<PAGE>
<PAGE>
Prospectus Supplement and Accompanying Prospectus Filed Pursuant to
Rule 424(b)(5) Relating to Registration Statement No. 333-1704
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 7, 1996)
$546,900,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1996-C1
- ----------------------------------------------------------
The Series 1996-C1 Mortgage Pass-Through Certificates (the 'Certificates') will
consist of fourteen classes (each, a 'Class') of Certificates, including the
seven Classes of Certificates offered hereby (collectively, the 'Offered
Certificates'). The Certificates, in the aggregate, will represent the entire
undivided beneficial ownership interest in a trust fund (the 'Trust Fund') to be
established by Merrill Lynch Mortgage Investors, Inc. (the 'Depositor'), that
will consist primarily of a segregated pool (the 'Mortgage Pool') of 159
conventional, fixed rate mortgage loans (the 'Mortgage Loans') secured by first
liens on commercial and multifamily properties (each, a 'Mortgaged Property')
and, in all but 11 cases, providing for balloon payments on their respective
maturity dates. As of April 1, 1996 (the 'Cut-off Date'), the Mortgage Loans had
an aggregate principal balance (the 'Initial Pool Balance')
(Continued on next page)
-----------------------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH UNDER 'RISK
FACTORS' BEGINNING ON PAGE S-25 OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE 16 OF
THE PROSPECTUS.
-----------------------
PROCEEDS OF THE ASSETS IN THE TRUST FUND WILL BE THE SOLE SOURCE OF PAYMENTS ON
THE OFFERED CERTIFICATES. THE OFFERED CERTIFICATES WILL NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, THE MASTER SERVICER, THE
TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THE OFFERED CERTIFICATES
NOR THE MORTGAGE LOANS WILL BE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<TABLE>
<CAPTION>
RATED FINAL
INITIAL CERTIFICATE % OF INITIAL PASS-THROUGH DISTRIBUTION EXPECTED
CLASS BALANCES(1) POOL BALANCE(1) RATE DATE(2) RATING(3)
<S> <C> <C> <C> <C> <C>
Class A-1.............................. $ 182,300,000 28.2% 7.15% April 25, 2028 AAA
Class A-2.............................. $ 27,813,000 4.3% 7.24% April 25, 2028 AAA
Class A-3.............................. $ 226,505,616 35.0% 7.42% April 25, 2028 AAA
Class A-PO............................. $ 254,384 (4) (5) April 25, 2028 AAA
Class B................................ $ 38,833,000 6.0% 7.42% April 25, 2028 AA
Class C................................ $ 38,833,000 6.0% 7.42% April 25, 2028 A
Class D................................ $ 32,361,000 5.0% 7.42% April 25, 2028 BBB
<FN>
(1) Subject to a permitted variance of plus or minus 5%.
(2) The Rated Final Scheduled Distribution Date has been set to a date two
years after the Distribution Date following the end of the amortization
term for the Mortgage Loan that, as of the Cut-off Date, has the longest
amortizaton term. See 'Ratings' herein.
(3) By each of Fitch Investors Service, L.P. and, except with respect to the
Class A-PO Certificates, Standard & Poor's Ratings Services.
(4) Represents less than 0.2% of the Initial Pool Balance.
(5) The Class A-PO Certificates are not entitled to distributions of interest.
</FN>
</TABLE>
------------------------
The Offered Certificates will be offered by Merrill Lynch, Pierce, Fenner &
Smith Incorporated and First Union Capital Markets Corp. (together, the
'Underwriters') from time to time in negotiated transactions or otherwise at
varying prices to be determined at the time of sale. Proceeds to the Depositor
from the sale of the Offered Certificates, before deducting expenses payable by
the Depositor, will be approximately $549,705,339, which includes accrued
interest. See 'METHOD OF DISTRIBUTION' herein.
The Offered Certificates are offered by the Underwriters 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. It
is expected that the Offered Certificates will be delivered in book-entry form
through the Same-Day Funds Settlement System of The Depository Trust Company on
or about April 3, 1996.
------------------------
MERRILL LYNCH & CO. FIRST UNION CAPITAL MARKETS CORP.
------------------------
The date of this Prospectus Supplement is April 1, 1996.
<PAGE>
<PAGE>
(cover continued)
of approximately $647,219,459, after application of all payments of principal
due on or before such date, whether or not received. The Offered Certificates
bear the class designations and have the characteristics set forth in the table
below.
The Depositor will acquire certain of the Mortgage Loans from Merrill Lynch
Mortgage Capital Inc. and certain of the Mortgage Loans from First Union
National Bank of North Carolina (each, a 'Mortgage Loan Seller'). On or before
the date the Certificates are issued, the Depositor will cause the Mortgage Loan
Sellers to assign the Mortgage Loans, without recourse, to Bankers Trust Company
of California, N.A., as trustee of the Trust Fund (the 'Trustee'), in exchange
for the Certificates.
As and to the extent described herein, the Class E, Class F, Class G and the
REMIC Residual Certificates will be subordinate to the Class A-1, Class A-2,
Class A-3, Class B, Class C and Class D Certificates; the Class B, Class C and
Class D Certificates will be subordinate to the Class A-1, Class A-2 and Class
A-3 Certificates; the Class C and Class D Certificates will be subordinate to
the Class B Certificates; and the Class D Certificates will be subordinate to
the Class C Certificates. Distributions of interest on and principal of the
Certificates will be made, to the extent of available funds, on the 25th day of
each month or, if any such 25th day is not a business day, then on the next
succeeding business day, commencing May 28, 1996 (each, a 'Distribution Date').
As described herein, distributions allocable to interest accrued on each Class
of Offered Certificates (other than the Class A-PO Certificates) will be made on
each Distribution Date based on the pass-through rate (the 'Pass-Through Rate')
then applicable to such Class and the principal amount (the 'Certificate
Balance') of such Class outstanding immediately prior to such Distribution Date.
As described herein, distributions allocable to principal of the Offered
Certificates will be made sequentially in respect of the Class A-PO
Certificates, to the extent set forth herein, and then to the Class A-1, Class
A-2, Class A-3, Class B, Class C and Class D Certificates, in that order, until
the respective Certificates are retired. The holders of the Certificates (other
than the Class A-PO Certificates) may also receive portions of any Prepayment
Premiums and Yield Maintenance Charges (each as defined herein) to the extent
described herein. See 'DESCRIPTION OF THE CERTIFICATES -- Distributions' herein.
The yield to maturity on each Class of Offered Certificates will depend on,
among other things, the rate and timing of principal payments (including by
reason of prepayments, defaults and liquidations) on the Mortgage Loans that are
applied in reduction of the Certificate Balance of such Class. THE YIELD TO
MATURITY ON THE CLASS A-PO CERTIFICATES WILL BE HIGHLY SENSITIVE TO THE RATE AND
TIMING OF PRINCIPAL PAYMENTS (INCLUDING BY REASON OF PREPAYMENTS, DEFAULTS AND
LIQUIDATIONS) ON THE MORTGAGE LOANS, PARTICULARLY THE DISCOUNT MORTGAGE LOANS,
AND INVESTORS IN THE CLASS A-PO CERTIFICATES SHOULD FULLY CONSIDER THE
ASSOCIATED RISKS, INCLUDING THE RISK THAT A SLOWER THAN EXPECTED RATE OF
PRINCIPAL PAYMENTS AND PRINCIPAL PREPAYMENTS ON THE MORTGAGE LOANS, PARTICULARLY
THE DISCOUNT MORTGAGE LOANS, COULD RESULT IN A LOWER THAN EXPECTED YIELD ON THE
CLASS A-PO CERTIFICATES. The allocation to any Offered Class (other than the
Class A-PO Certificates) of any Prepayment Premium or Yield Maintenance Charge
may be insufficient to offset fully the effects on the reduction to the
anticipated yield to maturity resulting from the corresponding principal
prepayment. Any delay in collection of a Balloon Payment due at the maturity of
a Mortgage Loan will likely extend the weighted average life of the Class or
Classes of Offered Certificates entitled to distributions in respect of
principal as of the date such Balloon Payment was due. See 'DESCRIPTION OF THE
CERTIFICATES -- Certificate Balances and Notional Amounts' and
' -- Distributions,' 'YIELD AND MATURITY CONSIDERATIONS' and 'SERVICING OF THE
MORTGAGE LOANS -- Modifications, Waivers and Amendments' herein, and 'YIELD AND
MATURITY CONSIDERATIONS' and 'RISK FACTORS -- Prepayments; Average Life of
Certificates; Yields' in the Prospectus.
As described herein, three separate 'real estate mortgage investment
conduit' ('REMIC') elections will be made with respect to the Trust Fund for
federal income tax purposes (the REMICs formed thereby, 'REMIC I', 'REMIC II'
and 'REMIC III'). The Offered Certificates will constitute the 'regular
interests' in the related REMIC. See 'CERTAIN FEDERAL INCOME TAX CONSEQUENCES'
herein and in the Prospectus.
There is currently no secondary market for the Offered Certificates. Each of
the Underwriters intends to make a secondary market in the Offered Certificates,
but has no obligation to do so. See 'RISK FACTORS -- The Certificates -- Limited
Liquidity' herein.
THE PROSPECTUS THAT ACCOMPANIES THIS PROSPECTUS SUPPLEMENT CONTAINS
IMPORTANT INFORMATION REGARDING THIS OFFERING THAT IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL TO OBTAIN MATERIAL INFORMATION CONCERNING THE OFFERED
CERTIFICATES. SALES OF THE OFFERED CERTIFICATES MAY NOT BE CONSUMMATED UNLESS
THE PURCHASER HAS RECEIVED A PAPER COPY OF BOTH THE PROSPECTUS AND THIS
PROSPECTUS SUPPLEMENT REGARDLESS OF WHETHER THE PURCHASER HAS RECEIVED SUCH
DOCUMENTS ELECTRONICALLY.
UPON RECEIPT OF A REQUEST BY AN INVESTOR, OR HIS OR HER REPRESENTATIVE,
WITHIN THE PERIOD DURING WHICH THERE IS A PROSPECTUS DELIVERY OBLIGATION, THE
UNDERWRITERS WILL TRANSMIT OR CAUSE TO BE TRANSMITTED PROMPTLY, WITHOUT CHARGE
AND IN ADDITION TO ANY SUCH DELIVERY REQUIREMENTS, A PAPER COPY OF A PROSPECTUS
SUPPLEMENT AND A PROSPECTUS OR A PROSPECTUS SUPPLEMENT AND A PROSPECTUS
ELECTRONICALLY.
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-2
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF PROSPECTUS SUPPLEMENT........................................................................... S-5
RISK FACTORS............................................................................................... S-25
The Certificates....................................................................................... S-25
Limited Liquidity................................................................................. S-25
Certain Yield and Maturity Considerations......................................................... S-25
Potential Conflicts of Interest................................................................... S-26
The Mortgage Loans..................................................................................... S-26
Risks of Lending on Income-Producing Properties................................................... S-26
Nonrecourse Mortgage Loans........................................................................ S-28
Environmental Law Considerations.................................................................. S-28
Balloon Payments.................................................................................. S-28
DESCRIPTION OF THE MORTGAGE POOL........................................................................... S-29
General................................................................................................ S-29
Certain Terms and Conditions of the Mortgage Loans..................................................... S-29
Mortgage Rates; Calculations of Interest.......................................................... S-29
Due Dates......................................................................................... S-30
Amortization...................................................................................... S-30
Prepayment Provisions............................................................................. S-30
Non-recourse Obligations.......................................................................... S-30
'Due-on-Sale' and 'Due-on-Encumbrance' Provisions................................................. S-30
Cross-Default and Cross-Collateralization of Certain Mortgage Loans............................... S-30
Low Income Housing Tax Credits.................................................................... S-30
Assessments of Property Condition...................................................................... S-31
Property Inspection............................................................................... S-31
Appraisals........................................................................................ S-31
Environmental and Engineering Assessments......................................................... S-31
Earthquake Analyses............................................................................... S-32
Additional Mortgage Loan Information................................................................... S-32
The Mortgage Pool................................................................................. S-32
The Mortgage Loan Sellers.............................................................................. S-42
Assignment of the Mortgage Loans; Repurchases.......................................................... S-42
Representations and Warranties; Repurchases............................................................ S-43
Changes in Mortgage Pool Characteristics............................................................... S-44
SERVICING OF THE MORTGAGE LOANS............................................................................ S-44
General................................................................................................ S-44
The Master Servicer and Special Servicer............................................................... S-44
Replacement of the Special Servicer.................................................................... S-45
Servicing and Other Compensation and Payment of Expenses............................................... S-46
Modifications, Waivers and Amendments.................................................................. S-48
The Extension Adviser.................................................................................. S-48
Election of the Extension Adviser................................................................. S-48
Duties of the Extension Adviser................................................................... S-49
Limitation on Liability of Extension Adviser...................................................... S-49
REO Properties......................................................................................... S-49
Inspections; Collection of Operating Information....................................................... S-50
DESCRIPTION OF THE CERTIFICATES............................................................................ S-50
General................................................................................................ S-50
</TABLE>
S-3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Registration and Denominations......................................................................... S-51
Certificate Balances and Notional Amount............................................................... S-52
Pass-Through Rates..................................................................................... S-52
Distributions.......................................................................................... S-53
General........................................................................................... S-53
The Available Distribution Amount................................................................. S-53
Application of the Available Distribution Amount.................................................. S-54
Distributable Certificate Interest................................................................ S-56
Principal Distribution Amount..................................................................... S-56
Treatment of REO Properties....................................................................... S-57
Allocation of Prepayment Premiums and Yield
Maintenance Charges........................................................................... S-57
Subordination; Allocation of Losses and Certain Expenses............................................... S-58
P&I Advances........................................................................................... S-59
Appraisal Reductions................................................................................... S-60
Reports to Certificateholders; Available Information................................................... S-61
Voting Rights.......................................................................................... S-62
Termination............................................................................................ S-62
The Trustee............................................................................................ S-63
YIELD AND MATURITY CONSIDERATIONS.......................................................................... S-64
Yield Considerations................................................................................... S-64
General........................................................................................... S-64
Rate and Timing of Principal Payment.............................................................. S-64
Losses and Shortfalls............................................................................. S-65
Certain Relevant Factors.......................................................................... S-65
Delay in Payment of Distributions................................................................. S-66
Unpaid Distributable Certificate Interest......................................................... S-66
Yield Sensitivity of the Class A-PO Certificates.................................................. S-66
Weighted Average Life.................................................................................. S-67
USE OF PROCEEDS............................................................................................ S-72
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................................................... S-72
ERISA CONSIDERATIONS....................................................................................... S-73
LEGAL INVESTMENT........................................................................................... S-75
METHOD OF DISTRIBUTION..................................................................................... S-75
LEGAL MATTERS.............................................................................................. S-76
RATINGS.................................................................................................... S-76
INDEX OF PRINCIPAL DEFINITIONS............................................................................. S-78
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS.............................................................. A-1
FORM OF DISTRIBUTION DATE STATEMENT........................................................................ B-1
</TABLE>
S-4
<PAGE>
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Certain capitalized terms used in this Summary may
be defined elsewhere in this Prospectus Supplement or in the Prospectus. An
'Index of Principal Definitions' is included at the end of both this Prospectus
Supplement and the Prospectus. Terms that are used but not defined in this
Prospectus Supplement have the meanings specified in the Prospectus.
<TABLE>
<CAPTION>
WEIGHTED
INITIAL PERCENT OF APPROXIMATE PASS- AVERAGE
S&P/FITCH CERTIFICATE INITIAL CREDIT THROUGH LIFE
CLASS RATING BALANCES(1) POOL BALANCE(1) SUPPORT DESCRIPTION RATE (YEARS)(2)
- --------------------- --------- ------------ --------------- ----------- ---------------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Offered Certificates
Class A-1........ AAA/AAA $182,300,000 28.2% 32.5% Fixed Coupon 7.15% 5.2
Class A-2........ AAA/AAA 27,813,000 4.3 32.5 Fixed Coupon 7.24 7.4
Class A-3........ AAA/AAA 226,505,616 35.0 32.5 Fixed Coupon 7.42 9.8
Class A-PO....... NR/AAA 254,384 (3) -- Principal Only (4) 4.8
Class B.......... AA/AA 38,833,000 6.0 26.5 Fixed Coupon 7.42 9.9
Class C.......... A/A 38,833,000 6.0 20.5 Fixed Coupon 7.42 10.0
Class D.......... BBB/BBB 32,361,000 5.0 15.5 Fixed Coupon 7.42 10.0
Private Certificates(5)
Class E.......... BB/BB 48,541,000 7.5 8.0 Fixed Coupon -- 10.3
Class F.......... B/B- 32,361,000 5.0 3.0 Fixed Coupon -- 14.3
Class G.......... NR/NR 19,417,459 3.0 0.0 Fixed Coupon -- 21.7
Class IO......... NR/AAA (6) N/A -- I/O Strip (6) N/A
<CAPTION>
CASH FLOW
OR
PRINCIPAL
CLASS WINDOW(2)
- --------------------- ----------
<S> <C>
Offered Certificates
Class A-1........ 5/96-4/03
Class A-2........ 4/03-8/04
Class A-3........ 8/04-2/06
Class A-PO....... 5/96-2/01
Class B.......... 2/06-3/06
Class C.......... 3/06-3/06
Class D.......... 3/06-4/06
Private Certificates(5)
Class E.......... 4/06-1/07
Class F.......... 1/07-2/13
Class G.......... 2/13-3/21
Class IO......... 5/96-3/21
- ------------
<FN>
(1) Subject to a permitted variance of plus or minus 5%.
(2) Based on Scenario(1) set forth under 'Yield and Maturity
Considerations -- Weighted Average Life' herein.
(3) Represents less than 0.2% of the Initial Pool Balance.
(4) The Class A-PO Certificates are not entitled to distribution of interest.
(5) The Private Certificates are not being offered hereby. Accordingly, any
information herein regarding the terms of the Private Certificates is
provided solely because of its potential relevance to a prospective
purchaser of an Offered Certificate.
(6) The Class IO Certificates will receive the sum of the interest accrued on
each of its Components, as described herein. See ' -- Description of the
Certificates -- Certificate Balances and Notional Amount' herein.
</FN>
</TABLE>
S-5
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Title of Certificates.................... Merrill Lynch Mortgage Investors, Inc., Mortgage Pass- Through
Certificates, Series 1996-C1 (the 'Certificates'), to be issued
in fourteen classes (each, a 'Class') to be designated as: (i)
the Class A-1, Class A-2, Class A-3, Class A-PO, Class B, Class
C, Class D, Class IO, Class E, Class F and Class G Certificates
(collectively, the 'REMIC Regular Certificates'); and (ii) the
Class R-I, Class R-II and Class R-III Certificates
(collectively, the 'REMIC Residual Certificates'). Only the
Class A-1, Class A-2, Class A-3, Class A-PO, Class B, Class C
and Class D Certificates (collectively, the 'Offered Certifi-
cates') are offered hereby. The Class E, Class F, Class G, Class
IO and REMIC Residual Certificates (collectively, the 'Private
Certificates') have not been registered under the Securities Act
of 1933, as amended (the 'Securities Act'), and are not offered
hereby.
Depositor................................ Merrill Lynch Mortgage Investors, Inc., a Delaware corporation.
The Depositor is a wholly-owned, limited purpose finance
subsidiary of one of the Mortgage Loan Sellers and an affiliate
of Merrill Lynch, Pierce, Fenner & Smith Incorporated ('Merrill
Lynch'), one of the Underwriters. Neither the Depositor nor any
of its affiliates has insured or guaranteed the Offered
Certificates. See 'THE DEPOSITOR' in the Prospectus.
Master Servicer.......................... GE Capital Asset Management Corporation, a Delaware corporation.
See 'SERVICING OF THE MORTGAGE LOANS -- The Master Servicer and
Special Servicer' and ' -- Servicing and Other Compensation and
Payment of Expenses' herein.
Special Servicer......................... GE Capital Realty Group, Inc., a Texas corporation and an
affiliate of the Master Servicer, will be the initial Special
Servicer and will be responsible for performing certain
servicing functions with respect to the Mortgage Loans that, in
general, are in default or as to which default is imminent, and
for administering any REO Property (as defined herein). The
majority holder (or holders) of the Sequential Pay Certificates
(as defined herein) of the Class with the latest alphabetical
Class designation will have the right, subject to certain
conditions described herein, to replace the Special Servicer.
See 'SERVICING OF THE MORTGAGE LOANS -- The Master Servicer and
Special Servicer,' ' -- Replacement of the Special Servicer' and
' -- Servicing and Other Compensation and Payment of Expenses'
herein.
Trustee.................................. Bankers Trust Company of California, N.A., a national banking
association.
Mortgage Loan Sellers.................... Merrill Lynch Mortgage Capital Inc. ('MLMCI'), the Depositor's
corporate parent and an affiliate of Merrill Lynch, one of the
Underwriters, and First Union National Bank of North Carolina
('FUNB'), an affiliate of First Union Capital Markets Corp.
('First Union'), one of the
</TABLE>
S-6
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Underwriters. See 'DESCRIPTION OF THE MORTGAGE POOL -- The
Mortgage Loan Sellers' herein.
Cut-off Date............................. April 1, 1996.
Closing Date............................. On or about April 3, 1996.
Registration of the Offered
Certificates............................. The Offered Certificates of each Class thereof will initially be
represented by one or more global Certificates registered in the
name of Cede & Co., as nominee of The Depository Trust Company
('DTC'). No person acquiring an interest in any Offered
Certificate (any such person, a 'Certificate Owner') will be
entitled to receive such Certificate in fully registered,
certificated form (a 'Definitive Offered Certificate'), except
under the limited circumstances described under 'DESCRIPTION OF
THE CERTIFICATES -- Registration and Denominations' herein.
Instead, DTC will effect payments and transfers in respect of
the Offered Certificates by means of its electronic
recordkeeping services, acting through certain participating
organizations ('Participants'). This may result in certain
delays in receipt of payments by an investor and may restrict an
investor's ability to pledge its Certificates. Unless and until
Definitive Offered Certificates of any Class are issued to the
related Certificate Owners, all references herein to the rights
of holders of such Class of Offered Certificates are to the
rights of those Certificate Owners as such rights may be
exercised through DTC and its Participants, except as otherwise
specified herein.
Denominations............................ The Offered Certificates of each Class will be issued, maintained
and transferred on the book-entry records of DTC and its
Participants in denominations of $1,000 actual principal amount
and in integral multiples of $1 in excess thereof.
The Mortgage Pool........................ The Mortgage Pool will consist of 159 conventional, fixed rate
Mortgage Loans with an Initial Pool Balance of $647,219,459,
equal to the aggregate unpaid principal balance of each Mortgage
Loan as of the Cut-off Date, after application of all payments
of principal due on or before such date, whether or not received
(with respect to each Mortgage Loan, the 'Cut-off Date
Balance'). The Cut-off Date Balances of the Mortgage Loans range
from $748,657 to $24,074,864 and the Mortgage Loans will have an
average Cut-off Date Balance of $4,070,563. All percentages of
the Mortgage Loans, or of any specified group of Mortgage Loans,
referred to herein without further description are approximate
percentages by aggregate Cut-off Date Balance. References to
percentages of Mortgaged Properties referred to herein without
further description are references to the percentages of the
Initial Pool Balance represented by the aggregate Cut-off Date
Balance of the related Mortgage Loans. For purposes of
</TABLE>
S-7
<PAGE>
<PAGE>
<TABLE>
<S> <C>
calculations herein, each Mortgage Loan is deemed to be secured
by one (1) Mortgaged Property, whether or not such Mortgaged
Property is comprised of more than one parcel of real property.
All numerical information provided herein with respect to the
Mortgage Loans is provided on an approximate basis.
Generally, all of the Mortgage Loans are non-recourse obligations
of the related borrowers. No Mortgage Loan will be insured or
guaranteed by any governmental entity or private insurer, or by
any other person.
Each Mortgage Loan is secured by a first mortgage lien on the
borrower's fee simple estate in an income producing real
property (each, a 'Mortgaged Property'). Ninety-four (94) of the
Mortgaged Properties, or 53%, are multi-family rental properties
(including nine (9) Mortgaged Properties, or 3%, which are
eligible to receive low-income housing tax credits pursuant to
Section 42 of the Internal Revenue Code of 1986 (the 'Code'));
forty-one (41) of the Mortgaged Properties, or 32%, are retail
properties (including 17 anchored shopping centers, or 19%, and
24 unanchored shopping centers, or 13%); four (4) of the
Mortgaged Properties, or 2%, are residential health care
facilities (including two (2) assisted living facilities, or 1%;
one (1) continuum care facility, or 1%, and one (1) nursing
home, or 1%); four (4) of the Mortgaged Properties, or 2%, are
hospitality properties (all of which are affiliated with
recognized hotel/motel franchisors); seven (7) of the Mortgaged
Properties, or 4%, are warehouse/office or warehouse/industrial
properties; four (4) of the Mortgaged Properties, or 2%, are
office properties; and 5 (five) of the Mortgaged Properties, or
5%, are mobile home parks.
The Mortgaged Properties are located throughout 33 states, with
the largest concentrations in California (26 Mortgaged
Properties, or 21%); Texas (25 Mortgaged Properties, or 13%);
and Nevada (11 Mortgaged Properties, or 13%). No other state has
a concentration of Mortgaged Properties equal to or greater than
7%. See 'DESCRIPTION OF THE MORTGAGE POOL -- Additional Mortgage
Loan Information' herein.
All of the Mortgage Loans bear interest at annualized rates
('Mortgage Rates') that will remain fixed for their respective
remaining loan terms. Scheduled payments of principal and
interest on the mortgage loans ('Monthly Payments') are due
monthly on the first day of each month. See 'DESCRIPTION OF THE
MORTGAGE POOL -- Certain Terms and Conditions of the Mortgage
Loans -- Due Dates' and ' -- Mortgage Rates; Calculations of
Interest' herein.
One hundred and forty-eight (148) of the Mortgage Loans, or 96%,
provide for Monthly Payments based on amorti-
</TABLE>
S-8
<PAGE>
<PAGE>
<TABLE>
<S> <C>
zation schedules significantly longer than their terms to
maturity. As a result, such Mortgage Loans ('Balloon Loans'),
will have substantial principal amounts due and payable (each
such amount, a 'Balloon Payment') on their respective maturity
dates, unless prepaid prior thereto. The remaining 11 Mortgage
Loans, or 4%, are self-amortizing. See 'RISK FACTORS -- The
Mortgage Loans -- Balloon Payments' herein and 'RISK FAC-
TORS -- Balloon Payments; Borrower Default' in the Prospectus.
As of the Cut-off Date, all of the Mortgage Loans restrict or
prohibit voluntary principal prepayments. In general, the
Mortgage Loans: (i) currently permit voluntary principal
prepayments provided that the prepayment is accompanied by a
Yield Maintenance Charge or Prepayment Premium (each as defined
herein) in excess of the amount prepaid for most of their
respective remaining terms to maturity (three (3) Mortgage
Loans, or 3%); (ii) currently prohibit voluntary prepayments of
principal for a period (a 'Lockout Period') ending on a date
specified in the related Mortgage Note and, in general,
thereafter impose a Yield Maintenance Charge or Prepayment
Premium for most of their respective remaining terms to maturity
(147 Mortgage Loans, or 94%); or (iii) currently prohibit
voluntary prepayments of principal for a Lock-out Period and
thereafter permit voluntary principal prepayments in whole
without material restrictions (nine (9) Mortgage Loans, or 3%).
See 'DESCRIPTION OF THE MORTGAGE POOL -- Certain Terms and
Conditions of the Mortgage Loans' and ' -- Additional Mortgage
Loan Information' herein. The ability of the Master Servicer or
the Special Servicer to waive or modify the terms of any
Mortgage Loan relating to the payment of a Prepayment Premium or
Yield Maintenance Charge is limited as described herein. See
'SERVICING OF THE MORTGAGE LOANS -- Modifications, Waivers and
Amendments' herein. The Depositor makes no representation as to
the enforceability of the provision of any Mortgage Note
requiring the payment of a Prepayment Premium or Yield
Maintenance Charge, or of the collectability of any Prepayment
Premium or Yield Maintenance Charge.
One hundred and one (101) of the Mortgage Loans, or 64%, were
originated during the calendar year 1996 and the remaining 58
Mortgage Loans, or 36%, were originated during the calendar year
1995.
As of the Cut-off Date, the Mortgage Loans will have the following
additional characteristics (all weighted averages set forth
below are based on the Cut-off Date Balances of the respective
Mortgage Loans):
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(i) Mortgage Rates ranging from 7.380% per annum to 9.560% per
annum, and a weighted average Mortgage Rate of 8.217% per
annum;
(ii) remaining terms to scheduled maturity ranging from 57
months to 299 months, and a weighted average remaining
term to scheduled maturity of 119 months;
(iii) remaining amortization terms ranging from 155 months to
360 months, and a weighted average remaining amortization
term of 324 months (see 'DESCRIPTION OF THE MORTGAGE
POOL -- Certain Terms and Conditions of the Mortgage
Loans -- Amortization,' herein);
(iv) Cut-off Date LTV Ratios (the loan-to-value ratio of each
Mortgage Loan equal to the ratio of (a) the Cut-off Date
Balance of such Mortgage Loan to (b) the appraised value
of the related Mortgaged Property based upon the most
recent third-party appraisal available to the applicable
Mortgage Loan Seller), ranging from 25.59% to 85.88%, and
a weighted average Cut-off Date LTV Ratio of 71.57%;
(v) Balloon LTV Ratios (the loan-to-value ratio of each
Mortgage Loan on the date its Balloon Payment, if any, is
due, equal to the ratio of (a) the Balloon Payment of such
Mortgage Loan to (b) the appraised value of the related
Mortgaged Property based upon the most recent third-party
appraisal available to the applicable Mortgage Loan
Seller), ranging from 15.84% to 76.50%, and a weighted
average Balloon LTV Ratio of 58.38%; and
(vi) Debt Service Coverage Ratios (calculated as described
under 'DESCRIPTION OF THE MORTGAGE POOL -- Additional
Mortgage Loan Information' herein) ranging from 1.15x to
3.46x, and a weighted average Debt Service Coverage Ratio
of 1.36x.
MLMCI acquired 74 of the Mortgage Loans, or 54% (the 'MLMCI
Loans'), from either of two participants in its commercial and
multifamily mortgage loan conduit program concurrently with or
shortly after origination. FUNB originated or acquired
concurrently with or shortly after origination 85 Mortgage
Loans, or 46% (the 'FUNB Loans'). See 'DESCRIPTION OF THE
MORTGAGE POOL' herein.
On or prior to the Closing Date, the Depositor will cause the
Mortgage Loan Sellers to assign the Mortgage Loans, without
recourse, to the Trustee for the benefit of the holders of the
Certificates (the 'Certificateholders'). In connection with such
assignment, each Mortgage Loan
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Seller will make certain representations and warranties
regarding the characteristics of the Mortgage Loans assigned by
such Mortgage Loan Seller and, as more particularly described
herein, will agree to cure any material breach thereof or, in
the absence of such a cure, to repurchase the affected Mortgage
Loan. See 'DESCRIPTION OF THE MORTGAGE POOL -- Representations
and Warranties; Repurchases' herein.
Description of the Certificates.......... The Certificates will be issued pursuant to a Pooling and
Servicing Agreement, to be dated as of April 1, 1996, among the
Depositor, the Master Servicer, the Special Servicer and the
Trustee (the 'Pooling and Servicing Agreement'), and will
represent in the aggregate the entire beneficial ownership
interest in a trust fund (the 'Trust Fund') consisting of the
Mortgage Pool and certain related assets.
A. Certificate Balances and
Notional Amount...................... Upon initial issuance, and in each case subject to a permitted
variance of plus or minus 5%, the Class A-1, Class A-2, Class
A-3, Class A-PO, Class B, Class C, Class D, Class E, Class F and
Class G Certificates (collectively, the 'Sequential Pay
Certificates') will have the Certificate Balances representing
the approximate percentage of the Initial Pool Balance set forth
in the table at the beginning of this Summary.
The 'Certificate Balance' of any Class of Certificates outstanding
at any time represents the maximum amount that the holders
thereof are entitled to receive as distributions allocable to
principal from the cash flow on the Mortgage Loans and other
assets in the Trust Fund. As more particularly described herein,
the Certificate Balance of any Class of Sequential Pay
Certificates will be reduced on each Distribution Date by any
distributions of principal actually made on such Class of
Certificates on such Distribution Date, and further by any
losses on the Mortgage Loans (herein referred to as 'Realized
Losses') and certain Trust Fund expenses (herein referred to as
'Additional Trust Fund Expenses') actually allocated to such
Class of Certificates on such Distribution Date.
The Class IO Certificates will not have a Certificate Balance, but
will represent the right to receive the sum of the interest
accrued on each of its Components, as described herein. The
Class IO-1 Component will have a notional amount equal to the
aggregate Stated Principal Balance of the Mortgage Loans and the
Class IO-2 Component will have a notional amount equal to the
aggregate Certificate Balance of the Class A-1 Certificates and
the Class A-2 Certificates (each of the Class IO-1 Component and
the Class IO-2 Component, a 'Component'). Each Component will
accrue interest at its applicable Pass-Through Rate. On each
Distribution
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Date on which an Appraisal Reduction Amount has been allocated
to any Class of Certificates, the Class IO-1 Component will be
similarly reduced. The Class IO-1 Component and the Class IO-2
Component do not represent separate Classes of Certificates, but
rather separate components each deemed to be a part of the Class
IO Certificates. See 'DESCRIPTION OF THE CERTIFI-
CATES -- Certificate Balances and Notional Amounts' herein.
The REMIC Residual Certificates will not have Certificate
Balances, but will represent the right to receive certain
limited amounts not otherwise payable on the REMIC Regular
Certificates.
B. Pass-Through Rates........................ The Pass-Through Rates applicable to each Class of Certificates
for each Distribution Date is set forth in the table at the
beginning of this Summary. The Class A-PO and the REMIC Residual
Certificates will not bear interest.
The Pass-Through Rate applicable to the Class IO-1 Component for
each Distribution Date will equal the Weighted Average Net
Mortgage Rate minus 7.42% (but not less than zero) and the
Pass-Through Rate applicable to the Class IO-2 Component for
each Distribution Date will equal the weighted average of the
Class A-1 Strip Rate and the Class A-2 Strip Rate, weighted by
the Certificate Balances of the corresponding Classes. The Class
A-1 Strip Rate will equal 0.27% and the Class A-2 Strip Rate
will equal 0.18%.
The 'Weighted Average Net Mortgage Rate' for each Distribution
Date is the weighted average of the Net Mortgage Rates for the
Mortgage Loans, weighted on the basis of their respective Stated
Principal Balances outstanding immediately prior to such
Distribution Date. The 'Net Mortgage Rate' for each Mortgage
Loan will generally equal the Mortgage Rate in effect for such
Mortgage Loan as of the Cut-off Date, minus the applicable
Master Servicing Fee Rate and the Trustee Fee Rate (each as
defined herein); however, for purposes of computing the Weighted
Average Net Mortgage Rate, the Net Mortgage Rate for each
Mortgage Loan having a Net Mortgage Rate less than 7.42% (each,
a 'Discount Mortgage Loan') will be deemed to be 7.42%. The
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'Stated Principal Balance' of each Mortgage Loan outstanding at
any time represents the principal balance of such Mortgage Loan
ultimately due and payable to the Certificateholders and will
generally equal the Cut-off Date Balance thereof, reduced (to
not less than zero) on each Distribution Date by (i) any
payments or other collections (or advances in lieu thereof) of
principal of such Mortgage Loan that are due or received, as the
case may be, during the related Collection Period and distrib-
uted on the Certificates on such date and (ii) the principal
portion of any Realized Loss and Additional Trust Fund Expenses
incurred in respect of such Mortgage Loan during the related
Collection Period for such Distribution Date. See 'DESCRIPTION
OF THE CERTIFICATES -- Pass-Through Rates' herein.
C. Distributions............................. Distributions on the Certificates will be made by the Trustee, to
the extent of available funds, on the 25th day of each month or,
if any such 25th day is not a business day, then on the next
succeeding business day, commencing May 28, 1996 (each, a
'Distribution Date'). The total of all payments or other
collections (or advances in lieu thereof) on or in respect of
the Mortgage Loans (other than Prepayment Premiums and Yield
Maintenance Charges, which are separately distributable in
respect of the Certificates (other than the Class A-PO
Certificates)) that are available for distribution to
Certificateholders on any Distribution Date (less certain fees
and expenses set forth in the Pooling and Servicing Agreement)
is herein referred to as the 'Available Distribution Amount' for
such date. See 'DESCRIPTION OF THE CERTIFI-
CATES -- Distributions -- The Available Distribution Amount'
herein.
On each Distribution Date, for so long as the aggregate
Certificate Balance of the Classes of Offered Certificates are
greater than zero, the Trustee will (except as otherwise
described under 'DESCRIPTION OF THE CERTIFI-
CATES -- Termination' herein) apply the Available Distribution
Amount for such date for the following purposes and in the
following order of priority, in each case to the extent of
remaining available funds:
(1) to distributions of interest to the holders of the Class
A-1, Class A-2, Class A-3 and Class IO Certificates (in
each case, so long as any such Class remains outstanding),
pro rata, in accordance with the respective amounts of
interest distributable on such Classes of Certificates on
such Distribution Date, in an amount equal to all
Distributable Certificate Interest in respect of each such
Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution
Dates;
(2) to distributions of principal to the holders of the Class
A-PO Certificates with respect to each Discount Mortgage
Loan in an amount (not to exceed the then outstanding
Certificate Balance of such
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Class of Certificates) equal to: (x) a portion of each
payment of or in respect of principal on such Discount
Mortgage Loan equal to the amount of such payment
multiplied by a fraction, the numerator of which is 7.42%
minus the Net Mortgage Rate for such Mortgage Loan and the
denominator of which is 7.42% (such fraction, the 'Class
A-PO Fraction') and (y) the product of the Class A-PO
Fraction for such Discount Mortgage Loan and any Realized
Losses and Additional Trust Fund Expenses with respect to
such Discount Mortgage Loan that were realized during the
related Collection Period, to the extent such Realized
Losses and Additional Trust Fund Expenses have not been
allocated to the Class A-PO Certificates pursuant to the
terms of the Pooling and Servicing Agreement. See
' -- Subordination; Allocation of Losses and Certain
Expenses' herein;
(3) to distributions of principal to the holders of the Class
A-1 Certificates in an amount (not to exceed the then
outstanding Certificate Balance of such Class of
Certificates) equal to the Principal Distribution Amount
for such Distribution Date, less any portion thereof
distributed in respect of the Class A-PO Certificates;
(4) if the Class A-1 Certificates have been retired, to
distributions of principal to the holders of the Class A-2
Certificates in an amount (not to exceed the then
outstanding Certificate Balance of such Class of
Certificates) equal to the Principal Distribution Amount
for such Distribution Date, less any portion thereof
distributed in respect of the Class A-PO and/or Class A-1
Certificates;
(5) if the Class A-1 and Class A-2 Certificates have been
retired, to distributions of principal to the holders of
the Class A-3 Certificates in an amount (not to exceed the
then outstanding Certificate Balance of such Class of
Certificates) equal to the Principal Distribution Amount
for such Distribution Date, less any portion thereof
distributed in respect of the Class A-PO, Class A-1 and/or
Class A-2 Certificates;
(6) to distributions to the holders of the Class A-1, Class
A-2, Class A-3 and Class A-PO Certificates, pro rata, in
accordance with the amount of Realized Losses and
Additional Trust Fund Expenses, if any, previously
allocated to such Classes of Certificates for which no
reimbursement has previously been received, to reimburse
such holders for such Realized Losses and Additional Trust
Fund Expenses, if any;
(7) to distributions of interest to the holders of the Class B
Certificates in an amount equal to all Distributable
Certificate Interest in respect of such
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Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution
Dates;
(8) if the Class A-1, Class A-2 and Class A-3 Certificates have
been retired, to distributions of principal to the holders
of the Class B Certificates in an amount (not to exceed the
then outstanding Certificate Balance of such Class of
Certificates) equal to the Principal Distribution Amount
for such Distribution Date, less any portion thereof
distributed in respect of the Class A-1, Class A-2, Class
A-3 and/or Class A-PO Certificates;
(9) to distributions to the holders of the Class B Certificates
to reimburse such holders for all Appraisal Reduction
Amount Shortfalls and Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class
of Certificates and for which no reimbursement has
previously been received;
(10) to distributions of interest to the holders of the Class C
Certificates in an amount equal to all Distributable
Certificate Interest in respect of such Class of
Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(11) if the Class A-1, Class A-2, Class A-3 and Class B
Certificates have been retired, to distributions of
principal to the holders of the Class C Certificates in an
amount (not to exceed the then outstanding Certificate
Balance of such Class of Certificates) equal to the
Principal Distribution Amount for such Distribution Date,
less any portion thereof distributed in respect of the
Class A-1, Class A-2, Class A-3, Class A-PO and/or Class B
Certificates;
(12) to distributions to the holders of the Class C Certificates
to reimburse such holders for all Appraisal Reduction
Amount Shortfalls and Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class
of Certificates and for which no reimbursement has
previously been received;
(13) to distributions of interest to the holders of the Class D
Certificates in an amount equal to all Distributable
Certificate Interest in respect of such Class of
Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(14) if the Class A-1, Class A-2, Class A-3, Class B and Class C
Certificates have been retired, to distributions of
principal to the holders of the Class D Certificates in an
amount (not to exceed the then outstanding Certificate
Balance of such Class of Certificates) equal to the
Principal Distribution
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Amount for such Distribution Date, less any portion thereof
distributed in respect of the Class A-1, Class A-2, Class
A-3, Class A-PO, Class B and/or Class C Certificates;
(15) to distributions to the holders of the Class D Certificates
to reimburse such holders for all Appraisal Reduction
Amount Shortfalls and Realized Losses and Additional Trust
Fund Expenses, if any, previously allocated to such Class
of Certificates and for which no reimbursement has
previously been received; and
(16) to distributions to the holders of the respective Classes
of Private Certificates (other than the REMIC Residual
Certificates) as described herein (provided that no
distributions of principal will be made in respect of any
Class of Private Certificates until the aggregate
Certificate Balance of the Class A-1, Class A-2, Class A-3,
Class B, Class C and Class D Certificates has been reduced
to zero). See 'DESCRIPTION OF THE CERTIFICATES -- Dis-
tributions -- Application of the Available Distribution
Amount' herein.
Notwithstanding the priority of distributions set forth above, if,
on any Distribution Date, (i) the Class C Certificates have been
retired or (ii) the Class G, Class F and Class E Certificates
have been reduced to zero by any Realized Losses and Additional
Trust Fund Expenses, then the holders of the Class A-PO
Certificates will be entitled to distributions of principal in
an amount (not to exceed the then outstanding Certificate
Balance of such Class of Certificates) equal to the Principal
Distribution Amount for such Distribution Date until the
Class A-PO Certificates have been reduced to zero.
The 'Distributable Certificate Interest' in respect of any Class
of the Sequential Pay Certificates for any Distribution Date
(other than the Class A-PO Certificates which are not entitled
to any distributions in respect of interest) will generally
equal one month's interest at the applicable Pass-Through Rate
accrued on the Certificate Balance of such Class of Certificates
outstanding immediately prior to such Distribution Date, reduced
(to not less than zero) by such Class's allocable share (in each
case, calculated as described herein) of any Net Aggregate
Prepayment Interest Shortfall (as described below) for such
Distribution Date. The 'Distributable Certificate Interest' in
respect of the Class IO Certificates will equal the sum of the
interest due on each of the Components. Interest payable on such
Certificates will be calculated on a 30/360 basis. See
'SERVICING OF THE MORTGAGE LOANS -- Servicing and Other
Compensation and Payment of Expenses' and 'DESCRIPTION OF THE
CERTIFICATES -- Distributions -- Distributable Certificate
Interest' herein.
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The 'Principal Distribution Amount' for any Distribution Date will
generally equal the aggregate of the following: (a) the
aggregate of the principal portions of all Sched-
uled Payments (other than Balloon Payments) and any Assumed
Scheduled Payments due or deemed due on or in respect of the
Mortgage Loans for their respective Due Dates occurring during
the related Collection Period; (b) the aggregate of all
principal prepayments received on the Mortgage Loans during the
related Collection Period; (c) with respect to any Mortgage Loan
as to which the related stated maturity date occurred during or
prior to the related Collection Period, any payment of principal
made by or on behalf of the related borrower during the related
Collection Period, net of any portion of such payment that
represents a recovery of the principal portion of any Scheduled
Payment (other than a Balloon Payment) due or the principal
portion of any Assumed Scheduled Payment deemed due, in respect
of such Mortgage Loan on a Due Date during or prior to the
related Collection Period and not previously recovered; (d) the
aggregate of all liquidation proceeds, insurance proceeds,
condemnation awards and proceeds of Mortgage Loan repurchases
that were received on or in respect of Mortgage Loans during the
related Collection Period and that were identified and applied
by the Master Servicer as recoveries of principal, in each case
net of any portion of such amounts that represents a recovery of
the principal portion of any Scheduled Payment (other than a
Balloon Payment) due or of the principal portion of any Assumed
Scheduled Payment deemed due, in respect of the related Mortgage
Loan on a Due Date during or prior to the related Collection
Period and not previously recovered; (e) if such Distribution
Date is subsequent to the initial Distribution Date, the excess,
if any, of the Principal Distribution Amount for the immediately
preceding Distribution Date, over the aggregate distributions of
principal made on the Certificates on such immediately preceding
Distribution Date; and (f) any amounts not otherwise distributed
as interest on any Class of Certificates in respect of an
Appraisal Reduction Amount.
The 'Scheduled Payment' due on any Mortgage Loan on any related
Due Date will be the amount of the Monthly Payment that would
have been due thereon on such date, without regard to any
waiver, modification or amendment of such Mortgage Loan granted
or agreed to by the Master Servicer or the Special Servicer or
otherwise resulting in connection with a bankruptcy or similar
proceeding involving the related borrower, and assuming that
each prior Scheduled Payment has been made in a timely manner.
The 'Assumed Scheduled Payment' is an amount deemed due in
respect of any Balloon Loan that is delinquent in respect of its
Balloon Payment beyond the first Determination Date that follows
its stated maturity date. The Assumed Scheduled Payment deemed
due on any such Balloon Loan on its stated maturity date
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and on each successive related Due Date that it remains or is
deemed to remain outstanding will equal the Scheduled Payment
that would have been due thereon on such date if the related
Balloon Payment had not come due but rather such Mortgage Loan
had continued to amortize in accordance with such loan's
amortization schedule, if any, in effect prior to its stated
maturity date. The 'Determination Date' will be the 12th day of
each month (or, if not a business day, the next preceding
business day). See 'DESCRIPTION OF THE CERTIFICATES --
Distributions -- Principal Distribution Amount' herein.
Reimbursements of previously allocated Realized Losses and
Additional Trust Fund Expenses will not constitute distributions
of principal for any purpose and will not result in an
additional reduction in the Certificate Balance of the Class of
Certificates in respect of which any such reimbursement is made.
The holders of the Certificates (other than the Class A-PO
Certificates) may also receive portions of any Prepayment
Premiums and Yield Maintenance Charges to the extent described
under 'DESCRIPTION OF THE CERTIFICATES -- Distributions --
Allocation of Prepayment Premiums and Yield Maintenance Charges'
herein. Such distributions will be in addition to the
distributions of interest, if any, made to such holders from the
Available Distribution Amount on each Distribution Date.
P&I Advances................................. Subject to a recoverability determination, as described herein,
and further subject to the reduced advancing obligations in
respect of certain Required Appraisal Loans, the Master Servicer
will be required to make advances (each, a 'P&I Advance') with
respect to each Distribution Date in an amount that is generally
equal to the aggregate of all Scheduled Payments (other than
Balloon Payments) and any Assumed Scheduled Payments, net of
related Master Servicing Fees and any related Principal Recovery
Fees (each as defined herein), due or deemed due, as the case
may be, on or in respect of the Mortgage Loans during the
related Collection Period, in each case to the extent that such
amount was not paid by or on behalf of the related borrower or
otherwise collected as of the close of business on the last day
of the related Collection Period.
As more fully described herein, the Master Servicer will be
entitled to interest on any P&I Advance made by it, and each of
the Master Servicer and any Special Servicer will be entitled to
interest on certain reimbursable servicing expenses incurred by
either of them. Such interest will accrue from the date any such
P&I Advance is made or such servicing expense is incurred at a
rate per annum equal to the 'prime rate' published in the 'Money
Rates' Section of The Wall Street Journal, as such 'prime rate'
may change from time to time (the 'Reimbursement Rate') and will
be paid, contemporaneously with
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the reimbursement of such P&I Advance or servicing expense, out
of general collections on the Mortgage Pool then on deposit in
the Certificate Account. See 'DESCRIPTION OF THE CERTIFICATES --
P&I Advances' herein and 'DESCRIPTION OF THE CERTIFICATES --
Advances in Respect of Delinquencies' and 'DESCRIPTION OF THE
POOLING AGREEMENTS -- Certificate Account' in the Prospectus.
Compensating Interest Payments............... To the extent of its servicing compensation for the related
Collection Period, including Prepayment Interest Excesses
received during such Collection Period, the Master Servicer is
required to make a non-reimbursable payment (a 'Compensating
Interest Payment') with respect to each Distribution Date to
cover the aggregate of any Prepayment Interest Shortfalls
incurred during such Collection Period. A 'Prepayment Interest
Shortfall' is a shortfall in the collection of a full month's
interest (net of related Master Servicing Fees and the Trustee
Fee) on any Mortgage Loan by reason of a full or partial
principal prepayment made prior to its Due Date in any
Collection Period. A 'Prepayment Interest Excess' is a payment
of interest (net of related Master Servicing Fees and the
Trustee Fee) made in connection with any full or partial
prepayment of a Mortgage Loan subsequent to its Due Date in any
Collection Period, which payment of interest is intended to
cover the period on and after such Due Date. The 'Net Aggregate
Prepayment Interest Shortfall' for any Distribution Date will be
the amount, if any, by which (a) the aggregate of any Prepayment
Interest Shortfalls incurred during the related Collection
Period exceeds (b) any Compensating Interest Payment made by the
Master Servicer with respect to such Distribution Date. See
'SERVICING OF THE MORTGAGE LOANS -- Servicing and Other
Compensation and Payment of Expenses' and 'DESCRIPTION OF THE
CERTIFICATES -- Distributions -- Distributable Certificate
Interest' herein.
Subordination; Allocation of Losses and
Certain Expenses........................... The rights of holders of the Class B, Class C, Class D, Class E,
Class F, Class G and REMIC Residual Certificates (collectively,
the 'Subordinate Certificates'), to receive distributions of
amounts collected or advanced on the Mortgage Loans will, in
each case, be subordinated, to the extent described herein, to
the rights of holders of the Class A-1, Class A-2 and Class A-3
Certificates (collectively, the 'Senior Certificates') and each
other such Class of Subordinate Certificates, if any, with an
earlier alphabetical class designation. This subordination is
intended to enhance the likelihood of timely receipt by the
holders of the Senior Certificates of the full amount of
Distributable Certificate Interest payable in respect of such
Classes of Certificates (other than the Class A-PO Certificates)
on each Distribution Date, and the ultimate receipt by the
holders of the Senior Certificates of principal equal to the
entire respective Certificate Bal
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ances of such Certificates. Similarly, but to decreasing
degrees, this subordination is also intended to enhance the
likelihood of timely receipt by the holders of the Class B,
Class C and Class D Certificates of the full amount of
Distributable Certificate Interest payable in respect of such
Classes of Certificates on each Distribution Date, and the
ultimate receipt by the holders of such Certificates of
principal equal to the entire respective Certificate Balances of
those Classes of Certificates. The protection afforded to the
holders of the Offered Certificates by means of the
subordination referred to above will be accomplished by (i) the
application of the Available Distribution Amount on each
Distribution Date in the order described above in this Summary
under ' -- Description of the Certificates -- Distributions' and
(ii) by the allocation of Realized Losses and Additional Trust
Fund Expenses as described below. In addition, if, on any
Distribution Date, (i) the Class C Certificates have been
retired or (ii) the Class G, Class F and Class E Certificates
have been reduced to zero by any Realized Losses and Additional
Trust Fund Expenses, then the holders of the Class A-PO
Certificates will be entitled to distributions of principal
prior to any other outstanding Class of Certificates. No other
form of Credit Support will be available for the benefit of the
holders of the Offered Certificates.
On each Distribution Date, following all distributions on the
Certificates to be made on such date, the aggregate of all
Realized Losses and Additional Trust Fund Expenses that have
been incurred since the Cut-off Date through the end of the
related Collection Period and that have not previously been so
allocated will be allocated first to the Class G, Class F, Class
E, Class D, Class C and Class B Certificates, in that order,
until the Certificate Balance of each such Class has been
reduced to zero. Thereafter any additional Realized Losses and
Additional Trust Fund Expenses will be allocated to the Class
A-1, Class A-2 and Class A-3 Certificates, pro rata, in
proportion to their outstanding Certificate Balances; provided
that if such losses or expenses occur with respect to a Discount
Mortgage Loan, an amount equal to the product of the Class A-PO
Fraction and the amount of such loss or expense shall be
allocated to the Class A-PO Certificates and the remainder shall
be allocated pro rata to the Class A-1, Class A-2 and Class A-3
Certificates (in each case in reduction of their respective
Certificate Balances), but in the aggregate only to the extent
that the aggregate Certificate Balance of such Classes of
Certificates remaining outstanding after giving effect to the
distributions on such Distribution Date exceeds the aggregate
Stated Principal Balance of the Mortgage Pool that will be
outstanding immediately following such Distribution Date. See
'DESCRIPTION OF THE CERTIFICATES -- Subordination; Allocation of
Losses and Certain Expenses' herein.
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Treatment of REO Properties.................. Notwithstanding that a Mortgaged Property may be acquired on
behalf of the Certificateholders through foreclosure, deed in
lieu of foreclosure or otherwise (upon acquisition, an 'REO
Property'), the related Mortgage Loan will be treated, for
purposes of (i) determining distributions on the Certificates,
(ii) allocations of Realized Losses and Additional Trust Fund
Expenses to the Certificates and (iii) the amount of fees
payable to the Trustee, the Master Servicer and the Special
Servicer under the Pooling and Servicing Agreement, as having
remained outstanding until such REO Property is liquidated. In
connection therewith, operating revenues and other proceeds
derived from such REO Property (net of related operating costs,
including certain reimbursements payable to the Master Servicer
or any separate Special Servicer in connection with the
operation and disposition of such REO Property) will be
'applied' by the Master Servicer as principal, interest and
other amounts that would have been 'due' on such Mortgage Loan,
and the Master Servicer will make P&I Advances in respect of
such Mortgage Loan, in all cases as if such Mortgage Loan had
remained outstanding.
Optional Termination......................... Each of the Depositor and the Master Servicer will have an option
to purchase all of the Mortgage Loans and all REO Properties, if
any, and thereby effect termination of the Trust Fund and early
retirement of the then outstanding Certificates, on any
Distribution Date on which the aggregate Stated Principal
Balance of the Mortgage Pool is less than 1% of the Initial Pool
Balance. See 'DESCRIPTION OF THE CERTIFICATES -- Termination'
herein and in the Prospectus.
Certain Investment Considerations............ The yield to maturity of a Class A-1, Class A-2, Class A-3, Class
B, Class C or Class D Certificate purchased at a discount or
premium will be affected by the rate of prepayments and other
unscheduled collections of principal on or in respect of the
Mortgage Loans and the allocation thereof to reduce the
principal balance of such Certificate. An investor should
consider, in the case of any such Certificate purchased at a
discount, the risk that a slower than anticipated rate of
prepayments could result in a lower than anticipated yield and,
in the case of any such Certificate purchased at a premium, the
risk that a faster than anticipated rate of prepayments could
result in a lower than anticipated yield. IN ADDITION, THE YIELD
TO MATURITY ON THE CLASS A-PO CERTIFICATES WILL BE HIGHLY
SENSITIVE TO THE RATE AND TIMING OF PRINCIPAL PAYMENTS
(INCLUDING BY REASON OF PREPAYMENTS, DEFAULTS AND LIQUIDATIONS)
ON THE MORTGAGE LOANS, PARTICULARLY, THE DISCOUNT MORTGAGE
LOANS, AND INVESTORS IN THE CLASS A-PO CERTIFICATES SHOULD FULLY
CONSIDER THE ASSOCIATED RISKS, INCLUDING THE RISK THAT A SLOWER
THAN EXPECTED RATE OF PRINCIPAL PAYMENTS AND PRINCIPAL
PREPAYMENTS IN RESPECT OF THE MORTGAGE LOANS, PARTICULARLY, THE
DISCOUNT MORTGAGE LOANS, COULD RESULT IN A LOWER THAN EXPECTED
YIELD ON THE CLASS A-PO CERTIFICATES. See 'YIELD AND MA
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TURITY CONSIDERATIONS' herein and in the Prospectus. The
allocation to any Class (other than the Class A-PO Certificates)
of any Prepayment Premium or Yield Maintenance Charge may be
insufficient to offset fully the effects on the reduction to the
anticipated yield to maturity resulting from the corresponding
principal prepayment. See 'DESCRIPTION OF CERTIFICATES --
Distributions -- Allocation of Prepayment Premiums and Yield
Maintenance Charges' herein.
In addition, insofar as an investor's initial investment in any
Offered Certificate is returned in the form of payments of
principal thereon, there can be no assurance that such amounts
can be reinvested in comparable alternative investments with
comparable yields. Investors in the Offered Certificates should
consider that, as of the Cut-off Date, certain of the Mortgage
Loans may be prepaid at any time and the remainder may be
prepaid at any time after the expiration of the applicable
Lock-Out Period (as defined herein), subject, in most cases, to
the payment of a Prepayment Premium or Yield Maintenance Charge.
See 'DESCRIPTION OF THE MORTGAGE POOL -- Prepayment Provisions'
herein. Accordingly, the rate of prepayments on the Mortgage
Loans is likely to be inversely related to the level of
prevailing market interest rates (and, presumably, to the yields
on comparable alternative investments).
Certain Federal Income Tax Consequences...... Three separate 'real estate mortgage investment conduit' ('REMIC')
elections will be made with respect to the Trust Fund for
federal income tax purposes with the resulting REMICs being
herein referred to as 'REMIC I', 'REMIC II' and 'REMIC III'. The
assets of REMIC I will consist of the Mortgage Loans, any REO
Properties acquired on behalf of the Certificateholders and the
Certificate Account (see 'DESCRIPTION OF THE POOLING
AGREEMENTS -- Certificate Account' in the Prospectus). For
federal income tax purposes, (a) the separate noncertificated
regular interests in REMIC I will be the 'regular interests' in
REMIC I and will constitute the assets of REMIC II, (b) the
Class R-I Certificates will be the sole class of 'residual
interests' in REMIC I, (c) the separate noncertificated regular
interests in REMIC II will be the 'regular interests' in REMIC
II and will constitute the assets of REMIC III, (d) the Class
R-II Certificates will be the sole class of 'residual interests'
in REMIC II, (e) the REMIC Regular Certificates will be the
'regular interests' in REMIC III and generally will be treated
as debt instruments of REMIC III, and (f) the Class R-III
Certificates will be the sole class of 'residual interests' in
REMIC III.
The Class A-1, Class A-2, Class A-3, Class B and Class C
Certificates will not, but the Class D and Class A-PO
Certificates will, be treated as having been issued with
original issue discount for federal income tax reporting
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purposes. The prepayment assumption that will be used for
purposes of computing the accrual of original issue discount,
market discount and premium, if any, for federal income tax
purposes will be equal to a CPR of 0%. However, no
representation is made that the Mortgage Loans will prepay at
that rate or at any other rate.
The Offered Certificates will be treated as 'qualifying real
property loans' within the meaning of Section 593(d) of the Code
and 'real estate assets' within the meaning of Section
856(c)(5)(A) of the Code. In addition, interest (including
original issue discount) on the Offered Certificates will be
interest described in Section 856(c)(3)(B) of the Code. However,
the Offered Certificates will generally only be considered
assets described in Section 7701(a)(19)(C) of the Code to the
extent that the Mortgage Loans are secured by residential
property and, accordingly, an investment in the Offered
Certificates may not be suitable for certain thrift
institutions.
For further information regarding the federal income tax
consequences of investing in the Offered Certificates, see
'CERTAIN FEDERAL INCOME TAX CONSEQUENCES' herein and in the
Prospectus.
ERISA Considerations......................... A fiduciary of any employee benefit plan or other retirement
arrangement subject to the Employee Retirement Income Security
Act of 1974, as amended ('ERISA'), or Section 4975 of the Code
(a 'Plan') should review carefully with its legal advisors
whether the purchase or holding of Offered Certificates could
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 to an investment therein.
The U.S. Department of Labor has issued to Merrill Lynch an
individual exemption, Prohibited Transaction Exemption 90-29,
which generally exempts from the application of certain of the
prohibited transaction provisions of Section 406 of ERISA and
the excise taxes imposed on such prohibited transactions by
Sections 4975(a) and (b) of the Code and Section 502(i) of
ERISA, transactions relating to the purchase, sale and holding
of pass-through certificates underwritten by Merrill Lynch and
the servicing and operation of related asset pools, provided
that certain conditions are satisfied.
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The Depositor expects that the Prohibited Transaction Exemption
will generally apply to the Class A-1, Class A-2, Class A-3 and
Class A-PO Certificates, but it will not apply to the other
Classes of Offered Certificates. ACCORDINGLY, EXCEPT AS
DESCRIBED HEREIN, THE CLASS B, CLASS C AND CLASS D CERTIFICATES
SHOULD NOT BE ACQUIRED BY A PLAN. See 'ERISA CONSIDERATIONS'
herein and in the Prospectus.
Ratings...................................... It is a condition of their issuance that the Offered Certificates
receive the ratings from each of Fitch Investors Service, L.P.
('Fitch') and, except with respect to the Class A-PO
Certificates, Standard & Poor's Ratings Services, a division of
McGraw Hill, Inc. ('Standard & Poor's'; and together with Fitch,
the 'Rating Agencies') set forth on the cover page of this
Prospectus Supplement. A security rating is not a recommendation
to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating organization.
A security rating does not address the frequency of prepayments
of Mortgage Loans or the corresponding effect on yield to
investors, nor does a security rating address the likelihood of
receipt of Prepayment Premiums or Yield Maintenance Charges or
the tax treatment of the Certificates. See 'RATINGS' herein and
'RISK FACTORS -- Limited Nature of Ratings' in the Prospectus.
Legal Investment............................. The Offered Certificates will not constitute 'mortgage related
securities' for purposes of the Secondary Mortgage Market
Enhancement Act of 1984. As a result, the appropriate
characterization of the Offered Certificates under various legal
investment restrictions, and thus the ability of investors
subject to these restrictions to purchase the Offered
Certificates of any Class, may be subject to significant
interpretative uncertainties. In addition, institutions whose
investment activities are subject to review by federal or state
regulatory authorities may be or may become subject to
restrictions on the investment by such institutions in certain
forms of mortgage backed securities. Investors should consult
their own legal advisors to determine whether and to what extent
the Offered Certificates constitute legal investments for them.
See 'LEGAL INVESTMENT' herein and in the Prospectus.
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RISK FACTORS
Prospective purchasers of the Offered Certificates of any Class should
consider, among other things, the following risk factors (as well as the risk
factors set forth under 'RISK FACTORS' in the Prospectus) in connection with an
investment therein.
THE CERTIFICATES
Limited Liquidity. There is currently no secondary market for the Offered
Certificates. While each of Merrill Lynch and First Union currently intends to
make a secondary market in the Offered Certificates, neither is under any
obligation to do so. Accordingly, there can be no assurance that a secondary
market for the Offered Certificates will develop. Moreover, if a secondary
market does develop, there can be no assurance that it will provide holders of
the Offered Certificates with liquidity of investment or that it will continue
for the life of the Offered Certificates. Any such secondary market may provide
less liquidity to investors than any comparable market for securities that
evidence, for example, interests solely in single-family mortgage loans. The
Certificates will not be listed on any securities exchange.
Certain Yield and Maturity Considerations. The yield on the Class A-PO
Certificates as well as any other Offered Certificate that is purchased at a
discount or premium will be affected by the rate and timing of principal
payments applied in reduction of the principal amount of such Certificate, which
in turn will be affected by (i) the rate and timing of principal payments and
collections on the Mortgage Loans, particularly the Discount Mortgage Loans,
particularly unscheduled payments or collections in the form of voluntary
prepayments of principal or unscheduled recoveries of principal due to defaults,
casualties or condemnations whether before or after the scheduled maturity date
of the related Mortgage Loans, and (ii) by the order of priority of
distributions of principal in respect of the Certificates. The rate and timing
of unscheduled payments and collections of principal on the Mortgage Loans is
impossible to accurately predict and will be affected by a variety of factors,
including, without limitation, the level of prevailing interest rates,
restrictions on voluntary prepayments contained in the Mortgage Notes, the
availability of mortgage credit and other economic, demographic, geographic, tax
and legal factors. In general, however, if prevailing interest rates fall
significantly below the Mortgage Rates on the Mortgage Loans, the Mortgage Loans
are likely to prepay at a higher rate than if prevailing rates remain at or
above those Mortgage Rates. As described herein, the Principal Distribution
Amount for each Distribution Date will be distributable first, in respect of the
Class A-PO Certificates, next entirely in reduction of the Certificate Balance
of the Class A-1 Certificates until the Certificate Balance thereof is reduced
to zero, and will thereafter be distributable in its entirety in respect of each
remaining Class of Sequential Pay Certificates, sequentially in alphabetical and
numerical order of Class designation, until the Certificate Balance of each such
Class is, in turn, reduced to zero. See 'DESCRIPTION OF THE
CERTIFICATES -- Distributions -- Application of the Available Distribution
Amount' herein. Accordingly, the actual rate of principal payments on the
Mortgage Loans may have different effects on the yields of the respective
Classes of Offered Certificates. The yield on the Class A-PO Certificates will
be extremely sensitive to the rate and timing of principal payments on the
Mortgage Loans, and the more quickly the Certificate Balance of the Class A-PO
Certificates are reduced, the greater will be the negative effect on its yield.
Accordingly, prospective investors in the Class A-PO Certificates should
consider the associated risks, including the risk that a slower than expected
rate of prepayments on the Mortgage Loans, particularly the Discount Mortgage
Loans, could result in the failure of such investors to recoup their initial
investments.
The yield on any Offered Certificate also will be affected by the rate and
timing of losses attributable to defaults on the Mortgage Loans, the severity of
such losses and the extent to which such losses and related expenses are applied
in reduction of the actual or notional principal amount of such Certificate or
otherwise reduce the amount of funds available for distribution to the holder of
such Certificate. As, and to the extent described herein, the Private
Certificates (other than the Class IO Certificates) are subordinate in right and
time of payment to the Offered Certificates and will bear shortfalls in
collections and losses incurred in respect of the Mortgage Loans prior to the
Offered Certificates; and the Class B, Class C and Class D Certificates are
subordinate in right and time of payment to the Class A-1, Class A-2, Class A-3,
Class A-PO and Class IO Certificates and will bear
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such shortfalls and losses prior to the Class A-1, Class A-2, Class A-3, Class
A-PO and Class IO Certificates, in reverse alphabetical order of Class
designation. Even though (i) the Class A-3 Certificates will receive principal
payments only after the Certificate Balances of the Class A-2 and Class A-1
Certificates have been reduced to zero and (ii) the Class A-2 Certificates will
receive principal payment only after the Certificate Balance of the Class A-1
Certificates has been reduced to zero, the Class A-1, Class A-2, Class A-3 and
Class A-PO Certificates will bear shortfalls in collections and losses incurred
in respect of the Mortgage Loans pro rata, in proportion to their outstanding
Certificate Balances. See 'DESCRIPTION OF THE CERTIFICATES -- Distributions' and
' -- Subordination; Allocation of Losses and Certain Expenses' herein and 'YIELD
AND MATURITY CONSIDERATIONS' herein and in the Prospectus.
Potential Conflicts of Interest. Subject to certain conditions described
herein, the Pooling and Servicing Agreement will permit the holder (or holders)
of the majority of the Voting Rights allocated to the Class of Sequential Pay
Certificates that has the latest alphabetical Class designation and that has a
Certificate Balance that is greater than 20% of its original Certificate Balance
(or, if no Class of Sequential Pay Certificates has a Certificate Balance that
is greater than 20% of its original Certificate Balance, the Class of Sequential
Pay Certificates with the latest alphabetical Class designation) to replace the
Special Servicer or any successor thereafter appointed. An appointing
Certificateholder will not be prohibited from appointing itself or an affiliate.
In addition, the Special Servicer may also provide sub-servicing functions with
respect to the Mortgage Loans, pursuant to a sub-servicing agreement with the
Master Servicer. As described herein, any such Special Servicer will have
considerable latitude in determining to liquidate or modify defaulted Mortgage
Loans. See 'SERVICING OF THE MORTGAGE LOANS -- Modifications, Waivers and
Amendments' herein. Although any Special Servicer will be obligated to observe
the terms of the Pooling and Servicing Agreement and will be governed by the
servicing standard described herein, it may, especially if it is itself a
Certificateholder, have interests when dealing with defaulted Mortgage Loans
that are in conflict with those of holders of Offered Certificates. For
instance, a Special Servicer that is a Certificateholder could seek to mitigate
the potential for loss to its Class from a troubled Mortgage Loan by deferring
enforcement in the hope of maximizing future proceeds. However, a market
downturn could result in less proceeds to the Trust Fund than would have been
realized if earlier action had been taken.
THE MORTGAGE LOANS
Risks of Lending on Income-Producing Properties. The Mortgaged Properties
consist entirely of income-producing real estate. Lending on the security of
income-producing real estate is generally viewed as exposing a lender to a
greater risk of loss than lending on the security of single-family residences.
Income property lending typically involves larger loans than single-family
lending. In addition, and unlike loans made on the security of single family
residences, repayment of loans made on the security of income-producing real
property depends upon the ability of the related real estate project (i) to
generate rental income sufficient to pay operating expenses and leasing
commissions, to make necessary repairs, tenant improvements and capital
improvements and to pay debt service and (ii) in the case of loans that do not
fully amortize over their terms, to retain sufficient value to permit the
borrower to pay off the loan at maturity by sale or refinancing. A number of
factors, many beyond the control of the property owner, can affect the ability
of an income-producing real estate project to generate sufficient net operating
income to pay debt service and/or to maintain its value. Among these factors are
economic conditions generally and in the area of the project, the age, quality
and design of the project and the degree to which it competes with other
projects in the area, changes or continued weakness in specific industry
segments, increases in operating costs, the willingness and ability of the owner
to provide capable property management and maintenance and, in the case of
Mortgaged Properties that are retail, industrial/warehouse or office properties,
the degree to which the project's revenue is dependent upon a single tenant or
user, a small group of tenants, tenants concentrated in a particular business or
industry and the competition to any such tenants. If leases are not renewed or
replaced, if tenants default and/or if rental rates fall and/or if operating
expenses increase, the borrower's ability to repay the loan may be impaired and
the resale value of the property, which is substantially dependent upon the
property's ability to generate income, may decline. In addition, there are other
factors, including changes in zoning or tax laws, the availability of credit for
refinancing, and
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changes in interest rate levels that may adversely affect the value of a project
(and thus the borrower's ability to sell or refinance) without necessarily
affecting the ability to generate current income.
In addition, particular types of income properties are exposed to
particular risks. For instance, office properties may require their owners to
expend significant amounts of cash to pay for general capital improvements,
tenant improvements and costs of re-leasing space. Also, office properties that
are not equipped to accommodate the needs of modern businesses may become
functionally obsolete and thus non-competitive. Multifamily projects are part of
a market that, in general, is characterized by low barriers to entry. Thus, a
particular apartment market with historically low vacancies could experience
substantial new construction, and a resultant oversupply of units, in a
relatively short period of time. Since multifamily apartment units are typically
leased on a short-term basis, the tenants who reside in a particular project
within such a market may easily move to alternative projects with more desirable
amenities or locations. The rent limitations imposed on Section 42 Properties
may adversely affect the ability of the applicable borrowers to increase rents
to maintain such Mortgaged Properties in proper condition during periods of
rapid inflation or declining market value of such Mortgaged Properties. In
addition, the income restrictions on tenants imposed by Section 42 of the Code
may reduce the number of eligible tenants in such Mortgaged Properties and
result in a reduction in occupancy rates applicable thereto. See 'DESCRIPTION OF
THE MORTGAGE POOL -- Certain Terms and Conditions of the Mortgage Loans -- Low
Income Housing Tax Credits' herein. Shopping centers, in general, are affected
by the health of the retail industry, which is currently undergoing a
consolidation and is experiencing changes due to the growing market share of
'off-price' retailing, and a particular shopping center may be adversely
affected by the bankruptcy or decline in drawing power of an anchor tenant, a
shift in consumer demand due to demographic changes (for example, population
decreases or changes in average age or income) and/or changes in consumer
preference (for example, to discount retailers). See 'DESCRIPTION OF THE
MORTGAGE POOL -- Additional Mortgage Loan Information -- Certain Lease Matters'
herein. Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment (for
example, a decline in defense spending), and a particular industrial property
that suited the needs of its original tenant may be difficult to relet to
another tenant or may become functionally obsolete relative to newer properties.
The successful operation of a hospitality property with a franchise affiliation
may depend in part upon the strength of the franchisor, the public perception of
the franchise service mark and the continued existence of the franchise license
agreement. The transferability of a franchise license agreement may be
restricted, and a lender or other person that acquires title to a hotel property
as a result of foreclosure may be unable to succeed to the borrower's rights
under the franchise license agreement. Moreover, the transferability of a
hotel's operating, liquor and other licenses upon a transfer of the hotel,
whether through purchase or foreclosure, is subject to local law requirements.
See 'RISK FACTORS -- Risks Associated with Certain Mortgage Loans and Mortgaged
Properties' in the Prospectus.
Mortgage Loans secured by liens on residential health care facilities pose
risks not associated with loans secured by liens on other types of
income-producing real estate. Providers of long-term nursing care, assisted
living and other medical services are subject to federal and state laws that
relate to the adequacy of medical care, distribution of pharmaceuticals, rate
setting, equipment, personnel, operating policies and additions to facilities
and services and, to the extent dependent on patients whose fees are reimbursed
by private insurers, to the reimbursement policies of such insurers. The failure
of any of such borrower to maintain or renew any required license or regulatory
approval could prevent it from continuing operations at a Mortgaged Property (in
which case no revenues would be received from such property or portion thereof
requiring licensing) or, if applicable, bar it from participation in government
reimbursement programs. Furthermore, in the event of foreclosure, there can be
no assurance that the Trustee or any other purchaser at a foreclosure sale would
be entitled to the rights under such licenses and such party may have to apply
in its own right for such a license. There can be no assurance that a new
license could be obtained. To the extent any nursing home receives a significant
portion of its revenues from government reimbursement programs, primarily
Medicaid and Medicare, such revenue may be subject to statutory and regulatory
changes, retroactive rate adjustments, administrative rulings, policy
interpretations, delays by fiscal intermediaries and government funding
restrictions. Moreover, governmental payors have employed cost-containment
measures that limit payments to health care
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providers, and there are currently under consideration various proposals in the
United States Congress that could materially change or curtail those payments.
Accordingly, there can be no assurance that payments under government
reimbursement programs will, in the future, be sufficient to fully reimburse the
cost of caring for program beneficiaries. If not, net operating income of the
Mortgaged Properties that receive substantial revenues from those sources, and
consequently the ability of the related borrowers to meet their Mortgage Loan
obligations, could be adversely affected. Under applicable federal and state
laws and regulations, including those that govern Medicare and Medicaid
programs, only the provider who actually furnished the related medical goods and
services may sue for or enforce its rights to reimbursement. Accordingly, in the
event of foreclosure, none of the Trustee, the Master Servicer, the Special
Servicer or a subsequent lessee or operator of the property would generally be
entitled to obtain from federal or state governments any outstanding
reimbursement payments relating to services furnished at the respective
properties prior to such foreclosure.
Nonrecourse Mortgage Loans. The Mortgage Loans are generally not insured
or guaranteed by any governmental entity, private mortgage insurer or any other
person. The Depositor has not undertaken any evaluation of the significance of
the recourse provisions of Mortgage Loans for recourse against the related
borrower or another person in the event of a default. Accordingly, investors
should consider all of the Mortgage Loans to be non-recourse loans as to which
recourse in the case of default will be limited to the related Mortgaged
Property.
Environmental Law Considerations. Contamination of real property may give
rise to a lien on that property to assure payment of the cost of clean-up or, in
certain circumstances, may result in liability to the lender for that cost. Such
contamination may also reduce the value of a property. A 'Phase I' environmental
site assessment was performed at each of the Mortgaged Properties and no such
assessment or additional assessments (including any 'Phase II' environmental
site assessments) revealed any environmental condition or circumstance
considered material and adverse to the interests of the holders of the Offered
Certificates. See 'DESCRIPTION OF THE MORTGAGE POOL -- Assessments of Property
Condition -- Environmental and Engineering Assessments' herein.
The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a Mortgaged Property prior to
acquiring title thereto or assuming its operation. Such requirement effectively
precludes enforcement of the security for the related Mortgage Note until a
satisfactory environmental site assessment is obtained (or until any required
remedial action is thereafter taken), but will decrease the likelihood that the
Trust Fund will become liable for a material adverse environmental condition at
the Mortgaged Property. However, there can be no assurance that the requirements
of the Pooling and Servicing Agreement will effectively insulate the Trust Fund
from potential liability for a materially adverse environmental condition at any
Mortgaged Property. See 'DESCRIPTION OF THE POOLING AGREEMENTS -- Realization
Upon Defaulted Mortgage Loans', 'RISK FACTORS -- Environmental Risks' and
'CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS -- Environmental Considerations' in the
Prospectus.
Balloon Payments. One hundred and forty-eight (148) of the Mortgage Loans
do not fully amortize over their terms to maturity. Thus, such Mortgage Loans
will have Balloon Payments due on their respective stated maturity dates unless
prepaid prior thereto. Loans with Balloon Payments involve a greater risk to a
lender than fully-amortizing loans because the ability of a borrower to make a
Balloon Payment typically will depend upon its ability either to fully refinance
the loan or to sell the related mortgaged property at a price sufficient to
permit the borrower to make the Balloon Payment. Moreover, and whether or not
losses are ultimately sustained, any delay in the collection of a Balloon
Payment that would otherwise be distributable in respect of a Class of Offered
Certificates will likely extend the weighted average life of such Class. The
ability of a borrower to effect a refinancing or sale will be affected by a
number of factors, including the value of the related Mortgaged Property, the
level of available mortgage rates at the time of sale or refinancing, the
borrower's equity in the Mortgaged Property, the financial condition and
operating history of the borrower and the Mortgaged Property, tax laws,
prevailing general economic conditions and the availability of credit for loans
secured by multifamily or commercial, as the case may be, real properties
generally. See 'RISK FACTORS -- Balloon Payments; Borrower Default' in the
Prospectus.
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In order to maximize recoveries on defaulted Mortgage Loans, the Pooling
and Servicing Agreement permits the Master Servicer, or the Special Servicer, to
extend and modify Mortgage Loans that are in material default or as to which a
payment default (including the failure to make a Balloon Payment) is imminent;
subject, however, to the limitations described under 'SERVICING OF THE MORTGAGE
LOANS -- Modifications, Waivers and Amendments' herein. There can be no
assurance, however, that any such extension or modification will increase the
present value of recoveries in a given case. Any delay in collection of a
Balloon Payment that would otherwise be distributable in respect of a Class of
Offered Certificates, whether such delay is due to borrower default or to
modification of the related Mortgage Loan, will likely extend the weighted
average life of such Class of Offered Certificates. See 'YIELD AND MATURITY
CONSIDERATIONS' herein and in the Prospectus.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 159 conventional, fixed rate Mortgage
Loans with an Initial Pool Balance of $647,219,459, equal to the aggregate
Cut-off Date Balance of such Mortgage Loans. The Cut-off Date Balances of the
Mortgage Loans range from $748,657 to $24,074,864 and the Mortgage Loans will
have an average Cut-off Date Balance of $4,070,563. All percentages of the
Mortgage Loans, or of any specified group of Mortgage Loans, referred to herein
without further description are approximate percentages by aggregate Cut-off
Date Balance. References to percentages of Mortgaged Properties referred to
herein without further description are references to the percentages of the
Initial Pool Balance represented by the aggregate Cut-off Date Balance of the
related Mortgage Loans. For purposes of calculations herein, each Mortgage Loan
is deemed to be secured by one (1) Mortgaged Property, whether or not such
Mortgaged Property is comprised of more than one parcel of real property. All
numerical information provided herein with respect to the Mortgage Loans is
provided on an approximate basis.
Each Mortgage Loan is evidenced by a promissory note (a 'Mortgage Note')
and secured by a mortgage, deed of trust or other similar security instrument (a
'Mortgage') that creates a first mortgage lien on a fee simple estate in an
income-producing real property (each, a 'Mortgaged Property'). Ninety-four (94)
of the Mortgaged Properties, or 53%, are multifamily rental properties
(including nine (9) Mortgaged Properties, or 3%, which are Section 42
Properties); forty-one (41) of the Mortgaged Properties, or 32%, are retail
properties (including 17 anchored shopping centers, or 19%, and 24 unanchored
shopping centers, or 13%, as indicated on Annex A hereto). No other type of
property accounts for more than 6% of the Mortgaged Properties. The Mortgaged
Properties are located throughout 33 states, including California (26 Mortgaged
Properties, or 21%), Texas (25 Mortgaged Properties, or 13%) and Nevada (11
Mortgaged Properties, or 13%). No other state has a concentration of Mortgaged
Properties equal to or greater than 7%. No loans to one borrower or group of
related borrowers exceed 5% of the Initial Pool Balance. See ' -- Additional
Mortgage Loan Information.'
MLMCI acquired 74 of the Mortgage Loans, or 54% (the 'MLMCI Loans')
concurrently with or shortly after origination from either of two participants
in its commercial and multifamily mortgage loan conduit program. FUNB originated
or acquired concurrently with or shortly after origination 85 of the Mortgage
Loans, or 46% (the 'FUNB Loans'). One hundred and one (101) of the Mortgage
Loans, or 64%, were originated in 1996, and the remaining 58 Mortgage Loans, or
36%, were originated during calendar year 1995.
None of the Mortgage Loans will be more than 30 days delinquent as of the
Cut-off Date, and no Mortgage Loan has been more than 30 days delinquent during
the 12 months preceding the Cut-off Date.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Mortgage Rates; Calculations of Interest. All of the Mortgage Loans bear
interest at Mortgage Rates that will remain fixed for their remaining terms. All
of the Mortgage Loans accrue interest on the basis (a '30/360 basis') of a
360-day year consisting of twelve 30-day months.
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Due Dates. All of the Mortgage Loans have Due Dates (that is, the dates
upon which the related Monthly Payments first become due) that occur on the
first day of each month.
Amortization. One hundred and forty-eight (148) of the Mortgage Loans, or
96%, provide for Monthly Payments based on amortization schedules significantly
longer than their terms to maturity, thereby leaving Balloon Payments due and
payable on their respective maturity dates, unless prepaid prior thereto. The
remainder of the Mortgage Loans, or 4%, are self-amortizing. See 'RISK FACTORS
-- Balloon Payments' herein.
Prepayment Provisions. As of the Cut-off Date, all of the Mortgage Loans
restrict or prohibit voluntary principal prepayment. In general, the Mortgage
Loans either (i) prohibit voluntary prepayments of principal for a period (a
'Lock-out Period') ending on a date specified in the related Mortgage Note and
thereafter, in general, require that prepayments made for most of their
respective terms to maturity be accompanied by a Prepayment Premium or Yield
Maintenance Charge in excess of the amount prepaid (147 Mortgage Loans, or 94%);
(ii) prohibit voluntary payments of principal for a Lock-out Period and
thereafter permit voluntary principal prepayments in whole without material
restrictions (nine (9) Mortgage Loans, or 3%) or (iii) permit voluntary
principal payments provided that the prepayment is accompanied by a Prepayment
Premium or Yield Maintenance Charge for most of their respective terms to
maturity (three (3) Mortgage Loans, or 3%). See ' -- Additional Mortgage Loan
Information' herein. Prepayment Premiums and Yield Maintenance Charges, if and
to the extent collected, will be distributed to the holders of the Offered
Certificates as described herein under 'DESCRIPTION OF THE
CERTIFICATES -- Distributions -- Allocation of Prepayment Premiums and Yield
Maintenance Charges.' The Depositor makes no representation as to the
collectability of any Prepayment Premium or Yield Maintenance Charge.
Neither the Master Servicer nor any Special Servicer will be permitted to
waive or modify the terms of any Mortgage Loan prohibiting voluntary prepayments
during a Lock-out Period or requiring the payment of a Prepayment Premium or
Yield Maintenance Charge except under the circumstances described in 'SERVICING
OF THE MORTGAGE LOANS -- Modifications, Waivers and Amendments' herein.
Non-recourse Obligations. The Mortgage Loans are generally non-recourse
obligations of the related borrowers and, upon any such borrower's default in
the payment of any amount due under the related Mortgage Loan, the holder
thereof may look only to the related Mortgaged Property for satisfaction of the
borrower's obligations. In addition, in those cases where recourse to a borrower
or guarantor is purportedly permitted, the Depositor has not undertaken an
evaluation of the financial condition of any such person, and prospective
investors should thus consider all of the Mortgage Loans to be non-recourse.
'Due-on-Sale' and 'Due-on-Encumbrance' Provisions. All of the Mortgages
contain 'due-on-sale' and 'due-on-encumbrance' clauses that, in general, 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. As provided in the Pooling Servicing Agreement, the
Master Servicer or the Special Servicer, on behalf of the Trust Fund, will
determine, in a manner consistent with the servicing standard described herein
under 'SERVICING OF THE MORTGAGE LOANS -- General,' whether to exercise any
right the holder of any Mortgage may have under any such clause to accelerate
payment of the related Mortgage Loan upon, or to withhold its consent to, any
transfer or further encumbrance of the related Mortgaged Property.
Cross-Default and Cross-Collateralization of Certain Mortgage Loans. Two
(2) of the Mortgage Loans, or 1%, are cross-collateralized and cross-defaulted
with each other. The Master Servicer or the Special Servicer will determine
whether to enforce the cross-default and cross-collateralization rights upon a
mortgage loan default with respect to either of these Mortgage Loans; the
Certificateholders will not have any right to participate in or control any such
determination. No other Mortgage Loans are subject to cross-collateralization or
cross-default provisions.
Low Income Housing Tax Credits. Nine (9) of the Mortgaged Properties, or
3%, are eligible to receive low-income housing tax credits ('Tax Credits')
pursuant to Section 42 of the Code ('Section 42
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Properties'). Section 42 of the Code provides a Tax Credit for owners of
residential rental property meeting the definition of low-income housing who
have received a tax credit allocation from the state or local allocating agency.
At the time the project is 'placed in service' (that is, when the first
unit is available for occupancy), the property owner must make an irrevocable
election of one of two set-aside rules, either (i) at least 20% of the units
must be rented to tenants with incomes of 50% or less of the median income (as
defined below), or (ii) at least 40% of the units must be rented to tenants with
incomes of 60% or less of the median income. The aggregate amount of Tax Credits
the owner is entitled to is based upon the percentage of total units made
available to qualified tenants. Median income is determined by the U.S.
Department of Housing and Urban Development ('HUD') for each metropolitan area
or county in the United States and is adjusted annually.
The Tax Credit provisions require that gross rent for each low-income unit
not exceed 30% of the annual HUD median income, adjusted for the household size
expected to occupy the particular unit. The gross rent charged for a unit must
take into account an allowance for utilities. If utilities are paid by the
tenant, then the maximum allowable Tax Credit rent is reduced according to
utility allowances, as provided in regulations of the Internal Revenue Service.
Under the Tax Credit provisions, a property owner must comply with the
tenant income restrictions and rental restrictions over a 15-year compliance
period. In addition, agreements governing the property may require an 'extended
use period' which has the effect of extending the income and rental restrictions
for an additional period (typically 15 years).
In the event a Tax Credit project does not maintain compliance with the Tax
Credit restrictions on tenant income or rental rates, the owners of the Tax
Credit project may lose the Tax Credits related to the period of the
noncompliance and face the partial recapture of previously taken Tax Credits.
The loss of Tax Credits, and the possibility of recapture of Tax Credits already
taken, may provide significant incentive for project owners to keep the Tax
Credit project in compliance and to fund property operating deficits.
ASSESSMENTS OF PROPERTY CONDITION
Property Inspection. All of the Mortgaged Properties were inspected within
the six (6) months (or 18 months with respect to five (5) of the Mortgaged
Properties) prior to the respective dates of origination or acquisition, by or
on behalf of the related Mortgage Loan Seller to assess their general condition.
No inspection revealed any patent structural deficiency or any deferred
maintenance considered material and adverse to the interests of the holders of
the Offered Certificates and for which adequate reserves have not been
established.
Appraisals. All of the Mortgaged Properties were appraised at the request
of the originator of the related Mortgage Loan by a state certified appraiser or
an appraiser belonging to the Appraisal. The purpose of each appraisal was to
provide an opinion of the fair market value of the related Mortgaged Property.
None of the Depositor, the Underwriters, the Trustee, the Master Servicer or
any other entity has prepared or obtained a separate independent appraisal or
reappraisal. There can be no assurance that another appraiser would have
arrived at the same opinion of value.
Environmental and Engineering Assessments. A 'Phase I' environmental site
assessment was performed with respect to all the Mortgaged Properties within six
(6) months (or 18 months with respect to three (3) of the Mortgaged Properties)
prior to the respective dates of origination. No 'Phase I' assessment or
additional assessments (including any 'Phase II' environmental site assessments)
revealed any environmental condition or circumstance that are considered
material and adverse to the interests of the holders of the Offered
Certificates. In addition, in connection with the origination of each Mortgage
Loan, 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 or environmental issues and recommended capital improvements or
environmental corrections with respect to certain of such Mortgaged Properties.
Generally, with respect to such Mortgaged Properties, the related borrowers were
required to deposit with the applicable Mortgage Loan Seller an amount equal to
at least 125% of the licensed
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engineer's or environmental assessor's estimated cost of the recommended
substantial repairs, corrections or replacements to assure their completion. The
amount of such reserves are indicated on Annex A hereto.
Earthquake Analyses. An architectural and engineering consultant performed
an analysis on 25 of the 26 Mortgaged Properties located in the State of
California (other than one Mortgage Property in California which is a mobile
home park) and one (1) Mortgaged Property located in the State of Kentucky in
order to evaluate the structural and seismic condition of the property and to
assess, based primarily on statistical information, the maximum probable loss or
bounded maximum loss for the property in an earthquake scenario. The resulting
reports, which were prepared not earlier than August 1995, concluded that only
one of those Mortgaged Properties is likely to suffer a maximum probable loss or
bounded maximum loss in excess of 25% of the amount of the estimated replacement
cost of the improvements. The related report for such Mortgaged Property
concluded that such Mortgaged Property is not likely to suffer a maximum
probable loss or bounded maximum loss in excess of 35% of the amount of the
estimated replacement cost of the improvements. However, such Mortgaged Property
has been covered by earthquake insurance since origination of the related
Mortgage Loan and pursuant to the terms of such Mortgage Loan is required to be
covered by such insurance through maturity.
ADDITIONAL MORTGAGE LOAN INFORMATION
The Mortgage Pool. For a detailed presentation of certain of the
characteristics of the Mortgage Loans and the Mortgaged Properties, on an
individual basis, see Annex A hereto. Certain additional information regarding
the Mortgage Loans is contained herein under ' -- Assignment of the Mortgage
Loans; Repurchases' and ' -- Representations and Warranties; Repurchases,' and
in the Prospectus under 'DESCRIPTION OF THE TRUST FUNDS' and 'CERTAIN LEGAL
ASPECTS OF MORTGAGE LOANS.'
Each of the following tables sets forth certain characteristics of the
Mortgage Pool presented, where applicable, as of the Cut-off Date. For purposes
of the tables:
(i) References to 'Remain Amort. Term' are references to the remaining
amortization terms.
(ii) References to 'DSCR' are references to 'Debt Service Coverage
Ratios.' Debt service coverage ratios are used by income property lenders
to measure the ratio of (a) cash currently generated by a property that is
available for debt service (that is, cash that remains after payment of
non-capital expenses of operation, tenant improvements, leasing commissions
and replacement reserves) to (b) required debt service payments. However,
debt service coverage ratios only measure the current, or recent, ability
of a property to service mortgage debt. Although, typically, a debt service
coverage ratio may not adequately reflect the significant amounts of cash
that a property owner may be required to expend to pay for the costs of
tenant improvements and leasing commissions when expiring leases are
replaced, the Debt Service Coverage Ratios used herein assume the
establishment of reserves for such improvements and commissions, as well as
reserves for capital expenditures. As a result, the Debt Service Coverage
Ratios used herein are lower than they would be if it did not reflect such
assumptions. The 'Debt Service Coverage Ratio' for any Mortgage Loan is the
ratio of 'Net Cash Flow' produced by the related Mortgaged Property to the
annualized amount of debt service that will be payable under that Mortgage
Loan commencing in April, 1996. The Net Cash Flow for a Mortgaged Property
is the 'net cash flow' of such Mortgaged Property as set forth in, or
determined by the Depositor on the basis of, Mortgaged Property operating
statements, generally unaudited, and certified rent rolls (as applicable)
supplied by the related borrower in the case of a Rental Property. In
general, the applicable Mortgage Loan Seller relied on full year 1995
operating statements, rolling 12-month operating statements and/or 1996
year-to-date financial statements, if available, and on rent rolls for all
Rental Properties that were current as of a date not earlier than six
months prior to the respective date of origination in determining Net Cash
Flow for the Mortgaged Properties.
In general, 'net cash flow' is the revenue derived from the use and
operation of a Mortgaged Property less operating expenses (such as utilities,
administrative expenses, repairs and maintenance, tenant improvement costs,
leasing commissions, management fees and advertising), fixed expenses (such
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as insurance, real estate taxes and, if applicable, ground lease payments) and
reserves (such as reserves for tenant improvements and leasing commissions in
the case of Rental Properties and assumed reserves for ongoing capital
expenditures). Net cash flow does not reflect interest expenses and non-cash
items such as depreciation and amortization, and generally does not reflect
capital expenditures, but does reflect reserves for replacements.
In determining the 'revenue' component of Net Cash Flow for each Rental
Property, the applicable Mortgage Loan Seller generally relied on the most
recent certified rent roll (as applicable) supplied and certified by the related
borrower and, where the actual vacancy shown thereon and the market vacancy was
less than 5%, assumed a 5% vacancy in determining revenue from rents, except
that in the case of certain anchored shopping centers, space occupied by anchor
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 respective Mortgage Loan Seller's underwriting standards. In
determining rental revenue for multifamily properties, the applicable Mortgage
Loan Seller either reviewed rental revenue shown on the certified rolling
12-month operating statements or annualized the rental revenue shown on
certified rent rolls or operating statements with respect to the prior three to
twelve month periods. For the other Rental Properties, the applicable Mortgage
Loan Seller 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 adjusted average daily occupancy shown on the borrower-supplied
operating statements. In the case of residential health care facilities,
receipts were based on historical occupancy levels, historical operating
revenues and the then current occupancy rates. Private occupancy rates were
within the then current market ranges and vacancy levels were a minimum of 5%.
In general, any non-recurring 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 Depositor generally relied on 1995 full-year or year-to-date
financial statements, rolling 12-month operating statements and/or 1996
year-to-date financial statements supplied by the related borrower, except that
(a) if tax or insurance expense information more current than that reflected in
the financial statements was available, the newer information was used, (b)
property management fees were assumed to be 4% to 5% of effective gross revenue
(except with respect to hospitality properties, where a minimum of 5% of gross
receipts was assumed) unless actual management fees were higher, in which case
actual management fees were assumed, (c) assumptions were made with respect to
reserves for leasing commissions, tenant improvement expenses and capital
expenditures and (d) expenses were assumed to include annual replacement
reserves equal to (1) in the case of retail, office and industrial properties,
not less than $0.10 and not more than $0.68 per square foot net rentable area,
(2) in the case of multifamily properties, not less than $150 or more than $435
per unit per year, depending on the condition of the property, (3) in the case
of hospitality properties, 4% of the gross receipts shown on the most recent
full-year financial statements, (4) in the case of residential healthcare
facilities, $250 to $301.71 per bed per year and (5) in the case of the mobile
home parks, not less than $31 or more than $50 per pad per year. In addition, in
some instances, the applicable Mortgage Loan Seller recharacterized as capital
expenditures those items reported by borrowers as operating expenses (thus
increasing 'net cash flow') where such Mortgage Loan Seller determined
appropriate.
THE CERTIFIED OPERATING STATEMENTS WERE IN MOST CASES UNAUDITED, AND
NEITHER THE MORTGAGE LOAN SELLERS NOR THE DEPOSITOR VERIFIED THEIR ACCURACY.
(iii) References to 'Cut-off Date LTV' are references to the ratio,
expressed as a percentage, of the Cut-off Date Balance of a Mortgage Loan
to the appraised value of the related Mortgaged Property as shown on the
most recent third-party appraisal thereof available to the related Mortgage
Loan Seller.
(iv) References to 'Balloon LTV' are references to the ratio,
expressed as a percentage, of the expected balance of a Mortgage Loan on
the Due Date on which a Balloon Payment is due (prior to the payment of
such Balloon Payment) to the appraised value of the related Mortgaged
Property
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<PAGE>
as shown on the most recent third-party appraisal thereof available to the
related Mortgage Loan Seller prior to the Cut-off Date.
(v) References to 'Loan per Sq ft, Unit, Bed, Key or Room' are, for
each Mortgage Loan secured by a lien on a multifamily property (including
the mobile home parks), hospitality property or residential healthcare
facility, respectively, references to the Cut-off Date Balance of such
Mortgage Loan divided by the number of dwelling units, pads, guest rooms or
beds, respectively in such Mortgaged Property, and, for each Mortgage Loan
secured by a lien on a retail, industrial/warehouse or office property,
references to the Cut-off Date Balance of such Mortgage Loan divided by the
net rentable square foot area of the related Mortgage Property.
(vi) References to 'Year Built' are references to the year that a
Mortgaged Property was originally constructed. With respect to any
Mortgaged Property which was constructed in phases, the 'Year Built' refers
to the year that the first phase was originally constructed.
(vii) References to 'weighted averages' are references to averages
weighted on the basis of the Cut-off Date Balances of the related Mortgage
Loans.
(viii) References to 'Mortgage Rate' are references to the interest
rate on a Mortgage Loan prior to any adjustment with respect to the
applicable Master Servicer Fee Rate and the Trustee Rate.
(ix) References to 'Initial Reserves at Closing' represent reserves
escrowed at closing for needed repairs and corrections of environmental
issues as outlined in engineering and environmental reports. Such amounts
typically represent 125% of the costs of the work outlined in such reports
and not completed by closing. With respect to amounts considered minimal
and a part of ongoing maintenance, a reserve was not established.
(x) References to 'Ongoing Reserves' represent amounts funded on a
monthly basis and utilized to cover capital costs.
(xi) References to 'Other Reserves At Closing' represent amounts
reserved by the originator at the closing of a Mortgage Loan generally in
connection with future leasing commissions, tenant improvement expenses and
future capital expenditures.
The sum in any column of any of the following tables may not equal the
indicated total due to rounding.
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S-35
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<PAGE>
<TABLE>
<CAPTION>
PROPERTY TYPES
% OF WEIGHTED AVERAGES
AGGREGATE AGG. AVERAGE HIGHEST -------------------------------------------------
CUT-OFF CUT-OFF CUT-OFF CUT-OFF STATED REMAIN. CUT-OFF
NUMBER DATE DATE DATE DATE MORTGAGE REMAIN. AMORT. DATE
PROPERTY TYPES OF LOANS BALANCE BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV
- ----------------- -------- ------------ ------- ------------ ------------ -------- ---------- ---------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MULTIFAMILY
Multifamily 85 $323,999,594 50.06 % $3,811,760 $10,903,261 8.034 % 111 337 1.33 x 72.65%
Section 42 9 21,313,603 3.29 % 2,368,178 3,842,584 8.185 % 298 345 1.24 x 80.43%
Subtotal 94 345,313,197 53.35 % 3,673,545 10,903,261 8.044 % 123 338 1.32 x 73.13%
RETAIL
Anchored
Shopping
Center 17 124,357,275 19.21 % 7,315,134 24,074,864 8.278 % 121 307 1.34 x 71.99%
Unanchored
Shopping
Center 24 82,872,305 12.80 % 3,453,013 9,570,125 8.453 % 109 305 1.40 x 65.81%
Subtotal 41 207,229,580 32.02 % 5,054,380 24,074,864 8.348 % 116 306 1.36 x 69.52%
MOBILE HOME PARK 5 30,532,370 4.72 % 6,106,474 15,000,000 7.980 % 90 353 1.33 x 75.55%
INDUSTRIAL 7 26,566,964 4.10 % 3,795,281 6,294,267 8.516 % 95 298 1.60 x 70.76%
HEALTHCARE
Assisted
Living 2 3,610,787 0.56 % 1,805,393 2,098,166 9.020 % 119 299 2.59 x 43.67%
Continuum Care 1 7,985,069 1.23 % 7,985,069 7,985,069 8.750 % 118 298 1.51 x 68.84%
Nursing 1 3,496,943 0.54 % 3,496,943 3,496,943 9.125 % 119 299 1.75 x 69.94%
Subtotal 4 15,092,799 2.33 % 3,773,200 7,985,069 8.902 % 118 298 1.82 x 63.07%
OFFICE 4 12,029,266 1.86 % 3,007,316 5,503,300 8.896 % 103 299 1.31 x 70.87%
HOSPITALITY 4 10,455,285 1.62 % 2,613,821 4,843,240 9.496 % 239 239 1.50 x 64.40%
TOTALS: 159 $647,219,459 100 % $4,070,563 $24,074,864 8.217 % 119 324 1.36 x 71.57%
WEIGHTED AVERAGES
----------------- LOAN PER
SQ FT, UNIT, AVERAGE
BALLOON OCCUPANCY BED, KEY PROPERTY
PROPERTY TYPES LTV PERCENTAGE(A) OR ROOM SIZE(B)
- ----------------- ------- ------------- ------------- --------
<S> <C> <C> <C> <C>
MULTIFAMILY
Multifamily 62.27% 95.09% $ 28,083.85 167
Section 42 24.00% 97.13% 29,822.09 92
Subtotal 59.90% 95.22% 28,191.14 160
RETAIL
Anchored
Shopping
Center 58.16% 95.58% 72.86 114,455
Unanchored
Shopping
Center 55.61% 95.33% 83.98 50,182
Subtotal 57.14% 95.48% 77.31 76,832
MOBILE HOME PARK 68.90% 98.31% 26,031.45 260
INDUSTRIAL 61.54% 100.00% 26.07 188,292
HEALTHCARE
Assisted
Living 36.23% 98.90% 25,154.33 75
Continuum Care 56.88% 92.06% 42,249.04 189
Nursing 58.23% 91.10% 26,899.56 130
Subtotal 52.25% 93.47% 34,602.91 117
OFFICE 60.89% 97.35% 74.93 45,548
HOSPITALITY 0.00% 0.00% 20,978.81 133
TOTALS: 58.38% 95.65% N/A N/A
- ------------
<FN>
(A) Weighted average of the occupancy percentages for the corresponding property
type determined on the basis of the individual occupancy percentages set
forth on Annex A.
(B) Average Property Size refers to total leasable square feet with respect to
retail, office and industrial/warehouse properties, number of units with
respect to multifamily properties and the mobile home parks, number of guest
rooms with respect to each hospitality property and number of beds with
respect to residential health care facilities.
</FN>
</TABLE>
<TABLE>
<CAPTION>
LOCATION
% OF WEIGHTED AVERAGES
AGGREGATE AGG. ------------------------------------------------------------
CUT-OFF CUT-OFF STATED REMAIN. CUT-OFF
NUMBER DATE DATE MORTGAGE REMAIN. AMORT. DATE
LOCATION OF LOANS BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV
- ----------------------- -------- ------------ ------- -------- ---------- ---------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California 26 $136,161,023 21.04 % 8.049% 101 330 1.40 x 72.68%
Nevada 11 83,915,952 12.97 % 8.121% 108 335 1.28 x 75.14%
Texas 25 82,887,715 12.81 % 8.188% 117 337 1.33 x 73.91%
Georgia 13 38,812,944 6.00 % 8.412% 154 294 1.34 x 72.37%
New York 9 37,895,124 5.86 % 8.283% 115 320 1.36 x 65.62%
Virginia 7 25,145,783 3.89 % 8.208% 124 315 1.48 x 66.93%
Connecticut 6 24,452,619 3.78 % 8.192% 109 341 1.34 x 69.31%
Kentucky 2 20,370,125 3.15 % 8.324% 119 299 1.37 x 66.30%
Wisconsin 7 18,459,612 2.85 % 8.640% 161 311 1.68 x 68.84%
Maryland 5 17,457,486 2.70 % 8.357% 99 315 1.38 x 66.08%
Michigan 4 13,633,591 2.11 % 8.045% 118 321 1.33 x 65.24%
New Jersey 2 13,500,000 2.09 % 8.750% 75 300 1.36 x 68.34%
Florida 5 13,012,968 2.01 % 8.516% 135 295 1.38 x 71.20%
Idaho 2 11,757,985 1.82 % 8.620% 118 335 1.39 x 72.94%
Kansas 2 11,554,668 1.79 % 7.979% 119 359 1.24 x 73.29%
Colorado 2 11,114,922 1.72 % 7.970% 169 358 1.33 x 76.83%
Ohio 2 10,667,435 1.65 % 8.402% 128 281 1.33 x 72.22%
Massachusetts 4 10,155,999 1.57 % 8.166% 100 298 1.32 x 66.32%
Pennsylvania 3 8,983,727 1.39 % 8.224% 109 302 1.38 x 72.79%
Alabama 4 8,162,787 1.26 % 8.522% 119 311 1.37 x 66.04%
New Mexico 3 7,800,222 1.21 % 8.186% 206 327 1.34 x 76.27%
Indiana 3 7,167,492 1.11 % 8.244% 257 338 1.23 x 79.83%
Missouri 1 6,771,112 1.05 % 8.000% 116 296 1.30 x 73.40%
Delaware 1 5,186,918 0.80 % 8.030% 81 327 1.33 x 64.04%
Arizona 2 4,696,718 0.73 % 8.202% 215 359 1.38 x 76.41%
Louisiana 1 3,887,533 0.60 % 7.959% 117 297 1.33 x 74.76%
District of Columbia 1 2,541,564 0.39 % 8.125% 116 326 1.44 x 74.75%
Mississippi 1 2,504,556 0.39 % 8.039% 116 326 1.43 x 74.76%
Oregon 1 2,250,000 0.35 % 8.160% 120 360 1.23 x 78.67%
Washington 1 2,196,990 0.34 % 7.920% 118 358 1.43 x 70.42%
Arkansas 1 1,867,353 0.29 % 9.440% 239 239 1.56 x 67.90%
Oklahoma 1 1,497,877 0.23 % 9.440% 239 239 1.53 x 58.74%
Maine 1 748,657 0.12 % 9.000% 82 298 1.38 x 57.59%
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS (33 Locations) 159 $647,219,459 100.00 % 8.217% 119 324 1.36 x 71.57%
WEIGHTED AVERAGES
-----------------
BALLOON
LOCATION LTV
- ----------------------- -------
<S> <C>
California 63.49%
Nevada 65.20%
Texas 61.39%
Georgia 46.61%
New York 55.94%
Virginia 53.36%
Connecticut 61.05%
Kentucky 54.23%
Wisconsin 46.03%
Maryland 57.82%
Michigan 55.02%
New Jersey 61.96%
Florida 52.21%
Idaho 63.19%
Kansas 64.41%
Colorado 55.22%
Ohio 46.02%
Massachusetts 56.69%
Pennsylvania 61.07%
Alabama 55.21%
New Mexico 44.39%
Indiana 36.60%
Missouri 59.70%
Delaware 58.29%
Arizona 46.24%
Louisiana 60.68%
District of Columbia 63.83%
Mississippi 63.71%
Oregon 69.35%
Washington 61.86%
Arkansas 0.00%
Oklahoma 0.00%
Maine 51.80%
- -----------------------
TOTALS (33 Locations) 58.38%
</TABLE>
S-36
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
YEARS BUILT
% OF WEIGHTED AVERAGES
AGGREGATE ------------------------------------------------------------------------
AGGREGATE CUT-OFF STATED REMAINING CUT-OFF
RANGE OF NUMBER CUT-OFF DATE DATE MORTGAGE REMAINING AMORT. DATE BALLOON
YEARS BUILT OF LOANS BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ------------ -------- ------------ --------- -------- ---------- ---------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1864 - 1959 13 $ 38,977,343 6.02% 8.485% 108 306 1.39 x 69.36% 56.13%
1960 - 1969 31 141,388,483 21.85% 8.189% 124 319 1.36 x 70.85% 56.88%
1970 - 1979 35 113,589,240 17.55% 8.255% 118 320 1.40 x 69.59% 57.62%
1980 - 1989 59 272,714,373 42.14% 8.171% 112 328 1.36 x 72.36% 60.76%
1990 - 1995 21 80,550,021 12.45% 8.239% 143 331 1.31 x 74.01% 55.14%
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS 159 $647,219,459 100.00% 8.217% 119 324 1.36 x 71.57% 58.38%
</TABLE>
<TABLE>
<CAPTION>
DEBT SERVICE COVERAGE RATIOS
% OF CUM. % WEIGHTED AVERAGES
RANGE OF AGGREGATE OF ------------------------------------------------
DEBT SERVICE AGGREGATE CUT-OFF CUT-OFF STATED REMAINING
COVERAGE NUMBER CUT-OFF DATE DATE DATE MORTGAGE REMAINING AMORT.
RATIOS OF LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR
- ------------------- -------- ------------ --------- ------- -------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.15x - 1.19x(A) 2 $ 4,763,624 0.74% 0.74 % 8.217% 298 358 1.16x
1.20x - 1.24x 10 52,016,287 8.04% 8.77 % 8.027% 112 354 1.23x
1.25x - 1.29x 31 192,150,514 29.69% 38.46 % 8.035% 121 333 1.28x
1.30x - 1.34x 31 119,741,595 18.50% 56.96 % 8.238% 120 321 1.32x
1.35x - 1.39x 32 108,312,016 16.73% 73.70 % 8.262% 104 316 1.36x
1.40x - 1.44x 27 86,054,229 13.30% 86.99 % 8.364% 119 312 1.42x
1.45x - 1.49x 7 16,879,868 2.61% 89.60 % 8.207% 89 337 1.46x
1.50x - 1.59x 10 41,941,635 6.48% 96.08 % 8.475% 146 304 1.53x
1.60x - 1.79x 4 9,456,896 1.46% 97.54 % 8.865% 146 293 1.68x
1.80x - 3.46x 5 15,902,795 2.46% 100.00 % 8.714% 119 299 2.22x
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS 159 $647,219,459 100.00% 100.00 % 8.217% 119 324 1.36x
RANGE OF
DEBT SERVICE CUT-OFF
COVERAGE DATE BALLOON
RATIOS LTV LTV
- ------------------- ------- -------
<S> <C> <C>
1.15x - 1.19x(A) 83.61% 31.17%
1.20x - 1.24x 77.54% 65.46%
1.25x - 1.29x 75.22% 62.26%
1.30x - 1.34x 70.93% 58.92%
1.35x - 1.39x 69.73% 59.14%
1.40x - 1.44x 68.82% 53.81%
1.45x - 1.49x 69.02% 62.26%
1.50x - 1.59x 65.13% 46.52%
1.60x - 1.79x 67.71% 42.92%
1.80x - 3.46x 58.66% 48.41%
- ----------------------------------------
TOTALS 71.57% 58.38%
- ------------
<FN>
(A) The only Mortgage Loans with Debt Service Coverage Ratios below 1.20x are
Mortgage Loans secured by Section 42 Properties.
</FN>
</TABLE>
<TABLE>
<CAPTION>
CUT-OFF DATE LTV RATIOS
% OF CUM. % WEIGHTED AVERAGES
RANGE AGGREGATE OF ------------------------------------------------
OF CUT-OFF AGGREGATE CUT-OFF CUT-OFF STATED REMAIN.
DATE LTV NUMBER CUT-OFF DATE DATE DATE MORTGAGE REMAIN. AMORT.
RATIOS OF LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR
- --------------------- -------- ------------ --------- ------- -------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
25.59% - 50.00% 4 $ 5,686,985 0.88% 0.88 % 8.547% 118 305 2.43x
50.01% - 55.00% 4 7,625,220 1.18% 2.06 % 8.387% 133 295 1.37x
55.01% - 60.00% 11 36,236,551 5.60% 7.66 % 8.265% 128 300 1.44x
60.01% - 65.00% 16 68,242,549 10.54% 18.20 % 8.433% 126 315 1.48x
65.01% - 70.00% 24 79,631,598 12.30% 30.50 % 8.472% 111 303 1.42x
70.01% - 75.00% 65 295,552,299 45.66% 76.17 % 8.180% 114 320 1.33x
75.01% - 80.00% 30 140,898,215 21.77% 97.94 % 8.013% 113 351 1.28x
80.01% - 85.88%(A) 5 13,346,043 2.06% 100.00 % 8.194% 298 358 1.22x
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS 159 $647,219,459 100.00% 100.00 % 8.217% 119 324 1.36x
WEIGHTED AVERAGES
RANGE -------------------
OF CUT-OFF CUT-OFF
DATE LTV DATE BALLOON
RATIOS LTV LTV
- --------------------- ------- -------
<S> <C> <C>
25.59% - 50.00% 36.42% 30.26%
50.01% - 55.00% 52.33% 37.45%
55.01% - 60.00% 57.62% 43.28%
60.01% - 65.00% 63.04% 48.90%
65.01% - 70.00% 68.35% 55.04%
70.01% - 75.00% 73.44% 61.20%
75.01% - 80.00% 78.49% 67.69%
80.01% - 85.88%(A) 83.77% 31.19%
- ------------------------------------------
TOTALS 71.57% 58.38%
- ------------
<FN>
(A) No Mortgage Loan has a Cut-off Date LTV Ratio higher than 80.10% with the
exception of five Section 42 Properties which do not exceed 85.88%.
</FN>
</TABLE>
S-37
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
BALLOON LTV RATIOS
% OF CUM. % WEIGHTED AVERAGES
RANGE AGGREGATE OF ------------------------------------------------
OF BALLOON AGGREGATE CUT-OFF CUT-OFF STATED REMAINING
LTV NUMBER CUT-OFF DATE DATE DATE MORTGAGE REMAINING AMORT.
RATIOS OF LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR
- ------------------- -------- ------------ --------- ------- -------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15.84% - 30.00% 3 $ 6,053,689 0.94% 4.58 % 8.472% 236 331 2.04x
30.01% - 40.00% 8 16,934,862 2.62% 7.19 % 8.197% 260 347 1.35x
40.01% - 50.00% 13 47,108,027 7.28% 14.47 % 8.257% 128 305 1.41x
50.01% - 55.00% 13 48,935,923 7.56% 22.03 % 8.321% 135 320 1.51x
55.01% - 60.00% 25 106,875,174 16.51% 38.55 % 8.340% 111 305 1.37x
60.01% - 70.00% 72 323,034,657 49.91% 88.46 % 8.180% 108 330 1.33x
70.01% - 76.50% 14 74,704,569 11.54% 100.00 % 7.871% 83 359 1.28x
Fully-Amortizing 11 23,572,558 3.64% 3.64 % 8.905% 238 238 1.43x
- -------------------------------------------------------------------------------------------------------------------------------
TOTALS 159 $647,219,459 100.00% 100.00 % 8.217% 119 324 1.36x
WEIGHTED AVERAGES
RANGE -------------------
OF BALLOON CUT-OFF
LTV DATE BALLOON
RATIOS LTV LTV
- ------------------- ------- -------
<S> <C> <C>
15.84% - 30.00% 59.07% 23.12%
30.01% - 40.00% 75.08% 32.10%
40.01% - 50.00% 59.60% 47.01%
50.01% - 55.00% 64.32% 51.67%
55.01% - 60.00% 69.24% 58.05%
60.01% - 70.00% 74.02% 64.18%
70.01% - 76.50% 78.72% 72.60%
Fully-Amortizing 65.58% 0.00%
- ----------------------------------------
TOTALS 71.57% 58.38%(A)
- ------------
<FN>
(A) Includes fully-amortizing Mortgage Loans.
</FN>
</TABLE>
<TABLE>
<CAPTION>
MORTGAGE RATES
% OF CUM %
AGG. OF WEIGHTED AVERAGES
AGGREGATE CUT- CUT- -----------------------------------------------
RANGE OF CUT-OFF OFF OFF STATED REMAIN.
MORTGAGE NUMBER DATE DATE DATE MORTGAGE REMAIN. AMORT.
RATES OF LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR
- ------------------ -------- ------------ ------ ------ -------- ---------- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7.380% - 7.499% 3 $ 13,409,757 2.07% 2.07% 7.439% 58 358 1.27x
7.500% - 7.749% 7 33,995,041 5.25% 7.32% 7.602% 75 358 1.32x
7.750% - 7.999% 24 106,348,813 16.43% 23.76% 7.878% 103 340 1.34x
8.000% - 8.249% 46 227,211,937 35.11% 58.86% 8.100% 132 325 1.33x
8.250% - 8.499% 37 126,018,151 19.47% 78.33% 8.311% 130 323 1.35x
8.500% - 8.749% 20 67,807,212 10.48% 88.81% 8.542% 109 311 1.35x
8.750% - 8.999% 10 33,832,650 5.23% 94.04% 8.826% 114 298 1.61x
9.000% - 9.249% 7 25,260,068 3.90% 97.94% 9.107% 90 299 1.57x
9.250% - 9.560% 5 13,335,830 2.06% 100.00% 9.494% 221 221 1.47x
- --------------------------------------------------------------------------------------------------------------------------
TOTALS 159 $647,219,459 100.00% 100.00% 8.217% 119 324 1.36x
WEIGHTED AVERAGES
-------------------
RANGE OF CUT-OFF
MORTGAGE DATE BALLOON
RATES LTV LTV
- ------------------ ------- -------
<S> <C> <C>
7.380% - 7.499% 73.06% 69.27%
7.500% - 7.749% 76.36% 70.86%
7.750% - 7.999% 75.16% 65.63%
8.000% - 8.249% 72.19% 57.37%
8.250% - 8.499% 68.70% 54.61%
8.500% - 8.749% 71.42% 61.04%
8.750% - 8.999% 69.19% 57.84%
9.000% - 9.249% 65.08% 57.61%
9.250% - 9.560% 64.96% 0.00%
- ---------------------------------------
TOTALS 71.57% 58.38%
</TABLE>
<TABLE>
<CAPTION>
ORIGINAL TERMS
% OF WEIGHTED AVERAGES
AGGREGATE AGG. --------------------------------------------------------------
RANGE OF CUT-OFF CUT-OFF STATED REMAIN.
ORIGINAL NUMBER DATE DATE MORTGAGE REMAIN. AMORT. SEASONING
TERMS OF LOANS BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR (MO.)(A)
- ------------------- -------- ------------ ------- -------- ---------- ---------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5-year Balloon 15 $ 67,163,266 10.38 % 7.869% 58 347 1.32x 2
7-year Balloon 20 79,947,576 12.35 % 8.268% 83 315 1.34x 1
10-year Balloon 100 417,662,842 64.53 % 8.232% 118 326 1.38x 2
11-year Balloon 1 16,821,585 2.60 % 8.020% 129 297 1.29x 3
15-year Balloon 5 24,750,066 3.82 % 8.246% 179 328 1.41x 1
25-year Balloon(B) 7 17,301,566 2.67 % 8.178% 298 355 1.23x 2
Fully-Amortizing(C) 11 23,572,558 3.64 % 8.905% 238 238 1.43x 2
- -------------------------------------------------------------------------------------------------------------------------------
TOTALS 159 $647,219,459 100.00 % 8.217% 119 324 1.36x 2
<CAPTION>
WEIGHTED AVERAGES
-------------------
RANGE OF CUT-OFF
ORIGINAL DATE BALLOON
TERMS LTV LTV
- ------------------- ------- -------
<S> <C> <C>
5-year Balloon 74.23% 70.28%
7-year Balloon 71.13% 64.09%
10-year Balloon 70.99% 60.31%
11-year Balloon 74.76% 58.61%
15-year Balloon 71.65% 50.67%
25-year Balloon(B) 82.18% 29.56%
Fully-Amortizing(C) 65.58% 0.00%
- ----------------------------------------
TOTALS 71.57% 58.38%
- ------------
<FN>
(A) Number of months elapsed since the first Due Date following origination.
(B) The only Balloon Loans with terms of 25 years are Mortgage Loans secured
by Section 42 Properties.
(C) Includes 1 Mortgage Loan with a term of 13 years; 8 Mortgage Loans with
terms of 20 years; and 2 Mortgage Loans with terms of 25 years (Section 42
Properties).
</FN>
</TABLE>
S-38
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
STATED REMAINING TERMS TO MATURITY
CUM
% OF % WEIGHTED AVERAGES
AGGREGATE AGG. OF -----------------------------------------------------------
RANGE OF CUT-OFF CUT-OFF CUT-OFF STATED REMAIN. CUT-OFF
REMAINING NUMBER DATE DATE DATE MORTGAGE REMAIN. AMORT. DATE
TERMS (MO.) OF LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV
- ------------ -------- ------------ ------- ------- -------- ---------- ---------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
57 - 59 13 $ 47,163,266 7.29 % 7.29 % 7.737% 58 348 1.34x 73.62%
60 - 71 2 20,000,000 3.09 % 10.38 % 8.180% 60 345 1.25x 75.68%
72 - 83 15 59,234,276 9.15 % 19.53 % 8.102% 83 321 1.35x 70.79%
84 - 95 5 20,713,300 3.20 % 22.73 % 8.743% 84 300 1.31x 72.10%
96 - 119 91 373,767,842 57.75 % 80.48 % 8.215% 118 325 1.39x 70.58%
120 - 131 10 60,716,585 9.38 % 89.86 % 8.275% 122 323 1.28x 74.57%
132 - 179 6 27,630,611 4.27 % 94.13 % 8.375% 176 310 1.41x 71.17%
180 - 239 8 16,679,976 2.58 % 96.71 % 8.971% 238 238 1.48x 63.58%
240 - 299 9 21,313,603 3.29 % 100.00 % 8.185% 298 345 1.24x 80.43%
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS 159 $647,219,459 100.00 % 100.00 % 8.217% 119 324 1.36x 71.57%
WEIGHTED AVERAGES
RANGE OF -----------------
REMAINING BALLOON
TERMS (MO.) LTV
- ----------- -------
<S> <C>
57 - 59 69.69%
60 - 71 71.69%
72 - 83 63.95%
84 - 95 64.48%
96 - 119 59.91%
120 - 131 62.35%
132 - 179 45.38%
180 - 239 0.00%
240 - 299 24.00%
- -----------------------------
TOTALS 58.38%
</TABLE>
<TABLE>
<CAPTION>
CUT-OFF DATE BALANCES
% OF WEIGHTED AVERAGES
AGGREGATE AGG. ------------------------------------------------------------
RANGE OF CUT-OFF CUT-OFF STATED REMAIN. CUT-OFF
CUT-OFF DATE NUMBER DATE DATE MORTGAGE REMAIN. AMORT. DATE
BALANCES OF LOANS BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV
- -------------------------- -------- ------------ ------- -------- ---------- ---------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
748,657 - 999,999 5 $ 4,281,791 0.66 % 8.618% 140 272 1.44 x 59.97%
1,000,000 - 1,999,999 42 64,112,025 9.91 % 8.319% 142 308 1.43 x 68.49%
2,000,000 - 2,999,999 29 71,577,979 11.06 % 8.298% 135 316 1.42 x 70.82%
3,000,000 - 3,999,999 23 80,935,631 12.51 % 8.259% 124 322 1.35 x 71.30%
4,000,000 - 4,999,999 20 91,259,564 14.10 % 8.285% 115 318 1.35 x 72.26%
5,000,000 - 5,999,999 11 60,643,203 9.37 % 8.210% 101 326 1.35 x 72.88%
6,000,000 - 6,999,999 5 32,977,619 5.10 % 8.291% 110 304 1.49 x 65.38%
7,000,000 - 7,999,999 9 67,727,773 10.46 % 8.163% 119 345 1.32 x 74.20%
8,000,000 - 8,999,999 3 25,059,918 3.87 % 8.437% 106 338 1.36 x 74.15%
9,000,000 - 9,999,999 3 29,369,176 4.54 % 7.959% 118 338 1.45 x 66.25%
10,000,000 - 14,999,999 6 63,378,330 9.79 % 8.102% 118 343 1.30 x 72.28%
15,000,000 - 24,074,864 3 55,896,450 8.64 % 7.990% 106 315 1.27 x 76.10%
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS 159 $647,219,459 100.00 % 8.217% 119 324 1.36 x 71.57%
WEIGHTED AVERAGES
RANGE OF -----------------
CUT-OFF DATE BALLOON
BALANCES LTV
- -------------------------- -------
<S> <C>
748,657 - 999,999 37.98%
1,000,000 - 1,999,999 46.97%
2,000,000 - 2,999,999 52.37%
3,000,000 - 3,999,999 56.91%
4,000,000 - 4,999,999 59.08%
5,000,000 - 5,999,999 63.15%
6,000,000 - 6,999,999 54.88%
7,000,000 - 7,999,999 64.44%
8,000,000 - 8,999,999 65.86%
9,000,000 - 9,999,999 56.55%
10,000,000 - 14,999,999 62.59%
15,000,000 - 24,074,864 64.12%
- -----------------------------------
TOTALS 58.38%
Average Cut-off Date Balance is $4,070,563.
</TABLE>
<TABLE>
<CAPTION>
YEARS OF ORIGINATION
% OF WEIGHTED AVERAGES
AGGREGATE AGG. ------------------------------------------------------------------------
CUT-OFF CUT-OFF STATED REMAIN. CUT-OFF
ORIGINATION NUMBER DATE DATE MORTGAGE REMAIN. AMORT. DATE BALLOON
YEAR OF LOANS BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ------------ -------- ------------ ------- -------- ---------- ---------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 58 $230,133,585 35.56 % 8.184% 121 317 1.38 x 69.87% 56.79%
1996 101 417,085,874 64.44 % 8.235% 118 327 1.35 x 72.51% 59.26%
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS 159 $647,219,459 100.00 % 8.217% 119 324 1.36 x 71.57% 58.38%
</TABLE>
S-39
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
YEARS OF SCHEDULED MATURITY
% OF CUM. % WEIGHTED AVERAGES
AGGREGATE AGG. OF ------------------------------------------------------------
SCHEDULED CUT-OFF CUT-OFF CUT-OFF STATED REMAIN. CUT-OFF
MATURITY NUMBER DATE DATE DATE MORTGAGE REMAIN. AMORT. DATE
YEAR OF LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV
- ---------- -------- ------------ ------- ------- -------- ---------- ---------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2001 15 $ 67,163,266 10.38 % 10.38 % 7.869% 58 347 1.32 x 74.23%
2003 20 79,947,576 12.35 % 22.73 % 8.268% 83 315 1.34 x 71.13%
2005 14 45,830,203 7.08 % 29.81 % 8.268% 116 321 1.38 x 69.27%
2006 86 371,832,639 57.45 % 87.26 % 8.228% 118 326 1.38 x 71.20%
2007 1 16,821,585 2.60 % 89.86 % 8.020% 129 297 1.29 x 74.76%
2009 1 2,880,545 0.45 % 90.31 % 9.490% 155 155 1.36 x 66.99%
2011 5 24,750,066 3.82 % 94.13 % 8.246% 179 328 1.41 x 71.65%
2016 8 16,679,976 2.58 % 96.71 % 8.971% 238 238 1.48 x 63.58%
2020 1 1,747,598 0.27 % 96.98 % 8.375% 296 356 1.15 x 81.28%
2021 8 19,566,005 3.02 % 100.00 % 8.168% 298 343 1.24 x 80.36%
- --------------------------------------------------------------------------------------------------------------------------------
TOTALS 159 $647,219,459 100.00 % 100.00 % 8.217% 119 324 1.36 x 71.57%
WEIGHTED AVERAGES
SCHEDULED -----------------
MATURITY BALLOON
YEAR LTV
- ---------- -------
<S> <C>
2001 70.28%
2003 64.09%
2005 58.82%
2006 60.50%
2007 58.61%
2009 0.00%
2011 50.67%
2016 0.00%
2020 30.68%
2021 23.40%
- -------------------
TOTALS 58.38%
Weighted Average Year of Scheduled Maturity is 2006.
</TABLE>
<TABLE>
<CAPTION>
PREPAYMENT RESTRICTIONS BY ORIGINAL TERM
WEIGHTED
AVERAGE TERM
PERCENT OF
OF WEIGHTED --------------
AGGREGATE WEIGHTED AVERAGE
NUMBER AGGREGATE CUT-OFF AVERAGE STATED
PREPAYMENT OF CUT-OFF DATE DATE MORTGAGE REMAINING LOCK YLD
ORIGINAL TERM RESTRICTION LOANS BALANCE BALANCE RATE TERM OUT MAINT
- ------------------------- ------------ ------ ------------ --------- -------- --------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5 Year Balloon Lock-out, then 15 $ 67,163,266 10.38% 7.87 58 35 0
Prepayment Premium
7 Year Balloon Lock-out, then
Yield Maintenance 11 38,460,000 5.94% 8.30 83 29 47
7 Year Balloon Lock-out, then 9 41,487,576 6.41% 8.24 83 47 0
Prepayment Premium
-----------------------------------------------------------------------------------
Sub-Total 20 79,947,576 12.35% 8.27 83 38 23
10 Year Balloon Yield Maintenance 3 17,985,485 2.78% 8.07 117 0 111
Only
10 Year Balloon Lock-out, then 62 221,938,204 34.29% 8.28 118 41 62
Yield Maintenance (A)
10 Year Balloon Lock-out, then 35 177,739,152 27.46% 8.19 119 59 0
Prepayment Premium
-----------------------------------------------------------------------------------
Sub-Total 100 417,662,842 64.53% 8.23 118 47 38
11 Year Balloon Lock-out, then 1 16,821,585 2.60% 8.02 129 66 0
Prepayment Premium
15 Year Balloon Lock-out, then 5 24,750,066 3.82% 8.25 179 95 0
Prepayment Premium
25 Year Balloon Lock-out Only 7 17,301,566 2.67% 8.18 298 178 0
Fully Amortizing Lock-out, then 9 19,560,521 3.02% 9.05 226 115 0
Prepayment Premium
Fully Amortizing Lock-out Only 2 4,012,037 0.62% 8.21 298 178 0
-----------------------------------------------------------------------------------
Fully Amortizing Sub-Total 11 23,572,558 3.64% 8.91 238 126 0
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 159 $647,219,459 100.00% 8.22 119 53 27
WEIGHTED AVERAGE TERM OF
------------------------
OPEN TO
PREPAYMENT
PRIOR TO
ORIGINAL TERM % PREMIUM MATURITY
- ------------------------- ---------- ----------
<S> <C> <C>
5 Year Balloon 20 4
7 Year Balloon 0 7
7 Year Balloon 33 3
-------------------------
17 5
10 Year Balloon 0 6
10 Year Balloon 7 7
10 Year Balloon 56 3
-------------------------
28 5
11 Year Balloon 57 6
15 Year Balloon 81 3
25 Year Balloon 0 120
Fully Amortizing 108 3
Fully Amortizing 0 120
-------------------------
Fully Amortizing 90 23
- -------------------------------------------------
TOTAL 30 9
- ------------
<FN>
(A) Includes 6 Mortgage Loans that are Lock-out, then Yield Maintenance and
then Prepayment Premium.
</FN>
</TABLE>
S-40
<PAGE>
<PAGE>
PREPAYMENT PENALTY CATEGORIES
<TABLE>
<CAPTION>
WEIGHTED
% OF AVERAGE
AGGREGATE AGGREGATE STATED LOCKOUT TERM (MO.)/
NUMBER CUT-OFF CUT-OFF REMAINING % OF WEIGHTED AVERAGE
OF DATE DATE TERM STATED REMAINING TERM
PREPAYMENT RESTRICTION LOANS BALANCE BALANCE (MO.) OF LOCK-OUT
- ----------------------------------------- ------ ------------ --------- --------- -----------------------
<S> <C> <C> <C> <C> <C>
Lock-out, then Prepayment Premium 74 $347,522,166 53.69% 114 59/52%
Lock-out, then Yield Maintenance 73 260,398,204 40.23 112 40/36
Lock-out Only 9 21,313,603 3.29 298 178/60
Yield Maintenance Only 3 17,985,485 2.78 117 0/0
- -----------------------------------------------------------------------------------------------------------------------
TOTAL 159 $647,219,459 100.00% 119 53/45%
AVERAGE # OF
MONTHS OPEN TO
PREPAYMENT PRIOR
PREPAYMENT RESTRICTION TO MATURITY
- ----------------------------------------- ------------------
<S> <C>
Lock-out, then Prepayment Premium 4
Lock-out, then Yield Maintenance 7
Lock-out Only 120
Yield Maintenance Only 6
- -------------------------------------------------------------
TOTAL 9
</TABLE>
<TABLE>
<CAPTION>
PREPAYMENT LOCK-OUT/PREMIUM ANALYSIS(A)
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT
RESTRICTION ASSUMING NO PAYMENTS
-----------------------------------------------------------------------------------------------
CURRENT 12 MO. 24 MO. 36 MO. 48 MO. 60 MO. 72 MO. 84 MO. 96 MO.
APRIL APRIL APRIL APRIL APRIL APRIL APRIL APRIL APRIL
PREPAYMENT RESTRICTIONS 1996 1997 1998 1999 2000 2001 2002 2003 2004
- ----------------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 97.22 % 89.49 % 86.99 % 77.13 % 49.63 % 18.88 % 11.07 % 12.77 % 7.35%
Yield Maintenance 2.78 % 10.51 % 12.71 % 16.05 % 33.52 % 47.24 % 40.95 % 40.79 % 38.28%
Prepayment Premium
5.00% and greater 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 26.73 % 6.98 % 0.00 % 5.34%
4.00% to 4.99% 0.00 % 0.00 % 0.29 % 5.76 % 6.40 % 0.00 % 32.44 % 8.11 % 0.00%
3.00% to 3.99% 0.00 % 0.00 % 0.00 % 0.00 % 3.62 % 7.14 % 0.58 % 37.67 % 8.13%
2.00% to 2.99% 0.00 % 0.00 % 0.00 % 0.00 % 5.78 % 0.00 % 7.14 % 0.67 % 37.73%
1.00% to 1.99% 0.00 % 0.00 % 0.00 % 1.06 % 1.06 % 0.00 % 0.00 % 0.00 % 0.67%
Open 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.85 % 0.00 % 2.51%
- -------------------------------------------------------------------------------------------------------------------------------
TOTALS 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00%
Mortgage Pool Balance
(in millions) 647.22 640.14 632.46 624.11 615.05 541.84 532.11 449.79 439.91
------- ------- ------- ------- ------- ------- ------- ------- -------
% of Initial Pool Balance(B) 100.00 % 98.91 % 97.72 % 96.43 % 95.03 % 83.72 % 82.21 % 69.50 % 67.97%
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT
RESTRICTION ASSUMING NO PAYMENTS
108 MO. 120 MO.
APRIL APRIL
PREPAYMENT RESTRICTIONS 2005 2006
- ----------------------------- ------- -------
<S> <C> <C>
Locked Out 7.29 % 28.05%
Yield Maintenance 37.71 % 0.00%
Prepayment Premium
5.00% and greater 5.30 % 17.94%
4.00% to 4.99% 0.00 % 33.40%
3.00% to 3.99% 0.00 % 0.00%
2.00% to 2.99% 8.15 % 0.00%
1.00% to 1.99% 38.47 % 20.61%
Open 3.08 % 0.00%
- -------------------------------------------------
TOTALS 100.00 % 100.00%
Mortgage Pool Balance
(in millions) 429.19 65.59
------- -------
% of Initial Pool Balance(B) 66.31 % 10.13%
- ------------
<FN>
(A) This table sets forth an analysis of the percentage of the declining
balance of the Mortgage Pool that, on April 1 of each of the years
indicated, will be within a Lock-out Period or in which Principal
Prepayment must be accompanied by the indicated Prepayment Premium or Yield
Maintenance Charge. The table was prepared generally on the basis of the
assumptions used in preparing the table set forth under 'YIELD AND MATURITY
CONSIDERATIONS -- Yield Considerations -- Yield Sensitivity of the Class
A-PO Certificates' herein, except that it was assumed in prepaing the table
that no Mortgage Loan will be prepaid, voluntarily or involuntarily.
(B) Represents the percentage of the Initial Pool Balance that will remain
outstanding at the indicated date based upon the assumptions used in
preparing this table.
</FN>
</TABLE>
S-41
<PAGE>
<PAGE>
THE MORTGAGE LOAN SELLERS
On or prior to the Closing Date, the Depositor will acquire the Mortgage
Loans from the Mortgage Loan Sellers pursuant to separate agreements (the
'Mortgage Loan Purchase Agreements'). The Mortgage Loan Sellers acquired or
originated the Mortgage Loans as described above under ' -- General.'
ASSIGNMENT OF THE MORTGAGE LOANS; REPURCHASES
On or prior to the Closing Date, the Depositor will transfer the Mortgage
Loans, without recourse, to the Trustee for the benefit of the
Certificateholders. In connection with such transfer, the Depositor will require
each Mortgage Loan Seller to deliver to the Trustee or to a document custodian
appointed by the Trustee (a 'Custodian'), among other things, the following
documents with respect to each Mortgage Loan (collectively, as to each Mortgage
Loan, the 'Mortgage File'): (i) the original Mortgage Note, endorsed, without
recourse, to the order of the Trustee; (ii) the original or a copy of the
Mortgage, together with an original or copy of any intervening assignments of
the Mortgage, in each case with evidence of recording indicated thereon; (iii)
the original or a copy of any related assignment of leases (if such item is a
document separate from the Mortgage), with evidence of recording indicated
thereon; (iv) an original assignment of the Mortgage in favor of the Trustee and
in recordable form; (v) an original assignment of any related assignment of
leases (if such item is a document separate from the Mortgage) in favor of the
Trustee and in recordable form; (vi) originals or copies of all written
modification agreements in those instances in which the terms or provisions of
the Mortgage or Mortgage Note have been modified; (vii) the original or a copy
of the policy or certificate of lender's title insurance issued on the date of
the origination of such Mortgage Loan, or, if such policy has not been issued,
an irrevocable, binding commitment to issue such title insurance policy; and
(viii) any file copies of any UCC financing statements in the possession of the
applicable Mortgage Loan Seller.
The Trustee or a Custodian on its behalf will be required to review each
Mortgage File within a specified period following its receipt thereof. If any of
the above-described documents is found during the course of such review to be
missing from any Mortgage File or defective, and in either case such omission or
defect materially and adversely affects the interests of the Certificateholders,
the applicable Mortgage Loan Seller, if it cannot deliver the document or cure
the defect within a period of 90 days following its receipt of notice thereof,
will be obligated pursuant to the applicable Mortgage Loan Purchase Agreement
(the relevant rights under which will be assigned by the Depositor to the
Trustee) to repurchase the affected Mortgage Loan within such 90-day period at a
price (the 'Purchase Price') generally equal to the sum of (i) the unpaid
principal balance of such Mortgage Loan, (ii) unpaid accrued interest on such
Mortgage Loan (calculated at the Mortgage Rate) to but not including the Due
Date in the Collection Period in which the purchase is to occur, and (iii)
certain servicing expenses that are reimbursable to the Master Servicer and any
separate Special Servicer; provided that such Mortgage Loan Seller will have an
additional 90-day period to deliver the document or cure the defect, as the case
may be, if it is diligently proceeding to effect such delivery or cure and has
delivered to the Trustee an officer's certificate that describes the reasons
that such delivery or cure was not effected within the first 90-day cure period
and the actions it proposes to take to effect such delivery or cure, and which
states that it anticipates such delivery or cure will be effected within the
additional 90-day period. The foregoing repurchase obligation will constitute
the sole remedy available to the Certificateholders and the Trustee for any
uncured failure to deliver, or any uncured defect in, a constituent Mortgage
Loan document. The applicable Mortgage Loan Seller will be solely responsible
for such repurchase obligation, and such obligation will not be the
responsibility of the Depositor or any of its other affiliates.
The Pooling and Servicing Agreement will require the Master Servicer
promptly (and in any event within 30 days after the Closing Date) to cause each
of the assignments described in clauses (iv) and (v) of the second preceding
paragraph to be submitted for recording in the real property records of the
jurisdiction in which the related Mortgaged Property is located. See
'DESCRIPTION OF THE POOLING AGREEMENTS -- Assignment of Mortgage Loans;
Repurchases' in the Prospectus.
S-42
<PAGE>
<PAGE>
REPRESENTATIONS AND WARRANTIES; REPURCHASES
In each Mortgage Loan Purchase Agreement, the applicable Mortgage Loan
Seller will represent and warrant with respect to each related Mortgage Loan, as
of the Closing Date, or as of such other date specifically provided in the
representation and warranty, among other things, generally that: (i) the
information set forth in the schedule of Mortgage Loans attached to the
applicable Mortgage Loan Purchase Agreement (which contains certain of the
information set forth in Annex A) is true and correct in all material respects
as of the Cut-off Date; (ii) the applicable Mortgage Loan Seller owns the
Mortgage Loan and is transferring the Mortgage Loan free and clear of any and
all liens, pledges, charges or security interests; (iii) the proceeds of the
Mortgage Loan have been fully disbursed and there is no requirement for future
advances thereunder; (iv) each of the related Mortgage Note, related Mortgage
and other agreements executed in connection therewith is the legal, valid and
binding obligation of the maker thereof (subject to any non-recourse provisions
contained in any of the foregoing agreements and any applicable 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); (v) the assignment of the
related Mortgage to the Trustee on behalf of the Certificateholders constitutes
the legal, valid and binding assignment of such Mortgage; (vi) the related
Mortgage is a valid and enforceable first priority mortgage lien on the related
Mortgaged Property, having priority over all other liens or encumbrances except
for (A) the lien of current real estate taxes and assessments not yet due and
payable, and (B) covenants, conditions and restrictions, rights of way,
easements and other matters that are of public record and/or are referred to in
the related lender's title insurance policy; (vii) prior to the Cut-off Date,
any delinquent taxes that had become due and owing in respect of the related
Mortgaged Property were paid, or an escrow of funds sufficient to cover such
payment had been established; (viii) as of the Cut-off Date, no scheduled
payment of principal or interest was more than 30 days past due; (ix) there is
no proceeding known to the applicable Mortgage Loan Seller to be pending for the
total or partial condemnation of the related Mortgaged Property, and the
Mortgaged Property is free and clear of any damage that would materially and
adversely affect its value as security for the Mortgage Loan; (x) the related
Mortgaged Property is covered by a lender's title insurance policy insuring that
the related Mortgage is a valid first lien on such Mortgaged Property, subject
only to the exceptions stated therein; (xi) each Mortgage Loan represents a
'qualified mortgage' within the meaning of Section 860G(a)(3) of the Code; (xii)
any Prepayment Premium constitutes a 'customary prepayment penalty' within the
meaning of Treasury Regulation Section 1.860G-1(b)(2) and (xiii) the applicable
Mortgage Loan Seller has no knowledge of any material and adverse environmental
condition or circumstance affecting any Mortgaged Property that was not
disclosed in the report of the related environmental assessment performed by or
on behalf of the applicable Mortgage Loan Seller.
In the case of a breach of any of the foregoing representations and
warranties that materially and adversely affects the interests of the
Certificateholders, the applicable Mortgage Loan Seller, if it cannot cure such
breach within a period of 90 days following its receipt of notice thereof, will
be obligated pursuant to the applicable Mortgage Loan Purchase Agreement (the
relevant rights under which will be assigned by the Depositor to the Trustee) to
repurchase the affected Mortgage Loan within such 90-day period at the
applicable Purchase Price; provided that such Mortgage Loan Seller will have an
additional 90-day period to cure such breach if it is diligently proceeding with
such cure and has delivered to the Trustee an officer's certificate that
describes the reasons that a cure was not effected within the first 90-day cure
period and the actions it proposes to take to effect such cure, and which states
that it anticipates such cure will be effected within the additional 90-day
period.
The foregoing repurchase obligation will constitute the sole remedy
available to the Certificateholders and the Trustee for any uncured breach of
the applicable Mortgage Loan Seller's representations and warranties regarding
the applicable Mortgage Loans. The applicable Mortgage Loan Seller will be the
sole warranting party in respect of the Mortgage Loans sold by such Mortgage
Loan Seller to the Depositor, and neither the Depositor nor any of its other
affiliates will be obligated to repurchase any such affected Mortgage Loan in
connection with a breach of the applicable Mortgage Loan Seller's
representations and warranties if the applicable Mortgage Loan Seller defaults
on its
S-43
<PAGE>
<PAGE>
obligation to do so. See 'DESCRIPTION OF THE POOLING
AGREEMENTS -- Representations and Warranties; Repurchases' in the Prospectus.
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 expected to be
constituted at the time the Offered Certificates are issued. 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 herein. The Depositor believes that the information
set forth herein 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, maturities and certain other
characteristics of the Mortgage Loans in the Mortgage Pool may vary.
A Current Report on Form 8-K (the 'Form 8-K') will be available to
purchasers of the Offered Certificates on or shortly after the Closing Date and
will be filed, together with the Pooling and Servicing Agreement, with the
Securities and Exchange Commission within fifteen days after the initial
issuance of the Offered Certificates. If Mortgage Loans are removed from or
added to the Mortgage Pool as described in the preceding paragraph, such removal
or addition will be noted in the Form 8-K.
SERVICING OF THE MORTGAGE LOANS
GENERAL
The Master Servicer and the Special Servicer, either directly or through
sub-servicers, will be required to service and administer the Mortgage Loans on
behalf of the Trustee and for the benefit of the Certificateholders, in
accordance with applicable law, the terms of the Pooling and Servicing
Agreement, the terms of the respective Mortgage Loans and, to the extent
consistent with the foregoing, (i) in the same manner as would prudent
institutional commercial mortgage lenders and loan servicers servicing mortgage
loans comparable to the Mortgage Loans or (ii) in the same manner in which it
administers mortgage loans for its own account, whichever standard is higher,
and with a view to the timely collection of all scheduled payments of principal
and interest under the Mortgage Loans or, if a Mortgage Loan comes into and
continues in default and no satisfactory arrangements can be made for the
collection of the delinquent payment, the maximization of the recovery on such
Mortgage Loan to Certificateholders on a present value basis, but in any case
without regard to: (i) any relationship that it or any of its affiliates may
have with the related borrower; (ii) its ownership (or that of an affiliate) of
any Certificate; (iii) any obligation to make P&I Advances or advances to cover
certain servicing expenses; and (iv) the adequacy of their or their affiliates'
compensation for its services or reimbursement of costs under the Pooling and
Servicing Agreement or with respect to any particular transaction.
Set forth below, following the subsection captioned ' -- The Master
Servicer and Special Servicer,' is a description of certain pertinent provisions
of the Pooling and Servicing Agreement relating to the servicing of the Mortgage
Loans. Reference is also made to the Prospectus, in particular to the section
captioned 'DESCRIPTION OF THE POOLING AGREEMENTS,' for important information in
addition to that set forth herein regarding the terms and conditions of the
Pooling and Servicing Agreement as they relate to the rights and obligations of
the Master Servicer and Special Servicer thereunder.
THE MASTER SERVICER AND SPECIAL SERVICER
GE Capital Asset Management Corporation, a Delaware corporation (the
'Master Servicer'), in its capacity as master servicer under the Pooling and
Servicing Agreement will be responsible for servicing the Mortgage Loans.
Although the Master Servicer is authorized to employ agents, including sub-
servicers, to directly service the Mortgage Loans, the Master Servicer will
remain liable for its servicing
S-44
<PAGE>
<PAGE>
obligations under the Pooling and Servicing Agreement. The Master Servicer is a
wholly-owned subsidiary of General Electric Capital Corporation ('GECC'). GECC
is a wholly-owned subsidiary of GE Capital Services Corporation, itself a
wholly-owned subsidiary of the General Electric Company. The Master Servicer's
principal servicing offices are located at 2000 West Loop South, Suite 1200,
Houston, TX 77242-0275.
At March 14, 1996, the Master Servicer serviced approximately 14,200
commercial and multifamily loans, totaling approximately $8.9 billion in
aggregate outstanding principal amounts, including loans securitized in
mortgage-backed securitization transactions.
The initial Special Servicer will be GE Capital Realty Group, Inc., a Texas
corporation, an affiliate of the Master Servicer. The Special Servicer will be
responsible for performing certain servicing functions with respect to Mortgage
Loans that, in general, are in default or as to which default is imminent, and
for administering any REO Property.
The information set forth herein concerning the Master Servicer and the
Special Servicer has been provided by the Master Servicer and Special
Servicer, respectively, and none of the Depositor or either Underwriter makes
any representation or warranty as to the accuracy or completeness of such
information.
REPLACEMENT OF THE SPECIAL SERVICER
The Pooling and Servicing Agreement will permit the holder (or holders) of
the majority of the Voting Rights allocated to the Controlling Class of
Sequential Pay Certificates to replace the Special Servicer. The 'Controlling
Class of Sequential Pay Certificates' is the Class of Sequential Pay
Certificates that has the latest alphabetical Class designation and that has a
Certificate Balance that is greater than 20% of its original Certificate
Balance; provided that if no Class of Sequential Pay Certificates has a
Certificate Balance that is greater than 20% of its original Certificate
Balance, the Class of Sequential Pay Certificates with the latest alphabetical
Class designation will be the 'Controlling Class of Sequential Pay
Certificates.' The Class A-PO, Class A-1, Class A-2 and Class A-3 Certificates
will be treated as one Class for determining the Controlling Class of Sequential
Pay Certificates. Any such replacement of a Special Servicer will be subject to,
among other things, (i) the delivery of notice of the proposed replacement to
the Rating Agencies and receipt of notice from the Rating Agencies that the
replacement will not result in a qualification, downgrade or withdrawal of any
of the then current ratings assigned to the Certificates, and (ii) the written
agreement of the Special Servicer to be bound by the terms and conditions of the
Pooling and Servicing Agreement. Subject to the foregoing, any Certificateholder
or affiliate thereof may be appointed as Special Servicer. See 'DESCRIPTION OF
CERTIFICATES -- Voting Rights' herein.
The Special Servicer will be responsible for servicing and administering
any Mortgage Loan as to which (a) any Monthly Payment shall be delinquent 60 or
more days (or, in the case of a Balloon Payment, if the Master Servicer
determines that the related borrower has obtained a commitment to refinance,
such longer period of delinquency (not to exceed 120 days) within which such
refinancing is expected to occur); (b) the Master Servicer shall have determined
that a default in making a Monthly Payment is likely to occur within 30 days and
is likely to remain unremedied for at least 60 days (or, in the case of a
Balloon Payment, if the Master Servicer determines that the related borrower has
obtained a commitment to refinance, such longer period of delinquency (not to
exceed 120 days) within which such refinancing is expected to occur); (c) there
shall have occurred a default (other than as described in clause (a) 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); (d) a decree or order under any bankruptcy, insolvency or similar law
shall have been entered against the related borrower and such decree or order
shall have remained in force, undischarged or unstayed for a period of 60 days;
(e) the related borrower shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency or similar proceedings of or relating
to such related borrower or of or relating to all or substantially all of its
property; (f) the related
S-45
<PAGE>
<PAGE>
borrower shall admit in writing its inability to pay its debts generally as they
become due, file a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its creditors, or
voluntarily suspend payment of its obligations; or (g) the Master Servicer shall
have received notice of the commencement of foreclosure or similar proceedings
with respect to the related Mortgaged Property.
In the event of any of the foregoing with respect to any Mortgage Loan, the
Master Servicer is required to use its reasonable efforts to permit the transfer
of its servicing responsibilities with respect thereto to the Special Servicer
within five business days. Notwithstanding such transfer, the Master Servicer
will continue to receive payments on such Mortgage Loan (including amounts
collected by the Special Servicer), to make certain calculations with respect to
such Mortgage Loan, and to make remittances (including, if necessary, P&I
Advances) and prepare certain reports to the Trustee with respect to such
Mortgage Loan. If title to the related Mortgaged Property is acquired by the
Trust Fund (upon acquisition, an 'REO Property'), whether through foreclosure,
deed-in-lieu of foreclosure or otherwise, the Special Servicer will continue to
be responsible for the operation and management thereof. Mortgage Loans serviced
by a Special Servicer are referred to herein as 'Specially Serviced Mortgage
Loans' and, together with any REO Properties, constitute 'Specially Serviced
Trust Fund Assets.' If the Special Servicer is not the Master Servicer, the
Master Servicer will have no responsibility for the Special Servicer's
performance of its duties under the Pooling and Servicing Agreement.
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, as
such, will re-assume servicing responsibilities):
(w) with respect to the circumstances described in clause (a) of the
second preceding paragraph, when the related borrower has made three
consecutive full and timely Monthly 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 modification, waiver or amendment granted or agreed to by the
Special Servicer);
(x) with respect to the circumstances described in clauses (b), (d),
(e) and (f) of the second preceding paragraph, when such circumstances
cease to exist in the good faith, reasonable judgment of the Special
Servicer;
(y) with respect to the circumstances described in clause (c) of the
second preceding paragraph, when such default is cured; and
(z) with respect to the circumstances described in clause (g) of the
second preceding paragraph, when such proceedings are terminated;
so long as at that time no circumstance identified in such clauses (a) through
(g) exists that would cause the Mortgage Loan to continue to be characterized as
a Specially Serviced Mortgage Loan.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal compensation to be paid to the Master Servicer in respect of
its servicing activities will be the Master Servicing Fee. The 'Master Servicing
Fee' will be payable monthly on a loan-by-loan basis from amounts received in
respect of interest on each Mortgage Loan, will accrue at the related Master
Servicing Fee Rate and will be computed on the basis of the same principal
amount and for the same period respecting which any related interest payment on
the Mortgage Loan is computed. The 'Master Servicing Fee Rate' will be a per
annum rate equal to: 0.1250%, in the case of 76 of the Mortgage Loans (or 57%),
0.1100% in the case of 73 of the Mortgage Loans (or 35%), 0.1450% in the case of
five(5) of the Mortgaged Loans (or 3%), 0.1950% in the case of four (4) of the
Mortgage Loans (or 4%) and 0.4300% in the case of one (1) of the Mortgage Loans
(or 1%). The weighted average Master Servicing Fee Rate of all the Mortgage
Loans will be .1249%. As additional servicing compensation, the Master Servicer
will be entitled to retain all assumption and modification fees, late charges
and Prepayment Interest Excesses collected from borrowers on Mortgage Loans
other than Specially Serviced Mortgage Loans. In addition, the Master Servicer
is authorized to invest or direct the investment of funds held in the
Certificate Account in certain short-term United States government securities
and other investment grade obligations, and the Master Servicer will be entitled
to retain any
S-46
<PAGE>
<PAGE>
interest or other income earned on such funds, but shall be required to cover
any losses from its own funds without any right to reimbursement.
If a borrower voluntarily prepays a Mortgage Loan in whole or in part
during any Collection Period on a date that is prior to its Due Date in such
Collection Period, the amount of interest (net of related Master Servicing Fees)
that accrues on the amount of such principal prepayment will be less (such
shortfall, a 'Prepayment Interest Shortfall') than the corresponding amount of
interest accruing on the Certificates. If such a principal prepayment occurs
during any Collection Period after the Due Date for such Mortgage Loan in such
Collection Period, the amount of interest (net of related Master Servicing Fees)
that accrues on the amount of such principal prepayment will exceed (such
excess, a 'Prepayment Interest Excess') the corresponding amount of interest
accruing on the Certificates. Any Prepayment Interest Excesses collected will be
paid to the Master Servicer as additional servicing compensation. However, with
respect to each Distribution Date, the Master Servicer will be required to
deposit into the Certificate Account (such deposit, a 'Compensating Interest
Payment'), without any right of reimbursement therefor, an amount equal to the
lesser of (i) its servicing compensation for the related Collection Period,
including any Prepayment Interest Excesses received during such Collection
Period, but excluding any portion of such compensation payable to any Special
Servicer as compensation for certain sub-servicing functions and, with respect
to each Mortgage Loan having a Master Servicing Fee Rate in excess of 0.1250% in
the case of the MLMCI Loans and 0.1100% in the case of the FUNB Loans per annum,
the portion of the aggregate Master Servicing Fee attributable to such excess,
and (ii) the aggregate of any Prepayment Interest Shortfalls experienced during
the related Collection Period. Compensating Interest Payments will not cover
shortfalls in Mortgage Loan interest accruals that result from any liquidation
of a defaulted Mortgage Loan, or of any REO Property acquired in respect
thereof, that occurs during a Collection Period prior to the related Due Date
therein.
As and to the extent described herein under 'DESCRIPTION OF THE
CERTIFICATES -- P&I Advances,' the Master Servicer will be entitled to receive
interest, at the Reimbursement Rate, on any P&I Advances made by it, and each of
the Master Servicer and the Special Servicer will be entitled to receive
interest, at the Reimbursement Rate, on any reimbursable servicing expenses
incurred by it. Such interest will be paid, contemporaneously with the
reimbursement of the related P&I Advance or servicing expense, from general
collections on the Mortgage Loans then on deposit in the Certificate Account.
The principal compensation to be paid to the Special Servicer in respect of
its special servicing activities will be the Special Servicing Fee (together
with the Master Servicing Fee, the 'Servicing Fees') and, under the
circumstances described herein, Principal Recovery Fees. As is the case with the
Master Servicing Fee, but only as to Specially Serviced Mortgage Loans, the
'Special Servicing Fee' will accrue at a rate (the 'Special Servicing Fee Rate')
equal to 0.25% per annum and will be computed on the basis of the same principal
amount and for the same period respecting which any related interest payment on
the related Specially Serviced Mortgage Loan is computed. However, earned
Special Servicing Fees will be payable out of general collections on the
Mortgage Loans then on deposit in the Certificate Account. The Special Servicing
Fee with respect to any Specially Serviced Mortgage Loan will cease to accrue if
such loan is liquidated or becomes a Corrected Mortgage Loan. The Special
Servicer will be entitled to a 'Principal Recovery Fee' with respect to each
Specially Serviced Trust Fund Asset and Corrected Mortgage Loan, which Principal
Recovery Fee generally will be in an amount equal to 0.25% of all amounts
received in respect thereof and allocable as a recovery of principal. However,
no Principal Recovery Fee will be payable in connection with, or out of
Liquidation Proceeds (as defined in the Prospectus) resulting from, the purchase
of any Specially Serviced Trust Fund Asset or Corrected Mortgage Loan (i) by a
Mortgage Loan Seller (as described herein under 'DESCRIPTION OF THE MORTGAGE
POOL -- Assignment of the Mortgage Loans; Repurchases' and ' -- Representations
and Warranties; Repurchases,' (ii) by the Master Servicer or the Depositor as
described herein under 'DESCRIPTION OF THE CERTIFICATES -- Termination' or (iii)
in certain other limited circumstances. As additional servicing compensation,
the Special Servicer will be entitled to retain all assumption and modification
fees and late payment charges received on or with respect to the Specially
Serviced Mortgage Loans.
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Each of the Master Servicer and Special Servicer will, in general, each be
required to pay all ordinary expenses incurred by it in connection with its
servicing activities under the Pooling and Servicing 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 and Servicing
Agreement. However, each of the Master Servicer and Special Servicer will be
permitted to pay certain of such expenses (including certain expenses incurred
as a result of a Mortgage Loan default) directly out of the Certificate Account
and at times without regard to the relationship between the expense and the
funds from which it is being paid. See 'DESCRIPTION OF THE
CERTIFICATES -- Distributions' herein and 'DESCRIPTION OF THE POOLING
AGREEMENTS -- Certificate Account' and ' -- Servicing Compensation and Payment
of Expenses' in the Prospectus.
MODIFICATIONS, WAIVERS AND AMENDMENTS
The Pooling and Servicing Agreement will permit the Special Servicer or
Master Servicer, as applicable, to modify, waive or amend any term of any
Mortgage Loan if (a) it determines, in accordance with the servicing standard
described under ' -- General' above, that it is appropriate to do so and (b)
except as described in the following paragraph, such modification, waiver or
amendment 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) 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 Lock-out 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 its judgment, 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, the Special Servicer
may (i) reduce the amounts owing under any Mortgage Loan by forgiving principal,
accrued interest and/or any Prepayment Premium or Yield Maintenance Charge, (ii)
reduce the amount of the Monthly Payment on any 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, and/or (iv) accept a
principal prepayment during any Lock-out Period; provided that (x) the related
borrower is in default with respect to the Mortgage Loan or, in the judgment of
the Special Servicer, such default is reasonably foreseeable, (y) in the sole,
good faith judgment of the Special Servicer, such modification, waiver or
amendment would increase the recovery to Certificateholders on a present value
basis and (z) such modification, waiver or amendment does not result in a tax
imposed on the Trust Fund or cause the REMIC created pursuant to the Pooling and
Servicing Agreement to fail to qualify as a REMIC at any time the Certificates
are outstanding. However, the Special Servicer will not be permitted to extend
the date on which any Balloon Payment is scheduled to be due for a period in
excess of 12 months per extension or 36 months in the aggregate, without the
consent of the Extension Adviser (as defined herein). See 'SERVICING OF THE
MORTGAGE LOANS -- The Extension Adviser.'
The Special Servicer and Master Servicer, as applicable, will 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 or the
related Custodian, 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. 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 CERTIFICATES -- Reports to Certificateholders; Available
Information' herein.
THE EXTENSION ADVISER
Election of the Extension Adviser. The Holder or Holders of 51% or more of
the Offered Certificates will be entitled to elect a representative (the
'Extension Adviser') from whom the Special Servicer will seek approval as
described below. Upon (i) the receipt by the Trustee of a written request
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for an election of an Extension Adviser by the Special Servicer (if no Extension
Adviser has previously been elected); (ii) the receipt by the Trustee of written
requests for an election of an Extension Adviser from the Holders of 51% or more
of the Offered Certificates, or (iii) the resignation or removal of the person
acting as Extension Adviser, an election of a successor Extension Adviser will
be held commencing as soon as practicable thereafter. The Extension Adviser may
be removed at any time by the written vote of Holders of 51% or more of the
Offered Certificates. In the event that at any time an Extension Adviser shall
not have been elected or shall have resigned or been removed and a successor
Extension Adviser shall not have been elected, there shall be no Extension
Adviser and the Special Servicer shall not have any right to extend the maturity
of any Specially Serviced Mortgage Loan which would require the approval of an
Extension Adviser during any such period that there is no Extension Adviser.
Duties of the Extension Adviser. The Special Servicer will not be
permitted to grant any extension of the maturity of a Specially Serviced
Mortgage Loan beyond the third anniversary of such Mortgage Loan's then stated
maturity date, unless the Extension Adviser has approved such action in writing
within ten days after receiving from the Special Servicer written notice thereof
and sufficient information to make an informed decision (provided that if a
written objection to such extension from the Extension Adviser has not been
received by the Special Servicer within said ten day period, then the Extension
Adviser's approval will be deemed to have been given). In addition, the
Extension Adviser will confirm to its reasonable satisfaction that all
conditions precedent to granting any such extension set forth in the Pooling and
Servicing Agreement have been satisfied. See 'SERVICING OF THE MORTGAGE
LOANS -- Modifications, Waivers and Amendments' herein.
Limitation on Liability of Extension Adviser. The Extension Adviser will
be acting solely as a representative of the interests of the Certificateholders
that elected the Extension Adviser, and will have no liability to the Trust or
any Certificateholders for any action taken, or for refraining from taking of
any action, in good faith pursuant to the Pooling and Servicing Agreement, or
for errors in judgment; provided that the Extension Adviser will not be
protected against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations or duties. By its acceptance of a
Certificate, each Certificateholder confirms its understanding that the
Extension Adviser may take actions that favor the interest of one or more
Classes of the Certificates over other Classes of the Certificates, and that the
Extension Adviser may have special relationships and interests that conflict
with those of Holders of some Classes of the Certificates and, absent willful
misfeasance, bad faith, negligence or reckless disregard of obligations or
duties on the part of the Extension Adviser, agree to take no action against the
Extension Adviser or any of its officers, directors, employees, principals or
agents as a result of such a special relationship or conflict.
REO PROPERTIES
If title to any Mortgaged Property is acquired by the Trustee on behalf of
the Certificateholders, the Special Servicer, on behalf of such holders, will be
required to sell the Mortgaged Property within two years of acquisition, 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 either REMIC created pursuant to the Pooling and Servicing Agreement to
fail to qualify as a REMIC under the Code. Subject to the foregoing, the Special
Servicer will generally be required to solicit bids for any Mortgaged Property
so acquired 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; however, 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 will be obligated to operate and manage
any Mortgaged Property acquired as REO Property in a manner that would, to the
extent commercially feasible, maximize the Trust Fund's net after-tax proceeds
from such property. After the Special Servicer reviews the operation
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of such property and consults with the Trustee to determine the Trustee's
federal income tax reporting position with respect to the income it is
anticipated that the Trust Fund would derive from suchproperty, the Special
Servicer could determine (particularly in the case of an REO Property that is a
hospitality 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 or a tax on 'prohibited
transactions' under Section 860F of the Code (either such tax referred to herein
as an 'REO Tax'). To the extent that income the Trust Fund receives from an REO
Property is subject to a tax on (i) 'net income from foreclosure property' such
income would be subject to federal tax at the highest marginal corporate tax
rate (currently 35%) or (ii) '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 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. See 'CERTAIN FEDERAL INCOME TAX
CONSEQUENCES' herein and 'CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- REMICs' in
the Prospectus.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Special Servicer will be required to perform a physical inspection of a
Mortgaged Property as soon as practicable after the related Mortgage Loan
becomes a Specially Serviced Mortgage Loan. In addition, the Master Servicer
will be required to inspect each Mortgaged Property at least once per calendar
year if, in a given calendar year, a Special Servicer has not already done so.
The Master Servicer and Special Servicer will each be required to prepare a
written report of each such inspection performed by it that describes the
condition of the Mortgaged Property and that specifies the existence with
respect thereto of any sale, transfer or abandonment or any material change in
its condition or value.
The Master Servicer or Special Servicer, as the case may be, is also
required to use reasonable efforts to collect from the related borrower and
review the annual operating statements of each Mortgaged Property and to cause
annual operating statements to be prepared for each REO Property. Each of the
Mortgages 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 is the Master Servicer
or any Special Servicer likely to have any practical means of compelling such
delivery in the case of an otherwise performing Mortgage Loan.
Copies of the inspection reports and operating statements referred to above
are required to be available for review by Certificateholders during normal
business hours at the offices of the Master Servicer. See 'DESCRIPTION OF THE
CERTIFICATES -- Reports to Certificateholders; Available Information' herein.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Depositor's Mortgage Pass-Through Certificates, Series 1996-C1 (the
'Certificates') will be issued pursuant to a Pooling and Servicing Agreement, to
be dated as of April 1, 1996, among the Depositor, the Master Servicer, the
Special Servicer and the Trustee (the 'Pooling and Servicing Agreement'). The
Certificates will represent in the aggregate the entire beneficial ownership
interest in a trust fund (the 'Trust Fund') consisting primarily of: (i) the
Mortgage Loans and all payments and
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other collections in respect of the Mortgage Loans received or applicable to
periods after the Cut-off Date (exclusive of payments of principal and interest
due on or before the Cut-off Date); (ii) any REO Property acquired on behalf of
the Trust Fund; (iii) such funds or assets as from time to time are deposited in
the Certificate Account (see 'Description of the Pooling Agreements --
Certificate Account' in the Prospectus); and (iv) certain rights of the
Depositor under the Mortgage Loan Purchase Agreements relating to Mortgage Loan
document delivery requirements and the representations and warranties of the
Mortgage Loan Sellers regarding the Mortgage Loans.
The Certificates will consist of fourteen classes (each, a 'Class') to be
designated as: (i) the Class A-1 Certificates, the Class A-2 Certificates, the
Class A-3 Certificates, the Class A-PO Certificates, the Class B Certificates,
the Class C Certificates, the Class D Certificates, the Class IO Certificates,
the Class E Certificates, the Class F Certificates and the Class G Certificates
(collectively, the 'REMIC Regular Certificates'); and (ii) the Class R-I
Certificates, the Class R-II Certificates and the Class R-III Certificates
(collectively, the 'REMIC Residual Certificates').
Only the Class A-1, Class A-2, Class A-3, Class A-PO, Class B, Class C and
Class D Certificates (collectively, the 'Offered Certificates') are offered
hereby. The Class E, Class F, Class G, Class IO and the REMIC Residual
Certificates (collectively, the 'Private Certificates') have not been registered
under the Securities Act, and are not offered hereby. Accordingly, information
herein regarding the terms of the Private Certificates is provided solely
because of its potential relevance to a prospective purchaser of an Offered
Certificate.
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be issued in book-entry format through the
facilities of The Depository Trust Company ('DTC'). Each Class of Offered
Certificates will be issued in denominations of not less than $1,000 principal
amount and in integral multiples of $1 in excess thereof.
Each Class of Offered Certificates will initially be represented by one or
more global Certificates registered in the name of the nominee of DTC. The
Depositor has been informed by DTC that DTC's nominee will be Cede & Co. No
beneficial owner of an Offered Certificate (each, a 'Certificate Owner') will be
entitled to receive a fully registered, certificated form of such Certificate (a
'Definitive Offered Certificate'), except under the limited circumstances
described in the Prospectus under 'Description of the Certificates -- Book-Entry
Registration and Definitive Certificates.' Unless and until Definitive Offered
Certificates are issued in respect of a Class of Offered Certificates,
beneficial ownership interests in such Class will be recorded and transferred on
the book-entry records of DTC and its participating organizations (the
'Participants'), and all references to actions by holders of a Class of Offered
Certificates will refer to actions taken by DTC upon instructions received from
the related Certificate Owners through the Participants in accordance with DTC
procedures, and all references herein to payments, notices, reports and
statements to the holders of a Class of 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 Certificate Owners
through the Participants in accordance with DTC procedures. The form of such
payments and transfers may result in certain delays in receipt of payments by an
investor and may restrict an investor's ability to pledge its securities. None
of the Depositor, the Master Servicer, the Special Servicer or the Trustee or
any of their respective affiliates will have any liability for any actions taken
by DTC or its nominee, including, without limitation, actions for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in Offered Certificates held by Cede & Co., as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests. See 'DESCRIPTION OF THE CERTIFICATES -- Book-Entry
Registration and Definitive Certificates' and 'RISK FACTORS -- Book-Entry
Registration' in the Prospectus.
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CERTIFICATE BALANCES AND NOTIONAL AMOUNT
Upon initial issuance, and in each case subject to a permitted variance of
plus or minus 5%, the Sequential Pay Certificates will have the Certificate
Balances representing the approximate percentage of the Initial Pool Balance as
set forth in the following table:
<TABLE>
<CAPTION>
PERCENT OF
INITIAL INITIAL POOL
CLASS OF CERTIFICATES CERTIFICATE BALANCE BALANCE
-------------------- ------------------
<S> <C> <C>
Class A-1 Certificates........................................ $182,300,000 28.2%
Class A-2 Certificates........................................ 27,813,000 4.3
Class A-3 Certificates........................................ 226,505,616 35.0
Class A-PO Certificates....................................... 254,384 (1)
Class B Certificates.......................................... 38,833,000 6.0
Class C Certificates.......................................... 38,833,000 6.0
Class D Certificates.......................................... 32,361,000 5.0
Private Certificates (other than the Class IO and REMIC
Residual Certificates)...................................... 100,319,459 15.5
- ------------
<FN>
(1) Represents less than 0.2% of the Initial Pool Balance.
</FN>
</TABLE>
The 'Certificate Balance' of any Class of Certificates outstanding at any
time represents the maximum amount that the holders thereof are entitled to
receive as distributions allocable to principal from the cash flow on the
Mortgage Loans and the other assets in the Trust Fund. The Certificate Balance
of each Class of Sequential Pay Certificates will be reduced on each
Distribution Date by any distributions of principal actually made on such Class
of Certificates on such Distribution Date, and further by any Realized Losses
and Additional Trust Fund Expenses actually allocated to such Class of
Certificates on such Distribution Date.
The Class IO Certificates will not have a Certificate Balance, but will
represent the right to receive the sum of the interest accrued on each of its
Components, as described herein. The Class IO-1 Component will have a notional
amount equal to the aggregate Stated Principal Balance of the Mortgage Loans and
the Class IO-2 Component will have a notional amount equal to the aggregate
Certificate Balance of the Class A-1 Certificates and the Class A-2 Certificates
(each of the Class IO-1 Component and the Class IO-2 Component, a 'Component').
Each Component will accrue interest at its applicable Pass-Through Rate. On each
Distribution Date on which an Appraisal Reduction Amount has been allocated to
any Class of Certificates, the Class IO-2 Component will be similarly reduced.
The Class IO-1 Component and the Class IO-2 Component do not represent separate
Classes of Certificates, but rather separate components each deemed to be a part
of the Class IO Certificates. The REMIC Residual Certificates will not have
Certificate Balances, but will represent the right to receive on each
Distribution Date any portion of the Available Distribution Amount (as defined
below) for such date that remains after the required distributions have been
made on all the other Classes of Certificates.
PASS-THROUGH RATES
The Pass-Through Rates applicable to each Class of Certificates for each
Distribution Date are set forth in the table set forth in 'DESCRIPTION OF THE
CERTIFICATES -- Certificate Balances and Notional Amounts' herein. The Class
A-PO Certificates and the REMIC Residual Certificates will not bear interest.
The Pass-Through Rate applicable to the Class IO-1 Component for each
Distribution Date will equal the Weighted Average Net Mortgage Rate minus 7.42%
(but not less than zero) and the Pass-Through Rate applicable to the Class IO-2
Component for each Distribution Date will equal the weighted average of the
Class A-1 Strip Rate and the Class A-2 Strip Rate, weighted by the Certificate
Balances of the corresponding Classes. The Class A-1 Strip Rate will equal 0.27%
and the Class A-2 Strip Rate will equal 0.18%.
The 'Weighted Average Net Mortgage Rate' for each Distribution Date is the
weighted average of the Net Mortgage Rates for the Mortgage Loans as of the
commencement of the related Collection
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Period, weighted on the basis of their respective Stated Principal Balances
outstanding immediately prior to such Distribution Date. The 'Net Mortgage Rate'
for each Mortgage Loan (other than the Discount Mortgage Loans) will generally
equal the Mortgage Rate in effect for such Mortgage Loan as of the Cut-off Date,
minus the applicable Master Servicing Fee Rate and the Trustee Fee Rate;
however, for purposes of computing the Weighted Average Net Mortgage Rate, the
Net Mortgage Rate (for each Mortgage Loan having a Net Mortgage Rate less than
7.42% (each, a 'Discount Mortgage Loan')) will be 7.42 %. The 'Stated Principal
Balance' of each Mortgage Loan outstanding at any time will generally be an
amount equal to the Cut-off Date Balance thereof, reduced (to not less than
zero) on each Distribution Date by (i) any payments or other collections (or
advances in lieu thereof) of principal of such Mortgage Loan that are due or
received, as the case may be, during the related Collection Period and are
distributed on the Certificates on such Distribution Date and (ii) the principal
portion of any Realized Loss and Additional Trust Fund Expenses incurred in
respect of such Mortgage Loan during the related Collection Period.
The 'Collection Period' for each Distribution Date will be the period that
begins immediately following the Determination Date in the month preceding the
month in which such Distribution Date occurs (or, in the case of the initial
Distribution Date, immediately following the Cut-off Date) and ends on and
includes the Determination Date in the same month as such Distribution Date. The
'Determination Date' will be the 12th day of each month (or, if not a business
day, the next preceding business day).
DISTRIBUTIONS
General. Distributions on the Certificates will be made by the Trustee, to
the extent of available funds, on the 25th day of each month or, if any such
25th day is not a business day, then on the next succeeding business day,
commencing May 28, 1996 (each, a 'Distribution Date'). Except as described
below, all such distributions will be made to the persons in whose names the
Certificates are registered (the 'Certificateholders') at the close of business
on the last business day of the month preceding the month in which the related
Distribution Date occurs. The final distribution on any Certificate (determined
without regard to any possible future reimbursement of any Realized Loss or
Additional Trust Fund Expense previously allocated to such 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.
Any distribution that is to be made with respect to a Certificate in
reimbursement of a Realized Loss or Additional Trust Fund Expenses previously
allocated thereto, which reimbursement is to occur after the Certificate is
surrendered as contemplated by the preceding sentence, will be made by mailed
check to the holder that surrendered such Certificate. All distributions made
with respect to a Class of Certificates will be allocated pro rata among the
outstanding Certificates of such Class based on their respective percentage
interests in such Class.
The Available Distribution Amount. The aggregate amount available for
distribution to Certificateholders on each Distribution Date (the 'Available
Distribution Amount') will, in general, equal the sum of the following amounts:
(a) the total amount of all cash received on or in respect of the
Mortgage Loans and any REO Properties that is on deposit in the Certificate
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) any Monthly Payments collected but due on a Due Date subsequent
to the related Collection Period,
(ii) any Prepayment Premiums and Yield Maintenance Charges, and
(iii) all amounts in the Certificate Account that are payable or
reimbursable to any person other than the Certificateholders;
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(b) all P&I Advances made by the Master Servicer with respect to such
Distribution Date;
(c) any Compensating Interest Payment made by the Master Servicer to
cover the aggregate of any Prepayment Interest Shortfalls experienced
during the related Collection Period. See 'SERVICING OF THE MORTGAGE
LOANS -- Servicing and other Compensation and Payment of Expenses' and
' -- P&I Advances' herein and 'DESCRIPTION OF THE POOLING
AGREEMENTS -- Certificate Account' in the Prospectus.
Any Prepayment Premiums and Yield Maintenance Charges actually collected
will be distributed separately from the Available Distribution Amount. See
' -- Distributions -- Allocation of Prepayment Premiums and Yield Maintenance
Charges' herein.
Application of the Available Distribution Amount. On each Distribution
Date, for so long as the aggregate Certificate Balance of the Offered
Certificates are greater than zero, the Trustee will (except as otherwise
described under ' -- Termination' below) apply amounts on deposit in the
Certificate Account, to the extent of the Available Distribution Amount, in the
following order of priority:
(1) to distributions of interest to the holders of the Class A-1,
Class A-2 and Class A-3 and Class IO Certificates (in each case, so long as
any such Class remains outstanding), pro rata, in accordance with the
respective amounts of interest distributable on such Classes of
Certificates on such Distribution Date in an amount equal to all
Distributable Certificate Interest in respect of each such Class of
Certificates for such Distribution Date and, to the extent not previously
paid, for all prior Distribution Dates;
(2) to distributions of principal to the holders to the Class A-PO
Certificates with respect to each Discount Mortgage Loan, in an amount (not
to exceed the then outstanding Certificate of such Class Certificate) equal
to: (x) a portion of each payment of or in respect of principal on such
Discount Mortgage Loan equal to the amount of such payment multiplied by a
fraction, the numerator of which is 7.42% minus the Net Mortgage Rate for
such Mortgage Loan and the denominator of which is 7.42% (such fraction,
the Class A-PO Fraction) and (y) the product of the Class A-PO Fraction for
such Discount Mortgage Loan and any Realized Losses and Additional Trust
Fund Expenses with respect to such Discount Mortgage Loan that were
realized during the related Collection Period, to the extent such Realized
Losses and Additional Trust Fund Expenses have not been allocated to the
Class A-PO Certificates pursuant to the terms of the Pooling and Servicing
Agreement. See ' -- Subordination; Allocation of Losses and Certain
Expenses' herein;
(3) to distributions of principal to the holders of the Class A-1
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of such Class of Certificates) equal to the Principal Distribution
Amount for such Distribution Date, less any portion thereof distributed in
respect of the Class A-PO Certificates;
(4) if the Class A-1 Certificates have been retired, to distributions
of principal to the holders of the Class A-2 Certificates in an amount (not
to exceed the then outstanding Certificate Balance of such Class of
Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-PO and/or the Class A-1 Certificates;
(5) if the Class A-1 and Class A-2 Certificates have been retired, to
distributions of principal to the holders of the Class A-3 Certificates in
an amount (not to exceed the then outstanding Certificate Balance of such
Class of Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-PO, Class A-1 and/or Class A-2 Certificates;
(6) to distributions to the holders of the Class A-1, Class A-2, Class
A-3 and Class A-PO Certificates, pro rata, in accordance with the amount of
Realized Losses and Additional Trust Fund Expenses, if any, previously
allocated to such Classes of Certificates for which no reimbursement has
previously been received, to reimburse such holders for all Realized Losses
and Additional Trust Fund Expenses, if any;
(7) to distributions of interest to the holders of the Class B
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
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(8) if the Class A-1, Class A-2 and Class A-3 Certificates have been
retired, to distributions of principal to the holders of the Class B
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of the Class B Certificates) equal to the Principal Distribution
Amount for such Distribution Date, less any portion thereof distributed in
respect of the Class A-1, Class A-2, Class A-3 and/or Class A-PO
Certificates on such Distribution Date;
(9) to distributions to the holders of the Class B Certificates to
reimburse such holders for all Appraisal Reduction Amount Shortfalls and
Realized Losses and Additional Trust Fund Expenses, if any, previously
allocated to such Class of Certificates and for which no reimbursement has
previously been received;
(10) to distributions of interest to the holders of the Class C
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(11) if the Class A-1, Class A-2, Class A-3 and Class B Certificates
have been retired, to distributions of principal to the holders of the
Class C Certificates in an amount (not to exceed the then outstanding
Certificate Balance of the Class C Certificates) equal to the Principal
Distribution Amount for such Distribution Date, less any portion thereof
distributed in respect of the Class A-1, Class A-2, Class A-3 and Class
A-PO and/or Class B Certificates on such Distribution Date;
(12) to distributions to the holders of the Class C Certificates to
reimburse such holders for all Appraisal Reduction Amount Shortfalls and
Realized Losses and Additional Trust Fund Expenses, if any, previously
allocated to such Class of Certificates and for which no reimbursement has
previously been received;
(13) to distributions of interest to the holders of the Class D
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(14) if the Class A-1, Class A-2, Class A-3, Class B and Class C
Certificates have been retired, to distributions of principal to the
holders of the Class D Certificates in an amount (not to exceed the then
outstanding Certificate Balance of the Class D Certificates) equal to the
Principal Distribution Amount for such Distribution Date, less any portion
thereof distributed in respect of the Class A-1, Class A-2, Class A-3,
Class A-PO, Class B and/or Class C Certificates on such Distribution Date;
(15) to distributions to the holders of the Class D Certificates to
reimburse such holders for all Appraisal Reduction Amount Shortfalls and
Realized Losses and Additional Trust Fund Expenses, if any, previously
allocated to such Class of Certificates and for which no reimbursement has
previously been received;
(16) to distributions of interest to the holders of the Class E
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(17) to distributions to the holders of the Class E Certificates to
reimburse such holders for all Appraisal Reduction Amount Shortfalls and
Realized Losses and Additional Trust Fund Expenses, if any, previously
allocated to such Class of Certificates and for which no reimbursement has
previously been received;
(18) to distributions of interest to the holders of the Class F
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(19) to distributions to the holders of the Class F Certificates to
reimburse such holders for all Appraisal Reduction Amount Shortfalls and
Realized Losses and Additional Trust Fund Expenses, if any, previously
allocated to such Class of Certificates and for which no reimbursement has
previously been received;
(20) to distributions of interest to the holders of the Class G
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
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(21) to distributions to the holders of the Class G and Class IO
Certificates, in that order, to reimburse such holders for all Appraisal
Reduction Amount Shortfalls and Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to each such Class of Certificates
and for which no reimbursement has previously been received; and
(22) to distributions to the holders of the REMIC Residual
Certificates in an amount equal to the balance, if any, of the Available
Distribution Amount remaining after the distributions to be made on such
Distribution Date as described in clauses (1) through (21) above.
Notwithstanding the priority of distrubutions set forth above, if, on any
Distribution Date, (i) the Class C Certificates have been retired or (ii) the
Class G, Class F and Class E Certificates have been reduced to zero by any
Realized Losses and Additional Trust Fund Expenses, then the holders of the
Class A-PO Certificates will be entitled to distributions of principal in an
amount (not to exceed the then outstanding Certificate Balance of such Class of
Certificates) equal to the Principal Distribution Amount for such Distribution
Date until the Class A-PO Certificates have been reduced to zero.
Distributable Certificate Interest. The 'Distributable Certificate
Interest' in respect of any Class of the Sequential Pay Certificates for each
Distribution Date (other than the Class A-PO Certificates which are not entitled
to any distributions in respect of interest) represents that portion of the
Accrued Certificate Interest in respect of such Class of Certificates for such
Distribution Date that is net of such Class's allocable share (calculated as
described below) of the aggregate of any Prepayment Interest Shortfalls
resulting from voluntary principal prepayments made on the Mortgage Loans during
the related Collection Period that are not covered by the Master Servicer's
Compensating Interest Payment for such Distribution Date (the aggregate of such
Prepayment Interest Shortfalls that are not so covered, as to such Distribution
Date, the 'Net Aggregate Prepayment Interest Shortfall').
The 'Accrued Certificate Interest' in respect of each Class of REMIC
Regular Certificates for each Distribution Date is equal to one month's interest
at the Pass-Through Rate applicable to such Class of Certificates for such
Distribution Date accrued on the related Certificate Balance outstanding
immediately prior to such Distribution Date. Accrued Certificate Interest will
be calculated on a 30/360 day basis.
The portion of the Net Aggregate Prepayment Interest Shortfall for any
Distribution Date that is allocable to each Class of REMIC Regular Certificates
will equal the product of (a) such Net Aggregate Prepayment Interest Shortfall,
multiplied by (b) a fraction, the numerator of which is equal to the Accrued
Certificate Interest in respect of such Class of Certificates for such
Distribution Date, and the denominator of which is equal to the aggregate
Accrued Certificate Interest for all the REMIC Regular Certificates for such
Distribution Date.
Principal Distribution Amount. The 'Principal Distribution Amount' for
each Distribution Date will generally equal the aggregate of the following:
(a) the aggregate of the principal portions of all Scheduled Payments
(other than Balloon Payments) due and any Assumed Scheduled Payments deemed
due on or in respect of the Mortgage Loans for their respective Due Dates
occurring during the related Collection Period;
(b) the aggregate of all principal prepayments received on the
Mortgage Loans during the related Collection Period;
(c) with respect to any Mortgage Loan as to which the related stated
maturity date occurred during or prior to the related Collection Period,
any payment of principal made by or on behalf of the related borrower
during the related Collection Period, net of any portion of such payment
that represents a recovery of the principal portion of any Scheduled
Payment (other than a Balloon Payment) due or the principal portion of any
Assumed Scheduled Payment deemed due, in respect of such Mortgage Loan on a
Due Date during or prior to the related Collection Period and not
previously recovered;
(d) the aggregate of all Liquidation Proceeds and Insurance Proceeds
(each as defined in the Prospectus) that were received on Mortgage Loans
during the related Collection Period and that were identified and applied
by the Master Servicer as recoveries of principal, in each case net of any
portion of such amounts that represents a recovery of the principal portion
of any Scheduled
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Payment (other than a Balloon Payment) due or of the principal portion of
any Assumed Scheduled Payment deemed due, in respect of the related
Mortgage Loan on a Due Date during or prior to the related Collection
Period and not previously recovered;
(e) if such Distribution Date is subsequent to the initial
Distribution Date, the excess, if any, of the Principal Distribution Amount
for the immediately preceding Distribution Date, over the aggregate
distributions of principal made on the Certificates on such immediately
preceding Distribution Date; and
(f) any amounts not otherwise distributed as interest on any Class of
Certificates in respect of an Appraisal Reduction Amount.
The 'Scheduled Payment' due on any Mortgage Loan on any related Due Date
will be the amount of the Monthly Payment that would have been due thereon on
such date, without regard to any waiver, modification or amendment of such
Mortgage Loan granted or agreed to by the Special Servicer or otherwise
resulting from a bankruptcy or similar proceeding involving the related
borrower, and assuming that each prior Scheduled Payment has been made in a
timely manner. The 'Assumed Scheduled Payment' is an amount deemed due in
respect of any Balloon Loan that is delinquent in respect of its Balloon Payment
beyond the first Determination Date that follows its stated maturity date. The
Assumed Scheduled Payment deemed due on any such Balloon Loan on its stated
maturity date and on each successive related Due Date that it remains or is
deemed to remain outstanding will equal the Scheduled Payment that would have
been due thereon on such date if the related Balloon Payment had not come due
but rather such Mortgage Loan had continued to amortize in accordance with such
loan's amortization schedule, if any, in effect prior to its stated maturity
date.
Distributions of the Principal Distribution Amount will constitute the only
distributions of principal on the Certificates. Reimbursements of previously
allocated Realized Losses and Additional Trust Fund Expenses will not constitute
distributions of principal for any purpose and will not result in an additional
reduction in the Certificate Balance of the Class of Certificates in respect of
which any such reimbursement is made.
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 (i) determining distributions on the Certificates, (ii) allocations
of Realized Losses and Additional Trust Fund Expenses to the Certificates, and
(iii) the amount of Trustee Fees and Master Servicing Fees payable under the
Pooling and Servicing Agreement, as having remained outstanding until such REO
Property is liquidated. In connection therewith, operating revenues and other
proceeds derived from such REO Property (net of related operating costs) will be
'applied' by the Master Servicer as principal, interest and other amounts that
would have been 'due' on such Mortgage Loan, and the Master Servicer will make
P&I Advances in respect of such Mortgage Loan, in all cases as if such Mortgage
Loan had remained outstanding.
Allocation of Prepayment Premiums and Yield Maintenance Charges. In the
event a borrower is required to pay any Yield Maintenance Charge or any
Prepayment Premium, the amount of such payments actually collected will be
distributed in respect of the Certificates (other than the Class A-PO
Certificates) and the Class IO Certificates as set forth below. 'Yield
Maintenance Charges' are paid or payable, as the context requires, on a Mortgage
Loan as a result of a prepayment of Principal not otherwise due thereon, which
have been calculated (based on Scheduled Payments on such Mortgage Loan) to
compensate the holder of the Mortgage for reinvestment losses based on the value
of a discount rate at or near the time of prepayment. Any other fees paid or
payable, as the context requires, as a result of a prepayment of principal on a
Mortgage Loan which are calculated based upon a specified percentage (which may
decline over time) of the amount prepaid are considered 'Prepayment Premiums'.
For any Distribution Date, with respect to any Prepayment Premiums actually
collected during the related Collection Period (except as set forth above), the
holders of the Class A-1, Class A-2, Class A-3, Class B, Class C, Class D, Class
E, Class F and Class G Certificates are, in the case of each such Class,
entitled to distributions in an amount equal to the product of (a) the related
Class Prepayment Percentage for such Distribution Date and (b) 40% of the total
amount of each such Prepayment
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Premium collected. Any remaining portion of such Prepayment Premiums collected
will be distributed to the holders of the Class IO Certificates. For any
Distribution Date, the respective 'Class Prepayment Percentage' for each of the
Class A-1, Class A-2, Class A-3, Class B, Class C and Class D Certificates is
computed in each case by dividing the total of Principal Distribution Amount, if
any, to be distributed to the holders of each Class of Certificates on such
date, by the total Principal Distribution Amount to be distributed on such date.
For any Distribution Date, with respect to any Yield Maintenance Charge
actually collected (except as set forth above) in respect of a Mortgage Loan
during the related Collection Period, the holders of the Class A-1, Class A-2,
Class A-3, Class B, Class C, Class D, Class E, Class F and Class G Certificates
are entitled to distributions in the amount of the product of (a) a fraction
(not greater than one and not less than zero), the numerator of which is the
applicable Pass-Through Rate minus the discount rate used in calculating such
Yield Maintenance Charge and the denominator of which is the Mortgage Rate of
the applicable Mortgage Loan minus such discount rate, (b) the appropriate Class
Prepayment Percentage and (c) the amount of such Yield Maintenance Charge
collected. On each Distribution Date, the holders of the Class IO Certificates
are entitled to receive any remaining portion of such Yield Maintenance Charge
received.
SUBORDINATION; ALLOCATION OF LOSSES AND CERTAIN EXPENSES
The rights of holders of the Class B, Class C, Class D, Class E, Class F
and Class G Certificates (collectively, the 'Subordinate Certificates') to
receive distributions of amounts collected or advanced on the Mortgage Loans
will be subordinated, to the extent described herein, to the rights of holders
of the Class A-1, Class A-2 and Class A-3 Certificates (collectively, the
'Senior Certificates') and each other such Class of Subordinate Certificates, if
any, with an earlier alphabetical Class designation. This subordination is
intended to enhance the likelihood of timely receipt by the holders of the
Senior Certificates of the full amount of Distributable Certificate Interest
payable in respect of such Classes of Certificates (other than the Class A-PO
Certificates) on each Distribution Date, and the ultimate receipt by the holders
of the Class A-1, Class A-2 and Class A-3 Certificates of principal in an amount
equal to the entire respective Certificate Balances of such Classes of
Certificates. Similarly, but to decreasing degrees, this subordination is also
intended to enhance the likelihood of timely receipt by the holders of the Class
B Certificates, the holders of the Class C Certificates and the holders of the
Class D Certificates of the full amount of Distributable Certificate Interest
payable in respect of such Classes of Certificates on each Distribution Date,
and the ultimate receipt by the holders of such Certificates of principal equal
to, in each case, the entire Certificate Balance of the related Class. The
protection afforded to the holders of the Class D Certificates by means of the
subordination of the Private Certificates (other than the Class IO
Certificates), to the holders of the Class C Certificates by means of the
subordination of the Class D and the Private Certificates (other than the Class
IO Certificates), to the holders of the Class B Certificates by means of the
subordination of the Class C, the Class D and the Private Certificates (other
than the Class IO Certificates), and to the holders of the Senior Certificates
by means of the subordination of the Subordinate Certificates, will be
accomplished by (i) the application of the Available Distribution Amount on each
Distribution Date in accordance with the order of priority described under
' -- Distributions -- Application of the Available Distribution Amount' above
and (ii) by the allocation of Realized Losses and Additional Trust Fund Expenses
as described below. The Class A-3 Certificates will receive principal payments
only after the Certificate Balances of the Class A-2 and Class A-1 Certificates
have been reduced to zero and the Class A-2 Certificates will receive principal
payments only after the Certificate Balance of the Class A-1 Certificates has
been reduced to zero. However, the Class A-1, Class A-2, Class A-3, Class A-PO
and Class IO Certificates will bear shortfalls in collections and losses
incurred in respect of the Mortgage Loans concurrently. In addition, if, on any
Distribution Date, (i) the Class C Certificates have been retired or (ii) the
Class G, Class F and Class E Certificates have been reduced to zero, then the
holders of the Class A-PO Certificates will be entitled to distributions of
principal prior to any other outstanding Class of Certificates. No other form of
Credit Support will be available for the benefit of the holders of the Offered
Certificates.
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On each Distribution Date, following all distributions on the Certificates
to be made on such date, the aggregate of all Realized Losses and Additional
Trust Fund Expenses that have been incurred since the Cut-off Date through the
end of the related Collection Period and that have not previously been allocated
as described below will be allocated among the respective Classes of Sequential
Pay Certificates (in each case in reduction of their respective Certificate
Balances) as follows, but in the aggregate only to the extent that the aggregate
Certificate Balance of all Classes of Sequential Pay Certificates remaining
outstanding after giving effect to the distributions on such Distribution Date
exceeds the aggregate Stated Principal Balance of the Mortgage Pool that will be
outstanding immediately following such Distribution Date: first, to the Class G
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; second, to the Class F Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
third, to the Class E Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; fourth, to the Class D
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; fifth, to the Class C Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
sixth, to the Class B Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero. Thereafter, additional Realized
Losses and Additional Trust Fund Expenses will be allocated to the Class A-1
Certificates, the Class A-2 Certificates and the Class A-3 Certificates, pro
rata, in proportion to their outstanding Certificate Balances, until the
remaining Certificate Balances of such Classes of Certificates are reduced to
zero; provided that if such losses or expenses occur with respect to a Discount
Mortgage Loan, an amount equal to the product of the Class A-PO Fraction and the
amount of such loss or expense shall be allocated to the Class A-PO Certificates
and the remainder shall be allocated pro rata to the Class A-1, Class A-2 and
Class A-3 Certificates.
'Realized Losses' are losses arising from the inability to collect all
amounts due and owing under any defaulted Mortgage Loan, including by reason of
the fraud or bankruptcy of the borrower or a casualty of any nature at the
related Mortgaged Property, to the extent not covered by insurance. 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 at the related Mortgage Rate in effect
from time to time to but not including the Due Date in the Collection Period in
which the liquidation occurred and (ii) certain related unreimbursed servicing
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 Special Servicer or in
connection with the bankruptcy or similar proceeding involving the related
borrower, the amount so forgiven also will be treated as a Realized Loss.
'Additional Trust Fund Expenses' include, among other things, (i) any
Special Servicing Fees or Principal Recovery Fees paid to the Special Servicer,
(ii) any interest paid to the Master Servicer and/or a Special Servicer in
respect of unreimbursed Advances, and (iii) any of certain unanticipated, non-
Mortgage Loan specific expenses of the Trust Fund, including certain
reimbursements to the Trustee of the type described under 'DESCRIPTION OF THE
POOLING AGREEMENTS -- Certain Matters Regarding the Trustee' in the Prospectus,
certain reimbursements to the Master Servicer, any Special Servicer and the
Depositor of the type described under 'DESCRIPTION OF THE POOLING
AGREEMENTS -- Certain Matters Regarding the Master Servicer and the Depositor'
in the Prospectus, and certain federal, state and local taxes, and certain tax
related expenses, payable from the assets of the Trust Fund and described under
'CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- Prohibited Transactions Tax and
Other Taxes' in the Prospectus. Additional Trust Fund Expenses will reduce
amounts payable to Certificateholders and, subject to the distribution
priorities described above, may result in a loss on one or more Classes of
Offered Certificates.
P&I ADVANCES
On or about each Distribution Date, the Master Servicer will be obligated,
subject to the recoverability determination described in the next paragraph, to
make advances (each, a 'P&I
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Advance') out of its own funds or, subject to the replacement thereof as
provided in the Pooling and Servicing Agreement, from funds held in the
Certificate Account that are not required to be distributed to
Certificateholders on such Distribution Date, in an amount that is generally
equal to the aggregate of all Scheduled Payments (other than Balloon Payments)
and any Assumed Scheduled Payments, net of related Master Servicing Fees and any
related Principal Recovery Fees, due or deemed due, as the case may be, in
respect of the Mortgage Loans during the related Collection Period, in each case
to the extent such amount was not paid by or on behalf of the related borrower
or otherwise collected as of the close of business on the related Determination
Date. The Master Servicer's obligations to make P&I Advances in respect of any
Mortgage Loan will continue until liquidation of such Mortgage Loan or
disposition of any REO Property acquired in respect thereof. However, if the
Monthly Payment on any Mortgage Loan has been reduced in connection with a
bankruptcy or similar proceeding or a modification, waiver or amendment granted
or agreed to by a Special Servicer, the Master Servicer will be required to
advance only the amount of the reduced Monthly Payment (net of related Master
Servicing Fees and Principal Recovery Fees) in respect of subsequent
delinquencies. In addition, if it is determined that an Appraisal Reduction
Amount exists with respect to any Required Appraisal Loan (as defined below),
then, with respect to the Distribution Date immediately following the date of
such determination and with respect to each subsequent Distribution Date for so
long as such Appraisal Reduction Amount exists, the Master Servicer will be
required in the event of subsequent delinquencies to advance in respect of such
Mortgage Loan only an amount equal to the product of (i) the amount of the P&I
Advance that would otherwise be required without regard to this 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.
The Master Servicer will be entitled to recover any P&I Advance made out of
its own funds from any amounts collected in respect of the Mortgage Loan as to
which such P&I Advance was made, whether such amounts are collected in the form
of late payments, Insurance Proceeds, Liquidation Proceeds or otherwise
('Related Proceeds'). The Master Servicer will not be obligated to make any P&I
Advance that it determines in accordance with the servicing standard described
herein, would, if made, not be recoverable out of Related Proceeds (a
'Nonrecoverable P&I Advance'), and the Master Servicer will be entitled to
recover any P&I Advance made that it later determines to be a Nonrecoverable P&I
Advance out of general funds on deposit in the Certificate Account. See
'DESCRIPTION OF THE CERTIFICATES -- Advances in Respect of Delinquencies' and
'DESCRIPTION OF THE POOLING AGREEMENTS -- Certificate Account' in the
Prospectus.
In connection with the recovery by the Master Servicer of any P&I Advance
made by it or the recovery by either the Master Servicer or the Special Servicer
of any reimbursable servicing expense incurred by it (each such P&I Advance or
expense, an 'Advance'), the Master Servicer or the Special Servicer, as
applicable, will be entitled to be paid, out of any amounts then on deposit in
the Certificate Account, interest at a per annum rate (the 'Reimbursement Rate')
equal to the 'prime rate' published in the 'Money Rates' section of The Wall
Street Journal, as such 'prime rate' may change from time to time, accrued on
the amount of such Advance from the date made to but not including the date of
reimbursement. To the extent not offset or covered by amounts otherwise payable
on the Private Certificates, interest accrued on outstanding Advances will
result in a reduction in amounts payable on the Offered Certificates, subject to
the distribution priorities described herein.
APPRAISAL REDUCTIONS
With respect to (1) each Mortgage Loan that is ninety (90) days or more
delinquent in respect of any Monthly Payments, (2) each Mortgage Loan that
becomes an REO Mortgage Loan, and (3) each Mortgage Loan that has been modified
by the Special Servicer to reduce the amount of any Monthly Payment, other than
a Balloon Payment (each such Mortgage Loan, including an REO Mortgage Loan, a
'Required Appraisal Loan'), the Master Servicer will be required to obtain
(within 60 days or, if in connection with a modification, within 180 days) of
such Mortgage Loan becoming a Required Appraisal Loan) an appraisal of the
related Mortgaged Property from an independent state certified appraiser or an
appraiser belonging to the Appraisal Institute, unless such an appraisal had
previously
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been obtained within the prior twelve months. The cost of such appraisal will be
borne by the Master Servicer, subject to the Master Servicer's right to be
reimbursed therefor out of Related Proceeds or, if not reimbursable therefrom,
out of general funds on deposit in the Certificate Account. 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 equal the excess, if any, of (a) the
sum of, as of the Determination Date immediately succeeding the date on which
the appraisal is obtained, (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 such Determination Date
at a per annum rate equal to the related Net Mortgage Rate, (iii) all accrued
but unpaid Master Servicing Fees and any Additional Trust Fund Expenses 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 and (v) all currently due and
unpaid real estate taxes and assessments, insurance premiums, and, if
applicable, ground rents in respect of the related Mortgaged Property, over (b)
an amount equal to 90% of the appraised value (net of any prior liens) of the
related Mortgaged Property as determined by such appraisal. The aggregate
Appraisal Reduction Amount will be allocated on each Distribution Date, for
purposes of determining distributions in respect of interest on such
Distribution Date, to the Certificate Principal Balance of the most subordinated
Class of Certificates that would otherwise receive distributions of interest
after allocation of Realized Losses and Additional Trust Fund Expenses. On each
Distribution Date, any distribution of interest to a Class to which an Appraisal
Reduction Amount has been allocated, will be reduced by the product of such
Appraisal Reduction Amount and the Pass-Through Rate applicable to such Class of
Certificates (an 'Appraisal Reduction Amount Shortfall'). See ' --
Subordination; Allocation of Losses and Certain Expenses' herein.
Notwithstanding the foregoing, if any Required Appraisal Loan as to which
an Appraisal Reduction Amount has been established in accordance with the
preceding paragraph becomes a Corrected Mortgage Loan, then the Appraisal
Reduction Amount shall be deemed to be zero, subject to such Mortgage Loan again
becoming subject to the appraisal requirement described above; provided that, in
the case of any Required Appraisal Loan that has been modified as described in
the immediately preceding paragraph, the Appraisal Reduction Amount will be
deemed to exist for so long as the term of the modification are in effect.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
On each Distribution Date, the Trustee will be required to forward by mail
to each holder of an Offered Certificate a statement (a 'Distribution Date
Statement'), providing various items of information relating to distributions
made on such date with respect to the relevant Class and a statement,
substantially in the form of Annex B, setting forth the recent status of the
Mortgage Pool based on information provided by the Master Servicer. For a more
detailed discussion of the particular items of information to be provided in
each Distribution Date Statement, as well as a discussion of certain annual
information reports to be furnished to persons who at any time during the prior
calendar year were holders of the Offered Certificates, see 'DESCRIPTION OF THE
CERTIFICATES -- Reports to Certificateholders' in the Prospectus. It is
anticipated that a portion of the Distribution Date Statement will be in the
form of a Mortgage Loan schedule to be prepared by the Master Servicer that may
include certain operating information for the respective Mortgaged Properties.
See 'SERVICING OF THE MORTGAGE LOANS -- Inspections; Collection of Operating
Information' herein. Such information will generally be obtained from the
related borrowers, and neither the Master Servicer nor the Trustee will assume
any responsibility therefor.
Except as described below, until such time as Definitive Offered
Certificates are issued in respect of a Class of Offered Certificates, the
foregoing information will be available to the related Certificate Owners only
to the extent it is forwarded by or otherwise available through DTC and its
Participants, or by the Underwriters in the case of initial purchasers of
Offered Certificates. The manner in which notices and other communications are
conveyed by DTC to Participants, and by Participants to the Certificate Owners,
will be governed by arrangements among them, subject to any statutory or
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regulatory requirements as may be in effect from time to time. The Master
Servicer, the Trustee and the Depositor may recognize as owner of a Certificate
the person in whose name the Certificate is registered on the books and records
of the Trustee, as registrar in respect of the Certificates (in such capacity,
the 'Certificate Registrar').
The Pooling and Servicing Agreement requires that the Master Servicer make
available at its offices primarily responsible for administration of the Trust
Fund, during normal business hours, for review by any Certificate Owner owning
an interest in an Offered Certificate or any person identified to the Master
Servicer as a prospective transferee of such an interest, originals or copies
of, among other things, the following items: (a) the Pooling and Servicing
Agreement and any amendments thereto, (b) all Distribution Date Statements
delivered to holders of the relevant Class of Offered Certificates since the
Closing Date, (c) all officer's certificates delivered to the Master Servicer
since the Closing Date as described under 'DESCRIPTION OF THE POOLING
AGREEMENTS -- Evidence as to Compliance' in the Prospectus, (d) all accountants'
reports delivered to the Master Servicer since the Closing Date as described
under 'DESCRIPTION OF THE POOLING AGREEMENTS -- Evidence as to Compliance' in
the Prospectus, (e) the most recent property inspection report prepared by or on
behalf of the Master Servicer or a Special Servicer in respect of each Mortgaged
Property and delivered to the Master Servicer, (f) the most recent Mortgaged
Property annual operating statements and rent roll, if any, collected by or on
behalf of the Master Servicer or a Special Servicer and delivered to the Master
Servicer, (g) any and all modifications, waivers and amendments of the terms of
a Mortgage Loan entered into by the Special Servicer, and (h) any and all
officers' certificates and other evidence delivered to the Master Servicer to
support the Master Servicer's or a Special Servicer's determination that any
Advance was or, if made, would not be recoverable from Related Proceeds. Copies
of any and all of the foregoing items will be available from the Master Servicer
upon request; however, the Master Servicer will be permitted to require payment
of a sum sufficient to cover the reasonable costs and expenses of providing such
copies.
A Certificate Owner may obtain a diskette containing certain information
contained in each Distribution Date Statement by sending a written request,
together with any fee that Bankers Trust Company, may require, to Bankers Trust
Company at 3 Park Plaza, 16th Floor, Irvine, California 92714, Attention: MLMI
1996-C1. Factor information may be obtained by calling (800) 735-7777. In
addition, if the Depositor so directs the Trustee and on terms agreeable to the
Trustee, the Trustee will make available, on its Bulletin Board System, certain
Mortgage Loan information. The Bulletin Board System may be accessed by dialing
(714) 253-7617.
Upon written request of any Certificateholder of record made for purposes
of communicating with other Certificateholders with respect to their rights
under the Pooling and Servicing Agreement, the Certificate Registrar will
furnish such Certificateholder with a list of the other Certificateholders then
of record.
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement, 100%
of the voting rights for the series offered hereby (the 'Voting Rights') will be
allocated among the respective Classes of Sequential Pay Certificates in
proportion to the Certificate Balances (as adjusted by treating any Appraisal
Reduction Amounts as Realized Losses solely for the purposes of adjusting Voting
Rights) of those Classes. Voting Rights allocated to a Class of Certificates
will be allocated among the related Certificateholders in proportion to the
percentage interests in such Class evidenced by their respective Certificates.
The Class A-1, Class A-2, Class A-3 and Class A-PO Certificates will be treated
as one Class for determining the Controlling Class of Sequential Pay
Certificates. See 'DESCRIPTION OF THE CERTIFICATES -- Voting Rights' in the
Prospectus.
TERMINATION
The obligations created by the Pooling and Servicing Agreement will
terminate following the earliest of (i) the final payment (or advance in respect
thereof) or other liquidation of the last Mortgage Loan or REO Property subject
thereto, and (ii) the purchase of all of the Mortgage Loans and all of the REO
Properties remaining in the Trust Fund, if any, by the Depositor or the Master
Servicer. Written notice of termination of the Pooling and Servicing Agreement
will be given to each Certificateholder,
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<PAGE>
and the final distribution will be made only upon surrender and cancellation of
the Certificates at the office of the Trustee or other registrar for the
Certificates or at such other location as may be specified in such notice of
termination.
Any such purchase by the Master Servicer or the Depositor of all the
Mortgage Loans and all of the REO Properties, if any, remaining in the Trust
Fund is required to be made at a price equal to (i) the aggregate Purchase Price
of all the Mortgage Loans then included in the Trust Fund, plus (ii) the fair
market value of all REO Properties then included in the Trust Fund, as
determined by an appraiser mutually agreed upon by the Master Servicer and the
Trustee, minus (iii) if the Purchaser is the Master Servicer, the aggregate of
amounts payable or reimbursable to the Master Servicer under the Pooling and
Servicing Agreement. Such purchase will effect early retirement of the then
outstanding Offered Certificates, but the right of the Master Servicer or the
Depositor to effect such termination is subject to the requirement that the then
aggregate Stated Principal Balance of the Mortgage Pool be less than % of the
Initial Pool Balance.
Distributions on the final Distribution Date will be made generally as
described above under ' -- Distributions -- Application of the Available
Distribution Amount' and ' -- Distributions -- Allocation of Prepayment Premiums
and Yield Maintenance Charges,' except that distributions of principal on the
Class A-1, Class A-2, Class A-3, Class B, Class C and Class D Certificates will
be made, in the case of each such Class of Certificates, to the extent of
available funds and subject to the distribution priorities described herein, in
an amount equal to the entire then outstanding Certificate Balance thereof.
THE TRUSTEE
Bankers Trust Company of California, N.A., a national banking association,
will act as Trustee pursuant to the Pooling and Servicing Agreement. The
principal offices of the Trustee are located at 3 Park Plaza, 16th Floor,
Irvine, California 92714, and its telephone number is (714) 253-7575. See
'DESCRIPTION OF THE POOLING AGREEMENTS -- The Trustee,' ' -- Duties of the
Trustee,' ' -- Certain Matters Regarding the Trustee' and ' -- Resignation and
Removal of the Trustee' in the Prospectus. As compensation for its services, the
Trustee will be entitled to receive, from general funds on deposit in the
Certificate Account, the Trustee Fee. The 'Trustee Fee' will be computed monthly
on a loan-by-loan basis, will accrue at the related Trustee Fee Rate and will be
computed on the basis of the same principal amount and for the same period
respecting which any related interest payment due on the Mortgage Loan or deemed
due on any REO Loan is computed. The 'Trustee Fee Rate' will be a per annum rate
equal to 0.0075%.
S-63
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<PAGE>
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, among other
things, (i) the Pass-Through Rate for such Certificate, (ii) the rate and timing
of principal payments (including principal prepayments) and other principal
collections on the Mortgage Loans and the extent to which such amounts are to be
applied in reduction of the Certificate Balance or Notional Amount of the
related Class, (iii) the rate, timing and severity of Realized Losses and
Additional Trust Fund Expenses and the extent to which such losses and expenses
are allocable in reduction of the Certificate Balance or notional amount of the
related Class, and (iv) the timing and severity of any Net Aggregate Prepayment
Interest Shortfalls and the extent to which such shortfalls are allocable in
reduction of the Distributable Certificate Interest payable on the related
Class.
Rate and Timing of Principal Payment. The yield to holders of the Class
A-PO Certificates will be extremely sensitive to, and the yield to holders of
any Offered Certificates purchased at a discount or premium will be affected by,
the rate and timing of principal payments made in reduction of the Certificate
Balance of such Certificates. As described herein, the Principal Distribution
Amount for each Distribution Date will be distributable first, in respect of the
Class A-PO Certificates, next entirely in respect of the Class A-1 Certificates
until the Certificate Balance thereof is reduced to zero, and will thereafter be
distributable entirely in respect of the Class A-2 Certificates, the Class A-3
Certificates, the Class B Certificates, the Class C Certificates and the Class D
Certificates, in that order, in each case until the Certificate Balance of such
Class of Certificates is reduced to zero. Consequently, the rate and timing of
principal payments that are distributed or otherwise result in reduction of the
Certificate Balance, as the case may be, of each Class of Offered Certificates
will be directly related to 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 dates on which Balloon Payments are due and
the rate and timing of principal 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 and purchases of the Mortgage Loans,
will result in distributions on the Offered Certificates of amounts that would
otherwise be distributed over the remaining terms of the Mortgage Loans.
Defaults on the Mortgage Loans, particularly at or near their stated maturity
dates, may result in significant delays in payments of principal on the Mortgage
Loans (and, accordingly, on the Offered Certificates that are Sequential Pay
Certificates) while work-outs are negotiated or foreclosures are completed. See
'SERVICING OF THE MORTGAGE LOANS -- Modifications, Waivers and Amendments'
herein and 'DESCRIPTION OF THE POOLING AGREEMENTS -- Realization Upon Defaulted
Mortgage Loans' 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 the Mortgage Loans in turn are distributed
or otherwise result in reduction of the Certificate Balance or Notional Amount
of such Certificates. An investor should consider, in the case of a Class A-PO
Certificate or any Offered Certificate purchased at a discount, the risk that a
slower than anticipated rate of principal payments on the Mortgage Loans,
particularly the Discount Mortgage Loans in the case of the Class A-PO
Certificates, could result in an actual yield to such investor that is lower
than the anticipated yield and, in the case of an Offered Certificate purchased
at a premium, the risk that a faster than anticipated rate of principal payments
could result in an actual yield to such investor that is lower than the
anticipated yield. In general, the earlier a payment of principal on the
Mortgage Loans is distributed or otherwise results in reduction of the principal
balance of an Offered Certificate purchased at a discount or premium, the
greater will be the effect on an investor's yield to maturity. As a result, the
effect on an investor's yield of principal payments on the Mortgage Loans
occurring at a rate higher (or lower) than the rate anticipated by the investor
during any particular period would not be fully offset by a
S-64
<PAGE>
<PAGE>
subsequent like reduction (or increase) in the rate of such principal payments.
Investors in the Class A-PO Certificates should fully consider the risk that a
slower than expected rate of principal payments on the Mortgage Loans,
particularly the Discount Mortgage Loans, could result in the failure of such
investors to recoup their initial investments. Because the rate of principal
payments on 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.
Losses and Shortfalls. The yield to holders of the Offered Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans. Losses and other
shortfalls on the Mortgage Loans will, with the exception of any Net Aggregate
Prepayment Interest Shortfalls, generally be borne: first, by the holders of the
Private Certificates (other than the Class IO Certificates), to the extent of
amounts otherwise distributable in respect of their Certificates; second, by the
holders of the Class D Certificates, to the extent of amounts otherwise
distributable in respect of their Certificates; third, by the holders of the
Class C Certificates, to the extent of amounts otherwise distributable in
respect of their Certificates; fourth, by the holders of the Class B
Certificates, to the extent of amounts otherwise distributable in respect of
their Certificates; and last, by the holders of the Class A-1, Class A-2, Class
A-3 and Class A-PO Certificates. Realized Losses and Additional Trust Fund
Expenses will be allocated, as and to the extent described herein, to the
respective Classes of Sequential Pay Certificates (in reduction of the
Certificate Balance of each such Class), in reverse alphabetical order of their
Class designations. As more fully described herein under 'DESCRIPTION OF THE
CERTIFICATES -- Distributions -- Distributable Certificate Interest', Net
Aggregate Prepayment Interest Shortfalls will generally be borne by the
respective Classes of REMIC Regular Certificates on a pro rata basis.
Certain Relevant Factors. The rate and timing of principal payments and
defaults and the severity of losses on the Mortgage Loans may be affected by a
number of factors, including, without limitation, prevailing interest rates, the
terms of the Mortgage Loans (for example, Lock-out Periods, provisions requiring
the payment of Prepayment Premiums and Yield Maintenance Charges and
amortization terms that require Balloon Payments), the demographics and relative
economic vitality of the areas in which the Mortgaged Properties are located and
the general supply and demand for rental units, hotel/motel guest rooms,
residential health care facility beds or comparable commercial space, as
applicable, 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 -- The Mortgage Loans'
and 'DESCRIPTION OF THE MORTGAGE POOL' herein and 'YIELD AND MATURITY
CONSIDERATIONS -- Principal Prepayments' in the Prospectus.
The rate of prepayment on the Mortgage Pool 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 a mortgage
interest rate, the related borrower has an incentive to refinance its mortgage
loan. As of the Cut-off Date, all of the Mortgage Loans may be prepaid at any
time after the expiration of the applicable Lock-out Period, subject, in most
cases, to the payment of a Prepayment Premium or a Yield Maintenance Charge. A
requirement that a prepayment be accompanied by a Prepayment Premium or Yield
Maintenance Charge may not provide a sufficient economic disincentive to deter a
borrower from refinancing at a more favorable interest rate.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell or
refinance 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.
The Depositor makes no representation 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
whether a default will have occurred as of any date or as to the overall rate of
prepayment or default on the Mortgage Loans.
S-65
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<PAGE>
Delay in Payment of Distributions. Because monthly distributions will not
be made to Certificateholders until a date that is scheduled to be at least 24
days following the Due Dates for the Mortgage Loans during the related
Collection Period, the effective yield to the holders of the Offered
Certificates will be lower than the yield that would otherwise be produced by
the applicable Pass-Through Rates and purchase prices (assuming such prices did
not account for such delay).
Unpaid Distributable Certificate Interest. As described under 'DESCRIPTION
OF THE CERTIFICATES -- Distributions -- Application of the Available
Distribution Amount' herein, if the portion of the Available Distribution Amount
distributable in respect of interest on any Class of Offered Certificates on any
Distribution Date is less than the Distributable Certificate Interest then
payable for such Class, the shortfall will be distributable to holders of such
Class of Certificates 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 of such Class of Certificates
for so long as it is outstanding.
Yield Sensitivity of the Class A-PO Certificates. The yields to maturity
on the Class A-PO Certificates will be extremely sensitive to the rate and
timing of principal payments (including by reason of prepayments, defaults and
liquidations) on the Mortgage Loans, particularly the Discount Mortgage Loans.
Accordingly, investors in the Class A-PO Certificates should fully consider the
associated risks, including the risk that a slower than expected rate of
amortization and prepayment of the Mortgage Loans, particularly the Discount
Mortgage Loans, could result in the failure of such investors to fully recoup
their initial investments.
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. As used in the
following table, the column headed '0%' assumes that none of the Mortgage Loans
is prepaid in whole or in part before maturity. The columns headed '5%' and
'10%', respectively, assume that prepayments are made each month at those levels
of CPR on each Mortgage Loan whether or not it is then in its Lock-out Period,
if any.
The following table indicates the approximate pre-tax yields to maturity
(on a corporate bond equivalent basis ('CBE')) on the Class A-PO Certificates
for the specified CPRs. Such calculations are based on the following assumptions
('Table Assumptions'): (i) the Initial Pool Balance is $647,219,459.10, (ii) the
initial Certificate Balance of the Class A-PO Certificates is $254,383.99, (iii)
there are no delinquencies, Realized Losses or Additional Trust Fund Expenses,
(iv) scheduled interest and principal payments on the Mortgage Loans are timely
received and prepayments are made on the Mortgage Loans on their respective Due
Dates (assumed in all cases to be the first day of each month) at the designated
scenarios set forth in the tables and described on pages S-67 and S-68, (v)
partial prepayments on the Mortgage Loans are permitted, but are assumed not to
affect the amortization schedules, (vi) neither the Master Servicer nor the
Depositor exercises its right of optional termination of the Trust Fund
described herein, (vii) no Mortgage Loan is required to be purchased from the
Trust Fund, (viii) distributions on the Certificates are made on the
twenty-fifth day (each assumed to be a business day) of each month, commencing
in May 1996, (ix) the Certificates will be issued on April 3, 1996 and (x) for
purposes of calculating the Class A-PO Fraction, a rate of 7.42% was subtracted
from the Net Mortgage Rate.
It was further assumed that the aggregate purchase prices of such Class of
Certificates is as specified below.
<TABLE>
<CAPTION>
PRE-TAX YIELD TO MATURITY (CBE) OF THE CLASS A-PO CERTIFICATES
0% CPR DURING LOCK-OUT
OR YLD. MAINT. -- OTHERWISE
AT INDICATED CPR
-----------------------------------
(0% CPR) (5% CPR) (10% CPR)
ASSUMED PURCHASE PRICE 1 5 6
- -------------------------------------------------------------------- ------- ------- --------
<S> <C> <C> <C>
65.765625% .................................................. 9.00% 9.15% 9.30%
67.281250% .................................................. 8.50% 8.64% 8.78%
68.828125% .................................................. 8.00% 8.13% 8.26%
</TABLE>
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<PAGE>
<PAGE>
The pre-tax yields set forth in the preceding table were calculated by
determining the monthly discount rates that, when applied to the assumed streams
of cash flow to be paid on the Class A-PO Certificates, would cause the
discounted present value of such assumed stream of cash flows to equal the
assumed aggregate purchase price of the Class A-PO Certificates and by
converting such monthly rates to corporate bond equivalent rates. Such
calculation does not take into account principal due to liquidation on the
Mortgage Loans or the interest rates at which investors may be able to reinvest
funds received by them as distributions on the Class A-PO Certificates (and
consequently does not purport to reflect the return on any investment in the
Class A-PO Certificates when such reinvestment rates are considered).
The characteristics of the Mortgage Loans differ in substantial respects
from those assumed in preparing the table above, and the table is presented for
illustrative purposes only. In particular, none of the Mortgage Loans permit
voluntary partial prepayments, and many of the Mortgage Loans are subject to
Lock-out Periods disregarded in preparing the table. Thus neither the Mortgage
Pool nor any Mortgage Loan will prepay at any constant rate. In addition, there
can be no assurance that the Mortgage Loans will prepay at any particular rate,
that the actual pre-tax yields on the Class A-PO Certificates will correspond to
any of the pre-tax yields shown herein or that the aggregate purchase prices of
the Class A-PO Certificates will be 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 Class A-PO
Certificates.
WEIGHTED AVERAGE LIFE
The weighted average life of any Class A-1, Class A-2, Class A-3, Class B,
Class C or Class D Certificate refers to the average amount of time that will
elapse from the date of its issuance until each dollar allocable to principal of
such Certificate is distributed to the investor. The weighted average life of
any such Offered Certificate will be influenced by, among other things, the rate
at which principal on the Mortgage Loans is paid or otherwise collected or
advanced and applied to pay principal of such Offered Certificate. As described
herein, the Principal Distribution Amount for each Distribution Date will be
distributable first in respect of the Class A-PO Certificates, and will
thereafter be distributable entirely in respect of the Class A-1 Certificates,
the Class A-2 Certificates, the Class A-3 Certificates, the Class B
Certificates, the Class C Certificates and the Class D Certificates, in that
order, in each case until the Certificate Balance of such Class of Certificates
is reduced to zero.
The following tables indicate the percentage of the initial Certificate
Balance of each Class of Offered Certificates that would be outstanding after
each of the dates shown under each of the designated scenarios (each, a
'Scenario') and the corresponding weighted average life of each such Class of
Offered Certificates. The tables have been prepared on the basis of, among
others, the assumptions described below. To the extent that the Mortgage Loans
or the Certificates have characteristics that differ from those assumed in
preparing the tables, the Class A-1, Class A-2, Class A-3, Class B, Class C
and/or Class D Certificates may mature earlier or later than indicated by the
tables. In particular, partial prepayments on the Mortgage Loans in fact are not
permitted. Accordingly, the Mortgage Loans will not prepay at any constant rate,
and it is highly unlikely that the Mortgage Loans will prepay in a manner
consistent with the assumptions underlying any of the Scenarios. 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 shorten or extend the weighted average lives) shown in
the following tables. Investors are urged to conduct their own analyses of the
rates at which the Mortgage Loans may be expected to prepay.
The tables set forth below were prepared on the basis of the relevant Table
Assumptions, except that it was assumed that there are no prepayments on the
Mortgage Loans other than in accordance with the designated Scenario. The
Scenarios are as follows:
Scenario (1): No Mortgage Loan prepays; that is, the CPR for the Mortgage
Pool is 0%.
Scenarios (2), (3) and (4): No Mortgage Loan prepays during its Lock-out
Period. Thereafter, each Mortgage Loan prepays each month at
the rate of 5% CPR in the case of Scenario (2), 10% CPR in
the case or Scenario (3) and 15% CPR in the case of Scenario
(4).
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<PAGE>
Scenarios (5), (6) and (7): No Mortgage Loan prepays during a month in
which a Lock-out Period is in effect or in which prepayments
on such Mortgage Loan are required to be accompanied by a
Yield Maintenance Charge. All other Mortgage Loans prepay
each month at the rate of 5% CPR in the case of Scenario
(5), 10% CPR in the case of Scenario (6) and 15% in the case
of Scenario (7).
Based on the above-referenced assumptions, the following six tables
indicate the resulting weighted average lives of each Class of Offered
Certificates and sets forth the percentages of the initial Certificate Balance
of such Class of Offered Certificates that would be outstanding after each of
the dates shown under each of the designated Scenarios. For purposes of the
following tables, the weighted average life of an Offered Certificate is
determined by (i) multiplying the amount of each principal distribution thereon
by the number of years from the date of issuance of such Certificate to the
related Distribution Date, (ii) summing the results and (iii) dividing the sum
by the aggregate amount of the reductions in the principal balance of such
Certificate.
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S-69
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-1 CERTIFICATES UNDER EACH DESIGNATED SCENARIO
0% CPR DURING 0% CPR DURING LOCK-OUT
LOCK-OUT -- OTHERWISE AT INDICATED OR YLD. MAINT. -- OTHERWISE
CPR AT INDICATED CPR
---------------------------------- ----------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (5% CPR) (10% CPR) (15% CPR)
DISTRIBUTION DATE 1 2 3 4 5 6 7
- ------------------------------ -------- -------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Closing Date.................. 100% 100% 100% 100% 100% 100% 100%
April 1997.................... 96 95 95 94 96 96 96
April 1998.................... 92 89 87 84 92 92 92
April 1999.................... 87 82 78 73 87 87 87
April 2000.................... 82 73 64 55 80 78 76
April 2001.................... 42 28 14 2 41 39 37
April 2002.................... 37 11 0 0 30 22 15
April 2003 and thereafter..... 0 0 0 0 0 0 0
Weighted Average Life (in
years)...................... 5.2 4.5 4.0 3.8 5.0 4.9 4.7
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-2 CERTIFICATES UNDER EACH DESIGNATED SCENARIO
0% CPR DURING 0% CPR DURING LOCK-OUT
LOCK-OUT -- OTHERWISE AT INDICATED OR YLD. MAINT. -- OTHERWISE
CPR AT INDICATED CPR
---------------------------------- ----------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (5% CPR) (10% CPR) (15% CPR)
DISTRIBUTION DATE 1 2 3 4 5 6 7
- ------------------------------ -------- -------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Closing Date.................. 100% 100% 100% 100% 100% 100% 100%
April 1997.................... 100 100 100 100 100 100 100
April 1998.................... 100 100 100 100 100 100 100
April 1999.................... 100 100 100 100 100 100 100
April 2000.................... 100 100 100 100 100 100 100
April 2001.................... 100 100 100 100 100 100 100
April 2002.................... 100 100 14 0 100 100 100
April 2003.................... 47 0 0 0 0 0 0
April 2004.................... 11 0 0 0 0 0 0
April 2005.................... 0 0 0 0 0 0 0
April 2006 and thereafter..... 0 0 0 0 0 0 0
Weighted Average Life (in
years)...................... 7.4 6.9 5.9 5.4 7.0 7.0 6.9
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-3 CERTIFICATES UNDER EACH DESIGNATED SCENARIO
0% CPR DURING 0% CPR DURING LOCK-OUT
LOCK-OUT -- OTHERWISE AT INDICATED OR YLD. MAINT. -- OTHERWISE
CPR AT INDICATED CPR
---------------------------------- ----------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (5% CPR) (10% CPR) (15% CPR)
DISTRIBUTION DATE 1 2 3 4 5 6 7
- ------------------------------ -------- -------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Closing Date.................. 100% 100% 100% 100% 100% 100% 100%
April 1997.................... 100 100 100 100 100 100 100
April 1998.................... 100 100 100 100 100 100 100
April 1999.................... 100 100 100 100 100 100 100
April 2000.................... 100 100 100 100 100 100 100
April 2001.................... 100 100 100 100 100 100 100
April 2002.................... 100 100 100 84 100 100 100
April 2003.................... 100 81 60 41 97 89 81
April 2004.................... 100 70 44 22 89 77 67
April 2005.................... 97 59 29 5 80 65 53
April 2006 and thereafter..... 0 0 0 0 0 0 0
Weighted Average Life (in
years)...................... 9.8 8.9 8.0 7.2 9.4 9.1 8.7
</TABLE>
S-70
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS B CERTIFICATES UNDER EACH DESIGNATED SCENARIO
0% CPR DURING 0% CPR DURING LOCK-OUT
LOCK-OUT -- OTHERWISE INDICATED OR YLD. MAINT. -- OTHERWISE
CPR AT INDICATED CPR
---------------------------------- ----------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (5% CPR) (10% CPR) (15% CPR)
DISTRIBUTION DATE 1 2 3 4 5 6 7
- ------------------------------ -------- -------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Closing Date.................. 100% 100% 100% 100% 100% 100% 100%
April 1997.................... 100 100 100 100 100 100 100
April 1998.................... 100 100 100 100 100 100 100
April 1999.................... 100 100 100 100 100 100 100
April 2000.................... 100 100 100 100 100 100 100
April 2001.................... 100 100 100 100 100 100 100
April 2002.................... 100 100 100 100 100 100 100
April 2003.................... 100 100 100 100 100 100 100
April 2004.................... 100 100 100 100 100 100 100
April 2005.................... 100 100 100 100 100 100 100
April 2006 and thereafter..... 0 0 0 0 0 0 0
Weighted Average Life (in
years)...................... 9.9 9.9 9.8 9.7 9.9 9.9 9.9
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS C CERTIFICATES UNDER EACH DESIGNATED SCENARIO
0% CPR DURING 0% CPR DURING LOCK-OUT
LOCK-OUT -- OTHERWISE AT INDICATED OR YLD. MAINT. -- OTHERWISE
CPR AT INDICATED CPR
---------------------------------- ----------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (5% CPR) (10% CPR) (15% CPR)
DISTRIBUTION DATE 1 2 3 4 5 6 7
- ------------------------------ -------- -------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Closing Date.................. 100% 100% 100% 100% 100% 100% 100%
April 1997.................... 100 100 100 100 100 100 100
April 1998.................... 100 100 100 100 100 100 100
April 1999.................... 100 100 100 100 100 100 100
April 2000.................... 100 100 100 100 100 100 100
April 2001.................... 100 100 100 100 100 100 100
April 2002.................... 100 100 100 100 100 100 100
April 2003.................... 100 100 100 100 100 100 100
April 2004.................... 100 100 100 100 100 100 100
April 2005.................... 100 100 100 100 100 100 100
April 2006 and thereafter..... 0 0 0 0 0 0 0
Weighted Average Life (in
years)...................... 10.0 10.0 9.9 9.8 10.0 9.9 9.9
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS D CERTIFICATES UNDER EACH DESIGNATED SCENARIO
0% CPR DURING 0% CPR DURING LOCK-OUT
LOCK-OUT -- OTHERWISE AT INDICATED OR YLD. MAINT. -- OTHERWISE
CPR AT INDICATED CPR
---------------------------------- ----------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (5% CPR) (10% CPR) (15% CPR)
DISTRIBUTION DATE 1 2 3 4 5 6 7
- ------------------------------ -------- -------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Closing Date.................. 100% 100% 100% 100% 100% 100% 100%
April 1997.................... 100 100 100 100 100 100 100
April 1998.................... 100 100 100 100 100 100 100
April 1999.................... 100 100 100 100 100 100 100
April 2000.................... 100 100 100 100 100 100 100
April 2001.................... 100 100 100 100 100 100 100
April 2002.................... 100 100 100 100 100 100 100
April 2003.................... 100 100 100 100 100 100 100
April 2004.................... 100 100 100 100 100 100 100
April 2005.................... 100 100 100 100 100 100 100
April 2006 and thereafter..... 0 0 0 0 0 0 0
Weighted Average Life (in
years)...................... 10.0 10.0 10.0 9.9 10.0 10.0 10.0
</TABLE>
S-71
<PAGE>
<PAGE>
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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the Offered Certificates, Willkie Farr & Gallagher,
counsel to the Underwriters, will deliver its opinion generally to the effect
that, assuming compliance with all provisions of the Pooling and Servicing
Agreement, for federal income tax purposes, portions of the Trust Fund
designated in the Pooling and Servicing Agreement as 'REMIC I', 'REMIC II' and
'REMIC III', respectively, will each qualify as a REMIC under the Code. For
federal income tax purposes, (a) the separate noncertificated regular interests
in REMIC I will be the 'regular interests' in REMIC I and will constitute the
assets of REMIC II, (b) the Class R-I Certificates will be the sole class of
'residual interests' in REMIC I, (c) the separate non-certificated regular
interests in REMIC II will be the 'regular interests' in REMIC II and will
constitute the assets of REMIC III, (d) the Class R-II Certificates will be the
sole class of 'residual interests' in REMIC II, (e) the REMIC Regular
Certificates will be the 'regular interests' in REMIC III and generally will be
treated as debt instruments of REMIC III, and (f) the Class R-III Certificates
will be the sole class of 'residual interests' in REMIC III. See 'CERTAIN
FEDERAL INCOME TAX CONSEQUENCES -- REMICs' in the Prospectus.
The Class A-1, Class A-2, Class A-3, Class B and Class C Certificates will
not, but the Class D and Class A-PO Certificates will, be treated as having been
issued with original issue discount for federal income tax reporting purposes.
The prepayment assumption that will be used in determining the rate of accrual
of original issue discount, market discount and premium, if any, for federal
income tax purposes will be based on the assumption that subsequent to the date
of any determination the Mortgage Loans will prepay at a rate equal to a CPR of
0%. No representation is made that the Mortgage Loans will prepay at that rate
or at any other rate. See 'CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- REMICs
- -- Taxation of Owners of REMIC Regular Certificates -- Original Issue
Discount' in the Prospectus.
The Internal Revenue Service (the 'IRS') has issued regulations (the 'OID
Regulations') under Sections 1271 to 1275 of the Code generally addressing the
treatment of debt instruments issued with original issue discount. The OID
Regulations in some circumstances permit the holder of a debt instrument to
recognize original issue discount under a method that differs from that used by
the issuer. Accordingly, it is possible that the holder of an Offered
Certificate may be able to select a method for recognizing original issue
discount that differs from that used by the Trustee in preparing reports to the
Certificateholders and the IRS. Prospective purchasers of Offered Certificates
are advised to consult their tax advisors concerning the tax treatment of such
Certificates.
The Offered Certificates will be treated as 'qualifying real property
loans' within the meaning of Section 593(d) of the Code and 'real estate assets'
within the meaning of Section 856(c)(5)(A) of the Code. In addition, interest
(including original issue discount) on the Offered Certificates will be interest
described in Section 856(c)(3)(B) of the Code. However, the Offered Certificates
will generally only be considered assets described in Section 7701(a)(19)(C) of
the Code to the extent that the Mortgage
S-72
<PAGE>
<PAGE>
Loans are secured by residential property and, accordingly, investment in the
Offered Certificates may not be suitable for certain thrift institutions.
Prepayment Premiums and Yield Maintenance Charges actually collected will
be distributed to the holders of the Offered Certificates and the Class IO
Certificates as described herein. 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 an Offered Certificate, but it is not expected, for federal
income tax reporting purposes, that Prepayment Premiums and Yield Maintenance
Charges will be treated as giving rise to any income to the holders of the
Offered Certificates prior to the Master Servicer's actual receipt of a
Prepayment Premium or Yield Maintenance Charge. It appears that Prepayment
Premiums and Yield Maintenance Charges, if any, will be treated as ordinary
income rather than capital gain. However, that is not entirely clear and
Certificateholders should consult their own tax advisors concerning the
treatment of Prepayment Premiums and Yield Maintenance Charges.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see 'CERTAIN FEDERAL INCOME TAX
CONSEQUENCES -- REMICs' in the Prospectus.
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, separate accounts and general accounts in which
such plans, accounts or arrangements are invested, that is subject to 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 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.
The U.S. Department of Labor issued to Merrill Lynch an individual
prohibited transaction exemption, Prohibited Transaction Exemption 90-29 (the
'Exemption'), which generally exempts from the application of the prohibited
transaction provisions of Section 406 of ERISA, and the excise taxes imposed on
such prohibited transactions pursuant to Sections 4975(a) and (b) of the Code
and Section 501(i) of ERISA, certain transactions, among others, relating to 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, underwritten by an 'underwriter,' provided that certain
conditions set forth in the Exemption are satisfied. For purposes of this
discussion, the term 'underwriter' shall include (a) Merrill Lynch, (b) any
person directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with Merrill Lynch 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 Senior Certificates,
including First Union.
The Exemption sets forth six general conditions that must be satisfied for
a transaction involving the purchase, sale and holding of Class A-1, Class A-2,
Class A-3 and Class A-PO Certificates to be eligible for exemptive relief
thereunder. First, the acquisition of the Certificates 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 Certificates must not be subordinated to the rights
and interests evidenced by the other certificates of the same trust. Third, such
Certificates at the time of acquisition by the Plan must be rated in one of the
three highest generic rating categories by Standard & Poor's, Duff & Phelps
Credit Rating Co. ('DCR'), Moody's Investors Service ('Moody's'), or Fitch.
Fourth, the Trustee cannot be an affiliate of any other member of the
'Restricted Group,' which consists of either underwriter, the Depositor, the
Master Servicer, a Special Servicer, the Trustee, any sub-servicer, and any
borrower 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 such Certificates. Fifth, the sum of all payments made to
and retained by either underwriter must represent not more than reasonable
compensation for underwriting such Certificates; the sum of all payments made to
and retained by the Depositor pursuant to the assignment of the Mortgage Loans
to the Trust Fund must represent not more than the fair market value of such
S-73
<PAGE>
<PAGE>
obligations; and the sum of all payments made to and retained by the Master
Servicer, a Special Servicer or any sub-servicer must represent not more than
reasonable compensation for such person's services under the Pooling and
Servicing Agreement and reimbursement of such person's reasonable expenses in
connection therewith. Sixth, the investing Plan must be an accredited investor
as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act.
Because none of the Class A-1, Class A-2, Class A-3 and Class A-PO
Certificates are subordinated with respect to the allocation of Realized Losses
and Additional Trust Fund Expenses 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 the issuance of the Class A-1, Class A-2,
Class A-3 and Class A-PO Certificates that they be rated not lower than 'AAA' by
one or both of Standard & Poor's and Fitch; thus, the third general condition
set forth above is satisfied with respect to such Certificates as of the Closing
Date. In addition, the fourth general condition set forth above is also
satisfied as of the Closing Date. A fiduciary of a Plan contemplating purchasing
any such Certificate in the secondary market must make its own determination
that, at the time of such purchase, such Certificate continue to satisfy the
third and fourth general conditions set forth above. A fiduciary of a Plan
contemplating the purchase of any such Certificate 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.
The Exemption also requires that the Trust Fund meet the following
requirements: (i) the Trust Fund must consist solely of assets of the type that
have been included in other investment pools; (ii) certificates in such other
investment pools must have been rated in one of the three highest categories of
Standard & Poor's, DCR, Moody's or Fitch for at least one year prior to the
Plan's acquisition of such Certificates; and (iii) certificates 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 such Certificates. The
Depositor has confirmed to its satisfaction that such requirements have been
satisfied as of the date hereof.
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 such Certificates
in the initial issuance of Certificates between the Depositor or an underwriter
and a Plan when the Depositor, an underwriter, Trustee, Master Servicer, Special
Servicer, sub-servicer or mortgagor is a 'Party in Interest,' as defined in the
Prospectus, 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 (iii) the 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 such Certificate on behalf of
an 'Excluded Plan' by any person who has discretionary authority or renders
investment advice with respect to the assets of such Excluded Plan. For purposes
hereof, an Excluded Plan is a Plan sponsored by any member of the Restricted
Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide an exemption from the restrictions imposed by Sections
406(b)(1) and (b)(2) of ERISA and the taxes imposed by 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 underwriter and a Plan when the person who has discretionary
authority or renders investment advice with respect to the investment of such
Plan's 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 such Plan and (3) the holding of such
Certificates by such Plan.
Further, if certain specific conditions of 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 Mortgage Pool.
The Depositor expects that the specific conditions of the Exemption required for
this purpose will be satisfied with respect to such Certificates.
S-74
<PAGE>
<PAGE>
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 such Certificates. A purchaser of any such 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 that may be considered prohibited transactions.
Before purchasing any such Certificate, a fiduciary of a Plan should itself
confirm that the specific and general conditions of the Exemption and the other
requirements set forth in the Exemption would be satisfied. In addition to
making its own determination as to the availability of the exemptive relief
provided in the Exemption, the Plan fiduciary should consider the availability
of any other prohibited transaction exemptions. See 'ERISA CONSIDERATIONS' in
the Prospectus.
THE CHARACTERISTICS OF THE CLASS B, CLASS C AND CLASS D CERTIFICATES DO NOT
MEET THE REQUIREMENTS OF THE EXEMPTIONS. ACCORDINGLY, CERTIFICATES OF THOSE
CLASSES MAY NOT BE ACQUIRED BY A PLAN, OTHER THAN AN INSURANCE COMPANY GENERAL
ACCOUNT RELYING ON SECTION III OF PTE 95-60 (DISCUSSED BELOW).
The U.S. Department of Labor recently issued Prohibited Transaction Class
Exemption 95-60 ('PTE 95-60'). Section III of PTE 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 Fund) 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 classes of Certificates (such as the Class
B, Class C and Class D Certificates) which do not meet the requirements of the
Exemptions solely because they (i) are subordinated to other classes of
Certificates in the Trust Fund and/or (ii) have not received a rating at the
time of the acquisition in one of the three highest rating categories from
Standard & Poor's, Moody's, DCR or Fitch. All other conditions of the Exemption
would have to be satisfied in order for PTE 95-60 to be available. Before
purchasing Class B, Class C or Class D Certificates, an insurance company
general account seeking to rely on Section III of PTE 95-60 should itself
confirm that all applicable conditions and other requirements have been
satisfied.
LEGAL INVESTMENT
As of the Closing Date, the Offered Certificates will not constitute
'mortgage related securities' for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ('SMMEA'). As a result, the appropriate characterization
of the Offered Certificates under various legal investment restrictions, and
thus the ability of investors subject to these restrictions to purchase the
Offered Certificates of any Class, may be subject to significant interpretative
uncertainties. In addition, institutions whose investment activities are subject
to review by federal or state regulatory authorities may be or may become
subject to restrictions on the investment by such institutions in certain forms
of mortgage related securities. Investors should consult their own legal
advisors to determine whether and to what extent the Offered Certificates
constitute legal investments for them. See 'Legal Investment' in the Prospectus.
As described therein, the definition of 'mortgage related securities' for
purposes of SMMEA has been expanded by legislation such that, if the legislation
were currently effective, the Class A-1, Class A-2, Class A-3, Class A-PO and
Class B Certificates would be 'mortgage related securities' for purposes of
SMMEA as of the Closing Date. The legislation will not become effective until
certain implementing regulations are promulgated, and it is possible that those
regulations, if and when promulgated, may impose limitations on the benefits
provided by SMMEA with respect to securities newly included within the
definition.
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
S-75
<PAGE>
<PAGE>
determining whether and to what extent the Offered Certificates constitute legal
investments for them or are subject to investment, capital or other
restrictions. See 'LEGAL INVESTMENT' in the Prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting agreement
( the 'Underwriting Agreement') among the Depositor and the Underwriters, the
Depositor has agreed to sell to each Underwriter, and each Underwriter has
agreed to purchase one-half of the respective Certificate Balances of each class
of Offered Certificates.
In the Underwriting Agreement, the Underwriters have severally agreed to
purchase all of the Offered Certificates if any are purchased. In the event of a
default by either Underwriter, the Underwriting Agreement provides that, the
purchase commitment of the non-defaulting Underwriter may be increased. Proceeds
to the Depositor from the sale of the Offered Certificates, before deducting
expenses payable by the Depositor, will be approximately $549,705,339, which
includes accrued interest.
Distribution of the Offered Certificates will be made by each Underwriter
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. Each Underwriter 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 such Underwriter. 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. Each
Underwriter and any dealers that participate with either Underwriter 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 connection with reoffers and sales
by them of Offered Certificates. Certificateholders should consult with their
legal advisors in this regard prior to any such reoffer or sale.
The Depositor also has been advised by the Underwriters that each of them,
through one or more of its affiliates, currently intends to make a market in the
Offered Certificates; however, neither Underwriter has any 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 -- Limited Liquidity' herein and in the Prospectus.
The Depositor has agreed to indemnify each Underwriter and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the
Securities Act against, or make contributions to each Underwriter and each such
controlling person with respect to, certain liabilities, including liabilities
under the Securities Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Thacher
Proffitt & Wood, New York, New York, and certain legal matters will be passed
upon for the Underwriters by Willkie Farr & Gallagher, New York, New York.
RATINGS
It is a condition of their issuance that the Class A-1, Class A-2 and Class
A-3 Certificates be rated not lower than 'AAA' by each Rating Agency, that the
Class A-PO be rated not lower than 'AAA' by Fitch, that the Class B Certificates
be rated not lower than 'AA' by each Rating Agency, that the Class C
Certificates be rated not lower than 'A' by each Rating Agency, and that the
Class D Certificates be rated not lower than 'BBB' by each Rating Agency.
The ratings on the Offered Certificates address the likelihood of the
receipt by holders thereof of distributions to which they are entitled by the
Rated Final Distribution Date set forth on the cover page
S-76
<PAGE>
<PAGE>
of this Prospectus Supplement. 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 required under the Offered
Certificates. The ratings on the Offered Certificates do not, however, represent
any assessment of (i) the likelihood or frequency of prepayments on the Mortgage
Loans and the corresponding effect on yield to investors, (ii) the degree to
which the frequency of prepayments might differ from that originally
anticipated, (iii) whether or to what extent Prepayment Premiums or Yield
Maintenance Charges may be received and (iv) the tax treatment of the
Certificates.
There can be no assurance that any rating agency not requested to rate the
Offered Certificates will not nonetheless issue a rating to any or all Classes
thereof and, if so, what such rating or ratings 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 rating assigned thereto by
either or both of the Rating Agencies.
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 Ratings' in the Prospectus.
S-77
<PAGE>
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
30/360 basis............................................................................................... S-29
Accrued Certificate Interest............................................................................... S-56
Additional Trust Fund Expenses............................................................................. S-11
Advance.................................................................................................... S-60
Appraisal Reduction Amount................................................................................. S-61
Appraisal Reduction Amount Shortfall....................................................................... S-61
Assumed Scheduled Payment.................................................................................. S-17
Available Distribution Amount.............................................................................. S-13
Balloon Loans.............................................................................................. S-9
Balloon LTV................................................................................................ S-33
Balloon Payment............................................................................................ S-9
CBE........................................................................................................ S-66
Certificate Balance........................................................................................ S-2
Certificate Owner.......................................................................................... S-7
Certificate Registrar...................................................................................... S-62
Certificateholders......................................................................................... S-10
Certificates............................................................................................... S-1
Class...................................................................................................... S-1
Class A-1 Strip Rate....................................................................................... S-12
Class A-2 Strip Rate....................................................................................... S-12
Class A-PO Fraction........................................................................................ S-13
Class Prepayment Percentage................................................................................ S-58
Closing Date............................................................................................... S-6
Code....................................................................................................... S-8
Collection Period.......................................................................................... S-53
Compensating Interest Payment.............................................................................. S-19
Class IO-1 Component....................................................................................... S-11
Class IO-2 Component....................................................................................... S-11
Component ................................................................................................. S-11
Constant Prepayment Rate or CPR............................................................................ S-66
Controlling Class of Sequential Pay Certificates........................................................... S-45
Corrected Mortgage Loan.................................................................................... S-46
Custodian.................................................................................................. S-42
Cut-off Date............................................................................................... S-1
Cut-off Date Balance....................................................................................... S-7
Cut-off Date LTV........................................................................................... S-33
DCR........................................................................................................ S-73
DSCR....................................................................................................... S-32
Debt Service Coverage Ratio................................................................................ S-32
Definitive Offered Certificate............................................................................. S-7
Depositor.................................................................................................. S-1
Determination Date......................................................................................... S-17
Discount Mortgage Loan..................................................................................... S-12
Distributable Certificate Interest......................................................................... S-16
Distribution Date.......................................................................................... S-2
Distribution Date Statement................................................................................ S-61
DTC........................................................................................................ S-7
Due Dates.................................................................................................. S-30
ERISA...................................................................................................... S-23
Excluded Plan.............................................................................................. S-74
Exemption.................................................................................................. S-73
Extension Adviser.......................................................................................... S-48
</TABLE>
S-78
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
First Union................................................................................................ S-6
Fitch...................................................................................................... S-23
Form 8-K................................................................................................... S-44
FUNB....................................................................................................... S-6
FUNB Loans................................................................................................. S-10
GECC....................................................................................................... S-45
HUD........................................................................................................ S-31
Initial Pool Balance....................................................................................... S-1
Initial Reserves at Closing................................................................................ S-34
IRS........................................................................................................ S-72
Loan per Sq ft, Unit, Bed, Key or Room..................................................................... S-34
Lockout Period............................................................................................ S-9
Master Servicer............................................................................................ S-6
Master Servicing Fee....................................................................................... S-46
Master Servicing Fee Rate.................................................................................. S-46
Merrill Lynch.............................................................................................. S-6
MLMCI...................................................................................................... S-6
MLMCI Loans................................................................................................ S-10
Monthly Payments........................................................................................... S-8
Moody's.................................................................................................... S-73
Mortgage................................................................................................... S-29
Mortgage File.............................................................................................. S-42
Mortgage Loan Purchase Agreements.......................................................................... S-42
Mortgage Loan Seller....................................................................................... S-2
Mortgage Loans............................................................................................. S-1
Mortgage Note.............................................................................................. S-29
Mortgage Pool.............................................................................................. S-1
Mortgage Rates............................................................................................. S-8
Mortgaged Property......................................................................................... S-1
Net Aggregate Prepayment Interest Shortfall................................................................ S-19
Net Cash Flow.............................................................................................. S-32
Net Mortgage Rate.......................................................................................... S-12
Nonrecoverable P&I Advance................................................................................. S-60
Offered Certificates....................................................................................... S-1
OID Regulations............................................................................................ S-72
Ongoing Reserves........................................................................................... S-34
P&I Advance................................................................................................ S-18
Participants............................................................................................... S-7
Party in Interest.......................................................................................... S-74
Pass-Through Rate.......................................................................................... S-2
Plan....................................................................................................... S-23
Pooling and Servicing Agreement............................................................................ S-11
Prepayment Interest Excess................................................................................. S-19
Prepayment Interest Shortfall.............................................................................. S-19
Prepayment Premiums........................................................................................ S-57
Principal Distribution Amount.............................................................................. S-16
Principal Recovery Fee..................................................................................... S-47
Private Certificates....................................................................................... S-6
PTE 95-60.................................................................................................. S-75
Purchase Price............................................................................................. S-42
Rating Agencies............................................................................................ S-23
Realized Losses............................................................................................ S-11
Reimbursement Rate......................................................................................... S-18
Related Proceeds........................................................................................... S-60
</TABLE>
S-79
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REMIC...................................................................................................... S-2
REMIC I.................................................................................................... S-2
REMIC II................................................................................................... S-2
REMIC III.................................................................................................. S-2
REMIC Regular Certificates................................................................................. S-6
REMIC Residual Certificates................................................................................ S-6
REO Extension.............................................................................................. S-49
REO Property............................................................................................... S-20
REO Tax.................................................................................................... S-50
Required Appraisal Loan.................................................................................... S-60
Restricted Group........................................................................................... S-73
Scenario................................................................................................... S-67
Scheduled Payment.......................................................................................... S-17
Section 42 Property........................................................................................ S-30
Securities Act............................................................................................. S-6
Senior Certificates........................................................................................ S-19
Sequential Pay Certificates................................................................................ S-11
Servicing Fees............................................................................................. S-47
SMMEA...................................................................................................... S-75
Special Servicer........................................................................................... S-6
Special Servicing Fee...................................................................................... S-47
Special Servicing Fee Rate................................................................................. S-47
Specially Serviced Mortgage Loans.......................................................................... S-46
Specially Serviced Trust Fund Assets....................................................................... S-46
Standard & Poor's.......................................................................................... S-23
Stated Principal Balance................................................................................... S-12
Subordinate Certificates................................................................................... S-19
Tax Credits................................................................................................ S-30
Table Assumptions.......................................................................................... S-66
Trust Fund................................................................................................. S-1
Trustee.................................................................................................... S-2
Trustee Fee................................................................................................ S-63
Trustee Fee Rate........................................................................................... S-63
Underwriters............................................................................................... S-1
Underwriting Agreement..................................................................................... S-76
Voting Rights.............................................................................................. S-62
Weighted Average Net Mortgage Rate......................................................................... S-12
Year Built................................................................................................. S-34
Yield Maintenance Charges.................................................................................. S-57
</TABLE>
S-80
<PAGE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
S-81
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CONTROL
NO. PROPERTY NAME ADDRESS CITY STATE
<S> <C> <C> <C> <C>
1 Mountaingate Plaza First St & Los Angeles Ave Simi Valley CA
2 Renaissance Center West 4001 South Decatur Blvd. Las Vegas NV
4 Tropicana Palms 6420 East Tropicana Avenue Las Vegas NV
101 Weavers Mill 91 Elm Street Manchester CT
6 Holiday Manor Shopping Center 4820 US Highway 42 Northfield KY
102 Cedar Springs Apartments 1750 East Karen Avenue Las Vegas NV
103 Desert Springs Apartments 1500 Karen Avenue Las Vegas NV
7 Mission Park Apartments 221 Woodland Parkway San Marcos CA
104 33 Gold Street 33 Gold Street New York NY
8 Canyon Country Plaza 19120 Soledad Canyon Road Santa Clarita CA
9 Verde Mont Villas 6155 Palm Avenue San Bernardino CA
105 West Kentucky Outlet Center 208 Outlet Avenue Eddyville KY
10 Brigantine Town Center 4200 Harbor Beach Boulevard Brigantine NJ
11 Pace's Crossing Apartments 2411 I-35E South Denton TX
12 The Corner at Seven Corners 6270-6290 Arlington Boulevard Falls Church VA
13 New Colony Apartments 1805-1917 S. Shields Street Fort Collins CO
107 Rancho Vista Retirement and Health 760 East Bobier Drive Vista CA
108 Candletree Apartments 5280 Tamarack Circle East Columbus OH
109 123 West 44th Street 123 West 44th Street New York NY
14 Southglen Center 12035-12055 Metcalf Ave. Overland Park KS
15 Northgate Shopping Center 7100 West State Street Boise ID
16 ANAParkTowne Apartments 290 Wilson Avenue Perris CA
17 Sunvilla Estates 91 Cabernet Parkway Reno NV
18 Pecan Square Apartments 3535 Webb Chapel Extension Dallas TX
19 Santee Town Center Town Center Parkway Santee CA
111 Mark Twain 170 Steamboat Lane Ballwin MO
112 220 East 22nd Street 220 East 22nd Street New York NY
113 Hunter Mill Plaza 2946-2952 Chain Bridge Road (Route 123) Oakton VA
207 Wisconsin Rapids-Public Warehouse 1941 Engle Rd. Wisconsin Rapids WI
114 Sierra Apartments and Townhomes 2901 Haine Drive Harlingen TX
20 Briarhill Apartments 140 West Hill Avenue Fullerton CA
22 Emorywoods Apartments 2085 Powell Lane DeKalb County GA
21 Canyon View Apartments 7400 Pirates Cove Road Las Vegas NV
216 Northwood Apartments 4200 Loch Raven Blvd. Baltimore MD
26 Rainbow Professional Center 2655-2685 S. Rainbow Blvd. Las Vegas NV
23 Cedar Crest Square Shopping Center Quentin Road Lebanon PA
25 Ocotillo Plaza 2415-2501 E. Tropicana Las Vegas NV
115 Greentree Apartments 710 Appletree Court Claymont DE
27 Coral Gables Apartments 10522 Beechnut Houston TX
30 Heritage Place Shopping Center 63 Church Street Flemington NJ
117 Gardner Street Apartments 75, 84, 88 & 90 Gardner Street Allston MA
29 Trailer Rancho Mobile Home Park 3499 East Bayshore Rd. Redwood City CA
28 Sorrento Pines 4104-4122 Sorrento Valley Blvd. San Diego CA
32 El Encanto Villas 1151 Walnut Avenue Tustin CA
35 Comfort Inn-Buckhead 2115 Piedmont Road, NE Atlanta GA
118 210 East 22nd Street 210 East 22nd Street New York NY
119 Shops of Dunwoody 550 Chamblee Dunwoody Road Dunwoody GA
33 Coral Island Apartments 4700 South Kirkwood Houston TX
116 Kings Point Plaza W. Atlantic Ave. and Carter/Jog Road Delray Beach FL
120 Yarn Mill 210 Pine Street Manchester CT
121 Fox Meadows 1457 Burke Avenue N.E. Grand Rapids MI
37 Post Falls Factory Outlet Center 4037 Riverbend Avenue Post Falls ID
213 Hollyview Apartments 5555 Hollyview Houston TX
38 Charleston Square (Phase I) 4420-4480 E. Charleston Blvd Las Vegas NV
39 Chateau Montagne Apartments 2628 I-85 Access+M3 Road DeKalb County GA
124 Duval Villa 4305 Duval Street Austin TX
122 Windtree I & II Apartments 3630 and 3631 Brennan Blvd., Amarillo TX
Randall/Potter
214 Willowbend Apartments 13949 Bammel North Houston TX
126 Schofield Warehouse 3606 Concord Avenue Schofield WI
125 Shoppes at Sawgrass Commons 13001-13191 West Sunrise Blvd. Sunrise FL
40 Suntree Apartments 3040 Suntree Plaza Kansas City KS
41 City Centre Office Building 200 Pine Avenue Long Beach CA
217 Hampton House Apartments 204 East Joppa Road Baltimore Count MD
127 Van Mark Apartments 3980 Old Sterlington Road Monroe LA
130 Quality Logistics 1709 I-45 South Hutchins TX
128 Cedar Creek Apartments 3991 Camino Juliana Santa Fe NM
129 Carroll Plaza Shopping Center 250 Englar Road Westminster MD
131 Cedar Ridge 2082 Knoll Crest Arlington TX
42 Peppertree Business Park 10656-10792 Roselle Street San Diego CA
43 Medical Arts Shopping Center 4700-4845 Walters Avenue Savannah GA
134 35 Main Street 35 Main Street Westport CT
45 Warwick Apartments 3330 Webb Chapel Extension Dallas TX
135 Hacienda Healthcare 361 East Grangeville Boulevard Hanford CA
136 Sutton Park Apartments 517 East Edgewood Blvd Lansing MI
46 ANA Vermont Breeze Apts 12901 S. Vermont Avenue Gardena CA
137 Zelda Place Shopping Center 2900-3000 Zelda Road Montgomery AL
138 The Spanish Mission Apartments 422 Connell Road Valdosta GA
47 ANA Towngate 23227 Hemlock Avenue Moreno Valley CA
140 Commerce Plaza 7000-7034 Commerce Street Springfield VA
141 Blue River Apartments 1251 Adams Avenue Silverthorne CO
<PAGE>
<PAGE>
<CAPTION>
STATED REM
REM AMORT
CONTROL ZIP ORIGINAL CURRENT % OF CUMULATIVE MORTGAGE TERM TERM MATURITY
NO. CODE BALANCE BALANCE POOL % OF POOL RATE (MO.) (MO.) ORIG DATE DATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 93065 $24,100,000 $24,074,864 3.72% 3.72% 8.050% 119 299 2/16/96 3/1/06
2 89103 16,875,000 16,821,585 2.60 6.32 8.020 129 297 12/18/95 1/1/07
4 89122 15,000,000 15,000,000 2.32 8.64 7.860 60 360 3/6/96 4/1/01
101 06040 10,925,000 10,903,261 1.68 10.32 8.090 117 357 12/22/95 1/1/06
6 40222 10,800,000 10,800,000 1.67 11.99 8.500 120 300 3/6/96 4/1/06
102 89109 10,750,000 10,735,526 1.66 13.65 8.000 118 358 1/26/96 2/1/06
103 89109 10,750,000 10,735,526 1.66 15.31 8.000 118 358 1/26/96 2/1/06
7 92069 10,200,000 10,178,307 1.57 16.88 7.760 117 357 12/27/95 1/1/06
104 10038 10,050,000 10,025,710 1.55 18.43 8.250 117 327 12/15/95 1/1/06
8 91355 10,000,000 9,993,584 1.54 19.97 8.220 179 359 2/29/96 3/1/11
9 92407 9,820,000 9,805,466 1.52 21.49 7.530 58 358 1/31/96 2/1/01
105 42038 9,600,000 9,570,125 1.48 22.97 8.125 117 297 12/28/95 1/1/06
10 08203 8,500,000 8,500,000 1.31 24.28 8.520 84 300 3/1/96 4/1/03
11 76205 8,480,000 8,480,000 1.31 25.59 8.350 120 360 3/6/96 4/1/06
12 22044 8,100,000 8,079,918 1.25 26.84 8.440 116 356 11/21/95 12/1/05
13 80526 8,000,000 7,989,031 1.23 28.07 7.910 118 358 1/4/96 2/1/06
107 92084 8,000,000 7,985,069 1.23 29.31 8.750 118 298 1/2/96 2/1/06
108 43229 7,800,000 7,786,890 1.20 30.51 8.000 118 328 1/23/96 2/1/06
109 10036 7,700,000 7,680,960 1.19 31.70 8.125 117 327 12/15/95 1/1/06
14 66126 7,600,000 7,594,668 1.17 32.87 7.780 119 359 2/6/96 3/1/06
15 83703 7,275,000 7,270,629 1.12 33.99 8.540 119 359 2/29/96 3/1/06
16 92571 7,240,000 7,235,336 1.12 35.11 8.200 119 359 2/29/96 3/1/06
17 89512 7,150,000 7,150,000 1.10 36.22 8.240 120 360 3/6/96 4/1/06
18 75220 7,040,000 7,035,189 1.09 37.30 7.910 119 359 2/9/96 3/1/06
19 92071 7,000,000 6,992,887 1.08 38.38 8.210 83 299 2/29/96 3/1/03
111 63011 6,800,000 6,771,112 1.05 39.43 8.000 116 296 11/14/95 12/1/05
112 10010 6,600,000 6,584,049 1.02 40.45 8.250 117 327 12/15/95 1/1/06
113 22124 6,355,000 6,335,304 0.98 41.43 8.150 117 297 12/15/95 1/1/06
207 54494 6,300,000 6,294,267 0.97 42.40 8.880 119 299 3/1/96 3/1/06
114 78550 6,000,000 5,991,773 0.93 43.32 7.910 118 358 1/12/96 2/1/06
20 92632 5,850,000 5,841,167 0.90 44.23 7.430 58 358 1/31/96 2/1/01
22 30033 5,800,000 5,794,193 0.90 45.12 8.300 179 299 2/27/96 3/1/11
21 89128 5,800,000 5,791,603 0.89 46.02 7.640 118 358 1/2/96 2/1/06
216 21218 5,550,000 5,545,759 0.86 46.87 8.500 83 329 3/1/96 3/1/03
26 89102 5,503,300 5,503,300 0.85 47.72 9.120 84 300 3/1/96 4/1/03
23 17042 5,500,000 5,482,954 0.85 48.57 8.150 117 297 12/28/95 1/1/06
25 89121 5,475,000 5,459,181 0.84 49.41 8.580 117 297 12/4/95 1/1/06
115 19703 5,200,000 5,186,918 0.80 50.22 8.030 81 327 12/14/95 1/1/03
27 77072 5,050,000 5,046,356 0.78 51.00 7.640 83 359 2/10/96 3/1/03
30 08822 5,000,000 5,000,000 0.77 51.77 9.140 60 300 3/5/96 4/1/01
117 02134 5,000,000 4,994,635 0.77 52.54 7.875 83 299 2/9/96 3/1/03
29 94063 5,000,000 4,993,254 0.77 53.31 7.990 118 358 1/17/96 2/1/06
28 92121 5,000,000 4,983,916 0.77 54.08 7.920 81 297 12/27/95 1/1/03
32 92680 4,950,000 4,942,600 0.76 54.84 7.480 58 358 1/31/96 2/1/01
35 30324 4,850,000 4,843,240 0.75 55.59 9.560 239 239 2/29/96 3/1/16
118 10010 4,850,000 4,838,278 0.75 56.34 8.250 117 327 12/15/95 1/1/06
119 30338 4,850,000 4,835,211 0.75 57.09 8.250 117 297 12/29/95 1/1/06
33 77072 4,790,000 4,786,544 0.74 57.83 7.640 83 359 2/10/96 3/1/03
116 33446 4,777,000 4,772,827 0.74 58.56 9.125 119 299 3/1/96 3/1/06
120 06040 4,578,500 4,569,390 0.71 59.27 8.090 117 357 12/22/95 1/1/06
121 49505 4,550,000 4,542,240 0.70 59.97 7.920 118 328 1/25/96 2/1/06
37 83854 4,500,000 4,487,356 0.69 60.67 8.750 117 297 12/21/95 1/1/06
213 77091 4,450,000 4,446,472 0.69 61.35 8.300 83 329 2/29/96 3/1/03
38 89104 4,325,000 4,325,000 0.67 62.02 8.520 120 300 3/4/96 4/1/06
39 30345 4,232,000 4,227,693 0.65 62.67 8.200 179 299 2/27/96 3/1/11
124 78751 4,220,000 4,206,822 0.65 63.32 8.420 115 355 10/18/95 11/1/05
122 79121 4,137,000 4,133,613 0.64 63.96 8.125 119 329 2/8/96 3/1/06
214 77066 4,125,000 4,121,730 0.64 64.60 8.300 83 329 2/29/96 3/1/03
126 54476 4,125,000 4,121,246 0.64 65.24 8.880 119 299 3/1/96 3/1/06
125 33323 4,100,000 4,087,498 0.63 65.87 8.250 117 297 12/29/95 1/1/06
40 66103 3,960,000 3,960,000 0.61 66.48 8.360 120 360 3/6/96 4/1/06
41 90802 3,937,000 3,933,309 0.61 67.09 8.700 119 299 2/29/96 3/1/06
217 21286 3,900,000 3,900,000 0.60 67.69 8.250 120 300 3/5/96 4/1/06
127 71203 3,900,000 3,887,533 0.60 68.29 7.959 117 297 12/19/95 1/1/06
130 75141 3,878,000 3,878,000 0.60 68.89 8.875 84 300 3/4/96 4/1/03
128 87501 3,850,000 3,842,584 0.59 69.48 8.250 297 357 12/11/95 1/1/21
129 21157 3,822,000 3,818,220 0.59 70.07 8.375 83 299 2/21/96 3/1/03
131 76014 3,750,000 3,738,330 0.58 70.65 8.125 117 297 12/28/95 1/1/06
42 92121 3,680,000 3,667,989 0.57 71.22 7.830 57 297 12/12/95 1/1/01
43 31405 3,650,000 3,640,176 0.56 71.78 9.010 57 297 12/11/95 1/1/01
134 06880 3,600,000 3,585,608 0.55 72.33 8.375 116 296 12/1/95 12/1/05
45 75220 3,500,000 3,497,754 0.54 72.88 8.220 119 359 2/29/96 3/1/06
135 93230 3,500,000 3,496,943 0.54 73.42 9.125 119 299 2/27/96 3/1/06
136 48911 3,400,000 3,394,285 0.52 73.94 8.000 118 328 1/22/96 2/1/06
46 90247 3,400,000 3,392,725 0.52 74.46 7.730 57 357 12/21/95 1/1/01
137 36116 3,306,000 3,303,474 0.51 74.97 8.500 119 329 2/9/96 3/1/06
138 31602 3,300,000 3,297,350 0.51 75.48 8.230 119 329 2/29/96 3/1/06
47 92571 3,300,000 3,295,096 0.51 75.99 7.510 58 358 1/29/96 2/1/01
140 22150 3,175,000 3,165,120 0.49 76.48 8.125 117 297 12/8/95 1/1/06
141 80498 3,130,000 3,125,891 0.48 76.96 8.125 298 358 1/4/96 2/1/21
<PAGE>
<PAGE>
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
ANNEX A
<CAPTION>
CONTROL
NO. PROPERTY TYPE PREPAYMENT RESTRICTIONS
<S> <C> <C>
1 Anchored Shopping Center 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
2 Anchored Shopping Center 5 yr 9 mos lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 6 mos open
4 Mobile Home Park 3 yr lock, 6 mos @ 4%, 3, 2, 3 mos @ 1%, 3 mos open
101 Multifamily 1 yr lock,YM-yr 9.5, 6 mos open
6 Anchored Shopping Center 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
102 Multifamily 1 yr lock, >1% or YM-yr 9.5, 6 mos open
103 Multifamily 1 yr lock, >1% or YM-yr 9.5, 6 mos open
7 Multifamily 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
104 Multifamily 4 yr lock, >1% or YM-yr 6, yr 7-9: 4%-2%, 1st 6 mos of yr 10: 1%, 6 mos open
8 Anchored Shopping Center 8 yr lock, yearly @ 6%, 5.25, 4.5, 3.75, 3, 2.25, 9 mos @ 1.5%, 3 mos open
9 Multifamily 3 yr 3 mos lock, 6 mos @ 4%, 3, 3 mos @ 2%, 6 mos open
105 Unanchored Shopping Center 4 yr lock, >1% or YM-yr 9.5, 6 mos open
10 Anchored Shopping Center 4 yr lock, yearly @ 4%, 3, 6 mos @ 2%, 3 mos @ 1%, 3 mos open
11 Multifamily 5 yrs 3 mos lock, yearly @ 5%, 4, 3, 2, 3 mos @ 1%, 6 mos open
12 Unanchored Shopping Center 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
13 Multifamily 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
107 Continuum Care 4 yr lock, >1% or YM-yr 9.5, 6 mos open
108 Multifamily No lock, >1% or YM-yr 9.5, 6 mos open
109 Multifamily 4 yr lock, >1% or YM-yr 6, yr 7-9: 4%-2%, 1st 6 mos of yr 10: 1%, 6 mos open
14 Anchored Shopping Center 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
15 Anchored Shopping Center 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
16 Multifamily 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
17 Mobile Home Park 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
18 Multifamily 5 yrs 3 mos lock, yearly @ 5%, 4, 3, 2, 3 mos @ 1%, 6 mos open
19 Anchored Shopping Center 4 yr lock, yearly @ 4%, 3, 6 mos @ 2%, 3 mos @ 1%, 3 mos open
111 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
112 Multifamily 4 yr lock, >1% or YM-yr 6, yr 7-9: 4%-2%, 1st 6 mos of yr 10: 1%, 6 mos open
113 Unanchored Shopping Center 5 yr lock, >1% or YM-yr 8, 24 mos open
207 Industrial 4 yr lock, >1% or YM-yr 9.5, 6 mos open
114 Multifamily No lock, >1% or YM-yr 9.5, 6 mos open
20 Multifamily 3 yr 3 mos lock, 6 mos @ 4%, 3, 3 mos @ 2%, 6 mos open
22 Multifamily 8 yr lock, yearly @ 6%, 5.25, 4.5, 3.75, 3, 2.25, 9 mos @ 1.5%, 3 mos open
21 Multifamily 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
216 Multifamily 2 yr lock, >1% or YM-yr 6.5, 6 mos open
26 Office 4 yr lock, yearly @ 4%, 3, 6 mos @ 2%, 3 mos @ 1%, 3 mos open
23 Anchored Shopping Center 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
25 Anchored Shopping Center 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
115 Multifamily 3 yr lock, >1% or YM-yr 6.5, 6 mos open
27 Multifamily 4 yr lock, yearly @ 4%, 3, 6 mos @ 2%, 3 mos @ 1%, 3 mos open
30 Unanchored Shopping Center 3 yr lock, 6 mos @ 4%, 3, 2, 3 mos @ 1%, 3 mos open
117 Multifamily 3 yr lock, >1% or YM-yr 6, 12 mos open
29 Mobile Home Park 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
28 Industrial 4 yr lock, yearly @ 4%, 3, 6 mos @ 2%, 3 mos @ 1%, 3 mos open
32 Multifamily 3 yr 3 mos lock, 6 mos @ 4%, 3, 3 mos @ 2%, 6 mos open
35 Hospitality 10 yr lock, yearly @ 8%, 7, 6, 5, 4, 3, 2, 33 mos @ 1%, 3 mos open
118 Multifamily 4 yr lock, >1% or YM-yr 6, yr 7-9: 4%-2%, 1st 6 mos of yr 10: 1%, 6 mos open
119 Unanchored Shopping Center 4 yr lock, >1% or YM-yr 9.5, 6 mos open
33 Multifamily 4 yr lock, yearly @ 4%, 3, 6 mos @ 2%, 3 mos @ 1%, 3 mos open
116 Unanchored Shopping Center 4 yr lock, >1% or YM-yr 9.5, 6 mos open
120 Multifamily 1 yr lock,YM-yr 9.5, 6 mos open
121 Multifamily 6 yr lock, >1% or YM-yr 9.5, 6 mos open
37 Unanchored Shopping Center 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
213 Multifamily 2 yr lock, >1% or YM-yr 6.5, 6 mos open
38 Anchored Shopping Center 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
39 Multifamily 8 yr lock, yearly @ 6%, 5.25, 4.5, 3.75, 3, 2.25, 9 mos @ 1.5%, 3 mos open
124 Multifamily No lock, >1% or YM-yr 9.5, 6 mos open
122 Multifamily 4 yr lock, >1% or YM-yr 9.5, 6 mos open
214 Multifamily 2 yr lock, >1% or YM-yr 6.5, 6 mos open
126 Industrial 4 yr lock, >1% or YM-yr 9.5, 6 mos open
125 Unanchored Shopping Center 4 yr lock, >1% or YM-yr 9.5, 6 mos open
40 Multifamily 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
41 Office 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
217 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
127 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
130 Industrial 3 yr lock, >1% or YM-yr 6.5, 6 mos open
128 Sec. 42 15 yr lock, 10 yr open
129 Unanchored Shopping Center 3 yr lock, >1% or YM-yr 6.5, 6 mos open
131 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
42 Industrial 3 yr lock, 6 mos @ 4%, 3, 2, 3 mos @ 1%, 3 mos open
43 Anchored Shopping Center 2 yr 6 mos lock, 27 mos @ 1%, 3 mos open
134 Unanchored Shopping Center 5 yr lock, >1% or YM-yr 6, yr 7-9: 4%-2%, 1%-yr 9.5, 6 mos open
45 Multifamily 5 yrs 3 mos lock, yearly @ 5%, 4, 3, 2, 3 mos @ 1%, 6 mos open
135 Nursing 4 yr lock, >1% or YM-yr 9.5, 6 mos open
136 Multifamily 1 yr lock, >1% or YM-yr 9.5, 6 mos open
46 Multifamily 3 yr lock, 6 mos @ 4%, 3, 2, 3 mos @ 1%, 3 mos open
137 Unanchored Shopping Center 4 yr lock, >1% or YM-yr 6, yr 7-8: 3%-2%, 1%-yr 9.5, 6 mos open
138 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
47 Multifamily 3 yr lock, 6 mos @ 4%, 3, 2, 3 mos @ 1%, 3 mos open
140 Unanchored Shopping Center 5 yr lock, >1% or YM-yr 8, 24 mos open
141 Sec. 42 15 yr lock, 10 yr open
<PAGE>
<PAGE>
<CAPTION>
LOAN PER
SQ FT. UNITS SQ FT. UNIT
CONTROL DEBT APPRAISED APPRAISAL CURRENT BALLOON YEAR BEDS, PADS BED, PAD
NO. SERVICE NCF DSCR VALUE YEAR LTV LTV BUILT OR ROOMS OR ROOM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2,241,680 $2,887,051 1.29x $32,140,000 1995 74.91% 60.81% 1960 288,677sqft 83/sqft
2 1,565,612 2,014,651 1.29 22,500,000 1995 74.76 58.61 1986 169,297sqft 99/sqft
4 1,303,251 1,594,846 1.22 18,860,000 1996 79.53 75.59 1989 532pads 28,195/pads
101 970,203 1,228,525 1.27 14,800,000 1995 73.67 64.98 1989 288units 37,859/units
6 1,043,574 1,304,597 1.25 14,600,000 1996 73.97 60.65 1965 150,141sqft 72/sqft
102 946,556 1,208,869 1.28 14,750,000 1995 72.78 64.04 1980 376units 28,552/units
103 946,556 1,208,869 1.28 14,750,000 1995 72.78 64.04 1979 376units 28,552/units
7 877,735 1,129,563 1.29 12,900,000 1995 78.90 69.14 1989 264units 38,554/units
104 925,618 1,332,278 1.44 16,400,000 1995 61.13 52.30 1979 196units 51,152/units
8 898,990 1,416,513 1.58 15,450,000 1995 64.68 50.21 1969 158,505sqft 63/sqft
9 826,377 1,049,965 1.27 12,860,000 1995 76.25 72.35 1991 300units 32,685/units
105 898,693 1,353,960 1.51 16,600,000 1995 57.65 46.99 1988 161,750sqft 59/sqft
10 822,707 1,130,201 1.37 12,000,000 1996 70.83 63.14 1990 126,588sqft 67/sqft
11 771,654 1,001,541 1.30 10,600,000 1996 80.00 70.79 1985 360units 23,556/units
12 743,255 1,044,939 1.41 11,300,000 1995 71.50 63.54 1984 70,890sqft 114/sqft
13 698,400 951,028 1.36 10,900,000 1995 73.29 64.37 1968 253units 31,577/units
107 789,258 1,195,116 1.51 11,600,000 1995 68.84 56.88 1983 189beds 42,249/beds
108 702,398 923,811 1.32 10,500,000 1995 74.16 63.04 1969 466units 16,710/units
109 701,270 944,039 1.35 11,000,000 1995 69.83 59.57 1981 111units 69,198/units
14 655,260 822,250 1.25 10,600,000 1995 71.65 62.72 1995 80,028sqft 95/sqft
15 673,738 889,873 1.32 9,650,000 1995 75.34 66.95 1984 216,659sqft 34/sqft
16 649,649 790,849 1.22 9,050,000 1995 79.95 70.58 1991 200units 36,177/units
17 643,984 792,866 1.23 9,400,000 1996 76.06 67.16 1987 324pads 22,068/pads
18 614,592 793,026 1.29 8,800,000 1995 79.95 70.17 1982 440units 15,989/units
19 660,054 924,430 1.40 10,800,000 1995 64.75 57.49 1990 69,829sqft 100/sqft
111 629,802 819,395 1.30 9,225,000 1995 73.40 59.70 1973 251units 26,977/units
112 607,869 799,037 1.31 11,600,000 1995 56.76 48.55 1980 127units 51,843/units
113 596,185 803,409 1.35 9,200,000 1995 68.86 56.16 1985 42,609sqft 149/sqft
207 628,232 1,333,734 2.12 10,000,000 1996 62.94 52.12 1977 472,500sqft 13/sqft
114 523,800 716,953 1.37 7,650,000 1995 78.32 68.79 1985 208units 28,807/units
20 487,488 625,716 1.28 7,800,000 1995 74.89 70.99 1985 128units 45,634/units
22 551,089 732,054 1.33 7,700,000 1996 75.25 48.78 1949 260units 22,285/units
21 493,343 637,683 1.29 7,250,000 1995 79.88 69.77 1989 138units 41,968/units
216 522,638 760,576 1.46 8,000,000 1996 69.32 63.41 1938 391units 14,184/units
26 559,639 699,543 1.25 7,800,000 1996 70.56 63.46 1992 55,527sqft 99/sqft
23 515,974 723,409 1.40 7,400,000 1995 74.09 60.43 1988 125,995sqft 44/sqft
25 532,581 752,264 1.41 7,300,000 1995 74.78 61.61 1974 72,142sqft 76/sqft
115 469,540 625,275 1.33 8,100,000 1995 64.04 58.29 1968 286units 18,136/units
27 429,549 578,905 1.35 6,800,000 1995 74.21 68.43 1979 326units 15,480/units
30 509,282 688,911 1.35 7,800,000 1996 64.10 59.96 1940 49,115sqft 102/sqft
117 458,132 571,749 1.25 6,800,000 1995 73.45 64.86 1966 112units 44,595/units
29 439,841 546,888 1.24 6,300,000 1995 79.26 69.73 1962 142pads 35,164/pads
28 459,915 633,284 1.38 6,690,000 1995 74.50 65.98 1979 114,497sqft 44/sqft
32 414,520 515,305 1.24 6,965,000 1995 70.96 67.31 1969 116units 42,609/units
35 544,783 775,896 1.42 7,800,000 1996 62.09 N/A 1967 185rooms 26,180/rooms
118 446,691 582,615 1.30 7,000,000 1995 69.12 59.13 1983 88units 54,980/units
119 458,878 610,362 1.33 6,500,000 1995 74.39 60.81 1981 69,701sqft 69/sqft
33 407,433 526,823 1.29 6,100,000 1995 78.47 72.35 1982 316units 15,147/units
116 485,977 657,072 1.35 6,400,000 1995 74.58 62.09 1973 75,332sqft 63/sqft
120 406,597 522,693 1.29 6,100,000 1995 74.91 66.08 1988 123units 37,150/units
121 406,764 529,571 1.30 6,700,000 1995 67.79 57.52 1951 268units 16,949/units
37 443,958 669,923 1.51 6,500,000 1995 69.04 57.10 1994 61,304sqft 73/sqft
213 411,685 548,647 1.33 6,050,000 1995 73.50 67.05 1981 328units 13,556/units
38 418,613 560,122 1.34 5,800,000 1996 74.57 61.17 1979 66,923sqft 65/sqft
39 398,711 499,837 1.25 5,300,000 1995 79.77 51.50 1968 208units 20,325/units
124 386,510 551,993 1.43 5,970,000 1995 70.47 62.63 1969 111units 37,899/units
122 376,773 504,471 1.34 6,825,000 1995 60.57 51.58 1980 276units 14,977/units
214 381,618 482,857 1.27 5,800,000 1995 71.06 64.83 1980 333units 12,378/units
126 411,342 738,935 1.80 5,500,000 1996 74.93 62.05 1980 281,250sqft 15/sqft
125 387,918 537,596 1.39 5,800,000 1995 70.47 57.61 1995 48,004sqft 85/sqft
40 360,738 440,102 1.22 5,180,000 1995 76.45 67.64 1965 215units 18,419/units
41 386,810 510,648 1.32 5,250,000 1995 74.92 61.78 1926 61,042sqft 64/sqft
217 368,995 481,112 1.30 6,800,000 1996 57.35 46.74 1964 205units 19,024/units
127 359,940 477,147 1.33 5,200,000 1995 74.76 60.68 1985 144units 26,997/units
130 386,553 483,163 1.25 5,200,000 1996 74.58 66.83 1986 242,500sqft 16/sqft
128 347,085 434,421 1.25 4,700,000 1995 81.76 30.58 1994 94units 40,879/units
129 365,454 493,370 1.35 5,800,000 1996 65.83 58.60 1966 87,471sqft 44/sqft
131 351,052 494,530 1.41 5,000,000 1995 74.77 60.94 1981 121units 30,895/units
42 335,876 479,041 1.43 5,000,000 1995 73.36 67.90 1984 91,609sqft 40/sqft
43 367,868 519,226 1.41 5,570,000 1995 65.35 61.22 1958 61,887sqft 59/sqft
134 344,227 470,549 1.37 7,050,000 1995 50.86 41.74 1963 18,466sqft 194/sqft
45 314,647 413,686 1.31 4,420,000 1996 79.13 69.89 1982 320units 10,930/units
135 356,065 622,100 1.75 5,000,000 1995 69.94 58.23 1965 130beds 26,900/beds
136 306,174 415,878 1.36 6,000,000 1995 56.57 48.09 1975 288units 11,786/units
46 291,732 404,002 1.38 4,250,000 1995 79.83 75.95 1963 104units 32,622/units
137 311,323 406,338 1.31 5,100,000 1995 64.77 55.62 1986 70,933sqft 47/sqft
138 303,391 413,454 1.36 4,400,000 1996 74.94 63.97 1973 150units 21,982/units
47 277,160 400,642 1.45 4,820,000 1995 68.36 64.86 1983 168units 19,614/units
140 297,224 387,475 1.30 4,850,000 1995 65.26 53.19 1982 31,722sqft 100/sqft
141 278,882 354,111 1.27 3,640,000 1995 85.88 31.82 1995 78units 40,076/units
<PAGE>
<PAGE>
<CAPTION>
LARGEST RETAIL TENANT
INITIAL OTHER -----------------------------------------------------------
CONTROL OCCUPANCY RESERVES RESERVES AREA % OF TOTAL
NO. PERCENTAGE AT CLOSING AT CLOSING ONGOING RESERVES NAME LEASED (SQ. FT.) AREA LEASED
<S> <C> <C> <C> <C> <S> <C> <C>
1 97.18% $ 69,125 -- $0 Edwards Theatre 31,695 10.98%
2 99.29 -- -- 0 Price Rite 60,560 35.77
4 97.90 -- -- 50 per pad N/A N/A N/A
101 98.90 6,375 -- 200 per unit N/A N/A N/A
6 95.65 235,000 -- 0 Kroger 55,955 37.27
102 92.00 100,313 -- 238 per unit N/A N/A N/A
103 92.00 101,563 -- 238 per unit N/A N/A N/A
7 91.67 35,750 -- 200 per unit N/A N/A N/A
104 100.00 322,500 -- 325 per unit N/A N/A N/A
8 92.12 -- -- 0 Food 4 Less 54,930 34.66
9 87.33 -- -- 200 per unit N/A N/A N/A
105 97.10 30,000 -- .10 per sq. ft. Bugle Boy 7,500 4.64
10 81.77 -- 15,000 0 Fleming Food 30,000 23.70
11 96.11 73,125 -- 293 per unit N/A N/A N/A
12 100.00 -- -- 0 The Gap 18,000 25.39
13 98.40 -- -- 250 per unit N/A N/A N/A
107 92.06 41,250 -- 256 per unit N/A N/A N/A
108 92.05 8,125 -- 283 per unit N/A N/A N/A
109 100.00 84,063 -- 435 per unit N/A N/A N/A
14 100.00 -- 47,944 0 Bed, Bath & Beyond 50,028 62.51
15 98.16 -- -- 0 Troutman Investments 32,672 15.08
16 94.78 -- -- 235 per unit N/A N/A N/A
17 99.69 18,750 -- 50 per pad N/A N/A N/A
18 91.14 261,031 -- 225 per unit N/A N/A N/A
19 90.60 10,625 -- 0 Hometown Buffet 10,800 15.47
111 94.02 91,125 -- 302 per unit N/A N/A N/A
112 100.00 45,000 -- 372 per unit N/A N/A N/A
113 92.09 14,375 -- .68 per sq. ft. Blockbuster Video 4,181 9.81
207 100.00 -- -- .10 per sq. ft. Warehousing of Wisconsin 263,175 55.70
114 99.04 150 -- 218 per unit N/A N/A N/A
20 94.53 -- -- 200 per unit N/A N/A N/A
22 99.57 237,700 -- 286 per unit N/A N/A N/A
21 98.75 22,785 -- 225 per unit N/A N/A N/A
216 97.00 126,750 -- 250 per unit N/A N/A N/A
26 94.20 -- -- 0 KDGO Holdings 7,640 13.76
23 86.15 -- 425,000 0 Foodland (1) 45,500 36.11
25 98.75 -- -- 0 Petsmart 24,034 33.31
115 86.40 225,000 -- 275 per unit N/A N/A N/A
27 93.87 86,931 -- 250 per unit N/A N/A N/A
30 88.29 1,313 150,000 0 Reebok 15,525 31.61
117 97.00 9,000 -- 240 per unit N/A N/A N/A
29 98.60 24,863 -- 50 per pad N/A N/A N/A
28 100.00 18,175 -- 0 Qualcomm 45,133 39.42
32 94.51 -- -- 200 per unit N/A N/A N/A
35 0.00 328,475 -- 4% of gross rev. N/A N/A N/A
118 100.00 18,750 -- 415 per unit N/A N/A N/A
119 99.50 16,913 -- .10 per sq. ft. Joseph A. Banks 10,998 15.78
33 90.51 86,399 -- 250 per unit N/A N/A N/A
116 91.30 16,500 -- .29 per sq. ft. KP Famous Deli 4,995 6.63
120 96.70 2,813 -- 200 per unit N/A N/A N/A
121 95.52 76,563 -- 225 per unit N/A N/A N/A
37 98.03 -- -- 0 Dress Barn 5,155 8.41
213 93.00 44,625 -- 200 per unit N/A N/A N/A
38 98.39 21,615 -- 0 Von's Grocery 36,800 54.99
39 97.10 31,125 -- 262.5 per unit N/A N/A N/A
124 94.59 54,120 -- 235 per unit N/A N/A N/A
122 94.00 101,713 -- 318 per unit N/A N/A N/A
214 95.00 18,820 -- 200 per unit N/A N/A N/A
126 100.00 -- -- .10 per sq. ft. Warehousing of Wisconsin 281,250 100.00
125 100.00 -- 75,000 .22 per sq. ft. Just For Feet 17,000 35.41
40 90.23 211,188 -- 250 per unit N/A N/A N/A
41 100.00 7,500 -- 0 City of Long Beach 10,226 16.75
217 90.20 206,250 -- 208 per unit N/A N/A N/A
127 97.90 2,500 -- 200 per unit N/A N/A N/A
130 100.00 -- -- .10 per sq. ft. Quality Logistics 242,500 100.00
128 100.00 -- -- 200 per unit N/A N/A N/A
129 93.70 -- 150,000 .16 per sq. ft. Reliable Stores, Inc. 23,110 26.42
131 97.52 95,875 -- 370 per unit N/A N/A N/A
42 100.00 18,875 -- 0 Aetrium Inc. 41,610 45.42
43 94.51 106,841 -- .15 per sq. ft. Revco 12,000 19.39
134 100.00 18,688 -- .41 per sq. ft. Barney's America, Inc. 4,900 26.54
45 97.50 204,619 -- 225 per unit N/A N/A N/A
135 91.10 500 -- 250 per unit N/A N/A N/A
136 89.60 307,681 -- 289 per unit N/A N/A N/A
46 89.42 17,750 -- 200 per unit N/A N/A N/A
137 92.65 -- -- .25 per sq. ft. The Mandarin Chinese Restaurant 6,742 9.50
138 98.00 62,564 -- 307 per unit N/A N/A N/A
47 98.80 22,000 -- 235 per unit N/A N/A N/A
140 85.61 12,313 -- .75 per sq. ft. Waterbedland 3,562 11.23
141 100.00 313 -- 200 per unit N/A N/A N/A
CONTROL LEASE CONTROL
NO. EXP. DATE NO.
<S> <C> <C>
1 05/31/11 1
2 12/31/06 2
4 N/A 4
101 N/A 101
6 02/01/16 6
102 N/A 102
103 N/A 103
7 N/A 7
104 N/A 104
8 11/01/20 8
9 N/A 9
105 08/31/97 105
10 07/31/10 10
11 N/A 11
12 01/31/05 12
13 N/A 13
107 N/A 107
108 N/A 108
109 N/A 109
14 08/14/10 14
15 02/28/99 15
16 N/A 16
17 N/A 17
18 N/A 18
19 06/08/14 19
111 N/A 111
112 N/A 112
113 10/31/00 113
207 02/01/11 207
114 N/A 114
20 N/A 20
22 N/A 22
21 N/A 21
216 N/A 216
26 08/31/96 26
23 11/30/04 23
25 11/30/06 25
115 N/A 115
27 N/A 27
30 04/30/00 30
117 N/A 117
29 N/A 29
28 01/31/98 28
32 N/A 32
35 N/A 35
118 N/A 118
119 01/31/03 119
33 N/A 33
116 08/31/05 116
120 N/A 120
121 N/A 121
37 12/31/00 37
213 N/A 213
38 06/01/09 38
39 N/A 39
124 N/A 124
122 N/A 122
214 N/A 214
126 02/01/11 126
125 02/28/10 125
40 N/A 40
41 09/30/98 41
217 N/A 217
127 N/A 127
130 12/01/98 130
128 N/A 128
129 05/01/98 129
131 N/A 131
42 07/14/99 42
43 4/30/06 43
134 01/31/03 134
45 N/A 45
135 N/A 135
136 N/A 136
46 N/A 46
137 04/30/00 137
138 N/A 138
47 N/A 47
140 02/29/96 140
141 N/A 141
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CONTROL
NO. PROPERTY NAME ADDRESS CITY STATE
<S> <C> <C> <C> <C>
48 ANA Country Hills Apts. 66900 Ironwood Drive Desert Hot Springs CA
142 Central High School 30 West Colfax Avenue South Bend IN
143 KMart Plaza 863 S. Main Street Lapeer MI
74 Main Street 680, 686 & 700 Worcester
144 Hamilton Plaza West Rd. Framingham MA
49 Bally's Scandinavian Health Spa 4733 Hills & Dales Road NW Canton OH
145 Melody Place Apartments 6852 Shady Brook Lane Dallas TX
147 Liberty West 3526 Langrehr Road Baltimore MD
148 Spencerwood Shopping Center 9695 Spencer Highway Deer Park TX
149 Brookshire Apartments 3915 Hunters Ridge Road Lansing MI
52 Villa Del Sol 3225 Long Beach Blvd. Long Beach CA
150 Terrace View VI 6800-C Hunt Club Road Blacksburg VA
53 The Fountains of San Antonio 8630 Fairhaven San Antonio TX
152 Kinsor Towers 1169 Ocean Avenue Brooklyn NY
153 1112 M Street 1112 M Street Washington DC
69 Greenwood Plaza State Road 23 and Ironwood Drive South Bend IN
154 Lakeview Village Apartments 8831 North 96th Street Milwaukee WI
155 Mark Greenville Apartments 481 Cypress Lane Greenville MS
156 Palm Oasis Apartments 802 North 30th Street Phoenix AZ
55 Island Breeze Apartments 1321-1325 Rosecrans Avenue Gardena CA
91 Vernitron Building 1601 Precision Park Lane San Diego CA
56 Sepulveda/Victory Center 6411 Sepulveda Blvd. Van Nuys CA
59 Tuxedo Park Apartments 16548 NE Halsey Portland OR
64 Comfort Inn-West-Amarillo 2001 South Coulter Road Amarillo TX
57 Fox Plaza Shopping Center 131, 201, 231 San Pedro, S.E. Albuquerque NM
58 Northwest Crossing Apartments 9640 & 9680 Timber Line Road Dallas TX
158 Village @ Eland Route 113 & Ross Lane Phoenixville PA
157 Discovery Zone Center 20-30 Backus Avenue Danbury CT
63 Canyon Park Apartments 2454 West Campbell Avenue Phoenix AZ
61 Charlestowne South Apartments 2119 Lumpkin Road Augusta GA
60 Adams Square Apartments 229 South Adams Road Spokane WA
62 Clubview Gardens Apartments 3333 Webb Chapel Extension Dallas TX
160 Huntington Retirement Hotel 20920 Earl Street Torrance CA
65 Woodhaven Apartments 1840 Killingsworth Road Augusta GA
67 Factory Square 12 Water Street Mystic CT
68 Elmwood Apartments 3593 Woodbrier Circle Tucker GA
161 Waples Mobile Home Park Lee Highway (Route 29) at Via Drive Fairfax VA
162 Royale Apartments 3593 Buford Highway Atlanta GA
71 Arborwood Apartments 200 Muller Garden Tyler TX
73 Comfort Inn-Airport-Little Rock 3200 Bankhead Little Rock AR
72 Talla Villa Apartments 925 East Magnolia Drive Tallahassee FL
76 Garden Breeze Apartments 415 South Mount Vernon Ave. San Bernadino CA
74 Huntington Office Center 900 Walt Whitman Road Melville NY
75 Highland Club Apartments Ponce de Leon Ave & Frederica St. Atlanta GA
78 Donna/Ventura 19000-19030 Ventura Blvd. Tarzana CA
166 Roebuck Shopping Center 9323-9333 Parkway East Birmingham AL
167 The Courtyard 3600 Woodman Drive Grand Chute WI
168 Fiesta Del Norte Shopping Center 6001 San Mateo Blvd. Albuquerque NM
170 Stephenson Mill 322 East Colfax South Bend IN
80 Fox Valley Apartments 513 Valley Avenue Birmingham AL
171 2881-2883 Third Avenue 2881-2883 Third Avenue Bronx NY
79 Morris Creek Apartments 982-B John Rolfe Drive Smithfield VA
172 Angels for the Elderly 44, 48, 52 Angels Court Montgomery AL
83 Comfort Inn-Oklahoma City 4017 N. W. 39th Expressway Oklahoma City OK
81 North Hills Tropicana Apartments 15015 Parthenia Street North Hills CA
174 Graystone Apartments 1109 San Marcus Parkway San Marcus TX
173 Bull Run Mobile Home Park 7410 Old Centreville Rd. (Route 616) Manassas VA
215 690 Gerard Avenue 690 Gerard Avenue Bronx NY
176 Pinedale II Apartments 384 Cedar Street Menomonie WI
185 Peachtree Avenue Apartments 23-25-26-29-33 Peachtree Avenue Atlanta GA
179 Park East Apartments 508 San Pablo Drive Las Vegas NV
180 1102-1130 Washington Street 1102-1130 Washington Street Boston MA
182 Kendale 1037 Maiden Choice Lane Baltimore MD
181 111 East 167th Street 111 East 167th Street Bronx NY
186 Westgate Manor Apartments 7208 Southwest 34th Avenue, Amarillo TX
Randall/Potter
212 Morningstar 123 & 135 White Drive Tallahassee FL
187 Omni Apartments 4602 54th Street, Lubbock County Lubbock TX
85 Deer Park Apartments 87 Ruby Road Willington CT
184 Riverloft 550-555 Pearl Street Reading PA
110 Wisconsin Rapids-Int'l Paper 2810 Industrial Street Wisconsin Rapids WI
188 St. Croix Apartments 200 Oak Street Woodville WI
87 Fallbrook/Saticoy 7606 Fallbrook Ave. Canoga Park CA
192 Western Oaks Apartments 4601 52nd Street, Lubbock County Lubbock TX
191 Escondido Manor Apartments 4280 Escondido Street Las Vegas NV
211 Pinecrest West 1380 Ocala Road Tallahassee FL
88 Summit Grove Apartments 2326-2340 Lawrenceville Highway DeKalb County GA
210 Castle Cove 2001-2057 Castle Drive Garland TX
199 Rivertree Park 3627 Manchaca Road Austin TX
195 101-109 State Street 101-109 State Street Boston MA
90 Shoppers Landing 15 Main Street Freeport ME
<PAGE>
<PAGE>
<CAPTION>
STATED REM
REM AMORT
CONTROL ZIP ORIGINAL CURRENT % OF CUMULATIVE MORTGAGE TERM TERM MATURITY
NO. CODE BALANCE BALANCE POOL % OF POOL RATE (MO.) (MO.) ORIG DATE DATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
48 92240 $3,100,000 $3,097,816 0.48% 77.44% 7.760% 59 359 2/26/96 3/1/01
142 46601 3,018,000 3,016,026 0.47 77.91 8.125 299 359 2/15/96 3/1/21
143 48446 3,014,000 3,001,401 0.46 78.37 8.100 116 296 11/30/95 12/1/05
144 01701 3,000,000 2,994,045 0.46 78.84 8.375 118 298 12/29/95 2/1/06
49 44708 2,890,000 2,880,545 0.45 79.28 9.490 155 155 2/26/96 3/1/09
145 75231 2,882,000 2,873,212 0.44 79.72 8.250 297 297 12/26/95 1/1/21
147 21244 2,850,000 2,840,784 0.44 80.16 8.250 116 326 11/9/95 12/1/05
148 77536 2,750,000 2,739,446 0.42 80.59 8.625 116 296 11/22/95 12/1/05
149 48911 2,700,000 2,695,665 0.42 81.00 8.250 118 328 1/16/96 2/1/06
52 90807 2,630,000 2,625,989 0.41 81.41 7.380 58 358 1/31/96 2/1/01
150 24060 2,593,000 2,584,360 0.40 81.81 8.085 116 326 11/8/95 12/1/05
53 78229 2,550,000 2,544,812 0.39 82.20 7.980 117 357 12/13/95 1/1/06
152 11230 2,550,000 2,542,224 0.39 82.59 8.250 117 297 12/15/95 1/1/06
153 20005 2,550,000 2,541,564 0.39 82.99 8.125 116 326 11/30/95 12/1/05
69 46614 2,540,000 2,537,523 0.39 83.38 8.460 179 299 2/15/96 3/1/11
154 53224 2,529,000 2,524,939 0.39 83.77 8.250 118 328 1/16/96 2/1/06
155 38701 2,513,000 2,504,556 0.39 84.16 8.039 116 326 11/6/95 12/1/05
156 85008 2,500,000 2,496,718 0.39 84.54 8.125 298 358 1/17/96 2/1/21
55 90247 2,480,000 2,478,302 0.38 84.93 7.900 83 359 2/26/96 3/1/03
91 92173 2,450,000 2,447,614 0.38 85.30 8.470 83 299 2/29/96 3/1/03
56 91406 2,450,000 2,442,875 0.38 85.68 8.540 117 297 12/28/95 1/1/06
59 97230 2,250,000 2,250,000 0.35 86.03 8.160 120 360 3/1/96 4/1/06
64 79106 2,250,000 2,246,815 0.35 86.38 9.440 239 239 2/28/96 3/1/16
57 87110 2,250,000 2,242,832 0.35 86.72 7.980 117 297 12/20/95 1/1/06
58 75220 2,240,000 2,238,563 0.35 87.07 8.220 119 359 2/29/96 3/1/06
158 19460 2,240,000 2,237,739 0.35 87.41 8.250 83 299 2/21/96 3/1/03
157 06810 2,225,000 2,216,105 0.34 87.76 8.375 116 296 11/17/95 12/1/05
63 85015 2,200,000 2,200,000 0.34 88.10 8.290 120 360 3/1/96 4/1/06
61 30906 2,200,000 2,197,074 0.34 88.44 8.060 178 358 1/31/96 2/1/11
60 99216 2,200,000 2,196,990 0.34 88.77 7.920 118 358 1/11/96 2/1/06
62 75220 2,160,000 2,158,524 0.33 89.11 7.910 119 359 2/9/96 3/1/06
160 90503 2,100,000 2,098,166 0.32 89.43 9.125 119 299 1/23/96 3/1/06
65 30904 2,000,000 1,997,941 0.31 89.74 8.130 119 299 2/16/96 3/1/06
67 06355 1,905,000 1,900,569 0.29 90.04 8.210 57 333 12/6/95 1/1/01
68 30084 1,900,000 1,895,912 0.29 90.33 7.880 118 298 1/24/96 2/1/06
161 22030 1,900,000 1,893,917 0.29 90.62 7.950 117 297 12/8/95 1/1/06
162 30329 1,900,000 1,893,441 0.29 90.91 7.890 116 326 11/30/95 12/1/05
71 75703 1,880,000 1,877,251 0.29 91.20 7.590 58 358 1/23/96 2/1/01
73 72206 1,870,000 1,867,353 0.29 91.49 9.440 239 239 2/28/96 3/1/16
72 32301 1,850,000 1,840,538 0.28 91.78 8.020 237 237 12/28/95 1/1/16
76 92410 1,800,000 1,798,735 0.28 92.05 7.770 59 359 2/27/96 3/1/01
74 11747 1,800,000 1,794,951 0.28 92.33 8.760 117 297 12/11/95 1/1/06
75 30306 1,800,000 1,793,799 0.28 92.61 7.910 238 238 1/10/96 2/1/16
78 91356 1,760,000 1,755,208 0.27 92.88 8.940 117 297 12/28/96 1/1/06
166 35215 1,750,000 1,748,304 0.27 93.15 8.500 119 299 2/23/96 3/1/06
167 54914 1,752,000 1,747,598 0.27 93.42 8.375 296 356 11/22/95 12/1/20
168 87109 1,720,000 1,714,806 0.26 93.68 8.310 117 297 12/22/95 1/1/06
170 46601 1,615,000 1,613,944 0.25 93.93 8.125 299 359 2/15/96 3/1/21
80 35209 1,600,000 1,598,387 0.25 94.18 8.260 119 299 2/27/96 3/1/06
171 10455 1,600,000 1,596,952 0.25 94.43 8.625 118 298 1/12/96 2/1/06
79 23430 1,600,000 1,591,967 0.25 94.67 8.170 237 237 12/12/95 1/1/16
172 36109 1,514,000 1,512,621 0.23 94.91 8.875 119 299 2/15/96 3/1/06
83 73112 1,500,000 1,497,877 0.23 95.14 9.440 239 239 2/28/96 3/1/16
81 91343 1,500,000 1,497,033 0.23 95.37 8.120 117 357 12/18/95 1/1/06
174 78667 1,500,000 1,495,472 0.23 95.60 8.625 116 326 11/16/95 12/1/05
173 22110 1,500,000 1,495,198 0.23 95.83 7.950 117 297 12/8/95 1/1/06
215 10451 1,482,000 1,482,000 0.23 96.06 8.500 84 300 3/5/96 4/1/03
176 54028 1,460,000 1,458,805 0.23 96.29 8.125 299 329 2/9/96 3/1/21
185 30305 1,400,000 1,398,528 0.22 96.50 8.000 83 299 2/29/96 3/1/03
179 89119 1,378,000 1,374,688 0.21 96.72 8.280 117 327 12/28/95 1/1/06
180 02116 1,375,000 1,369,614 0.21 96.93 8.500 116 296 11/21/95 12/1/05
182 21229 1,356,000 1,352,723 0.21 97.14 8.250 117 327 12/5/95 1/1/06
181 10452 1,350,000 1,350,000 0.21 97.34 8.500 84 300 3/5/96 4/1/03
186 79109 1,298,000 1,295,916 0.20 97.54 8.250 118 328 1/16/96 2/1/06
212 32304 1,294,000 1,292,941 0.20 97.74 8.125 119 329 2/7/96 3/1/06
187 79414 1,295,000 1,292,921 0.20 97.94 8.250 118 328 1/16/96 2/1/06
85 06279 1,280,000 1,277,686 0.20 98.14 8.560 57 357 12/6/95 1/1/01
184 19602 1,264,000 1,263,034 0.20 98.34 8.500 119 329 2/28/96 3/1/06
110 54495 1,175,000 1,173,931 0.18 98.52 8.880 119 299 3/1/96 3/1/06
188 54028 1,140,000 1,138,825 0.18 98.69 8.125 299 299 2/9/96 3/1/21
87 91304 1,110,000 1,106,772 0.17 98.87 8.540 117 297 12/28/96 1/1/06
192 79414 1,026,000 1,025,160 0.16 99.02 8.125 119 329 2/8/96 3/1/06
191 89119 1,022,000 1,019,543 0.16 99.18 8.280 117 327 12/28/95 1/1/06
211 32304 1,020,000 1,019,165 0.16 99.34 8.125 119 329 2/7/96 3/1/06
88 30033 1,000,000 998,387 0.15 99.49 8.410 239 239 2/23/96 3/1/16
210 75040 910,000 907,041 0.14 99.63 8.375 118 238 2/1/96 2/1/06
199 78704 830,000 830,000 0.13 99.76 8.780 120 300 3/4/96 4/1/06
195 02109 800,000 797,706 0.12 99.88 8.625 117 297 12/14/95 1/1/06
90 04032 750,000 748,657 0.12 100.00 9.000 82 298 1/24/96 2/1/03
<PAGE>
<PAGE>
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
ANNEX A
<CAPTION>
CONTRTOL
NO. PROPERTY TYPE PREPAYMENT RESTRICTIONS
<S> <C> <C>
48 Multifamily 3 yr lock, 6 mos @ 4%, 3, 2, 3 mos @ 1%, 3 mos open
142 Sec. 42 15 yr lock, 10 yr open
143 Anchored Shopping Center 4 yr lock, >1% or YM-yr 9.5, 6 mos open
144 Unanchored Shopping Center 4 yr lock, >1% or YM-yr 9, 12 mos open
49 Anchored Shopping Center 8 yr lock, yearly @ 6%, 5.25, 4.5, 3.75, 9 mos @ 3%, 3 mos open
145 Sec. 42 15 yr lock, 10 yr open
147 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
148 Anchored Shopping Center 4 yr lock, >1% or YM-yr 9.5, 6 mos open
149 Multifamily 1 yr lock, >1% or YM-yr 9.5, 6 mos open
52 Multifamily 3 yr 3 mos lock, 6 mos @ 4%, 3, 3 mos @ 2%, 6 mos open
150 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
53 Multifamily 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
152 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
153 Multifamily 4 yr lock, >1% or YM-yr 9.5, 6 mos open
69 Anchored Shopping Center 8 yr lock, yearly @ 6%, 5.25, 4.5, 3.75, 3, 2.25, 9 mos @ 1.5%, 3 mos open
154 Multifamily 1 yr lock, >1% or YM-yr 9.5, 6 mos open
155 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
156 Sec. 42 15 yr lock, 10 yr open
55 Multifamily 4 yr lock, yearly @ 4%, 3, 6 mos @ 2%, 3 mos @ 1%, 3 mos open
91 Industrial 4 yr 1 mos lock, 11 mos @ 4%, 12 mos @ 3%, 6 mos @ 2%, 2 mos @ 1%, 4 mos open
56 Unanchored Shopping Center 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
59 Multifamily 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
64 Hospitality 10 yr lock, yearly @ 8%, 7, 6, 5, 4, 3, 2, 33 mos @ 1%, 3 mos open
57 Anchored Shopping Center 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
58 Multifamily 5 yrs 3 mos lock, yearly @ 5%, 4, 3, 2, 3 mos @ 1%, 6 mos open
158 Unanchored Shopping Center 3 yr lock, >1% or YM-yr 6.5, 6 mos open
157 Unanchored Shopping Center 4 yr lock, >1% or YM-yr 9.5, 6 mos open
63 Multifamily 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
61 Multifamily 8 yr lock, yearly @ 6%, 5.25, 4.5, 3.75, 3, 2.25, 9 mos @ 1.5%, 3 mos open
60 Multifamily 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
62 Multifamily 5 yrs 3 mos lock, yearly @ 5%, 4, 3, 2, 3 mos @ 1%, 6 mos open
160 Assisted Living 4 yr lock, >1% or YM-yr 9.5, 6 mos open
65 Multifamily 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
67 Unanchored Shopping Center 2 yr 6 mos lock, 27 mos @ 1%, 3 mos open
68 Multifamily 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
161 Mobile Home Park 5 yr lock, >1% or YM-yr 8, 24 mos open
162 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
71 Multifamily 2 yr lock, 18 mos @ 4%, 6 mos @ 3%, 2, 3 mos @ 1%, 3 mos open
73 Hospitality 10 yr lock, yearly @ 8%, 7, 6, 5, 4, 3, 2, 33 mos @ 1%, 3 mos open
72 Multifamily 10 yr lock, yearly @ 8%, 7, 6, 5, 4, 3, 2, 33 mos @ 1%, 3 mos open
76 Multifamily 3 yr lock, 6 mos @ 4%, 3, 2, 3 mos @ 1%, 3 mos open
74 Office 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
75 Multifamily 10 yr lock, yearly @ 8%, 7, 6, 5, 4, 3, 2, 33 mos @ 1%, 3 mos open
78 Unanchored Shopping Center 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
166 Unanchored Shopping Center 4 yr lock, >1% or YM-yr 9.5, 6 mos open
167 Sec. 42 15 yr lock, 10 yr open
168 Unanchored Shopping Center 4 yr lock, >1% or YM-yr 9.5, 6 mos open
170 Sec. 42 15 yr lock, 10 yr open
80 Multifamily 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
171 Unanchored Shopping Center 4 yr lock, >1% or YM-yr 9.5, 6 mos open
79 Multifamily 10 yr lock, yearly @ 8%, 7, 6, 5, 4, 3, 2, 33 mos @ 1%, 3 mos open
172 Assisted Living 4 yr lock, >1% or YM-yr 9.5, 6 mos open
83 Hospitality 10 yr lock, yearly @ 8%, 7, 6, 5, 4, 3, 2, 33 mos @ 1%, 3 mos open
81 Multifamily 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
174 Multifamily 1 yr lock, >1% or YM-yr 9.5, 6 mos open
173 Mobile Home Park 5 yr lock, >1% or YM-yr 8, 24 mos open
215 Multifamily 1 yr lock, >1% or YM-yr 6.5, 6 mos open
176 Sec. 42 15 yr lock, 10 yr open
185 Multifamily 3 yr lock, >1% or YM-yr 6.5, 6 mos open
179 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
180 Unanchored Shopping Center 4 yr lock, >1% or YM-yr 9.5, 6 mos open
182 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
181 Multifamily 1 yr lock, >1% or YM-yr 6.5, 6 mos open
186 Multifamily 4 yr lock, >1% or YM-yr 9.5, 6 mos open
212 Multifamily 4 yr lock, >1% or YM-yr 9.5, 6 mos open
187 Multifamily 4 yr lock, >1% or YM-yr 9.5, 6 mos open
85 Multifamily 2 yr 6 mos lock, 27 mos @ 1%, 3 mos open
184 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
110 Industrial 4 yr lock, >1% or YM-yr 9.5, 6 mos open
188 Sec. 42 15 yr lock, 10 yr open
87 Unanchored Shopping Center 5 yr lock, yearly @ 5%, 4, 3, 2, 9 mos @ 1%, 3 mos open
192 Multifamily 4 yr lock, >1% or YM-yr 9.5, 6 mos open
191 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
211 Multifamily 4 yr lock, >1% or YM-yr 9.5, 6 mos open
88 Multifamily 10 yr lock, yearly @ 8%, 7, 6, 5, 4, 3, 2, 33 mos @ 1%, 3 mos open
210 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
199 Multifamily 5 yr lock, >1% or YM-yr 9.5, 6 mos open
195 Office 4 yr lock, >1% or YM-yr 9.5, 6 mos open
90 Unanchored Shopping Center 4 yr lock, yearly @ 4%, 3, 6 mos @ 2%, 3 mos @ 1%, 3 mos open
<PAGE>
<PAGE>
<CAPTION>
LOAN PER
SQ FT. UNITS SQ FT. UNIT
CONTROL DEBT APPRAISED APPRAISAL CURRENT BALLOON YEAR BEDS, PADS BED, PAD
NO. SERVICE NCF DSCR VALUE YEAR LTV LTV BUILT OR ROOMS OR ROOM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
48 $266,763 $368,088 1.38x $3,900,000 1995 79.43% 75.48% 1987 200 units 15,489/units
142 268,903 314,852 1.17 3,550,000 1995 84.96 31.46 1994 106 units 28,453/units
143 281,551 376,251 1.34 4,800,000 1995 62.53 50.99 1973 131,361 sqft 23/sqft
144 286,856 395,859 1.38 5,050,000 1995 59.29 48.56 1973 60,092 sqft 50/sqft
49 387,719 525,470 1.36 4,300,000 1995 66.99 N/A 1988 37,214 sqft 77/sqft
145 272,678 336,634 1.23 4,100,000 1995 70.08 N/A 1973 192 units 14,965/units
147 262,489 369,841 1.41 3,900,000 1995 72.84 62.36 1965 148 units 19,194/units
148 268,510 335,021 1.25 3,810,000 1995 71.90 59.36 1982 62,300 sqft 44/sqft
149 248,674 336,928 1.35 3,600,000 1995 74.88 64.00 1974 116 units 23,238/units
52 218,085 281,747 1.29 3,600,000 1995 72.94 69.12 1987 56 units 46,893/units
150 235,305 306,470 1.30 3,500,000 1995 73.84 62.99 1973 110 units 23,494/units
53 224,106 292,324 1.30 3,400,000 1995 74.85 65.88 1973 100 units 25,448/units
152 241,266 315,440 1.31 3,400,000 1995 74.77 61.12 1965 96 units 26,482/units
153 232,239 333,607 1.44 3,400,000 1995 74.75 63.83 1965 124 units 20,496/units
69 244,612 326,473 1.33 3,600,000 1995 70.49 45.99 1971 59,660 sqft 43/sqft
154 232,924 301,114 1.29 4,200,000 1995 60.12 51.39 1971 168 units 15,029/units
155 227,099 325,282 1.43 3,350,000 1995 74.76 63.71 1985 96 units 26,089/units
156 222,749 287,063 1.29 3,200,000 1995 78.02 28.91 1995 157 units 15,903/units
55 216,297 303,452 1.40 3,100,000 1995 79.95 73.98 1963 104 units 23,830/units
91 236,143 302,040 1.28 3,450,000 1995 70.95 63.25 1977 61,690 sqft 40/sqft
56 237,530 356,574 1.50 3,500,000 1995 69.80 57.45 1986 24,927 sqft 98/sqft
59 201,136 247,038 1.23 2,860,000 1995 78.67 69.35 1994 56 units 40,179/units
64 250,618 402,770 1.61 3,200,000 1996 70.21 N/A 1984 118 rooms 19,041/rooms
57 208,033 284,110 1.37 3,000,000 1995 74.76 60.72 1960 68,537 sqft 33/sqft
58 201,374 257,881 1.28 2,800,000 1996 79.95 70.61 1980 224 units 9,994/units
158 211,935 283,216 1.34 3,200,000 1995 69.93 62.13 1988 33,635 sqft 67/sqft
157 212,751 339,810 1.60 3,900,000 1995 56.82 46.64 1975 33,249 sqft 67/sqft
63 199,077 294,240 1.48 2,950,000 1996 74.58 65.91 1972 156 units 14,103/units
61 194,819 248,498 1.28 2,760,000 1995 79.60 61.50 1969 120 units 18,309/units
60 192,244 274,329 1.43 3,120,000 1995 70.42 61.86 1976 106 units 20,726/units
62 188,568 242,223 1.28 2,700,000 1995 79.95 70.17 1981 192 units 11,242/units
160 213,639 739,726 3.46 8,200,000 1995 25.59 21.30 1980 102 beds 20,570/beds
65 187,308 227,668 1.22 2,600,000 1996 76.84 62.51 1980 152 units 13,144/units
67 174,004 250,329 1.44 2,600,000 1995 73.10 69.19 1864 57,628 sqft 33/sqft
68 174,165 220,309 1.26 2,395,000 1995 79.16 64.06 1974 90 units 21,066/units
161 175,220 334,040 1.91 3,200,000 1995 59.18 48.03 1957 152 pads 12,460/pads
162 169,394 230,060 1.36 2,600,000 1995 72.82 61.86 1972 80 units 23,668/units
71 159,135 214,740 1.35 2,530,000 1995 74.20 70.45 1983 120 units 15,644/units
73 208,292 324,344 1.56 2,750,000 1995 67.90 N/A 1985 118 rooms 15,825/rooms
72 185,966 263,436 1.42 3,100,000 1995 59.37 N/A 1969 149 units 12,353/units
76 155,044 225,987 1.46 2,800,000 1995 64.24 61.05 1972 126 units 14,276/units
74 177,730 254,287 1.43 2,400,000 1995 74.79 61.87 1970 44,670 sqft 40/sqft
75 179,463 252,473 1.41 2,540,000 1995 70.62 N/A 1917 54 units 33,219/units
78 176,371 244,862 1.39 2,600,000 1995 67.51 56.08 1978 13,525 sqft 130/sqft
166 169,098 228,342 1.35 3,200,000 1996 54.63 44.84 1964 39,500 sqft 44/sqft
167 159,798 184,478 1.15 2,150,000 1995 81.28 30.68 1994 61 units 28,649/units
168 163,565 244,002 1.49 2,600,000 1995 65.95 53.99 1988 52,593 sqft 33/sqft
170 143,896 172,606 1.20 1,900,000 1996 84.94 31.45 1994 39 units 41,383/units
80 151,511 232,060 1.53 2,035,000 1996 78.54 64.09 1971 120 units 13,320/units
171 156,224 222,758 1.43 2,800,000 1995 57.03 46.99 1994 48,500 sqft 33/sqft
79 162,634 252,620 1.55 2,600,000 1995 61.23 N/A 1988 87 units 18,298/units
172 150,913 207,871 1.38 2,200,000 1996 68.76 56.93 1991 48 beds 31,513/beds
83 167,079 255,724 1.53 2,550,000 1995 58.74 N/A 1983 111 rooms 13,494/rooms
81 133,587 231,636 1.73 2,000,000 1995 74.85 66.06 1964 69 units 21,696/units
174 142,814 210,448 1.47 2,150,000 1995 69.56 60.02 1984 64 units 23,367/units
173 138,331 340,635 2.46 3,600,000 1995 41.53 33.71 1968 150 pads 9,968/pads
215 143,202 186,589 1.30 1,950,000 1996 76.00 67.72 1940 78 units 19,000/units
176 132,968 171,814 1.29 1,950,000 1995 74.81 15.84 1994 60 units 24,313/units
185 129,665 179,661 1.39 2,100,000 1996 66.60 58.93 1960 68 units 20,567/units
179 127,256 173,923 1.37 1,950,000 1995 70.50 60.34 1961 97 units 14,172/units
180 132,862 188,790 1.42 2,000,000 1995 68.48 56.37 1990 28,509 sqft 48/sqft
182 124,889 163,281 1.31 2,100,000 1995 64.42 55.10 1950 110 units 12,297/units
181 130,447 171,155 1.31 1,800,000 1996 75.00 66.83 1935 69 units 19,565/units
186 119,548 168,467 1.41 3,000,000 1995 43.20 36.92 1971 144 units 8,999/units
212 117,850 165,905 1.41 1,725,000 1996 74.95 63.84 1972 82 units 15,768/units
187 119,271 163,259 1.37 2,485,000 1995 52.03 44.47 1980 100 units 12,929/units
85 118,759 171,160 1.44 1,600,000 1995 79.86 76.50 1972 45 units 28,393/units
184 119,030 158,080 1.33 1,750,000 1995 72.17 61.97 1985 79 units 15,988/units
110 117,170 167,766 1.43 1,920,000 1996 61.14 50.63 1995 54,000 sqft 22/sqft
188 106,720 139,029 1.30 1,425,000 1995 79.92 N/A 1994 40 units 28,471/units
87 107,616 145,745 1.35 1,620,000 1995 68.32 56.24 1987 11,682 sqft 95/sqft
192 93,442 125,297 1.34 1,620,000 1995 63.28 53.90 1975 71 units 14,439/units
191 94,380 133,885 1.42 1,500,000 1995 67.97 58.18 1977 63 units 16,183/units
211 92,895 125,212 1.35 1,360,000 1995 74.94 63.83 1978 48 units 21,233/units
88 103,456 145,590 1.41 1,850,000 1995 53.97 N/A 1966 64 units 15,600/units
210 93,904 146,201 1.56 1,250,000 1995 72.56 51.04 1983 60 units 15,117/units
199 82,089 120,003 1.46 1,175,000 1995 70.64 58.30 1984 34 units 24,412/units
195 78,112 105,749 1.35 1,800,000 1995 44.32 36.55 1989 20,951 sqft 38/sqft
90 75,528 104,028 1.38 1,300,000 1995 57.59 51.80 1895 13,239 sqft 57/sqft
<PAGE>
<PAGE>
<CAPTION>
LARGEST RETAIL TENANT
INITIAL OTHER ------------------------------------------------------------
CONTROL OCCUPANCY RESERVES RESERVES ONGOING AREA % OF TOTAL
NO. PERCENTAGE AT CLOSING AT CLOSING RESERVES NAME LEASED (SQ. FT.) AREA LEASED
<S> <C> <C> <C> <C> <C> <C> <C>
48 80.50 60,000 -- 329 per unit N/A N/A N/A
142 98.00 125 -- 200 per unit N/A N/A N/A
143 100.00 33,594 250,000 .20 per sq. ft. KMart 82,911 63.12
144 100.00 1,000 125,000 .14 per sq. ft. Ski Market 10,000 16.64
49 100.00 25,875 -- 0 Scandinavian Health Spa 37,214 100.00
145 89.58 -- -- 205 per unit N/A N/A N/A
147 91.21 5,625 -- 250 per unit N/A N/A N/A
148 100.00 4,500 -- .10 per sq. ft. Gerland's Food Fair 31,617 50.75
149 97.40 205,800 -- 261 per unit N/A N/A N/A
52 96.40 -- -- 200 per unit N/A N/A N/A
150 100.00 5,625 -- 295 per unit N/A N/A N/A
53 97.00 36,691 -- 253 per unit N/A N/A N/A
152 96.88 158,719 -- 400 per unit N/A N/A N/A
153 99.19 15,313 -- 242 per unit N/A N/A N/A
69 100.00 43,750 -- 0 G.L. Perry 19,760 33.12
154 91.00 185,500 -- 245 per unit N/A N/A N/A
155 99.00 625 -- 214 per unit N/A N/A N/A
156 95.00 4,375 -- 200 per unit N/A N/A N/A
55 96.67 -- -- 200 per unit N/A N/A N/A
91 100.00 36,250 100,000 0 Vernitron 61,690 100.00
56 91.84 -- -- 0 GDP Corp/Kinko's 3,602 14.45
59 97.01 -- -- 216 per unit N/A N/A N/A
64 0.00 133,875 -- 4% of gross rev. N/A N/A N/A
57 100.00 12,125 -- 0 Furr's So-Lo Food Store 47,677 69.56
58 95.68 223,475 -- 225 per unit N/A N/A N/A
158 90.00 2,500 -- .18 per sq. ft. The Epicurean 3,800 11.30
157 93.10 4,063 -- .39 per sq. ft. Boston Billiards 12,540 37.72
63 94.87 48,750 -- 200 per unit N/A N/A N/A
61 97.78 -- -- 250 per unit N/A N/A N/A
60 94.93 12,125 -- 275 per unit N/A N/A N/A
62 96.35 43,369 -- 225 per unit N/A N/A N/A
160 98.10 13,125 2,500 301.71 per unit N/A N/A N/A
65 88.82 259,238 -- 250 per unit N/A N/A N/A
67 95.00 67,650 20,150 350/unit & .34 Margarita's (Kukai) 8500 14.75
sq.ft.
68 96.77 54,875 -- 251 per unit N/A N/A N/A
161 96.05 51,375 -- 47 per unit N/A N/A N/A
162 98.10 16,875 -- 297 per unit N/A N/A N/A
71 95.00 24,483 -- 250 per unit N/A N/A N/A
73 0.00 39,863 -- 4% of gross
rev. N/A N/A N/A
72 100.00 52,113 -- 250 per unit N/A N/A N/A
76 88.10 -- -- 378 per unit N/A N/A N/A
74 100.00 24,063 -- 0 Copy Tel 9,042 20.24
75 97.49 50,638 -- 250 per unit N/A N/A N/A
78 100.00 32,375 -- 0 VP Dis Corp 2,000 14.79
166 93.00 43,125 -- .25 per sq. ft. Showbiz Pizza Time, Inc. 12,500 31.65
167 95.10 -- -- 150 per unit N/A N/A N/A
168 92.00 21,250 100,000 .35 per sq. ft. Pier One 52,593 100.00
170 97.40 -- -- 200 per unit N/A N/A N/A
80 97.64 66,238 -- 300 per unit N/A N/A N/A
171 100.00 50,000 -- .10 per sq. ft. Furniture King 43,000 88.66
79 100.00 -- -- 250 per unit N/A N/A N/A
172 100.00 1,688 -- 250 per unit N/A N/A N/A
83 0.00 44,500 -- 4% of gross
rev. N/A N/A N/A
81 97.18 16,344 -- 250 per unit N/A N/A N/A
174 87.50 25,000 -- 280 per unit N/A N/A N/A
173 97.65 87,563 -- 31 per unit N/A N/A N/A
215 97.54 17,188 -- 360 per unit N/A N/A N/A
176 100.00 -- -- 175 per unit N/A N/A N/A
185 96.00 10,563 -- 200 per unit N/A N/A N/A
179 98.96 216,938 -- 202 per unit N/A N/A N/A
180 100.00 11,938 -- .16 per sq. ft. Mings Supermarket, Inc. 18,668 65.48
182 94.55 27,594 -- 200 per unit N/A N/A N/A
181 100.00 25,938 -- 308 per unit N/A N/A N/A
186 94.00 64,663 -- 284 per unit N/A N/A N/A
212 91.46 13,230 -- 206 per unit N/A N/A N/A
187 98.00 71,788 -- 258 per unit N/A N/A N/A
85 95.56 18,188 -- 250 per unit N/A N/A N/A
184 98.73 25,219 -- 255 per unit N/A N/A N/A
110 100.00 -- -- .10 per sq. ft. International Paper 54,000 100.00
188 100.00 -- -- 175 per unit N/A N/A N/A
87 90.00 -- -- 0 Amy Worell, D.V.M. 2,342 20.05
192 93.00 5,156 -- 267 per unit N/A N/A N/A
191 98.40 88,550 -- 240 per unit N/A N/A N/A
211 92.00 23,494 -- 308 per unit N/A N/A N/A
88 99.48 16,638 -- 250 per unit N/A N/A N/A
210 99.00 42,025 -- 276 per unit N/A N/A N/A
199 100.00 -- -- 293 per unit N/A N/A N/A
195 100.00 27,625 32,000 .27 per sq. ft. Trafalgar Financial Services 4,150 19.81
90 100.00 -- 6,000 0 Corbin Factory 4,148 31.33
CONTROL LEASE
NO. EXP. DATE
48 N/A
142 N/A
143 11/30/11
144 04/30/96
49 12/31/08
145 N/A
147 N/A
148 08/01/07
149 N/A
52 N/A
150 N/A
53 N/A
152 N/A
153 N/A
69 07/31/00
154 N/A
155 N/A
156 N/A
55 N/A
91 01/30/00
56 03/31/96
59 N/A
64 N/A
57 01/14/09
58 N/A
158 09/30/99
157 06/30/09
63 N/A
61 N/A
60 N/A
62 N/A
160 N/A
65 N/A
67 12/31/00
68 N/A
161 N/A
162 N/A
71 N/A
73 N/A
72 N/A
76 N/A
74 11/30/98
75 N/A
78 03/31/98
166 12/31/97
167 N/A
168 08/31/98
170 N/A
80 N/A
171 06/30/09
79 N/A
172 N/A
83 N/A
81 N/A
174 N/A
173 N/A
215 N/A
176 N/A
185 N/A
179 N/A
180 05/31/00
182 N/A
181 N/A
186 N/A
212 N/A
187 N/A
85 N/A
184 N/A
110 06/30/05
188 N/A
87 11/30/02
192 N/A
191 N/A
211 N/A
88 N/A
210 N/A
199 N/A
195 12/31/99
90 08/31/96
</TABLE>
<PAGE>
<PAGE>
ANNEX B
BANKERS TRUST COMPANY
<TABLE>
<CAPTION>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
SERIES 1996-C1
UPDATED MORTGAGE LOAN SCHEDULE
MARCH 1996
BALANCE TERMS AS OF CUT-OFF DATE CURRENT TERMS
------- ------------------------ -------------------------------------
EFFECTIVE
LOAN ID. PROPERTY NAME CITY STATE BALANCE RATE TERM AMORT BALANCE RATE NET RATE(1) TERM AMORT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
117 Gardner Street Apartments Allston MA
29 Trailer Rancho Mobile Home
Park Redwood City CA
28 Sorrento Pines San Diego CA
32 El Encanto Villas Tustin CA
35 Comfort Inn-Buckhead Altanta GA
118 210 East 22nd Street New York NY
119 Shops of Dunwoody Dunwoody GA
33 Coral Island Apartments Houston TX
116 Kings Point Plaza Delray Beach FL
120 Yarn Mill Manchester CT
121 Fox Meadows Grand Rapids MI
37 Post Falls Factory
Outlet Center Post Falls ID
213 Hollyview Apartments Houston TX
38 Charleston Square
(Phase I) Las Vegas NV
39 Chateau Montagne
Apartments DeKalb County GA
124 Duval Villa Austin TX
122 Windtree I & II
Apartments Amarillo TX
214 Willowbend Apartments Houston TX
126 Schofield Warehouse Schofield WI
125 Shoppes at Sawgrass
Commons Sunrise FL
40 Suntree Apartments Kansas City KS
41 City Centre Office
Building Long Beach CA
217 Hampton House Apartments Baltimore
County MD
127 Van Mark Apartments Monroe LA
130 Quality Logistics Hutchins TX
128 Cedar Creek Apartments Santa Fe NM
129 Carroll Plaza Shopping
Center Westminster MD
131 Cedar Ridge Arlington TX
42 Peppertree Business Park San Diego CA
43 Medical Arts Shopping
Center Savannah GA
134 35 Main Street Westport CT
45 Warwick Apartments Dallas TX
135 Hacienda Healthcare Hanford CA
136 Sutton Park Apartments Lansing MI
46 ANA Vermount Breeze Apts Gardena CA
137 Zelda Place Shopping
Center Montgomery AL
138 The Spanish Mission
Apartments Valdosta GA
47 ANA Towngate Moreno Valley CA
140 Commerce Plaza Springfield VA
141 Blue River Apartments Silverthorne CO
48 ANA Country Hills Apts Desert Hot
Sprin CA
142 Central High School South Bend IN
AS OF CUT-OFF DATE
-------------------------------------------------------------------------------
LOAN TOTAL TOTAL REPLACEMENT NOI YEAR OF
TYPE REVENUE EXPENSES RESERVES (NOI RESERVES) FINANCIAL DSCR(2)
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
B-1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
SERIES 1996-C1
UPDATED MORTGAGE LOAN SCHEDULE
MARCH 1996
MOST CURRENT
---------------------------------------------------------------------------------------------
TOTAL TOTAL REPLACEMENT NOI YEAR OF
LOAN ID. PROPERTY NAME PROPERTY TYPE REVENUE EXPENSES RESERVES (NOI RESERVES) FINANCIAL DSCR(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
117 Gardner Street Apartments Multifamily
29 Trailer Rancho Mobile Home
Park Mobile Home Park
28 Sorrento Pines Industrial
32 El Encanto Villas Multifamily
35 Comfort Inn-Buckhead Hospitality
118 210 East 22nd Street Multifamily
119 Shops of Dunwoody Unanchored Shopping Center
33 Coral Island Apartments Multifamily
116 Kings Point Plaza Unanchored Shopping Center
120 Yarn Mill Multifamily
121 Fox Meadows Multifamily
37 Post Falls Factory
Outlet Center Unanchored Shopping Center
213 Hollyview Apartments Multifamily
38 Charleston Square
(Phase I) Unanchored Shopping Center
39 Chateau Montagne
Apartments Multifamily
124 Duval Villa Multifamily
122 Windtree I & II
Apartments Multifamily
214 Willowbend Apartments Multifamily
126 Schofield Warehouse Industrial
125 Shoppes at Sawgrass
Commons Unanchored Shopping Center
40 Suntree Apartments Multifamily
41 City Centre Office
Building Office
217 Hampton House Apartments Multifamily
127 Van Mark Apartments Multifamily
130 Quality Logistics Industrial
128 Cedar Creek Apartments Sec. 42
129 Carroll Plaza Shopping
Center Unanchored Shopping Center
131 Cedar Ridge Multifamily
42 Peppertree Business Park Industrial
43 Medical Arts Shopping
Center Unanchored Shopping Center
134 35 Main Street Unanchored Shopping Center
45 Warwick Apartments Multifamily
135 Hacienda Healthcare Nursing
136 Sutton Park Apartments Multifamily
46 ANA Vermount Breeze Apts Multifamily
137 Zelda Place Shopping
Center Unanchored Shopping Center
138 The Spanish Mission
Apartments Multifamily
47 ANA Towngate Multifamily
140 Commerce Plaza Unanchored Shopping Center
141 Blue River Apartments Sec. 42
MOST CURRENT
- ---------------------------------
APPRAISED APPRAISAL APPRAISED OCCUPANCY OCCUPANCY
VALUE YEAR LTV PERCENTAGE AS OF DATE
<S> <C> <C> <C> <C>
</TABLE>
B-2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Bankers Trust Company
Corporate Trust and Agency Group
Mortgage Services
Merrill Lynch Mortgage Investors, Inc.
Series 1996-C1
Updated Mortgage Loan Schedule
March 1996
- ----------------------------------------------------------------------------------------------------------------------------------
Retail Properties
-------------------------------------
Tenant Lease Cumulative %
Largest % of Expiration of Pool Date of
Loan Id. Property Name Largest Retail Tenant Name Tenant Sqft Property Date as of Cutoff Modification
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
167 The Courtyard N/A N/A NA N/A 0.27 N/A
168 Fiesta Del Norte
Shopping Cent Pier One 52,593 100.00% 08/31/98 0.26 N/A
170 Stephenson Mill N/A N/A NA N/A 0.25 N/A
171 2881-2883 Third
Avenue Furniture King 60,000 123.71% 06/30/09 0.25 N/A
172 Angels for the
Elderly N/A N/A NA N/A 0.23 N/A
173 Bull Run Mobile
Home Park N/A N/A NA N/A 0.23 N/A
174 Greystone
Apartments N/A N/A NA N/A 0.23 N/A
176 Pinedale II
Apartments N/A N/A NA N/A 0.23 N/A
179 Park East
Apartments N/A N/A NA N/A 0.21 N/A
180 1102-1130 Washington
Street Mings Supermarket, Inc. 18,668 65.48% 05/31/00 0.21 N/A
181 111 East 167th St N/A N/A NA N/A 0.21 N/A
182 Kendale N/A N/A NA N/A 0.21 N/A
184 Riverloft N/A N/A NA N/A 0.20 N/A
185 Peachtree Avenue
Apartments N/A N/A NA N/A 0.22 N/A
186 Watergate Manor
Apartments N/A N/A NA N/A 0.20 N/A
187 Omni
Apartments N/A N/A NA N/A 0.20 N/A
188 St. Croix
Apartments N/A N/A NA N/A 0.18 N/A
191 Escondido Manor
Apartments N/A N/A NA N/A 0.16 N/A
192 Western Oaks
Apartments N/A N/A NA N/A 0.16 N/A
195 101-109 State
Street Trafalgar Financial Services 4,150 19.81% 12/31/99 0.12 N/A
199 Rivertree
Park N/A N/A NA N/A 0.13 N/A
207 Wisconsin Rapids -
Public Ware Warehousing of Wisconsin 263,175 55.70% 02/01/11 0.97 N/A
210 Castle Cove N/A N/A NA N/A 0.14 N/A
211 Pinecrest
West N/A N/A NA N/A 0.16 N/A
212 Morningstar N/A N/A NA N/A 0.20 N/A
213 Hollyview
Apartments N/A N/A NA N/A 0.69 N/A
214 Willowbend
Apartments N/A N/A NA N/A 0.64 N/A
215 690 Gerard
Avenue N/A N/A NA N/A 0.23 N/A
216 Northwood
Apartments N/A N/A NA N/A 0.86 N/A
217 Hampton House
Apartments N/A N/A NA N/A 0.60 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
159 Loans
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
As of Cut-Off Date
---------------------------------
Times Times Times
Delinquent Delinquent Delinquent Specially Workout/ In In
Status (2) 30 Days 60 Days 90 Days Serviced Modification Foreclosure Bankruptcy REO
- ------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
Current 0 0 0 No No No No No
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
<FN>
Notes:
- --------------------------------------
(1) Renewal under negotiation
(2) List of Status Comments:
- Current
- 30 - 59 days delinquent
- 60 - 89 days delinquent
- 90 + days delinquent
- Prepaid in Full on mm/dd/yy
- 2 month balloon extension
- Loan liquidated on mm/dd/yy
- Loan matured on scheduled maturity date
- Appraisal ordered, possible appraisal reduction amount $
</FN>
</TABLE>
B-3
<PAGE>
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
B-4
<PAGE>
<PAGE>
PROSPECTUS
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
DEPOSITOR
------------------------
The mortgage pass-through certificates (the 'Offered Certificates') offered
hereby and by the supplements hereto (each, a 'Prospectus Supplement') will be
offered from time to time in series. The Offered Certificates of each series,
together with any other mortgage pass-through certificates of such series, are
collectively referred to herein as the 'Certificates'.
Each series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a trust fund (with respect to any series, the
'Trust Fund') consisting primarily of a segregated pool of one or more of
various types of multifamily or commercial mortgage loans (the 'Mortgage
Loans'), mortgage-backed securities ('MBS') that evidence interests in, or that
are secured by pledges of, one or more of various types of multifamily or
commercial mortgage loans, or a combination of Mortgage Loans and MBS
(collectively, 'Mortgage Assets'). Mortgage Loans (or mortgage loans underlying
an MBS) may be delinquent or non-performing as of the date Certificates of a
series are issued, if so specified in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, the Trust Fund for a series of
Certificates may include letters of credit, insurance policies, guarantees,
reserve funds or other types of credit support, or any combination thereof (with
respect to any series, collectively, 'Credit Support'), and currency or interest
rate exchange agreements and other financial assets, or any combination thereof
(with respect to any series, collectively, 'Cash Flow Agreements'). See
'Description of the Trust Funds', 'Description of the Certificates' and
'Description of Credit Support'.
Each series of Certificates will consist of one or more classes of
Certificates, and such class or classes (including classes of Offered
Certificates) may (i) provide for the accrual of interest thereon based on a
fixed, variable or adjustable rate; (ii) be senior or subordinate to one or more
other classes of Certificates in entitlement to certain distributions on the
Certificates; (iii) be entitled to distributions of principal, with
disproportionately small, nominal or no distributions of interest; (iv) be
entitled to distributions of interest, with disproportionately small, nominal or
no distributions of principal; (v) provide for distributions of principal and/or
interest that commence only following the occurrence of certain events, such as
the retirement of one or more other classes of Certificates of such series; (vi)
provide for distributions of principal to be made, from time to time or for
designated periods, at a rate that is faster (and, in some cases, substantially
faster) or slower (and, in some cases, substantially slower) than the rate at
which payments or other collections of principal are received on the Mortgage
Assets in the related Trust Fund; or (vii) provide for distributions of
principal to be made, subject to available funds, based on a specified principal
payment schedule or other methodology. See 'Description of the Certificates'.
Distributions in respect of the Certificates of each series will be made on
a monthly, quarterly, semi-annual or other periodic basis as specified in the
related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, such distributions will be made only from the assets of
the related Trust Fund.
No Certificates of any series will represent an obligation of or interest
in the Depositor or any of its affiliates, except to the limited extent
described herein and in the related Prospectus Supplement. Neither the
Certificates of any series nor the assets in the related Trust Fund will be
guaranteed or insured by any governmental agency or instrumentality or by any
other person, unless otherwise provided in the related Prospectus Supplement.
The assets in each Trust Fund will be held in trust for the benefit of the
holders of the related series of Certificates (the 'Certificateholders')
pursuant to a Pooling Agreement, as more fully described herein.
The yield on each class of Certificates of a series will be affected by,
among other things, the rate of payment of principal (including prepayments) on
the Mortgage Assets in the related Trust Fund and the timing of receipt of such
payments as described herein and in the related Prospectus Supplement. See
'Yield and Maturity Considerations'. A Trust Fund may be subject to early
termination under the circumstances described herein and in the related
Prospectus Supplement. See 'Description of the Certificates'.
If so provided in the related Prospectus Supplement, one or more elections
may be made to treat the related Trust Fund or a designated portion thereof as a
'real estate mortgage investment conduit' (a 'REMIC') for federal income tax
purposes. See 'Certain Federal Income Tax Consequences' herein.
------------------------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH UNDER 'RISK
FACTORS' ON PAGE 16 OF THIS PROSPECTUS AND SUCH INFORMATION AS MAY BE SET
FORTH UNDER THE CAPTION 'RISK FACTORS' IN THE RELATED PROSPECTUS
SUPPLEMENT BEFORE PURCHASING ANY OFFERED CERTIFICATE.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
Prior to issuance there will have been no market for the Certificates of
any series and there can be no assurance that a secondary market for any Offered
Certificates will develop or that, if it does develop, it will continue. See
'Risk Factors.' This Prospectus may not be used to consummate sales of the
Offered Certificates of any series unless accompanied by the Prospectus
Supplement for such series.
The Offered Certificates of any series may be offered through one or more
different methods, including offerings through underwriters, as more fully
described under 'Method of Distribution' herein and in the related Prospectus
Supplement.
March 7, 1996
<PAGE>
<PAGE>
PROSPECTUS SUPPLEMENT
As more particularly described herein, each Prospectus Supplement will,
among other things, set forth, as and to the extent appropriate: (i) a
description of the class or classes of Offered Certificates of the related
series, including the payment provisions with respect to each such class, the
aggregate principal amount of each such class (the 'Certificate Balance'), the
rate at which interest will accrue from time to time, if at all, with respect to
each such class (the 'Pass-Through Rate') or the method of determining such
rate; (ii) information with respect to any other classes of Certificates of the
same series; (iii) the respective dates on which distributions are to be made to
Certificateholders; (iv) information as to the assets constituting the related
Trust Fund, including the general characteristics of the assets included
therein, including the Mortgage Assets and any Credit Support and Cash Flow
Agreements (with respect to the Certificates of any series, the 'Trust Assets');
(v) the circumstances, if any, under which the related Trust Fund may be subject
to early termination; (vi) additional information with respect to the method of
distribution of such Offered Certificates; (vii) whether one or more REMIC
elections will be made and the designation of the 'regular interests' and
'residual interests' in each REMIC to be created; (viii) the initial percentage
ownership interest in the related Trust Fund to be evidenced by each class of
Certificates of such series; (ix) information concerning the trustee (as to any
series, the 'Trustee') of the related Trust Fund; (x) information concerning the
master servicer (as to any series, the 'Master Servicer') and any special
servicer (as to any series, the 'Special Servicer') engaged to administer the
related Mortgage Assets; (xi) information as to the nature and extent of any
subordination in entitlement to distributions of any class of Certificates of
such series; and (xii) whether such Offered Certificates will be initially
issued in definitive or book-entry form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement (of which this Prospectus forms a part)
under the Securities Act of 1933, as amended, with respect to the Offered
Certificates. This Prospectus and the Prospectus Supplement relating to the
Offered Certificates of each series contain summaries of the material terms of
the documents referred to herein and therein, but do not contain all of the
information set forth in the Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its Regional
Offices located as follows: Chicago Regional Office, 500 West Madison, 14th
Floor, Chicago, Illinois 60661; and New York Regional Office, Seven World Trade
Center, New York, New York 10048.
No person has been authorized to give any information or to make any
representation not contained in this Prospectus and any related Prospectus
Supplement and, if given or made, such information or representation must not be
relied upon. This Prospectus and any related Prospectus Supplement do not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the Offered Certificates, or an offer of the Offered Certificates to
any person in any state or other jurisdiction in which such offer would be
unlawful. The delivery of this Prospectus at any time does not imply that
information herein is correct as of any time subsequent to its date; however, if
any material change occurs while this Prospectus is required by law to be
delivered, this Prospectus will be amended or supplemented accordingly.
The related Master Servicer or Trustee will be required to mail to holders
of the Offered Certificates of each series periodic unaudited reports concerning
the related Trust Fund. If beneficial interests in a class of Offered
Certificates are being held and transferred in book-entry format through the
facilities of The Depository Trust Company ('DTC') as described herein, then
unless otherwise provided in the related Prospectus Supplement, such reports
will be sent on behalf of the related Trust Fund to a nominee of DTC as the
registered holder of the Offered Certificates. The means by which notices and
other communications are conveyed by DTC to its participating organizations, and
directly or indirectly through such participating organizations to the
beneficial owners of the applicable Offered Certificates, will be governed by
arrangements among them, subject to any statutory or regulatory
2
<PAGE>
<PAGE>
requirements as may be in effect from time to time. See 'Description of the
Certificates -- Reports to Certificateholders' and ' -- Book-Entry Registration
and Definitive Certificates', and 'Description of the Pooling
Agreements -- Evidence as to Compliance'. The Depositor will file or cause to be
filed with the Commission such periodic reports with respect to each Trust Fund
as are required under the Securities Exchange Act of 1934, as amended (the
'Exchange Act'), and the rules and regulations of the Commission thereunder.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of an offering of Offered Certificates evidencing interests therein. The
Depositor, upon request, will provide or cause to be provided without charge to
each person to whom this Prospectus is delivered in connection with the offering
of one or more classes of Offered Certificates, a copy of any or all documents
or reports incorporated herein by reference, in each case to the extent such
documents or reports relate to one or more of such classes of such Offered
Certificates, other than the exhibits to such documents (unless such exhibits
are specifically incorporated by reference in such documents). Requests to the
Depositor should be directed in writing to its principal executive office at 250
Vesey Street, Fifteenth Floor, New York, New York 10281-1315, Attention:
Secretary, or by telephone at (212) 449-0336. The Depositor has determined that
its financial statements will not be material to the offering of any Offered
Certificates.
3
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement...................................................................................... 2
Available Information...................................................................................... 2
Incorporation of Certain Information by Reference.......................................................... 3
Summary of Prospectus...................................................................................... 8
Risk Factors............................................................................................... 16
Limited Liquidity..................................................................................... 16
Limited Assets........................................................................................ 16
Prepayments; Average Life of Certificates; Yields..................................................... 17
Limited Nature of Ratings............................................................................. 18
Risks Associated with Certain Mortgage Loans and Mortgaged Properties................................. 18
Balloon Payments; Borrower Default.................................................................... 19
Credit Support Limitations............................................................................ 19
Leases and Rents...................................................................................... 20
Environmental Risks................................................................................... 20
ERISA Considerations.................................................................................. 20
Certain Federal Tax Considerations Regarding REMIC Residual Certificates.............................. 21
Book-Entry Registration............................................................................... 21
Delinquent and Non-Performing Mortgage Loans.......................................................... 21
Description of the Trust Funds............................................................................. 22
General............................................................................................... 22
Mortgage Loans........................................................................................ 22
General.......................................................................................... 22
Default and Loss Considerations with Respect to the Mortgage Loans............................... 22
Payment Provisions of the Mortgage Loans......................................................... 24
Mortgage Loan Information in Prospectus Supplements.............................................. 24
MBS................................................................................................... 25
Certificate Accounts.................................................................................. 25
Credit Support........................................................................................ 26
Cash Flow Agreements.................................................................................. 26
Yield and Maturity Considerations.......................................................................... 26
General............................................................................................... 26
Pass-Through Rate..................................................................................... 26
Payment Delays........................................................................................ 26
Certain Shortfalls in Collections of Interest......................................................... 27
Yield and Prepayment Considerations................................................................... 27
Weighted Average Life and Maturity.................................................................... 29
Controlled Amortization Classes and Companion Classes................................................. 29
Other Factors Affecting Yield, Weighted Average Life and Maturity..................................... 30
Balloon Payments; Extensions of Maturity......................................................... 30
Negative Amortization............................................................................ 30
Foreclosures and Payment Plans................................................................... 31
Losses and Shortfalls on the Mortgage Assets..................................................... 31
Additional Certificate Amortization.............................................................. 31
The Depositor.............................................................................................. 32
Use of Proceeds............................................................................................ 32
Description of the Certificates............................................................................ 32
General............................................................................................... 32
Distributions......................................................................................... 32
Distributions of Interest on the Certificates......................................................... 33
Distributions of Certificate Principal................................................................ 34
Distributions on the Certificates in Respect of Prepayment Premiums or in Respect of Equity
Participations....................................................................................... 35
</TABLE>
4
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Allocation of Losses and Shortfalls................................................................... 35
Advances in Respect of Delinquencies.................................................................. 35
Reports to Certificateholders......................................................................... 36
Voting Rights......................................................................................... 38
Termination........................................................................................... 38
Book-Entry Registration and Definitive Certificates................................................... 38
Description of the Pooling Agreements...................................................................... 40
General............................................................................................... 40
Assignment of Mortgage Loans; Repurchases............................................................. 40
Representations and Warranties; Repurchases........................................................... 41
Certificate Account................................................................................... 42
General.......................................................................................... 42
Deposits......................................................................................... 42
Withdrawals...................................................................................... 43
Collection and Other Servicing Procedures............................................................. 44
Modifications, Waivers and Amendments of Mortgage Loans............................................... 44
Sub-Servicers......................................................................................... 45
Special Servicers..................................................................................... 45
Realization Upon Defaulted Mortgage Loans............................................................. 45
Hazard Insurance Policies............................................................................. 47
Due-On-Sale and Due-On-Encumbrance Provisions......................................................... 48
Servicing Compensation and Payment of Expenses........................................................ 48
Evidence as to Compliance............................................................................. 48
Certain Matters Regarding the Master Servicer and the Depositor....................................... 49
Events of Default..................................................................................... 50
Rights Upon Event of Default.......................................................................... 50
Amendment............................................................................................. 51
List of Certificateholders............................................................................ 51
The Trustee........................................................................................... 51
Duties of the Trustee................................................................................. 51
Certain Matters Regarding the Trustee................................................................. 52
Resignation and Removal of the Trustee................................................................ 52
Description of Credit Support.............................................................................. 52
General............................................................................................... 52
Subordinate Certificates.............................................................................. 53
Cross-Support Provisions.............................................................................. 53
Insurance or Guarantees with Respect to Mortgage Loans................................................ 53
Letter of Credit...................................................................................... 53
Certificate Insurance and Surety Bonds................................................................ 54
Reserve Funds......................................................................................... 54
Credit Support with Respect to MBS.................................................................... 54
Certain Legal Aspects of Mortgage Loans.................................................................... 55
General............................................................................................... 55
Types of Mortgage Instruments......................................................................... 55
Leases and Rents...................................................................................... 55
Personalty............................................................................................ 56
Junior Mortgages; Rights of Senior Lenders............................................................ 56
Foreclosure........................................................................................... 57
General.......................................................................................... 57
Foreclosure procedures vary from state to state.................................................. 57
Judicial Foreclosure............................................................................. 57
Non-Judicial Foreclosure/Power of Sale........................................................... 57
Limitations on the Rights of Mortgage Lenders.................................................... 58
Rights of Redemption............................................................................. 59
</TABLE>
5
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Anti-Deficiency Legislation...................................................................... 59
Leasehold Considerations......................................................................... 59
Bankruptcy Laws....................................................................................... 60
Environmental Considerations.......................................................................... 61
General.......................................................................................... 61
Superlien Laws................................................................................... 61
CERCLA........................................................................................... 61
Certain Other Federal and State Laws............................................................. 61
Additional Considerations........................................................................ 62
Due-On-Sale and Due-On-Encumbrance.................................................................... 62
Subordinate Financing................................................................................. 63
Default Interest and Limitations on Prepayments....................................................... 63
Applicability of Usury Laws........................................................................... 63
Soldiers' and Sailors' Civil Relief Act Of 1940....................................................... 63
Americans with Disabilities Act....................................................................... 64
Certain Federal Income Tax Consequences.................................................................... 64
General............................................................................................... 64
REMICs................................................................................................ 65
Classification of REMICs......................................................................... 65
Characterization of Investments in REMIC Certificates............................................ 65
Tiered REMIC Structures.......................................................................... 66
Taxation of Owners of REMIC Regular Certificates...................................................... 66
General.......................................................................................... 66
Original Issue Discount.......................................................................... 66
Market Discount.................................................................................. 69
Premium.......................................................................................... 70
Realized Losses.................................................................................. 70
Taxation of Owners of REMIC Residual Certificates..................................................... 70
General.......................................................................................... 70
Taxable Income of the REMIC...................................................................... 71
Basis Rules, Net Losses and Distributions........................................................ 73
Excess Inclusions................................................................................ 73
Noneconomic REMIC Residual Certificates.......................................................... 74
Mark-to-Market Rules............................................................................. 75
Possible Pass-Through of Miscellaneous Itemized Deductions....................................... 76
Sales of REMIC Certificates...................................................................... 76
Prohibited Transactions Tax and Other Taxes...................................................... 77
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain Organizations........ 78
Termination...................................................................................... 79
Reporting and Other Administrative Matters....................................................... 79
Backup Withholding with Respect to REMIC Certificates............................................ 80
Foreign Investors in REMIC Certificates.......................................................... 80
Grantor Trust Funds................................................................................... 80
Classification of Grantor Trust Funds............................................................ 80
Characterization of Investments in Grantor Trust Certificates......................................... 81
Grantor Trust Fractional Interest Certificates................................................... 81
Grantor Trust Strip Certificates................................................................. 81
Taxation of Owners of Grantor Trust Fractional Interest Certificates.................................. 81
General.......................................................................................... 81
If Stripped Bond Rules Apply..................................................................... 82
If Stripped Bond Rules Do Not Apply.............................................................. 84
Market Discount.................................................................................. 85
Premium.......................................................................................... 86
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Taxation of Owners of Grantor Trust Strip Certificates........................................... 87
Possible Application of Proposed Contingent Payment Rules........................................ 88
Sales of Grantor Trust Certificates.............................................................. 88
Grantor Trust Reporting.......................................................................... 88
Backup Withholding............................................................................... 89
Foreign Investors................................................................................ 89
State and Other Tax Consequences........................................................................... 89
ERISA Considerations....................................................................................... 89
General............................................................................................... 89
Plan Asset Regulations................................................................................ 90
Prohibited Transaction Exemptions..................................................................... 90
Legal Investment........................................................................................... 92
Method of Distribution..................................................................................... 93
Legal Matters.............................................................................................. 94
Financial Information...................................................................................... 94
Rating..................................................................................................... 94
Index of Principal Definitions............................................................................. 95
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SUMMARY OF PROSPECTUS
The following summary of certain pertinent information is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Prospectus and by reference to the information with respect to each series
of Certificates contained in the Prospectus Supplement to be prepared and
delivered in connection with the offering of Offered Certificates of such
series. An Index of Principal Definitions is included at the end of this
Prospectus.
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Title of Certificates..................... Mortgage Pass-Through Certificates, issuable in series (the
'Certificates').
Depositor................................. Merrill Lynch Mortgage Investors, Inc., a wholly-owned limited
purpose subsidiary of Merrill Lynch Mortgage Capital Inc. (the
'Depositor') See 'The Depositor'.
Master Servicer........................... The master servicer (the 'Master Servicer'), if any, for a series of
Certificates will be named in the related Prospectus Supplement and
may be an affiliate of the Depositor. See 'Description of the
Pooling Agreements -- Collection and Other Servicing Procedures'.
Special Servicer.......................... The special servicer (the 'Special Servicer'), if any, for a series
of Certificates will be named, or the circumstances under which a
Special Servicer will be appointed will be described, in the
related Prospectus Supplement. See 'Description of the Pooling
Agreements -- Special Servicers'.
Trustee................................... The trustee (the 'Trustee') for each series of Certificates will be
named in the related Prospectus Supplement. See 'Description of the
Pooling Agreements -- The Trustee'.
The Trust Assets.......................... Each series of Certificates will represent in the aggregate the
entire beneficial ownership interest in a Trust Fund consisting
primarily of:
A. Mortgage Assets................... The Mortgage Assets with respect to each series of Certificates will,
in general, consist of a pool of mortgage loans (collectively, the
'Mortgage Loans') secured by liens on, or security interests in,
(i) residential properties consisting of five or more rental or
cooperatively-owned dwelling units (the 'Multifamily Properties')
or (ii) office buildings, shopping centers, retail stores, hotels
or motels, nursing homes, hospitals or other health-care related
facilities, mobile home parks, warehouse facilities, mini-warehouse
facilities or self-storage facilities, industrial plants, mixed use
or other types of income-producing properties or unimproved land
(the 'Commercial Properties'). If so specified in the related
Prospectus Supplement, a Trust Fund may include Mortgage Loans
secured by liens on real estate projects under construction. If so
specified in the related Prospectus Supplement, some Mortgage Loans
may be delinquent or non-performing as of the date of their deposit
into the related Trust Fund. The Mortgage Loans will not be
guaranteed or insured by the Depositor, any of its affiliates or,
unless otherwise specified in the Prospectus Supplement, by any
governmental agency or instrumentality or other person.
As and to the extent described in the related Prospectus Supplement,
a Mortgage Loan (i) may provide for accrual of interest thereon at
an interest rate (a 'Mortgage Rate') that is fixed over its term or
that adjusts from time to time, or that may be converted at the
borrower's election from an
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adjustable to a fixed Mortgage Rate, or from a fixed to an
adjustable Mortgage Rate, (ii) may provide for level payments to
maturity or for payments that adjust from time to time to
accommodate changes in the Mortgage Rate or to reflect the
occurrence of certain events, and may permit negative amortization,
(iii) may be fully amortizing over its term to maturity, or may
provide for little or no amortization over its term and thus
require a balloon payment on its stated maturity date, (iv) may
contain a prohibition on prepayment or require payment of a premium
or a yield maintenance penalty in connection with a prepayment and
(v) may provide for payments of principal, interest or both, on due
dates that occur monthly, quarterly, semi-annually or at such other
interval as is specified in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement,
each Mortgage Loan will have had an original term to maturity of
not more than 40 years, and will have been originated by a person
other than the Depositor. See 'Description of the Trust
Funds -- Mortgage Loans'.
If and to the extent specified in the related Prospectus Supplement,
the Mortgage Assets that constitute a particular Trust Fund may
also include or consist solely of (i) private mortgage
participations, mortgage pass-through certificates or other
mortgage-backed securities or (ii) certificates insured or
guaranteed by the Federal Home Loan Mortgage Corporation ('FHLMC'),
the Federal National Mortgage Association ('FNMA') or the
Governmental National Mortgage Association ('GNMA') or the Federal
Agricultural Mortgage Corporation ('FAMC') (collectively, the
mortgage-backed securities referred to in clauses (i) and (ii),
'MBS'), provided that each MBS will evidence an interest in, or
will be secured by a pledge of, one or more mortgage loans that
conform to the descriptions of the Mortgage Loans contained herein.
See 'Description of the Trust Funds -- MBS'.
Each Mortgage Asset will be selected by the Depositor for inclusion
in a Trust Fund from among those purchased, either directly or
indirectly, from a prior holder thereof (a 'Mortgage Asset
Seller'), which prior holder may or may not be the originator of
such Mortgage Loan or the issuer of such MBS and may be an
affiliate of the Depositor.
B. Certificate Account............... Each Trust Fund will include one or more accounts (collectively, the
'Certificate Account') established and maintained on behalf of the
Certificateholders into which the person or persons designated in
the related Prospectus Supplement will, to the extent described
herein and in such Prospectus Supplement, deposit all payments and
collections received or advanced with respect to the Mortgage
Assets and other assets in the Trust Fund. A Certificate Account
may be maintained as an interest bearing or a non-interest bearing
account, and funds held therein may be held as cash or invested in
certain short-term, investment grade obligations, in each case as
described in the related Prospectus Supplement. See 'Description of
the Trust Funds -- Certificate Accounts' and 'Description of the
Pooling Agreements -- Certificate Account'.
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C. Credit Support.................... If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Mortgage
Assets in the related Trust Fund may be provided to one or more
classes of Certificates of the related series in the form of
subordination of one or more other classes of Certificates of such
series, which other classes may include one or more classes of
Offered Certificates, or by one or more other types of credit
support, such as a letter of credit, insurance policy, guarantee,
reserve fund or another type of credit support, or a combination
thereof (any such coverage with respect to the Certificates of any
series, 'Credit Support'). The amount and types of any Credit
Support, the identification of the entity providing it (if
applicable) and related information will be set forth in the
related Prospectus Supplement. See 'Risk Factors -- Credit Support
Limitations', 'Description of the Trust Funds -- Credit Support'
and 'Description of Credit Support'.
D. Cash Flow Agreements.............. If so provided in the related Prospectus Supplement, a Trust Fund may
include guaranteed investment contracts pursuant to which moneys
held in the funds and accounts established for the related series
will be invested at a specified rate. The Trust Fund may also
include certain other agreements, such as interest rate exchange
agreements, interest rate cap or floor agreements, currency
exchange agreements or similar agreements designed to reduce the
effects of interest rate or currency exchange rate fluctuations on
the Mortgage Assets or on one or more classes of Certificates. The
principal terms of any such guaranteed investment contract or other
agreement (any such agreement, a 'Cash Flow 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. In addition, the related Prospectus
Supplement will contain certain information that pertains to the
obligor under any such Cash Flow Agreement. See 'Description of the
Trust Funds -- Cash Flow Agreements'.
Description of Certificates............... Each series of Certificates will be issued in one or more classes
pursuant to a pooling and servicing agreement or other agreement
specified in the related Prospectus Supplement (in either case, a
'Pooling Agreement') and will represent in the aggregate the entire
beneficial ownership interest in the related Trust Fund.
Each series of Certificates will consist of one or more classes of
Certificates, and such class or classes (including classes of
Offered Certificates) may (i) be senior (collectively, 'Senior
Certificates') or subordinate (collectively, 'Subordinate
Certificates') to one or more other classes of Certificates in
entitlement to certain distributions on the Certificates; (ii) be
entitled to distributions of principal, with disproportionately
small, nominal or no distributions of interest (collectively,
'Stripped Principal Certificates'); (iii) be entitled to
distributions of interest, with disproportionately small, nominal
or no distributions of principal (collectively, 'Stripped Interest
Certificates'); (iv) provide for distributions of principal and/or
interest that commence only after the occurrence of certain events,
such as the retirement of one or more other classes of Certificates
of such series; (v) provide for distributions of principal to be
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made, from time to time or for designated periods, at a rate that
is faster (and, in some cases, substantially faster) or slower
(and, in some cases, substantially slower) than the rate at which
payments or other collections of principal are received on the
Mortgage Assets in the related Trust Fund; or (vi) provide for
distributions of principal to be made, subject to available funds,
based on a specified principal payment schedule or other
methodology.
Each class of Certificates, other than certain classes of Stripped
Interest Certificates and certain REMIC Residual Certificates (as
defined below), will have a stated principal amount (a 'Certificate
Balance'); and each class of Certificates, other than certain
classes of Stripped Principal Certificates and certain REMIC
Residual Certificates, will accrue interest on its Certificate
Balance or, in the case of certain classes of Stripped Interest
Certificates, on a notional amount ('Notional Amount'), based on a
fixed, variable or adjustable interest rate (a 'Pass-Through
Rate'). The related Prospectus Supplement will specify the
Certificate Balance, Notional Amount and Pass-Through Rate for each
class of Offered Certificates, as applicable, or, in the case of a
variable or adjustable Pass-Through Rate, the method for
determining the Pass-Through Rate.
The Certificates will not be guaranteed or insured by the Depositor
or any of its affiliates, by any governmental agency or
instrumentality or by any other person, unless otherwise provided
in the related Prospectus Supplement. See 'Risk Factors -- Limited
Assets' and 'Description of the Certificates'.
Distributions of Interest on the
Certificates............................ Interest on each class of Offered Certificates (other than certain
classes of Stripped Principal Certificates and Stripped Interest
Certificates and certain REMIC Residual Certificates) of each
series will accrue at the applicable Pass-Through Rate on the
Certificate Balance or, in the case of certain classes of Stripped
Interest Certificates, the Notional Amount thereof outstanding from
time to time and will be distributed to Certificateholders as
provided in the related Prospectus Supplement (each of the
specified dates on which distributions are to be made, a
'Distribution Date'). Distributions of interest with respect to one
or more classes of Certificates (collectively, 'Accrual
Certificates') may not commence until the occurrence of certain
events, such as the retirement of one or more other classes of
Certificates, and interest accrued with respect to a class of
Accrual Certificates prior to the occurrence of such an event will
either be added to the Certificate Balance thereof or otherwise
deferred. Distributions of interest with respect to one or more
classes of Certificates may be reduced to the extent of certain
delinquencies, losses and other contingencies described herein and
in the related Prospectus Supplement. See 'Risk
Factors -- Prepayments; Average Life of Certificates; Yields',
'Yield and Maturity Considerations', and 'Description of the
Certificates -- Distributions of Interest on the Certificates'.
Distributions of Certificate Principal.... Each class of the Certificates of each series (other than certain
classes of Stripped Interest Certificates and/or REMIC Residual
Certificates) will have a Certificate Balance which,
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as of any date, will represent the maximum amount that the holders
thereof are then entitled to receive in respect of principal from
future cash flow on the Mortgage Assets in the related Trust Fund.
Unless otherwise specified in the related Prospectus Supplement,
the initial aggregate Certificate Balance of all classes of a
series of Certificates will not exceed the outstanding principal
balance of the related Mortgage Assets as of a specified date (the
'Cut-off Date'), after application of scheduled payments due on or
before such date, whether or not received. As and to the extent
described in the related Prospectus Supplement, distributions of
principal with respect to each series of Certificates will be made
on each Distribution Date to the holders of the class or classes of
Certificates of such series entitled thereto until the Certificate
Balances of such Certificates have been reduced to zero.
Distributions of principal with respect to one or more classes of
Certificates (i) may be made at a rate that is faster (and, in some
cases, substantially faster) than the rate at which payments or
other collections of principal are received on the Mortgage Assets
in the related Trust Fund; (ii) may not commence until the
occurrence of certain events, such as the retirement of one or more
other classes of Certificates of the same series, or may be made at
a rate that is slower (and, in some cases, substantially slower)
than the rate at which payments or other collections of principal
are received on the Mortgage Assets in the related Trust Fund;
(iii) may be made, subject to available funds, based on a specified
principal payment schedule (any such class, a 'Controlled
Amortization Class'); and (iv) may be contingent on the specified
principal payment schedule for a Controlled Amortization Class of
the same series and the rate at which payments and other
collections of principal on the Mortgage Assets in the related
Trust Fund are received (any such class, a 'Companion Class').
Unless otherwise specified in the related Prospectus Supplement,
distributions of principal of any class of Certificates will be
made on a pro rata basis among all of the Certificates of such
class. See 'Description of the Certificates -- Distributions of
Certificate Principal'.
Advances.................................. If and to the extent provided in the related Prospectus Supplement,
the Master Servicer and/or other specified person will be obligated
to make, or have the option of making, certain advances with
respect to delinquent scheduled payments of principal and/or
interest on the Mortgage Loans in the related Trust Fund. Any such
advances made with respect to a particular Mortgage Loan will be
reimbursable from subsequent recoveries in respect of such Mortgage
Loan and otherwise to the extent described herein and in the
related Prospectus Supplement. If and to the extent provided in the
Prospectus Supplement for a series of Certificates, the Master
Servicer or other specified person will be entitled to receive
interest on its advances for the period that they are outstanding,
payable from amounts in the related Trust Fund. See 'Description of
the Certificates -- Advances in Respect of Delinquencies'. If a
Trust Fund includes MBS, any comparable advancing obligation of a
party to the related Pooling Agreement, or of a party to the
related MBS Agreement, will be described in the related Prospectus
Supplement.
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Termination............................... If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination by means
of the repurchase of the Mortgage Assets in the related Trust Fund
by the party or parties specified therein, under the circumstances
and in the manner set forth therein. If so provided in the related
Prospectus Supplement, upon the reduction of the Certificate
Balance of a specified class or classes of Certificates by a
specified percentage or amount, a party specified therein may be
authorized or required to solicit bids for the purchase of all of
the Mortgage Assets of the Trust Fund, or of a sufficient portion
of such Mortgage Assets to retire such class or classes, under the
circumstances and in the manner set forth therein. See 'Description
of the Certificates -- Termination'.
Registration of Book-Entry Certificates... If so provided in the related Prospectus Supplement, one or more
classes of the Offered Certificates of any series will be offered
in book-entry format (collectively, 'Book-Entry Certificates')
through the facilities of The Depository Trust Company ('DTC').
Each class of Book-Entry Certificates will be initially represented
by one or more Certificates registered in the name of a nominee of
DTC. No person acquiring an interest in a class of Book-Entry
Certificates (a 'Certificate Owner') will be entitled to receive a
Certificate of such class in fully registered, definitive form (a
'Definitive Certificate'), except under the limited circumstances
described herein. See 'Risk Factors -- Book-Entry Registration' and
'Description of the Certificates -- Book-Entry Registration and
Definitive Certificates'.
Tax Status of the Certificates............ The Certificates of each series will constitute either (i)'regular
interests' ('REMIC Regular Certificates') and 'residual interests'
('REMIC Residual Certificates') in a Trust Fund, or a designated
portion thereof, treated as a REMIC under Sections 860A through
860G of the Internal Revenue Code of 1986 (the 'Code'), or (ii)
interests ('Grantor Trust Certificates') in a Trust Fund treated as
a grantor trust under applicable provisions of the Code.
A. REMIC............................. REMIC Regular Certificates generally will be treated as debt
obligations of the applicable REMIC for federal income tax
purposes. In general, to the extent the assets and income of the
REMIC are treated as qualifying assets and income under the
following sections of the Code, REMIC Regular Certificates owned by
a thrift institution will be treated as 'qualifying real property
loans' within the meaning of Section 593(d) of the Code, and REMIC
Regular Certificates owned by a real estate investment trust will
be treated as 'real estate assets' for purposes of Section
856(c)(5)(A) of the Code and interest income therefrom will be
treated as 'interest on obligations secured by mortgages on real
property' for purposes of Section 856(c)(3)(B) of the Code. In
addition, REMIC Regular Certificates will be 'qualified mortgages'
within the meaning of Section 860G(a)(3) of the Code. Moreover, if
95% or more of the assets and the income of the REMIC qualify for
any of the foregoing treatments, the REMIC Regular Certificates
will qualify for the foregoing treatments in their entirety.
However, REMIC Regular Certificates owned by a thrift institution
will constitute assets described in Section 7701(a)(19)(C) of the
Code only if so specified in the related
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Prospectus Supplement. Holders of REMIC Regular Certificates must
report income with respect thereto on the accrual method,
regardless of their method of tax accounting generally. Holders of
any class of REMIC Regular Certificates issued with original issue
discount generally will be required to include the original issue
discount in income as it accrues, which will be determined using an
initial prepayment assumption and taking into account, from time to
time, actual prepayments occurring at a rate different than the
prepayment assumption. See 'Certain Federal Income Tax
Consequences -- REMICs -- Taxation of Owners of REMIC Regular
Certificates'.
REMIC Residual Certificates generally will be treated as representing
an interest in qualifying assets and income to the same extent
described above for institutions subject to Sections 593(d),
856(c)(5)(A) and 856(c)(3)(B) of the Code, but not for purposes of
Section 7701(a)(19)(C) of the Code unless otherwise stated in the
related Prospectus Supplement. A portion (or, in certain cases,
all) of the income from REMIC Residual Certificates (i) may not be
offset by any losses from other activities of the holder of such
REMIC Residual Certificates (except generally with respect to
thrift institutions described in Section 593 of the Code, if such
REMIC Residual Certificate has 'significant value'), (ii) may be
treated as unrelated business taxable income for holders of REMIC
Residual Certificates that are subject to tax on unrelated business
taxable income (as defined in Section 511 of the Code), and (iii)
may be subject to foreign withholding rules. See 'Certain Federal
Income Tax Consequences -- REMICs -- Taxation of Owners of REMIC
Residual Certificates'.
B. Grantor Trust..................... Unless otherwise provided in the related Prospectus Supplement,
Grantor Trust Certificates may be either Certificates that have a
Certificate Balance and a Pass-Through Rate or that are Stripped
Principal Certificates (collectively, 'Grantor Trust Fractional
Interest Certificates'), or may be Stripped Interest Certificates.
Owners of Grantor Trust Fractional Interest Certificates will be
treated for federal income tax purposes as owners of an undivided
pro rata interest in the assets of the related Trust Fund, and
generally will be required to report their pro rata share of the
entire gross income (including amounts incurred as servicing or
other fees and expenses) from the Mortgage Assets and will be
entitled, subject to certain limitations, to deduct their pro rata
shares of any servicing or other fees and expenses incurred during
the year. Holders of Grantor Trust Fractional Interest Certificates
generally will be treated as owning an interest in qualifying
assets and income under Sections 593(d), 856(c)(5)(A), 856(c)(3)(B)
and 860G(a)(3) of the Code, but will not be so treated for purposes
of Section 7701(a)(19)(C) of the Code unless otherwise stated in
the related Prospectus Supplement.
It is unclear whether Stripped Interest Certificates will be treated
as representing an ownership interest in qualifying assets and
income under Sections 593(d), 856(c)(5)(A) and 856(c)(3)(B) of the
Code, although the policy considerations underlying those Sections
suggest that such treatment should be available. However, such
Certificates will not be treated
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as representing an ownership interest in assets described in
Section 7701(a)(19)(C) of the Code unless otherwise stated in the
related Prospectus Supplement. The taxation of holders of Stripped
Interest Certificates is uncertain in various respects, including
in particular the method such holders should use to recover their
purchase price and to report their income with respect to such
Stripped Interest Certificates. See 'Certain Federal Income Tax
Consequences -- Grantor Trust Funds'.
Investors are advised to consult their tax advisors and to review
'Certain Federal Income Tax Consequences' herein and in the related
Prospectus Supplement.
ERISA Considerations...................... Fiduciaries of employee benefit plans and certain other retirement
plans and arrangements, including individual retirement accounts,
annuities, Keogh plans, and collective investment funds and
separate accounts in which such plans, accounts, annuities or
arrangements are invested, that are subject to the Employee
Retirement Income Security Act of 1974, as amended ('ERISA'), or
Section 4975 of the Code, should carefully review with their legal
advisors whether the purchase or holding of Offered Certificates
could give rise to a transaction that is prohibited or is not
otherwise permissible either under ERISA or Section 4975 of the
Code. See 'ERISA Considerations' herein and in the related
Prospectus Supplement.
Legal Investment.......................... The Offered Certificates of any series will constitute 'mortgage
related securities' for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 only if so specified in the related
Prospectus Supplement. Investors whose investment authority is
subject to legal restrictions should consult their own legal
advisors to determine whether and to what extent the Offered
Certificates constitute legal investments for them. See 'Legal
Investment' herein and in the related Prospectus Supplement.
Rating.................................... At their respective dates of issuance, each class of Offered
Certificates will be rated not lower than investment grade by one
or more nationally recognized statistical rating agencies (each, a
'Rating Agency'). See 'Rating' herein and in the related Prospectus
Supplement.
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RISK FACTORS
In considering an investment in the Offered Certificates of any series,
investors should consider, among other things, the following factors and any
other factors set forth under the heading 'Risk Factors' in the related
Prospectus Supplement. In general, to the extent that the factors discussed
below pertain to or are influenced by the characteristics or behavior of
Mortgage Loans included in a particular Trust Fund, they would similarly pertain
to and be influenced by the characteristics or behavior of the mortgage loans
underlying any MBS included in such Trust Fund.
LIMITED LIQUIDITY
Merrill Lynch, Pierce, Fenner & Smith Incorporated, itself or through one
or more of its affiliates, currently expects to make a secondary market in the
Offered Certificates of each series, but has no obligation to do so. However,
there can be no assurance that a secondary market for the Offered Certificates
of any series will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue for as long as such Certificates
remain outstanding. Furthermore, because, among other things, the timing of
receipt of payments with respect to a pool of multifamily or commercial mortgage
loans may be substantially more difficult to predict than that of a pool of
single family mortgage loans, any such secondary market that does develop may
provide less liquidity to investors than any comparable market for securities
that evidence interests in single-family mortgage loans.
The primary source of continuing information regarding the Offered
Certificates of any series, including information regarding the status of the
related Mortgage Assets and any Credit Support for such Certificates, will be
the periodic reports to Certificateholders delivered pursuant to the related
Pooling Agreement as described herein under the heading 'Description of the
Certificates -- Reports to Certificateholders'. There can be no assurance that
any additional continuing information regarding the Offered Certificates of any
series will be available through any other source, and the limited nature of
such information may adversely affect the liquidity thereof, even if a secondary
market for such Certificates does develop.
Except to the extent described herein and in the related Prospectus
Supplement, Certificateholders will have no redemption rights, and the Offered
Certificates of each series are subject to early retirement only under certain
specified circumstances described herein and in the related Prospectus
Supplement. See 'Description of the Certificates -- Termination'.
LIMITED ASSETS
Unless otherwise specified in the related Prospectus Supplement, neither
the Offered Certificates of any series nor the Mortgage Assets in the related
Trust Fund will be guaranteed or insured by the Depositor or any of its
affiliates, by any governmental agency or instrumentality or by any other
person; and no Offered Certificate of any series will represent a claim against
or security interest in the Trust Funds for any other series. Accordingly, if
the related Trust Fund has insufficient assets to make payments on such
Certificates, no other assets will be available for payment of the deficiency.
Additionally, certain amounts on deposit from time to time remaining in certain
funds or accounts constituting part of a Trust Fund, including the Certificate
Account and any accounts maintained as Credit Support, may be withdrawn under
certain conditions that will be described in the related Prospectus Supplement,
for purposes other than the payment of principal of or interest on the related
series of Certificates. If so provided in the Prospectus Supplement for a series
of Certificates consisting of one or more classes of Subordinate Certificates,
on any Distribution Date in respect of which losses or shortfalls in collections
on the Mortgage Assets have been incurred, the amount of such losses or
shortfalls will be borne first by one or more classes of the Subordinate
Certificates, and, thereafter, by the remaining classes of Certificates in the
priority and manner and subject to the limitations specified in such Prospectus
Supplement.
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PREPAYMENTS; AVERAGE LIFE OF CERTIFICATES; YIELDS
For a number of reasons, including the difficulty of predicting the rate of
prepayments on the Mortgage Loans in a particular Trust Fund, the amount and
timing of distributions of principal and/or interest on the Offered Certificates
of the related series may be highly unpredictable. Prepayments on the Mortgage
Loans in any Trust Fund will result in a faster rate of principal payments on
one or more classes of the related Certificates than if payments on such
Mortgage Loans were made as scheduled. Thus, the prepayment experience on the
Mortgage Loans may affect the average life of each class of such Certificates,
including a class of Offered Certificates. The rate of principal payments on
pools of mortgage loans varies among pools and from time to time is influenced
by a variety of economic, demographic, geographic, social, tax, legal and other
factors. For example, if prevailing interest rates fall significantly below the
Mortgage Rates borne by the Mortgage Loans included in a Trust Fund, principal
prepayments are likely to be higher than if prevailing rates remain at or above
the rates borne by those Mortgage Loans. Conversely, if prevailing interest
rates rise significantly above the Mortgage Rates borne by the Mortgage Loans
included in a Trust Fund, principal prepayments thereon are likely to be lower
than if prevailing interest rates remain at or below the rates borne by those
Mortgage Loans. There can be no assurance as to the rate of prepayments on the
Mortgage Loans in any Trust Fund or that such rate will conform to any model
described herein or in any Prospectus Supplement. As a result, depending on the
anticipated rate of prepayment for the Mortgage Loans in any Trust Fund, the
retirement of any class of Certificates of the related series could occur
significantly earlier or later than expected.
The extent to which prepayments on the Mortgage Loans in any Trust Fund
ultimately affect the average life of any class of Certificates of the related
series will depend on the terms of such Certificates. A class of Certificates,
including a class of Offered Certificates, may provide that on any Distribution
Date the holders of such Certificates are entitled to a pro rata share of the
prepayments (including prepayments occasioned by defaults) on the Mortgage Loans
in the related Trust Fund that are distributable on such date, to a
disproportionately large share (which, in some cases, may be all) of such
prepayments, or to a disproportionately small share (which, in some cases, may
be none) of such prepayments. A class of Certificates that entitles the holders
thereof to a disproportionately large share of prepayments enhances the risk of
early retirement of such class ('call risk') if the rate of prepayment is faster
than anticipated; while a class of Certificates that entitles the holders
thereof to a disproportionately small share of prepayments enhances the risk of
an extended average life of such class ('extension risk') if the rate of
prepayment is slower than anticipated. As and to the extent described in the
related Prospectus Supplement, the respective entitlements of the various
classes of Certificateholders of any series to receive payments (and, in
particular, prepayments) of principal of the Mortgage Loans in the related Trust
Fund may vary based on the occurrence of certain events (e.g., the retirement of
one or more classes of Certificates of such series) or subject to certain
contingencies (e.g., prepayment and default rates with respect to such Mortgage
Loans).
A series of Certificates may include one or more Controlled Amortization
Classes that will be entitled to receive principal distributions according to a
specified principal payment schedule. Although prepayment risk cannot be
eliminated entirely for any class of Certificates, it can be reduced
substantially in the case of a Controlled Amortization Class so long as the
actual rate of prepayments on the Mortgage Loans in the related Trust Fund
remains relatively constant at the rate, or within the range of rates, of
prepayment used to establish the specific principal payment schedule for such
Certificates. However, the reduction of prepayment risk afforded to a Controlled
Amortization Class comes at the expense of one or more Companion Classes of the
same series, any of which Companion Classes may also be a class of Offered
Certificates. In general, and as more specifically described in the related
Prospectus Supplement, a Companion Class will entitle the holders thereof to a
disproportionately large share of prepayments on the Mortgage Loans in the
related Trust Fund when the rate of prepayment is relatively fast, and to a
disproportionately small share of those prepayments when the rate of prepayment
is relatively slow, and thus absorbs some (but not all) of the 'call risk'
and/or 'extension risk' that would otherwise affect the related Controlled
Amortization Class if all payments of principal of the Mortgage Loans were
allocated on a pro rata basis.
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A series of Certificates may also include one or more classes of Offered
Certificates offered at a premium or discount. Yields on such classes of
Certificates will be sensitive, and in some cases extremely sensitive, to
prepayments on the Mortgage Loans in the related Trust Fund and, where the
amount of interest payable with respect to a class is disproportionately large,
as compared to the amount of principal, as with certain classes of Stripped
Interest Certificates, a holder might fail to recoup its original investment
under some prepayment scenarios. An investor should consider, in the case of any
Offered Certificate purchased at a discount, the risk that a slower than
anticipated rate of principal payments on the Mortgage Loans could result in an
actual yield to such investor that is lower than the anticipated yield and, in
the case of any Offered Certificate purchased at a premium, the risk that a
faster than anticipated rate of principal payments could result in an actual
yield to such investor that is lower than the anticipated yield. See 'Yield and
Maturity Considerations' herein and, if applicable, in the related Prospectus
Supplement.
LIMITED NATURE OF RATINGS
Any rating assigned by a Rating Agency to a class of Offered Certificates
will reflect only its assessment of the likelihood that holders of Certificates
of such class will receive payments to which such Certificateholders are
entitled under the related Pooling Agreement. Such rating will not constitute an
assessment of the likelihood that principal prepayments on the related Mortgage
Loans will be made, the degree to which the rate of such prepayments might
differ from that originally anticipated or the likelihood of early optional
termination of the related Trust Fund. Neither will such rating address the
possibility that prepayments on the related Mortgage Loans at a higher or lower
rate than anticipated by an investor may cause such investor to experience a
lower than anticipated yield or that an investor that purchases an Offered
Certificate at a significant premium might fail to recoup its initial investment
under certain prepayment scenarios.
The amount, type and nature of Credit Support, if any, provided with
respect to a series of Certificates will be determined on the basis of criteria
established by each Rating Agency rating classes of the Certificates of such
series. Those criteria are sometimes based upon an actuarial analysis of the
behavior of mortgage loans in a larger group. However, there can be no assurance
that the historical data supporting any such actuarial analysis will accurately
reflect future experience, or that the data derived from a large pool of
mortgage loans will accurately predict the delinquency, foreclosure or loss
experience of any particular pool of Mortgage Loans. In other cases, such
criteria may be based upon determinations of the values of the Mortgaged
Properties that provide security for the Mortgage Loans. However, no assurance
can be given that those values will not decline in the future. See 'Description
of Credit Support' and 'Rating'.
RISKS ASSOCIATED WITH CERTAIN MORTGAGE LOANS AND MORTGAGED PROPERTIES
Mortgage loans made on the security of multifamily or commercial property
may entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with loans made on the
security of single-family property. See 'Description of the Trust
Funds -- Mortgage Loans'. The ability of a borrower to repay a loan secured by
an income-producing property typically is dependent primarily upon the
successful operation of such property rather than upon the existence of
independent income or assets of the borrower; thus, the value of an income-
producing property is directly related to the net operating income derived from
such property. If the net operating income of the property is reduced (for
example, if rental or occupancy rates decline or real estate tax rates or other
operating expenses increase), the borrower's ability to repay the loan may be
impaired. A number of the Mortgage Loans may be secured by liens on
owner-occupied Mortgaged Properties or on Mortgaged Properties leased to a
single tenant. Accordingly, a decline in the financial condition of the borrower
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
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 tax rates and other operating expenses;
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changes in governmental rules, regulations and fiscal policies, including
environmental legislation; acts of God; and other factors beyond the control of
a Master Servicer.
In addition, additional risk may be presented by the type and use of a
particular Mortgaged Property. For instance, specialty properties (such as
hotels, health care facilities, self-storage facilities and restaurants) are
often characterized by substantial operating risk associated with the particular
industry or business that is in addition to traditional real estate risk. Also,
specialty properties frequently are of such design that they may not be readily
converted to alternative uses if that industry or business declines.
It is anticipated that some or all of the Mortgage Loans included in any
Trust Fund will be nonrecourse loans or loans for which recourse may be
restricted or unenforceable. As to those Mortgage Loans, recourse in the event
of borrower default will be limited to the specific real property and other
assets, if any, that were pledged to secure the Mortgage Loan. However, even
with respect to those Mortgage Loans that provide for recourse against the
borrower and its assets generally, there can be no assurance that enforcement of
such recourse provisions will be practicable, or that the assets of the borrower
will be sufficient to permit a recovery in respect of a defaulted Mortgage Loan
in excess of the liquidation value of the related Mortgaged Property.
Further, the concentration of default, foreclosure and loss risks in
individual Mortgage Loans in a particular Trust Fund will generally be greater
than for pools of single-family loans because Mortgage Loans in a Trust Fund
will generally consist of a smaller number of higher balance loans than would a
pool of single-family loans of comparable aggregate unpaid principal balance.
BALLOON PAYMENTS; BORROWER DEFAULT
Certain of the Mortgage Loans included in a Trust Fund may not be fully
amortizing (or may not amortize at all) over their terms to maturity and, thus,
will require substantial principal payments (that is, balloon payments) at their
stated maturity. Mortgage Loans of this type involve a greater degree of risk
than self-amortizing loans because the ability of a borrower to make a balloon
payment typically will depend upon its ability either to fully refinance the
loan or to sell the related Mortgaged Property at a price sufficient to permit
the borrower to make the balloon payment. The ability of a borrower to
accomplish either of these goals will be affected by a number of factors,
including the value of the related Mortgaged Property, the level of available
mortgage rates at the time of sale or refinancing, the borrower's equity in the
related Mortgaged Property, the financial condition and operating history of the
borrower and the related Mortgaged Property, tax laws, rent control laws (with
respect to certain residential properties), Medicaid and Medicare reimbursement
rates (with respect to hospitals and nursing homes), prevailing general economic
conditions and the availability of credit for loans secured by commercial or
multifamily, as the case may be, real properties generally.
If and to the extent specified in the related Prospectus Supplement, in
order to maximize recoveries on defaulted Mortgage Loans, the Master Servicer or
a Special Servicer will be permitted (within prescribed limits) to extend and
modify Mortgage Loans that are in default or as to which a payment default is
imminent. While a Master Servicer generally will be required to determine that
any such extension or modification is reasonably likely to produce a greater
recovery on a present value basis than liquidation, there can be no assurance
that any such extension or modification will in fact increase the present value
of receipts from or proceeds of the affected Mortgage Loans.
CREDIT SUPPORT LIMITATIONS
The Prospectus Supplement for the Offered Certificates of each series will
describe any Credit Support provided with respect thereto. Use of Credit Support
will be subject to the conditions and limitations described herein and in the
related Prospectus Supplement. Moreover, such Credit Support may not cover all
potential losses or risks; for example, Credit Support may or may not cover
fraud or negligence by a mortgage loan originator or other parties.
A series of Certificates may include one or more classes of Subordinate
Certificates (which may include Offered Certificates), if so provided in the
related Prospectus Supplement. Although subordination is intended to reduce the
risk to holders of Senior Certificates of delinquent distributions
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or ultimate losses, the amount of subordination will be limited and may decline
under certain circumstances. In addition, if principal payments on one or more
classes of Certificates of a series are made in a specified order of priority,
any limits with respect to the aggregate amount of claims under any related
Credit Support may be exhausted before the principal of the lower priority
classes of Certificates of such series has been fully repaid. As a result, the
impact of losses and shortfalls experienced with respect to the Mortgage Assets
may fall primarily upon those classes of Certificates having a lower priority of
payment. Moreover, if a form of Credit Support covers more than one series of
Certificates, holders of Certificates of one series will be subject to the risk
that such Credit Support will be exhausted by the claims of the holders of
Certificates of one or more other series.
The amount of any applicable Credit Support supporting one or more classes
of Offered Certificates, including the subordination of one or more classes of
Certificates, will be determined on the basis of criteria established by each
Rating Agency rating such classes of Certificates based on an assumed level of
defaults, delinquencies and losses on the underlying Mortgage Assets and other
factors. There can, however, be no assurance that the loss experience on the
related Mortgage Assets will not exceed such assumed levels. See ' -- Limited
Nature of Ratings', 'Description of the Certificates' and 'Description of Credit
Support'.
LEASES AND RENTS
The Mortgage Loans included in any Trust Fund typically will be secured by
an assignment of leases and rents pursuant to which the borrower assigns to the
lender its right, title and interest as landlord under the leases of the related
Mortgaged Property, and the income derived therefrom, as further security for
the related Mortgage Loan, while retaining a license to collect rents for so
long as there is no default. If the borrower defaults, the license terminates
and the lender is entitled to collect rents. Some state laws 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 borrower, the lender's ability to collect the rents may be adversely
affected. See 'Certain Legal Aspects of Mortgage Loans -- Leases and Rents'.
ENVIRONMENTAL RISKS
Under the laws of certain states, contamination of real property may give
rise to a lien on the property to assure the costs of cleanup. In several
states, such a lien has priority over an existing mortgage lien on 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 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 caused by the borrower or a prior owner. A
lender also risks such liability on foreclosure of the mortgage. See 'Certain
Legal Aspects of Mortgage Loans -- Environmental Considerations'. If a Trust
Fund includes Mortgage Loans and the related Prospectus Supplement does not
otherwise specify, the related Pooling Agreement will contain provisions
generally to the effect that the Master Servicer, acting on behalf of the Trust
Fund, may not acquire title to a Mortgaged Property or assume control of its
operation unless the Master Servicer, based upon a report prepared by a person
who regularly conducts environmental audits, has made the determination that it
is appropriate to do so, as described under 'Description of the Pooling
Agreements -- Realization Upon Defaulted Mortgage Loans.' These provisions are
designed to reduce substantially the risk of liability for costs associated with
remediation of a hazardous environmental condition, but there can be no
assurance in a given case that those risks can be eliminated entirely.
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 that govern such plans,
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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 Offered Certificates of any series. See 'ERISA
Considerations'.
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING REMIC RESIDUAL CERTIFICATES
Holders of REMIC Residual 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 under 'Certain Federal Income Tax
Consequences -- REMICs'. Accordingly, under certain circumstances, holders of
Offered Certificates that constitute REMIC Residual 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 REMIC Residual Certificates report their pro rata share of the
taxable income and net loss of the REMIC will continue until the Certificate
Balances of all classes of Certificates of the related series have been reduced
to zero, even though holders of REMIC Residual Certificates have received full
payment of their stated interest and principal. A portion (or, in certain
circumstances, all) of such Certificateholder'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 taxable income
and (iii) for a foreign holder, will not qualify for exemption from withholding
tax. Individual holders of REMIC Residual Certificates may be limited in their
ability to deduct servicing fees and other expenses of the REMIC. In addition,
REMIC Residual Certificates are subject to certain restrictions on transfer.
Because of the special tax treatment of REMIC Residual Certificates, the taxable
income arising in a given year on a REMIC Residual 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 a REMIC Residual Certificate may be
significantly less than that of a corporate bond or stripped instrument having
similar cash flow characteristics.
BOOK-ENTRY REGISTRATION
If so provided in the related Prospectus Supplement, one or more classes of
the Offered Certificates of any series will be issued as Book-Entry
Certificates. Each class of Book-Entry Certificates will be initially
represented by one or more Certificates registered in the name of a nominee for
DTC. As a result, unless and until corresponding Definitive Certificates are
issued, the Certificate Owners with respect to any class of Book-Entry
Certificates will be able to exercise the rights of Certificateholders only
indirectly through DTC and its participating organizations ('Participants'). In
addition, the access of Certificate Owners to information regarding the
Book-Entry Certificates in which they hold interests may be limited. The means
by which notices and other communications are conveyed by DTC to its
Participants, and directly and indirectly through such Participants to
Certificate Owners, will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Furthermore, as described herein, Certificate Owners may experience delays in
the receipt of payments on the Book-Entry Certificates, and the ability of any
Certificate Owner to pledge or otherwise take actions with respect to its
interest in the Book-Entry Certificates may be limited due to the lack of a
physical certificate evidencing such interest. See 'Description of the
Certificates -- Book-Entry Registration and Definitive Certificates'.
DELINQUENT AND NON-PERFORMING MORTGAGE LOANS
If so provided in the related Prospectus Supplement, the Trust Fund for a
particular series of Certificates may include Mortgage Loans that are past due
or are non-performing as of the date they are deposited in the Trust Fund. If so
specified in the related Prospectus Supplement, the servicing of such Mortgage
Loans will be performed by a Special Servicer. Credit Support provided with
respect to a particular series of Certificates may not cover all losses related
to such delinquent or non-performing Mortgage Loans, and investors should
consider the risk that the inclusion of such Mortgage Loans in the Trust Fund
may adversely affect the rate of defaults and prepayments on the Mortgage Loans
in the
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Trust Fund and the yield on the Offered Certificates of such series. See
'Description of the Trust Funds -- Mortgage Loans-General'.
DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each Trust Fund will consist of (i) multifamily
and/or commercial mortgage loans (the 'Mortgage Loans'), (ii) mortgage
participations, pass-through certificates or other mortgage-backed securities
('MBS') that evidence interests in, or that are secured by pledges of, one or
more of various types of multifamily or commercial mortgage loans or (iii) a
combination of Mortgage Loans and MBS (collectively, 'Mortgage Assets'). Each
Trust Fund will be established by Merrill Lynch Mortgage Investors, Inc. (the
'Depositor'). Each Mortgage Asset will be selected by the Depositor for
inclusion in a Trust Fund from among those purchased, either directly or
indirectly, from a prior holder thereof (a 'Mortgage Asset Seller'), which prior
holder may or may not be the originator of such Mortgage Loan or the issuer of
such MBS and may be an affiliate of the Depositor. The Mortgage Assets will not
be guaranteed or insured by the Depositor or any of its affiliates or, unless
otherwise provided in the related Prospectus Supplement, by any governmental
agency or instrumentality or by any other person. The discussion below under the
heading ' -- Mortgage Loans,' unless otherwise noted, applies equally to
mortgage loans underlying any MBS included in a particular Trust Fund.
MORTGAGE LOANS
General. The Mortgage Loans will be evidenced by promissory notes (the
'Mortgage Notes') secured by mortgages, deeds of trust or similar security
instruments (the 'Mortgages') that create liens on properties (the 'Mortgaged
Properties') consisting of (i) residential properties consisting of five or more
rental or cooperatively-owned dwelling units in high-rise, mid-rise or garden
apartment buildings or other residential structures ('Multifamily Properties')
or (ii) office buildings, retail stores, hotels or motels, nursing homes,
hospitals or other health care-related facilities, mobile home parks, warehouse
facilities, mini-warehouse facilities, self-storage facilities, industrial
plants, mixed use or other types of income-producing properties or unimproved
land ('Commercial Properties'). The Multifamily Properties may include mixed
commercial and residential structures and may include apartment buildings owned
by private cooperative housing corporations ('Cooperatives'). Unless otherwise
specified in the related Prospectus Supplement, each Mortgage will create a
first priority mortgage lien on a Mortgaged Property. A Mortgage may create a
lien on a borrower's leasehold estate in a property; however, unless otherwise
specified in the related Prospectus Supplement, the term of any such leasehold
will exceed the term of the Mortgage Note by at least two years. Each Mortgage
Loan will have been originated by a person (the 'Originator') other than the
Depositor.
If so specified in the related Prospectus Supplement, Mortgage Assets for a
series of Certificates may include Mortgage Loans made on the security of real
estate projects under construction. In that case, the related Prospectus
Supplement will describe the procedures and timing for making disbursements from
construction reserve funds as portions of the related real estate project are
completed. In addition, the Mortgage Assets for a particular series of
Certificates may include Mortgage Loans that are delinquent or non-performing as
of the date such Certificates are issued. In that case, the related Prospectus
Supplement will set forth, as to each such Mortgage Loan, available information
as to the period of such delinquency or non-performance, any forbearance
arrangement then in effect, the condition of the related Mortgaged Property and
the ability of the Mortgaged Property to generate income to service the mortgage
debt.
Default and Loss Considerations with Respect to the Mortgage
Loans. Mortgage loans secured by liens on income-producing properties are
substantially different from loans made on the security of owner-occupied
single-family homes. The repayment of a loan secured by a lien on an
income-producing property is typically dependent upon the successful operation
of such property (that is, its ability to generate income). Moreover, some or
all of the Mortgage Loans included in a particular Trust Fund may be
non-recourse loans, which means that, absent special facts, recourse in the case
of
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default will be limited to the Mortgaged Property and such other assets, if any,
that were pledged to secure repayment of the Mortgage Loan.
Lenders typically look to the Debt Service Coverage Ratio of a loan secured
by income-producing property as an important measure of the risk of default on
such a loan. Unless otherwise defined in the related Prospectus Supplement, the
'Debt Service Coverage Ratio' of a Mortgage Loan at any given time is the ratio
of (i) the Net Operating Income of the related Mortgaged Property for a
twelve-month period to (ii) the annualized scheduled payments on the Mortgage
Loan and on any other loan that is secured by a lien on the Mortgaged Property
prior to the lien of the related Mortgage. Unless otherwise defined in the
related Prospectus Supplement, 'Net Operating Income' means, for any given
period, the total operating revenues derived from a Mortgaged Property during
such period, minus the total operating expenses incurred in respect of such
Mortgaged Property during such period other than (i) non-cash items such as
depreciation and amortization, (ii) capital expenditures and (iii) debt service
on loans (including the related Mortgage Loan) secured by liens on the Mortgaged
Property. The Net Operating Income of a Mortgaged Property will fluctuate over
time and may or may not be sufficient to cover debt service on the related
Mortgage Loan at any given time. As the primary source of the operating revenues
of a non-owner occupied income-producing property, rental income (and
maintenance payments from tenant-stockholders of a Cooperative) may be affected
by the condition of the applicable real estate market and/or area economy. In
addition, properties typically leased, occupied or used on a short-term basis,
such as certain health care-related facilities, hotels and motels, and
mini-warehouse and self-storage facilities, tend to be affected more rapidly by
changes in market or business conditions than do properties typically leased for
longer periods, such as warehouses, retail stores, office buildings and
industrial plants. Commercial Properties may be owner-occupied or leased to a
single tenant. Thus, the Net Operating Income of such a Mortgaged Property may
depend substantially on the financial condition of the borrower or the single
tenant, and Mortgage Loans secured by liens on such properties may pose greater
risks than loans secured by liens on Multifamily Properties or on multi-tenant
Commercial Properties.
Increases in operating expenses due to the general economic climate or
economic conditions in a locality or industry segment, such as increases in
interest rates, real estate tax rates, energy costs, labor costs and other
operating expenses, and/or to changes in governmental rules, regulations and
fiscal policies, may also affect the risk of default on a Mortgage Loan. As may
be further described in the related Prospectus Supplement, in some cases leases
of Mortgaged Properties may provide that the lessee, rather than the
borrower/landlord, is responsible for payment of operating expenses ('Net
Leases'). However, the existence of such 'net of expense' provisions will result
in stable Net Operating Income to the borrower/landlord only to the extent that
the lessee is able to absorb operating expense increases while continuing to
make rent payments.
Lenders also look to the Loan-to-Value Ratio of a mortgage loan as a
measure of risk of loss if a property must be liquidated following a default.
Unless otherwise defined in the related Prospectus Supplement, the
'Loan-to-Value Ratio' of a Mortgage Loan at any given time is the ratio
(expressed as a percentage) of (i) the then outstanding principal balance of the
Mortgage Loan and the outstanding principal balance of any loan secured by a
lien on the related Mortgaged Property prior to the lien of the related
Mortgage, to (ii) the Value of such Mortgaged Property. The 'Value' of a
Mortgaged Property, is generally its fair market value determined in an
appraisal obtained by the originator at the origination of such loan. The lower
the Loan-to-Value Ratio, the greater the percentage of the borrower's equity in
a Mortgaged Property, and thus the greater the cushion provided to the lender
against loss on liquidation following a default.
Loan-to-Value Ratios will not necessarily constitute an accurate measure of
the risk of liquidation loss in a pool of Mortgage Loans. For example, the value
of a Mortgaged Property as of the date of initial issuance of the related series
of Certificates may be less than the Value determined at loan origination, and
will likely continue to fluctuate from time to time based upon changes in
economic conditions and the real estate market. Moreover, even when current, an
appraisal is not necessarily a reliable estimate of value. Appraised values of
income-producing properties are generally based on the market comparison method
(recent resale value of comparable properties at the date of the appraisal), the
cost replacement method (the cost of replacing the property at such date), the
income capitalization
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method (a projection of value based upon the property's projected net cash
flow), or upon a selection from or interpolation of the values derived from such
methods. Each of these appraisal methods can present analytical difficulties. It
is often difficult to find truly comparable properties that have recently been
sold; the replacement cost of a property may have little to do with its current
market value; and income capitalization is inherently based on inexact
projections of income and expense and the selection of an appropriate
capitalization rate. Where more than one of these appraisal methods are used and
provide significantly different results, an accurate determination of value and,
correspondingly, a reliable analysis of default and loss risks, is even more
difficult.
While the Depositor believes that the foregoing considerations are
important factors that generally distinguish loans secured by liens on
income-producing real estate from single-family mortgage loans there is no
assurance that all of such factors will in fact have been prudently considered
by the Originators of the Mortgage Loans, or that, for a particular Mortgage
Loan, they are complete or relevant. See 'Risk Factors -- Risks Associated with
Certain Mortgage Loans and Mortgaged Properties' and ' -- Balloon Payments;
Borrower Default'.
Payment Provisions of the Mortgage Loans. Unless otherwise specified in
the related Prospectus Supplement, all of the Mortgage Loans will have had
original terms to maturity of not more than 40 years and will provide for
scheduled payments of principal, interest or both, to be made on specified dates
('Due Dates') that occur monthly, quarterly or semi-annually. A Mortgage Loan
(i) may provide for accrual of interest thereon at an interest rate (a 'Mortgage
Rate') that is fixed over its term or that adjusts from time to time, or that
may be converted at the borrower's election from an adjustable to a fixed
Mortgage Rate, or from a fixed to an adjustable Mortgage Rate, (ii) may provide
for level payments to maturity or for payments that adjust from time to time to
accommodate changes in the Mortgage Rate or to reflect the occurrence of certain
events, and may permit negative amortization, (iii) may be fully amortizing over
its term to maturity, or may provide for little or no amortization over its term
and thus require a balloon payment on its stated maturity date, and (iv) may
contain a prohibition on prepayment (the period of such prohibition, a 'Lock-out
Period' and its date of expiration, a 'Lock-out Expiration Date') or require
payment of a premium or a yield maintenance penalty (a 'Prepayment Premium') in
connection with a prepayment, in each case as described in the related
Prospectus Supplement. A Mortgage Loan may also contain a provision that
entitles the lender to a share of profits realized from the operation or
disposition of the Mortgaged Property (an 'Equity Participation'), as described
in the related Prospectus Supplement. If holders of any class or classes of
Offered Certificates of a series will be entitled to all or a portion of an
Equity Participation, the related Prospectus Supplement will describe the Equity
Participation and the method or methods by which distributions in respect
thereof will be made to such holders.
Mortgage Loan Information in Prospectus Supplements. Each Prospectus
Supplement will contain certain information pertaining to the Mortgage Loans
which will generally be current as of a date specified in the related Prospectus
Supplement and which, to the extent then applicable and specifically known to
the Depositor, will include the following: (i) the aggregate outstanding
principal balance and the largest, smallest and average outstanding principal
balance of the Mortgage Loans, (ii) the type or types of property that provide
security for repayment of the Mortgage Loans, (iii) the original and remaining
terms to maturity of the Mortgage Loans, and the seasoning of the Mortgage
Loans, (iv) the earliest and latest origination date and maturity date and
weighted average original and remaining terms to maturity of the Mortgage Loans,
(v) the original Loan-to-Value Ratios of the Mortgage Loans, (vi) the Mortgage
Rates or range of Mortgage Rates and the weighted average Mortgage Rate borne by
the Mortgage Loans, (vii) the geographic distribution of the Mortgaged
Properties on a state-by-state basis, (viii) information with respect to the
prepayment provisions, if any, of the Mortgage Loans, (ix) with respect to
Mortgage Loans with adjustable Mortgage Rates ('ARM Loans'), the index or
indices upon which such adjustments are based, the adjustment dates, the range
of gross margins and the weighted average gross margin, and any limits on
Mortgage Rate adjustments at the time of any adjustment and over the life of the
ARM Loan, (x) Debt Service Coverage Ratios either at origination or as of a more
recent date (or both) and (xi) information regarding the payment characteristics
of the Mortgage Loans, including without limitation balloon payment and other
amortization provisions. In appropriate cases, the related Prospectus Supplement
will also contain certain information available to the Depositor that pertains
to the provisions of leases and the nature of tenants of the Mortgaged
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Properties. If the Depositor is unable to tabulate the specific information
described above at the time Offered Certificates of a series are initially
offered, more general information of the nature described above will be provided
in the related Prospectus Supplement, and specific information will be set forth
in a report which will be available to purchasers of those Certificates at or
before the initial issuance thereof and will be filed as part of a Current
Report on Form 8-K with the Commission within fifteen days following such
issuance.
MBS
MBS may include (i) private (that is, not guaranteed or insured by the
United States or any agency or instrumentality thereof) mortgage participations,
mortgage pass-through certificates or other mortgage-backed securities or (ii)
certificates insured or guaranteed by FHLMC, FNMA, GNMA or FAMC, provided that
each MBS will evidence an interest in, or will be secured by a pledge of,
mortgage loans that conform to the descriptions of the Mortgage Loans contained
herein.
Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, an indenture or similar agreement
(an 'MBS Agreement'). The issuer (the 'MBS Issuer') of the MBS and/or the
servicer (the 'MBS Servicer') of the underlying mortgage loans will have entered
into the MBS Agreement, generally with a trustee (the 'MBS Trustee') or, in the
alternative, with the original purchaser or purchasers of the MBS.
The MBS may have been issued in one or more classes with characteristics
similar to the classes of Certificates described herein. Distributions in
respect of the MBS will be made by the MBS Servicer or the MBS Trustee on the
dates specified in the related Prospectus Supplement. The MBS Issuer or the MBS
Servicer or another person specified in the related Prospectus Supplement may
have the right or obligation to repurchase or substitute assets underlying the
MBS after a certain date or under other circumstances specified in the related
Prospectus Supplement.
Reserve funds, subordination or other credit support similar to that
described for the Certificates under 'Description of Credit Support' may have
been provided with respect to the MBS. The type, characteristics and amount of
such credit support, if any, will be a function of the characteristics of the
underlying mortgage loans and other factors and generally will have been
established on the basis of the requirements of any Rating Agency that may have
assigned a rating to the MBS, or by the initial purchasers of the MBS.
The Prospectus Supplement for a series of Certificates that evidence
interests in MBS will specify, to the extent available, (i) the aggregate
approximate initial and outstanding principal amount and type of the MBS to be
included in the Trust Fund, (ii) the original and remaining term to stated
maturity of the MBS, if applicable, (iii) the pass-through or bond rate of the
MBS or the formula for determining such rates, (iv) the payment characteristics
of the MBS, (v) the MBS Issuer, MBS Servicer and MBS Trustee, as applicable,
(vi) a description of the credit support, if any, (vii) the circumstances under
which the related underlying mortgage loans, or the MBS themselves, may be
purchased prior to their maturity, (viii) the terms on which mortgage loans may
be substituted for those originally underlying the MBS, (ix) the servicing fees
payable under the MBS Agreement, (x) to the extent available to the Depositor,
the type of information in respect of the underlying mortgage loans described
under ' -- Mortgage Loans -- Mortgage Loan Information in Prospectus
Supplements' and (xi) the characteristics of any cash flow agreements that
relate to the MBS.
CERTIFICATE ACCOUNTS
Each Trust Fund will include one or more accounts (collectively, the
'Certificate Account') established and maintained on behalf of the
Certificateholders into which the person or persons designated in the related
Prospectus Supplement will, to the extent described herein and in such
Prospectus Supplement, deposit all payments and collections received or advanced
with respect to the Mortgage Assets and other assets in the Trust Fund. A
Certificate Account may be maintained as an interest bearing or a non-interest
bearing account, and funds held therein may be held as cash or invested in
certain short-term, investment grade obligations, in each case as described in
the related Prospectus Supplement.
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CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Mortgage Assets in the
related Trust Fund may be provided to one or more classes of Certificates in the
related series in the form of subordination of one or more other classes of
Certificates in such series or by one or more other types of credit support,
such as a letter of credit, insurance policy, guarantee or reserve fund, among
others, or by a combination thereof (any such coverage with respect to the
Certificates of any series, 'Credit Support'). The amount and types of Credit
Support, the identity of the entity providing it (if applicable) and related
information with respect to each type of Credit Support, if any, will be set
forth in the Prospectus Supplement for the Offered Certificates of each series.
See 'Risk Factors -- Credit Support Limitations' and 'Description of Credit
Support'.
CASH FLOW AGREEMENTS
If so provided in the related Prospectus Supplement, the Trust Fund may
include guaranteed investment contracts pursuant to which moneys held in the
funds and accounts established for the related series will be invested at a
specified rate. The Trust Fund may also include certain other agreements, such
as interest rate exchange agreements, interest rate cap or floor agreements,
currency exchange agreements or similar agreements designed to reduce the
effects of interest rate or currency exchange rate fluctuations on the Mortgage
Assets on one or more classes of Certificates. The principal terms of any such
guaranteed investment contract or other agreement (any such agreement, a 'Cash
Flow Agreement'), and the identity of the Cash Flow Agreement obligor, will be
described in the related Prospectus Supplement.
YIELD AND MATURITY CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate and the amount and
timing of distributions on the Certificate. See 'Risk Factors -- Prepayments;
Average Life of Certificates; Yields'. The following discussion contemplates a
Trust Fund that consists solely of Mortgage Loans. While the characteristics and
behavior of mortgage loans underlying MBS can generally be expected to have the
same effect on the yield to maturity and/or weighted average life of a Class of
Certificates as will the characteristics and behavior of comparable Mortgage
Loans, the effect may differ due to the payment characteristics of the MBS. If a
Trust Fund includes MBS, the related Prospectus Supplement will discuss the
effect that the MBS payment characteristics may have on the yield to maturity
and weighted average lives of the Offered Certificates offered thereby.
PASS-THROUGH RATE
The Certificates of any class within a series may have a fixed, variable or
adjustable Pass-Through Rate, which may or may not be based upon the interest
rates borne by the Mortgage Loans in the related Trust Fund. The Prospectus
Supplement with respect to the Offered Certificates of any series will specify
the Pass-Through Rate for each class of such Certificates or, in the case of a
class of Offered Certificates with a variable or adjustable Pass-Through Rate,
the method of determining the Pass-Through Rate; the effect, if any, of the
prepayment of any Mortgage Loan on the Pass-Through Rate of one or more classes
of Offered Certificates; and whether the distributions of interest on the
Offered Certificates of any class will be dependent, in whole or in part, on the
performance of any obligor under a Cash Flow Agreement.
PAYMENT DELAYS
With respect to any series of Certificates, a period of time will elapse
between the date upon which payments on the Mortgage Loans in the related Trust
Fund are due and the Distribution Date on which
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such payments are passed through to Certificateholders. That delay will
effectively reduce the yield that would otherwise be produced if payments on
such Mortgage Loans were distributed to Certificateholders on or near the date
they were due.
CERTAIN SHORTFALLS IN COLLECTIONS OF INTEREST
When a principal prepayment in full or in part is made on a Mortgage Loan,
the borrower is generally charged interest only for the period from the Due Date
of the preceding scheduled payment up to the date of such prepayment, instead of
for the full accrual period, that is, the period from the Due Date of the
preceding scheduled payment up to the Due Date for the next scheduled payment.
However, interest accrued on any series of Certificates and distributable
thereon on any Distribution Date will generally correspond to interest accrued
on the principal balance of Mortgage Loans for their respective full accrual
periods. Consequently, if a prepayment on any Mortgage Loan is distributable to
Certificateholders on a particular Distribution Date, but such prepayment is not
accompanied by interest thereon for the full accrual period, the interest
charged to the borrower (net of servicing and administrative fees) may be less
(such shortfall, a 'Prepayment Interest Shortfall') than the corresponding
amount of interest accrued and otherwise payable on the Certificates of the
related series. If and to the extent that any such shortfall is allocated to a
class of Offered Certificates, the yield thereon will be adversely affected. The
Prospectus Supplement for a series of Certificates will describe the manner in
which any such shortfalls will be allocated among the classes of such
Certificates. If so specified in the related Prospectus Supplement, the Master
Servicer will be required to apply some or all of its servicing compensation for
the corresponding period to offset the amount of any such shortfalls. The
related Prospectus Supplement will also describe any other amounts available to
offset such shortfalls. See 'Description of the Pooling Agreements -- Servicing
Compensation and Payment of Expenses'.
YIELD AND PREPAYMENT CONSIDERATIONS
A Certificate's yield to maturity will be affected by the rate of principal
payments on the Mortgage Loans in the related Trust Fund and the allocation
thereof to reduce the principal balance (or Notional Amount, if applicable) of
such Certificate. The rate of principal payments on the Mortgage Loans will in
turn be affected by the amortization schedules thereof (which, in the case of
ARM Loans, will change periodically to accommodate adjustments to their Mortgage
Rates), the dates on which any balloon payments are due, and the rate of
principal prepayments thereon (including for this purpose, prepayments resulting
from liquidations of Mortgage Loans due to defaults, casualties or condemnations
affecting the Mortgaged Properties, or purchases of Mortgage Loans out of the
Trust Fund). Because the rate of principal prepayments on the Mortgage Loans in
any Trust Fund will depend on future events and a variety of factors (as
discussed more fully below), it is impossible to predict with assurance.
The extent to which the yield to maturity of a class of Offered
Certificates of any series may vary from the anticipated yield will depend upon
the degree to which they are purchased at a discount or premium and when, and to
what degree, payments of principal on the Mortgage Loans in the related Trust
Fund are in turn distributed on such Certificates (or, in the case of a class of
Stripped Interest Certificates, result in the reduction of the Notional Amount
thereof). Further, an investor should consider, in the case of any Offered
Certificate purchased at a discount, the risk that a slower than anticipated
rate of principal payments on the Mortgage Loans in the related Trust Fund could
result in an actual yield to such investor that is lower than the anticipated
yield and, in the case of any Offered Certificate purchased at a premium, the
risk that a faster than anticipated rate of principal payments could result in
an actual yield to such investor that is lower than the anticipated yield. In
general, the earlier a prepayment of principal on the Mortgage Loans is
distributed on an Offered Certificate purchased at a discount or premium (or, if
applicable, is allocated in reduction of the Notional Amount thereof), the
greater will be the effect on the investor's yield to maturity. As a result, the
effect on such investor's yield of principal payments (to the extent
distributable in reduction of the principal balance or Notional Amount of such
investor's Offered Certificates) occurring at a rate higher (or lower) than the
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rate anticipated by the investor during any particular period would not be fully
offset by a subsequent like reduction (or increase) in the rate of principal
payments.
A class of Certificates, including a class of Offered Certificates, may
provide that on any Distribution Date the holders of such Certificates are
entitled to a pro rata share of the prepayments (including prepayments
occasioned by defaults) on the Mortgage Loans in the related Trust Fund that are
distributable on such date, to a disproportionately large share (which, in some
cases, may be all) of such prepayments, or to a disproportionately small share
(which, in some cases, may be none) of such prepayments. As and to the extent
described in the related Prospectus Supplement, the respective entitlements of
the various classes of Certificateholders of any series to receive payments
(and, in particular, prepayments) of principal of the Mortgage Loans in the
related Trust Fund may vary based on the occurrence of certain events (e.g., the
retirement of one or more classes of Certificates of such series) or subject to
certain contingencies (e.g., prepayment and default rates with respect to such
Mortgage Loans).
In general, the Notional Amount of a class of Stripped Interest
Certificates will either (i) be based on the principal balances of some or all
of the Mortgage Assets in the related Trust Fund or (ii) equal the Certificate
Balances of one or more of the other classes of Certificates of the same series.
Accordingly, the yield on such Stripped Interest Certificates will be directly
related to the amortization of such Mortgage Assets or such classes of
Certificates, as the case may be. Thus, if a class of Certificates of any series
consists of Stripped Interest Certificates or Stripped Principal Certificates, a
lower than anticipated rate of principal prepayments on the Mortgage Loans in
the related Trust Fund will negatively affect the yield to investors in Stripped
Principal Certificates, and a higher than anticipated rate of principal
prepayments on such Mortgage Loans will negatively affect the yield to investors
in Stripped Interest Certificates.
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 multifamily or commercial mortgage loans. However, the extent
of prepayments of principal of the Mortgage Loans in any Trust Fund may be
affected by a number of factors, including, without limitation, the availability
of mortgage credit, the relative economic vitality of the area in which the
Mortgaged Properties are located, the quality of management of the Mortgaged
Properties, the servicing of the Mortgage Loans, possible changes in tax laws
and other opportunities for investment. In addition, the rate of principal
payments on the Mortgage Loans in any Trust Fund may be affected by the
existence of Lock-out Periods and requirements that principal prepayments be
accompanied by Prepayment Premiums, and by the extent to which such provisions
may be practicably enforced.
The rate of prepayment on a pool of mortgage loans is also 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 a mortgage
coupon, a borrower may have an increased incentive to refinance its mortgage
loan. In addition, as prevailing market interest rates decline, even borrowers
with ARM Loans that have experienced a corresponding interest rate decline may
have an increased incentive to refinance for purposes of either (i) converting
to a fixed rate loan and thereby 'locking in' such rate or (ii) taking advantage
of the initial 'teaser rate' (a mortgage interest rate below what it would
otherwise be if the applicable index and gross margin were applied) on another
adjustable rate mortgage loan.
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. The Depositor
will make no representation as to the particular factors that will affect the
prepayment of the Mortgage Loans in any Trust Fund, as to the relative
importance of such factors, as to the percentage of the principal balance of
such Mortgage Loans that will be paid as of any date or as to the overall rate
of prepayment on such Mortgage Loans.
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WEIGHTED AVERAGE LIFE AND MATURITY
The rate at which principal payments are received on the Mortgage Loans in
any Trust Fund will affect the ultimate maturity and the weighted average life
of one or more classes of the Certificates of such series. Weighted average life
refers to the average amount of time that will elapse from the date of issuance
of an instrument until each dollar of the principal amount of such instrument is
repaid to the investor.
The weighted average life and maturity of a class of Certificates of any
series will be influenced by the rate at which principal on the related Mortgage
Loans, whether in the form of scheduled amortization or prepayments (for this
purpose, the term 'prepayment' includes voluntary prepayments, liquidations due
to default and purchases of Mortgage Loans out of the related Trust Fund), is
paid to such class. Prepayment rates on loans are 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.
CPR represents an assumed constant rate of prepayment each month (expressed as
an annual percentage) relative to the then outstanding principal balance of a
pool of loans for the life of such loans. SPA represents an assumed variable
rate of prepayment each month (expressed as an annual percentage) relative to
the then outstanding principal balance of a pool of loans, with different
prepayment assumptions often expressed as percentages of SPA. For example, 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 particular pool of loans. Moreover, the
CPR and SPA models were developed based upon historical prepayment experience
for single-family loans. Thus, it is unlikely that the prepayment experience of
the Mortgage Loans included in any Trust Fund will conform to any particular
level of CPR or SPA.
The Prospectus Supplement with respect to each series of Certificates will
contain tables, if applicable, setting forth the projected weighted average life
of each class of Offered Certificates of such series and the percentage of the
initial Certificate Balance of each such class that would be outstanding on
specified Distribution Dates based on the assumptions stated in such Prospectus
Supplement, including assumptions that prepayments on the related Mortgage Loans
are made at rates corresponding to various percentages of CPR or SPA, or at such
other rates specified in such Prospectus Supplement. Such tables and assumptions
will illustrate the sensitivity of the weighted average lives of the
Certificates to various assumed prepayment rates and will not be intended to
predict, or to provide information that will enable investors to predict, the
actual weighted average lives of the Certificates.
CONTROLLED AMORTIZATION CLASSES AND COMPANION CLASSES
A series of Certificates may include one or more Controlled Amortization
Classes that are designed to provide increased protection against prepayment
risk by transferring that risk to one or more Companion Classes. Unless
otherwise specified in the related Prospectus Supplement, each Controlled
Amortization Class will either be a Planned Amortization Class (a 'PAC') or a
Targeted Amortization Class (a 'TAC'). In general, distributions of principal on
a PAC are made in accordance with a specified amortization schedule so long as
prepayments on the underlying Mortgage Loans occur within a specified range of
constant prepayment rates and, as described below, so long as one or more
Companion Classes remain to absorb excess cash flows and make up for shortfalls.
For example, if the rate of prepayments is significantly higher than expected,
the excess prepayments may retire the Companion Classes much earlier than
expected, thus leaving the PAC without further prepayment protection. A TAC is
similar to a PAC, but a TAC structure generally does not draw on Companion
Classes to make up cash flow shortfalls, and will generally not provide
protection to the TAC against the risk that prepayments occur more slowly than
expected.
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In general, the reduction of prepayment risk afforded to a Controlled
Amortization Class comes at the expense of one or more Companion Classes of the
same series (any of which may also be a class of Offered Certificates) which
absorb a disproportionate share of the overall prepayment risk of a given
structure. As more particularly described in the related Prospectus Supplement,
the holders of a Companion Class will receive a disproportionately large share
of prepayments when the rate of prepayment exceeds the rate assumed in
structuring the Controlled Amortization Class, and (in the case of a Companion
Class that supports a PAC) a disproportionately small share of prepayments (or
no prepayments) when the rate of prepayment falls below that assumed rate. Thus,
as and to the extent described in the related Prospectus Supplement, a Companion
Class will absorb a disproportionate share of the risk that a relatively fast
rate of prepayments will result in the early retirement of the investment, that
is, 'call risk,' and, if applicable, the risk that a relatively slow rate of
prepayments will extend the average life of the investment, that is, 'extension
risk' that would otherwise be allocated to the related Controlled Amortization
Class. Accordingly, Companion Classes can exhibit significant average life
variability.
OTHER FACTORS AFFECTING YIELD, WEIGHTED AVERAGE LIFE AND MATURITY
Balloon Payments; Extensions of Maturity. Some or all of the Mortgage
Loans included in a particular Trust Fund may require that balloon payments be
made at maturity. 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 Mortgage Loans that require
balloon payments may default at maturity, or that the maturity of such a
Mortgage Loan may be extended 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 Master
Servicer or a Special Servicer, to the extent and under the circumstances set
forth herein and in the related Prospectus Supplement, may be authorized to
modify Mortgage Loans that are in default or as to which a payment default is
imminent. Any defaulted balloon payment or modification that extends the
maturity of a Mortgage Loan may delay distributions of principal on a class of
Offered Certificates and thereby extend the weighted average life of such
Certificates and, if such Certificates were purchased at a discount, reduce the
yield thereon.
Negative Amortization. The weighted average life of a class of
Certificates can be affected by Mortgage Loans that permit negative
amortization. In general, such Mortgage Loans by their terms limit the amount by
which scheduled payments may adjust in response to changes in Mortgage Rates
and/or provide that scheduled payment amounts will adjust less frequently than
the Mortgage Rates. Accordingly, during a period of rising interest rates, the
scheduled payment on a Mortgage Loan that permits negative amortization may be
less than the amount necessary to amortize the loan fully over its remaining
amortization schedule and pay interest at the then applicable Mortgage Rate. In
that case, the Mortgage Loan balance would amortize more slowly than necessary
to repay it over such schedule and, if the amount of scheduled payment were less
than the amount necessary to pay current interest at the applicable Mortgage
Rate, the loan balance would negatively amortize to the extent of the amount of
the interest shortfall. Conversely, during a period of declining interest rates,
the scheduled payment on such a Mortgage Loan may exceed the amount necessary to
amortize the loan fully over its remaining amortization schedule and pay
interest at the then applicable Mortgage Rate. In that case, the excess would be
applied to principal, thereby resulting in amortization at a rate faster than
necessary to repay the Mortgage Loan balance over such schedule.
A slower or negative rate of Mortgage Loan amortization would
correspondingly be reflected in a slower or negative rate of amortization for
one or more classes of Certificates of the related series. Accordingly, the
weighted average lives of Mortgage Loans that permit negative amortization (and
that of the classes of Certificates to which any such negative amortization
would be allocated or which would bear the effects of a slower rate of
amortization on such Mortgage Loans) may increase as a result of such feature. A
faster rate of Mortgage Loan amortization will shorten the weighted average life
of such Mortgage Loans and, correspondingly, the weighted average lives of those
classes of Certificates then entitled to a portion of the principal payments on
such Mortgage Loans. The related Prospectus
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Supplement will describe, if applicable, the manner in which negative
amortization in respect of the Mortgage Loans in any Trust Fund is allocated
among the respective classes of Certificates of the related series.
Foreclosures and Payment Plans. The number of foreclosures and the
principal amount of the Mortgage Loans that are foreclosed in relation to the
number and principal amount of Mortgage Loans that are repaid in accordance with
their terms will affect the weighted average lives of those Mortgage Loans and,
accordingly, the weighted average lives of and yields on the Certificates of the
related series. 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 proceedings, may also have an
effect upon the payment patterns of particular Mortgage Loans and thus the
weighted average lives of and yields on the Certificates of the related series.
Losses and Shortfalls on the Mortgage Assets. The yield to holders of the
Offered Certificates of any series will directly depend on the extent to which
such holders are required to bear the effects of any losses or shortfalls in
collections arising out of defaults on the Mortgage Loans in the related Trust
Fund and the timing of such losses and shortfalls. In general, the earlier that
any such loss or shortfall occurs, the greater will be the negative effect on
yield for any class of Certificates that is required to bear the effects
thereof.
The amount of any losses or shortfalls in collections on the Mortgage
Assets in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of Credit Support) will be allocated among
the respective classes of Certificates of the related series in the priority and
manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may result in reductions in the entitlements to interest and/or Certificate
Balances of one or more such classes of Certificates, or may be effected simply
by a prioritization of payments among such classes of Certificates. The yield to
maturity on a class of Subordinate Certificates may be extremely sensitive to
losses and shortfalls in collections on the Mortgage Loans in the related Trust
Fund.
Additional Certificate Amortization. In addition to entitling the holders
thereof to a specified portion (which may range from none to all) of the
principal payments received on the Mortgage Assets in the related Trust Fund,
one or more classes of Certificates of any series, including one or more classes
of Offered Certificates of such series, may provide for distributions of
principal thereof from (i) amounts attributable to interest accrued but not
currently distributable on one or more classes of Accrual Certificates, (ii)
Excess Funds or (iii) any other amounts described in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement,
'Excess Funds' will, in general, represent that portion of the amounts
distributable in respect of the Certificates of any series on any Distribution
Date that represent (i) interest received or advanced on the Mortgage Assets in
the related Trust Fund that is in excess of the interest currently distributable
on the Certificates of such series, as well as any interest accrued but not
currently distributable on any Accrual Certificates of such series, or (ii)
Prepayment Premiums, payments from Equity Participations or any other amounts
received on the Mortgage Assets in the related Trust Fund that do not constitute
interest thereon or principal thereof.
The amortization of any class of Certificates out of the sources described
in the preceding paragraph would shorten the weighted average life of such
Certificates and, if such Certificates were purchased at a premium, reduce the
yield thereon. The related Prospectus Supplement will discuss the relevant
factors to be considered in determining whether distributions of principal of
any class of Certificates out of such sources would have any material effect on
the rate at which such Certificates are amortized.
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THE DEPOSITOR
Merrill Lynch Mortgage Investors, Inc., the Depositor, is a Delaware
corporation organized on June 13, 1986 as a wholly-owned limited purpose finance
subsidiary of Merrill Lynch Mortgage Capital Inc. (a wholly-owned indirect
subsidiary of Merrill Lynch & Co.). The Depositor maintains its principal office
at World Financial Center, North Tower-Fifteenth Floor, 250 Vesey Street, New
York, New York 10281-1315. Its telephone number is (212) 449-0336. The Depositor
does not have, nor is it expected in the future to have, any significant assets.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates of any
series will be applied by the Depositor to the purchase of Trust Assets or will
be used by the Depositor for general corporate purposes. The Depositor expects
to sell the Certificates from time to time, but the timing and amount of
offerings of Certificates will depend on a number of factors, including the
volume of Mortgage Assets acquired by the Depositor, prevailing interest rates,
availability of funds and general market conditions.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates of each series will consist of one or more classes and
will represent the entire beneficial ownership interest in the Trust Fund
created pursuant to the related Pooling Agreement. Each series of Certificates
may consist of one or more classes of Certificates (including classes of Offered
Certificates) that (i) provide for the accrual of interest thereon at a fixed,
variable or adjustable rate; (ii) are senior (collectively, 'Senior
Certificates') or subordinate (collectively, 'Subordinate Certificates') to one
or more other classes of Certificates in entitlement to certain distributions on
the Certificates; (iii) are entitled to distributions of principal, with
disproportionately small, nominal or no distributions of interest (collectively,
'Stripped Principal Certificates'); (iv) are entitled to distributions of
interest, with disproportionately small, nominal or no distributions of
principal (collectively, 'Stripped Interest Certificates'); (v) provide for
distributions of principal and/or interest thereon that commence only after the
occurrence of certain events, such as the retirement of one or more other
classes of Certificates of such series; (vi) provide for distributions of
principal to be made, from time to time or for designated periods, at a rate
that is faster (and, in some cases, substantially faster) or slower (and, in
some cases, substantially slower) than the rate at which payments or other
collections of principal are received on the Mortgage Assets in the related
Trust Fund; or (vii) provide for distributions of principal to be made, subject
to available funds, based on a specified principal payment schedule or other
methodology.
Each class of Offered Certificates of a series will be issued in minimum
denominations corresponding to the Certificate Balances or, in case of Stripped
Interest Certificates or REMIC Residual Certificates, Notional Amounts or
percentage interests, specified in the related Prospectus Supplement. As
provided in the related Prospectus Supplement, one or more classes of Offered
Certificates of any series may be issued in fully registered, definitive form
(such Certificates, 'Definitive Certificates') or may be offered in book-entry
format (such Certificates, 'Book-Entry Certificates') through the facilities of
The Depository Trust Company ('DTC'). The Offered Certificates of each series
(if issued as Definitive Certificates) may be transferred or exchanged, subject
to any restrictions on transfer described in the related Prospectus Supplement,
at the location specified in the related Prospectus Supplement, without the
payment of any service charge, other than any tax or other governmental charge
payable in connection therewith. Interests in a class of Book-Entry Certificates
will be transferred on the book-entry records of DTC and its participating
organizations. See 'Risk Factors -- Limited Liquidity', ' -- Limited Assets' and
' -- Book-Entry Registration'.
DISTRIBUTIONS
Distributions on the Certificates of each series will be made by or on
behalf of the related Trustee or Master Servicer on each Distribution Date as
specified in the related Prospectus Supplement from
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the Available Distribution Amount for such series and such Distribution Date.
Unless otherwise provided in the related Prospectus Supplement, the 'Available
Distribution Amount' for any series of Certificates and any Distribution Date
will refer to the total of all payments or other collections (or advances in
lieu thereof) on, under or in respect of the Mortgage Assets and any other
assets included in the related Trust Fund that are available for distribution to
the Certificateholders of such series on such date. The particular components of
the Available Distribution Amount for any series on each Distribution Date will
be more specifically described in the related Prospectus Supplement.
Except as otherwise specified in the related Prospectus Supplement,
distributions on the Certificates of each series (other than the final
distribution in retirement of any such Certificate) will be made to the persons
in whose names such Certificates are registered at the close of business on the
last business day of the month preceding the month in which the applicable
Distribution Date occurs (the 'Record Date'), and the amount of each
distribution will be determined as of the close of business on the date (the
'Determination Date') specified in the related Prospectus Supplement. All
distributions with respect to each class of Certificates on each Distribution
Date will be allocated pro rata among the outstanding Certificates in such
class. Payments will be made either by wire transfer in immediately available
funds to the account of a Certificateholder at a bank or other entity having
appropriate facilities therefor, if such Certificateholder has provided the
Trustee or other person required to make such payments with wiring instructions
(which may be provided in the form of a standing order applicable to all
subsequent distributions) no later than the date specified in the related
Prospectus Supplement (and, if so provided in the related Prospectus Supplement,
such Certificateholder holds Certificates in the requisite amount or
denomination specified therein), or by check mailed to the address of such
Certificateholder as it appears on the Certificate Register; provided, however,
that the final distribution in retirement of any class of Certificates (whether
Definitive Certificates or Book-Entry Certificates) will be made only upon
presentation and surrender of such Certificates at the location specified in the
notice to Certificateholders of such final distribution.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of Certificates of each series (other than certain classes of
Stripped Principal Certificates and certain REMIC Residual Certificates that
have no Pass-Through Rate) may have a different Pass-Through Rate, which may be
fixed, variable or adjustable. The related Prospectus Supplement will specify
the Pass-Through Rate or, in the case of a variable or adjustable Pass-Through
Rate, the method for determining the Pass-Through Rate, for each class. Unless
otherwise specified in the related Prospectus Supplement, interest on the
Certificates of each series will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
Distributions of interest in respect of the Certificates of any class
(other than any class of Certificates that will be entitled to distributions of
accrued interest commencing only on the Distribution Date, or under the
circumstances, specified in the related Prospectus Supplement ('Accrual
Certificates'), and other than any class of Stripped Principal Certificates or
REMIC Residual Certificates that is not entitled to any distributions of
interest) will be made on each Distribution Date based on the Accrued
Certificate Interest for such class and such Distribution Date, subject to the
sufficiency of the portion of the Available Distribution Amount allocable to
such class on such Distribution Date. Prior to the time interest is
distributable on any class of Accrual Certificates, the amount of Accrued
Certificate Interest otherwise distributable on such class will be added to the
Certificate Balance thereof on each Distribution Date. With respect to each
class of Certificates (other than certain classes of Stripped Interest
Certificates and REMIC Residual Certificates), 'Accrued Certificate Interest'
for each Distribution Date will be equal to interest at the applicable
Pass-Through Rate accrued for a specified period (generally the period between
Distribution Dates) on the outstanding Certificate Balance thereof immediately
prior to such Distribution Date. Unless otherwise provided in the related
Prospectus Supplement, Accrued Certificate Interest for each Distribution Date
on Stripped Interest Certificates will be similarly calculated except that it
will accrue on a notional amount (a 'Notional Amount') that is either (i) based
on the principal balances of some or all of the Mortgage Assets in the related
Trust Fund or (ii) equal to the Certificate Balances of one or more other
classes of Certificates of the same series. Reference to a Notional Amount with
respect to a class of
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Stripped Interest Certificates is solely for convenience in making certain
calculations and does not represent the right to receive any distributions of
principal. If so specified in the related Prospectus Supplement, the amount of
Accrued Certificate Interest that is otherwise distributable on (or, in the case
of Accrual Certificates, that may otherwise be added to the Certificate Balance
of) one or more classes of the Certificates of a series will be reduced to the
extent that any Prepayment Interest Shortfalls, as described under 'Yield and
Maturity Considerations -- Certain Shortfalls in Collections of Interest',
exceed the amount of any sums (including, if and to the extent specified in the
related Prospectus Supplement, the Master Servicer's servicing compensation)
that are applied to offset such shortfalls. The particular manner in which such
shortfalls will be allocated among some or all of the classes of Certificates of
that series will be specified in the related Prospectus Supplement. The related
Prospectus Supplement will also describe the extent to which the amount of
Accrued Certificate Interest that is otherwise distributable on (or, in the case
of Accrual Certificates, that may otherwise be added to the Certificate Balance
of) a class of Offered Certificates may be reduced as a result of any other
contingencies, including delinquencies, losses and deferred interest on or in
respect of the Mortgage Assets in the related Trust Fund. Unless otherwise
provided in the related Prospectus Supplement, any reduction in the amount of
Accrued Certificate Interest otherwise distributable on a class of Certificates
by reason of the allocation to such class of a portion of any deferred interest
on or in respect of the Mortgage Assets in the related Trust Fund will result in
a corresponding increase in the Certificate Balance of such class. See 'Risk
Factors -- Prepayments; Average Life of Certificates; Yields' and 'Yield and
Maturity Considerations'.
DISTRIBUTIONS OF CERTIFICATE PRINCIPAL
Each class of Certificates of each series (other than certain classes of
Stripped Interest Certificates of REMIC Residual Certificates) will have a
'Certificate Balance' which, at any time, will equal the then maximum amount
that the holders of Certificates of such class will be entitled to receive in
respect of principal out of the future cash flow on the Mortgage Assets and
other assets included in the related Trust Fund. The outstanding Certificate
Balance of a class of Certificates will be reduced by distributions of principal
made thereon from time to time and, if so provided in the related Prospectus
Supplement, further by any losses incurred in respect of the related Mortgage
Assets allocated thereto from time to time. In turn, the outstanding Certificate
Balance of a class of Certificates may be increased as a result of any deferred
interest on or in respect of the related Mortgage Assets that is allocated
thereto from time to time, and will be increased, in the case of a class of
Accrual Certificates prior to the Distribution Date on which distributions of
interest thereon are required to commence, by the amount of any Accrued
Certificate Interest in respect thereof (reduced as described above). Unless
otherwise provided in the related Prospectus Supplement, the initial aggregate
Certificate Balance of all classes of a series of Certificates will not be
greater than the aggregate outstanding principal balance of the related Mortgage
Assets as of the applicable Cut-off Date, after application of scheduled
payments due on or before such date, whether or not received. As and to the
extent described in the related Prospectus Supplement, distributions of
principal with respect to a series of Certificates will be made on each
Distribution Date to the holders of the class or classes of Certificates of such
series entitled thereto until the Certificate Balances of such Certificates have
been reduced to zero. Distributions of principal with respect to one or more
classes of Certificates may be made at a rate that is faster (and, in some
cases, substantially faster) than the rate at which payments or other
collections of principal are received on the Mortgage Assets in the related
Trust Fund, may not commence until the occurrence of certain events, such as the
retirement of one or more other classes of Certificates of the same series, or
may be made at a rate that is slower (and, in some cases, substantially slower)
than the rate at which payments or other collections of principal are received
on such Mortgage Assets. In addition, distributions of principal with respect to
one or more classes of Certificates (each such class, a 'Controlled Amortization
Class') may be made, subject to available funds, based on a specified principal
payment schedule and, with respect to one or more classes of Certificates (each
such class, a 'Companion Class'), may be contingent on the specified principal
payment schedule for a Controlled Amortization Class of the same series and the
rate at which payments and other collections of principal on the Mortgage Assets
in the related Trust Fund are received. Unless otherwise specified in the
related
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Prospectus Supplement, distributions of principal of any class of Certificates
will be made on a pro rata basis among all of the Certificates of such class.
DISTRIBUTIONS ON THE CERTIFICATES IN RESPECT OF PREPAYMENT PREMIUMS
OR IN RESPECT OF EQUITY PARTICIPATIONS
If so provided in the related Prospectus Supplement, Prepayment Premiums or
payments in respect of Equity Participations received on or in connection with
the Mortgage Assets in any Trust Fund will be distributed on each Distribution
Date to the holders of the class of Certificates of the related series entitled
thereto in accordance with the provisions described in such Prospectus
Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
The amount of any losses or shortfalls in collections on the Mortgage
Assets in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of Credit Support) will be allocated among
the respective classes of Certificates of the related series in the priority and
manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may result in reductions in the entitlements to interest and/or in the
Certificate Balances of one or more such classes of Certificates, or may be
effected simply by a prioritization of payments among such classes of
Certificates.
ADVANCES IN RESPECT OF DELINQUENCIES
If and to the extent provided in the related Prospectus Supplement, the
related Master Servicer and/or other specified person (including a provider of
Credit Support) may be obligated to advance, or have the option of advancing, on
or before each Distribution Date, from its or their own funds or from excess
funds held in the related Certificate Account that are not part of the Available
Distribution Amount for the related series of Certificates for such Distribution
Date, an amount up to the aggregate of any payments of principal (other than any
balloon payments) and interest that were due on or in respect of such Mortgage
Loans during the related Due Period and were delinquent on the related
Determination Date. Unless otherwise provided in the related Prospectus
Supplement, a 'Due Period' is the period between Distribution Dates, and
scheduled payments on the Mortgage Loans in any Trust Fund that became due
during a given Due Period will, to the extent received by the related
Determination Date or advanced by the related Master Servicer or other specified
person, be distributed on the Distribution Date next succeeding such
Determination Date.
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. Accordingly, all
advances made from the advancing person's own funds will be reimbursable out of
related recoveries on the Mortgage Loans (including amounts received under any
instrument of Credit Support) respecting which such advances were made (as to
any Mortgage Loan, 'Related Proceeds') and such other specific sources as may be
identified in the related Prospectus Supplement, including in the case of a
series that includes one or more classes of Subordinate Certificates,
collections on other Mortgage Loans in the related Trust Fund that would
otherwise be distributable to the holders of one or more classes of such
Subordinate Certificates. No advance will be required to be made by the Master
Servicer or by any other person if, in the good faith judgment of the Master
Servicer or such other person, such advance would not be recoverable from
Related Proceeds or another specifically identified source (any such advance, a
'Nonrecoverable Advance'); and, if previously made by a Master Servicer or
another person, a Nonrecoverable Advance will be reimbursable from any amounts
in the related Certificate Account prior to any distributions being made to the
related series of Certificateholders.
If advances have been made from excess funds in a Certificate Account, the
Master Servicer or other person that advanced such funds will be required to
replace such funds in the Certificate Account on any future Distribution Date to
the extent that funds then in the Certificate Account are insufficient to permit
full distributions to Certificateholders on such date. If so specified in the
related Prospectus Supplement, the obligation of a Master Servicer or other
specified person to make advances may be
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secured by a cash advance reserve fund or a surety bond. If applicable,
information regarding the characteristics of, and the identity of any obligor
on, any such surety bond, will be set forth in the related Prospectus
Supplement.
If and to the extent so provided in the related Prospectus Supplement, any
entity making advances will be entitled to receive interest thereon for the
period that such advances are outstanding at the rate specified in such
Prospectus Supplement, and such entity will be entitled to payment of such
interest periodically from general collections on the Mortgage Loans in the
related Trust Fund prior to any payment to Certificateholders or as otherwise
provided in the related Pooling Agreement and described in such Prospectus
Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust Fund that includes MBS will describe any comparable
advancing obligation of a party to the related Pooling Agreement or of a party
to the related MBS Agreement.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, together with the distribution to the holders of
each class of the Offered Certificates of a series, a Master Servicer or
Trustee, as provided in the related Prospectus Supplement, will forward to each
such holder, a statement (a 'Distribution Date Statement') that, unless
otherwise provided in the related Prospectus Supplement, will set forth, among
other things, in each case to the extent applicable:
(i) the amount of such distribution to holders of Certificates of such
class that was applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of Certificates of
such class that is allocable to Accrued Certificate Interest;
(iii) the amount, if any, of such distribution to holders of
Certificates of such class that is allocable to (A) Prepayment Premiums and
(B) payments on account of Equity Participations;
(iv) the amount of servicing compensation received by the related
Master Servicer (and, if payable directly out of the related Trust Fund, by
any Special Servicer and any Sub-Servicer) and such other customary
information as such Master Servicer or the related Trustee, as the case may
be, deems necessary or desirable, or that a Certificateholder reasonably
requests, to enable Certificateholders to prepare their tax returns;
(v) the aggregate amount of advances included in such distribution,
and the aggregate amount of unreimbursed advances at the close of business
on such Distribution Date;
(vi) the aggregate principal balance of the related Mortgage Loans on,
or as of a specified date shortly prior to, such Distribution Date;
(vii) the number and aggregate principal balance of any Mortgage Loans
in respect of which (A) one scheduled payment is delinquent, (B) two
scheduled payments are delinquent, (C) three or more scheduled payments are
delinquent and (D) foreclosure proceedings have been commenced;
(viii) with respect to each Mortgage Loan that is delinquent in
respect of three or more scheduled payments, (A) the loan number thereof,
(B) the unpaid balance thereof, (C) whether the delinquency is in respect
of any balloon payment, (D) the aggregate amount of unreimbursed servicing
expenses and unreimbursed advances in respect thereof, (E) if applicable,
the aggregate amount of any interest accrued and payable to the related
Master Servicer, a Special Servicer and/or any other entity on related
servicing expenses and related advances, (F) whether a notice of
acceleration has been sent to the borrower and, if so, the date of such
notice and (G) a brief description of the status of any foreclosure
proceedings or negotiations with the borrower;
(ix) with respect to any Mortgage Loan liquidated during the related
Prepayment Period (that is, the specified period, generally equal in length
to the time period between Distribution Dates, during which prepayments and
other unscheduled collections on the Mortgage Loans in the related Trust
Fund must be received in order to be distributed on a particular
Distribution Date) in connection with a default thereon or by reason of
being purchased out of the related Trust Fund,
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(A) the loan number thereof, (B) the manner in which it was liquidated, (C)
the aggregate amount of Liquidation Proceeds received, (D) the portion of
such Liquidation Proceeds payable or reimbursable to the related Master
Servicer or a Special Servicer in respect of such Mortgage Loan and (E) the
amount of any loss to Certificateholders;
(x) with respect to each Mortgaged Property acquired through
foreclosure, deed-in-lieu of foreclosure or otherwise (an 'REO Property')
and included in the related Trust Fund as of the end of the related Due
Period or Prepayment Period, as applicable, (A) the loan number of the
related Mortgage Loan, (B) the date of acquisition, (C) the principal
balance of the related Mortgage Loan (calculated as if such Mortgage Loan
were still outstanding taking into account certain limited modifications to
the terms thereof specified in the related Pooling Agreement), (D) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof and (E) if applicable, the aggregate amount of
interest accrued and payable to the related Master Servicer, a Special
Servicer and/or any other entity on related servicing expenses and related
advances;
(xi) with respect to any REO Property sold during the related
Prepayment Period, (A) the loan number of the related Mortgage Loan, (B)
the aggregate amount of sales proceeds, (C) the portion of such sales
proceeds payable or reimbursable to the related Master Servicer or a
Special Servicer in respect of such REO Property or the related Mortgage
Loan and (D) the amount of any loss to Certificateholders in respect of the
related Mortgage Loan;
(xii) the Certificate Balance or Notional Amount, as the case may be,
of each class of Certificates (including any class of Certificates not
offered hereby) at the close of business on such Distribution Date,
separately identifying any reduction in such Certificate Balance due to the
allocation of any losses in respect of the related Mortgage Loans and any
increase in the Certificate Balance of a class of Accrual Certificates in
the event that Accrued Certificate Interest has been added to such balance;
(xiii) the aggregate amount of principal prepayments made on the
Mortgage Loans during the related Prepayment Period;
(xiv) the amount deposited in or withdrawn from any reserve fund on
such Distribution Date, and the amount remaining on deposit in such reserve
fund as of the close of business on such Distribution Date;
(xv) the amount of any Accrued Certificate Interest due but not paid
on such class of Offered Certificates at the close of business on such
Distribution Date;
(xvi) if such class of Offered Certificates has a variable
Pass-Through Rate or an adjustable Pass-Through Rate, the Pass-Through Rate
applicable thereto for such Distribution Date and, if determinable, for the
next succeeding Distribution Date; and
(xvii) if the related Trust Fund includes one or more instruments of
Credit Support, such as a letter of credit, an insurance policy and/or a
surety bond, the amount of coverage under each such instrument as of the
close of business on such Distribution Date.
In the case of information furnished pursuant to subclauses (i)-(iv) above,
the amounts will be expressed as a dollar amount per minimum denomination of the
relevant class of Offered Certificates or per a specified portion of such
minimum denomination. The Prospectus Supplement for each series of Offered
Certificates will describe any additional information to be included in reports
to the holders of such Certificates.
Within a reasonable period of time after the end of each calendar year, the
related Master Servicer or Trustee, as the case may be, will be required to
furnish to each person who at any time during the calendar year was a holder of
an Offered Certificate a statement containing the information set forth in
subclauses (i)-(iv) above, aggregated for such calendar year or the applicable
portion thereof during which such person was a Certificateholder. Such
obligation will be deemed to have been satisfied to the extent that
substantially comparable information is provided pursuant to any requirements of
the Code as are from time to time in force. See, however, 'Description of the
Certificates -- Book-Entry Registration and Definitive Certificates'.
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If the Trust Fund for a series of Certificates includes MBS, the ability of
the related Master Servicer or Trustee, as the case may be, to include in any
Distribution Date Statement information regarding the mortgage loans underlying
such MBS will depend on the reports received with respect to such MBS. In such
cases, the related Prospectus Supplement will describe the loan-specific
information to be included in the Distribution Date Statements that will be
forwarded to the holders of the Offered Certificates of that series in
connection with distributions made to them.
VOTING RIGHTS
The voting rights evidenced by each series of Certificates (as to such
series, the 'Voting Rights') will be allocated among the respective classes of
such series in the manner described in the related Prospectus Supplement.
Certificateholders will generally have a right to vote only with respect to
required consents to certain amendments to the related Pooling Agreement and as
otherwise specified in the related Prospectus Supplement. See 'Description of
the Pooling Agreements -- Amendment'. The holders of specified amounts of
Certificates of a particular series will have the collective right to remove the
related Trustee and also to cause the removal of the related Master Servicer in
the case of an Event of Default on the part of the Master Servicer. See
'Description of the Pooling Agreements -- Events of Default', ' -- Rights Upon
Event of Default' and ' -- Resignation and Removal of the Trustee'.
TERMINATION
The obligations created by the Pooling Agreement for each series of
Certificates will terminate upon the payment (or provision for payment) to
Certificateholders of that series of all amounts held in the related Certificate
Account, or otherwise by the related Master Servicer or Trustee or by a Special
Servicer, and required to be paid to such Certificateholders pursuant to such
Pooling Agreement following the earlier of (i) the final payment or other
liquidation of the last Mortgage Asset subject thereto or the disposition of all
property acquired upon foreclosure of any Mortgage Loan subject thereto and (ii)
the purchase of all of the assets of the related Trust Fund by the party
entitled to effect such termination, under the circumstances and in the manner
that will be described in the related Prospectus Supplement. Written notice of
termination of a Pooling Agreement will be given to each Certificateholder of
the related series, and the final distribution will be made only upon
presentation and surrender of the Certificates of such series at the location to
be specified in the notice of termination.
If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination through the repurchase
of the assets in the related Trust Fund by a party that will be specified
therein, under the circumstances and in the manner set forth therein. If so
provided in the related Prospectus Supplement, upon the reduction of the
Certificate Balance of a specified class or classes of Certificates by a
specified percentage or amount, a party identified therein will be authorized or
required to solicit bids for the purchase of all the assets of the related Trust
Fund, or of a sufficient portion of such assets to retire such class or classes,
under the circumstances and in the manner set forth therein.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the related Prospectus Supplement, one or more classes of
the Offered Certificates of any series will be offered in book-entry format
through the facilities of The Depository Trust Company ('DTC'), and each such
class will be represented by one or more global Certificates registered in the
name of DTC or its nominee.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a 'banking corporation' within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a 'clearing corporation' within the
meaning of the New York Uniform Commercial Code, and a 'clearing agency'
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participating organizations
('Participants') and facilitate the clearance and settlement of securities
transactions between Participants through electronic computerized book-
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entry changes in their accounts, thereby eliminating the need for physical
movement of securities certificates. 'Direct Participants', which maintain
accounts with DTC, include securities brokers and dealers (including Merrill
Lynch, Pierce, Fenner & Smith Incorporated), banks, trust companies and clearing
corporations and may include certain other organizations. DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system also is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
('Indirect Participants'). The Rules applicable to DTC and its Participants are
on file with the Commission.
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the Book-Entry
Certificates on DTC's records. The ownership interest of each actual purchaser
of a Book-Entry Certificate (a 'Certificate Owner') will in turn be recorded on
the records of Direct and Indirect Participants. Certificate Owners will not
receive written confirmation from DTC of their purchases, but Certificate Owners
are expected to receive written confirmations providing details of such
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participant through which each Certificate Owner entered into the
transaction. Transfers of ownership interest in the Book-Entry Certificates will
be accomplished by entries made on the books of Participants acting on behalf of
Certificate Owners. Certificate Owners will not receive certificates
representing their ownership interests in the Book-Entry Certificates, except in
the event that use of the book-entry system for the Book-Entry Certificates of
any series is discontinued as described below.
DTC will not know the identity of actual Certificate Owners of the
Book-Entry Certificates; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Certificates are credited. The Participants
will remain responsible for keeping account of their holdings on behalf of their
customers. Notices and other communications conveyed by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Certificate Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Distributions on the Book-Entry Certificates will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the related Distribution
Date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on such date.
Disbursement of such distributions by Participants to Certificate Owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
'street name', and will be the responsibility of each such Participant (and not
of DTC, the Depositor or any Trustee or Master Servicer), subject to any
statutory or regulatory requirements as may be in effect from time to time.
Under a book-entry system, Certificate Owners may receive payments after the
related Distribution Date.
Unless otherwise provided in the related Prospectus Supplement, the only
'Certificateholder' (as such term is used in the related Pooling Agreement) of a
Book-Entry Certificate will be the nominee of DTC, and the Certificate Owners
will not be recognized as Certificateholders under the Pooling Agreement.
Certificate Owners will be permitted to exercise the rights of
Certificateholders under the related Pooling Agreement only indirectly through
the Participants who in turn will exercise their rights through DTC. The
Depositor is informed that DTC will take action permitted to be taken by a
Certificateholder under a Pooling Agreement only at the direction of one or more
Participants to whose account with DTC interests in the Book-Entry Certificates
are credited.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain Certificate Owners, the ability of a
Certificate Owner to pledge its interest in Book-Entry Certificates to persons
or entities that do not participate in the DTC system, or otherwise take actions
in respect of its interest in Book-Entry Certificates, may be limited due to the
lack of a physical certificate evidencing such interest.
Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued in fully
registered, certificated form (as so issued, 'Definitive Certificates') to
Certificate Owners or their nominees, rather than to DTC or its nominee, only if
(i) the
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Depositor advises the Trustee in writing that DTC is no longer willing or able
to properly discharge its responsibilities as depository with respect to such
Certificates and the Depositor is unable to locate a qualified successor or (ii)
the Depositor, at its option, elects to terminate the book-entry system through
DTC with respect to such Certificates. Upon the occurrence of either of the
events described in the preceding sentence, DTC will be required to notify all
Participants of the availability through DTC of Definitive Certificates. Upon
surrender by DTC of the certificate or certificates representing a class of
Book-Entry Certificates, together with instructions for reregistration, the
Trustee or other designated party will be required to issue to the Certificate
Owners identified in such instructions the Definitive Certificates to which they
are entitled, and thereafter the holders of such Definitive Certificates will be
recognized as Certificateholders under the related Pooling Agreement.
DESCRIPTION OF THE POOLING AGREEMENTS
GENERAL
The Certificates of each series will be issued pursuant to a pooling and
servicing agreement or other agreement specified in the related Prospectus
Supplement (in either case, a 'Pooling Agreement'). In general, the parties to a
Pooling Agreement will include the Depositor, the Trustee, the Master Servicer
and, in some cases, a Special Servicer appointed as of the date of the Pooling
Agreement. However, a Pooling Agreement that relates to a Trust Fund that
consists solely of MBS may not include a Master Servicer or other servicer as a
party. All parties to each Pooling Agreement under which Certificates of a
series are issued will be identified in the related Prospectus Supplement.
A form of a Pooling and Servicing Agreement has been filed as an exhibit to
the Registration Statement of which this Prospectus is a part. However, the
provisions of each Pooling Agreement will vary depending upon the nature of the
Certificates to be issued thereunder and the nature of the related Trust Fund.
The following summaries describe certain provisions that may appear in a Pooling
Agreement under which Certificates that evidence interests in Mortgage Loans
will be issued. The Prospectus Supplement for a series of Certificates will
describe any provision of the related Pooling Agreement that materially differs
from the description thereof contained in this Prospectus and, if the related
Trust Fund includes MBS, will summarize all of the material provisions of the
related Pooling Agreement. The summaries herein do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Pooling Agreement for each series of Certificates and the
description of such provisions in the related Prospectus Supplement. As used
herein with respect to any series, the term 'Certificate' refers to all of the
Certificates of that series, whether or not offered hereby and by the related
Prospectus Supplement, unless the context otherwise requires. The Depositor will
provide a copy of the Pooling Agreement (without exhibits) that relates to any
series of Certificates without charge upon written request of a holder of a
Certificate of such series addressed to Merrill Lynch Mortgage Investors, Inc.,
World Financial Center, North Tower-Fifteenth Floor, 250 Vesey Street, New York,
New York 10281-1315. Attention: Secretary.
ASSIGNMENT OF MORTGAGE LOANS; REPURCHASES
At the time of issuance of any series of Certificates, the Depositor will
assign (or cause to be assigned) to the designated Trustee the Mortgage Loans to
be included in the related Trust Fund, together with, unless otherwise specified
in the related Prospectus Supplement, all principal and interest to be received
on or with respect to such Mortgage Loans after the Cut-off Date, other than
principal and interest due on or before the Cut-off Date. The Trustee will,
concurrently with such assignment, deliver the Certificates to or at the
direction of the Depositor in exchange for the Mortgage Loans and the other
assets to be included in the Trust Fund for such series. Each Mortgage Loan will
be identified in a schedule appearing as an exhibit to the related Pooling
Agreement. Such schedule generally will include detailed information that
pertains to each Mortgage Loan included in the related Trust Fund, which
information will typically include the address of the related Mortgaged Property
and type of such property; the Mortgage Rate and, if applicable, the applicable
index, gross margin, adjustment date and any rate cap information; the original
and remaining term to maturity; the original amortization term;
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the original and outstanding principal balance; and the Loan-to-Value Ratio and
Debt Service Coverage Ratio as of the date indicated.
With respect to each Mortgage Loan to be included in a Trust Fund, the
Depositor will deliver (or cause to be delivered) to the related Trustee (or to
a custodian appointed by the Trustee) certain loan documents which, unless
otherwise specified in the related Prospectus Supplement, will include the
original Mortgage Note endorsed, without recourse, to the order of the Trustee,
the original Mortgage (or a certified copy thereof) with evidence of recording
indicated thereon and an assignment of the Mortgage to the Trustee in recordable
form. Unless otherwise provided in the related Prospectus Supplement, the
related Pooling Agreement will require that the Depositor or other party thereto
promptly cause each such assignment of Mortgage to be recorded in the
appropriate public office for real property records.
The related Trustee (or the custodian appointed by the Trustee) will be
required to review the Mortgage Loan documents within a specified period of days
after receipt thereof, and the Trustee (or the custodian) will hold such
documents in trust for the benefit of the Certificateholders of the related
series. Unless otherwise specified in the related Prospectus Supplement, if any
such document is found to be missing or defective, in either case such that
interests of the Certificateholders are materially and adversely affected, the
Trustee (or such custodian) will be required to notify the Master Servicer and
the Depositor, and the Master Servicer will be required to notify the relevant
Mortgage Asset Seller. In that case, and if the Mortgage Asset Seller cannot
deliver the document or cure the defect within a specified number of days after
receipt of such notice, then unless otherwise specified in the related
Prospectus Supplement, the Mortgage Asset Seller will be obligated to replace
the related Mortgage Loan or repurchase it from the Trustee at a price that will
be specified in the related Prospectus Supplement.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the related Prospectus Supplement, the
Depositor will, with respect to each Mortgage Loan in the related Trust Fund,
make or assign certain representations and warranties, (the person making such
representations and warranties, the 'Warranting Party') covering, by way of
example: (i) the accuracy of the information set forth for such Mortgage Loan on
the schedule of Mortgage Loans appearing as an exhibit to the related Pooling
Agreement; (ii) the enforceability of the related Mortgage Note and Mortgage and
the existence of title insurance insuring the lien priority of the related
Mortgage; (iii) the Warranting Party's title to the Mortgage Loan and the
authority of the Warranting Party to sell the Mortgage Loan; and (iv) the
payment status of the Mortgage Loan. Each Warranting Party will be identified in
the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, each
Pooling Agreement will provide that the Master Servicer and/or Trustee will be
required to notify promptly any Warranting Party of any breach of any
representation or warranty made by it in respect of a Mortgage Loan that
materially and adversely affects the interests of the related
Certificateholders. If such Warranting Party cannot cure such breach within a
specified period following the date on which it was notified of such breach,
then, unless otherwise provided in the related Prospectus Supplement, it will be
obligated to repurchase such Mortgage Loan from the Trustee within a specified
period at a price that will be specified in the related Prospectus Supplement.
If so provided in the Prospectus Supplement for a series of Certificates, a
Warranting Party, in lieu of repurchasing a Mortgage Loan as to which a breach
has occurred, will have the option, exercisable upon certain conditions and/or
within a specified period after initial issuance of such series of Certificates,
to replace such Mortgage Loan with one or more other mortgage loans, in
accordance with standards that will be described in the Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, this repurchase
or substitution obligation will constitute the sole remedy available to holders
of Certificates of any series for a breach of representation and warranty by a
Warranting Party. Moreover, neither the Depositor (unless it is the Warranting
Party) nor the Master Servicer will be obligated to purchase or replace a
Mortgage Loan if a Warranting Party defaults on its obligation to do so.
The dates as of which representations and warranties have been made by a
Warranting Party will be specified in the related Prospectus Supplement. In some
cases, such representations and warranties
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will have been made as of a date prior to the date upon which the related series
of Certificates is issued, and thus may not address events that may occur
following the date as of which they were made. However, the Depositor will not
include any Mortgage Loan in the Trust Fund for any series of Certificates if
anything has come to the Depositor's attention that would cause it to believe
that the representations and warranties made in respect of such Mortgage Loan
will not be accurate in all material respects as of such date of issuance.
CERTIFICATE ACCOUNT
General. The Master Servicer and/or the Trustee will, as to each Trust
Fund, establish and maintain or cause to be established and maintained one or
more separate accounts for the collection of payments on the related Mortgage
Loans (collectively, the 'Certificate Account'), which will be established so as
to comply with the standards of each Rating Agency that has rated any one or
more classes of Certificates of the related series. As described in the related
Prospectus Supplement, a Certificate Account may be maintained either as an
interest-bearing or a non-interest-bearing account, and the funds held therein
may be held as cash or invested in United States government securities and other
investment grade obligations specified in the related Pooling Agreement
('Permitted Investments'). Unless otherwise provided in the related Prospectus
Supplement, any interest or other income earned on funds in the Certificate
Account will be paid to the related Master Servicer or Trustee as additional
compensation. If permitted by such Rating Agency or Agencies and so specified in
the related Prospectus Supplement, a Certificate Account may contain funds
relating to more than one series of mortgage pass-through certificates and may
contain other funds representing payments on mortgage loans owned by the related
Master Servicer or serviced by it on behalf of others.
Deposits. Unless otherwise provided in the related Pooling Agreement and
described in the related Prospectus Supplement, the related Master Servicer,
Trustee or Special Servicer will be required to deposit or cause to be deposited
in the Certificate Account for each Trust Fund within a certain period following
receipt (in the case of collections and payments), the following payments and
collections received, or advances made, by the Master Servicer, the Trustee or
any Special Servicer subsequent to the Cut-off Date (other than payments due on
or before the Cut-off Date):
(i) all payments on account of principal, including principal
prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans,
including any default interest collected, in each case net of any portion
thereof retained by the Master Servicer, any Special Servicer or
Sub-Servicer as its servicing compensation or as compensation to the
Trustee;
(iii) all proceeds received under any hazard, title or other insurance
policy that provides coverage with respect to a Mortgaged Property or the
related Mortgage Loan (other than proceeds applied to the restoration of
the property or released to the related borrower in accordance with the
customary servicing practices of the Master Servicer (or, if applicable, a
Special Servicer) and/or the terms and conditions of the related Mortgage
(collectively, 'Insurance Proceeds') and all other amounts received and
retained in connection with the liquidation of defaulted Mortgage Loans or
property acquired in respect thereof, by foreclosure or otherwise
('Liquidation Proceeds'), together with the net operating income (less
reasonable reserves for future expenses) derived from the operation of any
Mortgaged Properties acquired by the Trust Fund through foreclosure or
otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates as
described under 'Description of Credit Support';
(v) any advances made as described under 'Description of the
Certificates -- Advances in Respect of Delinquencies';
(vi) any amounts paid under any Cash Flow Agreement, as described
under 'Description of the Trust Funds -- Cash Flow Agreements';
(vii) all proceeds of the purchase of any Mortgage Loan, or property
acquired in respect thereof, by the Depositor, any Mortgage Asset Seller or
any other specified person as described
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under ' -- Assignment of Mortgage Loans; Repurchases' and
' -- Representations and Warranties; Repurchases', all proceeds of the
purchase of any defaulted Mortgage Loan as described under ' -- Realization
Upon Defaulted Mortgage Loans', and all proceeds of any Mortgage Asset
purchased as described under 'Description of the
Certificates -- Termination' (all of the foregoing, also, 'Liquidation
Proceeds');
(viii) any amounts paid by the Master Servicer to cover Prepayment
Interest Shortfalls arising out of the prepayment of Mortgage Loans as
described under ' -- Servicing Compensation and Payment of Expenses';
(ix) to the extent that any such item does not constitute additional
servicing compensation to the Master Servicer or a Special Servicer, any
payments on account of modification or assumption fees, late payment
charges, Prepayment Premiums or Equity Participations on the Mortgage
Loans;
(x) all payments required to be deposited in the Certificate Account
with respect to any deductible clause in any blanket insurance policy
described under ' -- Hazard Insurance Policies';
(xi) any amount required to be deposited by the Master Servicer or the
Trustee in connection with losses realized on investments for the benefit
of the Master Servicer or the Trustee, as the case may be, of funds held in
the Certificate Account; and
(xii) any other amounts required to be deposited in the Certificate
Account as provided in the related Pooling Agreement and described in the
related Prospectus Supplement.
Withdrawals. Unless otherwise provided in the related Pooling Agreement
and described in the related Prospectus Supplement, a Master Servicer, Trustee
or Special Servicer may make withdrawals from the Certificate Account for each
Trust Fund for any of the following purposes:
(i) to make distributions to the Certificateholders on each
Distribution Date;
(ii) to reimburse the Master Servicer or any other specified person
for unreimbursed amounts advanced by it as described under 'Description of
the Certificates -- Advances in Respect of Delinquencies', such
reimbursement to be made out of amounts received which were identified and
applied by the Master Servicer as late collections of interest (net of
related servicing fees) on and principal of the particular Mortgage Loans
with respect to which the advances were made or out of amounts drawn under
any form of Credit Support with respect to such Mortgage Loans;
(iii) to reimburse the Master Servicer or a Special Servicer for
unpaid servicing fees earned by it and certain unreimbursed servicing
expenses incurred by it with respect to Mortgage Loans in the Trust Fund
and properties acquired in respect thereof, such reimbursement to be made
out of amounts that represent Liquidation Proceeds and Insurance Proceeds
collected on the particular Mortgage Loans and properties, and net income
collected on the particular properties, with respect to which such fees
were earned or such expenses were incurred or out of amounts drawn under
any form of Credit Support with respect to such Mortgage Loans and
properties;
(iv) to reimburse the Master Servicer or any other specified person
for any advances described in clause (ii) above made by it and any
servicing expenses referred to in clause (iii) above incurred by it which,
in the good faith judgment of the Master Servicer or such other person,
will not be recoverable from the amounts described in clauses (ii) and
(iii), respectively, such reimbursement to be made from amounts collected
on other Mortgage Loans in the related Trust Fund or, if and to the extent
so provided by the related Pooling Agreement and described in the related
Prospectus Supplement, only from that portion of amounts collected on such
other Mortgage Loans that is otherwise distributable on one or more classes
of Subordinate Certificates of the related series;
(v) if and to the extent described in the related Prospectus
Supplement, to pay the Master Servicer, a Special Servicer or another
specified entity (including a provider of Credit Support) interest accrued
on the advances described in clause (ii) above made by it and the servicing
expenses described in clause (iii) above incurred by it while such remain
outstanding and unreimbursed;
(vi) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments performed with respect to Mortgaged
Properties that constitute security for defaulted Mortgage Loans, and for
any containment, clean-up or remediation of hazardous wastes and
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materials present on such Mortgaged Properties, as described under
' -- Realization Upon Defaulted Mortgage Loans';
(vii) to reimburse the Master Servicer, the Depositor, or any of their
respective directors, officers, employees and agents, as the case may be,
for certain expenses, costs and liabilities incurred thereby, as and to the
extent described under ' -- Certain Matters Regarding the Master Servicer
and the Depositor';
(viii) if and to the extent described in the related Prospectus
Supplement, to pay the fees of the Trustee;
(ix) to reimburse the Trustee or any of its directors, officers,
employees and agents, as the case may be, for certain expenses, costs and
liabilities incurred thereby, as and to the extent described under
' -- Certain Matters Regarding the Trustee';
(x) to pay the Master Servicer or the Trustee, as additional
compensation, interest and investment income earned in respect of amounts
held in the Certificate Account;
(xi) to pay (generally from related income) for costs incurred in
connection with the operation, management and maintenance of any Mortgaged
Property acquired by the Trust Fund by foreclosure or otherwise;
(xii) if one or more elections have been made to treat the Trust Fund
or designated portions thereof as a REMIC, to pay any federal, state or
local taxes imposed on the Trust Fund or its assets or transactions, as and
to the extent described under 'Certain Federal Income Tax Consequences --
REMICS -- Prohibited Transactions Tax and Other Taxes';
(xiii) to pay for the cost of an independent appraiser or other expert
in real estate matters retained to determine a fair sale price for a
defaulted Mortgage Loan or a property acquired in respect thereof in
connection with the liquidation of such Mortgage Loan or property;
(xiv) to pay for the cost of various opinions of counsel obtained
pursuant to the related Pooling Agreement for the benefit of
Certificateholders;
(xv) to make any other withdrawals permitted by the related Pooling
Agreement and described in the related Prospectus Supplement; and
(xvi) to clear and terminate the Certificate Account upon the
termination of the Trust Fund.
COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer for any mortgage pool, directly or through
Sub-Servicers, will be required to make reasonable efforts to collect all
scheduled Mortgage Loan payments and will be required to follow such collection
procedures as it would follow with respect to mortgage loans that are comparable
to such Mortgage Loans and held for its own account, provided such procedures
are consistent with (i) the terms of the related Pooling Agreement and any
related instrument of Credit Support included in the related Trust Fund, (ii)
applicable law and (iii) the servicing standard specified in the Pooling
Agreement and in the related Prospectus Supplement (the 'Servicing Standard').
The Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining escrow or
impound accounts for payment of taxes, insurance premiums and similar items, or
otherwise monitoring the timely payment of those items; attempting to collect
delinquent payments; supervising foreclosures; conducting property inspections
on a periodic or other basis; managing Mortgaged Properties acquired through or
in lieu of foreclosure (each, an 'REO Property'); and maintaining servicing
records relating to the Mortgage Loans. Unless otherwise specified in the
related Prospectus Supplement, the Master Servicer will be responsible for
filing and settling claims in respect of particular Mortgage Loans under any
applicable instrument of Credit Support. See 'Description of Credit Support'.
MODIFICATIONS, WAIVERS AND AMENDMENTS OF MORTGAGE LOANS
A Master Servicer may agree to modify, waive or amend any term of any
Mortgage Loan serviced by it in a manner consistent with the Servicing Standard;
provided that, unless otherwise set forth in the
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related Prospectus Supplement, the modification, waiver or amendment will not
(i) affect the amount or timing of any scheduled payments of principal or
interest on the Mortgage Loan or (ii) in the judgment of the Master Servicer,
materially impair the security for the Mortgage Loan or reduce the likelihood of
timely payment of amounts due thereon. Unless otherwise provided in the related
Prospectus Supplement, a Master Servicer also may agree to any other
modification, waiver or amendment if, in its judgment (i) a material default on
the Mortgage Loan has occurred or a payment default is imminent and (ii) such
modification, waiver or amendment is reasonably likely to produce a greater
recovery with respect to the Mortgage Loan on a present value basis than would
liquidation.
SUB-SERVICERS
A Master Servicer may delegate its servicing obligations in respect of the
Mortgage Loans serviced by it to one or more third-party servicers (each, a
'Sub-Servicer'), but the Master Servicer will remain liable for such obligations
under the related Pooling Agreement unless otherwise provided in the related
Prospectus Supplement. Unless otherwise provided in the related Prospectus
Supplement, each sub-servicing agreement between a Master Servicer and a
Sub-Servicer (a 'Sub-Servicing Agreement') must provide that, if for any reason
the Master Servicer is no longer acting in such capacity, the Trustee or any
successor Master Servicer may assume the Master Servicer's rights and
obligations under such Sub-Servicing Agreement.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer will be solely liable for all fees owed by it to any Sub-Servicer,
irrespective of whether the Master Servicer's compensation pursuant to the
related Pooling Agreement is sufficient to pay such fees. Each Sub-Servicer will
be reimbursed by the Master Servicer for certain expenditures which it makes,
generally to the same extent the Master Servicer would be reimbursed under a
Pooling Agreement. See ' -- Certificate Account' and ' -- Servicing Compensation
and Payment of Expenses'.
SPECIAL SERVICERS
If and to the extent specified in the related Prospectus Supplement, a
special servicer (the 'Special Servicer') may be a party to the related Pooling
Agreement or may be appointed by the Master Servicer or another specified party
to perform certain specified duties (for example, the servicing of defaulted
Mortgage Loans) in respect of the servicing of the related Mortgage Loans. The
Master Servicer will be liable for the performance of a Special Servicer only
if, and to the extent, set forth in such Prospectus Supplement.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
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 payment of taxes and to otherwise maintain and insure the
related Mortgaged Property. In general, the related Master 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 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
Master Servicer is able to assess the success of any such corrective action or
the need for additional initiatives.
The time within which the Master 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 Master Servicer may not be permitted to accelerate the maturity of
the related
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Mortgage Loan or to foreclose on the Mortgaged Property for a considerable
period of time. See 'Certain Legal Aspects of Mortgage Loans'.
A Pooling Agreement may grant to the Master Servicer, a Special Servicer, a
provider of Credit Support and/or the holder or holders of certain classes of
Certificates of the related series a right of first refusal to purchase from the
Trust Fund, at a predetermined purchase price (which, if insufficient to fully
fund the entitlements of Certificateholders to principal and interest thereon,
will be specified in the related Prospectus Supplement), any Mortgage Loan as to
which a specified number of scheduled payments are delinquent. In addition,
unless otherwise specified in the related Prospectus Supplement, the Master
Servicer may offer to sell any defaulted Mortgage Loan if and when the Master
Servicer determines, consistent with the Servicing Standard, that such a sale
would produce a greater recovery on a present value basis than would liquidation
of the related Mortgaged Property. Unless otherwise provided in the related
Prospectus Supplement, the related Pooling Agreement will require that the
Master Servicer accept the highest cash bid received from any person (including
itself, an affiliate of the Master Servicer or any Certificateholder) that
constitutes a fair price for such defaulted Mortgage Loan. In the absence of any
bid determined in accordance with the related Pooling Agreement to be fair, the
Master Servicer will generally be required to proceed with respect to such
defaulted Mortgage Loan as described below.
If a default on a Mortgage Loan has occurred or, in the Master Servicer's
judgment, is imminent, the Master Servicer, on behalf of the Trustee, may at any
time institute foreclosure proceedings, exercise any power of sale contained in
the related Mortgage, obtain a deed in lieu of foreclosure, or otherwise acquire
title to the related Mortgaged Property, by operation of law or otherwise, if
such action is consistent with the Servicing Standard. Unless otherwise
specified in the related Prospectus Supplement, the Master Servicer may not,
however, acquire title to any Mortgaged Property or take any other action that
would cause the Trustee, for the benefit of Certificateholders of the related
series, or any other specified person to be considered to hold title to, to be a
'mortgagee-in-possession' of, or to be an 'owner' or an 'operator' of such
Mortgaged Property within the meaning of certain federal environmental laws,
unless the Master Servicer has previously determined, based on a report prepared
by a person who regularly conducts environmental audits (which report will be an
expense of the Trust Fund), that:
(i) either 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 into compliance therewith is
reasonably likely to produce a greater recovery on a present value basis
than not taking such actions; and
(ii) either 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, if such circumstances or conditions are present for which any such
action could be required, taking such actions with respect to the 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 Considerations'.
Unless otherwise provided in the related Prospectus Supplement, if title to
any Mortgaged Property is acquired by a Trust Fund as to which a REMIC election
has been made, the Master Servicer, on behalf of the Trust Fund, will be
required to sell the Mortgaged Property within two years of acquisition, unless
(i) the Internal Revenue Service grants an extension of time to sell such
property or (ii) the Trustee receives an opinion of independent counsel to the
effect that the holding of the property by the Trust Fund for more than two
years after its acquisition will not result in the imposition of a tax on the
Trust Fund or cause the Trust Fund to fail to qualify as a REMIC under the Code
at any time that any Certificate is outstanding. Subject to the foregoing, the
Master Servicer will generally be required to solicit bids for any Mortgaged
Property so acquired in such a manner as will be reasonably likely to realize a
fair price for such property. If the Trust Fund acquires title to any Mortgaged
Property, the Master Servicer, on behalf of the Trust Fund, may retain an
independent contractor to manage and operate such property. The retention of an
independent contractor, however, will not
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relieve the Master Servicer of its obligation to manage such Mortgaged Property
in a manner consistent with the Servicing Standard.
If Liquidation Proceeds collected with respect to a defaulted Mortgage Loan
are less than the outstanding principal balance of the defaulted Mortgage Loan
plus interest accrued thereon plus the aggregate amount of reimbursable expenses
incurred by the Master Servicer with respect to such Mortgage Loan, the Trust
Fund will realize a loss in the amount of such difference. The Master Servicer
will be entitled to reimburse itself from the Liquidation Proceeds recovered on
any defaulted Mortgage Loan, prior to the distribution of such Liquidation
Proceeds to Certificateholders, amounts that represent unpaid servicing
compensation in respect of the Mortgage Loan, unreimbursed servicing expenses
incurred with respect to the Mortgage Loan and any unreimbursed advances of
delinquent payments made with respect to the Mortgage Loan.
If any Mortgaged Property suffers damage that the proceeds, if any, of the
related hazard insurance policy are insufficient to fully restore, the Master
Servicer will not be required to expend its own funds to restore the damaged
property unless (and to the extent not otherwise provided in the related
Prospectus Supplement) it determines (i) that such restoration will increase the
proceeds to Certificateholders on liquidation of the Mortgage Loan after
reimbursement of the Master Servicer for its expenses and (ii) that such
expenses will be recoverable by it from related Insurance Proceeds or
Liquidation Proceeds.
HAZARD INSURANCE POLICIES
Unless otherwise specified in the related Prospectus Supplement, each
Pooling Agreement will require the related Master Servicer to cause each
Mortgage Loan borrower to maintain a hazard insurance policy that provides for
such coverage as is required under the related Mortgage or, if the Mortgage
permits the holder thereof to dictate to the borrower the insurance coverage to
be maintained on the related Mortgaged Property, such coverage as is consistent
with the requirements of the Servicing Standard. Unless otherwise specified in
the related Prospectus Supplement, such coverage generally will be in an amount
equal to the lesser of the principal balance owing on such Mortgage Loan and the
replacement cost of the Mortgaged Property, but in either case not less than the
amount necessary to avoid the application of any co-insurance clause contained
in the hazard insurance policy. The ability of the Master Servicer to assure
that hazard insurance proceeds are appropriately applied may be dependent upon
its being named as an additional insured under any hazard insurance policy and
under any other insurance policy referred to below, or upon the extent to which
information concerning covered losses is furnished by borrowers. All amounts
collected by the Master Servicer under any such policy (except for amounts to be
applied to the restoration or repair of the Mortgaged Property or released to
the borrower in accordance with the Master Servicer's normal servicing
procedures and/or to the terms and conditions of the related Mortgage and
Mortgage Note) will be deposited in the related Certificate Account. The Pooling
Agreement may provide that the Master Servicer may satisfy its obligation to
cause each borrower to maintain such a hazard insurance policy by maintaining a
blanket policy insuring against hazard losses on all of the Mortgage Loans in
the related Trust Fund. If such blanket policy contains a deductible clause, the
Master Servicer will be required, in the event of a casualty covered by such
blanket policy, to deposit in the related Certificate Account all sums that
would have been deposited therein but for such deductible clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies covering the Mortgaged Properties will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, most such policies typically do not cover any physical damage
resulting from war, revolution, governmental actions, floods and other
water-related causes, earth movement (including earthquakes, landslides and
mudflows), wet or dry rot, vermin, domestic animals and certain other kinds of
risks.
The hazard insurance policies covering the Mortgaged Properties will
typically contain co-insurance clauses that in effect require an insured at all
times to carry insurance of a specified percentage
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(generally 80% to 90%) of the full replacement value of the improvements on the
property in order to recover the full amount of any partial loss. If the
insured's coverage falls below this specified percentage, such clauses generally
provide that the insurer's liability in the event of partial loss does not
exceed the lesser of (i) the replacement cost of the improvements less physical
depreciation and (ii) such proportion of the loss as the amount of insurance
carried bears to the specified percentage of the full replacement cost of such
improvements.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Mortgage Loans may contain a due-on-sale clause that
entitles the lender to accelerate payment of the Mortgage Loan upon any sale or
other transfer of the related Mortgaged Property made without the lender's
consent. Certain of the Mortgage Loans may also contain a due-on-encumbrance
clause that entitles the lender to accelerate the maturity of the Mortgage Loan
upon the creation of any other lien or encumbrance upon the Mortgaged Property.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer will determine whether to exercise any right the Trustee may have under
any such provision in a manner consistent with the Servicing Standard. Unless
otherwise specified in the related Prospectus Supplement, the Master Servicer
will be entitled to retain as additional servicing compensation any fee
collected in connection with the permitted transfer of a Mortgaged Property. See
'Certain Legal Aspects of Mortgage Loans -- Due-on-Sale and Due-on-Encumbrance'.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related Prospectus Supplement, a Master
Servicer's primary servicing compensation with respect to a series of
Certificates will come from the periodic payment to it of a portion of the
interest payments on each Mortgage Loan in the related Trust Fund. Since that
compensation is generally based on a percentage of the principal balance of each
such Mortgage Loan outstanding from time to time, it will decrease in accordance
with the amortization of the Mortgage Loans. The Prospectus Supplement with
respect to a series of Certificates may provide that, as additional
compensation, the Master Servicer may retain all or a portion of late payment
charges, Prepayment Premiums, modification fees and other fees collected from
borrowers and any interest or other income that may be earned on funds held in
the Certificate Account. Any Sub-Servicer will receive a portion of the Master
Servicer's compensation as its sub-servicing compensation.
In addition to amounts payable to any Sub-Servicer, a Master Servicer may
be required, to the extent provided in the related Prospectus Supplement, to pay
from amounts that represent its servicing compensation certain expenses incurred
in connection with the administration of the related Trust Fund, including,
without limitation, payment of the fees and disbursements of independent
accountants and payment of expenses incurred in connection with distributions
and reports to Certificateholders. Certain other expenses, including certain
expenses related to Mortgage Loan defaults and liquidations and, to the extent
so provided in the related Prospectus Supplement, interest on such expenses at
the rate specified therein, and the fees of the Trustee and any Special
Servicer, may be required to be borne by the Trust Fund.
If and to the extent provided in the related Prospectus Supplement, the
Master Servicer may be required to apply a portion of the servicing compensation
otherwise payable to it in respect of any period to Prepayment Interest
Shortfalls. See 'Yield and Maturity Considerations -- Certain Shortfalls in
Collections of Interest'.
EVIDENCE AS TO COMPLIANCE
Unless otherwise provided in the related Prospectus Supplement, each
Pooling Agreement will require that, on or before a specified date in each year,
the Master Servicer cause a firm of independent public accountants to furnish a
statement to the Trustee to the effect that, based on an examination by such
firm conducted substantially in compliance with either the Uniform Single Audit
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC, the servicing by or on behalf of the Master Servicer of mortgage loans
under pooling and servicing agreements substantially
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similar to each other (which may include the related Pooling Agreement) was
conducted through the preceding calendar year or other specified twelve-month
period in compliance with the terms of such agreements except for any
significant exceptions or errors in records that, in the opinion of such firm,
either the Audit Program for Mortgages serviced for FHLMC or paragraph 4 of the
Uniform Single Audit Program for Mortgage Bankers, as the case may be, requires
it to report. Each Pooling Agreement will also provide for delivery to the
Trustee, on or before a specified date in each year, of a statement signed by
one or more officers of the Master Servicer to the effect that the Master
Servicer has fulfilled its material obligations under the Pooling Agreement
throughout the preceding calendar year or other specified twelve-month period.
Unless otherwise provided in the related Prospectus Supplement, copies of
the annual accountants' statement and the statement of officers of a Master
Servicer will be made available to Certificateholders without charge upon
written request to the Master Servicer.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE DEPOSITOR
The Master Servicer under a Pooling Agreement may be an affiliate of the
Depositor and may have other normal business relationships with the Depositor or
the Depositor's affiliates. Unless otherwise specified in the Prospectus
Supplement for a series of Certificates, the related Pooling Agreement will
permit the Master Servicer to resign from its obligations thereunder only 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 at the date of the Pooling Agreement. No such
resignation will become effective until the Trustee or a successor servicer has
assumed the Master Servicer's obligations and duties under the Pooling
Agreement. Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer will also be required to maintain a fidelity bond and errors and
omissions policy that provides coverage against losses that may be sustained as
a result of an officer's or employee's misappropriation of funds, errors and
omissions or negligence, subject to certain limitations as to amount of
coverage, deductible amounts, conditions, exclusions and exceptions.
Unless otherwise specified in the related Prospectus Supplement, each
Pooling Agreement will further provide that none of the Master Servicer, the
Depositor and any director, officer, employee or agent of either of them will be
under any liability to the related Trust Fund or Certificateholders for any
action taken, or not taken, in good faith pursuant to the Pooling Agreement or
for errors in judgment; provided, however, that none of the Master Servicer, the
Depositor and any such person will be protected against any breach of a
representation, warranty or covenant made in such Pooling Agreement, or against
any expense or liability that such person is specifically required to bear
pursuant to the terms of such Pooling Agreement, or against any liability that
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of obligations or duties thereunder or by reason
of reckless disregard of such obligations and duties. Unless otherwise specified
in the related Prospectus Supplement, each Pooling Agreement will further
provide that the Master Servicer, the Depositor and any director, officer,
employee or agent of either of them will be entitled to indemnification by the
related Trust Fund against any loss, liability or expense incurred in connection
with any legal action that relates to the Pooling Agreement or the related
series of Certificates; provided, however, that such indemnification will not
extend to any loss, liability or expense (i) that such person is specifically
required to bear pursuant to the terms of such agreement, or is incidental to
the performance of obligations and duties thereunder and is not reimbursable
pursuant to the Pooling Agreement; (ii) incurred in connection with any breach
of a representation, warranty or covenant made in the Pooling Agreement; (iii)
incurred by reason of misfeasance, bad faith or gross negligence in the
performance of obligations or duties under the Pooling Agreement, or by reason
of reckless disregard of such obligations or duties; or (iv) incurred in
connection with any violation of any state or federal securities law. In
addition, each Pooling Agreement will provide that neither the Master Servicer
nor the Depositor will be under any obligation to appear in, prosecute or defend
any legal action that is not incidental to its respective responsibilities under
the Pooling Agreement and that in its opinion may involve it in any expense or
liability. However, each of the Master Servicer and the Depositor 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
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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
Certificateholders, and the Master Servicer or the Depositor, as the case may
be, will be entitled to charge the related Certificate Account therefor.
Any person into which the Master Servicer or the Depositor may be merged or
consolidated, or any person resulting from any merger or consolidation to which
the Master Servicer or the Depositor is a party, or any person succeeding to the
business of the Master Servicer or the Depositor, will be the successor of the
Master Servicer or the Depositor, as the case may be, under the related Pooling
Agreement.
EVENTS OF DEFAULT
Unless otherwise provided in the Prospectus Supplement for a series of
Certificates, 'Events of Default' under the related Pooling Agreement will
include (i) any failure by the Master Servicer to distribute or cause to be
distributed to Certificateholders, or to remit to the Trustee for distribution
to Certificateholders in a timely manner, any amount required to be so
distributed or remitted, which failure continues unremedied for five days after
written notice of such failure has been given to the Master Servicer by the
Trustee or the Depositor, or to the Master Servicer, the Depositor and the
Trustee by Certificateholders entitled to not less than 25% (or such other
percentage specified in the related Prospectus Supplement) of the Voting Rights
for such series); (ii) any failure by the Master Servicer duly to observe or
perform in any material respect any of its other covenants or obligations under
the Pooling Agreement which continues unremedied for sixty days after written
notice of such failure has been given to the Master Servicer by the Trustee or
the Depositor, or to the Master Servicer, the Depositor and the Trustee by
Certificateholders entitled to not less than 25% (or such other percentage
specified in the related Prospectus Supplement) of the Voting Rights for such
series; and (iii) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings in respect of or
relating to the Master Servicer and certain actions by or on behalf of the
Master Servicer indicating its insolvency or inability to pay its obligations.
Material variations to the foregoing Events of Default (other than to add
thereto or shorten cure periods or eliminate notice requirements) will be
specified in the related Prospectus Supplement.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default under a Pooling Agreement remains
unremedied, the Depositor or the Trustee will be authorized, and at the
direction of Certificateholders entitled to not less than 51% (or such other
percentage specified in the related Prospectus Supplement) of the Voting Rights
for such series, the Trustee will be required, to terminate all of the rights
and obligations of the Master Servicer as master servicer under the Pooling
Agreement, whereupon the Trustee will succeed to all of the responsibilities,
duties and liabilities of the Master Servicer under the Pooling Agreement
(except that if the Master Servicer is required to make advances in respect of
Mortgage Loan delinquencies, but the Trustee is prohibited by law from
obligating itself to do so, or if the related Prospectus Supplement so
specifies, the Trustee will not be obligated to make such advances) and will be
entitled to similar compensation arrangements. Unless otherwise specified in the
related Prospectus Supplement, if the Trustee is unwilling or unable so to act,
it may (or, at the written request of Certificateholders entitled to at least
51% (or such other percentage specified in the related Prospectus Supplement) of
the Voting Rights for such series, it will be required to) appoint, or petition
a court of competent jurisdiction to appoint, a loan servicing institution that
(unless otherwise provided in the related Prospectus Supplement) is acceptable
to each Rating Agency that assigned ratings to the Offered Certificates of such
series to act as successor to the Master Servicer under the Pooling Agreement.
Pending such appointment, the Trustee will be obligated to act in such capacity.
No Certificateholder will have the right under any Pooling Agreement to
institute any proceeding with respect thereto unless such holder previously has
given to the Trustee written notice of default and unless Certificateholders
entitled to at least 25% (or such other percentage specified in the related
Prospectus Supplement) of the Voting Rights for the related series shall have
made written request upon the Trustee to institute such proceeding in its own
name as Trustee thereunder and shall have
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offered to the Trustee reasonable indemnity, and the Trustee for sixty days (or
such other period specified in the related Prospectus Supplement) 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 any 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 holders of
Certificates of the related series, unless such Certificateholders have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby.
AMENDMENT
Each Pooling Agreement may be amended by the parties thereto, without the
consent of any of the holders of the related Certificates, (i) to cure any
ambiguity, (ii) to correct a defective provision therein or to correct, modify
or supplement any provision therein that may be inconsistent with any other
provision therein, (iii) to add any other provisions with respect to matters or
questions arising under the Pooling Agreement that are not inconsistent with the
provisions thereof, (iv) to comply with any requirements imposed by the Code or
(v) for any other purpose; provided that such amendment (other than an amendment
for the purpose specified in clause (iv) above) may not (as evidenced by an
opinion of counsel to such effect satisfactory to the Trustee) adversely affect
in any material respect the interests of any such holder. Unless otherwise
specified in the related Prospectus Supplement, each Pooling Agreement may also
be amended for any purpose by the parties, with the consent of
Certificateholders entitled to at least 51% (or such other percentage specified
in the related Prospectus Supplement) of the Voting Rights for the related
series allocated to the affected classes; provided, however, that unless
otherwise specified in the related Prospectus Supplement, no such amendment may
(i) reduce in any manner the amount of, or delay the timing of, payments
received or advanced on Mortgage Loans that are required to be distributed in
respect of any Certificate without the consent of the holder of such
Certificate, (ii) adversely affect in any material respect the interests of the
holders of any class of Certificates, in a manner other than as described in
clause (i), without the consent of the holders of all Certificates of such class
or (iii) modify the provisions of the Pooling Agreement described in this
paragraph without the consent of the holders of all Certificates of the related
series. However, unless otherwise specified in the related Prospectus
Supplement, the Trustee will be prohibited from consenting to any amendment of a
Pooling Agreement pursuant to which a REMIC election is to be or has been made
unless the Trustee shall first have received an opinion of counsel to the effect
that such amendment will not result in the imposition of a tax on the related
Trust Fund or cause the related Trust Fund to fail to qualify as a REMIC at any
time that the related Certificates are outstanding.
LIST OF CERTIFICATEHOLDERS
Upon written request of any Certificateholder of record made for purposes
of communicating with other holders of Certificates of the same series with
respect to their rights under the related Pooling Agreement, the Trustee or
other specified person will afford such Certificateholder access, during normal
business hours, to the most recent list of Certificateholders of that series
then maintained by such person.
THE TRUSTEE
The Trustee under each Pooling Agreement will be named in the related
Prospectus Supplement. The commercial bank, national banking association,
banking corporation or trust company that serves as Trustee may have typical
banking relationships with the Depositor and its affiliates and with any Master
Servicer and its affiliates.
DUTIES OF THE TRUSTEE
The Trustee for a series of Certificates will make no representation as to
the validity or sufficiency of the related Pooling Agreement, the Certificates
or any Mortgage Loan or related document and will not be accountable for the use
or application by or on behalf of any Master Servicer of any funds paid
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to the Master Servicer or any Special Servicer in respect of the Certificates or
the Mortgage Loans, or any funds deposited into or withdrawn from the
Certificate Account or any other account by or on behalf of the Master Servicer
or any Special Servicer. If no Event of Default has occurred and is continuing,
the Trustee will be required to perform only those duties specifically required
under the related Pooling Agreement. However, upon receipt of any of the various
certificates, reports or other instruments required to be furnished to it
pursuant to the Pooling Agreement, the Trustee will be required to examine such
documents and to determine whether they conform to the requirements of the
Pooling Agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
Unless otherwise specified in the related Prospectus Supplement, the
Trustee for a series of Certificates will be entitled to indemnification, from
amounts held in the related Certificate Account, for any loss, liability or
expense incurred by the Trustee in connection with the Trustee's acceptance or
administration of its trusts under the related Pooling Agreement; provided,
however, that such indemnification will not extend to any loss, liability or
expense that constitutes a specific liability imposed on the Trustee pursuant to
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, or by reason of its
reckless disregard of such obligations or duties, or as may arise from a breach
of any representation, warranty or covenant of the Trustee made therein. As and
to the extent described in the related Prospectus Supplement, the fees and
normal disbursements of any Trustee may be the expense of the related Master
Servicer or other specified person or may be required to be borne by the related
Trust Fund.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The Trustee for a series of Certificates will be permitted at any time to
resign from its obligations and duties under the related Pooling Agreement by
giving written notice thereof to the Depositor. Upon receiving such notice of
resignation, the Depositor (or such other person as may be specified in the
related Prospectus Supplement) will be required to use its best efforts to
promptly appoint a successor trustee. If no successor trustee shall have
accepted an appointment within a specified period after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction to appoint a successor trustee.
If at any time the Trustee ceases to be eligible to continue as such under
the related Pooling Agreement, or if at any time the Trustee becomes incapable
of acting, or if certain events of (or proceedings in respect of) bankruptcy or
insolvency occur with respect to the Trustee, the Depositor will be authorized
to remove the Trustee and appoint a successor trustee. In addition, holders of
the Certificates of any series entitled to at least 51% (or such other
percentage specified in the related Prospectus Supplement) of the Voting Rights
for such series may at any time (with or without cause) remove the Trustee and
appoint a successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
trustee will not become effective until acceptance of appointment by the
successor trustee.
DESCRIPTION OF CREDIT SUPPORT
GENERAL
Credit Support may be provided with respect to one or more classes of the
Certificates of any series, or with respect to the related Mortgage Assets.
Credit Support may be in the form of a letter of credit, the subordination of
one or more classes of Certificates, the use of a pool insurance policy or
guarantee insurance, the establishment of one or more reserve funds or another
method of Credit Support described in the related Prospectus Supplement, or any
combination of the foregoing. If so provided in the related Prospectus
Supplement, any form of Credit Support may provide credit enhancement for more
than one series of Certificates to the extent described therein.
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Unless otherwise provided in the related Prospectus Supplement for a series
of Certificates, the Credit Support will not provide protection against all
risks of loss and will not guarantee payment to Certificateholders of all
amounts to which they are entitled under the related Pooling Agreement. If
losses or shortfalls occur that exceed the amount covered by the Credit Support
or that are not covered by the Credit Support, Certificateholders will bear
their allocable share of deficiencies. Moreover, if a form of Credit Support
covers more than one series of Certificates, holders of Certificates of one
series will be subject to the risk that such Credit Support will be exhausted by
the claims of the holders of Certificates of one or more other series before the
former receive their intended share of such coverage.
If Credit Support is provided with respect to one or more classes of
Certificates of a series, or with respect to the related Mortgage Assets, the
related Prospectus Supplement will include a description of (i) the nature and
amount of coverage under such Credit Support, (ii) any conditions to payment
thereunder not otherwise described herein, (iii) the conditions (if any) under
which the amount of coverage under such Credit Support may be reduced and under
which such Credit Support may be terminated or replaced and (iv) the material
provisions relating to such Credit Support. Additionally, the related Prospectus
Supplement will set forth certain information with respect to the obligor under
any instrument of Credit Support, generally 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 the regulatory agencies that
exercise primary jurisdiction over the conduct of its business and (iv) its
total assets, and its stockholders' equity or policyholders' surplus, if
applicable, as of a date that will be specified in the Prospectus Supplement.
See 'Risk Factors -- Credit Support Limitations'.
SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more classes
of Certificates of a series may be Subordinate Certificates. To the extent
specified in the related Prospectus Supplement, the rights of the holders of
Subordinate Certificates to receive distributions from the Certificate Account
on any Distribution Date will be subordinated to the corresponding rights of the
holders of Senior Certificates. If so provided in the related Prospectus
Supplement, the subordination of a class may apply only in the event of (or may
be limited to) certain types of losses or shortfalls. The related Prospectus
Supplement will set forth information concerning the amount of subordination
provided by a class or classes of Subordinate Certificates in a series, the
circumstances under which such subordination will be available and the manner in
which the amount of subordination will be made available.
CROSS-SUPPORT PROVISIONS
If the Mortgage Assets in any Trust Fund are divided into separate groups,
each supporting a separate class or classes of Certificates of a series, Credit
Support may be provided by cross-support provisions requiring that distributions
be made on Senior Certificates evidencing interests in one group of Mortgage
Assets prior to distributions on Subordinate Certificates evidencing interests
in a different group of Mortgage Assets within the Trust Fund. The Prospectus
Supplement for a series that includes a cross-support provision will describe
the manner and conditions for applying such provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO MORTGAGE LOANS
If so provided in the Prospectus Supplement for a series of Certificates,
Mortgage Loans included in the related Trust Fund will be covered for certain
default risks by insurance policies or guarantees. To the extent material, a
copy of each such instrument will accompany the Current Report on Form 8-K to be
filed with the Commission within 15 days of issuance of the Certificates of the
related series.
LETTER OF CREDIT
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more letters of credit, issued by a
bank or financial institution specified in such Prospectus Supplement (the 'L/C
Bank'). Under a letter of credit, the L/C Bank will be obligated to honor draws
thereunder in an
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aggregate fixed dollar amount, net of unreimbursed payments thereunder,
generally equal to a percentage specified in the related Prospectus Supplement
of the aggregate principal balance of the Mortgage Assets on the related Cut-off
Date or of the initial aggregate Certificate Balance of one or more classes of
Certificates. If so specified in the related Prospectus Supplement, the letter
of credit may permit draws only in the event of certain types of losses and
shortfalls. The amount available under the letter of credit will, in all cases,
be reduced to the extent of the unreimbursed payments thereunder and may
otherwise be reduced as described in the related Prospectus Supplement. The
obligations of the L/C Bank under the letter of credit for each series of
Certificates will expire at the earlier of the date specified in the related
Prospectus Supplement or the termination of the Trust Fund. A copy of any such
letter of credit will accompany the Current Report on Form 8-K to be filed with
the Commission within 15 days of issuance of the Certificates of the related
series.
CERTIFICATE INSURANCE AND SURETY BONDS
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by insurance policies and/or surety bonds
provided by one or more insurance companies or sureties. Such instruments may
cover, with respect to one or more classes of Certificates of the related
series, timely distributions of interest and/or 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. A copy of any such
instrument will accompany the Current Report on Form 8-K to be filed with the
Commission within 15 days of issuance of the Certificates of the related series.
RESERVE FUNDS
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered (to the extent of available funds) by one or
more reserve funds in which cash, a letter of credit, Permitted Investments, a
demand note or a combination thereof will be deposited, in the amounts specified
in such Prospectus Supplement. If so specified in the related Prospectus
Supplement, the reserve fund for a series may also be funded over time by a
specified amount of the collections received on the related Mortgage Assets.
Amounts on deposit in any reserve fund for a series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, reserve funds may be established
to provide protection only against certain types of losses and shortfalls.
Following each Distribution Date, amounts in a 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.
If so specified in the related Prospectus Supplement, amounts deposited in
any reserve fund will be invested in Permitted Investments. 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 any related Master Servicer
or another service provider as additional compensation for its services. The
reserve fund, if any, for a series will not be a part of the Trust Fund unless
otherwise specified in the related Prospectus Supplement.
CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the Prospectus Supplement for a series of Certificates,
any MBS included in the related Trust Fund and/or the related underlying
mortgage loans may be covered by one or more of the types of Credit Support
described herein. The related Prospectus Supplement will specify, as to each
such form of Credit Support, the information indicated above with respect
thereto, to the extent such information is material and available.
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CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties.
Because such legal aspects are governed by applicable state law (which laws may
differ substantially), the summaries do not purport to be complete, to reflect
the laws of any particular state, or to encompass the laws of all states in
which the security for the Mortgage Loans (or mortgage loans underlying any MBS)
is situated. Accordingly, the summaries are qualified in their entirety by
reference to the applicable laws of those states. See 'Description of the Trust
Funds -- Mortgage Loans'. For purposes of the following discussion, 'Mortgage
Loan' includes a mortgage loan underlying an MBS.
GENERAL
Each Mortgage Loan will be evidenced by a note or bond and secured by an
instrument granting a security interest in real property, which may be a
mortgage, 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. Mortgages, deeds of trust and deeds to secure debt are herein
collectively referred to as 'mortgage instruments'. A mortgage instrument
creates a lien upon, or grants a title interest in, the real property covered
thereby, and represents the security for the repayment of the indebtedness
customarily evidenced by a promissory note. The priority of the lien created or
interest granted will depend on the terms of the mortgage instrument and, in
some cases, on the terms of separate subordination agreements or intercreditor
agreements with others that hold interests in the real property, the knowledge
of the parties to the mortgage instrument as to the existence of prior liens
and, generally, the order of recordation of the mortgage instrument in the
appropriate public recording office. However, the lien of a recorded mortgage
instrument will generally be subordinate to later-arising liens for real estate
taxes and assessments and other charges imposed under governmental police
powers.
TYPES OF MORTGAGE INSTRUMENTS
There are two parties to a mortgage: a mortgagor (the borrower and usually
the owner of the subject property) and a mortgagee (the lender). In a mortgage,
the mortgagor grants a lien on the subject property in favor of the mortgagee. A
deed of trust is a three-party instrument, among a trustor (the equivalent of a
borrower), a trustee to whom the real property is conveyed, and a beneficiary
(the lender) for whose benefit the conveyance is made. Under a deed of trust,
the trustor grants the property to the trustee, in trust, irrevocably until the
debt is paid, and generally with a power of sale. A deed to secure debt
typically has two parties. The borrower, or grantor, conveys title to the real
property to the grantee, or lender, generally with a power of sale, until such
time as the debt is repaid. In a case where the borrower is a land trust, there
would be an additional party to a mortgage instrument because legal title to the
property is held by a land trustee under a land trust agreement for the benefit
of the borrower. At origination of a mortgage loan involving a land trust, the
borrower generally executes a separate undertaking to make payments on the
mortgage note. The mortgagee's authority under a mortgage, the trustee's
authority under a deed of trust and the grantee's authority under a deed to
secure debt are governed by the express provisions of the related instrument,
the law of the state in which the real property is located, certain federal laws
and, in some deed of trust transactions, the directions of the beneficiary.
LEASES AND RENTS
Mortgage instruments that encumber income-producing property often contain
or are accompanied by an assignment of rents and leases, pursuant to which the
borrower assigns to the lender the borrower's right, title and interest as
landlord under each lease and the income derived therefrom, while (unless rents
are to be paid directly to the lender) retaining a revocable license to collect
the rents for so long as there is no default. If the borrower 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.
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In most states, hotel and motel room rates are considered accounts
receivable under the Uniform Commercial Code ('UCC'); in cases where hotels or
motels constitute loan security, the rates are generally pledged by the borrower
as additional security for the loan. In general, the lender must file financing
statements in order to perfect its security interest in the rates 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 rates is
perfected under the UCC, it will generally be required to commence a foreclosure
action or otherwise take possession of the property in order to collect the room
rates following a default.
PERSONALTY
In the case of certain types of mortgaged properties, such as hotels,
motels and nursing homes, personal property (to the extent owned by the borrower
and not previously pledged) may constitute a significant portion of the
property's value as security. The creation and enforcement of liens on personal
property are governed by the UCC. Accordingly, if a borrower pledges personal
property as security for a mortgage loan, the lender generally must file UCC
financing statements in order to perfect its security interest therein, and must
file continuation statements, generally every five years, to maintain that
perfection.
JUNIOR MORTGAGES; RIGHTS OF SENIOR LENDERS
Some of the Mortgage Loans included in a Trust Fund may be secured by
mortgage instruments that are subordinate to mortgage instruments held by other
lenders. The rights of the Trust Fund (and therefore the Certificateholders), as
holder of a junior mortgage instrument, are subordinate to those of the senior
lender, including the prior rights of the senior lender to receive rents, hazard
insurance and condemnation proceeds and to cause the Mortgaged Property to be
sold upon borrower's default and thereby extinguish the Trust Fund's junior lien
unless the Master Servicer or Special Servicer asserts its subordinate interest
in a property in a foreclosure litigation or satisfies the defaulted senior
loan. As discussed more fully below, in many states a junior lender may satisfy
a defaulted senior loan in full, adding the amounts expended to the balance due
on the junior loan. Absent a provision in the senior mortgage instrument, no
notice of default is required to be given to the junior lender.
The form of the mortgage instrument used by many institutional lenders
confers on the lender on the right both to receive all proceeds collected under
any hazard insurance policy and all awards made in connection with any
condemnation proceedings, and (subject to any limits imposed by applicable state
law) to apply such proceeds and awards to any indebtedness secured by the
mortgage instrument in such order as the lender may determine. Thus, if
improvements on a property are damaged or destroyed by fire or other casualty,
or if the property is taken by condemnation, the holder of the senior mortgage
instrument 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 senior indebtedness. Accordingly, only
the proceeds in excess of the amount of senior indebtedness will be available to
be applied to the indebtedness secured by a junior mortgage instrument.
The form of mortgage instrument used by many institutional lenders
typically contains a 'future advance' clause, which provides, in general, 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 instrument. 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 an 'optional' advance. If the lender is obligated to
advance the additional amounts, the advance may be entitled to receive the same
priority as the amounts advanced at origination, notwithstanding that
intervening junior liens may have been recorded between the date of recording of
the senior mortgage instrument and the date of the future advance, and
notwithstanding that the senior lender had actual knowledge of such intervening
junior liens at the time of the advance. Where the senior lender is not
obligated to advance the additional amounts and has actual knowledge of the
intervening junior liens, the advance may be subordinate to such intervening
junior liens. Priority of advances under a 'future advance' clause rests,
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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 mortgage instrument used
by many institutional lenders permits the lender to itself perform certain
obligations of the borrower (for example, the obligations to pay when due all
taxes and assessments on the property and, when due, all encumbrances, charges
and liens on the property that are senior to the lien of the mortgage
instrument, to maintain hazard insurance on the property, and to maintain and
repair the property) upon a failure of the borrower to do so, with all sums so
expended by the lender becoming part of the indebtednesss secured by the
mortgage instrument.
The form of mortgage instrument used by many institutional lenders
typically requires the borrower to obtain the consent of the lender in respect
of actions affecting the mortgaged property, including the execution of new
leases and the termination or modification of existing leases, the performance
of alterations to buildings forming a part of the mortgaged property and the
execution of managment and leasing agreements for the mortgaged property.
Tenants will often refuse to execute leases unless the lender 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 lender may refuse to consent to matters
approved by a junior lender, with the result that the value of the security for
the junior mortgage instrument is diminished.
FORECLOSURE
General. Foreclosure is a legal procedure that allows the lender to
recover the borrower's mortgage debt by enforcing its rights and available legal
remedies under the mortgage instrument. If the borrower defaults in payment or
performance of its obligations under the note or mortgage instrument, the lender
has the right to institute foreclosure proceedings to sell the real property at
public auction to satisfy the indebtedness.
Foreclosure procedures vary from state to state. Two primary methods of
foreclosing a mortgage instrument are judicial foreclosure, involving court
proceedings, and non-judicial foreclosure pursuant to a power of sale granted in
the mortgage instrument. Other foreclosure procedures are available in some
states, but they are either infrequently used or available only in limited
circumstances. A foreclosure action is subject to most of the delays and
expenses of other lawsuits if defenses are raised or counterclaims are
interposed, and sometimes requires several years to complete.
Judicial Foreclosure. A judicial foreclosure proceeding is conducted in a
court having jurisdiction over the mortgaged property. Generally, the action is
initiated by the service of legal pleadings upon all parties having a
subordinate interest of record in the real property and all parties in
possession of the property, under leases or otherwise, whose interests are
subordinate to the mortgage. Delays in completion of the foreclosure may
occasionally result from difficulties in locating defendants. When the lender's
right to foreclose is contested, the legal proceedings can be time-consuming.
Upon successful completion of a judicial foreclosure proceeding, the court
generally issues a judgment of foreclosure and appoints a referee or other
officer to conduct a public sale of the mortgaged property, the proceeds of
which are used to satisfy the judgment. Such sales are made in accordance with
procedures that vary from state to state.
Non-Judicial Foreclosure/Power of Sale. Foreclosure of a deed of trust is
generally accomplished by a non-judicial trustee's sale pursuant to a power of
sale typically granted in the deed of trust. A power of sale may also be
contained in any other type of mortgage instrument (in particular, a deed to
secure debt) if applicable law so permits. A power of sale under a deed of trust
allows a non-judicial public sale to be conducted generally following a request
from the beneficiary/lender to the trustee to sell the property upon default by
the borrower and after notice of sale is given in accordance with the terms of
the deed of trust and applicable state law. In some states, prior to such sale,
the trustee under the deed of trust must record a notice of default and notice
of sale and send a copy to the borrower and to any other party who has recorded
a request for a copy of a notice of default and notice of sale. In addition, in
some states the trustee must provide notice to any other party having an
interest of record in the real property, including junior lienholders. A notice
of sale must be posted in a public place and,
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in most states, published for a specified period of time in one or more
newspapers. The borrower or junior lienholder may then have the right, during a
reinstatement period required in some states, to cure the default by paying the
entire actual amount in arrears (without regard to the acceleration of the
indebtedness), plus the lender's expenses incurred in enforcing the obligation.
In other states, the borrower or the junior lienholder is not provided 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 governs the procedure for
public sale, the parties entitled to notice, the method of giving notice and the
applicable time periods.
Limitations on the Rights of Mortgage Lenders. United States courts have
traditionally imposed general equitable principles to limit the remedies
available to lenders in foreclosure actions. These principles are generally
designed to relieve borrowers from the effects of mortgage defaults perceived as
harsh or unfair. Relying on such principles, a court may alter the specific
terms of a loan to the extent it considers necessary to prevent or remedy an
injustice, undue oppression or overreaching, or may require the lender to
undertake affirmative actions to determine the cause of 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 and have required
that lenders reinstate loans or recast payment schedules in order to accommodate
borrowers who are suffering from a temporary financial disability. In other
cases, courts have limited the right of the lender to foreclose in the case of a
non-monetary default, such as a failure to adequately maintain the mortgaged
property or an impermissible further encumbrance of the mortgaged property.
Finally, some courts have addressed the issue of whether federal or state
constitutional provisions reflecting due process concerns for adequate notice
require that a borrower receive notice in addition to statutorily-prescribed
minimum notice. For the most part, these cases have upheld the reasonableness of
the notice provisions or have found that a public sale under a mortgage
instrument providing for a power of sale does not involve sufficient state
action to trigger constitutional protections.
Also, a third party may be unwilling to purchase a mortgaged property at a
public sale because of the difficulty in determining the exact status of title
to the property (due to, among other things, redemption rights that may exist)
and because of the possibility that physical deterioration of the property may
have occurred during the foreclosure proceedings. Potential buyers may also be
reluctant to purchase property at a foreclosure sale as a result of the 1980
decision of the United States Court of Appeals for the Fifth Circuit in Durrett
v. Washington National Insurance Company. The court in Durrett held that even a
non-collusive, regularly conducted foreclosure sale was a fraudulent transfer
under Section 67d of the former Bankruptcy Act (Section 548 of the Bankruptcy
Code, Bankruptcy Reform Act of 1978, as amended, 11 U.S.C. SSSS 101-1330 (the
'Bankruptcy Code')) and, therefore, could be rescinded in favor of the
bankrupt's estate, if (i) the foreclosure sale was held while the debtor was
insolvent and not more than one year prior to the filing of the bankruptcy
petition and (ii) the price paid for the foreclosed property did not represent
'fair consideration' ('reasonably equivalent value' under the Bankruptcy Code).
Although the reasoning and result of Durrett were rejected by the United States
Supreme Court in May, 1994, the case could nonetheless be persuasive to a court
applying a state fraudulent conveyance law with provisions similar to those
construed in Durrett. For these reasons, it is common for the lender to purchase
the mortgaged property for an amount equal to the secured indebtedness and
accrued and unpaid interest plus the expenses of foreclosure, in which event the
borrower's debt will be extinguished. Thereafter, subject to the borrower's
right in some states to remain in possession during a redemption period, the
lender will become the owner of the property and have both the benefits and
burdens of ownership, including the obligation to pay debt service on any senior
mortgage loans, to pay taxes, to obtain casualty insurance and to make such
repairs as are necessary to render the property suitable for sale. The costs of
operating and maintaining a commercial or multifamily residential property may
be significant and may be greater than the income derived from that property.
The lender also will commonly obtain the services of a real estate broker and
pay the broker's commission in connection with the sale or lease 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,
because of the expenses associated with acquiring, owning and selling a
mortgaged property, a lender could realize an overall loss on a mortgage loan
even if the 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 loan plus accrued interest.
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The holder of a junior mortgage that forecloses on a 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.
Rights of Redemption. The purposes of a foreclosure action are to enable
the lender to realize upon its security and to bar the borrower, and all persons
who have interests in the property that are subordinate to that of the
foreclosing lender, from the exercise of their 'equity of redemption'. The
doctrine of equity of redemption provides that, until the property encumbered by
a mortgage has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having interests that are subordinate to that of the
foreclosing lender have an equity of redemption and may redeem the property by
paying the entire debt with interest. Those having an equity of redemption must
generally be made parties and joined in the foreclosure proceeding in order for
their equity of redemption to be terminated.
The equity of redemption is a common-law (non-statutory) right which should
be distinguished from post-sale statutory rights of redemption. In some states,
after sale pursuant to a deed of trust or foreclosure of a mortgage, the
borrower and foreclosed junior lienors are given a statutory period in which to
redeem the property. In some states, statutory redemption may occur only upon
payment of the foreclosure sale price. In other states, redemption may be
permitted 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 because the exercise of a right of redemption would
defeat the title of any purchaser through a foreclosure. Consequently, the
practical effect of the redemption right is to force the lender to maintain the
property and pay the expenses of ownership until the redemption period has
expired. In some states, a post-sale statutory right of redemption may exist
following a judicial foreclosure, but not following a trustee's sale under a
deed of trust.
Anti-Deficiency Legislation. In general, it is expected that some or all
of the Mortgage Loans in a particular Trust Fund may be nonrecourse loans, as to
which recourse in the case of default will be limited to the Mortgaged Property
and such other assets, if any, that were pledged to secure the Mortgage Loan.
However, even if a Mortgage Loan by its terms provides for recourse to the
borrower's other assets, a lender's ability to realize upon those assets may be
limited by state law. For example, in some states a lender cannot 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 to the difference between the net amount realized upon the public
sale of the real property and the amount due to the lender. Other statutes may
require the lender to exhaust the security afforded under a mortgage 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 those states,
the lender, following judgment on such personal action, may be deemed to have
elected a remedy and thus may be precluded from foreclosing upon the security.
Consequently, lenders in those states where such an election of remedy provision
exists will usually proceed first against the security. Finally, other statutory
provisions, designed to protect borrowers from exposure to large deficiency
judgments that might result from bidding at below-market values at the
foreclosure sale, limit any deficiency judgment to the excess of the outstanding
debt over the fair market value of the property at the time of the sale.
Leasehold Considerations. Mortgage loans may be secured by a lien on the
borrower's leasehold interest in a ground lease. Leasehold mortgage loans are
subject to certain risks not associated with mortgage loans secured by a lien on
the fee estate of the borrower. The most significant of these risks is that if
the borrower's leasehold were to be terminated (for example, as a result of a
lease default or the bankruptcy of the ground lessor or the borrower/ground
lessee), the leasehold mortgagee would be left without its security. This risk
may be substantially lessened if the ground lease contains provisions protective
of the leasehold mortgagee, such as a provision that requires the ground lessor
to give the leasehold mortgagee notices of lessee defaults and an opportunity to
cure them, a provision that permits the leasehold estate to be assigned to and
by the leasehold mortgagee or the purchaser at a foreclosure sale, a provision
that gives the leasehold mortgagee the right to enter into a new ground lease
with the
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ground lessor on the same terms and conditions as the old ground lease or a
provision that prohibits the ground lessee/borrower 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. Certain
mortgage loans, however, may be secured by liens on ground leases that do not
contain these provisions.
BANKRUPTCY LAWS
Operation of the Bankruptcy Code and related state laws may interfere with
or affect the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings) to
collect a debt are automatically stayed upon the filing of the bankruptcy
petition and, often, no interest or principal payments are made during the
course of the bankruptcy case. The delay and the consequences thereof caused by
such automatic stay can be significant. Also, under the Bankruptcy Code, the
filing of a petition in bankruptcy by or on behalf of a junior lienor may stay
the senior lender from taking action to foreclose out such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards protective of the lender are met, the amount and terms of a mortgage
loan secured by a lien on property of the debtor may be modified under certain
circumstances. For example, the outstanding amount of the loan may be reduced to
the then-current value of the property (with a corresponding partial reduction
of the amount of lender's security interest) pursuant to a confirmed plan or
lien avoidance proceeding, thus leaving the lender a general unsecured creditor
for the difference between such value and the outstanding balance of the loan.
Other modifications may include the reduction in the amount of each scheduled
payment, by means of a reduction in the rate of interest and/or an alteration of
the repayment schedule (with or without affecting the unpaid principal balance
of the loan), and/or by an extension (or shortening) of the term to maturity.
Some bankruptcy courts have approved plans, based on the particular facts of the
reorganization case, that effected the cure of a mortgage loan default by paying
arrearages over a number of years. Also, a bankruptcy court may permit a debtor,
through its rehabilitative plan, to reinstate a loan mortgage payment schedule
even if the lender has obtained a final judgment of foreclosure prior to the
filing of the debtor's petition.
Federal bankruptcy law may also have the effect of interfering with or
affecting the ability of the secured lender to enforce the borrower's assignment
of rents and leases related to the mortgaged property. Under Section 362 of the
Bankruptcy Code, the lender will be stayed from enforcing the assignment, and
the legal proceedings necessary to resolve the issue could be time-consuming,
with resulting delays in the lender's receipt of the rents. However, 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 is defined and interpreted under the Bankruptcy Code.
If a borrower's ability to make payment on a mortgage loan is dependent on
its receipt of rent payments under a lease of the related property, that ability
may be impaired by the commencement of a bankruptcy proceeding relating to a
lessee under such lease. Under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a lessee results in a stay in bankruptcy against
the commencement or continuation of any state court proceeding for past due
rent, for accelerated rent, for damages or for a summary eviction order with
respect to a default under the lease that occurred prior to the filing of the
lessee's petition. In addition, the Bankruptcy Code generally provides that a
trustee or debtor-in-possession may, subject to approval of the court, (i)
assume the lease and retain it or assign it to a third party or (ii) reject the
lease. If the lease is assumed, the trustee or debtor-in-possession (or
assignee, if applicable) must cure any defaults under the lease, compensate the
lessor for its losses and provide the lessor with 'adequate assurance' of future
performance. Such remedies may be insufficient, and any assurances provided to
the lessor may, in fact, be inadequate. If the lease is rejected, the lessor
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will be treated as an unsecured creditor with respect to its claim for damages
for termination of the lease. The Bankruptcy Code also limits a lessor's damages
for lease rejection to the rent reserved under the lease (without regard to
acceleration) for the greater of one year, or 15%, not to exceed three years, of
the remaining term of the lease.
ENVIRONMENTAL CONSIDERATIONS
General. A lender may be subject to environmental risks when taking a
security interest in real property. Of particular concern may be properties that
are or have been used for industrial, manufacturing, military or disposal
activity. Such environmental risks include the possible diminution of the value
of a contaminated property or, as discussed below, potential liability for
clean-up costs or other remedial actions that could exceed the value of the
property or the amount of the lender's loan. In certain circumstances, a lender
may decide to abandon a contaminated mortgaged property as collateral for its
loan rather than foreclose and risk liability for clean-up costs.
Superlien Laws. Under the laws of many states, contamination on a property
may give rise to a lien on the property for clean-up costs. In several states,
such a lien has priority over all existing liens, including those of existing
mortgages. In these states, the lien of a mortgage may lose its priority to such
a 'superlien'.
CERCLA. The federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ('CERCLA'), imposes strict liability on
present and past 'owners' and 'operators' of contaminated real property for the
costs of clean-up. A secured lender may be liable as an 'owner' or 'operator' of
a contaminated mortgaged property if agents or employees of the lender have
participated in the management of such mortgaged property or the operations of
the borrower. Such liability may exist even if the lender did not cause or
contribute to the contamination and regardless of whether the lender has
actually taken possession of a mortgaged property through foreclosure, deed in
lieu of foreclosure or otherwise. Moreover, such liability is not limited to the
original or unamortized principal balance of a loan or to the value of the
property securing a loan. 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'.
In general, what constitutes sufficient management of a mortgaged property
or the business of a borrower to render the secured creditor exemption
unavailable to a lender is based upon judicial interpretation of the statutory
language, and court decisions have been inconsistent in this matter. In United
States v. Fleet Factors, 901 F.2d 1550 (11th Cir. 1990), cert. den. 498 U.S.
1046 (1991), the Court of Appeals for the Eleventh Circuit suggested that the
mere capacity of the lender to influence a borrower's disposal of hazardous
substances was sufficient participation in the management of the borrower's
business to deny the secured creditor exemption to the lender. However, in In
re:Bergsoe, 910 F.2d 668 (9th Cir. 1990), the Court of Appeals for the Ninth
Circuit disagreed with the Fleet Factors decision and held that there must be
some degree of 'actual management' of a facility on the part of a lender in
order to bar its reliance on the secured creditor exemption. In addition,
certain cases decided in the First Circuit and the Fourth Circuit have held that
lenders were entitled to the secured creditor exemption, notwithstanding a
lender's taking title to a mortgaged property through foreclosure or deed in
lieu of foreclosure.
CERCLA's 'innocent landowner' defense may be available to a lender that has
taken title to a mortgaged property and has performed an appropriate
environmental site assessment that does not disclose existing contamination and
that meets other requirements of the defense. However, it is unclear whether the
environmental site assessment must be conducted upon loan origination, prior to
foreclosure, or both, and uncertainty exists as to what kind of environmental
site assessment must be performed in order to qualify for the defense.
Certain Other Federal and State Laws. Many states have statutes similar to
CERCLA, and not all of those statutes provide for a secured creditor exemption.
In addition, lenders may face potential liability for remediation of releases or
petroleum or hazardous substances from underground storage tanks under Subtitle
I of the federal Resource Conservation and Recovery Act ('RCRA'), if they are
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deemed to be the 'owners' or 'operators' of facilities in which they have a
security interest or upon which they have foreclosed. On September 7, 1995, the
United States Environmental Protection Agency ('EPA') promulgated regulations
that limit, in certain circumstances, such liability for lenders who hold a
security interest in, or foreclose upon, facilities with underground tanks
containing petroleum. At this time, it is not known whether those regulations
will be the subject of a lawsuit seeking to overturn them. The regulations do
not apply to facilities with underground tanks that contain regulated substances
other than petroleum.
In a few states, transfers of some types of properties are conditioned upon
cleanup 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 clean up 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 uninsured liabilities of the
borrower may jeopardize the borrower's ability to meet its loan obligations.
Additional Considerations. The cost of remediating hazardous substance
contamination at a property can be substantial. If a lender becomes liable, it
can bring an action for contribution against the owner or operator who created
the environmental hazard, but that individual or entity may be without
substantial assets. Accordingly, it is possible that such costs could become a
liability of the Trust Fund and occasion a loss to the Certificateholders.
To reduce the likelihood of such a loss, unless otherwise specified in the
related Prospectus Supplement, the Pooling and Servicing Agreement will provide
that the Master Servicer, acting on behalf of the Trustee, may not acquire title
to a Mortgaged Property or take over its operation unless the Master Servicer,
based solely (as to environmental matters) on a report prepared by a person who
regularly conducts environmental audits, has made the determination that it is
appropriate to do so, as described under 'The Pooling and Servicing
Agreements -- Realization Upon Defaulted Mortgage Loans'.
If a lender forecloses on a mortgage secured by a property, the operations
on which are subject to environmental laws and regulations, the lender will be
required to operate the property in accordance with those laws and regulations.
Such compliance may entail substantial expense, especially in the case of
industrial or manufacturing properties.
In addition, a lender may be obligated to disclose environmental conditions
on a property to government entities and/or to prospective buyers (including
prospective buyers at a foreclosure sale or following foreclosure). Such
disclosure may decrease the amount that prospective buyers are willing to pay
for the affected property, sometimes substantially, and thereby decrease the
ability of the lender to recoup its investment in a loan upon foreclosure.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
Certain of the Mortgage Loans may contain 'due-on-sale' and
'due-on-encumbrance' clauses that purport to permit the lender to accelerate the
maturity of the loan if the borrower transfers or encumbers the related
Mortgaged 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 that 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), a Master Servicer may nevertheless have the right to accelerate the
maturity of a Mortgage Loan that contains a 'due-on-sale' provision upon
transfer of an interest in the property, regardless of the Master Servicer's
ability to demonstrate that a sale threatens its legitimate security interest.
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SUBORDINATE FINANCING
Certain of the Mortgage Loans may not restrict the ability of the borrower
to use the Mortgaged Property as security for one or more additional loans.
Where a borrower encumbers a mortgaged property with one or more junior liens,
the senior lender is subjected to additional risk. First, the borrower may have
difficulty servicing and repaying multiple loans. Moreover, if the subordinate
financing permits recourse to the borrower (as is frequently the case) and the
senior loan does not, a borrower may have more incentive to repay sums due on
the subordinate loan. Second, acts of the senior lender that 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. Third, 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 or
delay the taking of action by the senior lender. Moreover, the bankruptcy of a
junior lender may operate to stay foreclosure or similar proceedings by the
senior lender.
DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
Notes and mortgages may contain provisions that obligate the borrower to
pay a late charge or additional interest if payments are not timely made, and in
some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In certain states, there are or may be specific
limitations upon the late charges that 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. In
addition, the enforceability of provisions that provide for prepayment fees or
penalties upon an involuntary prepayment is unclear under the laws of many
states.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980 ('Title V') provides that state usury limitations shall not apply to
certain types of residential (including multifamily) first mortgage loans
originated by certain lenders after March 31, 1980. Title V authorized any state
to reimpose interest rate limits by adopting, before April 1, 1983, a law or
constitutional provision that expressly rejects application of the federal law.
In addition, even where Title V is 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. Certain states have taken action to reimpose
interest rate limits and/or to limit discount points or other charges.
No Mortgage Loan originated in any state in which application of Title V
has been expressly rejected or a provision limiting discount points or other
charges has been adopted, will (if originated after that rejection or adoption)
be eligible for inclusion in a Trust Fund 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 are to 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 borrower's
counsel has rendered an opinion that such choice of law provision would be given
effect.
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 borrower who enters military service after the
origination of such borrower's mortgage loan (including a borrower 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 borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
individuals who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
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assigned to duty with the military. Because the Relief Act applies to
individuals 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 with individuals as borrowers 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 borrower's period of active
duty status, and, under certain circumstances, during an additional three-month
period thereafter.
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 that 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. The requirements of the ADA may also
be imposed on a foreclosing lender who succeeds to the interest of the borrower
as owner or landlord. 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 borrower of complying with the requirements of
the ADA may be subject to more stringent requirements than those to which the
borrower is subject.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of Offered
Certificates. This discussion is directed solely to Certificateholders that hold
the Certificates as capital assets within the meaning of Section 1221 of the
Internal Revenue Code of 1986 (the 'Code') and it does not purport to discuss
all federal income tax consequences that may be applicable to particular
categories of investors, some of which (such as banks, insurance companies and
foreign investors) may be subject to special rules. Further, the authorities on
which this discussion, and the opinion referred to below, are based are subject
to change or differing interpretations, which could apply retroactively.
Taxpayers and preparers of tax returns (including those filed by any REMIC or
other issuer) should be aware that under applicable Treasury regulations a
provider of advice on specific issues of law is not considered an income tax
return preparer unless the advice (i) is given with respect to events that have
occurred at the time the advice is rendered and is not given with respect to the
consequences of contemplated actions, and (ii) is directly relevant to the
determination of an entry on a tax return. Accordingly, taxpayers should consult
their own tax advisors and tax return preparers regarding the preparation of any
item on a tax return, even where the anticipated tax treatment has been
discussed herein. In addition to the federal income tax consequences described
herein, potential investors should consider the state and local tax
consequences, if any, of the purchase, ownership and disposition of Offered
Certificates. See 'State and Other Tax Consequences'. Certificateholders are
advised to consult their own tax advisors concerning the federal, state, local
or other tax consequences to them of the purchase, ownership and disposition of
Offered Certificates.
The following discussion addresses securities of two general types: (i)
certificates ('REMIC Certificates') representing interests in a Trust Fund, or a
portion thereof, that the Master Servicer or
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the Trustee will elect to have treated as a real estate mortgage investment
conduit ('REMIC') under Sections 860A through 860G (the 'REMIC Provisions') of
the Code, and (ii) certificates ('Grantor Trust Certificates') representing
interests in a Trust Fund ('Grantor Trust Fund') as to which no such election
will be made. The Prospectus Supplement for each series of Certificates will
indicate whether a REMIC election (or elections) will be made for the related
Trust Fund and, if such an election is to be made, will identify all 'regular
interests' and 'residual interests' in the REMIC. For purposes of this tax
discussion, references to a 'Certificateholder' or a 'holder' are to the
beneficial owner of a Certificate.
The following discussion is limited in applicability to Offered
Certificates. Moreover, this discussion applies only to the extent that Mortgage
Assets held by a Trust Fund consist solely of Mortgage Loans. To the extent that
other Mortgage Assets, including REMIC certificates and mortgage pass-through
certificates, are to be held by a Trust Fund, the tax consequences associated
with the inclusion of such assets will be disclosed in the related Prospectus
Supplement. In addition, if Cash Flow Agreements, other than guaranteed
investment contracts, are included in a Trust Fund, the tax consequences
associated with such Cash Flow Agreements also will be disclosed in the related
Prospectus Supplement. See 'Description of the Trust Funds -- Cash Flow
Agreements'.
Furthermore, the following discussion is based in part upon the rules
governing original issue discount that are set forth in Sections 1271-1273 and
1275 of the Code and in the Treasury regulations issued thereunder (the 'OID
Regulations'), and in part upon the REMIC Provisions and the Treasury
regulations issued thereunder (the 'REMIC Regulations'). The OID Regulations do
not adequately address certain issues relevant to, and in some instances provide
that they are not applicable to, securities such as the Certificates.
REMICS
Classification of REMICs. Upon the issuance of each series of REMIC
Certificates, counsel to the Depositor will deliver its opinion generally to the
effect that, assuming compliance with all provisions of the related Pooling
Agreement, the related Trust Fund (or each applicable portion thereof) will
qualify as a REMIC and the REMIC Certificates offered with respect thereto will
be considered to evidence ownership of 'regular interests' ('REMIC Regular
Certificates') or 'residual interests' ('REMIC Residual Certificates') in that
REMIC within the meaning of the REMIC Provisions.
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 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.
Characterization of Investments in REMIC Certificates. In general, unless
otherwise provided in the related Prospectus Supplement, the REMIC Certificates
will be 'qualifying real property loans' within the meaning of Section 593(d) of
the Code, 'real estate assets' within the meaning of Section 856(c)(5)(A) of the
Code and assets described in Section 7701(a)(19)(C) of the Code in the same
proportion that the assets of the REMIC underlying such Certificates would be so
treated. However, to the extent that the REMIC assets constitute mortgages on
property not used for residential or certain other prescribed purposes, the
REMIC Certificates will not be treated as assets qualifying under Section
7701(a)(19)(C)(v). Moreover, if 95% or more of the assets of the REMIC qualify
for any of the foregoing treatments at all times during a calendar year, the
REMIC Certificates will qualify for the corresponding status in their entirety
for that calendar year. Interest (including original issue discount) on the
REMIC Regular Certificates and income allocated to the class of REMIC Residual
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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)(A) of the Code. In addition, the REMIC Regular
Certificates will be 'qualified mortgages' within the meaning of Section
860G(a)(3) of the Code. The determination as to the percentage of the REMIC's
assets that constitute assets described in the foregoing sections of the Code
will be made with respect to each calendar quarter based on the average adjusted
basis of each category of the assets held by the REMIC during such calendar
quarter. The Master Servicer or the Trustee will report those determinations to
Certificateholders in the manner and at the times required by the applicable
Treasury regulations.
The assets of the REMIC will include, in addition to Mortgage Loans,
payments on Mortgage Loans held pending distribution on the REMIC Certificates
and property acquired by foreclosure held pending sale, and may include amounts
in reserve accounts. It is unclear whether property acquired by foreclosure held
pending sale and amounts in reserve accounts would be considered to be part of
the Mortgage Loans, or whether such assets (to the extent not invested in assets
described in the foregoing sections) otherwise would receive the same treatment
as the Mortgage Loans for purposes of all of the foregoing sections. In
addition, in some instances Mortgage Loans may not be treated entirely as assets
described in the foregoing sections. If so, the related Prospectus Supplement
will describe those Mortgage Loans that may not be so treated. The REMIC
Regulations do provide, however, that payments on Mortgage Loans held pending
distribution are considered part of the Mortgage Loans for purposes of Sections
593(d) and 856(c)(5)(A) of the Code.
Tiered REMIC Structures. For certain series of REMIC Certificates, two or
more separate elections may be made to treat designated portions of the related
Trust Fund as REMICs ('Tiered REMICs') for federal income tax purposes. Upon the
issuance of any such series of REMIC Certificates, counsel to the Depositor will
deliver its opinion generally to the effect that, assuming compliance with all
provisions of the related Pooling Agreement, the Tiered REMICs will each qualify
as a REMIC and the REMIC Certificates issued by the Tiered REMICs, respectively,
will be considered to evidence ownership of REMIC Regular Certificates or REMIC
Residual Certificates in the related REMIC within the meaning of the REMIC
Provisions.
Solely for purposes of determining whether the REMIC Certificates will be
'qualifying real property loans' under Section 593(d) of the Code, 'real estate
assets' within the meaning of Section 856(c)(5)(A) of the Code, and 'loans
secured by an interest in real property' under Section 7701(a)(19)(C) of the
Code, and whether the income on such Certificates is interest described in
Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one
REMIC.
TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the REMIC or its assets.
Moreover, holders of REMIC Regular Certificates that otherwise report income
under a cash method of accounting will be required to report income with respect
to REMIC Regular Certificates under an accrual method.
Original Issue Discount. Certain REMIC Regular Certificates may be issued
with 'original issue discount' within the meaning of Section 1273(a) of the
Code. Any holders of REMIC Regular Certificates issued with original issue
discount generally will be required to include original issue discount in income
as it accrues, in accordance with the method described below, in advance of the
receipt of the cash attributable to such income. In addition, Section 1272(a)(6)
of the Code provides special rules applicable to REMIC Regular Certificates and
certain other debt instruments issued with original issue discount. Regulations
have not been issued under that section.
The Code requires that a prepayment assumption be used with respect to
Mortgage Loans held by a REMIC in computing the accrual of original issue
discount on REMIC Regular Certificates issued by that REMIC, and that
adjustments be made in the amount and rate of accrual of such discount to
reflect differences between the actual prepayment rate and the prepayment
assumption. The prepayment assumption is to be determined in a manner prescribed
in Treasury regulations; as noted above, those regulations have not been issued.
The Conference Committee Report accompanying the Tax Reform
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Act of 1986 (the 'Committee Report') indicates that the regulations will provide
that the prepayment assumption used with respect to a REMIC Regular Certificate
must be the same as that used in pricing the initial offering of such REMIC
Regular Certificate. The prepayment assumption (the 'Prepayment Assumption')
used in reporting original issue discount for each series of REMIC Regular
Certificates will be consistent with this standard and will be disclosed in the
related Prospectus Supplement. However, neither the Depositor nor any other
person will make any representation that the Mortgage Loans will in fact prepay
at a rate conforming to the Prepayment Assumption or at any other rate.
The original issue discount, if any, on a REMIC Regular Certificate will be
the excess of its stated redemption price at maturity over its issue price. The
issue price of a particular class of REMIC Regular Certificates will be the
first cash price at which a substantial amount of REMIC Regular Certificates of
that class is sold (excluding sales to bond houses, brokers and underwriters).
If less than a substantial amount of a particular class of REMIC Regular
Certificates is sold for cash on or prior to the date of their initial issuance
(the 'Closing Date'), the issue price for such class will be the fair market
value of such class on the Closing Date. Under the OID Regulations, the stated
redemption price of a REMIC Regular Certificate is equal to the total of all
payments to be made on such Certificate other than 'qualified stated interest'.
'Qualified stated interest' includes interest that is unconditionally payable at
least annually at a single fixed rate, at a 'qualified floating rate', or at an
'objective rate', a combination of a single fixed rate and one or more
'qualified floating rates' or one 'qualified inverse floating rate', or a
combination of 'qualified floating rates' that does not operate in a manner that
accelerates or defers interest payments on such REMIC Regular Certificate.
In the case of REMIC Regular Certificates bearing adjustable interest
rates, the determination of the total amount of original issue discount and the
timing of the inclusion thereof will vary according to the characteristics of
such REMIC Regular Certificates. If the original issue discount rules apply to
such Certificates, the related Prospectus Supplement will describe the manner in
which such rules will be applied with respect to those Certificates in preparing
information returns to the Certificateholders and the Internal Revenue Service
(the 'IRS').
Certain classes of the REMIC Regular Certificates may provide for the first
interest payment with respect to such Certificates to be made more than one
month after the date of issuance, a period which is longer than the subsequent
monthly intervals between interest payments. Assuming the 'accrual period' (as
defined below) for original issue discount is each monthly period that ends on a
Distribution Date, in some cases, as a consequence of this 'long first accrual
period', some or all interest payments may be required to be included in the
stated redemption price of the REMIC Regular Certificate and accounted for as
original issue discount. Because interest on REMIC Regular Certificates must in
any event be accounted for under an accrual method, applying this analysis would
result in only a slight difference in the timing of the inclusion in income of
the yield on the REMIC Regular Certificates.
In addition, if the accrued interest to be paid on the first Distribution
Date is computed with respect to a period that begins prior to the Closing Date,
a portion of the purchase price paid for a REMIC Regular Certificate will
reflect such accrued interest. In such cases, information returns provided to
the Certificateholders and the IRS will be based on the position that the
portion of the purchase price paid for the interest accrued with respect to
periods prior to the Closing Date is treated as part of the overall cost of such
REMIC Regular Certificate (and not as a separate asset the cost of which is
recovered entirely out of interest received on the next Distribution Date) and
that portion of the interest paid on the first Distribution Date in excess of
interest accrued for a number of days corresponding to the number of days from
the Closing Date to the first Distribution Date should be included in the stated
redemption price of such REMIC Regular Certificate. However, the OID Regulations
state that all or some portion of such accrued interest may be treated as a
separate asset the cost of which is recovered entirely out of interest paid on
the first Distribution Date. It is unclear how an election to do so would be
made under the OID Regulations and whether such an election could be made
unilaterally by a Certificateholder.
Notwithstanding the general definition of original issue discount, original
issue discount on a REMIC Regular Certificate will be considered to be de
minimis if it is less than 0.25% of the stated redemption price of the REMIC
Regular Certificate multiplied by its weighted average life. For this purpose,
the weighted average life of the REMIC Regular Certificate is computed as the
sum of the
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amounts determined, as to each payment included in the stated redemption price
of such REMIC Regular Certificate, by multiplying (i) the number of complete
years (rounding down for partial years) from the issue date until such payment
is expected to be made (presumably taking into account the Prepayment
Assumption) by (ii) a fraction, the numerator of which is the amount of the
payment, and the denominator of which is the stated redemption price at maturity
of such REMIC Regular Certificate. Under the OID Regulations, original issue
discount of only a de minimis amount (other than de minimis original discount
attributable to a so-called 'teaser' interest rate or an initial interest
holiday) will be included in income as each payment of stated principal is made,
based on the product of the total amount of such de minimis original issue
discount and a fraction, the numerator of which is the amount of such principal
payment and the denominator of which is the outstanding stated principal amount
of the REMIC Regular Certificate. The OID Regulations also would permit a
Certificateholder to elect to accrue de minimis original issue discount into
income currently based on a constant yield method. See ' -- Taxation of Owners
of REMIC Regular Certificates -- Market Discount' for a description of such
election under the OID Regulations.
If original issue discount on a REMIC Regular Certificate is in excess of a
de minimis amount, the holder of such Certificate must include in ordinary gross
income the sum of the 'daily portions' of original issue discount for each day
during its taxable year on which it held such REMIC Regular Certificate,
including the purchase date but excluding the disposition date. In the case of
an original holder of a REMIC Regular Certificate, the daily portions of
original issue discount will be determined as follows.
As to each 'accrual period', that is, unless otherwise stated in the
related Prospectus Supplement, each period that ends on a date that corresponds
to a Distribution Date and begins on the first day following the immediately
preceding accrual period (or in the case of the first such period, begins on the
Closing Date), a calculation will be made of the portion of the original issue
discount that accrued during such accrual period. The portion of original issue
discount that accrues in any accrual period will equal the excess, if any, of
(i) the sum of (a) the present value, as of the end of the accrual period, of
all of the distributions remaining to be made on the REMIC Regular Certificate,
if any, in future periods and (b) the distributions made on such REMIC Regular
Certificate during the accrual period of amounts included in the stated
redemption price, over (ii) the adjusted issue price of such REMIC Regular
Certificate at the beginning of the accrual period. The present value of the
remaining distributions referred to in the preceding sentence will be calculated
(i) assuming that distributions on the REMIC Regular Certificate will be
received in future periods based on the Mortgage Loans being prepaid at a rate
equal to the Prepayment Assumption and (ii) using a discount rate equal to the
original yield to maturity of the Certificate. For these purposes, the original
yield to maturity of the Certificate will be calculated based on its issue price
and assuming that distributions on the Certificate will be made in all accrual
periods based on the Mortgage Loans being prepaid at a rate equal to the
Prepayment Assumption. The adjusted issue price of a REMIC Regular Certificate
at the beginning of any accrual period will equal the issue price of such
Certificate, increased by the aggregate amount of original issue discount that
accrued with respect to such Certificate in prior accrual periods, and reduced
by the amount of any distributions made on such REMIC Regular Certificate in
prior accrual periods of amounts included in the stated redemption price. The
original issue discount accruing during any accrual period, computed as
described above, will be allocated ratably to each day during the accrual period
to determine the daily portion of original issue discount for such day.
A subsequent purchaser of a REMIC Regular Certificate that purchases such
Certificate at a cost (excluding any portion of such cost attributable to
accrued qualified stated interest) less than its remaining stated redemption
price will also be required to include in gross income the daily portions of any
original issue discount with respect to such Certificate. However, each such
daily portion will be reduced, if such cost is in excess of its 'adjusted issue
price', in proportion to the ratio such excess bears to the aggregate original
issue discount remaining to be accrued on such REMIC Regular Certificate. The
adjusted issue price of a REMIC Regular Certificate on any given day equals the
sum of (i) the adjusted issue price (or, in the case of the first accrual
period, the issue price) of such Certificate at the beginning of the accrual
period which includes such day and (ii) the daily portions of original issue
discount for all days during such accrual period prior to such day.
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Market Discount. A Certificateholder that purchases a REMIC Regular
Certificate at a market discount, that is, in the case of a REMIC Regular
Certificate issued without original issue discount, at a purchase price less
than its remaining stated principal amount, or in the case of a REMIC Regular
Certificate issued with original issue discount, at a purchase price less than
its adjusted issue price will recognize gain upon receipt of each distribution
representing stated redemption price. In particular, under Section 1276 of the
Code such a Certificateholder generally will be required to allocate the portion
of each such distribution representing stated redemption price first to accrued
market discount not previously included in income, and to recognize ordinary
income to that extent. A Certificateholder may elect to include market discount
in income currently as it accrues rather than including it on a deferred basis
in accordance with the foregoing. If made, such election will apply to all
market discount bonds acquired by such Certificateholder on or after the first
day of the first taxable year to which such election applies. In addition, the
OID Regulations permit a Certificateholder to elect to accrue all interest,
discount (including de minimis market or original issue discount) and premium in
income as interest, based on a constant yield method. If such an election were
made with respect to a REMIC Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to include currently
market discount in income with respect to all other debt instruments having
market discount that such Certificateholder acquires during the taxable year of
the election or thereafter, and possibly previously acquired instruments.
Similarly, a Certificateholder that made this election for a Certificate that is
acquired at a premium would be deemed to have made an election to amortize bond
premium with respect to all debt instruments having amortizable bond premium
that such Certificateholder owns or acquires. See ' -- Taxation of Owners of
REMIC Regular Certificates -- Premium'. Each of these elections to accrue
interest, discount and premium with respect to a Certificate on a constant yield
method or as interest would be irrevocable.
However, market discount with respect to a REMIC Regular Certificate will
be considered to be de minimis for purposes of Section 1276 of the Code if such
market discount is less than 0.25% of the remaining stated redemption price of
such REMIC Regular Certificate multiplied by the number of complete years to
maturity remaining after the date of its purchase. In interpreting a similar
rule with respect to original issue discount on obligations payable in
installments, the OID Regulations refer to the weighted average maturity of
obligations, and it is likely that the same rule will be applied with respect to
market discount, presumably taking into account the Prepayment Assumption. If
market discount is treated as de minimis under this rule, it appears that the
actual discount would be treated in a manner similar to original issue discount
of a de minimis amount. See ' -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount'. Such treatment would result in
discount being included in income at a slower rate than discount would be
required to be included in income using the method described above.
Section 1276(b)(3) of the Code specifically authorizes the Treasury
Department to issue regulations providing for the method for accruing market
discount on debt instruments, the principal of which is payable in more than one
installment. Until regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. The Committee Report indicates
that in each accrual period market discount on REMIC Regular Certificates should
accrue, at the Certificateholder's option: (i) on the basis of a constant yield
method, (ii) in the case of a REMIC Regular Certificate issued without original
issue discount, in an amount that bears the same ratio to the total remaining
market discount as the stated interest paid in the accrual period bears to the
total amount of stated interest remaining to be paid on the REMIC Regular
Certificate as of the beginning of the accrual period, or (iii) in the case of a
REMIC Regular Certificate issued with original issue discount, in an amount that
bears the same ratio to the total remaining market discount as the original
issue discount accrued in the accrual period bears to the total original issue
discount remaining on the REMIC Regular Certificate at the beginning of the
accrual period. Moreover, the Prepayment Assumption used in calculating the
accrual of original issue discount is also used in calculating the accrual of
market discount. Because the regulations referred to in this paragraph have not
been issued, it is not possible to predict what effect such regulations might
have on the tax treatment of a REMIC Regular Certificate purchased at a discount
in the secondary market.
To the extent that REMIC Regular Certificates provide for monthly or other
periodic distributions throughout their term, the effect of these rules may be
to require market discount to be includible in
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income at a rate that is not significantly slower than the rate at which such
discount would accrue if it were original issue discount. Moreover, in any event
a holder of a REMIC Regular Certificate generally will be required to treat a
portion of any gain on the sale or exchange of such Certificate as ordinary
income to the extent of the market discount accrued to the date of disposition
under one of the foregoing methods, less any accrued market discount previously
reported as ordinary income.
Further, under Section 1277 of the Code a holder of a REMIC Regular
Certificate may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry a REMIC Regular Certificate purchased with market discount.
For these purposes, the de minimis rule referred to above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during such taxable year and is, in general, allowed as a deduction not later
than the year in which such market discount is includible in income. If such
holder elects to include market discount in income currently as it accrues on
all market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Premium. A REMIC Regular Certificate purchased at a cost (excluding any
portion of such cost attributable to accrued qualified stated interest) greater
than its remaining stated redemption price will be considered to be purchased at
a premium. The holder of such a REMIC Regular Certificate may elect under
Section 171 of the Code to amortize such premium under the constant yield method
over the life of the Certificate. If made, such an election will apply to all
debt instruments having amortizable bond premium that the holder owns or
subsequently acquires. Amortizable premium will be treated as an offset to
interest income on the related debt instrument, rather than as a separate
interest deduction. The OID Regulations also permit Certificateholders to elect
to include all interest, discount and premium in income based on a constant
yield method, further treating the Certificateholder as having made the election
to amortize premium generally. See ' -- Taxation of Owners of REMIC Regular
Certificates -- Market Discount'. The Committee Report states that the same
rules that apply to accrual of market discount (which rules will require use of
a Prepayment Assumption in accruing market discount with respect to REMIC
Regular Certificates without regard to whether such Certificates have original
issue discount) will also apply in amortizing bond premium under Section 171 of
the Code.
Realized Losses. Under Section 166 of the Code, both corporate holders of
the REMIC Regular Certificates and noncorporate holders of the REMIC Regular
Certificates that acquire such Certificates in connection with a trade or
business should be allowed to deduct, as ordinary losses, any losses sustained
during a taxable year in which their Certificates become wholly or partially
worthless as the result of one or more realized losses on the Residential Loans.
However, it appears that a noncorporate holder that does not acquire a REMIC
Regular Certificate 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 Certificate
becomes wholly worthless (i.e., until its outstanding principal balance has been
reduced to zero) and that the loss will be characterized as a short-term capital
loss.
Each holder of a REMIC Regular Certificate will be required to accrue
interest and original issue discount with respect to such Certificate, without
giving effect to any reductions in distributions attributable to defaults or
delinquencies on the Residential Loans or the underlying Certificates 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 REMIC Regular Certificate could exceed the amount of economic income
actually realized by the holder in such period. Although the holder of a REMIC
Regular Certificate eventually will recognize a loss or reduction in income
attributable to previously accrued and included income that as the result of a
realized loss ultimately will not be realized, the law is unclear with respect
to the timing and character of such loss or reduction in income.
TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES
General. As residual interests, the REMIC Residual Certificates will be
subject to tax rules that differ significantly from those that would apply if
the REMIC Residual Certificates were treated for federal income tax purposes as
direct ownership interests in the Mortgage Loans or as debt instruments issued
by the REMIC.
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An original holder of a REMIC Residual Certificate generally will be
required to report its daily portion of the taxable income or, subject to the
limitations noted in this discussion, the net loss of the REMIC for each day
during a calendar quarter that such holder owned such REMIC Residual
Certificate. For this purpose, the taxable income or net loss of the REMIC will
be allocated to each day in the calendar quarter ratably using a '30 days per
month/90 days per quarter/360 days per year' convention unless otherwise
disclosed in the related Prospectus Supplement. The daily amounts so allocated
will then be allocated among the REMIC Residual Certificateholders in proportion
to their respective ownership interests on such day. Any amount included in the
gross income or allowed as a loss of any REMIC Residual Certificateholder by
virtue of this paragraph will be treated as ordinary income or loss. The taxable
income of the REMIC will be determined under the rules described below in
' -- Taxable Income of the REMIC' and will be taxable to the REMIC Residual
Certificateholders without regard to the timing or amount of cash distributions
by the REMIC. Ordinary income derived from REMIC Residual Certificates will be
'portfolio income' for purposes of the taxation of taxpayers subject to
limitations under Section 469 of the Code on the deductibility of 'passive
losses'.
A holder of a REMIC Residual Certificate that purchased such Certificate
from a prior holder of such Certificate also will be required to report on its
federal income tax return amounts representing its daily share of the taxable
income (or net loss) of the REMIC for each day that it holds such REMIC Residual
Certificate. Those daily amounts generally will equal the amounts of taxable
income or net loss determined as described above. The Committee Report indicates
that certain modifications of the general rules may be made, by regulations,
legislation or otherwise to reduce (or increase) the income of a REMIC Residual
Certificateholder that purchased such REMIC Residual Certificate from a prior
holder of such Certificate at a price greater than (or less than) the adjusted
basis (as defined below) such REMIC Residual Certificate would have had in the
hands of an original holder of such Certificate. The REMIC Regulations, however,
do not provide for any such modifications.
Any payments received by a holder of a REMIC Residual Certificate in
connection with the acquisition of such REMIC Residual Certificate will be taken
into account in determining the income of such holder for federal income tax
purposes. Although it appears likely that any such payment would be includible
in income immediately upon its receipt, the IRS might assert that such payment
should be included in income over time according to an amortization schedule or
according to some other method. Because of the uncertainty concerning the
treatment of such payments, holders of REMIC Residual Certificates should
consult their tax advisors concerning the treatment of such payments for income
tax purposes.
The amount of income REMIC Residual Certificateholders will be required to
report (or the tax liability associated with such income) may exceed the amount
of cash distributions received from the REMIC for the corresponding period.
Consequently, REMIC Residual Certificateholders should have other sources of
funds sufficient to pay any federal income taxes due as a result of their
ownership of REMIC Residual Certificates or unrelated deductions against which
income may be offset, subject to the rules relating to 'excess inclusions',
residual interests without 'significant value' and 'noneconomic' residual
interests discussed below. The fact that the tax liability associated with the
income allocated to REMIC Residual Certificateholders may exceed the cash
distributions received by such REMIC Residual Certificateholders for the
corresponding period may significantly adversely affect such REMIC Residual
Certificateholders' after-tax rate of return.
Taxable Income of the REMIC. The taxable income of the REMIC will equal
the income from the Mortgage Loans and other assets of the REMIC plus any
cancellation of indebtedness income due to the allocation of realized losses to
REMIC Regular Certificates, less the deductions allowed to the REMIC for
interest (including original issue discount and reduced by any premium on
issuance) on the REMIC Regular Certificates (and any other class of REMIC
Certificates constituting 'regular interests' in the REMIC not offered hereby),
amortization of any premium on the Mortgage Loans, bad debt losses with respect
to the Mortgage Loans and, except as described below, for servicing,
administrative and other expenses.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate basis in its assets equal to the sum of the issue prices of
all REMIC Certificates (or, if a class of REMIC Certificates is not sold
initially, their fair market values). Such aggregate basis will be allocated
among
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the Mortgage Loans and the other assets of the REMIC in proportion to their
respective fair market values. The issue price of any REMIC Certificates offered
hereby will be determined in the manner described above under ' -- Taxation of
Owners of REMIC Regular Certificates -- Original Issue Discount'. The issue
price of a REMIC Certificate received in exchange for an interest in the
Mortgage Loans or other property will equal the fair market value of such
interests in the Mortgage Loans or other property. Accordingly, if one or more
classes of REMIC Certificates are retained initially rather than sold, the
Master Servicer or the Trustee may be required to estimate the fair market value
of such interests in order to determine the basis of the REMIC in the Mortgage
Loans and other property held by the REMIC.
Subject to possible application of the de minimis rules, the method of
accrual by the REMIC of original issue discount income and market discount
income with respect to Mortgage Loans that it holds will be equivalent to the
method for accruing original issue discount income for holders of REMIC Regular
Certificates (that is, under the constant yield method taking into account the
Prepayment Assumption). 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. See ' -- Taxation of Owners of REMIC Regular
Certificates' above, which describes a method for accruing such discount income
that is analogous to that required to be used by a REMIC as to Mortgage Loans
with market discount that it holds.
A Mortgage Loan will be deemed to have been acquired with discount (or
premium) to the extent that the REMIC's basis therein, determined as described
in the preceding paragraph, is less than (or greater than) its stated redemption
price. Any such discount will be includible in the income of the REMIC as it
accrues, in advance of receipt of the cash attributable to such income, under a
method similar to the method described above for accruing original issue
discount on the REMIC Regular Certificates. It is anticipated that each REMIC
will elect under Section 171 of the Code to amortize any premium on the Mortgage
Loans. Premium on any Mortgage Loan to which such election applies may be
amortized under a constant yield method, presumably taking into account a
Prepayment Assumption. Further, such an election would not apply to any Mortgage
Loan originated on or before September 27, 1985. Instead, premium on such a
Mortgage Loan should be allocated among the principal payments thereon and be
deductible by the REMIC as those payments become due or upon the prepayment of
such Mortgage Loan.
A REMIC will be allowed deductions for interest (including original issue
discount) on the REMIC Regular Certificates (including any other class of REMIC
Certificates constituting 'regular interests' in the REMIC not offered hereby)
equal to the deductions that would be allowed if the REMIC Regular Certificates
(including any other class of REMIC Certificates constituting 'regular
interests' in the REMIC not offered hereby) were indebtedness of the REMIC.
Original issue discount will be considered to accrue for this purpose as
described above under ' -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount', except that the de minimis rule and
the adjustments for subsequent holders of REMIC Regular Certificates (including
any other class of REMIC Certificates constituting 'regular interests' in the
REMIC not offered hereby) described therein will not apply.
If a class of REMIC Regular Certificates is issued at a price in excess of
the stated redemption price of such class (such excess 'Issue Premium'), the net
amount of interest deductions that are allowed the REMIC in each taxable year
with respect to the REMIC Regular Certificates of such class will be reduced by
an amount equal to the portion of the Issue Premium that is considered to be
amortized or repaid in that year. Although the matter is not entirely certain,
it is likely that Issue Premium would be amortized under a constant yield method
in a manner analogous to the method of accruing original issue discount
described above under ' -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount'.
As a general rule, the taxable income of a REMIC will be determined in the
same manner as if the REMIC were an individual having the calendar year as its
taxable year and using the accrual method of accounting. However, no item of
income, gain, loss or deduction allocable to a prohibited transaction will be
taken into account. See ' -- Prohibited Transactions Tax and Other Taxes' below.
Further, the limitation on miscellaneous itemized deductions imposed on
individuals by Section 67 of the Code (which allows such deductions only to the
extent they exceed in the aggregate two percent of the
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taxpayer's adjusted gross income) will not be applied at the REMIC level so that
the REMIC will be allowed deductions for servicing, administrative and other
non-interest expenses in determining its taxable income. All such expenses will
be allocated as a separate item to the holders of REMIC Certificates, subject to
the limitation of Section 67 of the Code. See ' -- Possible Pass-Through of
Miscellaneous Itemized Deductions'. If the deductions allowed to the REMIC
exceed its gross income for a calendar quarter, such excess will be the net loss
for the REMIC for that calendar quarter.
Basis Rules, Net Losses and Distributions. The adjusted basis of a REMIC
Residual Certificate will be equal to the amount paid for such REMIC Residual
Certificate, increased by amounts included in the income of the REMIC Residual
Certificateholder and decreased (but not below zero) by distributions made, and
by net losses allocated, to such REMIC Residual Certificateholder.
A REMIC Residual Certificateholder is not allowed to take into account any
net loss for any calendar quarter to the extent such net loss exceeds such REMIC
Residual Certificateholder's adjusted basis in its REMIC Residual Certificate as
of the close of such calendar quarter (determined without regard to such net
loss). Any loss that is not currently deductible by reason of this limitation
may be carried forward indefinitely to future calendar quarters and, subject to
the same limitation, may be used only to offset income from the REMIC Residual
Certificate. The ability of REMIC Residual Certificateholders to deduct net
losses may be subject to additional limitations under the Code, as to which
REMIC Residual Certificateholders should consult their tax advisors.
Any distribution on a REMIC Residual Certificate will be treated as a
non-taxable return of capital to the extent it does not exceed the holder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
on a REMIC Residual Certificate exceeds such adjusted basis, it will be treated
as gain from the sale of such REMIC Residual Certificate. Holders of certain
REMIC Residual Certificates may be entitled to distributions early in the term
of the related REMIC under circumstances in which their bases in such REMIC
Residual Certificates will not be sufficiently large that such distributions
will be treated as nontaxable returns of capital. Their bases in such REMIC
Residual Certificates will initially equal the amount paid for such REMIC
Residual Certificates and will be increased by their allocable shares of taxable
income of the Trust Fund. However, such bases increases may not occur until the
end of the calendar quarter, or perhaps the end of the calendar year, with
respect to which such REMIC taxable income is allocated to the REMIC Residual
Certificateholders. To the extent such REMIC Residual Certificateholders'
initial bases are less than the distributions to such REMIC Residual
Certificateholders, and increases in such initial bases either occur after such
distributions or (together with their initial bases) are less than the amount of
such distributions, gain will be recognized to such REMIC Residual
Certificateholders on such distributions and will be treated as gain from the
sale of their REMIC Residual Certificates.
The effect of these rules is that a REMIC Residual Certificateholder may
not amortize its basis in a REMIC Residual Certificate, but may only recover its
basis through distributions, through the deduction of any net losses of the
REMIC or upon the sale of its REMIC Residual Certificate. See ' -- Sales of
REMIC Certificates'. For a discussion of possible modifications of these rules
that may require adjustments to income of a holder of a REMIC Residual
Certificate other than an original holder in order to reflect any difference
between the cost of such REMIC Residual Certificate to such REMIC Residual
Certificateholder and the adjusted basis such REMIC Residual Certificate would
have in the hands of an original holder, see ' -- Taxation of Owners of REMIC
Residual Certificates -- General'.
Excess Inclusions. Any 'excess inclusions' with respect to a REMIC
Residual Certificate will, with an exception discussed below for certain REMIC
Residual Certificates held by thrift institutions, be subject to federal income
tax in all events.
In general, the 'excess inclusions' with respect to a REMIC Residual
Certificate for any calendar quarter will be the excess, if any, of (i) the sum
of the daily portions of REMIC taxable income allocable to such REMIC Residual
Certificate over (ii) the sum of the 'daily accruals' (as defined below) for
each day during such quarter that such REMIC Residual Certificate was held by
such REMIC Residual Certificateholder. The daily accruals of a REMIC Residual
Certificateholder will be determined by allocating to each day during a calendar
quarter its ratable portion of the product of the 'adjusted issue price' of the
REMIC Residual Certificate at the beginning of the calendar quarter and
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120% of the 'long-term Federal rate' in effect on the Closing Date. For this
purpose, the adjusted issue price of a REMIC Residual Certificate as of the
beginning of any calendar quarter will be equal to the issue price of the REMIC
Residual Certificate, increased by the sum of the daily accruals for all prior
quarters and decreased (but not below zero) by any distributions made with
respect to such REMIC Residual Certificate before the beginning of such quarter.
The issue price of a REMIC Residual Certificate is the initial offering price to
the public (excluding bond houses and brokers) at which a substantial amount of
the REMIC Residual Certificates were sold. The 'long-term Federal rate' is an
average of current yields on Treasury securities with a remaining term of
greater than nine years, computed and published monthly by the IRS.
For REMIC Residual Certificateholders, an excess inclusion (i) will not be
permitted to be offset by deductions, losses or loss carryovers from other
activities, (ii) will be treated as 'unrelated business taxable income' to an
otherwise tax-exempt organization and (iii) will not be eligible for any rate
reduction or exemption under any applicable tax treaty with respect to the 30%
United States withholding tax imposed on distributions to REMIC Residual
Certificateholders that are foreign investors. See, however, ' -- Foreign
Investors in REMIC Certificates' below.
As an exception to the general rules described above, thrift institutions
are allowed to offset their excess inclusions with unrelated deductions, losses
or loss carryovers, but only if the REMIC Residual Certificates are considered
to have 'significant value'. The REMIC Regulations provide that in order to be
treated as having significant value, the REMIC Residual Certificates must have
an aggregate issue price, at least equal to two percent of the aggregate issue
prices of all of the related REMIC's Regular and Residual Certificates. In
addition, based on the Prepayment Assumption, the anticipated weighted average
life of the REMIC Residual Certificates must equal or exceed 20 percent of the
anticipated weighted average life of the REMIC, based on the Prepayment
Assumption and on any required or permitted clean up calls or required
liquidation provided for in the REMIC's organizational documents. Although it
has not done so, the Treasury also has authority to issue regulations that would
treat the entire amount of income accruing on a REMIC Residual Certificate as an
excess inclusion if the REMIC Residual Certificates are considered not to have
'significant value'. The related Prospectus Supplement will disclose whether
offered REMIC Residual Certificates may be considered to have 'significant
value' under the REMIC Regulations; provided, however, that any disclosure that
a REMIC Residual Certificate will have 'significant value' will be based upon
certain assumptions, and the Depositor will make no representation that a REMIC
Residual Certificate will have 'significant value' for purposes of the
above-described rules. The above-described exception for thrift institutions
applies only to those residual interests held directly by, and deductions,
losses and loss carryovers incurred by, such institutions (and not by other
members of an affiliated group of corporations filing a consolidated income tax
return) or by certain wholly-owned direct subsidiaries of such institutions
formed or operated exclusively in connection with the organization and operation
of one or more REMICs.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Section 857(b)(2) of the
Code, excluding any net capital gain), will be allocated among the shareholders
of such trust in proportion to the dividends received by such shareholders from
such trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Treasury regulations yet to be issued could apply a similar rule to
regulated investment companies, common trust funds and certain cooperatives; the
REMIC Regulations currently do not address this subject.
Noneconomic REMIC Residual Certificates. Under the REMIC Regulations,
transfers of 'noneconomic' REMIC Residual Certificates will be disregarded for
all federal income tax purposes if 'a significant purpose of the transfer was to
enable the transferor to impede the assessment or collection of tax'. If such
transfer is disregarded, the purported transferor will continue to remain liable
for any taxes due with respect to the income on such 'noneconomic' REMIC
Residual Certificate. The REMIC Regulations provide that a REMIC Residual
Certificate is noneconomic unless, based on the Prepayment Assumption and on any
required or permitted clean up calls, or required liquidation
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provided for in the REMIC's organizational documents, (1) the present value of
the expected future distributions (discounted using the 'applicable Federal
rate' for obligations whose term ends on the close of the last quarter in which
excess inclusions are expected to accrue with respect to the REMIC Residual
Certificate, which rate is computed and published monthly by the IRS) on the
REMIC Residual Certificate equals at least the present value of the expected tax
on the anticipated excess inclusions, and (2) the transferor reasonably expects
that the transferee will receive distributions with respect to the REMIC
Residual Certificate at or after the time the taxes accrue on the anticipated
excess inclusions in an amount sufficient to satisfy the accrued taxes.
Accordingly, all transfers of REMIC Residual Certificates that may constitute
noneconomic residual interests will be subject to certain restrictions under the
terms of the related Pooling Agreement that are intended to reduce the
possibility of any such transfer being disregarded. Such restrictions will
require each party to a transfer to provide an affidavit that no purpose of such
transfer is to impede the assessment or collection of tax, including certain
representations as to the financial condition of the prospective transferee, as
to which the transferor is also required to make a reasonable investigation to
determine such transferee's historic payment of its debts and ability to
continue to pay its debts as they come due in the future. Prior to purchasing a
REMIC Residual Certificate, prospective purchasers should consider the
possibility that a purported transfer of such REMIC Residual Certificate by such
a purchaser to another purchaser at some future date may be disregarded in
accordance with the above-described rules which would result in the retention of
tax liability by such purchaser.
The related Prospectus Supplement will disclose whether offered REMIC
Residual Certificates may be considered 'noneconomic' residual interests under
the REMIC Regulations; provided, however, that any disclosure that a REMIC
Residual Certificate will not be considered 'noneconomic' will be based upon
certain assumptions, and the Depositor will make no representation that a REMIC
Residual Certificate will not be considered 'noneconomic' for purposes of the
above-described rules. See ' -- Foreign Investors in REMIC Certificates -- REMIC
Residual Certificates' below for additional restrictions applicable to transfers
of certain REMIC Residual Certificates to foreign persons.
Mark-to-Market Rules. Prospective purchasers of a REMIC Residual
Certificate should be aware that on December 28, 1993, the IRS released
temporary regulations under Code Section 475 (the 'Temporary Mark-to-Market
Regulations') relating to the requirement that a securities dealer mark to
market securities held for sale to customers. This mark-to-market requirement
applies to all securities owned by a dealer, except to the extent that the
dealer has specifically identified a security as held for investment. The
Temporary Mark-to-Market Regulations provide that for purposes of this
mark-to-market requirement, a 'negative value' REMIC Residual Certificate is not
treated as a security and thus may not be marked to market. In general, a REMIC
Residual Certificate has negative value if, as of the date a taxpayer acquires
the REMIC Residual Certificate, the present value of the tax liabilities
associated with holding the REMIC Residual Certificate exceeds the sum of (i)
the present value of the expected future distributions on the REMIC Residual
Certificate, and (ii) the present value of the anticipated tax savings
associated with holding the REMIC Residual Certificate as the REMIC generates
losses. The amounts and present values of the anticipated tax liabilities,
expected future distributions and anticipated tax savings are all to be
determined using (i) the prepayment and reinvestment assumptions adopted under
Section 1272(a)(6) of the Code, or that would have been adopted had the REMIC's
regular interests been issued with original issue discount, (ii) any required or
permitted clean up calls, or required qualified liquidation, provided for in the
REMIC's organizational documents and (iii) a discount rate equal to the
'applicable Federal rate' (as specified in Section 1274(d)(1) of the Code) that
would apply to a debt instrument issued on the date of acquisition of the REMIC
Residual Certificate. The Temporary Mark-to-Market Regulations apply to taxable
years ending on or after December 31, 1993. Furthermore, the Temporary
Mark-to-Market Regulations provide the IRS with the authority to treat any REMIC
Residual Certificate having substantially the same economic effect as a
'negative value' residual interest. On January 3, 1995, the IRS released
proposed regulations under Section 475 of the Code (the 'Proposed Mark-to-Market
Regulations'). The Proposed Mark-to-Market Regulations provide that any residual
interest (regardless of whether it has negative value) that is acquired on or
after January 4, 1995 is not a 'security' for the purposes of Section 475 of the
Code, and thus is not subject to the mark-to-market rules. Prospective
purchasers of
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a REMIC Residual Certificate should consult their tax advisors regarding the
possible application of the Temporary Mark-to-Market Regulations and the
Proposed Mark-to-Market Regulations.
Possible Pass-Through of Miscellaneous Itemized Deductions. Fees and
expenses of a REMIC generally will be allocated to the holders of the related
REMIC Residual Certificates. The applicable Treasury regulations indicate,
however, that in the case of a REMIC that is similar to a single class grantor
trust, all or a portion of such fees and expenses should be allocated to the
holders of the related REMIC Regular Certificates. Unless otherwise stated in
the related Prospectus Supplement, such fees and expenses will be allocated to
holders of the related REMIC Residual Certificates in their entirety and not to
the holders of the related REMIC Regular Certificates.
With respect to REMIC Residual Certificates or REMIC Regular Certificates
the holders of which receive an allocation of fees and expenses in accordance
with the preceding discussion, if any holder thereof is an individual, estate or
trust, or a 'pass-through entity' beneficially owned by one or more individuals,
estates or trusts, (i) an amount equal to such individual's, estate's or trust's
share of such fees and expenses will be added to the gross income of such holder
and (ii) such individual's, estate's or trust's share of such fees and expenses
will be treated as a miscellaneous itemized deduction allowable subject to the
limitation of Section 67 of the Code, which permits such deductions only to the
extent they exceed in the aggregate two percent of a taxpayer's adjusted gross
income. In addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be reduced by the lesser of (i) 3% of the excess
of the individual's adjusted gross income over such amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for the taxable year. The
amount of additional taxable income reportable by REMIC Certificateholders that
are subject to the limitations of either Section 67 or Section 68 of the Code
may be substantial. Furthermore, in determining the alternative minimum taxable
income of such a holder of a REMIC Certificate that is an individual, estate or
trust, or a 'pass-through entity' beneficially owned by one or more individuals,
estates or trusts, no deduction will be allowed for such holder's allocable
portion of servicing fees and other miscellaneous itemized deductions of the
REMIC, even though an amount equal to the amount of such fees and other
deductions will be included in such holder's gross income. Accordingly, such
REMIC Certificates may not be appropriate investments for individuals, estates,
or trusts, or pass-through entities beneficially owned by one or more
individuals, estates or trusts. Such prospective investors should carefully
consult with their own tax advisors prior to making an investment in such
Certificates.
Sales of REMIC Certificates. If a REMIC Certificate is sold, the selling
Certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its adjusted basis in the REMIC Certificate.
The adjusted basis of a REMIC Regular Certificate generally will equal the cost
of such REMIC Regular Certificate to such Certificateholder, increased by income
reported by such Certificateholder with respect to such REMIC Regular
Certificate (including original issue discount and market discount income) and
reduced (but not below zero) by distributions on such REMIC Regular Certificate
received by such Certificateholder and by any amortized premium. The adjusted
basis of a REMIC Residual Certificate will be determined as described under
' -- Taxation of Owners of REMIC Residual Certificates -- Basis Rules, Net
Losses and Distributions'. Except as provided in the following two paragraphs,
any such gain or loss will be capital gain or loss, provided such REMIC
Certificate is held as a capital asset (generally, property held for investment)
within the meaning of Section 1221 of the Code. The Code as of the date of this
Prospectus provides for a top marginal tax rate of 39.6% for individuals and a
maximum marginal rate for long-term capital gains of individuals of 28%. No such
rate differential exists for corporations. In addition, the distinction between
a capital gain or loss and ordinary income or loss remains relevant for other
purposes.
Gain from the sale of a REMIC Regular Certificate that might otherwise be
capital gain will be treated as ordinary income to the extent such gain does not
exceed the excess, if any, of (i) the amount that would have been includible in
the seller's income with respect to such REMIC Regular Certificate assuming that
income had accrued thereon at a rate equal to 110% of the 'applicable Federal
rate' (generally, a rate based on an average of current yields on Treasury
securities having a maturity comparable to that of the Certificate based on the
application of the Prepayment Assumption to such Certificate, which rate is
computed and published monthly by the IRS), determined as of the date of
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purchase of such REMIC Regular Certificate, over (ii) the amount of ordinary
income actually includible in the seller's income prior to such sale. In
addition, gain recognized on the sale of a REMIC Regular Certificate by a seller
who purchased such REMIC Regular Certificate at a market discount will be
taxable as ordinary income in an amount not exceeding the portion of such
discount that accrued during the period such REMIC Certificate was held by such
holder, reduced by any market discount included in income under the rules
described above under ' -- Taxation of Owners of REMIC Regular
Certificates -- Market Discount' and ' -- Premium'.
REMIC Certificates will be 'evidences of indebtedness' within the meaning
of Section 582(c)(1) of the Code, so that gain or loss recognized from the sale
of a REMIC Certificate by a bank or thrift institution to which such section
applies will be ordinary income or loss.
A portion of any gain from the sale of a REMIC Regular Certificate that
might otherwise be capital gain may be treated as ordinary income to the extent
that such Certificate is held as part of a 'conversion transaction' within the
meaning of Section 1258 of the Code. A conversion transaction generally is one
in which the taxpayer has taken two or more positions in the same or similar
property that reduce or eliminate market risk, if substantially all of the
taxpayer's return is attributable to the time value of the taxpayer's net
investment in such transaction. The amount of gain so realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate 'applicable Federal rate' (which rate is computed and
published monthly by the IRS) at the time the taxpayer enters into the
conversion transaction, subject to appropriate reduction for prior inclusion of
interest and other ordinary income items from the transaction.
Finally, a taxpayer may elect to have net capital gain taxed at ordinary
income rates rather than capital gains rates in order to include such net
capital gain in total net investment income for the taxable year, for purposes
of the rule that limits the deduction of interest on indebtedness incurred to
purchase or carry property held for investment to a taxpayer's net investment
income.
Except as may be provided in Treasury regulations yet to be issued, if the
seller of a REMIC Residual Certificate reacquires a REMIC Residual Certificate,
or acquires any other residual interest in a REMIC or any similar interest in a
'taxable mortgage pool' (as defined in Section 7701(i) of the Code) during the
period beginning six months before, and ending six months after, the date of
such sale, such sale will be subject to the 'wash sale' rules of Section 1091 of
the Code. In that event, any loss realized by the REMIC Residual
Certificateholder on the sale will not be deductible, but instead will be added
to such REMIC Residual Certificateholder's adjusted basis in the newly-acquired
asset.
Prohibited Transactions Tax and Other Taxes. The Code imposes a tax on
REMICs equal to 100% of the net income derived from 'prohibited transactions' (a
'Prohibited Transactions Tax'). In general, subject to certain specified
exceptions a prohibited transaction means the disposition of a Mortgage Loan,
the receipt of income from a source other than a Mortgage Loan or certain other
permitted investments, the receipt of compensation for services, or gain from
the disposition of an asset purchased with the payments on the Mortgage Loans
for temporary investment pending distribution on the REMIC Certificates. It is
not anticipated that the REMIC will engage in any prohibited transactions in
which it would recognize a material amount of net income.
In addition, certain contributions to a REMIC made after the day on which
the REMIC issues all of its interests could result in the imposition of a tax on
the REMIC equal to 100% of the value of the contributed property (a
'Contributions Tax'). Each Pooling Agreement will include provisions designed to
prevent the acceptance of any contributions that would be subject to such tax.
REMICs also are subject to federal income tax at the highest corporate rate
on 'net income from foreclosure property', determined by reference to the rules
applicable to real estate investment trusts. 'Net income from foreclosure
property' generally means gain from the sale of a foreclosure property that is
inventory property and gross income from foreclosure property other than
qualifying rents and other qualifying income for a real estate investment trust.
Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any REMIC will recognize 'net income from foreclosure property'
subject to federal income tax.
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Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any material state or local income or franchise tax will be
imposed on any REMIC.
Unless otherwise stated in the related Prospectus Supplement, and to the
extent permitted by then applicable laws, any Prohibited Transactions Tax,
Contributions Tax, tax on 'net income from foreclosure property' or state or
local income or franchise tax that may be imposed on the REMIC will be borne by
the related Master Servicer, Special Servicer or Trustee in any case out of its
own funds, provided that such person has sufficient assets to do so, and
provided further that such tax arises out of a breach of such person's
obligations under the related Pooling Agreement and in respect of compliance
with applicable laws and regulations. Any such tax not borne by a Master
Servicer, Special Servicer or Trustee will be charged against the related Trust
Fund resulting in a reduction in amounts payable to holders of the related REMIC
Certificates.
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain
Organizations. If a REMIC Residual Certificate is transferred to a
'disqualified organization' (as defined below), a tax would be imposed in an
amount (determined under the REMIC Regulations) equal to the product of (i) the
present value (discounted using the 'applicable Federal rate' for obligations
whose term ends on the close of the last quarter in which excess inclusions are
expected to accrue with respect to the REMIC Residual Certificate, which rate is
computed and published monthly by the IRS) of the total anticipated excess
inclusions with respect to such REMIC Residual Certificate for periods after the
transfer and (ii) the highest marginal federal income tax rate applicable to
corporations. The anticipated excess inclusions must be determined as of the
date that the REMIC Residual Certificate is transferred and must be based on
events that have occurred up to the time of such transfer, the Prepayment
Assumption and any required or permitted clean up calls or required liquidation
provided for in the REMIC's organizational documents. Such a tax generally would
be imposed on the transferor of the REMIC Residual Certificate, except that
where such transfer is through an agent for a disqualified organization, the tax
would instead be imposed on such agent. However, a transferor of a REMIC
Residual Certificate would in no event be liable for such tax with respect to a
transfer if the transferee furnishes to the transferor an affidavit that the
transferee is not a disqualified organization and, as of the time of the
transfer, the transferor does not have actual knowledge that such affidavit is
false. Moreover, an entity will not qualify as a REMIC unless there are
reasonable arrangements designed to ensure that (i) residual interests in such
entity are not held by disqualified organizations and (ii) information necessary
for the application of the tax described herein will be made available.
Restrictions on the transfer of REMIC Residual Certificates and certain other
provisions that are intended to meet this requirement will be included in the
Pooling Agreement, and will be discussed more fully in any Prospectus Supplement
relating to the offering of any REMIC Residual Certificate.
In addition, if a 'pass-through entity' (as defined below) includes in
income excess inclusions with respect to a REMIC Residual Certificate, and a
disqualified organization is the record holder of an interest in such entity,
then a tax will be imposed on such entity equal to the product of (i) the amount
of excess inclusions on the REMIC Residual Certificate that are allocable to the
interest in the pass-through entity held by such disqualified organization and
(ii) the highest marginal federal income tax rate imposed on corporations. A
pass-through entity will not be subject to this tax for any period, however, if
each record holder of an interest in such pass-through entity furnishes to such
pass-through entity (i) such holder's social security number and a statement
under penalty of perjury that such social security number is that of the record
holder or (ii) a statement under penalty of perjury that such record holder is
not a disqualified organization.
For these purposes, a 'disqualified organization' means (i) the United
States, any State or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of the foregoing
(but would not include instrumentalities described in Section 168(h)(2)(D) of
the Code or the Federal Home Loan Mortgage Corporation), (ii) any organization
(other than a cooperative described in Section 521 of the Code) that is exempt
from federal income tax, unless it is subject to the tax imposed by Section 511
of the Code or (iii) any organization described in Section 1381(a)(2)(C) of the
Code. For these purposes, a 'pass-through entity' means any regulated investment
company, real estate investment trust, trust, partnership or certain other
entities described in
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Section 860E(e)(6) of the Code. In addition, a person holding an interest in a
pass-through entity as a nominee for another person will, with respect to such
interest, be treated as a pass-through entity.
Termination. A REMIC will terminate immediately after the Distribution
Date following receipt by the REMIC of the final payment in respect of the
Mortgage Loans or upon a sale of the REMIC's assets following the adoption by
the REMIC of a plan of complete liquidation. The last distribution on a REMIC
Regular Certificate will be treated as a payment in retirement of a debt
instrument. In the case of a REMIC Residual Certificate, if the last
distribution on such REMIC Residual Certificate is less than the REMIC Residual
Certificateholder's adjusted basis in such REMIC Residual Certificate, such
REMIC Residual Certificateholder should (but may not) be treated as realizing a
loss equal to the amount of such difference, and such loss may be treated as a
capital loss.
Reporting and Other Administrative Matters. Solely for purposes of the
administrative provisions of the Code, the REMIC will be treated as a
partnership and REMIC Residual Certificateholders will be treated as partners.
Unless otherwise stated in the related Prospectus Supplement, either the Trustee
or the Master Servicer, generally will hold at least a nominal amount of REMIC
Residual Certificates, will file REMIC federal income tax returns on behalf of
the related REMIC, and will be designated as and will act as the 'tax matters
person' with respect to the REMIC in all respects.
As the tax matters person, the Trustee or the Master Servicer, as the case
may be, will, subject to certain notice requirements and various restrictions
and limitations, generally have the authority to act on behalf of the REMIC and
the REMIC Residual Certificateholders in connection with the administrative and
judicial review of items of income, deduction, gain or loss of the REMIC, as
well as the REMIC's classification. REMIC Residual Certificateholders will
generally be required to report such REMIC items consistently with their
treatment on the related REMIC's tax return and may in some circumstances be
bound by a settlement agreement between the Trustee or the Master Servicer, as
the case may be, as tax matters person, and the IRS concerning any such REMIC
item. Adjustments made to the REMIC tax return may require a REMIC Residual
Certificateholder to make corresponding adjustments on its return, and an audit
of the REMIC's tax return, or the adjustments resulting from such an audit,
could result in an audit of a REMIC Residual Certificateholder's return. No
REMIC will be registered as a tax shelter pursuant to Section 6111 of the Code
because it is not anticipated that any REMIC will have a net loss for any of the
first five taxable years of its existence. Any person that holds a REMIC
Residual Certificate as a nominee for another person may be required to furnish
to the related REMIC, in a manner to be provided in Treasury regulations, the
name and address of such person and other information.
Reporting of interest income, including any original issue discount, with
respect to REMIC Regular Certificates is required annually, and may be required
more frequently under Treasury regulations. These information reports generally
are required to be sent to individual holders of REMIC Regular Interests and the
IRS; holders of REMIC Regular 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 REMIC must also comply with rules
requiring a REMIC Regular 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 REMIC Residual Certificates, including income, excess inclusions,
investment expenses and relevant information regarding qualification of the
REMIC's assets will be made as required under the Treasury regulations,
generally on a quarterly basis.
As applicable, the REMIC Regular Certificate information reports will
include a statement of the adjusted issue price of the REMIC Regular 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 the holder's
purchase price that the REMIC may not have, such regulations only require that
information pertaining to the appropriate
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proportionate method of accruing market discount be provided. See ' -- Taxation
of Owners of REMIC Regular Certificates -- Market Discount'.
The responsibility for complying with the foregoing reporting rules will be
borne by either the Trustee or the Master Servicer, unless otherwise stated in
the related Prospectus Supplement.
Backup Withholding with Respect to REMIC Certificates. Payments of
interest and principal, as well as payments of proceeds from the sale of REMIC
Certificates, may be subject to the 'backup withholding tax' under Section 3406
of the Code at a rate of 31% if recipients of such payments fail to furnish to
the payor certain information, including their taxpayer identification numbers,
or otherwise fail to establish an exemption from such tax. Any amounts deducted
and withheld from a distribution to a recipient would be allowed as a credit
against such recipient's federal income tax. Furthermore, certain penalties may
be imposed by the IRS on a recipient of payments that is required to supply
information but that does not do so in the proper manner.
Foreign Investors in REMIC Certificates. A REMIC Regular Certificateholder
that is not a 'United States person' (as defined below) and is not subject to
federal income tax as a result of any direct or indirect connection to the
United States in addition to its ownership of a REMIC Regular Certificate will
not, unless otherwise disclosed in the related Prospectus Supplement, be subject
to United States federal income or withholding tax in respect of a distribution
on a REMIC Regular Certificate, provided that the holder complies to the extent
necessary with certain identification requirements (including delivery of a
statement, signed by the Certificateholder under penalties of perjury,
certifying that such Certificateholder is not a United States person and
providing the name and address of such Certificateholder). For these purposes,
'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 or any political subdivision thereof, or an estate or
trust whose income from sources without the United States is includible in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States. It
is possible that the IRS may assert that the foregoing tax exemption should not
apply with respect to a REMIC Regular Certificate held by a REMIC Residual
Certificateholder that owns directly or indirectly a 10% or greater interest in
the REMIC Residual Certificates. If the holder does not qualify for exemption,
distributions of interest, including distributions in respect of accrued
original issue discount, to such holder may be subject to a tax rate of 30%,
subject to reduction under any applicable tax treaty.
In addition, the foregoing rules will not apply to exempt a United States
shareholder of a controlled foreign corporation from taxation on such United
States shareholder's allocable portion of the interest income received by such
controlled foreign corporation.
Further, it appears that a REMIC Regular Certificate would not be included
in the estate of a non-resident alien individual and would not be subject to
United States estate taxes. However, Certificateholders who are non-resident
alien individuals should consult their tax advisors concerning this question.
Unless otherwise stated in the related Prospectus Supplement, transfers of
REMIC Residual Certificates to investors that are not United States persons will
be prohibited under the related Pooling Agreement.
GRANTOR TRUST FUNDS
Classification of Grantor Trust Funds. With respect to each series of
Grantor Trust Certificates, counsel to the Depositor will deliver its opinion to
the effect that, assuming compliance with all provisions of the related Pooling
Agreement, the related Grantor Trust Fund will be classified as a grantor trust
under subpart E, part I of subchapter J of the Code and not as a partnership or
an association taxable as a corporation. Accordingly, each holder of a Grantor
Trust Certificate generally will be treated as the owner of an interest in the
Mortgage Loans included in the Grantor Trust Fund.
For purposes of the following discussion, a Grantor Trust Certificate
representing an undivided equitable ownership interest in the principal of the
Mortgage Loans constituting the related Grantor Trust Fund, together with
interest thereon at a pass-through rate, will be referred to as a 'Grantor Trust
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Fractional Interest Certificate'. A Grantor Trust Certificate representing
ownership of all or a portion of the difference between interest paid on the
Mortgage Loans constituting the related Grantor Trust Fund (net of normal
administration fees and any spread) and interest paid to the holders of Grantor
Trust Fractional Interest Certificates issued with respect to such Grantor Trust
Fund will be referred to as a 'Grantor Trust Strip Certificate'. A Grantor Trust
Strip Certificate may also evidence a nominal ownership interest in the
principal of the Mortgage Loans constituting the related Grantor Trust Fund.
CHARACTERIZATION OF INVESTMENTS IN GRANTOR TRUST CERTIFICATES
Grantor Trust Fractional Interest Certificates. In the case of Grantor
Trust Fractional Interest Certificates, unless otherwise disclosed in the
related Prospectus Supplement, counsel to the Depositor will deliver an opinion
that, in general, Grantor Trust Fractional Interest Certificates will represent
interests in (i) 'qualifying real property loans' within the meaning of Section
593(d) of the Code; (ii) assets described in Section 7701(a)(19)(C) of the Code;
(iii) 'obligation[s] (including any participation or certificate of beneficial
ownership therein) which . . . [are] principally secured by an interest in real
property' within the meaning of Section 860G(a)(3)(A) of the Code; and (iv)
'real estate assets' within the meaning of Section 856(c)(5)(A) of the Code. In
addition, counsel to the Depositor will deliver an opinion that interest on
Grantor Trust Fractional Interest Certificates will to the same extent be
considered 'interest on 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.
Grantor Trust Strip Certificates. Even if Grantor Trust Strip Certificates
evidence an interest in a Grantor Trust Fund consisting of Mortgage Loans that
are assets described in Section 7701(a)(19)(C) of the Code, 'qualifying real
property loans' within the meaning of Section 593(d) of the Code, and 'real
estate assets' within the meaning of Section 856(c)(5)(A) of the Code, and the
interest on which is 'interest on obligations secured by mortgages on real
property' within the meaning of Section 856(c)(3)(B) of the Code, it is unclear
whether the Grantor Trust Strip Certificates, and the income therefrom, will be
so characterized. However, the policies underlying such sections (namely, to
encourage or require investments in mortgage loans by thrift institutions and
real estate investment trusts) may suggest that such characterization is
appropriate. Counsel to the Depositor will not deliver any opinion on these
questions. Prospective purchasers to which such characterization of an
investment in Grantor Trust Strip Certificates is material should consult their
tax advisors regarding whether the Grantor Trust Strip Certificates, and the
income therefrom, will be so characterized.
The Grantor Trust Strip Certificates will be 'obligation[s] (including any
participation or certificate of beneficial ownership therein) which . . . [are]
principally secured by an interest in real property' within the meaning of
Section 860G(a)(3)(A) of the Code.
TAXATION OF OWNERS OF GRANTOR TRUST FRACTIONAL INTEREST CERTIFICATES
General. Holders of a particular series of Grantor Trust Fractional
Interest Certificates generally will be required to report on their federal
income tax returns their shares of the entire income from the Mortgage Loans
(including amounts used to pay reasonable servicing fees and other expenses) and
will be entitled to deduct their shares of any such reasonable servicing fees
and other expenses. Because of stripped interests, market or original issue
discount, or premium, the amount includible in income on account of a Grantor
Trust Fractional Interest Certificate may differ significantly from the amount
distributable thereon representing interest on the Mortgage Loans. Under Section
67 of the Code, an individual, estate or trust holding a Grantor Trust
Fractional Interest Certificate directly or through certain pass-through
entities will be allowed a deduction for such reasonable servicing fees and
expenses only to the extent that the aggregate of such holder's miscellaneous
itemized deductions exceeds two percent of such holder's adjusted gross income.
In addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be reduced by the lesser of (i) 3% of the excess
of the individual's adjusted gross income over such amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for the taxable year. The
amount of additional taxable income reportable by holders of Grantor Trust
Fractional Interest Certificates who are subject to the limitations of either
Section 67 or Section 68 of the Code may be substantial. Further,
Certificateholders (other than corporations) subject
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to the alternative minimum tax may not deduct miscellaneous itemized deductions
in determining such holder's alternative minimum taxable income. Although it is
not entirely clear, it appears that in transactions in which multiple classes of
Grantor Trust Certificates (including Grantor Trust Strip Certificates) are
issued, such fees and expenses should be allocated among the classes of Grantor
Trust Certificates using a method that recognizes that each such class benefits
from the related services. In the absence of statutory or administrative
clarification as to the method to be used, it currently is intended to base
information returns or reports to the IRS and Certificateholders on a method
that allocates such expenses among classes of Grantor Trust Certificates with
respect to each period based on the distributions made to each such class during
that period.
The federal income tax treatment of Grantor Trust Fractional Interest
Certificates of any series will depend on whether they are subject to the
'stripped bond' rules of Section 1286 of the Code. Grantor Trust Fractional
Interest Certificates may be subject to those rules if (i) a class of Grantor
Trust Strip Certificates is issued as part of the same series of Certificates or
(ii) the Depositor or any of its affiliates retains (for its own account or for
purposes of resale) a right to receive a specified portion of the interest
payable on a Mortgage Asset. Further, the IRS has ruled that an unreasonably
high servicing fee retained by a seller or servicer will be treated as a
retained ownership interest in mortgages that constitutes a stripped coupon. For
purposes of determining what constitutes reasonable servicing fees for various
types of mortgages the IRS has established certain 'safe harbors'. The servicing
fees paid with respect to the Mortgage Loans for certain series of Grantor Trust
Certificates may be higher than the 'safe harbors' and, accordingly, may not
constitute reasonable servicing compensation. The related Prospectus Supplement
will include information regarding servicing fees paid to a Master Servicer, a
Special Servicer, any Sub-Servicer or their respective affiliates necessary to
determine whether the preceding 'safe harbor' rules apply.
If Stripped Bond Rules Apply. If the stripped bond rules apply, each
Grantor Trust Fractional Interest Certificate will be treated as having been
issued with 'original issue discount' within the meaning of Section 1273(a) of
the Code, subject, however, to the discussion below regarding the treatment of
certain stripped bonds as market discount bonds and the discussion regarding de
minimis market discount. See ' -- Taxation of Grantor Trust Fractional Interest
Certificates -- Market Discount'. Under the stripped bond rules, the holder of a
Grantor Trust Fractional Interest Certificate (whether a cash or accrual method
taxpayer) will be required to report interest income from its Grantor Trust
Fractional Interest Certificate for each month in an amount equal to the income
that accrues on such Certificate in that month calculated under a constant yield
method, in accordance with the rules of the Code relating to original issue
discount.
The original issue discount on a Grantor Trust Fractional Interest
Certificate will be the excess of such Certificate's stated redemption price
over its issue price. The issue price of a Grantor Trust Fractional Interest
Certificate as to any purchaser will be equal to the price paid by such
purchaser for the Grantor Trust Fractional Interest Certificate. The stated
redemption price of a Grantor Trust Fractional Interest Certificate will be the
sum of all payments to be made on such Certificate, other than 'qualified stated
interest', if any, as well as such Certificate's share of reasonable servicing
fees and other expenses. See ' -- Taxation of Grantor Trust Fractional Interest
Certificates -- If Stripped Bond Rules Do Not Apply' for a definition of
'qualified stated interest'. In general, the amount of such income that accrues
in any month would equal the product of such holder's adjusted basis in such
Grantor Trust Fractional Interest Certificate at the beginning of such month
(see ' -- Sales of Grantor Trust Certificates') and the yield of such Grantor
Trust Fractional Interest Certificate to such holder. Such yield would be
computed at the rate (compounded based on the regular interval between payment
dates) that, if used to discount the holder's share of future payments on the
Mortgage Loans, would cause the present value of those future payments to equal
the price at which the holder purchased such Certificate. In computing yield
under the stripped bond rules, a Certificateholder's share of future payments on
the Mortgage Loans will not include any payments made in respect of any spread
or any other ownership interest in the Mortgage Loans retained by the Depositor,
a Master Servicer, a Special Servicer, any Sub-Servicer or their respective
affiliates, but will include such Certificateholder's share of any reasonable
servicing fees and other expenses.
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Section 1272(a)(6) of the Code requires (i) the use of a reasonable
prepayment assumption in accruing original issue discount and (ii) adjustments
in the accrual of original issue discount when prepayments do not conform to the
prepayment assumption, with respect to certain categories of debt instruments,
and regulations could be adopted applying those provisions to the Grantor Trust
Fractional Interest Certificates. It is unclear whether those provisions would
be applicable to the Grantor Trust Fractional Interest Certificates or whether
use of a reasonable prepayment assumption may be required or permitted without
reliance on these rules. It is also uncertain, if a prepayment assumption is
used, whether the assumed prepayment rate would be determined based on
conditions at the time of the first sale of the Grantor Trust Fractional
Interest Certificate or, with respect to any holder, at the time of purchase of
the Grantor Trust Fractional Interest Certificate by that holder.
Certificateholders are advised to consult their own tax advisors concerning
reporting original issue discount in general and, in particular, whether a
prepayment assumption should be used in reporting original issue discount with
respect to Grantor Trust Fractional Interest Certificates.
In the case of a Grantor Trust Fractional Interest Certificate acquired at
a price equal to the principal amount of the Mortgage Loans allocable to such
Certificate, the use of a prepayment assumption generally would not have any
significant effect on the yield used in calculating accruals of interest income.
In the case, however, of a Grantor Trust Fractional Interest Certificate
acquired at a discount or premium (that is, at a price less than or greater than
such principal amount, respectively), the use of a reasonable prepayment
assumption would increase or decrease such yield, and thus accelerate or
decelerate, respectively, the reporting of income.
If a prepayment assumption is not used, then when a Mortgage Loan prepays
in full, the holder of a Grantor Trust Fractional Interest Certificate acquired
at a discount or a premium generally will recognize ordinary income or loss
equal to the difference between the portion of the prepaid principal amount of
the Mortgage Loan that is allocable to such Certificate and the portion of the
adjusted basis of such Certificate that is allocable to such Certificateholder's
interest in the Mortgage Loan. If a prepayment assumption is used, it appears
that no separate item of income or loss should be recognized upon a prepayment.
Instead, a prepayment should be treated as a partial payment of the stated
redemption price of the Grantor Trust Fractional Interest Certificate and
accounted for under a method similar to that described for taking account of
original issue discount on REMIC Regular Certificates. See
' -- REMICs -- Taxation of Owners of REMIC Regular Certificates -- Original
Issue Discount'. It is unclear whether any other adjustments would be required
to reflect differences between an assumed prepayment rate and the actual rate of
prepayments.
In the absence of statutory or administrative clarification, it is
currently intended to base information reports or returns to the IRS and
Certificateholders in transactions subject to the stripped bond rules on a
prepayment assumption (the 'Prepayment Assumption') that will be disclosed in
the related Prospectus Supplement and on a constant yield computed using a
representative initial offering price for each class of Certificates. However,
neither the Depositor nor any other person will make any representation that the
Mortgage Loans will in fact prepay at a rate conforming to such Prepayment
Assumption or any other rate and Certificateholders should bear in mind that the
use of a representative initial offering price will mean that such information
returns or reports, even if otherwise accepted as accurate by the IRS, will in
any event be accurate only as to the initial Certificateholders of each series
who bought at that price.
Under Treasury regulation Section 1.1286-1T, certain stripped bonds are to
be treated as market discount bonds and, accordingly, any purchaser of such a
bond is to account for any discount on the bond as market discount rather than
original issue discount. This treatment only applies, however, if immediately
after the most recent disposition of the bond by a person stripping one or more
coupons from the bond and disposing of the bond or coupon (i) there is no
original issue discount (or only a de minimis amount of original issue discount)
or (ii) the annual stated rate of interest payable on the original bond is no
more than one percentage point lower than the gross interest rate payable on the
original mortgage loan (before subtracting any servicing fee or any stripped
coupon). If interest payable on a Grantor Trust Fractional Interest Certificate
is more than one percentage point lower than the gross interest rate payable on
the Mortgage Loans, the related Prospectus Supplement will disclose that fact.
If the original issue discount or market discount on a Grantor Trust Fractional
Interest Certificate
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determined under the stripped bond rules is less than 0.25% of the stated
redemption price multiplied by the weighted average maturity of the Mortgage
Loans, then such original issue discount or market discount will be considered
to be de minimis. Original issue discount or market discount of only a de
minimis amount will be included in income in the same manner as de minimis
original issue and market discount described in ' -- Taxation of Owners of
Grantor Trust Fractional Interest Certificates -- If Stripped Bond Rules Do Not
Apply' and ' -- Market Discount'.
If Stripped Bond Rules Do Not Apply. Subject to the discussion below on
original issue discount, if the stripped bond rules do not apply to a Grantor
Trust Fractional Interest Certificate, the Certificateholder will be required to
report its share of the interest income on the Mortgage Loans in accordance with
such Certificateholder's normal method of accounting. The original issue
discount rules will apply to a Grantor Trust Fractional Interest Certificate to
the extent it evidences an interest in Mortgage Loans issued with original issue
discount.
The original issue discount, if any, on the Mortgage Loans will equal the
difference between the stated redemption price of such Mortgage Loans and their
issue price. Under the OID Regulations, the stated redemption price is equal to
the total of all payments to be made on such Mortgage Loan other than 'qualified
stated interest'. 'Qualified stated interest' includes interest that is
unconditionally payable at least annually at a single fixed rate, at a
'qualified floating rate', or at an 'objective rate', a combination of a single
fixed rate and one or more 'qualified floating rates' or one 'qualified inverse
floating rate', or a combination of 'qualified floating rates' that does not
operate in a manner that accelerates or defers interest payments on such
Mortgage Loan. In general, the issue price of a Mortgage Loan will be the amount
received by the borrower from the lender under the terms of the Mortgage Loan,
less any 'points' paid by the borrower, and the stated redemption price of a
Mortgage Loan will equal its principal amount, unless the Mortgage Loan provides
for an initial below-market rate of interest or the acceleration or the deferral
of interest payments.
In the case of Mortgage Loans bearing adjustable or variable interest
rates, the related Prospectus Supplement will describe the manner in which such
rules will be applied with respect to those Mortgage Loans in preparing
information returns to the Certificateholders and the IRS.
Notwithstanding the general definition of original issue discount, original
issue discount will be considered to be de minimis if such original issue
discount is less than 0.25% of the stated redemption price multiplied by the
weighted average maturity of the Mortgage Loan. For this purpose, the weighted
average maturity of the Mortgage Loan will be computed as the sum of the amounts
determined, as to each payment included in the stated redemption price of such
Mortgage Loan, by multiplying (i) the number of complete years (rounding down
for partial years) from the issue date until such payment is expected to be made
by (ii) a fraction, the numerator of which is the amount of the payment and the
denominator of which is the stated redemption price of the Mortgage Loan. Under
the OID Regulations, original issue discount of only a de minimis amount (other
than de minimis original issue discount attributable to a so-called 'teaser'
rate or initial interest holiday) will be included in income as each payment of
stated principal price is made, based on the product of the total amount of such
de minimis original issue discount and a fraction, the numerator of which is the
amount of each such payment and the denominator of which is the outstanding
stated principal amount of the Mortgage Loan. The OID Regulations also permit a
Certificateholder to elect to accrue de minimis original issue discount into
income currently based on a constant yield method. See ' -- Taxation of Owners
of Grantor Trust Fractional Interest Certificates -- Market Discount' below.
If original issue discount is in excess of a de minimis amount, all
original issue discount with respect to a Mortgage Loan will be required to be
accrued and reported in income each month, based on a constant yield. The OID
Regulations suggest that no prepayment assumption is appropriate in computing
the yield on prepayable obligations issued with original issue discount. In the
absence of statutory or administrative clarification, it currently is not
intended to base information reports or returns to the IRS and
Certificateholders on the use of a prepayment assumption in transactions not
subject to the stripped bond rules. However, Section 1272(a)(6) of the Code may
require that a prepayment assumption be made in computing yield with respect to
all mortgage-backed securities. Certificateholders are advised to consult their
own tax advisors concerning whether a prepayment assumption should be used in
reporting original issue discount with respect to Grantor Trust Fractional
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Interest Certificates. Certificateholders should refer to the related Prospectus
Supplement with respect to each series to determine whether and in what manner
the original issue discount rules will apply to Mortgage Loans in such series.
A purchaser of a Grantor Trust Fractional Interest Certificate that
purchases such Grantor Trust Fractional Interest Certificate at a cost less than
such Certificate's allocable portion of the aggregate remaining stated
redemption price of the Mortgage Loans held in the related Trust Fund will also
be required to include in gross income such Certificate's daily portions of any
original issue discount with respect to such Mortgage Loans. However, each such
daily portion will be reduced, if the cost of such Grantor Trust Fractional
Interest Certificate to such purchaser is in excess of such Certificate's
allocable portion of the aggregate 'adjusted issue prices' of the Mortgage Loans
held in the related Trust Fund, approximately in proportion to the ratio such
excess bears to such Certificate's allocable portion of the aggregate original
issue discount remaining to be accrued on such Mortgage Loans. The adjusted
issue price of a Mortgage Loan on any given day equals the sum of (i) the
adjusted issue price (or, in the case of the first accrual period, the issue
price) of such Mortgage Loan at the beginning of the accrual period that
includes such day and (ii) the daily portions of original issue discount for all
days during such accrual period prior to such day. The adjusted issue price of a
Mortgage Loan at the beginning of any accrual period will equal the issue price
of such Mortgage Loan, increased by the aggregate amount of original issue
discount with respect to such Mortgage Loan that accrued in prior accrual
periods, and reduced by the amount of any payments made on such Mortgage Loan in
prior accrual periods of amounts included in its stated redemption price.
Unless otherwise provided in the related Prospectus Supplement, the Trustee
or Master Servicer, as applicable, will provide to any holder of a Grantor Trust
Fractional Interest Certificate such information as such holder may reasonably
request from time to time with respect to original issue discount accruing on
Grantor Trust Fractional Interest Certificates. See ' -- Grantor Trust
Reporting' below.
Market Discount. If the stripped bond rules do not apply to the Grantor
Trust Fractional Interest Certificate, a Certificateholder may be subject to the
market discount rules of Sections 1276 through 1278 of the Code to the extent an
interest in a Mortgage Loan is considered to have been purchased at a 'market
discount', that is, in the case of a Mortgage Loan issued without original issue
discount, at a purchase price less than its remaining stated redemption price
(as defined above), or in the case of a Mortgage Loan issued with original issue
discount, at a purchase price less than its adjusted issue price (as defined
above). If market discount is in excess of a de minimis amount (as described
below), the holder generally will be required to include in income in each month
the amount of such discount that has accrued (under the rules described in the
next paragraph) through such month that has not previously been included in
income, but limited, in the case of the portion of such discount that is
allocable to any Mortgage Loan, to the payment of stated redemption price on
such Mortgage Loan that is received by (or, in the case of accrual basis
Certificateholders, due to) the Trust Fund in that month. A Certificateholder
may elect to include market discount in income currently as it accrues (under a
constant yield method based on the yield of the Certificate to such holder)
rather than including it on a deferred basis in accordance with the foregoing.
If made, such election will apply to all market discount bonds acquired by such
Certificateholder during or after the first taxable year to which such election
applies. In addition, the OID Regulations would permit a Certificateholder to
elect to accrue all interest, discount (including de minimis market or original
issue discount) and premium in income as interest, based on a constant yield
method. If such an election were made with respect to a Mortgage Loan with
market discount, the Certificateholder would be deemed to have made an election
to include currently market discount in income with respect to all other debt
instruments having market discount that such Certificateholder acquires during
the taxable year of the election and thereafter, and possibly previously
acquired instruments. Similarly, a Certificateholder that made this election for
a Certificate acquired at a premium would be deemed to have made an election to
amortize bond premium with respect to all debt instruments having amortizable
bond premium that such Certificateholder owns or acquires. See
' -- REMICs -- Taxation of Owners of REMIC Regular Certificates -- Premium'.
Each of these elections to accrue interest, discount and premium with respect to
a Certificate on a constant yield method or as interest is irrevocable.
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Section 1276(b)(3) of the Code authorized the Treasury Department to issue
regulations providing for the method for accruing market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. Under those rules, in each
accrual period market discount on the Mortgage Loans should accrue, at the
Certificateholder's option: (i) on the basis of a constant yield method, (ii) in
the case of a Mortgage Loan issued without original issue discount, in an amount
that bears the same ratio to the total remaining market discount as the stated
interest paid in the accrual period bears to the total stated interest remaining
to be paid on the Mortgage Loan as of the beginning of the accrual period, or
(iii) in the case of a Mortgage Loan issued with original issue discount, in an
amount that bears the same ratio to the total remaining market discount as the
original issue discount accrued in the accrual period bears to the total
original issue discount remaining at the beginning of the accrual period. The
prepayment assumption, if any, used in calculating the accrual of original issue
discount is to be used in calculating the accrual of market discount. The effect
of using a prepayment assumption could be to accelerate the reporting of such
discount income. Because the regulations referred to in this paragraph have not
been issued, it is not possible to predict what effect such regulations might
have on the tax treatment of a Mortgage Loan purchased at a discount in the
secondary market.
Because the Mortgage Loans will provide for periodic payments of stated
redemption price, such discount may be required to be included in income at a
rate that is not significantly slower than the rate at which such discount would
be included in income if it were original issue discount.
Market discount with respect to Mortgage Loans generally will be considered
to be de minimis if it is less than 0.25% of the stated redemption price of the
Mortgage Loans multiplied by the number of complete years to maturity remaining
after the date of its purchase. In interpreting a similar rule with respect to
original issue discount on obligations payable in installments, the OID
Regulations refer to the weighted average maturity of obligations, and it is
likely that the same rule will be applied with respect to market discount,
presumably taking into account the prepayment assumption used, if any. The
effect of using a prepayment assumption could be to accelerate the reporting of
such discount income. If market discount is treated as de minimis under the
foregoing rule, it appears that actual discount would be treated in a manner
similar to original issue discount of a de minimis amount. See ' -- Taxation of
Owners of Grantor Trust Fractional Interest Certificates -- If Stripped Bond
Rules Do Not Apply'.
Further, under the rules described in ' -- REMICs -- Taxation of Owners of
REMIC Regular Certificates -- Market Discount', any discount that is not
original issue discount and exceeds a de minimis amount may require the deferral
of interest expense deductions attributable to accrued market discount not yet
includible in income, unless an election has been made to report market discount
currently as it accrues. This rule applies without regard to the origination
dates of the Mortgage Loans.
Premium. If a Certificateholder is treated as acquiring the underlying
Mortgage Loans at a premium, that is, at a price in excess of their remaining
stated redemption price, such Certificateholder may elect under Section 171 of
the Code to amortize using a constant yield method the portion of such premium
allocable to Mortgage Loans originated after September 27, 1985. Amortizable
premium is treated as an offset to interest income on the related debt
instrument, rather than as a separate interest deduction. However, premium
allocable to Mortgage Loans originated before September 28, 1985 or to Mortgage
Loans for which an amortization election is not made, should be allocated among
the payments of stated redemption price on the Mortgage Loan and be allowed as a
deduction as such payments are made (or, for a Certificateholder using the
accrual method of accounting, when such payments of stated redemption price are
due).
It is unclear whether a prepayment assumption should be used in computing
amortization of premium allowable under Section 171 of the Code. If premium is
not subject to amortization using a prepayment assumption and a Mortgage Loan
prepays in full, the holder of a Grantor Trust Fractional Interest Certificate
acquired at a premium should recognize a loss, equal to the difference between
the portion of the prepaid principal amount of the Mortgage Loan that is
allocable to the Certificate and the portion of the adjusted basis of the
Certificate that is allocable to the Mortgage Loan. If a prepayment assumption
is used to amortize such premium, it appears that such a loss would be
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unavailable. Instead, if a prepayment assumption is used, a prepayment should be
treated as a partial payment of the stated redemption price of the Grantor Trust
Fractional Interest Certificate and accounted for under a method similar to that
described for taking account of original issue discount on REMIC Regular
Certificates. See ' -- REMICs -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount'. It is unclear whether any other
adjustments would be required to reflect differences between the prepayment
assumption used, if any, and the actual rate of prepayments.
Taxation of Owners of Grantor Trust Strip Certificates. The 'stripped
coupon' rules of Section 1286 of the Code will apply to the Grantor Trust Strip
Certificates. Except as described above in ' -- Taxation of Owners of Grantor
Trust Fractional Interest Certificates -- If Stripped Bond Rules Apply', no
regulations or published rulings under Section 1286 of the Code have been issued
and some uncertainty exists as to how it will be applied to securities such as
the Grantor Trust Strip Certificates. Accordingly, holders of Grantor Trust
Strip Certificates should consult their own tax advisors concerning the method
to be used in reporting income or loss with respect to such Certificates.
The OID Regulations do not apply to 'stripped coupons', although they
provide general guidance as to how the original issue discount sections of the
Code will be applied. In addition, the discussion below is subject to the
discussion under ' -- Possible Application of Proposed Contingent Payment Rules'
below and assumes that the holder of a Grantor Trust Strip Certificate will not
own any Grantor Trust Fractional Interest Certificates.
Under the stripped coupon rules, it appears that original issue discount
will be required to be accrued in each month on the Grantor Trust Strip
Certificates based on a constant yield method. In effect, each holder of Grantor
Trust Strip Certificates would include as interest income in each month an
amount equal to the product of such holder's adjusted basis in such Grantor
Trust Strip Certificate at the beginning of such month and the yield of such
Grantor Trust Strip Certificate to such holder. Such yield would be calculated
based on the price paid for that Grantor Trust Strip Certificate by its holder
and the payments remaining to be made thereon at the time of the purchase, plus
an allocable portion of the servicing fees and expenses to be paid with respect
to the Mortgage Loans. See ' -- Taxation of Owners of Grantor Trust Fractional
Interest Certificates -- If Stripped Bond Rules Apply' above.
As noted above, Section 1272(a)(6) of the Code requires that a prepayment
assumption be used in computing the accrual of original issue discount with
respect to certain categories of debt instruments, and that adjustments be made
in the amount and rate of accrual of such discount when prepayments do not
conform to such prepayment assumption. Regulations could be adopted applying
those provisions to the Grantor Trust Strip Certificates. It is unclear whether
those provisions would be applicable to the Grantor Trust Strip Certificates or
whether use of a prepayment assumption may be required or permitted in the
absence of such regulations. It is also uncertain, if a prepayment assumption is
used, whether the assumed prepayment rate would be determined based on
conditions at the time of the first sale of the Grantor Trust Strip Certificate
or, with respect to any subsequent holder, at the time of purchase of the
Grantor Trust Strip Certificate by that holder.
The accrual of income on the Grantor Trust Strip Certificates will be
significantly slower if a prepayment assumption is permitted to be made than if
yield is computed assuming no prepayments. In the absence of statutory or
administrative clarification, it currently is intended to base information
returns or reports to the IRS and Certificateholders on the Prepayment
Assumption disclosed in the related Prospectus Supplement and on a constant
yield computed using a representative initial offering price for each class of
Certificates. However, neither the Depositor nor any other person will make any
representation that the Mortgage Loans will in fact prepay at a rate conforming
to the Prepayment Assumption or at any other rate and Certificateholders should
bear in mind that the use of a representative initial offering price will mean
that such information returns or reports, even if otherwise accepted as accurate
by the IRS, will in any event be accurate only as to the initial
Certificateholders of each series who bought at that price. Prospective
purchasers of the Grantor Trust Strip Certificates should consult their own tax
advisors regarding the use of the Prepayment Assumption.
It is unclear under what circumstances, if any, the prepayment of a
Mortgage Loan will give rise to a loss to the holder of a Grantor Trust Strip
Certificate. If a Grantor Trust Strip Certificate is treated as a single
instrument (rather than an interest in discrete mortgage loans) and the effect
of prepayments is taken into account in computing yield with respect to such
Grantor Trust Strip Certificate, it appears
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that no loss may be available as a result of any particular prepayment unless
prepayments occur at a rate faster than the Prepayment Assumption. However, if a
Grantor Trust Strip Certificate is treated as an interest in discrete Mortgage
Loans, or if the Prepayment Assumption is not used, then when a Mortgage Loan is
prepaid, the holder of a Grantor Trust Strip Certificate should be able to
recognize a loss equal to the portion of the adjusted issue price of the Grantor
Trust Strip Certificate that is allocable to such Mortgage Loan.
Possible Application of Proposed Contingent Payment Rules. The coupon
stripping rules' general treatment of stripped coupons is to regard them as
newly issued debt instruments in the hands of each purchaser. To the extent that
payments on the Grantor Trust Strip Certificates would cease if the Mortgage
Loans were prepaid in full, the Grantor Trust Strip Certificates could be
considered to be debt instruments providing for contingent payments. Under the
OID Regulations, debt instruments providing for contingent payments are not
subject to the same rules as debt instruments providing for noncontingent
payments, but no final regulations have been promulgated with respect to
contingent payment debt instruments. Proposed regulations were promulgated in
1994 regarding contingent payment debt instruments, but have not been made final
and are likely to be substantially revised before being made final. Moreover,
like the OID Regulations, such proposed regulations do not specifically address
securities, such as the Grantor Trust Strip Certificates, that are subject to
the stripped bond rules of Section 1286 of the Code.
Certificateholders should consult their tax advisors concerning the
possible application of the contingent payment rules to the Grantor Trust Strip
Certificates.
Sales of Grantor Trust Certificates. Any gain or loss, equal to the
difference between the amount realized on the sale or exchange of a Grantor
Trust Certificate and its adjusted basis, recognized on such sale or exchange of
a Grantor Trust Certificate by an investor who holds such Grantor Trust
Certificate as a capital asset, will be capital gain or loss, except to the
extent of accrued and unrecognized market discount, which will be treated as
ordinary income, and (in the case of banks and other financial institutions)
except as provided under Section 582(c) of the Code. The adjusted basis of a
Grantor Trust Certificate generally will equal its cost, increased by any income
reported by the seller (including original issue discount and market discount
income) and reduced (but not below zero) by any previously reported losses, any
amortized premium and by any distributions with respect to such Grantor Trust
Certificate. The Code as of the date of this Prospectus provides a top marginal
tax rate of 39.6% for individuals and a maximum marginal rate for long-term
capital gains of individuals of 28%. No such rate differential exists for
corporations. In addition, the distinction between a capital gain or loss and
ordinary income or loss remains relevant for other purposes.
Gain or loss from the sale of a Grantor Trust Certificate may be partially
or wholly ordinary and not capital in certain circumstances. Gain attributable
to accrued and unrecognized market discount will be treated as ordinary income,
as will gain or loss recognized by banks and other financial institutions
subject to Section 582(c) of the Code. Furthermore, a portion of any gain that
might otherwise be capital gain may be treated as ordinary income to the extent
that the Grantor Trust Certificate is held as part of a 'conversion transaction'
within the meaning of Section 1258 of the Code. A conversion transaction
generally is one in which the taxpayer has taken two or more positions in the
same or similar property that reduce or eliminate market risk, if substantially
all of the taxpayer's return is attributable to the time value of the taxpayer's
net investment in such transaction. The amount of gain realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate 'applicable Federal rate' (which rate is computed and
published monthly by the IRS) at the time the taxpayer enters into the
conversion transaction, subject to appropriate reduction for prior inclusion of
interest and other ordinary income items from the transaction. Finally, a
taxpayer may elect to have net capital gain taxed at ordinary income rates
rather than capital gains rates in order to include such net capital gain in
total net investment income for that taxable year, for purposes of the rule that
limits the deduction of interest on indebtedness incurred to purchase or carry
property held for investment to a taxpayer's net investment income.
Grantor Trust Reporting. Unless otherwise provided in the related
Prospectus Supplement, the Trustee or Master Servicer, as applicable, will
furnish to each holder of a Grantor Trust Certificate with
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each distribution a statement setting forth the amount of such distribution
allocable to principal on the underlying Mortgage Loans and to interest thereon
at the related Pass-Through Rate. In addition, within a reasonable time after
the end of each calendar year, the Trustee or Master Servicer, as applicable,
will furnish to each Certificateholder during such year such customary factual
information as the Depositor or the reporting party deems necessary or desirable
to enable holders of Grantor Trust Certificates to prepare their tax returns and
will furnish comparable information to the IRS as and when required by law to do
so. Because the rules for accruing discount and amortizing premium with respect
to the Grantor Trust Certificates are uncertain in various respects, there is no
assurance the IRS will agree with the Trustee's or Master Servicer's, as the
case may be, information reports of such items of income and expense. Moreover,
such information reports, even if otherwise accepted as accurate by the IRS,
will in any event be accurate only as to the initial Certificateholders that
bought their Certificates at the representative initial offering price used in
preparing such reports.
Backup Withholding. In general, the rules described in
' -- REMICs -- Backup Withholding with Respect to REMIC Certificates' will also
apply to Grantor Trust Certificates.
Foreign Investors. In general, the discussion with respect to REMIC
Regular Certificates in ' -- REMICs -- Foreign Investors in REMIC Certificates'
applies to Grantor Trust Certificates except that Grantor Trust Certificates
will, unless otherwise disclosed in the related Prospectus Supplement, be
eligible for exemption from United States withholding tax, subject to the
conditions described in such discussion, only to the extent the related Mortgage
Loans were originated after July 18, 1984.
To the extent that interest on a Grantor Trust Certificate would be exempt
under Sections 871(h)(1) and 881(c) of the Code from United States withholding
tax, and the Grantor Trust Certificate is not held in connection with a
Certificateholder's trade or business in the United States, such Grantor Trust
Certificate will not be subject to United States estate taxes in the estate of a
non-resident alien individual.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in 'Certain
Federal Income Tax Consequences', potential investors should consider the state
and local tax consequences of the acquisition, ownership, and disposition of the
Offered Certificates. State tax law may differ substantially from the
corresponding federal tax law, and the discussion above does not purport to
describe any aspect of the tax laws of any state or other jurisdiction.
Therefore, prospective investors should consult their own tax advisors with
respect to the various tax consequences of investments in the Offered
Certificates.
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ('ERISA'),
and the Code impose certain requirements on employee benefit plans, and on
certain other retirement plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and collective investment funds and separate
accounts in which such plans, accounts or arrangements are invested that are
subject to the fiduciary responsibility provisions of ERISA and Section 4975 of
the Code (all of which are hereinafter referred to as 'Plans'), and on persons
who are fiduciaries with respect to Plans, in connection with the investment of
Plan assets. Certain employee benefit plans, such as governmental plans (as
defined in ERISA Section 3(32)), and, if no election has been made under Section
410(d) of the Code, church plans (as defined in Section 3(33) of ERISA) are not
subject to ERISA requirements. Accordingly, assets of such plans may be invested
in Offered Certificates without regard to the ERISA considerations described
below, subject to the provisions of other applicable federal and state law. Any
such plan which is qualified and exempt from taxation under Sections 401(a) and
501(a) of the Code, however, is subject to the prohibited transaction rules set
forth in Section 503 of the Code.
ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and the
requirement that a Plan's investments be made
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in accordance with the documents governing the Plan. In addition, ERISA and the
Code prohibit a broad range of transactions involving assets of a Plan and
persons ('Parties in Interest') who have certain specified relationships to the
Plan, unless a statutory or administrative exemption is available. Certain
Parties in Interest that participate in a prohibited transaction may be subject
to an excise tax imposed pursuant to Section 4975 of the Code, unless a
statutory or administrative exemption is available. These prohibited
transactions generally are set forth in Section 406 of ERISA and Section 4975 of
the Code.
PLAN ASSET REGULATIONS
A Plan's investment in Certificates may cause the Trust Assets to be deemed
Plan assets. Section 2510.3-101 of the regulations of the United States
Department of Labor ('DOL') provides that when a Plan acquires an equity
interest in an entity, the Plan's assets include both such equity interest and
an undivided interest in each of the underlying assets of the entity, unless
certain exceptions not applicable to this discussion apply, or unless the equity
participation in the entity by 'benefit plan investors' (that is, Plans and
certain employee benefit plans not subject to ERISA) is not 'significant'. For
this purpose, in general, equity participation in a Trust Fund will be
'significant' on any date if, immediately after the most recent acquisition of
any Certificate, 25% or more of any class of Certificates is held by benefit
plan investors.
Any person who has discretionary authority or control respecting the
management or disposition of Plan assets, and any person who provides investment
advice with respect to such assets for a fee, is a fiduciary of the investing
Plan. If the Trust Assets constitute Plan assets, then any party exercising
management or discretionary control regarding those assets, such as a Master
Servicer, a Special Servicer or any Sub-Servicer, may be deemed to be a Plan
'fiduciary' with respect to the investing Plan, and thus subject to the
fiduciary responsibility provisions and prohibited transaction provisions of
ERISA and the Code. In addition, if the Trust Assets constitute Plan assets, the
purchase of Certificates by a Plan, as well as the operation of the Trust Fund,
may constitute or involve a prohibited transaction under ERISA and the Code.
PROHIBITED TRANSACTION EXEMPTIONS
The DOL issued an individual administrative exemption, Prohibited
Transaction Exemption 90-29 (the 'Exemption'), to Merrill Lynch, Pierce, Fenner
& Smith Incorporated, which generally exempts from the application of the
prohibited transaction provisions of Section 406 of ERISA, and the excise taxes
imposed on such prohibited transactions pursuant to Section 4975(a) and (b) of
the Code and Section 502(i) of ERISA, certain transactions, among others,
relating to the servicing and operation of mortgage pools and the purchase, sale
and holding of mortgage pass-through certificates underwritten by an Underwriter
(as hereinafter defined), provided that certain conditions set forth in the
Exemption are satisfied. For purposes of this Section 'ERISA Considerations',
the term 'Underwriter' includes (i) Merrill Lynch, Pierce, Fenner & Smith
Incorporated, (ii) any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with Merrill
Lynch, Pierce, Fenner & Smith Incorporated and (iii) any member of the
underwriting syndicate or selling group of which Merrill Lynch, Pierce, Fenner &
Smith Incorporated or a person described in (ii) is a manager or co-manager with
respect to a class of Certificates.
The Exemption sets forth six general conditions which must be satisfied for
a transaction involving the purchase, sale and holding of Certificates to be
eligible for exemptive relief thereunder. First, the acquisition of Certificates
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
Exemption only applies to Certificates evidencing rights and interests not
subordinated to the rights and interests evidenced by the other Certificates of
the same series. Third, the Certificates at the time of acquisition by the Plan
must be rated in one of the three highest generic rating categories by Standard
& Poor's Corporation ('Standard & Poor's'), Moody's Investors Service, Inc.
('Moody's'), Duff & Phelps, Inc. ('Duff & Phelps') or Fitch Investors Service,
Inc. ('Fitch'). Fourth, the Trustee cannot be an affiliate of any member of the
'Restricted Group', which consists of any Underwriter, the Depositor, the
Trustee, the Master Servicer, any Sub-Servicer, the provider of any Credit
Support and any obligor with respect to
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Mortgage Assets (including mortgage loans underlying an MBS not issued by FNMA,
FHLMC or GNMA) constituting more than 5% of the aggregate unamortized principal
balance of the Mortgage Assets in the related Trust Fund as of the date of
initial issuance of the Certificates. Fifth, the sum of all payments made to and
retained by the Underwriter(s) must represent not more than reasonable
compensation for underwriting the Certificates; the sum of all payments made to
and retained by the Depositor pursuant to the assignment of the Mortgage Assets
to the related Trust Fund 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 and any Sub-Servicer must represent not more than reasonable
compensation for such person's services under the related Agreement and
reimbursement of such person's reasonable expenses in connection therewith.
Sixth, the investing Plan must be 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, as amended.
The Exemption also requires that each Trust Fund meet the following
requirements: (i) the Trust Fund must consist solely of assets of the type that
have been included in other investment pools; (ii) certificates in such other
investment pools must have been rated in one of the three highest categories of
Standard & Poor's, Moody's, Duff & Phelps or Fitch for at least one year prior
to the Plan's acquisition of Certificates; and (iii) certificates 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 Certificates.
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 Offered
Certificates acquired by a Plan upon issuance from the Depositor or Underwriter
when the Depositor, Master Servicer, Special Servicer, Sub-Servicer, Trustee,
provider of Credit Support, Underwriter or obligor with respect to Mortgage
Assets is a Party in Interest with respect to the investing Plan, (ii) the
direct or indirect acquisition or disposition in the secondary market of fuel
Certificates by a Plan and (iii) the holding of Offered 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
Certificate on behalf of an 'Excluded Plan' by any person who has discretionary
authority or renders investment advice with respect to the assets of such
Excluded Plan. For purposes hereof, an Excluded Plan is a Plan sponsored by any
member of the Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide an exemption from the restrictions imposed by Sections
406(b)(1) and (b)(2) of ERISA and the taxes imposed by Section 4975(c)(1)(E) of
the Code in connection with (i) the direct or indirect sale, exchange or
transfer of Offered Certificates in the initial issuance of Offered Certificates
between the Depositor or an Underwriter 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) an obligor with respect to
5% or less of the fair market value of the Mortgage Assets (including mortgage
loans underlying an MBS not issued by FNMA, FHLMC or GNMA) in the related Trust
Fund or (b) an affiliate of such a person, (ii) the direct or indirect
acquisition or disposition in the secondary market of Offered Certificates by a
Plan and (iii) the holding of Offered Certificates by a Plan.
Further, if certain specific conditions of 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 Assets.
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 Section 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
Offered Certificates.
Before purchasing a Certificate, a fiduciary of a Plan should itself
confirm (i) that the Offered Certificates constitute 'certificates' for purposes
of the Exemption and (ii) that the specific and general
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conditions set forth in the Exemption and the other requirements set forth in
the Exemption would be satisfied. In addition to making its own determination as
to the availability of the exemptive relief provided in the Exemption, the Plan
fiduciary should consider its general fiduciary obligations under ERISA in
determining whether to purchase any Offered Certificates on behalf of a Plan.
Any fiduciary of a Plan that proposes to cause the Plan to purchase Offered
Certificates should consult with its counsel with respect to the potential
applicability of ERISA and the Code to such investment and the availability of
(and scope of relief provided by) the Exemption or any other prohibited
transaction exemption in connection therewith. The Prospectus Supplement with
respect to a series of Certificates may contain additional information regarding
the application of the Exemption or any other exemption, with respect to the
Certificates offered thereby. In addition, any Plan fiduciary that proposes to
cause a Plan to purchase Stripped Interest Certificates should consider the
federal income tax consequences of such investment.
LEGAL INVESTMENT
The Offered Certificates of any series will constitute 'mortgage related
securities' for purposes of the Secondary Mortgage Market Enhancement Act of
1984 ('SMMEA') only if so specified in the related Prospectus Supplement.
Accordingly, investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to determine whether and to
what extent the Offered Certificates constitute legal investments for them.
Generally, only classes of Offered Certificates 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 evidencing interests in a Trust Fund consisting of loans
secured by a single parcel of real estate upon which is located a dwelling or
mixed residential and commercial structure, such as certain Multifamily Loans,
and originated by types of Originators specified in SMMEA, will be 'mortgage
related securities' for purposes of SMMEA. 'Mortgage related securities' are
legal investments 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 persons,
trusts, corporations, partnerships, associations, business trusts and business
entities (including depository institutions, insurance companies and pension
funds created pursuant to or existing under the laws of the United States or of
any state, the authorized investments of which are subject to state regulation).
Under SMMEA, if a state enacted legislation prior to October 3, 1991 that
specifically limits the legal investment authority of any such entities with
respect to 'mortgage related securities', Offered Certificates would constitute
legal investments for entities subject to such legislation 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 with 'mortgage
related securities' without limitation as to the percentage of their assets
represented thereby, federal credit unions may invest in such securities, and
national banks may purchase such securities for their own account without regard
to the limitations generally applicable to investment securities set forth in 12
U.S.C. 24 (Seventh), subject in each case to such regulations as the applicable
federal regulatory authority may prescribe.
Upon the issuance of final implementing regulations under the Riegle
Community Development and Regulatory Improvement Act of 1994 and subject to any
limitations those regulations may impose, a modification of the definition of
'mortgage related securities' will become effective to include among the types
of loans to which such securities may relate loans secured by 'one or more
parcels of real estate upon which is located one or more commercial structures'.
In addition, the related legislative history states that this expanded
definition includes multifamily loans secured by more than one parcel of real
estate upon which is located more than one structure. Until September 23, 2001
any state may enact legislation limiting the extent to which 'mortgage related
securities' under this expanded definition would constitute legal investments
under that state's laws.
All depository institutions considering an investment in the Offered
Certificates of any series 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
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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.
METHOD OF DISTRIBUTION
The Offered Certificates offered hereby and by the Prospectus Supplements
hereto will be offered in series. The distribution of the Offered Certificates
may be effected from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
to be determined at the time of sale or at the time of commitment therefor. The
Prospectus Supplement for the Offered Certificates of each series will, as to
each class of such Certificates, set forth the method of the offering, either
the initial public offering price or the method by which the price at which the
Certificates of such class will be sold to the public can be determined, the
amount of any underwriting discounts, concessions and commissions to
underwriters, any discounts or commissions to be allowed to dealers and the
proceeds of the offering to the Depositor.
If so specified in the related Prospectus Supplement, the Offered
Certificates of a series will be distributed in a firm commitment underwriting,
subject to the terms and conditions of the underwriting agreement, by Merrill
Lynch, Pierce, Fenner & Smith Incorporated ('Merrill Lynch') acting as
underwriter with other underwriters, if any, named therein. Alternatively, the
Prospectus Supplement may specify that Offered Certificates will be distributed
by Merrill Lynch acting as agent. If Merrill Lynch acts as agent in the sale of
Offered Certificates, Merrill Lynch will receive a selling commission with
respect to such Offered Certificates, depending on market conditions, expressed
as a percentage of the aggregate Certificate Balance or Notional Amount of such
Offered Certificates as of the date of issuance. The exact percentage for each
series of Certificates will be disclosed in the related Prospectus Supplement.
To the extent that Merrill Lynch elects to purchase Offered Certificates as
principal, Merrill Lynch may realize losses or profits based upon the difference
between its purchase price and the sales price. The Prospectus Supplement with
respect to any series offered other than through underwriters will contain
information regarding the nature of such offering and any agreements to be
entered into between the Depositor and purchasers of Offered Certificates of
such series.
The Depositor will agree to indemnify Merrill Lynch and any underwriters
and their respective controlling persons against certain civil liabilities,
including liabilities under the Securities Act of 1933, or will contribute to
payments that any such person may be required to make in respect thereof.
In the ordinary course of business, Merrill Lynch and the Depositor may
engage in various securities and financing transactions, including repurchase
agreements to provide interim financing of the Depositor's mortgage loans
pending the sale of such mortgage loans or interests therein, including the
Certificates.
The Depositor anticipates that the Offered Certificates will be sold
primarily to institutional investors. Purchasers of 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 of 1933 in connection with reoffers and sales by them of Offered
Certificates. Certificateholders should consult with their legal advisors in
this regard prior to any such reoffer or sale.
As to each series of Certificates, only those classes rated in an
investment grade rating category by any Rating Agency will be offered hereby.
Any class of Certificates not offered hereby may be initially
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retained by the Depositor, and may be sold by the Depositor at any time to one
or more institutional investors.
LEGAL MATTERS
Unless otherwise specified in the related Prospectus Supplement, certain
legal matters in connection with the Certificates of each series, including
certain federal income tax consequences, will be passed upon for the Depositor
and for Merrill Lynch, Pierce, Fenner & Smith Incorporated by Thacher Proffitt &
Wood, New York, New York.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each series of
Certificates, and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
RATING
It is a condition to the issuance of any class of Offered Certificates that
they shall have been rated not lower than investment grade, that is, in one of
the four highest rating categories, by at least one Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by the holders thereof of all collections on the underlying mortgage
assets to which such holders are entitled. These ratings address the structural,
legal and issuer-related aspects associated with such certificates, the nature
of the underlying mortgage assets and the credit quality of the guarantor, if
any. Ratings on mortgage pass-through certificates do not represent any
assessment of the likelihood of principal prepayments by borrowers or of the
degree by which such prepayments might differ from those originally anticipated.
As a result, certificateholders might suffer a lower than anticipated yield,
and, in addition, holders of stripped interest certificates in extreme cases
might fail to recoup their initial investments.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated independently of any
other security rating.
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INDEX OF PRINCIPAL DEFINITIONS
PAGE
--------------
Accrual Certificates................ 12, 35
Accrued Certificate Interest........ 35
ADA................................. 66
ARM Loans........................... 26
Available Distribution Amount....... 34
Bankruptcy Code..................... 60
Book-Entry Certificates............. 14, 34
Cash Flow Agreement................. 1, 11, 28
CERCLA.............................. 22, 63
Certificate......................... 1, 8, 42
Certificate Account................. 10, 27, 44
Certificate Balance................. 2, 12, 36
Certificate Owner................... 14, 41
Certificateholder................... 1, 41
Closing Date........................ 69
Code................................ 14, 67
Commercial Properties............... 8, 24
Commission.......................... 2
Committee Report.................... 69
Companion Class..................... 13, 36
Controlled Amortization Class....... 13, 36
Cooperatives........................ 24
CPR................................. 31
Credit Support...................... 1, 10, 28
Cut-off Date........................ 13
Debt Service Coverage Ratio......... 25
Definitive Certificate.............. 14, 34, 41
Depositor........................... 8, 24
Determination Date.................. 34
Direct Participants................. 40
Distribution Date................... 12
Distribution Date Statement......... 37
DOL................................. 92
DTC................................. 2, 14, 34, 40
Due Dates........................... 26
Due Period.......................... 37
Duff & Phelps....................... 93
Equity Participation................ 26
ERISA............................... 17, 92
Excess Funds........................ 33
Exchange Act........................ 3
Exemption........................... 93
FAMC................................ 9
FHLMC............................... 9
FNMA................................ 9
GNMA................................ 9
Grantor Trust Certificates.......... 14, 67
Grantor Trust Fractional Interest
Certificates...................... 16
Grantor Trust Fund.................. 67
Grantor Trust Strip Certificate..... 83
Indirect Participants............... 41
PAGE
--------------
Insurance Proceeds.................. 44
IRS................................. 69
Issue Premium....................... 75
L/C Bank............................ 56
Liquidation Proceeds................ 44, 45
Loan-to-Value Ratio................. 25
Lock-out Expiration Date............ 26
Lock-out Period..................... 26
Master Servicer..................... 2, 8
MBS................................. 1, 9, 24
MBS Agreement....................... 27
MBS Issuer.......................... 27
MBS Servicer........................ 27
MBS Trustee......................... 27
Merrill Lynch....................... 96
Mortgage Asset Seller............... 10, 24
Mortgage Assets..................... 1, 24
Mortgage Loan....................... 1, 8, 24, 57
Mortgage Notes...................... 24
Mortgage Rate....................... 9, 26
Mortgaged Properties................ 24
Mortgages........................... 24
Multifamily Properties.............. 8, 24
Net Leases.......................... 25
Net Operating Income................ 25
Nonrecoverable Advance.............. 37
Notional Amount..................... 12, 35
Offered Certificates................ 1
OID Regulations..................... 67
Originator.......................... 24
PAC................................. 31
Participants........................ 23, 40
Parties in Interest................. 92
Pass-Through Rate................... 2, 12
Permitted Investments............... 44
Plans............................... 92
Pooling Agreement................... 11, 42
Prepayment Assumption............... 69, 86
Prepayment Interest Shortfall....... 29
Prepayment Premium.................. 26
Prohibited Transactions Tax......... 80
Prospectus Supplement............... 1
Rating Agency....................... 17
Record Date......................... 34
Related Proceeds.................... 37
Relief Act.......................... 66
REMIC............................... 67
REMIC Certificates.................. 67
REMIC Provisions.................... 67
REMIC Regular Certificates.......... 14, 67
REMIC Regulations................... 67
REMIC Residual Certificates......... 14, 67
95
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PAGE
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REO Property........................ 38, 47
Senior Certificates................. 11, 34
Servicing Standard.................. 47
SMMEA............................... 94
SPA................................. 31
Special Servicer.................... 2, 8, 48
Stripped Interest Certificates...... 11, 34
Stripped Principal Certificates..... 11, 34
Sub-Servicer........................ 47
Sub-Servicing Agreement............. 47
Subordinate Certificates............ 11, 34
TAC................................. 31
PAGE
--------------
Temporary Mark-to-Market
Regulations....................... 77
Tiered REMICs....................... 68
Title V............................. 65
Trust Assets........................ 2
Trust Fund.......................... 1
Trustee............................. 2, 8
UCC................................. 58
Value............................... 25
Voting Rights....................... 40
Warranting Party.................... 43
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This diskette contains a file: The file 'distdisk.xls.' The file is a
Microsoft Excel(1), Version 5.0 spreadsheet that provides, in electronic format,
the information shown in Annex A of the Prospectus Supplement. (2)
Open the file as you would normally open any spreadsheet in Microsoft
Excel. Before the file is displayed, a message will appear notifying you that
the file is Read Only. Click the 'READ ONLY' button, and after the file is
opened, a securities law legend will be displayed. READ THE LEGEND CAREFULLY. To
view the Annex A data, click on the worksheet tab titled 'MLMI 1996-C1 Annex A.'
(1) Microsoft Excel is a registered trademark of Microsoft Corporation.
(2) Please note that with respect to Control No. 171, the area leased by the
largest retail tenant is set forth on the diskette as 60,000 square feet.
The actual leased square footage should be 43,000 square feet. The
percentage leased by the largest retail tenant should be 88.66%.
<PAGE>
<PAGE>
_____________________________________ _____________________________________
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE DEPOSITOR OR BY THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SINCE THE DATE OF
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary.......................................................................................................... S-5
Risk Factors..................................................................................................... S-25
Description of the Mortgage Pool................................................................................. S-29
Servicing of the Mortgage Loans.................................................................................. S-44
Description of the Certificates.................................................................................. S-50
Yield and Maturity Considerations................................................................................ S-64
Use of Proceeds.................................................................................................. S-72
Certain Federal Income Tax Consequences.......................................................................... S-72
ERISA Considerations............................................................................................. S-73
Legal Investment................................................................................................. S-75
Method of Distribution........................................................................................... S-75
Legal Matters.................................................................................................... S-76
Ratings.......................................................................................................... S-76
Index of Principal Definitions................................................................................... S-78
Annex A.......................................................................................................... A-1
Annex B.......................................................................................................... B-1
PROSPECTUS
Prospectus Supplement............................................................................................ 2
Available Information............................................................................................ 2
Incorporation of Certain Information by Reference................................................................ 3
Summary of Prospectus............................................................................................ 8
Risk Factors..................................................................................................... 16
Description of the Trust Funds................................................................................... 22
Yield and Maturity Considerations................................................................................ 26
The Depositor.................................................................................................... 32
Use of Proceeds.................................................................................................. 32
Description of the Certificates.................................................................................. 32
Description of the Pooling Agreements............................................................................ 40
Description of Credit Support.................................................................................... 52
Certain Legal Aspects of Mortgage Loans.......................................................................... 55
Certain Federal Income Tax Consequences.......................................................................... 64
State and Other Tax Considerations............................................................................... 89
ERISA Considerations............................................................................................. 89
Legal Investment................................................................................................. 92
Method of Distribution........................................................................................... 93
Legal Matters.................................................................................................... 94
Financial Information............................................................................................ 94
Rating........................................................................................................... 94
Index of Principal Definitions................................................................................... 95
</TABLE>
MERRILL LYNCH MORTGAGE
INVESTORS, INC.
(DEPOSITOR)
$546,900,000
(APPROXIMATE)
MORTGAGE PASS-THROUGH
CERTIFICATES
SERIES 1996-C1
------------------------
PROSPECTUS SUPPLEMENT
------------------------
MERRILL LYNCH & CO.
FIRST UNION CAPITAL MARKETS CORP.
APRIL 1, 1996
_____________________________________ _____________________________________
<PAGE>
