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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended
Date of Report (Date of earliest event reported): October 23, 1996
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
(AS DEPOSITOR UNDER THE POOLING AND SERVICING AGREEMENT,
DATED AS OF OCTOBER 1, 1996, PROVIDING FOR THE ISSUANCE OF
ASSET-BACKED CERTIFICATES, SERIES 1996-LB2)
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 333-14225 13-3439681
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
Seven World Trade Center
New York, New York 10048
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (212) 783-5659
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<PAGE>
-2-
Item 5. OTHER EVENTS
Description of the Certificates and the Mortgage Pool
As of the date hereof, Salomon Brothers Mortgage Securities VII, Inc.
(the "Registrant") has caused to be filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Commission's Rule 424 a Prospectus
Supplement to its Prospectus, dated October 23, 1996, in connection with the
Registrant's issuance of a series of certificates, entitled Salomon Brothers
Mortgage Securities VII, Inc., Asset-Backed Certificates, Series 1996-LB2 (the
"Certificates"), to be issued pursuant to a pooling and servicing agreement,
dated as of October 1, 1996, among the Registrant as depositor, Long Beach
Mortgage Company as master servicer and Norwest Bank Minnesota, N.A. as trustee.
The Certificates designated as the Series 1996-LB2 Certificates will represent
in the aggregate the entire beneficial ownership in a trust fund (the "Trust
Fund") consisting primarily of a segregated pool (the "Mortgage Pool") of
conventional, one- to four-family, first lien mortgage loans having original
terms to maturity ranging from 5 years to 30 years (the "Mortgage Loans").
Structural Term Sheets and Computational Materials
Salomon Brothers Inc (the "Underwriter") has advised the Registrant
that it has furnished to certain prospective purchasers of Certificates certain
information, herein referred to as "Structural Term Sheets", in written form,
which may include, a description of the securities to be offered, the name of
the issuer, the size of the offering, the number of classes, seniority and order
of payment.
The Underwriter has also provided certain prospective purchasers of
Certificates with certain materials, herein referred to as "Computational
Materials", in written form, which Computational Materials are in the nature of
data tables and term sheet information relating to the Mortgage Loans or other
assets of the Trust Fund, the structure of the Certificates and terms of certain
classes of Certificates, and the hypothetical characteristics and hypothetical
performance of certain classes of Certificates under certain assumptions and
scenarios.
The Structural Term Sheets and the Computational Materials have been
provided by the Underwriters. The information in the Structural Term Sheets and
the Computational Materials is preliminary and will be superseded by the
Prospectus Supplement relating to the Certificates and by any other information
subsequently filed with the Commission.
The Structural Term Sheets and the Computational Materials were
prepared by the Underwriter at the request of certain prospective investors. The
Structural Term Sheets and the Computational Materials may be based on
information that differs from the information set forth in the Prospectus
Supplement.
<PAGE>
-3-
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable
(b) Not applicable
(c) Exhibits
Exhibit No. Description
----------- -----------
99.1 Structural Term Sheets (as defined in Item 5)
that have been provided by Salomon Brothers
Inc to certain prospective purchasers of
Salomon Brothers Mortgage Securities VII,
Inc., Asset-Backed Certificates, Series
1996-LB2
99.2 Computational Materials (as defined in Item 5)
that have been provided by Salomon Brothers
Inc to certain prospective purchasers of
Salomon Brothers Mortgage Securities VII,
Inc., Asset-Backed Certificates, Series
1996-LB2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: October 23, 1996
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
By: /s/ Susan S. Woodbury
------------------------------
Name: Susan S. Woodbury
Title: Vice President
<PAGE>
INDEX TO EXHIBITS
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Sequentially
Exhibit No. Description Numbered Page
----------- ----------- -------------
99.1 Structural Term Sheets (as defined in 6
Item 5) that have been provided by
Salomon Brothers Inc to certain
prospective purchasers of Salomon
Brothers Mortgage Securities VII, Inc.,
Asset-Backed Certificates, Series 1996-
LB2
99.2 Computational Materials (as defined in P
Item 5) that have been provided by
Salomon Brothers Inc to certain
prospective purchasers of Salomon
Brothers Mortgage Securities VII, Inc.,
Asset-Backed Certificates, Series 1996-
LB2
Exhibit 99.1
<PAGE>
P R I C E S R E F L E C T E D A R E
I N D I C A T I V E O N L Y A N D
A R E S U B J E C T T O C H A N G E
W I T H O U T N O T I C E
SBMS VII Series 1996-LB2
Term Sheet Dated October 2, 1996
SUBJECT TO REVISION
$289,605,000 Fixed Rate Asset Backed Certificates (+/- 5%)
Long Beach Mortgage Company, as Servicer
SBMS VII, Inc., as Issuer
MBIA Guaranty
THE OFFERED CERTIFICATES REPRESENT FRACTIONAL UNDIVIDED INTERESTS IN THE SBMS
VII TRUST (THE TRUST) AND DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE
SERVICER. NEITHER THE OFFERED CERTIFICATES NOR THE UNDERLYING ASSETS ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENT
AGENCY.
<PAGE>
P R I C E S R E F L E C T E D A R E
I N D I C A T I V E O N L Y A N D
A R E S U B J E C T T O C H A N G E
W I T H O U T N O T I C E
THIS TERM SHEET CONTAINS STRUCTURAL AND COLLATERAL INFORMATION WITH RESPECT TO
THE SERIES 1996-LB2 OFFERED CERTIFICATES; HOWEVER, THIS TERM SHEET DOES NOT
CONTAIN COMPLETE INFORMATION WITH RESPECT TO THE OFFERING OF THE 1996-LB2
OFFERED CERTIFICATES. THE INFORMATION HEREIN IS PRELIMINARY AND WILL BE
SUPERSEDED BY THE INFORMATION CONTAINED IN THE PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS. ADDITIONAL INFORMATION WILL BE CONTAINED IN THE PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS. PURCHASERS ARE URGED TO READ BOTH THE PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS.
THIS TERM SHEET SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SALES OF THE
SERIES 1996-LB2 OFFERED CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER
HAS RECEIVED BOTH THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
<PAGE>
P R I C E S R E F L E C T E D A R E
I N D I C A T I V E O N L Y A N D
A R E S U B J E C T T O C H A N G E
W I T H O U T N O T I C E
SBMS VII Series 1996-LB2
$36,206,000 Class A-1 Fixed Rate Asset Backed Certificates paying 6.65%.
$17,863,000 Class A-2 Fixed Rate Asset Backed Certificates paying 6.50%.
$80,930,000 Class A-3 Fixed Rate Asset Backed Certificates paying 6.75%.
$10,444,000 Class A-4 Fixed Rate Asset Backed Certificates paying 6.90%.
$54,989,000 Class A-5 Fixed Rate Asset Backed Certificates paying 7.05%.
$21,141,000 Class A-6 Fixed Rate Asset Backed Certificates paying 7.20%.
$27,332,000 Class A-7 Fixed Rate Asset Backed Certificates paying 7.40%.
$36,044,000 Class A-8 Fixed Rate Asset Backed Certificates paying 7.65%.
<PAGE>
P R I C E S R E F L E C T E D A R E
I N D I C A T I V E O N L Y A N D
A R E S U B J E C T T O C H A N G E
W I T H O U T N O T I C E
All Offered Certificates are Aaa/AAA rated by Moodys/Standard & Poors.
All Offered Certificates are Publicly offered, SMMEA and ERISA eligible.
Subs, PO & IO not available at this time.
Transaction Timing and Overview
Structure: REMIC/Senior/Sub w/MBIA Guaranty
Expected Pricing Date: October _, 1996
Collateral Cut-off Date: October 1, 1996
Expected Closing Date: October [25], 1996
First Payment Date: November 25, 1996
Settlement: DTC / Same Day Funds
Accrued Interest: Settles with Accrued from Nov. 1
Sole Manager: Salomon Brothers Inc
<PAGE>
P R I C E S R E F L E C T E D A R E
I N D I C A T I V E O N L Y A N D
A R E S U B J E C T T O C H A N G E
W I T H O U T N O T I C E
For Further Information
Finance: Susan Woodbury (212-783-5659)
Debt Syndicate: Paul Young (212-783-3727)
Yield Book: SAL96.LB2
<PAGE>
P R I C E S R E F L E C T E D A R E
I N D I C A T I V E O N L Y A N D
A R E S U B J E C T T O C H A N G E
W I T H O U T N O T I C E
Computational Materials: Bloomberg: SBOF[space] HOME [go]
(spell out HOME)
Collateral: Bruce Rose/David Nagle (212-783-3656)
<PAGE>
P R I C E S R E F L E C T E D A R E
I N D I C A T I V E O N L Y A N D
A R E S U B J E C T T O C H A N G E
W I T H O U T N O T I C E
<TABLE>
SBMS VII, SERIES 1996-LB2
<CAPTION>
Class A-1 Class A-2 Class A-3 Class A-4
<S> <C> <C> <C> <C>
Approx. Principal Amount $36,206,000 $17,863,000 $80,930,000 $10,444,000
Pass-Through Rate 6.65% 6.50% 6.75% 6.90%
Relative Size 11.9% 5.9% 26.5% 3.4%
Expected Ratings (Mdys/S&P) Aaa/AAA Aaa/AAA Aaa/AAA Aaa/AAA
Credit Enhancement 100% MBIA Guar. 100% MBIA Guar. 100% MBIA Guar. 6.25% 100% MBIA Guar.
6.25% Sub. 6.25% Sub. Sub. 6.25% Sub.
Pricing Prepayment Speed(1) 100% model 100% model 100% model 100% model
Optional Clean Up Call 10% call 10% call 10% call 10% call
Weighted Average Life 0.5 years 1.0 years 1.95 years 3.0 years
Principal Pmt. Begins Month 1 Month 10 Month 14 Month 34
Principal Pmt. Ends Month 10 Month 14 Month 34 Month 38
Length of Payment Window 10 Months 5 Months 21 Months 5 Months
Final Maturity Date 7/97 11/97 7/99 11/99
Legal Final Payment Date October 25, 2026 October 25, 2026 October 25, 2026 October 25, 2026
Payment Frequency Monthly Monthly Monthly Monthly
Payment Date 25th 25th 25th 25th
Delay Days 54 days 54 days 54 days 54 days
First Coupon Payment Date November 25 November 25 November 25 November 25
Accrued Interest From Oct. 1 From Oct. 1 From Oct. 1 From Oct. 1
Fixed/Floating Fixed Fixed Fixed Fixed
Day Count 30/360 30/360 30/360 30/360
ERISA Eligible Yes Yes Yes Yes
SMMEA Eligible Yes Yes Yes Yes
Tax Structure REMIC REMIC REMIC REMIC
</TABLE>
(1) A 100% Prepayment Model assumes that prepayments start at 5% CPR in
Month 1, building to 20% CPR in Month 12 and remain at 20% CPR
thereafter on seasonally adjusted basis.
<PAGE>
P R I C E S R E F L E C T E D A R E
I N D I C A T I V E O N L Y A N D
A R E S U B J E C T T O C H A N G E
W I T H O U T N O T I C E
<TABLE>
SBMS VII, SERIES 1996-LB2
CONTINUED
<CAPTION>
Class A-5 Class A-6 Class A-7 Class A-8
<S> <C> <C> <C> <C>
Approx. Principal Amount $54,989,000 $21,141,000 $27,332,000 36,044.000
Pass-Through Rate 7.05% 7.20% 7.40% 7.65%
Relative Size 18.0% 6.90% 9.0% 11.8%
Expected Ratings (Mdys/S&P) Aaa/AAA Aaa/AAA Aaa/AAA Aaa/AAA
Credit Enhancement 100% MBIA GUAR. 100% MBIA GUAR. 100% MBIA Guar. 100% MBIA Guar.
6.25% Sub. 6.25% Sub. 6.25% Sub. 6.25% Sub.
Pricing Prepayment Speed(1) 100% model 100% model 100% model 100% model
Optional Clean Up Call 10% call 10% call 10% call 10% call
Weighted Average Life 4.0 years 5.5 years 7.0 years 9.7 years
Principal Pmt. Begins Month 38 Month 60 Month 73 Month 98
Principal Pmt. Ends Month 60 Month 73 Month 98 Month 122
Length of Payment Window 23 Months 14 Months 26 Months 25 Months
Final Maturity Date 9/01 10/02 11/04 12/06
Legal Final Payment Date October 25, 2026 October 25, 2026 October 25, 2026 October 25, 2026
Payment Frequency Monthly Monthly Monthly Monthly
Payment Date 25th 25th 25th 25th
Delay Days 54 days 54 days 54 days 54 days
First Coupon Payment Date November 25 November 25 November 26 November 26
Accrued Interest From Oct. 1 From Oct. 1 From Oct. 1 From Oct. 1
Fixed/Floating Fixed Fixed Fixed Fixed
Day Count 30/360 30/360 30/360 30/360
ERISA Eligible Yes Yes Yes Yes
SMMEA Eligible Yes Yes Yes Yes
Tax Structure REMIC REMIC REMIC REMIC
</TABLE>
(1) A 100% Prepayment Model assumes that prepayments start at 5% CPR in
Month 1, building to 20% CPR in Month 12 and remain at 20% CPR
thereafter on seasonally adjusted basis.
<PAGE>
P R I C E S R E F L E C T E D A R E
I N D I C A T I V E O N L Y A N D
A R E S U B J E C T T O C H A N G E
W I T H O U T N O T I C E
Credit Enhancement
Subordinate Classes: There will be approximately 6.25% of Subordinate Classes
beneath the Offered Certificates which will absorb losses starting with the
lowest rated class (NR) and moving up to the highest rated class (BBB). The
6.25% Subordination creates a BBB rating level, which is then wrapped by MBIA
and brought to a AAA rating. All of the Subordinate Classes will be locked out
from principal prepayments for 5 years. In the event that the principal balance
of the Subordinate Classes has been reduced to zero, MBIA will absorb all
further losses. The size of the Subordinate Classes is preliminary and is
subject to the Rating Agencies' and the MBIA's due diligence. The Subordinate
classes and IO are not offered for sale at this time. [Call Bruce Rose/David
Nagle for details on Subs and IO]
<PAGE>
P R I C E S R E F L E C T E D A R E
I N D I C A T I V E O N L Y A N D
A R E S U B J E C T T O C H A N G E
W I T H O U T N O T I C E
Guaranty: The Offered Certificates will have the benefit of a 100% MBIA
guarantee of principal and interest. MBIA's claims-paying ability is rated
Aaa/AAA by Moodys/S&P.
Monthly Advances: To protect investors from payment delays due to borrower
delinquencies, the Servicer is required to make monthly advances to cover these
delinquencies.
Compensating Interest: The Servicer is required to pay compensating interest to
the extent of its servicing fees to cover prepayment interest shortfalls due to
partial and full prepayments by borrowers.
<PAGE>
P R I C E S R E F L E C T E D A R E
I N D I C A T I V E O N L Y A N D
A R E S U B J E C T T O C H A N G E
W I T H O U T N O T I C E
Structural Details
Offered Certificates: The Offered Certificates will be publicly offered, SMMEA
and ERISA eligible, and be rated AAA by both Standard & Poor's and Moody's. The
transaction will be a shifting interest Senior/Subordinate structure with a MBIA
guaranty. The Offered Certificates, consisting of seven sequential classes, will
pay principal and interest on the 25th of each month.
Principal Payments: Generally, monthly principal payments on the Offered
Certificates will be the pro rata share of scheduled principal, and for the
first 5 years, all principal prepayments collected on the underlying Mortgage
Loans. After the first 5 years there will be a shifting of prepayments from the
Offered Certificates to the Subordinate Classes.
Interest Payments: Interest payments for any class of Certificate will be at the
related pass- through rate stated above calculated on a 30/360 basis.
<PAGE>
P R I C E S R E F L E C T E D A R E
I N D I C A T I V E O N L Y A N D
A R E S U B J E C T T O C H A N G E
W I T H O U T N O T I C E
Losses: Generally, any losses on the underlying Mortgage Loans will be absorbed
first, by the Subordinate Classes, starting with the lowest rated class (NR) up
to the highest rated class (BBB) and then, if and when the Subordinate Class
principal balance has been reduced to zero, MBIA will absorb all further losses.
Call Provision: The deal may be called by the Servicer/MBIA when the current
balance of all of the Mortgage Loans is equal to or less than 10% of its
original balance. In that event of a call, the Offered Certificates will be
redeemed at par plus accrued interest. In the event that the deal is eligible to
be called but is not called, there will be a step-up in coupon of 50 bps.
on the Class A-8 Bond.
Step-Up in Coupon on A-8 Bond: In the event that the deal is eligible to be
called but is not called [See Call Provision], there will be a step-up in coupon
of 50 bps. on the A-8 Bond.
Prepayment Assumptions: The Offered Certificates will be priced assuming a
prepayment vector (PPV) starting at 5.00% CPR in month one increasing
_________________ remaining at 20% CPR for the remaining life of the collateral.
Fees: Servicing 50 bps
MBIA 15 bps
Other Fees 1 bp
Total Fees 66 bps
<PAGE>
P R I C E S R E F L E C T E D A R E
I N D I C A T I V E O N L Y A N D
A R E S U B J E C T T O C H A N G E
W I T H O U T N O T I C E
Servicer
Long Beach Mortgage Company, with principal executive offices located at 1100
Town and Country Road, Orange, California, was incorporated in June 1994 and is
approved as a seller/servicer for FNMA and FHIMC and as a nonsupervised
mortgagee by HUD. On October 7, 1994, Long Beach succeeded to the mortgage
banking business formerly conducted by Long Beach Bank, F.S.B, a federally
chartered savings bank.
The principal business of Long Beach is originating, purchasing, selling and
servicing residential real estate loans secured by single-family and multifamily
properties. At 6/30/95, Long Beach had 112 offices, consisting of 41 loan
origination centers in California and 71 loan origination centers located
throughout the United States.
Long Beach originates single-family and multifamily real estate loans through
referrals from mortgage brokerage companies and through its network of offices
and loan origination centers.
The following table sets forth Long Beach's delinquency and loss experience at
the dates indicated on its servicing portfolio of mortgage loans originated
under Long Beach Programs - the majority of such loans are adjustable rate
loans.
<PAGE>
P R I C E S R E F L E C T E D A R E
I N D I C A T I V E O N L Y A N D
A R E S U B J E C T T O C H A N G E
W I T H O U T N O T I C E
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 6/30/96
<S> <C> <C> <C> <C>
Total Outstanding Balance ($ millions) $1,949 $2,423 $2,406 $2,517
Delinquencies (% of outstanding balance)
31-60 days 0.67% 0.69% 1.35% 1.39%
61-90 days 0.67% 0.75% 0.88% 1.02%
91 + 3.11% 2.89% 3.92% 4.22%
Total Delinquencies 4.46% 4.33% 6.15% 6.62%
Foreclosures Pending
(% of outstanding balance) * 3.31% 3.22% 4.28% 4.47%
Net Gains/(Losses)
(% of outstanding balance) -0.69% -1.02% -1.01% -0.61%
</TABLE>
* Foreclosures pending are included in the delinquencies above.
