitations on purchases and substitutions as
described above.
The Depositor's only source of funds to effect any cure, repurchase or
substitution will be through the enforcement of the corresponding obligations of
the responsible originator or seller of such Mortgage Loans. See "RISK FACTORS".
REPORTS TO CERTIFICATEHOLDERS
The Trustee will prepare and forward to each Certificateholder on each
Distribution Date, or as soon thereafter as is practicable, a statement setting
forth, to the extent applicable to any Series, among other things:
(i) with respect to a Series, the amount of such distribution allocable to
principal on the Mortgage Assets, separately identifying the aggregate
amount of any principal prepayments included therein and the amount, if
any, advanced by the Servicer or by a Servicer;
(ii) with respect to a Series, the amount of such distribution allocable to
interest on the Mortgage Assets and the amount, if any, advanced by a
Servicer;
(iii) the amount of servicing compensation with respect to the Mortgage
Assets and paid during the Due Period commencing on the Due Date to
which such distribution relates and the amount of servicing
compensation during such period attributable to penalties and fees;
(iv) the aggregate outstanding principal balance of the Mortgage Assets as
of the opening of business on the Due Date, after giving effect to
distributions allocated to principal and reported under (i) above;
(v) the aggregate outstanding principal amount of the Certificates of such
series as of the Due Date, after giving effect to distributions
allocated to principal reported under (i) above;
(vi) with respect to Compound Interest Securities, prior to the Accrual
Termination Date in addition to the information specified in (ii)
above, the amount of interest accrued on such Securities during the
related Interest Accrual Period and added to the Compound Value
thereof;
(vii) in the case of Variable Rate Securities, the Variable Interest Rate
applicable to the distribution being made;
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(viii) if applicable, the amount of any shortfall (i.e., the difference
between the aggregate amounts of principal and interest which
Certificateholders would have received if there were sufficient
eligible funds to distribute and the amounts actually distributed);
(ix) if applicable, the number and aggregate principal balances of Mortgage
Loans delinquent for (A) two consecutive payments and (B) three or more
consecutive payments, as of the close of the business on the
Determination Date to which such distribution relates;
(x) if applicable, the book value of any REO Property acquired on behalf of
Certificateholders through foreclosure, grant of a deed in lieu of
foreclosure or repossession as of the close of the business on the
Business Day preceding the Distribution Date to which such distribution
relates;
(xi) if applicable, the amount of coverage under any pool insurance policy
as of the close of business on the applicable Distribution Date;
(xii) if applicable, the amount of coverage under any special hazard
insurance policy as of the close of business on the applicable
Distribution Date;
(xiii) if applicable, the amount of coverage under any bankruptcy bond as of
the close of business on the applicable Distribution Date;
(xiv) in the case of any other Enhancement described in the related
Prospectus Supplement, the amount of coverage of such credit support as
of the close of business on the applicable Distribution Date;
(xv) in the case of any Series which includes a Subordinate Securities, the
subordinated amount, if any, determined as of the related Determination
Date and if the distribution to the Holders of Senior Securities is less
than their required distribution, the amount of the shortfall;
(xvi) the amount of any withdrawal from any applicable reserve fund included
in amounts actually distributed to Certificateholders and the remaining
balance of each reserve fund, if any, on such Distribution Date, after
giving effect to distributions made on such date; and
(xvii) such other information as specified in the related Trust Agreement.
In addition, within a reasonable period of time after the end of each
calendar year the Trustee, unless otherwise specified in the related Prospectus
Supplement, will furnish to each Certificateholder of record at any time during
such calendar year: (a) the aggregate of amounts reported pursuant to (i)
through (iv), (vi), (viii) and (xvi) above for such calendar year and (b) such
information specified in the Trust Agreement to enable Certificateholders to
prepare their tax returns including, without limitation, the amount of original
issue discount accrued on the Certificates, if applicable. Information in the
Distribution Date and annual reports provided to the Certificateholders will not
have been examined and reported upon by an independent public accountant.
However, the Master Servicer will provide to the Trustee a report by independent
public accountants with respect to the Master Servicer's servicing of the
Mortgage Loans. See "SERVICING OF MORTGAGE LOANS--Evidence as to Compliance"
herein.
EVENT OF DEFAULT
Unless otherwise specified in the related Prospectus Supplement, events of
Default under the Trust Agreement for each Series include (i) any failure by the
Master Servicer to distribute to Certificateholders of such Series any required
payment which continues unremedied for five days after the giving of written
notice of such failure to the Master Servicer by the Trustee for such Series, or
to the Master Servicer and the Trustee by the Holders of Certificates of such
Series evidencing not less than 25% of the aggregate outstanding principal
amount of the Certificates for such Series, (ii) any failure by the Servicer
duly to observe or perform in any material respect any other of its covenants or
agreements in the Trust Agreement which continues unremedied for 30 days after
the giving of written notice of such failure to the
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Master Servicer by the Trustee, or to the Master Servicer and the Trustee by the
Holders of Certificates of such Series evidencing not less than 25% of the
aggregate outstanding principal amount of the Certificates and (iii) certain
events in insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings and certain actions by the Master Servicer
indicating its insolvency, reorganization or inability to pay its obligations.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default remains unremedied under the Trust Agreement
for a Series, the Trustee for such Series or Holders of Certificates of such
Series evidencing not less than 25% of the aggregate outstanding principal
amount of the Certificates for such Series may terminate all of the rights and
obligations of the Master Servicer as servicer under the Trust Agreement and in
and to the Mortgage Loans (other than its right to recovery of other expenses
and amounts advanced pursuant to the terms of the Trust Agreement which rights
the Master Servicer will retain under all circumstances), whereupon the Trustee
will succeed to all the responsibilities, duties and liabilities of the Master
Servicer under the Trust Agreement and will be entitled to reasonable servicing
compensation not to exceed the applicable servicing fee, together with other
servicing compensation in the form of assumption fees, late payment charges or
otherwise as provided in the Trust Agreement.
In the event that the Trustee is unwilling or unable so to act, it may
select, or petition a court of competent jurisdiction to appoint, a housing and
home finance institution, bank or mortgage servicing institution with a net
worth of at least $15,000,000 to act as successor Master Servicer under the
provisions of such Trust Agreement relating to the servicing of the Mortgage
Loans. The successor Servicer would be entitled to reasonable servicing
compensation in an amount not to exceed the servicing fee as set forth in the
related Prospectus Supplement, together with the other servicing compensation in
the form of assumption fees, late payment charges or otherwise, as provided in
the Trust Agreement.
During the continuance of any Event of Default under the Trust Agreement for
a Series, the Trustee for such Series will have the right to take action to
enforce its rights and remedies and to protect and enforce the rights and
remedies of the Certificateholders of such Series, and Holders of Certificates
evidencing not less than 25% of the aggregate outstanding principal amount of
the Certificates for such Series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred upon the Trustee. However, the Trustee will not be
under any obligation to pursue any such remedy or to exercise any of such trusts
or powers unless such Certificateholders have offered the Trustee reasonable
security or indemnity against the cost, expenses and liabilities which may be
incurred by the Trustee therein or thereby. Also, the Trustee may decline to
follow any such direction if the Trustee determines that the action or
proceeding so directed may not lawfully be taken or would involve it in personal
liability or be unjustly prejudicial to the nonassenting Certificateholders.
No Certificateholder of a Series, solely by virtue of such Holder's status
as a Certificateholder, will have any right under the Trust Agreement for such
Series to institute any proceeding with respect to the Trust Agreement, unless
such Holder previously has given to the Trustee for such Series written notice
of default and unless the Holders of Certificates evidencing not less than 25%
of the aggregate outstanding principal amount of the Certificates for such
Series have made written request upon the Trustee to institute such proceeding
in its own name as Trustee thereunder and have offered to the Trustee reasonable
indemnity, and the Trustee for 60 days has neglected or refused to institute any
such proceeding.
THE TRUSTEE
The identity of the commercial bank, savings and loan association or trust
company named as the Trustee for each Series of Certificates will be set forth
in the related Prospectus Supplement, and such
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Trustee may be LaSalle National Bank. The entity serving as Trustee may have
normal banking relationships with the Depositor or the Master Servicer. In
addition, for the purpose of meeting the legal requirements of certain local
jurisdictions, the Trustee will have the power to appoint co-trustees or
separate trustees of all or any part of the Trust Fund relating to a Series of
Certificates. In the event of such appointment, all rights, powers, duties and
obligations conferred or imposed upon the Trustee by the Trust Agreement
relating to such Series will be conferred or imposed upon the Trustee and each
such separate trustee or co-trustee jointly, or, in any jurisdiction in which
the Trustee shall be incompetent or unqualified to perform certain acts, singly
upon such separate trustee or co-trustee who shall exercise and perform such
rights, powers, duties and obligations solely at the direction of the Trustee.
The Trustee may also appoint agents to perform any of the responsibilities of
the Trustee, which agents shall have any or all of the rights, powers, duties
and obligations of the Trustee conferred on them by such appointment; provided
that the Trustee shall continue to be responsible for its duties and obligations
under the Trust Agreement.
DUTIES OF THE TRUSTEE
The Trustee makes no representations as to the validity or sufficiency of
the Trust Agreement, the Certificates or of any Mortgage Asset or related
documents. If no Event of Default (as defined in the related Trust Agreement)
has occurred, the Trustee is required to perform only those duties specifically
required of it under the Trust Agreement. Upon receipt of the various
certificates, statements, reports or other instruments required to be furnished
to it, the Trustee is required to examine them to determine whether they are in
the form required by the related Trust Agreement; provided, however, the Trustee
will not be responsible for the accuracy or content of any such documents
furnished to it.
The Trustee may be held liable for its own grossly negligent action or
failure to act, or for its own willful misconduct; provided, however, that the
Trustee will not be personally liable with respect to any action taken, suffered
or omitted to be taken by it in good faith in accordance with the direction of
the Certificateholders in connection with the occurrence and/or continuation of
an Event of Default (see "--Rights Upon Event of Default" above). The Trustee is
not required to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties under a Trust Agreement, or in
the exercise of any of its rights or powers, if it has reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
RESIGNATION OF TRUSTEE
The Trustee may, upon written notice to the Depositor, resign at any time,
in which event the Depositor will be obligated to use its best efforts to
appoint a successor Trustee. If no successor Trustee has been appointed and has
accepted the appointment within 30 days after giving such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for
appointment of a successor Trustee. The Trustee may also be removed at any time
(i) by the Depositor, if the Trustee ceases to be eligible to continue as such
under the Trust Agreement, if the Trustee becomes insolvent, or if a tax is
imposed or threatened with respect to the Trust Fund by any state in which the
Trustee or the Trust Fund held by the Trustee pursuant to the Trust Agreement is
located, or (ii) by the Holders of Certificates evidencing over 50% of the
aggregate outstanding principal amount of the Certificates in the Trust Fund
upon 30 days' advance written notice to the Trustee and to the Depositor. Any
resignation or removal of the Trustee and appointment of a successor Trustee
will not become effective until acceptance of the appointment by the successor
Trustee.
AMENDMENT OF TRUST AGREEMENT
Unless otherwise specified in the Prospectus Supplement, the Trust Agreement
for each Series of Certificates may be amended by the Depositor, the Master
Servicer, and the Trustee with respect to such Series, without notice to or
consent of the Certificateholders (i) to cure any ambiguity, (ii) to correct or
supplement any provision therein which may be inconsistent with any other
provision therein or in the
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Prospectus Supplement, (iii) to make any other provisions with respect to
matters or questions arising under such Trust Agreement or (iv) to comply with
any requirements imposed by the Code; provided that any such amendment pursuant
to clause (iii) above will not adversely affect in any material respect the
interests of any Certificateholders of such Series not consenting thereto. Any
such amendment pursuant to clause (iii) of the preceding sentence shall be
deemed not to adversely affect in any material respect the interests of any
Certificateholder if the Trustee receives written confirmation from each Rating
Agency rating such Certificates that such amendment will not cause such Rating
Agency to reduce the then current rating thereof. The Trust Agreement for each
Series may also be amended by the Trustee, the Master Servicer and the Depositor
with respect to such Series with the consent of the Holders possessing not less
than 66 2/3% of the aggregate outstanding principal amount of the Certificates
of each Class of such Series affected thereby, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Trust Agreement or modifying in any manner the rights of Certificateholders
of such Series; provided, however, that no such amendment may (a) reduce the
amount or delay the timing of payments on any Certificate without the consent of
the Holder of such Certificate; or (b) reduce the aforesaid percentage of
aggregate outstanding principal amount of Certificates of each Class, the
Holders of which are required to consent to any such amendment without the
consent of the Holders of 100% of the aggregate outstanding principal amount of
each Class of Certificates affected thereby.
VOTING RIGHTS
The related Prospectus Supplement will set forth the method of determining
allocation of voting rights with respect to a Series, if other than set forth
herein.
LIST OF CERTIFICATEHOLDERS
Upon written request of three or more Certificateholders of record of a
Series for purposes of communicating with other Certificateholders with respect
to their rights under the Trust Agreement or under the Certificates for such
Series, which request is accompanied by a copy of the communication which such
Certificateholders propose to transmit, the Trustee will afford such
Certificateholders access during business hours to the most recent list of
Certificateholders of that Series held by the Trustee.
No Trust Agreement will provide for the holding of any annual or other
meeting of Certificateholders.
REMIC ADMINISTRATOR
With respect to any Series, preparation of certain reports and certain other
administrative duties with respect to the Trust Fund may be performed by a REMIC
administrator, who may be an affiliate of the Depositor.
TERMINATION
The obligations created by the Trust Agreement for a Series will terminate
upon the distribution to Certificateholders of all amounts distributable to them
pursuant to such Trust Agreement after (i) the later of the final payment or
other liquidation of the last Mortgage Loan remaining in the Trust Fund for such
Series or the disposition of all REO Property or (ii) the repurchase, as
described below, by the Servicer from the Trustee for such Series of all
Mortgage Loans at that time subject to the Trust Agreement and all REO Property.
The Trust Agreement for each Series permits, but does not require, the Servicer
to repurchase from the Trust Fund for such Series all remaining Mortgage Loans
at a price equal to 100% of the Aggregate Asset Value of such Mortgage Loans
plus, with respect to REO Property, if any, the outstanding principal balance of
the related Mortgage Loan, less, in either case, related unreimbursed Advances
(in the case of the Mortgage Loans, only to the extent not already reflected in
the computation of the Aggregate Asset Value of such Mortgage Loans) and
unreimbursed expenses (that are reimburseable pursuant to the terms of the Trust
Agreement) plus, in either case, accrued interest thereon at the
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weighted average Mortgage Rate through the last day of the Due Period in which
such repurchase occurs; provided, however, that if an election is made for
treatment as a REMIC under the Code, the repurchase price may equal the greater
of (a) 100% of the Aggregate Asset Value of such Loans, plus accrued interest
thereon at the applicable net Mortgage Rates through the last day of the month
of such repurchase and (b) the aggregate fair market value of such Mortgage
Loans; plus the fair market value of any property acquired in respect of a
Mortgage Loan and remaining in the Trust Fund. The exercise of such right will
effect early retirement of the Certificates of such Series, but the Servicer's
right to so purchase is subject to the Aggregate Value of the Mortgage Loans at
the time of repurchase being less than a fixed percentage, to be set forth in
the related Prospectus Supplement, of the Cut-off Date Aggregate Asset Value. In
no event, however, will the trust created by the Trust Agreement continue beyond
the expiration of 21 years from the death of the last survivor of certain
persons identified therein. For each Series, the Servicer or the Trustee, as
applicable, will give written notice of termination of the Trust Agreement to
each Certificateholder, and the final distribution will be made only upon
surrender and cancellation of the Certificates at an office or agency specified
in the notice of termination. If so provided in the related Prospectus
Supplement for a Series, the Depositor or another entity may effect an optional
termination of the Trust Fund or repurchase all or certain Classes of
Certificates of a Series under the circumstances described in such Prospectus
Supplement. See "DESCRIPTION OF THE SECURITIES--Optional Termination,"
"--Optional Repurchase of Certificates," and "--Other Repurchases" herein.
THE ISSUER
THE COMPANY
The Company was incorporated in the State of Delaware on January 2, 1987.
The principal office of the Company is located at 200 Vesey Street, New York,
New York 10285. Its telephone number is (212) 526-5594.
The Certificate of Incorporation of the Company provides that the Company
may not conduct any activities other than those related to the issue and sale of
one or more Series and to serve as depositor of one or more trusts that may
issue and sell Bonds or Certificates. The Certificate of Incorporation of the
Company provides that any Securities, except for subordinated Securities, issued
by the Company must be rated in one of the three highest categories available by
any Rating Agency rating the Series. Pursuant to the terms of the Indenture or
Trust Agreement, as applicable, the Company may not issue any Securities which
would result in the lowering of the then current ratings of the outstanding
Securities of any Series.
The Series Supplement for a particular Series may permit the Primary Assets
pledged to secure the related Series of Bonds to be transferred by the Issuer to
a trust, subject to the obligations of the Bonds of such Series, thereby
relieving the Issuer of its obligations with respect to such Bonds.
OWNER TRUST
Each owner trust established to act as Issuer of a Series of bonds (each, an
"Owner Trust") will be created pursuant to a deposit trust agreement (the
"Deposit Trust Agreement") between the Company which will act as Depositor and
the bank, trust company or other fiduciary named in the related Prospectus
Supplement which will act solely in its fiduciary capacity as Owner Trustee.
Under the terms of each Deposit Trust Agreement, the Company will convey to the
Owner Trustee Mortgage Assets and other Primary Assets to secure one or more
Series in return for certificates or other instruments evidencing beneficial
ownership of the Owner Trust and the net proceeds of the sale of the Bonds. The
Company may in turn sell or assign the certificates of beneficial interest to
another entity or entities, including affiliates of the Company.
The Owner Trust will pledge the Mortgage Assets and other Primary Assets to
the Trustee under the related Indenture as security for a Series. The Trustee
will hold such Mortgage Assets as security only for that Series, and Holders of
the Bonds of such Series will be entitled to the equal and proportionate
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benefits of such security, subject to the express subordination of certain
Classes thereof, as if the same had been granted by a corporate issuer.
Each Deposit Trust Agreement will provide that the related Trust may not
conduct any activities other than those related to the issuance and sale of the
particular Series. No Deposit Trust Agreement will be subject to amendment
without the prior written consent of the Owner Trustee, the holders representing
a majority of the beneficial interest of the Owner Trust and the Trustee, except
that the holders of not less than 66 2/3% of the Aggregate Outstanding Principal
of each Series must consent to any amendment of, among other provisions, the
limitation on activities of the Owner Trust and the provision regarding
amendments to the Deposit Trust Agreement. The holders of the beneficial
interests in an Owner Trust which issues a Series will not be liable for payment
of principal of or interest on the Bonds and each holder of Bonds of such Series
will be deemed to have released such beneficial owners from any such liability.
ADMINISTRATOR
Unless otherwise specified in the related Prospectus Supplement, it is
expected that the Issuer will enter into an administration agreement with an
administrator acceptable to the Rating Agencies rating the applicable Series of
Securities (the "Administrator") pursuant to which advisory, administrative,
accounting and clerical services will be provided to the Issuer with respect to
the Securities. The Trustee or the Master Servicer may serve as the Securities
Administrator. In addition, under the Indenture or Trust Agreement, as
applicable, the Issuer is responsible for certain administrative and accounting
matters relating to the Securities. It is intended that the Administrator will
perform these services on behalf of the Issuer, and amounts payable with respect
to such services, unless otherwise provided in the related Prospectus
Supplement, will be subordinate to the Issuer's obligations to pay principal and
interest to the Bondholders or Certificateholders (including any Residual
Interest Bondholders or Residual Interest Certificateholders) but, unless
otherwise specified in the related Prospectus Supplement, will be senior to the
Issuer's obligation to pay any Excess Cash Flow to the Residual Interest
Bondholders or Residual Interest Certificateholders.
USE OF PROCEEDS
The Issuer will apply all or substantially all of the net proceeds from the
sale of each Series offered hereby and by the related Prospectus Supplement to
purchase the Mortgage Assets securing each Series simultaneously with the
issuance and sale of such Securities. The proceeds may also be used to repay
indebtedness which has been incurred to acquire Mortgage Assets, to establish
the Reserve Funds, if any, for the Series and to pay costs of structuring,
guaranteeing and issuing the Securities. If so specified in the related
Prospectus Supplement, the purchase of the Mortgage Assets for a Series may be
effected by an exchange of Securities with the Seller of such Mortgage Assets.
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LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
Any bearer securities will be issued in compliance with United States
federal tax laws and regulations applicable at the time of issuance. Under
current law, bearer securities may not be offered or sold during the restricted
period, or delivered in definitive form in connection with a sale during the
restricted period (as defined under "DESCRIPTION OF THE SECURITIES--Bearer
Securities and Registered Securities"), in the United States or to United States
persons other than to (a) the United States office of (i) an international
organization (as defined in Section 7701(a)(18) of the Code), (ii) a foreign
central bank (as defined in Section 895 of the Code), or (iii) any underwriter,
agent, or dealer offering or selling bearer securities during the restricted
period (a "Distributor") pursuant to a written contract with the Issuer or with
another Distributor, that purchases bearer securities for resale or for its own
account and agrees to comply with the requirements of Section 165(j)(3)(A), (B),
or (C) of the Code, or (b) the foreign branch of a United States financial
institution purchasing for its own account or for resale, which institution
agrees to comply with the requirements of Section 165(j)(3)(A), (B), or (C) of
the Code. In addition, a sale of a bearer security may be made during the
restricted period to a United States person who acquired and holds the bearer
security on the certification date through a foreign branch of a United States
financial institution that agrees to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Code. Any Distributor (including an affiliate of
a Distributor) offering or selling bearer securities during the restricted
period must agree not to offer or sell bearer securities in the United States or
to United States persons (except as discussed above) and must employ procedures
reasonably designed to ensure that its employees or agents directly engaged in
selling bearer securities are aware of these restrictions.
Bearer securities and their interest coupons will bear a legend
substantially to the following effect: "Any United States person who holds this
obligation will be subject to limitations under the United States income tax
laws, including the limitations provided in Section 165(j) and 1287(a) of the
Internal Revenue Code."
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States and an estate the income of which is
subject to United States federal income taxation regardless of its source or a
trust if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United States
persons have the authority to control all substantial decisions of such trust,
and "United States" means the United States of America (including the States and
the District of Columbia) and its possessions including Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana
Islands.
FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a summary of certain anticipated federal income tax
consequences of the purchase, ownership, and disposition of the Securities. The
summary is based upon the provisions of the Code, the regulations promulgated
thereunder, including, where applicable, proposed regulations, and the judicial
and administrative rulings and decisions now in effect, all of which are subject
to change or possible differing interpretations. The statutory provisions,
regulations, and interpretations on which this summary and the opinion of
counsel to which the summary refers below, are based are subject to change, and
such a change could apply retroactively. No rulings have been or will be sought
from the IRS on these matters.
The summary does not purport to deal with all aspects of federal income
taxation that may affect particular investors in light of their individual
circumstances, nor with certain types of investors subject to special treatment
under the federal income tax laws. This summary focuses primarily upon investors
who will hold Securities as "capital assets" (generally, property held for
investment) within the meaning of Section 1221 of the Code, but much of the
discussion is applicable to other investors as well. Potential
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purchasers of Securities are advised to consult their own tax advisers
concerning the federal, state or local tax consequences to them of the purchase,
holding and disposition of the Securities.
CHARACTERIZATION OF SECURITIES
Unless otherwise stated in the applicable Prospectus Supplement, a REMIC
election will be made with respect to each Series of Securities. In such a case,
special counsel to the Issuer will deliver its opinion to the effect that the
arrangement by which the Securities of that Series are issued will be treated as
a REMIC as long as all of the provisions of the applicable Indenture or Trust
Agreement, as applicable, are complied with and the statutory and regulatory
requirements are satisfied. Securities of such Series will be designated as
"regular interests" or "residual interests" in a REMIC, as specified in the
related Prospectus Supplement.
If the applicable Prospectus Supplement so specifies with respect to a
Series of Securities, the Securities of such Series will not be treated as
regular or residual interests in a REMIC for federal income tax purposes but
instead will be treated as (i) indebtedness of the Issuer; (ii) an undivided
beneficial ownership interest in the Mortgage Loans (and the arrangement
pursuant to which the Mortgage Loans will be held and the Securities will be
issued will be treated as a grantor trust under Subpart E, part I of subchapter
J of the Code and not as an association taxable as a corporation for federal
income tax purposes); (iii) equity interests in an association that will satisfy
the requirements for qualification as a real estate investment trust; (iv)
interests in an entity that will be treated as a partnership for federal income
tax purposes, or (v) interests in an entity or a pool of assets that will
satisfy the requirements for qualification as a financial asset securitization
investment trust (a "FASIT") for federal income tax purposes. The federal income
tax consequences to Bondholders or Certificateholders of any such Series will be
described in the applicable Prospectus Supplement.
If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for such status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In that event, such entity may be taxable as a corporation
under Treasury regulations, and the related REMIC Certificates may not be
accorded the status or given the tax treatment described below. Although the
Code authorizes the Treasury Department to issue regulations providing relief in
the event of an inadvertent termination of REMIC status, no such regulations
have been issued. Any such relief, moreover, may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the Trust
Fund's income for the period in which the requirements for such status are not
satisfied. The Pooling Agreement or Indenture with respect to each REMIC will
include provisions designed to maintain the Trust Fund's status as a REMIC under
the REMIC Provisions. It is not anticipated that the status of any Trust Fund as
a REMIC will be terminated.
Except to the extent the related Prospectus Supplement specifies otherwise,
if a REMIC election is made with respect to a Series of Securities, (i)
Securities held by a domestic building and loan association will constitute "a
regular or a residual interest in a REMIC" within the meaning of Code Section
7701(a)(19)(C)(xi) (assuming that at least 95% of the REMIC's assets consist of
cash, government securities, "loans . . . secured by an interest in real
property which is . . . residential real property," and other types of assets
described in Code Section 7701(a)(19)(C)); and (ii) Securities held by a real
estate investment trust will constitute "real estate assets" within the meaning
of Code Section 856(c)(5)(B), and income with respect to the Securities will be
considered "interest on obligations secured by mortgages on real property or on
interest in real property" within the meaning of Code Section 856(c)(3)(B)
(assuming, for both purposes, that at least 95% of the REMIC's assets are
qualifying assets). If less than 95% of the REMIC's assets consist of assets
described in (i) or (ii) above, then Securities will qualify for the tax
treatment described in (i) or (ii) in the proportion that such REMIC assets are
qualifying assets. In general, Mortgage Loans secured by non-residential real
property will not constitute "loans . . . secured by an interest in real
property which is . . . residential real property" within the meaning of Section
7701(a)(19)(C). The Small Business Job Protection Act of 1996 (the "SBJPA of
1996") repealed the
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reserve method for bad debts of domestic building and loan associations and
mutual savings banks, and thus has eliminated the asset category of "qualifying
real property loans" in former Code Section 593(d) for taxable years beginning
after December 31, 1995. The requirement in the SBJPA of 1996 that such
institutions must "recapture" a portion of their existing bad debt reserves is
suspended if a certain portion of their assets are maintained in "residential
loans" under Code Section 7701(a)(19)(C)(v), but only if such loans were made to
acquire, construct or improve the related real property and not for the purpose
of refinancing. However, no effort will be made to identify the portion of the
Mortgage Loans of any Series meeting this requirement, and no representation is
made in this regard.
It is possible that various reserves or funds will reduce the proportion of
REMIC assets which qualify under the standards described above.
TAXATION OF REGULAR INTEREST SECURITIES
INTEREST AND ACQUISITION DISCOUNT. Securities that qualify as regular
interests in a REMIC ("Regular Interest Securities") are generally treated as
indebtedness for federal income tax purposes. Stated interest on a Regular
Interest Security will be taxable as ordinary income using the accrual method of
accounting, regardless of the Bondholder's or Certificateholder's normal
accounting method. Reports will be made annually to the IRS and to holders of
Regular Interest Securities that are not excepted from the reporting
requirements regarding amounts treated as interest (including accrual of
original issue discount) on Regular Interest Securities.
Compound Interest Securities, Interest Weighted Securities, and Zero Coupon
Securities will, and other Securities constituting Regular Interest Securities
may, be issued with "original issue discount" ("OID") within the meaning of Code
Section 1273. Rules governing original issue discount are set forth in sections
1271-1275 of the Code and the Treasury regulations thereunder (the "OID
Regulations"). Treasury regulations (the "Contingent Regulations") governing the
treatment of contingent payment obligations also have been adopted. As described
more fully below, Code Section 1272(a)(6) requires the use of an income tax
accounting methodology that utilizes (i) a single constant yield to maturity and
(ii) the Prepayment Assumptions. Under Section 1272(a)(6) of the Code, special
rules apply to the computation of OID on instruments, such as the Regular
Interest Securities, on which principal is prepaid based on prepayments of the
underlying assets. Neither the OID Regulations nor the Contingent Regulations
contain rules applicable to instruments governed by Section 1272(a)(6). Although
technically not applicable to prepayable securities, the Contingent Regulations
may represent a possible method to be applied in calculating OID on certain
Classes of Certificates. Until the Treasury Department issues guidance to the
contrary, the Servicer or other person responsible for computing the amount of
original issue discount to be reported to a Regular Interest Securityholder each
taxable year (the "Tax Administrator") intends to base its computations on Code
Section 1272(a)(6), the OID Regulations and the Contingent Regulations as
described below. However, because no regulatory guidance currently exists under
Code Section 1272(a)(6), there can be no assurance that the methodology
described below represents the correct manner of calculating original issue
discount on the Regular Interest Securities.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Regular Interest Security and its issue price.
A holder of a Regular Interest Security must include such OID in gross income as
ordinary interest income as it accrues under a method taking into account an
economic accrual of the discount. In general, OID must be included in income in
advance of the receipt of the cash representing that income. The amount of OID
on a Regular Interest Security will be considered to be zero if it is less than
a DE MINIMIS amount determined under the Code, generally less than 0.25% of the
stated redemption price at maturity of the Regular Interest Security multiplied
by the weighted average maturity of the Regular Interest Security. For this
purpose, the weighted average maturity of the Regular Interest Security is
computed as the sum of the amounts determined by multiplying the number of full
years (I.E., rounding down partial years) from the issue date until each
distribution in reduction of stated redemption price at maturity is scheduled to
be made by a fraction, the numerator of which is the amount
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of each distribution included in the stated redemption price at maturity of the
Regular Interest Security and the denominator of which is the stated redemption
price at maturity of the Regular Interest Security. The schedule of such
distributions should be determined in accordance with the assumed rate of
prepayment of the Mortgage Loans used in pricing the Regular Interest Securities
(the "Prepayment Assumption") relating to the Regular Interest Securities. The
Prepayment Assumption with respect to a Series of Regular Interest Securities
will be set forth in the applicable Prospectus Supplement. However, the amount
of any DE MINIMIS OID must be included in income as principal payments are
received on a Regular Interest Security, in the proportion that each such
payment bears to the original principal balance of the Security.
The issue price of a Regular Interest Security of a Class will generally be
the initial offering price at which a substantial amount of the Securities in
the Class are sold, and will be treated by the Issuer as including, in addition,
the amount paid by the Bondholder or Certificateholder for accrued interest that
relates to a period prior to the Closing Date of such Regular Interest Security.
Under the OID Regulations, the stated redemption price at maturity is the sum of
all payments on the Security other than any "qualified stated interest"
payments. Qualified stated interest is defined as any one of a series of
payments equal to the product of the outstanding principal balance of the
Security and a single fixed rate, or certain variable rates of interest, that is
unconditionally payable at least annually. See "--Variable Rate Securities"
below. In the case of the Compound Interest Securities, Interest Weighted
Securities and certain of the other Regular Interest Securities, none of the
payments under the instrument will be considered "qualified stated interest,"
and thus the aggregate amount of all payments will be included in the stated
redemption price. For example, any securities upon which interest can be
deferred and added to principal ("Deferred Interest Securities") will not be
"qualified stated interest." In addition, because Securities Owners are entitled
to receive interest only to the extent that payments are made on the Mortgage
Loans, interest on all Regular Interest Securities may not be "unconditionally
payable." In that case, all of the yield on a Regular Interest Security will be
taxed as OID, but interest would not then be includable in income again when
received. Unless otherwise specified in the related Prospectus Supplement, the
Issuer intends to take the position for income tax information reporting
purposes that interest on the Regular Interest Securities is "unconditionally
payable."
The holder of a Regular Interest Security issued with OID must include in
gross income, for all days during its taxable year on which it holds such
Regular Interest Security, the sum of the "daily portions" of such OID. Such
daily portions are computed by allocating to each day during a taxable year a
pro rata portion of the OID that accrued during the relevant accrual period. In
the case of a debt instrument, subject to Section 1272(a)(6) of the Code, such
as a Regular Interest Security, that is subject to acceleration due to
prepayments on other debt obligations securing such instrument, OID is computed
by taking into account the Prepayment Assumption. The amount of OID that will
accrue during an accrual period (generally the period between interest payments
or compounding dates) is the excess (if any) of (i) the sum of (a) the present
value of all payments remaining to be made on the Regular Interest Security as
of the close of the accrual period and (b) the payments during the accrual
period of amounts included in the stated redemption price of the Regular
Interest Security, over (ii) an "adjusted issue price" of the Regular Interest
Security at the beginning of the accrual period. The adjusted issue price of a
Regular Interest Security is the sum of its issue price plus prior accruals of
OID, reduced by the total payments made with respect to such Regular Interest
Security in all prior periods, other than qualified stated interest payments.
The present value of the remaining payments is determined on the basis of three
factors: (i) the original yield to maturity of the Regular Interest Security
(determined on the basis of compounding at the end of each accrual period and
properly adjusted for the length of the accrual period), (ii) events which have
occurred before the end of the accrual period and (iii) the assumption that the
remaining payments will be made in accordance with the original Prepayment
Assumption. Although original issue discount will be reported to Bondholders or
Certificateholders based on the Prepayment Assumption, no representation is made
to Bondholders or Certificateholders that Mortgage Loans will be prepaid at that
rate or at any other rate.
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Certain classes of Regular Interest Securities may represent more than one
class of REMIC regular interests. Unless the applicable Prospectus Supplement
specifies otherwise, the Trustee intends, based on the OID Regulations, to
calculate OID on such Regular Interest Securities as if, solely for the purposes
of computing OID, the separate regular interests were a single debt instrument.
Certain Series of Securities may be structured to include two or more
REMICs, one or more of which (each, an "Upper Tier REMIC") hold regular
interests ("Lower Tier Interests") in other REMICs (each, a "Lower Tier REMIC").
Under the OID Regulations, OID on all of the Lower Tier Interests issued by a
single Lower Tier REMIC that are held by a second REMIC will be calculated by
treating all of such Lower Tier Interests as a single debt instrument.
A holder of a Regular Interest Security, which acquires the Regular Interest
Security for an amount that exceeds its stated redemption price, will not
include any original issue discount in gross income. A subsequent holder of a
Regular Interest Security which acquires the Regular Interest Security for an
amount that is less than its stated redemption price, will be required to
include original issue discount in gross income, but such a holder who purchases
such Regular Interest Security for an amount that exceeds its adjusted issue
price will be entitled (as will an initial holder who pays more than a Regular
Interest Security's issue price) to offset such original issue discount by
comparable economic accruals of offsetting portions of such excess.
INTEREST WEIGHTED SECURITIES. It is not clear how income should be accrued
with respect to Regular Interest Securities the payments on which consist solely
or primarily of a specified portion of the interest payments on qualified
mortgages held by a REMIC ("Interest Weighted Securities"). Absent guidance to
the contrary, the Issuer intends to take the position that all of the income
derived from Interest Weighted Securities is treated as OID and that the amount
and rate of accrual of such OID should be calculated in the same manner as for a
Compound Interest Security. Those calculations could result in an income accrual
for a period below zero (a "Negative Adjustment"). The legislative history to
the relevant Code provisions indicates, and the relevant Code provisions appear
to provide that any such Negative Adjustment may not be taken as current loss or
deduction, but may only be carried forward to offset future accruals of positive
OID. Thus, in the absence of such accruals of positive OID, it appears that any
losses resulting from a Negative Adjustment must be carried forward until
disposition or retirement of the debt obligation, and may give rise to a capital
loss at that time. However it is possible that income derived from an Interest
Weighted Security that had a principal balance might be calculated as if the
Interest Weighted Security were a bond purchased at a premium equal to the
excess of the price paid by such holder for the Interest Weighted Security over
its stated principal amount, if any. Under this approach, a holder would be
entitled to amortize such premium only if it had in effect an election under
Section 171 of the Code with respect to all taxable debt instruments held by
such holder, as described below.
VARIABLE RATE REGULAR SECURITIES. The REMIC regulations (the "REMIC
Regulations") permit REMICs to issue regular interests bearing a variety of
variable rates including rates based on (i) "qualified floating rates" or (ii) a
weighted average of the interest rates on some or all of the qualified mortgages
held by the REMIC (a "Variable Rate Security"). Under the OID Regulations,
interest is treated as payable at a variable rate if, generally, (i) the issue
price does not exceed the original principal balance by more than a specified
amount and (ii) the interest compounds or is payable at least annually at
current values of (a) one or more "qualified floating rates," (b) a single fixed
rate and one or more qualified floating rates, (c) a single "objective rate," or
(d) a singled fixed rate and a single objective rate that is a "qualified
inverse floating rate." A floating rate is a qualified floating rate if
variations in the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds, where such rate is subject to a
fixed multiple that is greater than 0.65 but not more than 1.35. Such rate may
also be increased or decreased by a fixed spread or subject to a fixed cap or
floor, or a cap or floor that is not reasonably expected as of the issue date to
affect the yield of the instrument significantly. An objective rate is any rate
(other than a qualified floating rate) that is determined using a single fixed
formula and that is based on objective financial or economic information,
provided that such information
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is not (i) within the control of the issuer or a related party or (ii) unique to
the circumstances of the issuer or a related party. A qualified inverse floating
rate is a rate equal to a fixed rate minus a qualified floating rate that
inversely reflects contemporaneous variations in the cost of newly borrowed
funds; an inverse floating rate that is not a qualified inverse floating rate
may nevertheless be an objective rate.
Under the OID Regulations, the amount and accrual of OID on a Variable Rate
Security that qualifies for treatment under the rules applicable to variable
rate debt instruments (a "VRDI Security") is determined, in general, by
converting the VRDI Security into a hypothetical fixed rate security and
applying the rules applicable to fixed rate securities described above to the
hypothetical fixed rate security. A VRDI Security providing for a qualified
floating rate or rates or a qualified inverse floating rate is converted to a
hypothetical fixed rate security by assuming that each qualified floating rate
or the qualified inverse floating rate will remain at its value as of the issue
date. A VRDI Security providing for an objective rate or rates is converted to a
hypothetical fixed rate security by assuming that each objective rate will equal
a fixed rate that reflects the yield that reasonably is expected for the
instrument. Such hypothetical fixed rate securities are assumed to have terms
identical to those provided under the related VRDI Securities, except for the
substitution of fixed rates for the qualified floating rates, objective rates,
or qualified inverse floating rate as described above. In the case of a VRDI
Security that does not provide for the payment of interest at least annually,
appropriate adjustments to the OID accruals and the qualified stated interest
payments are made in each accrual period to the extent that the interest
actually accrued or paid during the accrual period is greater or less than the
interest assumed to be accrued or paid under the hypothetical fixed rate
security.
Regular Interest Securities of certain Series may provide for interest based
on a weighted average of the interest rates on some or all of the Mortgage Loans
of the related Trust ("Weighted Average Securities"). Under the OID Regulations,
it appears that Weighted Average Securities bear interest at an "objective
rate."
Due to the complexity of these rules and the variety of Variable Rate
Securities that may be offered hereunder, the precise application of these rules
to any Variable Rate Securities offered hereunder will be discussed in the
related Prospectus Supplement, based on the specific characteristics of each
such security.
EFFECT OF DEFAULTS AND DELINQUENCIES. Each holder of a Regular Interest
Security will be required to accrue interest and original issue discount on such
Security without giving effect to any reductions in distributions attributable
to defaults or delinquencies on the Mortgage Loans, until it can be established
that any such reduction ultimately will not be recoverable. As a result, the
amount of taxable income reported in any period by the holder of a Regular
Interest Security could exceed the amount of economic income actually realized
by the holder in such period. Although the holder of a Regular Interest Security
eventually will recognize a loss or reduction in income attributable to
previously accrued and included income that, as a result of such loss,
ultimately will not be paid, the law is unclear with respect to the timing and
character of such losses or reduction in income.
Under Section 166 of the Code, both corporate and noncorporate holders of
Regular Interest Securities that hold such Securities in connection with a trade
of business should be allowed to deduct, as ordinary losses, any losses
sustained during a taxable year in which their Regular Interest Securities
become wholly or partially worthless as the result of one or more realized
losses on the Mortgage Loans. However, it appears that a noncorporate holder
that does not acquire a Regular Interest Security in connection with a trade or
business will not be entitled to deduct a loss under Section 166 of the Code
until such holder's Regular Interest Security becomes wholly worthless (that is,
until its outstanding principal balance has been reduced to zero) and that the
loss will be characterized as a short-term capital loss.
MARKET DISCOUNT AND PREMIUM. A purchaser of a Regular Interest Security may
also be subject to the market discount rules of the Code. Such purchaser
generally will be required to recognize accrued market discount as ordinary
income as payments of principal are received on such Regular Interest Security,
or
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upon sale or exchange of the Regular Interest Security. In general terms, until
regulations are promulgated, market discount may be treated as accruing, at the
election of the holder, either (i) under a constant yield method, taking into
account the Prepayment Assumption, or (ii) in the ratio of (a) in the case of a
Regular Interest Security not originally issued with original issue discount,
stated interest payable in the relevant period to total stated interest
remaining to be paid at the beginning of the period or (b) in the case of a
Regular Interest Security originally issued at a discount, original issue
discount in the relevant period to total original issue discount remaining to be
paid. A holder of a Regular Interest Security having market discount may also be
required to defer a portion of the interest deductions attributable to any
indebtedness incurred or continued to purchase or carry the Regular Interest
Security. As an alternative to the inclusion of market discount in income on the
foregoing basis, the holder may elect to include such market discount in income
currently as it accrues on all market discount instruments acquired by such
holder in that taxable year or thereafter, in which case the interest deferral
rule will not apply.
A holder who purchases a Regular Interest Security (other than an Interest
Weighted Security, to the extent described above) at a cost greater than its
stated redemption price at maturity, generally will be considered to have
purchased the Security at a premium, which it may elect to amortize as an offset
to interest income on such Security (and not as a separate deduction item) on a
constant yield method. Although no regulations addressing the computation of
premium accrual on collateralized mortgage obligations or REMIC regular
interests have been issued, applicable legislative history indicates that
premium is to be accrued in the same manner as market discount. Accordingly, it
appears that the accrual of premium on a Regular Interest Security will be
calculated using the prepayment assumption used in pricing such Regular Interest
Security. If a holder makes an election to amortize premium on a Security, such
election will apply to all taxable debt instruments (including all REMIC regular
interests) held by the holder at the beginning of the taxable year in which the
election is made, and to all taxable debt instruments acquired thereafter by
such holder, and will be irrevocable without the consent of the Internal Revenue
Service. Purchasers who pay a premium for the Regular Interest Security should
consult their tax advisers regarding the election to amortize premium and the
method to be employed.
ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD METHOD. A holder of
a debt instrument such as a Regular Interest Security may elect to treat all
interest that accrues on the instrument using the constant yield method, with
none of the interest being treated as qualified stated interest. For purposes of
applying the constant yield method to a debt instrument subject to such an
election, (i) "interest" includes stated interest, original issue discount, DE
MINIMIS original issue discount, market discount and DE MINIMIS market discount,
as adjusted by any amortizable bond premium or acquisition premium and (ii) the
debt instrument is treated as if the instrument were issued on the holder's
acquisition date in the amount of the holder's adjusted basis immediately after
acquisition. It is unclear whether, for this purpose, the initial Prepayment
Assumption would continue to apply or if a new prepayment assumption as of the
date of the holder's acquisition would apply. A holder generally may make such
an election on an instrument by instrument basis or for a class or group of debt
instruments. However, if the holder makes such an election with respect to a
debt instrument with amortizable bond premium or with market discount, the
holder is deemed to have made elections to amortize bond premium or to report
market discount income currently as it accrues under the constant yield method,
respectively, for all premium bonds held or market discount bonds acquired by
the holder in the same taxable year or thereafter. The election is made on the
holder's federal income tax return for the year in which the debt instrument is
acquired and is irrevocable except with the approval of the Internal Revenue
Service. Investors should consult their own tax advisors regarding the
advisability of making such an election.
SALE OR EXCHANGE OF REGULAR INTEREST SECURITIES
A Regular Bondholder's or Regular Certificateholder's tax basis in its
Regular Interest Securities is the price such holder pays for a Security, plus
amounts of original issue discount and market discount included in income and
reduced by any payments received (other than qualified periodic interest
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payments), any amortized premium, and any prior losses. Gain or loss recognized
on a sale, exchange, or redemption of a Regular Interest Securities, measured by
the difference between the amount realized and the Regular Interest Security's
basis as so adjusted, will generally be capital gain or loss, assuming that the
Regular Interest Security is held as a capital asset. If, however, a Regular
Bondholder or Regular Certificateholder is a bank, thrift, or similar
institution described in Section 582 of the Code, gain or loss realized on the
sale or exchange of a Regular Interest Security will be taxable as ordinary
income or loss. In addition, gain from the disposition of a Regular Interest
Security that might otherwise be capital gain will be treated as ordinary income
to the extent of the excess, if any, of (i) the amount that would have been
includable in the holder's income if the yield on such Regular Interest Security
had equaled 110% of the applicable federal rate as of the beginning of such
holder's holding period, over (ii) the amount of ordinary income actually
recognized by the holder with respect to such Regular Interest Security. The
Taxpayer Relief Act of 1997 (the "1997 Act") has generally reduced capital gains
tax rates for non-corporate taxpayers, who should consult their tax advisors
regarding the consequences to them of the 1997 Act. There is no such discrepancy
in tax rates on capital gains and ordinary income in the case of corporations.
REMIC EXPENSES
As a general rule, all of the expenses of a REMIC will be taken into account
by holders of the Residual Interest Securities or the REMIC residual interest.
In the case of a "single class REMIC," however, the expenses will be allocated,
under temporary Treasury regulations, among the holders of the Regular Interest
Securities and the holders of the Residual Interest Securities on a daily basis
in proportion to the relative amounts of income accruing to each Bondholder or
Certificateholder on that day. In the case of a holder of a Regular Interest
Security who is an individual or a "pass-through interest holder" (including
certain pass-through entities but not including real estate investment trusts),
such expenses will be deductible only to the extent that such expenses, plus
other "miscellaneous itemized deductions" of the Bondholder or Certificateholder
exceed 2% of such Bondholder's or Certificateholder's adjusted gross income and
will not be deductible in computing alternative minimum taxable income. In
addition, Code Section 68 provides that the amount of itemized deductions
otherwise allowable for the taxable year for an individual whose adjusted gross
income exceeds the applicable amount (for 1991, $100,000, or $50,000 in the case
of a separate return by a married individual within the meaning of Code Section
7703, which amounts will be adjusted annually for inflation) will be reduced by
the lesser of (i) 3% of the excess of adjusted gross income over the applicable
amount, or (ii) 80% of the amount of itemized deductions otherwise allowable for
such taxable year. Moreover, such expenses are disallowed entirely as deductions
for purposes of the Alternative Minimum Tax. The disallowance of this deduction
may have a significant impact on the yield of the Regular Interest Security to
such a holder. In general terms, a single class REMIC is one that either (i)
would qualify, under existing Treasury regulations, as a grantor trust if it
were not a REMIC (treating all interests as ownership interests, even if they
would be classified as debt for federal income tax purposes) or (ii) is similar
to such a trust and which is structured with the principal purpose of avoiding
the single class REMIC rules.
Unless otherwise disclosed in the related Prospectus Supplement, REMICs
issuing securities offered hereunder will not be treated as "single class"
REMICs under these rules.
TAXATION OF THE REMIC
GENERAL. Although a REMIC is a separate entity for federal income tax
purposes, a REMIC is not generally subject to entity-level tax. Rather, the
taxable income or net loss of a REMIC is taken into account by the holders of
residual interests. The regular interests are generally taxable as debt of the
REMIC.
CALCULATION OF REMIC INCOME. The taxable income or net loss of a REMIC is
determined under an accrual method of accounting and in the same manner as in
the case of an individual, with certain adjustments. In general, the taxable
income or net loss will be the difference between (i) the gross income
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produced by the REMIC's assets, including stated interest and any original issue
discount or market discount on loans and other assets, income from amortization
of premium on Regular Interest Securities issued at a premium and income from
write-off of Regular Interest Securities, and (ii) deductions, including stated
interest and original issue discount accrued on a Regular Interest Security,
amortization of any premium with respect to loans, losses on Mortgage Loans, and
servicing fees and other expenses of the REMIC. A holder of a Residual Interest
Security that is an individual or a "pass-through interest holder" (including
certain pass-through entities, but not including real estate investment trusts)
will be unable to deduct servicing fees payable on the loans or other
administrative expenses of the REMIC for a given taxable year, to the extent
that such expenses, when aggregated with the Residual Interest Securityholder's
other miscellaneous itemized deductions for that year, do not exceed two percent
of such holder's adjusted gross income. In addition, Code Section 68 provides
that the amount of itemized deductions otherwise allowable for the taxable year
for an individual whose adjusted gross income exceeds a specified applicable
amount will be reduced by the lesser of (i) 3% of the excess of adjusted gross
income over the applicable amount, or (ii) 80% of the amount of itemized
deductions otherwise allowable for such taxable year. See "--REMIC Expenses"
above.
For purposes of computing its taxable income or net loss, the REMIC should
have an initial aggregate tax basis in its assets equal to the aggregate fair
market value of the regular interests and the residual interests on the Start Up
Day (generally, the day that the interests are issued). That aggregate basis
will be allocated among the assets of the REMIC in proportion to their
respective fair market values.
The original issue discount provisions of the Code apply to loans of
individuals originated on or after March 2, 1984, and the market discount
provisions apply to all loans. Subject to possible application of the DE MINIMIS
rules, the method of accrual by the REMIC of original issue discount on such
loans will be equivalent to the method under which holders of Regular Interest
Securities accrue original issue discount (i.e., under the constant yield method
taking into account the Prepayment Assumption). The REMIC will deduct original
issue discount on the Regular Interest Securities in the same manner that the
holders of the Securities include such discount in income, but without regard to
the DE MINIMIS rules. See "--Taxation of Regular Interest Securities" above.
However, a REMIC that acquires loans at a market discount must include such
market discount in income currently, as it accrues, on a constant interest
basis.
To the extent that the REMIC's basis allocable to loans that it holds
exceeds their principal amounts, the resulting premium, if attributable to
mortgages originated after September 27, 1985, will be amortized over the life
of the loans (taking into account the Prepayment Assumption) on a constant yield
method. Although the law is somewhat unclear regarding recovery of premium
attributable to loans originated on or before such date, it is possible that
such premium may be recovered in proportion to payments of loan principal.
INCOME FROM FORECLOSURE PROPERTY. To the extent that the Lower Tier REMIC
derives income from Foreclosed Properties that is treated as "net income from
foreclosure property," that income will be subject to taxation at the highest
corporate tax rate. Net income from foreclosure property generally includes gain
from the sale of a foreclosure property that is inventory property and net
income from the property that would not be treated as "rents from real property"
or other certain other qualifying income for a real estate investment trust. A
trust agreement or indenture may permit the Servicer to operate a Foreclosed
Property in a manner that produces income subject to the foregoing tax if
certain conditions are satisfied. In addition, if the operation of the
Foreclosed Property is treated as a trade or business carried on by the REMIC,
then unless the property is operated through an independent contractor, the
income from the foreclosed property will be subject to tax on "net income from
foreclosure property" at a rate of 100%. Accordingly, operation of Foreclosed
Properties generally will be required to be conducted through an independent
contractor.
PROHIBITED TRANSACTIONS AND CONTRIBUTIONS TAX. The REMIC will be subject to
a 100% tax on any net income derived from a "prohibited transaction." For this
purpose, net income will be calculated without
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taking into account any losses from other prohibited transactions or any
deductions attributable to any prohibited transaction that resulted in a loss.
In general, prohibited transactions include (i) subject to limited exceptions,
the sale or other disposition of any qualified mortgage transferred to the
REMIC; (ii) subject to a limited exception, the sale or other disposition of a
cash flow investment; (iii) the receipt of any income from assets not permitted
to be held by the REMIC pursuant to the Code; or (iv) the receipt of any fees or
other compensation for services rendered by the REMIC. It is anticipated that a
REMIC will not engage in any prohibited transactions in which it would recognize
a material amount of net income. In addition, subject to a number of exceptions,
a tax is imposed at the rate of 100% on amounts contributed to a REMIC after the
close of the three-month period beginning on the Start Up Day. Unless chargeable
to the servicer or trustee under the applicable Trust Agreement or Indenture,
such taxes will be paid out of the assets of the REMIC and, unless otherwise
specified in the related Prospectus Supplement, will be allocated pro rata to
all outstanding Classes of Securities of such REMIC.
TAXATION OF HOLDERS OF RESIDUAL INTEREST SECURITIES
The Holder of a Security representing a REMIC residual interest (a "Residual
Interest Security") will take into account the "daily portion" of the taxable
income or net loss of the REMIC for each day during the taxable year on which
such holder held the Residual Interest Security. The daily portion is determined
by allocating to each day in any calendar quarter its ratable portion of the
taxable income or net loss of the REMIC for such quarter, and by allocating that
amount among the holders (on such day) of the Residual Interest Securities in
proportion to their respective holdings on such day.
The holder of a Residual Interest Security must report its proportionate
share of the taxable income of the REMIC whether or not it receives cash
distributions from the REMIC attributable to such income or loss. The reporting
of taxable income without corresponding distributions could occur, for example,
in certain REMIC issues in which the loans held by the REMIC were issued or
acquired at a discount, since mortgage prepayments cause recognition of discount
income, while the corresponding portion of the prepayment could be used in whole
or in part to make principal payments on Regular Interest Securities issued
without any discount or at an insubstantial discount. (If this occurs, it is
likely that cash distributions will exceed taxable income in later years.)
Taxable income may also be greater in earlier years of certain REMIC issues as a
result of the fact that interest expense deductions, as a percentage of
outstanding principal on Regular Interest Securities, will typically increase
over time as lower yielding Securities are paid, whereas interest income with
respect to loans will generally remain constant over time as a percentage of
loan principal.
In any event, because the holder of a residual interest is taxed on the net
income of the REMIC, the taxable income derived from a Residual Interest
Security in a given taxable year will not be equal to the taxable income
associated with investment in a corporate bond or stripped instrument having
similar cash flow characteristics and pretax yield. Therefore, the after-tax
yield on the Residual Interest Security may be less than that of such a bond or
instrument, or may be negative. Consequently, a Residual Interest Security may
have a negative "value".
LIMITATION ON LOSSES. The amount of the REMIC's net loss that a holder may
take into account currently is limited to the holder's adjusted basis at the end
of the calendar quarter in which such loss arises. A holder's basis in a
Residual Interest Security will initially equal such holder's purchase price,
and will subsequently be increased by the amount of the REMIC's taxable income
allocated to the holder, and decreased (but not below zero) by the amount of
distributions made and the amount of the REMIC's net loss allocated to the
holder. Any disallowed loss may be carried forward indefinitely, but may be used
only to offset income generated by the same REMIC. The ability of Residual
Bondholders or Residual Certificateholders to deduct net losses may be subject
to additional limitations under the Code, as to which such holders should
consult their tax advisers.
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DISTRIBUTIONS. Distributions on a Residual Interest Security (whether at
their scheduled times or as a result of prepayments) will generally not result
in any additional taxable income or loss to a holder of a Residual Interest
Security. If the amount of such payment exceeds a holder's adjusted basis in the
Residual Interest Security, however, the holder will recognize gain (treated as
gain from the sale of the Residual Interest Security) to the extent of such
excess.
MARK-TO-MARKET RULES. A Residual Interest Security is not treated as a
security and thus may not be marked to market under Treasury regulations that
generally require a securities dealer to mark to market securities held for sale
to customers.
SALE OR EXCHANGE. A holder of a Residual Interest Security will recognize
gain or loss on the sale or exchange of a Residual Interest Security equal to
the difference, if any, between the amount realized and such Bondholder's or
Certificateholder's adjusted basis in the Residual Interest Security at the time
of such sale or exchange. Except to the extent provided in regulations, which
have not yet been issued, any loss upon disposition of a Residual Interest
Security will be disallowed if the selling Bondholder or Certificateholder
acquires any residual interest in a REMIC or similar mortgage pool within six
months before or after such disposition.
EXCESS INCLUSION INCOME
The portion of a Residual Bondholder's or Residual Certificateholder's REMIC
taxable income consisting of "excess exclusion" income may not be offset by
other deductions or losses, including net operating losses, on such Bondholder's
or Certificateholder's federal income tax return. Further, if the holder of a
Residual Interest Security is an organization subject to the tax on unrelated
business income imposed by Code Section 511, such Residual Bondholder's or
Residual Certificateholder's excess inclusion income will be treated as
unrelated business taxable income of such Bondholder or Certificateholder's. In
addition, under Treasury regulations yet to be issued, if a real estate
investment trust, a regulated investment company, a common trust fund, or
certain cooperatives were to own a Residual Interest Security, a portion of
dividends (or other distributions) paid by the real estate investment trust (or
other entity) would be treated as excess inclusion income. If a Residual
Interest Security is owned by a foreign person, excess inclusion income is
subject to tax at a rate of 30% which may not be reduced by treaty and is not
eligible for treatment as "portfolio interest."
The excess inclusion portion of a REMIC's income is generally equal to the
excess, if any, of REMIC taxable income for the quarterly period allocable to a
Residual Interest Security, over the daily accruals for such quarterly period of
(i) 120% of the long term applicable federal rate on the Start Up Day multiplied
by (ii) the adjusted issue price of such Residual Interest Security at the
beginning of such quarterly period. The adjusted issue price of a Residual
Interest Security at the beginning of each calendar quarter will equal its issue
price (calculated in a manner analogous to the determination of the issue price
of a Regular Interest Security), increased by the aggregate of the daily
accruals for prior calendar quarters, and decreased (but not below zero) by the
amount of loss allocated to a holder and the amount of distributions made on the
Residual Interest Security before the beginning of the quarter. The long-term
federal rate, which is announced monthly by the Treasury Department, is an
interest rate that is based on the average market yield of outstanding
marketable obligations of the United States government having remaining
maturities in excess of nine years.
Under the REMIC Regulations, in certain circumstances, transfers of Residual
Interest Securities may be disregarded. See "--Restrictions on Ownership and
Transfer of Residual Interest Securities" and "--Tax Treatment of Foreign
Investors" below.
RESTRICTIONS ON OWNERSHIP AND TRANSFER OF RESIDUAL INTEREST SECURITIES
As a condition to qualification as a REMIC, reasonable arrangements must be
made to prevent the ownership of a REMIC residual interest by any "Disqualified
Organization." Disqualified Organizations
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include the United States, any State or political subdivision thereof, any
foreign government, any international organization, or any agency or
instrumentality of any of the foregoing, a rural electric or telephone
cooperative described in Section 1381(a)(2)(C) of the Code, or any entity exempt
from the tax imposed by Sections 1-1399 of the Code, if such entity is not
subject to tax on its unrelated business income. Accordingly, the Indenture or
Trust Agreement, as applicable, will prohibit Disqualified Organizations from
owning a Residual Interest Security. In addition, no transfer of a Residual
Interest Security will be permitted unless the proposed transferee shall have
furnished to the Issuer an affidavit representing and warranting that it is
neither a Disqualified Organization nor an agent or nominee acting on behalf of
a Disqualified Organization.
If a Residual Interest Security is transferred to a Disqualified
Organization (in violation of the restrictions set forth above), a substantial
tax will be imposed on the transferor of such Residual Interest Security at the
time of the transfer. In addition, if a Disqualified Organization holds an
interest in a pass-through entity (including, among others, a partnership,
trust, real estate investment trust, regulated investment company, or any person
holding as nominee), that owns a Residual Interest Security, the pass-through
entity will be required to pay an annual tax on its share of the excess
inclusion income of the REMIC allocable to such Disqualified Organization.
Under the REMIC Regulations, if a Residual Interest Security is a
"noneconomic residual interest," as described below, a transfer of a Residual
Interest Security to a United States person will be disregarded for all Federal
tax purposes unless no significant purpose of the transfer was to impede the
assessment or collection of tax. A Residual Interest Security is a "noneconomic
residual interest" unless, at the time of the transfer (i) the present value of
the expected future distributions on the Residual Interest Security at least
equals the product of the present value of the anticipated excess inclusions and
the highest rate of tax for the year in which the transfer occurs, and (ii) the
transferor reasonably expects that the transferee will receive distributions
from the REMIC at or after the time at which the taxes accrue on the anticipated
excess inclusions in an amount sufficient to satisfy the accrued taxes. The
present value is calculated based on the Prepayment Assumption, using a discount
rate equal to the "applicable federal rate" at the time of transfer. If a
transfer of a residual interest is disregarded, the transferor would be liable
for any Federal income tax imposed upon taxable income derived by the transferee
from the REMIC. A significant purpose to impede the assessment or collection of
tax exists if the transferor, at the time of transfer, knew or should have known
that the transferee would be unwilling or unable to pay taxes on its share of
the taxable income of the REMIC. A similar limitation exists with respect to
certain transfers of residual interests by foreign persons to United States
persons. See "--Tax Treatment of Foreign Investors" below.
ADMINISTRATIVE MATTERS
The REMIC's books must be maintained on a calendar year basis and the REMIC
must file an annual federal income tax return. The REMIC will also be subject to
the procedural and administrative rules of the Code applicable to partnerships,
including the determination of any adjustments to, among other things, items of
REMIC income, gain, loss, deduction, or credit, by the Internal Revenue Service
in a unified administrative proceeding. The holder of the Residual Interest
Security holding the largest percentage interest will be designated as "tax
matters person" of the related REMIC for purposes of any such proceeding.
TAX STATUS AS A GRANTOR TRUST
GENERAL. If the applicable Prospectus Supplement so specifies with respect
to a Series of Securities, the Securities of such Series will not be treated as
regular or residual interests in a REMIC for federal income tax purposes but
instead, special tax counsel to the Issuer will deliver its opinion to the
effect that the arrangement by which the Securities of that Series are issued
will be treated as a "grantor" or "fixed investment" trust as long as all of the
provisions of the applicable Trust Agreement are complied with and the statutory
and regulatory requirements are satisfied. In some Series ("Pass-Through
Certificates"),
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there will be no separation of the principal and interest payments on the
Mortgage Loans. In such circumstances, a Certificateholder will be considered to
have purchased an undivided interest in each of the Mortgage Loans. In other
cases ("Stripped Certificates"), sale of the Certificates will produce a
separation in the ownership of the principal payments and interest payments on
the Mortgage Loans.
Each Certificateholder must report on its federal income tax return its pro
rata share of the gross income derived from the Mortgage Loans (not reduced by
the amount payable as fees to the Trustee and the Master Servicer and similar
fees (collectively, the "Servicing Fee")), at the same time and in the same
manner as such items would have been reported under the Certificateholder's tax
accounting method had it held its interest in the Mortgage Loans directly,
received directly its share of the amounts received with respect to the Mortgage
Loans, and paid directly its share of the Servicing Fees. In the case of
Pass-Through Certificates, such gross income will consist of a pro rata share of
all of the income derived from all of the Mortgage Loans and, in the case of
Stripped Certificates, such income will consist of a pro rata share of the
income derived from each stripped bond or stripped coupon in which the
Certificateholder owns an interest. The holder of a Certificate will generally
be entitled to deduct such Servicing Fees under Section 162 or Section 212 of
the Code to the extent that such Servicing Fees represent "reasonable"
compensation for the services rendered by the Trustee, the Master Servicer, and
any other service providers. In the case of a noncorporate holder, however,
Servicing Fees (to the extent not otherwise disallowed, e.g., because they
exceed reasonable compensation) will be deductible in computing such holder's
regular tax liability only to the extent that such fees, when added to other
miscellaneous itemized deductions, exceed 2% of adjusted gross income and may
not be deductible to any extent in computing such holder's alternative minimum
tax liability. In addition, Code Section 68 provides that the amount of itemized
deductions otherwise allowable for the taxable year for an individual whose
adjusted gross income exceeds a specified applicable amount will be reduced by
the lesser of (i) 3% of the excess of adjusted gross income over the applicable
amount, or (ii) 80% of the amount of itemized deductions otherwise allowable for
such taxable year.
DISCOUNT OR PREMIUM ON PASS-THROUGH CERTIFICATES. The holder's purchase
price of a Pass-Through Certificate is to be allocated among the Mortgage Loans
in proportion to their fair market values, determined as of the time of purchase
of the Certificates. In the typical case, the Trustee believes it is reasonable
for this purpose to treat each Mortgage Loan as having a fair market value
proportional to the share of the aggregate principal balances of all of the
Mortgage Loans that it represents, to the extent that the Mortgage Loans
underlying a series have a relatively uniform interest rate and other common
characteristics. To the extent that the portion of the purchase price of a
Certificate allocated to a Mortgage Loan (other than to a right to receive any
accrued interest thereon and any undistributed principal payments) is less than
or greater than the portion of the principal balance of the Mortgage Loan
allocable to the Certificate, the interest in the Mortgage Loan allocable to the
Certificate will be deemed to have been acquired at a discount or premium,
respectively.
The treatment of any discount will depend on whether the discount represents
original issue discount or market discount. Under Legislation enacted in 1997,
Section 1272(a)(6) of the Code requires in the case of a pool of Mortgage Loans
with original issue discount in excess of a prescribed DE MINIMIS amount, that a
holder of a Certificate report as interest income in each taxable year its share
of the amount of original issue discount that accrues during that year,
determined under a constant yield method by reference to the initial yield to
maturity of the Mortgage Loan, based on a prepayment assumption, in advance of
receipt of the cash attributable to such income and regardless of the method of
federal income tax accounting employed by that holder. It is unclear when such
prepayment assumption is determined or adjusted. Original issue discount with
respect to a Mortgage Loan could arise for example by virtue of the financing of
points by the originator of the Mortgage Loan, or by virtue of the charging of
points by the originator of the Mortgage Loan in an amount greater than a
statutory DE MINIMIS exception, in circumstances under which the points are not
currently deductible pursuant to applicable Code provisions. However, the OID
Regulations provide that if a holder acquires an obligation at a price that
exceeds its stated redemption
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price, the holder will not include any original issue discount in gross income.
In addition, if a subsequent holder acquires an obligation for an amount that
exceeds its adjusted issue price, the subsequent holder will be entitled to
offset the original issue discount with economic accruals of portions of such
excess. Accordingly, if the Mortgage Loans acquired by a Certificateholder are
purchased at a price that exceeds the adjusted issue price of such Mortgage
Loans, any original issue discount will be reduced or eliminated.
Certificateholders also may be subject to the market discount rules of
Sections 1276-1278 of the Code. A Certificateholder that acquires an interest in
Mortgage Loans with more than a prescribed DE MINIMISamount of "market discount"
(generally, the excess of the principal amount of the Mortgage Loans over the
purchaser's purchase price) will be required under Section 1276 of the Code to
include accrued market discount in income as ordinary income in each month, but
limited to an amount not exceeding the principal payments on the Mortgage Loans
received in that month and, if the Certificates are sold, the gain realized.
Such market discount would accrue, using a prepayment assumption, in a manner to
be provided in Treasury regulations. The relevant legislative history of the
1986 Act indicates that, until such regulations are issued, such market discount
would in general accrue either (i) on the basis of a constant interest rate or
(ii) in the ratio of (a) in the case of Mortgage Loans not originally issued
with original issue discount, stated interest payable in the relevant period to
total stated interest remaining to be paid at the beginning of the period or (b)
in the case of Mortgage Loans originally issued at a discount, original issue
discount in the relevant period to total original issue discount remaining to be
paid.
Section 1277 of the Code provides that the excess of interest paid or
accrued to purchase or carry a loan with market discount over interest received
on such loan is allowed as a current deduction only to the extent such excess is
greater than the market discount that accrued during the taxable year in which
such interest expense was incurred. In general, the deferred portion of any
interest expense will be deductible when such market discount is included in
income, including upon the sale, disposition, or repayment of the loan. A holder
may elect to include market discount in income currently as it accrues, on all
market discount obligations acquired by such holder during the taxable year such
election is made and thereafter, in which case the interest deferral rule
discussed above will not apply.
A Certificateholder who purchases a Certificate at a premium generally will
be deemed to have purchased its interest in the underlying Mortgage Loans at a
premium. A Certificateholder who holds a Certificate as a capital asset may
generally elect under Section 171 of the Code to amortize such premium as an
offset to interest income on the Mortgage Loans (and not as a separate deduction
item) on a constant yield method. The legislative history of the 1986 Act
suggests that the same rules that will apply to the accrual of market discount
(described above), which rules now appear to require the use of a prepayment
assumption, will generally also apply in amortizing premium with respect to
Mortgage Loans originated after September 27, 1985. If a holder makes an
election to amortize premium, such election will apply to all taxable debt
instruments held by such holder at the beginning of the taxable year in which
the election is made, and to all taxable debt instruments acquired thereafter by
such holder, and will be irrevocable without the consent of the Internal Revenue
Service. Purchasers who pay a premium for the Certificates should consult their
tax advisers regarding the election to amortize premium and the method to be
employed. Although the law is somewhat unclear regarding recovery of premium
allocable to Mortgage Loans originated before September 28, 1985, it is possible
that such premium may be recovered in proportion to payments of Mortgage Loan
principal.
Discount or Premium on Stripped Certificates. A Stripped Certificate may
represent a right to receive only a portion of the interest payments on the
Mortgage Loans, a right to receive only principal payments on the Mortgage
Loans, or a right to receive certain payments of both interest and principal.
Certain Stripped Certificated ("Ratio Strip Certificates") may represent a right
to receive differing percentages of both the interest and principal on each
Mortgage Loan. Pursuant to Section 1286 of the Code, the separation of ownership
of the right to receive some or all of the interest payments on an obligation
from ownership of the right to receive some or all of the principal payments
results in the creation of "stripped bonds" with respect to principal payments
and "stripped coupons" with respect to interest payments.
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Section 1286 of the Code applies the original issue discount rules to stripped
bonds and stripped coupons. For purposes of computing original issue discount, a
stripped bond or a stripped coupon is treated as a debt instrument issued on the
date that such stripped interest is purchased with an issue price equal to its
purchase price or, if more than one stripped interest is purchased, the ratable
share of the purchase price allocable to such stripped interest. The Code, the
OID Regulations, and judicial decisions provide no direct guidance as to how the
interest and original issue discount rules are to apply to Stripped
Certificates. Under the method described above for REMIC Regular Interest
Certificates (the "Cash Flow Bond Method"), a prepayment assumption is used and
periodic recalculations are made which take into account with respect to each
accrual period the effect of prepayments during such period. Legislation enacted
in 1997 extends this treatment to instruments such as the Stripped Certificates.
The Cash Flow Bond Method will consequently be used in preparing information
reports as to the income accruing on such Certificates, and it is expected that
original issue discount will be reported on that basis. In applying the
calculation to a class of Certificates, the Trustee will treat all payments to
be received with respect to the Certificates, whether attributable to principal
or interest on the loans, as payments on a single installment obligation, in the
case of a Class of Certificates that has no right, or a nominal right, to
receive principal, and as includable in the stated redemption price at maturity.
In the case of a "stripped bond" which is entitled to a significant amount of
principal, the Trustee intends to take the position that interest payments are
"qualified stated interest." The Internal Revenue Service could, however, assert
that original issue discount must be calculated separately for each Mortgage
Loan underlying a Certificate. In addition, in the case of Ratio Strip or
similar Certificates, the Internal Revenue Service could assert that original
issue discount must be calculated separately for each stripped coupon or
stripped bond underlying a Certificate.
Under certain circumstances, if the Mortgage Loans prepay at a rate faster
than the Prepayment Assumption, the use of the Cash Flow Bond Method may
accelerate a Certificateholder's recognition of income. If, however, the
Mortgage Loans prepay at a rate slower than the prepayment assumption, in some
circumstances the use of this method may decelerate a Certificateholder's
recognition of income.
A Stripped Certificate which either embodies only interest payments on the
underlying loans or (if it embodies some principal payments on the Mortgage
Loans) is issued at a price that exceeds the principal payments (an "Interest
Weighted Certificate"), may be taxed as a contingent payment instrument.
POSSIBLE ALTERNATIVE CHARACTERIZATIONS. The characterizations of the
Stripped Certificates described above are not the only possible interpretations
of the applicable Code provisions. Among other possibilities, the Internal
Revenue Service could contend that (i) in certain Series, each non-Interest
Weighted Certificate is composed of an unstripped undivided ownership interest
in Mortgage Loans and an installment obligation consisting of stripped principal
payments; (ii) the non-Interest Weighted Certificates are subject to the OID
Regulations; (iii) each Interest Weighted Certificate is composed of an
unstripped undivided ownership interest in the Mortgage Loans and an installment
obligation consisting of stripped interest payments; or (iv) there are as many
stripped bonds or stripped coupons as there are scheduled payments of principal
and/or interest on each Mortgage Loan.
Given the variety of alternatives for treatment of the Certificates and the
different federal income tax consequences that result from each alternative,
potential purchasers are urged to consult their own tax advisers regarding the
proper treatment of the Certificates for federal income tax purposes.
CHARACTER AS QUALIFYING MORTGAGE LOANS. In the case of Stripped
Certificates there is no specific legal authority existing regarding whether the
character of the Certificates, for federal income tax purposes, will be the same
as the Mortgage Loans. The IRS could take the position that the Mortgage Loans'
character is not carried over to the Certificates in such circumstances.
Pass-Through Certificates will be, and, although the matter is not free from
doubt, Stripped Certificates should be considered to represent "real estate
assets" within the meaning of Section 856(c)(5)(B) of the Code, and "loans . . .
secured by an interest in real property which is . . . residential real
property" within the meaning of Section 7701(a)(19)(C)(v) of the Code, and
interest income attributable to the Certificates should be considered to
represent "interest on
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obligations secured by mortgages on real property or on interests in real
property" within the meaning of Section 856(c)(3)(B) of the Code, in each case
to the extent the underlying Mortgage Loans qualify for such treatments.
However, Mortgage Loans secured by non-residential real property will not
constitute "loans . . . secured by an interest in real property which is . . .
residential real property" within the meaning of Section 7701(a)(19)(C)(v) of
the Code. In addition, it is possible that various reserve funds underlying the
Certificates may cause a proportionate reduction in the above-described
qualifying status categories of Certificates.
SALE OF CERTIFICATES. As a general rule, if a Certificate is sold, gain or
loss will be recognized by the holder thereof in an amount equal to the
difference between the amount realized on the sale and the Certificateholder's
adjusted tax basis in the Certificate. Such gain or loss will generally be
capital gain or loss if the Certificate is held as a capital asset. In the case
of Pass-Through Certificates, such tax basis will generally equal the holder's
cost of the Certificate increased by any discount income with respect to the
loans represented by such Certificate previously included in income, and
decreased by the amount of any distributions of principal previously received
with respect to the Certificate. Such gain, to the extent not otherwise treated
as ordinary income, will be treated as ordinary income to the extent of any
accrued market discount not previously reported as income. In the case of
Stripped Certificates, the tax basis will generally equal the
Certificateholder's cost for the Certificate, increased by any discount income
with respect to the Certificate previously included in income, and decreased by
the amount of all payments previously received with respect to such Certificate.
MISCELLANEOUS TAX ASPECTS
BACKUP WITHHOLDING. A Bondholder or Certificateholder, other than a Residual
Bondholder or Residual Certificateholder, may, under certain circumstances, be
subject to "backup withholding" at the rate of 31% with respect to distributions
or the proceeds of a sale of certificates to or through brokers that represent
interest or original issue discount on the Securities. This withholding
generally applies if the holder of a Security (i) fails to furnish the Issuer
with its taxpayer identification number ("TIN"); (ii) furnishes the Issuer an
incorrect TIN; (iii) fails to report properly interest, dividends or other
"reportable payments" as defined in the Code; or (iv) under certain
circumstances, fails to provide the Issuer or such holder's securities broker
with a certified statement, signed under penalty of perjury, that the TIN
provided is its correct number and that the holder is not subject to backup
withholding. Backup withholding will not apply, however, with respect to certain
payments made to Bondholders or Certificateholders, including payments to
certain exempt recipients (such as exempt organizations) and to certain
Nonresidents (as defined below). Holders of the Securities should consult their
tax advisers as to their qualification for exemption from backup withholding and
the procedure for obtaining the exemption.
The Issuer will report to the Securityholders and to the Internal Revenue
Service for each calendar year the amount of any "reportable payments" during
such year and the amount of tax withheld, if any, with respect to payments on
the Securities.
TAX TREATMENT OF FOREIGN INVESTORS
Under the Code, unless interest (including OID) paid on a Security (other
than a Residual Interest Security) is considered to be "effectively connected"
with a trade or business conducted in the United States by a nonresident alien
individual, foreign partnership or foreign corporation ("Nonresidents"), such
interest will normally qualify as portfolio interest (except where (i) the
recipient is a holder, directly or by attribution, of 10% or more of the capital
or profits interest in the Issuer or (ii) the recipient is a controlled foreign
corporation to which the Issuer is a related person) and will be exempt from
federal income tax. Upon receipt of appropriate ownership statements, the Issuer
normally will be relieved of the obligation to withhold federal income tax from
such interest payments. These provisions supersede the generally applicable
provisions of the Code that would otherwise require the Issuer to withhold at a
30% rate (unless
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such rate were reduced or eliminated by an applicable tax treaty) on, among
other things, interest and original issue discount paid to Nonresidents.
It is possible, under regulations promulgated under Section 881 of the Code
concerning conduit financing transactions, that the exemption from withholding
taxes described above may not be available to a holder that is a Nonresident if
such holder owns 10% or more of one or more underlying mortgagors or if the
holder is a controlled foreign corporation that is related to one or more
mortgagors.
Interest and original issue discount of Bondholders or Certificateholders
who are foreign persons are not subject to withholding if they are effectively
connected with a United States business conducted by the Bondholder or
Certificateholders. In such case, however, they will generally be subject to the
regular United States income tax.
Payments to holders of Residual Interest Securities who are foreign persons
will generally be treated as interest for purposes of the 30% (or lower treaty
rate) United States withholding tax. Holders should assume that such income does
not qualify for exemption from United States withholding tax as "portfolio
interest." To the extent that a payment represents a portion of REMIC taxable
income that constitutes excess inclusion income, a holder of a Residual Interest
Security will not be entitled to an exemption from or reduction of the 30% (or
lower treaty rate) withholding tax rule. If the payments are subject to United
States withholding tax, they generally will be taken into account for
withholding tax purposes only when paid or distributed (or when the Residual
Interest Security is disposed of). The Treasury has statutory authority,
however, to promulgate regulations which would require such amounts to be taken
into account at an earlier time in order to prevent the avoidance of tax. Under
the REMIC Regulations, if a Residual Interest Security has tax avoidance
potential, a transfer of a Residual Interest Security to a Nonresident will be
disregarded for all Federal tax purposes. A Residual Interest Security has tax
avoidance potential unless, at the time of the transfer the transferor
reasonably expects that the REMIC will distribute to the transferee residual
holder amounts that will equal at least 30% of each excess inclusion, and that
such amounts will be distributed at or after the time at which the excess
inclusion accrues and not later than the close of the calendar year following
the calendar year of accrual. If a Nonresident transfers a Residual Interest
Security to a United States person, and if the transfer has the effect of
allowing the transferor to avoid tax on accrued excess inclusions, then the
transfer is disregarded and the transferor continues to be treated as the owner
of the Residual Interest Security for purposes of the withholding tax provisions
of the Code. See "--Excess Inclusion Income."
STATE AND LOCAL TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "FEDERAL
INCOME TAX CONSIDERATIONS," potential investors should consider the state income
tax consequences of the acquisition, ownership, and disposition of the
Securities. State and local income tax law may differ substantially from the
corresponding federal law, and this discussion does not purport to describe any
aspect of the income tax laws of any state or locality. Therefore, potential
investors should consult their own tax advisors with respect to the various
state and local tax consequences of investment in the Bonds or Certificates. In
particular, potential investors in Residual Interest Securities should consult
their tax advisers regarding the taxation of the Residual Interest Securities in
general and the effect of foreclosure on the Mortgaged Properties on such
taxation.
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ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans ("Plans") subject to
ERISA and persons who have certain specified relationships to such Plans
("Parties in Interest"). ERISA also imposes certain duties on persons who are
fiduciaries of Plans subject to ERISA and prohibits certain transactions between
a Plan and Parties in Interest with respect to such Plans ("Prohibited
Transactions"). Under ERISA, any person who exercises any authority or control
respecting the management or disposition of the assets of a Plan is considered
to be a fiduciary of such Plan (subject to certain exceptions not here
relevant). Similar restrictions also apply to Plans and other retirement
arrangements, such as individual retirement accounts and Keogh plans, that are
subject to Section 4975 of the Code.
The Issuer, the Master Servicer, if any, the Servicer, the Trustee or the
provider of Enhancement, if any, because of their activities or the activities
of their respective affiliates, may be considered to be or may become Parties in
Interest with respect to certain Plans. If the Securities are acquired by a Plan
with respect to which the Issuer, the Master Servicer, if any, the Servicer, the
Trustee or the provider of Enhancement, if any, is a Party in Interest, such
transaction might be considered to violate the Prohibited Transaction rules of
ERISA and the Code unless such transaction were subject to one or more statutory
or administrative exemptions such as: Prohibited Transaction Class Exemption
("PTCE") 75-1, which exempts certain transactions involving employee benefit
plans and certain broker-dealers, reporting dealers and banks; PTCE 90-1, which
exempts certain transactions between insurance company pooled separate accounts
and Parties in Interest; PTCE 91-38, which exempts certain transactions between
bank collective investment funds and Parties in Interest; PTCE 95-60, which
exempts certain transactions between insurance company general accounts and
Parties in Interest; PTCE 84-14, which exempts certain transactions effected on
behalf of a Plan by a "qualified plan asset manager"; PTCE 96-23, which exempts
certain transactions effected on behalf of a Plan by an "in-house asset
manager"; or any other available exemption. Accordingly, prior to making an
investment in the Securities, investing Plans should determine whether the
Issuer is a Party in Interest with respect to such Plan and, if so, whether such
transaction is subject to one or more statutory or administrative exemptions.
Special caution should be exercised before the assets of a Plan (including
assets that may be held in an insurance company's separate or general accounts
where assets in such accounts may be deemed Plan assets for purposes of ERISA)
are used to purchase a Security if the Issuer, the Master Servicer, if any, the
Servicer, the Trustee, the provider of Enhancement, if any, or an affiliate
thereof is a fiduciary with respect to such assets.
The Certificates of a Series will, and the Bonds of a Series could, be
treated as "equity" for purposes of ERISA. Under regulations issued by the
Department of Labor ("DOL") (the "Plan Asset Regulations"), if a Plan makes an
"equity" investment in a corporation, partnership, trust or certain other
entities, the underlying assets and properties of such entity will be deemed for
purposes of ERISA to be assets of the investing Plan unless certain exceptions
set forth in the regulation apply. One such exception applies if the class of
"equity" interests in question is (i) held by 100 or more investors who are
independent of the Issuer and each other, (ii) freely transferable, and (iii)
sold as part of an offering pursuant to (a) an effective registration statement
under the Securities Act of 1933, and then subsequently registered under the
Securities Exchange Act of 1934 or (b) an effective registration statement under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934 ("Publicly Offered
Securities"). In addition, another exception provides that if at all times less
than 25% of the value of all classes of equity interests in the Issuer are held
by "benefit plan investors" (which is defined as including plans subject to
ERISA, individual retirement accounts, certain plans not subject to ERISA, and
entities whose underlying assets include plan assets by reason of plan
investment in such entities), the investing Plan's assets will not include any
of the underlying assets of the Issuer.
If a particular Series is treated as "equity" for purposes of the Plan Asset
Regulations and the underlying assets of the Issuer are treated as assets of a
Plan purchasing Securities of such Series and the Mortgage Assets securing such
Series consists of a single Mortgage Loan or obligations of a single obligor
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or related obligors as specified in the related Prospectus Supplement (e.g.,
affiliates of the Issuer), and Securities of such Series are acquired by a Plan
with respect to which the obligor or related obligors are Parties in Interest,
such transaction would violate the Prohibited Transaction rules of ERISA and the
Code unless such transaction were subject to one or more statutory or
administrative exemptions such as those described above or any other available
exemption. Accordingly, prior to making an investment in Securities of such
Series, a Plan investor should determine whether such obligor or related
obligors are Parties in Interest with respect to such Plan and, if so, whether
such transaction is subject to one or more of the statutory or administrative
exemptions.
If a particular Series is treated as "equity" for purposes of the Plan Asset
Regulations and the underlying assets of the Issuer are treated as assets of a
Plan purchasing Securities of such Series and the Mortgage Assets securing such
Series consists of multiple Mortgage Loans or obligations of multiple unrelated
obligors as specified in the related Prospectus Supplement, an investing Plan
may not be able to determine whether any of the obligors is a Party in Interest
with respect to such Plan. In that event, prior to making an investment in
Securities of such Series, such Plan investor should determine whether one or
more statutory or administrative exemptions is applicable.
Furthermore, in either of the cases above, if the Issuer were deemed to hold
plan assets by reason of a Plan's investment in a Security, the persons
providing services with respect to the assets of the Issuer, including the
Mortgage Loans, may be subject to the fiduciary responsibility provisions of
Title I of ERISA and be subject to the prohibited transactions provisions of
ERISA and Section 4975 of the Code with respect to transactions involving such
assets unless such transactions are subject to a statutory or administrative
exemption.
Even if the underlying assets of the Issuer are treated as assets of a Plan
purchasing Securities of such Series, an additional exemption may also be
available if the Issuer is a trust. The DOL granted to Shearson Lehman Hutton,
Inc. an administrative exemption (the "Exemption") from certain of the
prohibited transaction rules of ERISA with respect to the initial purchase, the
holding and the subsequent resale by Plans of certificates representing
interests in asset-backed pass through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The obligations covered by the Exemption include
obligations such as the Mortgage Assets. The Exemption will apply to the
acquisition, holding and resale of the Securities by a Plan, provided that
certain conditions (certain of which are described below) are met. The
Prospectus Supplement will specify whether the Exemption will apply with respect
to any particular series.
Among the conditions which must be satisfied for the Exemption to apply are
the following:
1. The acquisition of the Securities by a Plan is on terms (including
the price for the Securities) that are at least as favorable to the Plan as
they would be in an arm's-length transaction with an unrelated party;
2. The rights and interests evidenced by the Securities acquired by the
Plan are not subordinated to the rights and interests evidenced by other
certificates of the trust;
3. The Securities acquired by the Plan have received a rating at the
time of such acquisition that is in one of the three highest generic rating
categories from either Standard & Poor's Ratings Services, a Division of the
McGraw Hill Companies, Inc. ("Standard & Poor's"), Moody's Investors
Service, Inc. ("Moody's"), Duff & Phelps Credit Rating Co. ("DCR") or Fitch
Investors Service, L.P. ("Fitch");
4. The sum of all payments made to the underwriter in connection with
the distribution of the Securities represents not more than reasonable
compensation for underwriting the Securities. The sum of all payments made
to and retained by the seller pursuant to the sale of the obligations to the
trust represents not more than the fair market value of such obligations.
The sum of all payments made to and retained by the servicer represents not
more than reasonable compensation for the
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servicer's services under the related servicing agreement and reimbursement
of the servicer's reasonable expenses in connection therewith;
5. The Trustee must not be an affiliate of any other member of the
Restricted Group (as defined below); and
6. The Plan investing in the Securities is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933.
The trust also must meet the following requirements:
(i) the corpus of the trust must consist solely of assets of the
type which have been included in other investment pools;
(ii) certificates in such other investment pools must have been
rated in one of the three highest rating categories of Standard &
Poor's, Moody's, DCR or Fitch for at least one year prior to the
Plan's acquisition of certificates; and
(iii) certificates evidencing interests in such other investment
pools must have been purchased by investors other than Plans for at
least one year prior to any Plan's acquisition of Securities.
Moreover, the Exemption provides relief from certain self-dealing/conflict
of interest prohibited transactions that may occur when the Plan fiduciary
causes a Plan to acquire certificates in a trust in which the fiduciary (or its
affiliate) is an obligor on the receivables held in the trust provided that,
among other requirements: (i) in the case of an acquisition in connection with
the initial issuance of Securities, at least fifty (50) percent of each class of
Securities in which Plans have invested is acquired by persons independent of
the Restricted Group and at least fifty (50) percent of the aggregate interest
in the trust is acquired by persons independent of the Restricted Group; (ii)
such fiduciary (or its affiliate) is an obligor with respect to five (5) percent
or less of the fair market value of the obligations contained in the trust;
(iii) the Plan's investment in Securities does not exceed twenty-five (25)
percent of all of the Securities outstanding after the acquisition; and (iv) no
more than twenty-five (25) percent of the assets of the Plan are invested in
certificates representing an interest in one or more trusts containing assets
sold or serviced by the same entity. The Exemption does not apply to Plans
sponsored by the Issuer, the Underwriter, the Trustee, the Servicer, the Master
Servicer, if any, the Special Servicer, if any, any obligor with respect to
obligations included in a Trust constituting more than five (5) percent of the
aggregate unamortized principal balance of the assets in a Trust, provider of
Enhancement, if any, or any affiliate of such parties (the "Restricted Group").
There can be no assurance that the Securities will not be treated as equity
interests in the Issuer for purposes of the Plan Asset Regulations. Moreover, if
the Securities are treated as equity interests for purposes of ERISA, it should
be assumed, unless the Prospectus Supplement provides otherwise, that none of
the exceptions set forth in the Plan Asset Regulations will apply to the
purchase of Securities offered hereby.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code and the potential consequences to
their specific circumstances, prior to making an investment in the Securities.
Moreover, each Plan fiduciary should determine whether under the general
fiduciary standards of investment procedure and diversification an investment in
the Securities is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio.
A governmental plan as defined in Section 3(32) of ERISA is not subject to
ERISA or Section 4975 of the Code. However, such a governmental plan may be
subject to a federal, state, or local law which is, to a material extent,
similar to the provisions of ERISA or Section 4975 of the Code ("Similar Law").
A
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fiduciary of a governmental plan should make its own determination as to the
need for and the availability of any exemptive relief under Similar Law.
The sale of Securities to a Plan is in no respect a representation by the
Issuer or the Underwriter that this investment meets all relevant legal
requirements with respect to investments by Plans generally or by any particular
Plan, or that this investment is appropriate for Plans generally or for any
particular Plan.
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LEGAL INVESTMENT
The Prospectus Supplement for each Series of Securities will specify which,
if any, of the Classes of Securities offered thereby will constitute "mortgage
related securities" for purposes of the Secondary Mortgage Market Enhancement
Act of 1984, as amended ("SMMEA"). The appropriate characterization of those
Securities not qualifying as "mortgage related securities" ("Non-SMMEA
Securities") under various legal investment restrictions, and thus the ability
of investors subject to these restrictions to purchase such Securities, may be
subject to significant interpretive uncertainties. Accordingly, investors whose
investment authority is subject to legal restrictions should consult their own
legal advisors to determine whether and to what extent the Non-SMMEA Securities
constitute legal investments for them.
Those Classes of Securities that (i) are rated in one of the two highest
rating categories by one or more Rating Agencies and (ii) are part of a Series
representing interests in, or secured by, a Trust Fund consisting of Mortgage
Loans or Private Mortgage-Backed Securities, provided that such Mortgage Loans
(or the Mortgage Loans underlying the Private Mortgage-Backed Securities) are
secured by first liens on Mortgaged Property and were originated by certain
types of originators as specified in SMMEA, will be "mortgage related
securities" for purposes of SMMEA. As "mortgage related securities," such
Classes will constitute legal investments for persons, trusts, corporations,
partnerships, associations, business trusts and business entities (including,
but not limited to, state-chartered savings banks, commercial banks, savings and
loan associations and insurance companies, as well as trustees and state
government employee retirement systems) created pursuant to or existing under
the laws of the United States or of any state (including the District of
Columbia and Puerto Rico) whose authorized investments are subject to state
regulation to the same extent that, under applicable law, obligations issued by
or guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof constitute legal investments for such entities. Pursuant
to SMMEA, a number of states enacted legislation, on or before the October 3,
1991 cutoff for such enactments, limiting to varying extents the ability of
certain entities (in particular, insurance companies) to invest in "mortgage
related securities" secured by liens on residential, or mixed residential and
commercial properties, in most cases by requiring the affected investors to rely
solely upon existing state law, and not SMMEA. Pursuant to Section 347 of the
Riegle Community Development and Regulatory Improvement Act of 1994, which
amended the definition of "mortgage related security" (effective December 31,
1996) to include, in relevant part, Securities satisfying the rating, first lien
and qualified originator requirements for "mortgage related securities," but
representing interests in, or secured by, a Trust Fund consisting, in whole or
in part, of first liens on one or more parcels of real estate upon which are
located one or more commercial structures, states were authorized to enact
legislation, on or before September 23, 2001, specifically referring to Section
347 and prohibiting or restricting the purchase, holding or investment by
state-regulated entities in such types of Securities. Accordingly, the investors
affected by such legislation will be authorized to invest in Securities
qualifying as "mortgage related securities" only to the extent provided in such
legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in mortgage related
securities without limitation as to the percentage of their assets represented
thereby, federal credit unions may invest in such securities, and national banks
may purchase such securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
Section 24 (Seventh), subject in each case to such regulations as the applicable
federal regulatory authority may prescribe. In this connection, the Office of
the Comptroller of the Currency (the "OCC") has amended 12 C.F.R. Part 1 to
authorize national banks to purchase and sell for their own account, without
limitation as to a percentage of the bank's capital and surplus (but subject to
compliance with certain general standards concerning "safety and soundness" and
retention of credit information in 12 C.F.R. "1.5), certain "Type IV
securities," defined in 12 C.F.R. "1.2(1) to include certain "commercial
mortgage-related securities" and "residential mortgage-related securities." As
so defined, "commercial mortgage-related security" and "residential
mortgage-related security" mean, in relevant part, "mortgage-
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related security" within the meaning of SMMEA, PROVIDED THAT, in the case of a
"commercial mortgage-related security," it "represents ownership of a promissory
note or certificate of interest or participation that is directly secured by a
first lien on one or more parcels of real estate upon which one or more
commercial structures are located and that is fully secured by interests in a
pool of loans to NUMEROUS OBLIGORS." In the absence of any rule or
administrative interpretation by the OCC defining the term "numerous obligors,"
no representation is made as to whether any Class of Securities will qualify as
"commercial mortgage-related securities," and thus as "Type IV securities," for
investment by national banks. Federal credit unions should review National
Credit Union Administration ("NCUA") Letter to Credit Unions No. 96, as modified
by Letter to Credit Unions No. 108, which includes guidelines to assist federal
credit unions in making investment decisions for mortgage related securities.
The NCUA has adopted rules, codified as 12 C.F.R. 703.5(f)-(k), which prohibit
federal credit unions from investing in certain mortgage related securities
(including securities such as certain Series or Classes of Securities), except
under limited circumstances. Effective January 1, 1998, the NCUA has amended its
rules governing investments by federal credit unions at 12 C.F.R. Part 703; the
revised rules will permit investments in "mortgage related securities" under
certain limited circumstances, but will prohibit investments in stripped
mortgage related securities, residual interests in mortgage related securities,
and commercial mortgage related securities, unless the credit union has obtained
written approval from the NCUA to participate in the "investment pilot program"
described in 12 C.F.R. 703.140.
All depository institutions considering an investment in the Securities
should review the "Supervisory Policy Statement on Securities Activities" dated
January 28, 1992, as revised April 15, 1994 (the "Policy Statement") of the
Federal Financial Institutions Examination Council. The Policy Statement, which
has been adopted by the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the OCC and the Office of Thrift
Supervision, and by the NCUA (with certain modifications), prohibits depository
institutions from investing in certain "high-risk mortgage securities"
(including securities such as certain Series or Classes of the Securities),
except under limited circumstances, and sets forth certain investment practices
deemed to be unsuitable for regulated institutions.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any Securities,
as certain Series or Classes may be deemed unsuitable investments, or may
otherwise be restricted, under such rules, policies or guidelines (in certain
instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying," and, with regard to any Securities issued in
book-entry form, provisions which may restrict or prohibit investments in
securities which are issued in book-entry form.
Except as to the status of certain Classes of Securities as "mortgage
related securities," no representation is made as to the proper characterization
of the Securities for legal investment purposes, financial institution
regulatory purposes, or other purposes, or as to the ability of particular
investors to purchase Securities under applicable legal investment restrictions.
The uncertainties described above (and any unfavorable future determinations
concerning legal investment or financial institution regulatory characteristics
of the Securities) may adversely affect the liquidity of the Securities.
Investors should consult their own legal advisors in determining whether and
to what extent the Securities constitute legal investments for such investors.
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PLAN OF DISTRIBUTION
The Issuer may sell the Securities offered hereby through Lehman Brothers,
as agent or as underwriter, or through underwriting syndicates represented by
Lehman Brothers (collectively, the "Underwriters") or by one or more other
underwriters, in each case, to be specified in the related Prospectus
Supplement. The Prospectus Supplement relating to a Series will set forth the
terms of the offering of such Series and each Class within such Series,
including the name or names of the Underwriters, the proceeds to and their
intended use by the Issuer, and either the initial public offering price, the
discounts and commissions to the Underwriters and any discounts or concessions
allowed or reallowed to certain dealers, or the method by which the price at
which the Underwriters will sell the Securities will be determined.
The Underwriters will be obligated, subject to certain conditions, to
purchase all of the Securities described in the Prospectus Supplement relating
to a Series if any such Securities are purchased. The Securities may be acquired
by the Underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. If specified
in the related Prospectus Supplement, a Series may be offered in whole or in
part in exchange for the Mortgage Assets that would be pledged to secure such
Series. In such event, the Prospectus Supplement will specify the amount of
compensation to be paid to the Underwriters and expenses, if any, in connection
with such distribution. If so indicated in the Prospectus Supplement, the Issuer
will authorize Underwriters or other persons acting as the Issuer's agents to
solicit offers by certain institutions to purchase the Securities on such terms
and subject to such conditions as so specified.
The Issuer may also sell the Securities offered hereby and by means of the
related Prospectus Supplements from time to time in negotiated transactions or
otherwise, at prices determined at the time of sale. The Issuer may effect such
transactions by selling Securities to or through dealers and such dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Issuer and any purchasers of Securities for whom they may
act as agents.
If any Certificates are offered other than through underwriters pursuant to
such underwriting agreements, the related Prospectus Supplement or Prospectus
Supplements will contain information regarding the terms of such offering and
any agreements to be entered into in connection with such offering.
Purchasers of Certificates, including dealers, may, depending on the facts
and circumstances of such purchases, be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), in
connection with reoffers and sales by them of Certificates. Certificateholders
should consult with their legal advisors in this regard prior to any such
reoffer and sale.
If specified in the Prospectus Supplement relating to a Series of
Certificates, the Depositor, any affiliate thereof or any other person or
persons specified therein may purchase some or all of one or more Classes of
Certificates of such Series from the underwriter or underwriters of such other
person or persons specified in such Prospectus Supplement. The consideration for
such purchase may be cash or Mortgage Assets. Such purchaser may thereafter from
time to time offer and sell, pursuant to this Prospectus and the related
Prospectus Supplement, some or all of such Certificates so purchased, directly,
through one or more underwriters to be designated at the time of the offering of
such Certificates, through dealers acting as agent and/or principal as in such
other manner as may be specified in the related Prospectus Supplement. Such
offering may be restricted in the manner specified in such Prospectus
Supplement. Such transactions may be effected at market prices prevailing at the
time of sale, at negotiated prices or at fixed prices. Any underwriters and
dealers participating in such purchaser's offering of such Certificates may
receive compensation in the form of underwriting discounts or commissions from
such purchaser and such dealers may receive commissions from the investors
purchasing such Certificates for whom they may act as agent (which discounts or
commissions will not exceed those customary in those types of transactions
involved). Any dealer that participates in the distribution of such Certificates
may be deemed to be an
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"underwriter" within the meaning of the Securities Act and any commissions and
discounts received by such dealer and any profit on the resale of such
Certificates by such dealer might be deemed to be underwriting discounts and
commissions under the Securities Act.
The place and time of delivery for the Series in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
LEGAL MATTERS
Certain legal matters in connection with the Securities offered hereby will
be passed upon for the Issuer and for the Underwriters by Skadden, Arps, Slate,
Meagher & Flom, New York, New York, Cadwalader, Wickersham & Taft, New York, New
York, Sidley & Austin, New York, New York or Thacher Proffitt & Wood, New York,
New York.
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GLOSSARY
The following are abbreviated definitions of certain capitalized terms used
in this Prospectus. Unless otherwise provided in the Prospectus Supplement for a
Series, such definitions shall apply to capitalized terms used in such
Prospectus Supplement. The definitions may vary from those in the Indenture or
Trust Agreement, as applicable, and the Indenture or Trust Agreement, as
applicable, generally provides a more complete definition of certain of the
terms. Reference should be made to the Indenture or Trust Agreement, as
applicable, for a more complete definition of such terms.
"Accrual Date" means, with respect to any Series, the date upon which
interest begins accruing on the Securities of the Series, as specified in the
related Prospectus Supplement.
"Accrual Payment Amount" means, with respect to any Payment Date or
Distribution Date for a Series that occurs prior to or on the Accrual
Termination Date, the aggregate amount of interest which has accrued on the
Compound Interest Securities of such Series during the Interest Accrual Period
relating to such Payment Date or Distribution Date and which is not then
required to be paid.
"Accrual Termination Date" means, with respect to a Class of Compound
Interest Securities, the Payment Date or Distribution Date on which all
Securities of the related Series with Stated Maturities or Final Scheduled
Termination Dates earlier than that of such Class of Compound Interest
Securities have been fully paid, or such other date or period as may be
specified in the related Prospectus Supplement.
"Administration Agreement" means, with respect to a Series, an agreement
pursuant to which the Administrator agrees to perform certain ministerial,
administrative, accounting and clerical duties on behalf of the Issuer with
respect to such Series.
"Administration Fee" means the fee specified as such in the Administration
Agreement.
"Advances" means, unless otherwise specified in a Prospectus Supplement,
cash advances with respect to delinquent payments of principal and interest on
any Mortgage Loan made by the Primary Servicer from its own funds or, if so
specified in the related Prospectus Supplement, from excess funds in the
Custodial Account or Servicing Account, but only to the extent that such
advances are, in the good faith business judgment of the Servicer or the Master
Servicer, as the case may be, ultimately recoverable from future payments and
collections on the Mortgage Loans or otherwise.
"Aggregate Asset Value" means, with respect to any Series, the aggregate
amount obtained by adding the Asset Value of each Mortgage Loan or Private
Mortgage-Backed Security or other Mortgage Assets in the Trust Estate for such
Series, plus the Asset Value, as determined in the related Series Supplement, of
any cash remaining in the Collection Account or any other Pledged Fund or
Account subsequent to an initial deposit therein by the Issuer.
"Aggregate Outstanding Principal" means, with respect to any Series or Class
thereof, the principal amount of all Securities of such Series or Class
outstanding at the date of determination, including, in respect of any Class of
Compound Interest Securities of such Series (or other Class of Securities on
which interest accrues and is added to the outstanding principal amount
thereof), the Compound Value (or accreted value) of such Securities through the
Payment Date or Distribution Date immediately preceding the date of
determination.
"Appraised Value" means, unless otherwise specified in a Prospectus
Supplement, the lesser of the appraised value determined in an appraisal
obtained at origination or the sales price of a Mortgaged Property.
"ARM," "ARM Loan," or "Adjustable Rate Mortgage Loan" means a Mortgage which
provides for adjustment from time to time to the Mortgage Rate in accordance
with an approved index.
"Asset Value" means, unless specified otherwise in the related Prospectus
Supplement, with respect to each Private Mortgage-Backed Security or Mortgage
Loan or other Mortgage Assets included in the Trust Estate or Trust Fund for a
Series, its Scheduled Principal Balance. In addition, the related Series
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Supplement shall set forth, for purposes of calculating the Asset Value of
Mortgage Assets, the dates on which the scheduled principal and interest
payments with respect to such Mortgage Assets are assumed to be deposited in the
Collection Account. The Asset Value of any cash deposited in any Pledged Fund or
Account shall be as set forth in the related Series Supplement.
"Assumed Deposit Date" means the date specified therefor in the Series
Supplement for a Series, upon which distributions on the Primary Assets are
assumed to be deposited in the Collection Account for purposes of calculating
Reinvestment Income thereon.
"Assumed Reinvestment Rate" means, with respect to a Series, the per annum
rate or rates specified in the related Prospectus Supplement or the related
Guaranteed Investment Contract for a particular period or periods as the
"Assumed Reinvestment Rate" for funds held in Pledged Funds and Accounts for the
Series.
"BIF" means Bank Insurance Fund.
"Bondholder" means the Person in whose name a Bond is registered in the Bond
Register.
"Bond Interest Rate" means the interest rate on the outstanding principal
amount of a Bond payable on the applicable Payment Date for such Bond, as
specified in the related Prospectus Supplement.
"Bond Register" means the register maintained pursuant to the Trust
Indenture for a Series, providing for the registration of the Bonds of a Series
and the transfers and exchanges thereof.
"Bonds" means Collateralized Mortgage Obligations sold by the Issuer
pursuant to this Prospectus and a related Prospectus Supplement.
"Business Day" means, with respect to any Series that does not include any
Class of Variable Interest Securities, any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in New York, New York, or in
the cities in which the Corporate Trust Office or, if applicable, the offices of
the Servicer or the Special Servicer, are then located, are authorized or
obligated by law or executive order to be closed, and with respect to any Series
that includes any Class of Variable Interest Securities, a day that is not a
Saturday or Sunday, and that is not a legal holiday nor a day on which banking
institutions are authorized or obligated by law, regulation or executive order
to close in either London or New York City or in the city in which the Corporate
Trust Office is then located.
"Cash Liquidation" means as to any defaulted Mortgage Loan other than a
Mortgage Loan with respect to which the related Mortgaged Property became REO
Property, the recovery of all Insurance Proceeds, Liquidation Proceeds and other
payments or recoveries that the Master Servicer or Servicer, as applicable,
expects to be finally recoverable.
"CERCLA" means the federal Comprehensive Environmental Response,
Compensation, and Liability Act of 1980.
"Certificateholder" means the Person in whose name a Certificate is
registered in the Certificate Register.
"Certificate Interest Rate" means the per annum interest rate on the
outstanding principal amount of a Certificate payable on the applicable
Distribution Date for such Certificate, as specified in the related Prospectus
Supplement.
"Certificate Register" means the register maintained pursuant to the Trust
Agreement for a Series, providing for the registration of the Certificates of a
Series and the transfers and exchanges thereof.
"Certificates" means the Mortgage-Backed Certificates sold by the Issuer
pursuant to this Prospectus and a related Prospectus Supplement.
"Class" means a class of Securities of a Series.
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"Closing Date" means, with respect to a Series, the date specified in the
related Series Supplement as the date on which Securities of such Series are
first issued.
"Code" means the Internal Revenue Code of 1986, as amended, and regulations
promulgated thereunder.
"Collection Account" means, with respect to a Series, the account designated
as such and created pursuant to the Trust Indenture or Trust Agreement, as
applicable.
"Commercial Property" means any property securing a Mortgage Loan that used
for commercial purposes.
"Commission" means the Securities and Exchange Commission.
"Company" means Structured Asset Securities Corporation.
"Compound Interest Security" means any Security of a Series on which
interest accrues and is added to the principal of such Security periodically,
but with respect to which no interest or principal shall be payable except
during the period or periods specified in the related Prospectus Supplement.
"Compound Value" means, with respect to a Class of Compound Interest
Securities, as of any determination date, the original principal amount of such
Class, plus all accrued and unpaid interest, if any, previously added to the
principal thereof and reduced by any payments of principal previously made on
such Class of Compound Interest Securities and by any losses allocated to such
Class.
"Condemnation Proceeds" means any awards resulting from the full or partial
condemnation or any eminent domain proceeding or any conveyance in lieu or in
anticipation thereof with respect to a Mortgaged Property by or to any
governmental or quasi-governmental authority other than amounts to be applied to
the restoration, preservation or repair of such Mortgaged Property or released
to the related Mortgagor in accordance with the terms of the Mortgage Loan.
"Corporate Trust Office" means the corporate trust office of the Trustee.
"Covered Trust" means a Trust Estate or Trust Fund covered by a form of
credit support.
"CPR" means the Constant Prepayment Rate prepayment model.
"Custodial Account" means an account established by a Master Servicer, a
Servicer, or a Special Servicer in the name of the Trustee for the deposit on a
daily basis of all Mortgage Loan related receipts received by it subsequent to
the Cut-Off Date.
"Custodian" means any bank, savings and loan association, trust company or
other entity appointed to hold documentation with respect to any Mortgage Loans.
"Cut-Off Date" means, with respect to a Series, the date specified in the
related Series Supplement on which, as of the close of business on such date,
the Mortgage Loans securing or included in such Series are sold to a Trust or
subject to the lien of the Indenture.
"Deferred Interest" means the excess resulting when the amount of interest
required to be paid by a Mortgagor on a Mortgage Loan on any Due Date for such
Mortgage Loan is less than the amount of interest accrued on the Scheduled
Principal Balance thereof, to the extent such excess is added to the Scheduled
Principal Balance of such Mortgage Loan.
"Deferred Interest Securities" means Bonds or Certificates on which interest
accrued during an Interest Accrual Period may be added to the principal amount
of such Bonds or Certificates rather than being paid in cash on the related
Distribution Date.
"Definitive Securities" means the Bonds or the Certificates for a Series
when and if issued in definitive form to the Securities Owners of such Series or
their nominees.
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"Deleted Mortgage Loan" means a Mortgage Loan removed from the Trust Estate
or Trust Fund in order to substitute a Substitute Mortgage Loan.
"Delivery Date" means with respect to a Series, the date specified in the
related Prospectus Supplement as the date on which the Securities of such Series
are to be delivered to the original purchasers thereof.
"Depositor" means the Company (i) when acting in such capacity under a
Deposit Trust Agreement to deposit Primary Assets into an Owner Trust relating
to a Series of Bonds, or (ii) when acting in such capacity under a Trust
Agreement to deposit Primary Assets into a Trust Fund relating to a Series of
Certificates.
"Deposit Trust Agreement" means a deposit trust agreement between the
Company and an Owner Trustee pursuant to which an Owner Trust is created and
Primary Assets are deposited therein.
"Designated Interest Accrual Date" means, as specified in the related
Prospectus Supplement, (a) the day preceding a Redemption Date or Special
Redemption Date as the date through which accrued interest is paid upon
redemption or special redemption, or (b) the date through which accrued interest
is paid upon the occurrence of an Event of Default.
"Determination Date" means the date specified in the related Prospectus
Supplement.
"Disqualified Organization" means the United States, any State or political
subdivision thereof, any possession of the United States, any foreign
government, any international organization, or any agency or instrumentality of
any of the foregoing, a rural electric or telephone cooperative described in
section 1381(a)(2)(C) of the Code, or any entity exempt from the tax imposed by
sections 1-1399 of the Code, if such entity is not subject to tax on its
unrelated business income.
"Distribution Date" means the date on which distributions of principal of
and interest on Certificates of a Series will be made.
"DOL" means Department of Labor.
"Due Date" means each date on which a payment is due and payable on any
Mortgage Assets.
"Due Period" means, unless other specified in the related Prospectus
Supplement, for each Payment Date or Distribution Date, as applicable, the
period beginning on the second day of the month preceding the month in which
such Payment Date or Distribution Date, as applicable, occurs and ending on the
first day of the month in which such Payment Date or Distribution Date, as
applicable, occurs.
"Eligible Investments" means any one or more of the obligations or
securities described herein under "SECURITY FOR THE BONDS AND
CERTIFICATES--Investment of Funds."
"Enhancement" means the Enhancement for a Series, if any, specified in the
related Prospectus Supplement.
"Enhancement Agreement" means the agreement or instrument pursuant to which
any Enhancement is issued or the terms of any Enhancement are set forth.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plans" means qualified employee benefit plans established under ERISA
or the Code.
"Escrow Account" means an escrow account established and maintained by the
Primary Servicer in which payments by Mortgagors to pay taxes, assessments,
mortgage and hazard insurance premiums and other comparable items will be
deposited.
"Event of Default" unless otherwise specified in the Prospectus Supplement
shall have the meaning set forth herein under "THE INDENTURE AND TRUST
AGREEMENT--Events of Default."
"Excess Cash Flow" shall have the meaning set forth in the related
Prospectus Supplement.
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"Exchange Act" means the Securities Exchange Act of 1934.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHA" means the Federal Housing Administration, a division of HUD. "FHA
Loan" means a fixed-rate mortgage loan insured by the FHA. "FHLMC" means the
Federal Home Loan Mortgage Corporation.
"FNMA" means the Federal National Mortgage Association.
"Final Scheduled Distribution Date" means the Distribution Date on which
principal of and interest on a Series of Certificates is scheduled to be paid in
full.
"First Mandatory Principal Distribution Date" means the date specified in
the related Prospectus Supplement as the Distribution Date on which the Issuer
must begin paying installments of principal of the Certificates of the related
Series or Class if the Issuer has not already begun making such distributions.
"First Mandatory Principal Payment Date" means the date specified in the
related Prospectus Supplement as the Payment Date on which the Issuer must begin
paying installments of principal of the Bonds of the related Series or Class if
the Issuer has not already begun making such payments.
"First PAC Paydown Date" means the date on which the initial PAC Principal
Payment is applied to the PAC Bonds, as set forth in the related Prospectus
Supplement.
"Garn-St. Germain Act" means the Garn-St. Germain Depository Institutions
Act of 1982.
"Grant" means to mortgage, pledge, bargain, sell, warrant, alienate, remise,
convey, assign, transfer, create and grant a lien upon and a security interest
in and right of setoff against, deposit, set over and confirm.
"Guaranteed Investment Contract" means a guaranteed investment contract
providing for the investment of all distributions on the Mortgage Assets
guaranteeing a minimum or a fixed rate of return on the investment of moneys
deposited therein.
"Guarantor" means a guarantor acceptable to the Rating Agencies rating the
Securities.
"Highest Bond Interest Rate" means, unless specified otherwise in the
related Prospectus Supplement, with respect to any Series of Bonds, the highest
Bond Interest Rate borne by outstanding Bonds of the Series.
"Highest Certificate Interest Rate" means, unless otherwise specified in the
related Prospectus Supplement, with respect to any Series of Certificates, the
highest Certificate Interest Rate borne by outstanding Certificates of a Series.
"Holder" means a Bondholder or Certificateholder, as applicable.
"Housing Act" means the National Housing Act of 1934, as amended.
"HUD" means the United States Department of Housing and Urban Development.
"Indenture" means, with respect to any Series of Bonds, collectively the
Trust Indenture and any related Series Supplement.
"Individual Investor Bonds" means each of the Bonds of a Class identified as
such in the related Prospectus Supplement.
"Individual Investor Certificates" means each of the Certificates of a Class
identified as such in the related Prospectus Supplement.
"Insurance Policies" means hazard insurance and other insurance policies
required to be maintained with respect to Mortgage Loans.
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"Insurance Proceeds" means amounts received by the Trustee from the Master
Servicer or a Servicer in connection with sums paid or payable under any
insurance policies, to the extent not applied to the restoration or repair of
the Mortgaged Property.
"Interest Accrual Period" means the period specified in the related
Prospectus Supplement for a Series, during which interest accrues on Securities
of the related Series or Class with respect to any Payment Date, Distribution
Date, Redemption Date, or Special Redemption Date.
"Interest Only Securities" means a Security entitled to receive payments of
interest only based upon the Notional Amount of the Security.
"Interest Weighted Securities" means, with respect to Certificates issued by
a grantor Trust, Certificates that embody only interest payments on the
underlying Mortgage Loans or which consist in whole or in part of stripped
coupons or, in the case of a regular interest in a REMIC, which qualify as such
pursuant to Section 860G(a)(1)(B)(ii) of the Code.
"IRS" means the Internal Revenue Service.
"Issuer" means the Company Owner Trust, or a separate trust established by
the Company as issuer of a Series of Securities.
"L/C Bank" means the issuer of the letter of credit.
"LCPI" means Lehman Commercial Paper Inc.
"Lehman Brothers" means Lehman Brothers Inc.
"Liquidation Proceeds" means amounts (other than Insurance Proceeds)
received and retained in connection with liquidation of defaulted Mortgage Loans
whether through foreclosure or otherwise, net of related liquidation expenses
and certain other expenses.
"Loan-to-Value Ratio" means, as of any date of determination, the ratio of
the then outstanding principal amount to the lesser of the appraised value and
the purchase price of the Mortgaged Property at the time of origination.
"Master Servicer" means, with respect to a Series secured by Mortgage Loans
or Private Mortgage-Backed Securities, the Person, if any, designated in the
related Prospectus Supplement to manage and supervise the administration and
servicing by the Servicers of the Mortgage Loans comprising Mortgage Assets or
Underlying Collateral for that Series, or the successors or assigns of such
Person.
"Master Servicing Agreement" means the Master Servicing Agreement between
the Issuer and the Master Servicer, if any, specified in the related Prospectus
Supplement.
"Maximum Variable Interest Rate" means the interest rate cap on the Bond
Interest Rate or Certificate Interest Rate for Variable Interest Securities.
"Minimum Variable Interest Rate" means the interest rate floor on the Bond
Interest Rate or Certificate Interest Rate for Variable Interest Securities.
"Mortgage" means a mortgage, deed of trust or other security instrument
evidencing the lien on the Mortgaged Property.
"Mortgage Assets" means the Mortgage Loans, including participation
interests therein, REO Property and Private Mortgage-Backed Securities which are
Granted to the Trustee as security for a Series of Bonds or deposited into the
Trust Fund in respect of a Series of Certificates; an item of Mortgage Assets
refers to a specific Mortgage Loan, REO Property or Private Mortgage-Backed
Security.
"Mortgaged Properties" means the real properties on which liens are created
pursuant to Mortgages for purposes of securing the Mortgage Loans.
"Mortgage Loan Group" means groups of Mortgage Assets.
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"Mortgage Loan" means a mortgage loan or participation interest therein that
is owned by the Issuer and constitutes a part of the Mortgage Assets for a
Series, or that is Underlying Collateral for a Private Mortgage-Backed Security
that constitutes a part of the Mortgage Assets for a Series.
"Mortgage Note" means the note or other evidence of indebtedness of a
Mortgagor with respect to a Mortgage Loan.
"Mortgage Pool" means, with respect to a Series, the pool of Mortgage Loans.
"Mortgage Rate" means, with respect to each Mortgage Loan, the annual
interest rate required to be paid by the Mortgagor under the terms of the
related Mortgage Note.
"Mortgagor" means the Person indebted under the Mortgage Note relating to a
Mortgage Loan.
"Multifamily Property" means any property securing a Mortgage Loan
consisting of multifamily residential rental property or cooperatively owned
multifamily property consisting of five or more dwelling units.
"New York Presenting Agent" means the Issuer's agent in the State of New
York.
"Nonresidents" means a nonresident alien individual, foreign partnership or
foreign corporation.
"OID" means "original issue discount" within the meaning of section 1273 of
the Code.
"OTS" means the Office of the Thrift Supervision.
"Owner Trust" means the trust fund established by the Company pursuant to a
Deposit Trust Agreement to hold Primary Assets and issue a Series of Bonds.
"Owner Trustee" means the bank or trust company named in the Prospectus
Supplement related to a Series of Bonds, not in its individual capacity but
solely as trustee pursuant to a Deposit Trust Agreement, and its successors and
assigns.
"PAC" means Planned Amortization Class Securities.
"PAC Amount" means the scheduled amounts of principal payments to be applied
on each Payment Date or Distribution Date to the PAC Securities, as set forth in
the related Prospectus Supplement.
"PAC Security" or "Planned Amortization Class Security" means a Security on
which the Principal Amortization Amount in an amount equal to the PAC Principal
Payment or PAC Principal Distribution will be applied to such Securities
commencing on the First PAC Paydown Date, and each Payment Date or Distribution
Dates thereafter.
"PAC Paydown Date" means the date on which each PAC Amount is applied to the
PAC Securities as set forth in the related Prospectus Supplement.
"PAC Principal Payment" means, with respect to a particular Payment Date,
the scheduled PAC Amount, if any, for such Payment Date less any principal
payments made on the PAC Securities due to a special redemption subsequent to
the preceding Payment Date.
"Participating Securities" means a Security entitled to receive payments of
principal and interest and an additional return on investment as described in
the related Prospectus Supplement.
"Participation Agreement" means the agreement through which participation
interests in a Series will be acquired.
"Pass-Through Certificates" means, in respect of Certificates issued by a
grantor trust, Certificates in which there is no separation of the principal and
interest payments on the underlying Mortgage Loans.
"Paying Agent" means the Trustee or any other Person that meets the
eligibility standards for the Paying Agent specified in the Indenture or Trust
Agreement, as applicable and is authorized and appointed pursuant to the
Indenture or Trust Agreement, as applicable by the Issuer to pay the principal
of or interest on any Securities on behalf of the Issuer.
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"Payment Date" means the date on which payments of principal of and interest
on the Bonds will be made.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization, or government or any agency or political
subdivision thereof.
"Pledged Fund or Account" means any fund or account, including, without
limitation, the Collection Account or any Reserve Fund established with respect
to, and Granted as security for, a Series.
"PMBS Agreement" means the pooling and servicing agreement, indenture or
similar agreement pursuant to which Private Mortgage-Backed Securities have been
issued.
"PMBS Issuer" means the issuer of the Private Mortgage-Backed Securities.
"PMBS Trustee" means the trustee of the Private Mortgage-Backed Securities.
"Policy Statement" means the supervisory policy statement adopted by the
Federal Financial Institution Examination Council.
"Prepayment Assumption" means the anticipated rate of prepayments assumed in
pricing the Securities.
"Prepayment Period" means, if specified in any Prospectus Supplement with
respect to any Series, the calendar month preceding the month in which the
related Payment Date occurs.
"Primary Assets" means that portion of the Trust Estate pledged to secure a
Series of Bonds, or comprising the Trust Fund relating to a Series of
Certificates.
"Primary Servicer" means the entity which has primary liability for
servicing Mortgage Loans directly.
"Principal Balance" means, unless otherwise specified in a Prospectus
Supplement, with respect to any Mortgage Loan or related REO Property, for any
Due Date and the Due Period with respect thereto, the principal balance of such
Mortgage Loan (or, in the case of REO Property, of the related Mortgage Loan on
the last date on which a payment was made thereon) outstanding as of the Cut-Off
Date, after application of principal payments due on or before the Cut-Off Date,
whether or not received, plus all amounts of Deferred Interest accrued on such
Mortgage Loan to the Due Date in the Due Period immediately preceding the date
of determination minus the sum of (a) the principal portion of the Scheduled
Payment due on or prior to such Due Date, but only if received from or on behalf
of the Mortgagor, (b) all Principal Prepayments, and all Insurance Proceeds,
Condemnation Proceeds, Liquidation Proceeds and other amounts applied as
recoveries of principal to the extent identified and applied by the Master
Servicer, Special Servicer or Servicer, as applicable, as recoveries of
principal through the close of the related Prepayment Period for the Master
Servicer or Servicer, as applicable, and (c) any Realized Loss on such Mortgage
Loan to the extent treated as a principal loss and which is realized during such
Prepayment Period.
"Principal Determination Date" means the day specified in the related
Prospectus Supplement.
"Principal Payment Amount" means, with respect to any Payment Date or
Distribution Date related to a particular Series, the amount that is specified
in the related Prospectus Supplement.
"Principal Payment Dates" means, with respect to a Class, the dates
specified in the related Prospectus Supplement on which principal of the
Securities of such Class is to be paid.
"Principal Only Securities" means a Security entitled to receive payments of
principal only.
"Principal Prepayment" means, with respect to any Private Mortgage-Backed
Security or Mortgage Loan, any payment of principal on such Private
Mortgage-Backed Security or Mortgage Loan in excess of the Scheduled Payment,
resulting from prepayment, partial prepayment, (other than Liquidation Proceeds,
Condemnation Proceeds or Insurance Proceeds) with respect to the Mortgage Loan
or Mortgage Loans
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underlying such Private Mortgage-Backed Security but not including any Scheduled
Payment received prior to the Due Period in which it was scheduled to be paid.
"Private Mortgage-Backed Security" means a mortgage participation or other
interest, pass-through certificate or collateralized mortgage obligation.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"PTE" means Prohibited Transactions Exemption.
"Rating Agency" means a nationally recognized statistical rating agency.
"Realized Losses" means, unless otherwise specified in a Prospectus
Supplement, with respect to each Mortgage Loan or REO Property, as the case may
be, as to which a Cash Liquidation or REO Disposition has occurred, an amount
equal to (i) the Principal Balance of the Mortgage Loan as of the date of Cash
Liquidation or REO Disposition, plus (ii) interest at the applicable Mortgage
Rate, from the date as to which interest was last paid up to the Due Date in the
period in which such Cash Liquidation or REO Disposition has occurred on the
Principal Balance of such Mortgage Loan outstanding during each Due Period that
accrued interest was not paid, minus (iii) Liquidation Proceeds received during
the month in which such Cash Liquidation or REO Disposition occurred, net of
related expenses, including but not limited to, amounts that are payable to a
Master Servicer, Servicer, or Special Servicer, as applicable, with respect to
such Mortgage Loan and (iv) any other amounts applied as a recovery of principal
or interest on the Mortgage Loan.
"Redemption Date" means, with respect to any Series, the Payment Date
specified by the Issuer for the redemption of Bonds of such Series pursuant to
the Indenture.
"Redemption Price" means, with respect to any Bond of a Series or Class to
be redeemed, an amount equal to the percentage specified in the related
Prospectus Supplement of the principal amount (or of the Compound Value of any
Compound Interest Security) of such Security so redeemed, together with accrued
and unpaid interest thereon at the applicable Bond Interest Rate to the
Designated Interest Accrual Date for such Series.
"Regular Bondholder" means a Holder of a Regular Interest Bond.
"Regular Certificateholder" means a Holder of a Regular Interest
Certificate.
"Regular Interest Bonds" means Classes of Bonds constituting regular
interests in a REMIC.
"Regular Interest Certificates" means Classes of Certificates constituting
regular interests in a REMIC.
"Regular Interest Securities" means Regular Interest Bonds, Regular Interest
Certificates or Uncertificated Regular Interests, as applicable.
"Reinvestment Income" means any interest or other earnings on Pledged Funds
or Accounts that are part of the Primary Assets for a Series.
"REMIC Provisions" means the provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of the Code, and related provisions, and regulations and
rulings promulgated thereunder.
"REMIC Regulations" means final Treasury regulations under Sections 860A
through 860G of the Code or related provisions.
"REO Disposition" means the receipt by the Master Servicer, Servicer, or
Special Servicer, as applicable, of Liquidation Proceeds, Insurance Proceeds and
other payments and recoveries (including proceeds of a final sale) from the sale
or other disposition of the REO Property.
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"REO Property" means Mortgaged Properties the beneficial interest in which
has been acquired by a Trust Fund or by a Trustee on behalf of Bondholders by
foreclosure, by deed-in-lieu of foreclosure or otherwise.
"Reserve Fund" means, with respect to a Series, any reserve fund described
in the applicable Prospectus Supplement, including a Subordination Reserve Fund.
"Reserve Funds" means, collectively, more than one reserve fund.
"Residual Bondholder" means the Holder of a Residual Interest Bond.
"Residual Certificateholder" means the Holder of a Residual Interest
Certificate.
"Residual Interest Bonds" means Classes of Bonds constituting the residual
interest in a REMIC.
"Residual Interest Certificates" means Classes of Certificates constituting
residual interests in a REMIC.
"Residual Interest Securities" means Residual Interest Bonds or Residual
Interest Certificates, as applicable.
"SAIF" means Savings Association Insurance Fund.
"Scheduled Payments" means the scheduled payments of principal and interest
to be made by the Mortgagor on a Mortgage Loan in accordance with the terms of
the related Mortgage Note, as modified by any permitted modification of a
Mortgage Note.
"Scheduled Principal Balance" means the principal balance of a Mortgage Loan
outstanding as of the Cut-Off Date, after application of principal payments due
on or before the Cut-Off Date, whether or not received, plus all amounts of
Deferred Interest accrued on such Mortgage Loan to the Due Date in the Due
Period immediately preceding the date of determination, minus the sum of (a) the
principal portion of all Scheduled Payments due on or prior to such Due Date,
irrespective of any delinquency in payment by the Mortgagor, (b) all Principal
Prepayments and all Insurance Proceeds, Condemnation Proceeds, Liquidation
Proceeds and other amounts applied as recoveries of principal to the extent
identified and applied by the Master Servicer, Special Servicer, or Servicer, as
applicable, as recoveries of principal through the close of the related
Prepayment Period, and (c) any Realized Loss on such Mortgage Loan to the extent
treated as a principal loss and that is realized during such Prepayment Period.
"Securities" means Bonds of Certificates.
"Securities Owners" means the owners of the beneficial interests in a Series
of Bonds or Certificates.
"Senior Securities" means a Class of Securities which are senior in right
and priority to the extent described in the related Prospectus Supplement to
payment of principal and interest to certain other Classes of Securities of such
Series.
"Series" means a separate series of Bonds sold pursuant to this Prospectus
and the related Prospectus Supplement.
"Series Supplement" means the supplemental indenture to or terms indenture
incorporating by reference the Trust Indenture or Trust Agreement, as
applicable, between the Issuer of a Series of Securities and the Trustee
relating to such Series of Securities.
"Servicer" means, for any Mortgage Loan, the Person approved by the Issuer
and by the Master Servicer, if any, as servicer of such Mortgage Loan, which
Person shall also be a FNMA or FHLMC-approved seller and servicer.
"Servicer Remittance Date" means with respect to each Mortgage Loan, the
date on which the Servicer shall remit all funds held in the Servicing Account
together with any Advances made by such Servicer for deposit to the Collection
Account.
126
<PAGE>
"Servicing Account" means an account established by a Servicer which
complies with the standards set forth herein for a Custodial Account.
"Servicing Agreements" means the Master Servicing Agreement, Servicing
Agreement and Special Servicing Agreement, if any.
"Servicing Fee" means for any Series, the aggregate fees paid to the
Trustee, Master Servicer or other similar fees.
"SMMEA" means the Secondary Mortgage Market Enhancement Act of 1984, as
amended.
"SPA" means the Standard Prepayment Assumption prepayment model.
"Special Redemption Date" means, with respect to a Series, the date each
month (other than any month in which a Payment Date occurs) on which Bonds of
that Series may be redeemed pursuant to the Trust Indenture or the related
Series Supplement; such date shall be the same day of the month as the day on
which the Payment Date for the Bonds of that Series occurs.
"Special Servicer" means a special servicer identified in the related
Prospectus Supplement appointed to perform the activities set forth in the
related Prospectus Supplement.
"Start Up Day" means the "startup day" of the REMIC as defined in section
860G(a)(9) of the Code.
"Stated Maturity" means the date specified in the related Prospectus
Supplement no later than which all the Bonds of such Class will be fully paid,
calculated on the basis of the assumptions set forth in the related Prospectus
Supplement.
"Stripped Certificates" means, in respect of Certificates issued by a
grantor trust, Certificates in which there is considered to be a separate
ownership of the payments of principal and interest on the underlying Mortgage
Loans. "Subordinate Securities" means a Class of Securities which are
subordinate in right and priority to the extent described in the related
Prospectus Supplement to payment of principal and interest to Senior Classes of
Securities of such Series.
"Substitute Mortgage Asset" means any Mortgage Asset that is Granted to the
Trustee as security for a Series of Bonds or deposited into the Trust Fund in
respect of a Series of Certificates in lieu of any Mortgage Assets then pledged
as security.
"Substitute Mortgage Loan" means a Mortgage Loan substituted for one or more
Deleted Mortgage Loans in the Trust Estate or Trust Fund.
"TIN" means Taxpayer Identification Number.
"Trust Agreement" means the trust agreement between the Company and a
Trustee pursuant to which a Series of Certificates is issued.
"Trust Estate" means, with respect to any Series of Bonds, all money,
instruments, securities and other property, including all proceeds thereof,
which are subject or intended to be subject to the lien of the Indenture for the
benefit of the Series as of any particular time (including, without limitation,
all property and interests Granted to the Trustee pursuant to the Series
Supplement for such Series).
"Trust Fund" means the trust fund established pursuant to a Trust Agreement
into which Primary Assets are deposited for the purpose of issuing a Series of
Certificates.
"Trust Indenture" means the trust indenture between the Company and the
Trustee or a Trust and the Trustee pursuant to which a Series of Bonds are
issued.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 and
rules and regulations promulgated by the Commission with respect thereto.
127
<PAGE>
"Trustee" means LaSalle National Bank or another bank or trust company named
as trustee in the Prospectus Supplement for a series of Securities and, in the
case of a series of Bonds, qualified under the TIA.
"Unavailable Amount" means, with respect to a Series, the amount, if any,
remaining in the related Collection Account on a related Payment Date that
represents (1) payments of scheduled payments of principal of and interest on
the Mortgage Assets due subsequent to the Principal Determination Date
immediately preceding the related Payment Date or Distribution Date, (2) the
amount of all related prepayments received or deemed received subsequent to the
Principal Determination Date immediately preceding such Payment Date or
Distribution Date, or (3) any investment income that has accrued subsequent to
the Principal Determination Date immediately preceding such Payment Date or
Distribution Date.
"Uncertificated Regular Interest" means a regular interest in a REMIC that
is not represented by a physical Certificate.
"Undelivered Mortgage Assets" means Mortgage Assets that are not pledged and
delivered to the Trustee on the related Closing Date.
"Underlying Collateral" means, with respect to a Private Mortgage-Backed
Security, the underlying Mortgage Loans.
"Underwriters" means, collectively, Lehman Brothers, as agent or as
underwriter, or underwriting syndicates represented by Lehman Brothers.
"VRDI Security" means a Regular Interest Security that qualifies as a
"variable rate debt instrument" under Section 1.7275-5 of the Treasury
Regulations.
"Variable Interest Distribution Date" means, with respect to a Class of
Variable Interest Securities issued as part of a Series of Certificates, the
date specified in the related Prospectus Supplement, it being expressly provided
herein that Variable Interest Distribution Dates may be monthly, quarterly,
semi-annual or annual.
"Variable Interest Payment Date" means, with respect to any Class of
Variable Interest Securities issued as part of a Series of Bonds, the date
specified in the related Prospectus Supplement, it being expressly provided
herein that Variable Interest Payment Dates may be monthly, quarterly,
semi-annual or annual.
"Variable Interest Period" means, with respect to any Class of Variable
Interest Securities, the period commencing immediately subsequent to the
preceding Variable Interest Period (or, in the case of the Variable Interest
Period applicable to the first Variable Interest Payment Date with respect to
such Class of Variable Interest Securities, commencing on the Accrual Date for
such Class) and ending on the date specified in the related Prospectus
Supplement, during which such Class of Variable Interest Securities shall accrue
interest, payable on the immediately succeeding Variable Interest Payment Date
or Variable Interest Distribution Date, at the Bond Interest Rate or Certificate
Interest Rate determined on the immediately preceding Determination Date.
"Variable Interest Rate" means the interest rate in respect of a Variable
Interest Security.
"Variable Interest Security" means a Security on which interest accrues at a
Bond Interest Rate or Certificate Interest Rate that is adjusted, based upon a
predetermined index, at fixed periodic intervals, all as set forth in the
related Prospectus Supplement.
"Weighted Average Securities" means Regular Interest Securities that bear
interest at a rate based on a weighted average of the interest rates on some or
all of the Mortgage Loans of the related trust.
"Zero Coupon Bonds" means a Security entitled to receive payments or
distributions of Principal only. "1986 Act" means the Tax Reform Act of 1986, as
amended.
128
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PROSPECTUS SUPPLEMENT
Important Notice about the Information Contained
in this Prospectus Supplement and the
Accompanying Prospectus....................... S-3
Executive Summary............................... S-7
Summary of Prospectus Supplement................ S-8
Risk Factors.................................... S-30
Description of the Mortgage Pool................ S-49
Servicing of the Mortgage Loans................. S-83
Description of the Offered Certificates......... S-106
Yield and Maturity Considerations............... S-133
Use of Proceeds................................. S-139
Federal Income Tax Consequences................. S-140
Certain ERISA Considerations.................... S-144
Legal Investment................................ S-147
Method of Distribution.......................... S-148
Legal Matters................................... S-149
Ratings......................................... S-149
Index of Principal Definitions.................. S-151
ANNEX A-1--Certain Characteristics of the
Mortgage Loans................................ A-1
ANNEX A-2--Certain Monetary Terms of the
Mortgage Loans................................ A-2
ANNEX A-3--Certain Information Regarding
Reserves...................................... A-3
ANNEX B--Term Sheet............................. B-1
ANNEX C-1--Price/Yield Tables................... C-1
ANNEX C-2--Decrement Tables..................... C-2
ANNEX D--Form of Delinquent Loan Status
Report........................................ D-1
ANNEX E--Form of Historical Loan Modification
Report........................................ E-1
ANNEX F--Form of Historical Loss Estimate
Report........................................ F-1
ANNEX G--Form of REO Status Report.............. G-1
ANNEX H--Form of Watch List Report.............. H-1
ANNEX I--Form of Operating Statement Analysis... I-1
ANNEX J--Form of NOI Adjustment Worksheet....... J-1
ANNEX K--Form of Comparative Financial Status
Report........................................ K-1
PROSPECTUS
Prospectus Supplement........................... 6
Additional Information.......................... 6
Incorporation of Certain Documents by
Reference..................................... 7
Summary of Terms................................ 8
Risk Factors.................................... 28
Description of the Securities................... 35
Yield and Prepayment Considerations............. 44
Security for the Bonds and Certificates......... 48
Servicing of Mortgage Loans..................... 56
Enhancement..................................... 61
Description of Insurance on the Mortgage
Loans......................................... 63
Certain Legal Aspects of Mortgage Loans......... 65
The Indenture................................... 79
The Trust Agreement............................. 84
The Issuer...................................... 90
Use of Proceeds................................. 91
Limitations on Issuance of Bearer Securities.... 92
Federal Income Tax Considerations............... 92
State and Local Tax Considerations.............. 108
ERISA Considerations............................ 109
Legal Investment................................ 113
Plan of Distribution............................ 115
Legal Matters................................... 116
Glossary........................................ 117
</TABLE>
------------------------------
UNTIL , ALL DEALERS THAT EFFECT TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$1,600,000,000
(APPROXIMATE)
LB COMMERCIAL MORTGAGE
TRUST 1999-C1
CLASS A-1, CLASS A-2,
CLASS B, CLASS C, CLASS D,
CLASS E AND CLASS X
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES
SERIES 1999-C1
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PROSPECTUS SUPPLEMENT
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LEHMAN BROTHERS
MERRILL LYNCH & CO.
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