Information contained herein is subject to completion or amendment. Offers to
buy these securities may not be accepted withought he delivery of a Final
Prospectus Supplement and Prospectus. This prospectus supplement shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or qualificaton
under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED JUNE 5, 1997
PROSPECTUS SUPPLEMENT
- ----------------------------------
(TO PROSPECTUS DATED JUNE 5, 1997)
$745,386,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-C1
----------
The Mortgage Pass-Through Certificates, Series 1997-C1 (the "Certificates") will
consist of fifteen classes (each, a "Class") of Certificates, including the
eight 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 is
expected to consist primarily of a segregated pool (the "Mortgage Pool") of 220
conventional, fixed rate mortgage loans (the "Mortgage Loans") secured by first
liens on commercial and multifamily properties (each, a "Mortgaged Property").
As of June 1, 1997 (the "Cut-off Date"), the Mortgage Loans had an aggregate
principal balance (the "Initial Pool Balance") of approximately $842,244,629,
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. Simultaneously with
the issuance of the Offered Certificates, the Private Certificates (as defined
herein) will be issued. Only the Offered Certificates are offered hereby.
(Continued on next page)
----------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH UNDER "RISK
FACTORS" BEGINNING ONPAGE S-26 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, EITHER UNDERWRITER, THE MASTER
SERVICER, THE TRUSTEE, THE FISCAL AGENT 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>
===============================================================================================
PERCENTAGE 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 .. $252,440,000 30.0% % June 18, 2029 Aaa/AAA/AAA
Class A-2 .. $ 86,358,000 10.3% % June 18, 2029 Aaa/AAA/AAA
Class A-3 .. $254,984,000 30.3% % June 18, 2029 Aaa/AAA/AAA
Class B .... $ 46,323,000 5.5% % June 18, 2029 Aa2/AA/AA
Class C .... $ 46,324,000 5.5% % June 18, 2029 A2/A/A
Class D .... $ 42,112,000 5.0% % June 18, 2029 Baa2/BBB/NR
Class E .... $ 16,845,000 2.0% % June 18, 2029 Baa3/BBB-/NR
Class IO ... N/A N/A (4) June 18, 2029 Aaa/NR/AAA
===============================================================================================
</TABLE>
(1) Subject to a permitted variance of plus or minus 5%.
(2) The Rated Final Distribution Date is the first Distribution Date (as
defined herein) that follows the second anniversary of the end of the
amortization term for the Mortgage Loan that, as of the Cut-off Date, has
the longest amortization term. See "Ratings" herein.
(3) By each of Moody's Investors Service, Inc., Standard & Poor's Ratings
Services (except with respect to the Class IO Certificates) and Fitch
Investors Service, L.P. (except with respect to the Class D and Class E
Certificates).
(4) The Class IO Certificates will not have a principal balance nor will they
entitle the holders thereof to be entitled to receive distributions of
principal, but will entitle such holders to receive payments of interest
equal to the aggregate interest accrued on the notional amount of each of
its Components, as described herein. See "DESCRIPTION OF THE
CERTIFICATES--Certificate Balances and Notional Amounts" and
"--Pass-Through Rates" herein.
----------
The Offered Certificates will be offered by Merrill Lynch, Pierce, Fenner
& Smith Incorporated and Daiwa Securities America Inc. (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 $_____________, 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 June 26, 1997.
----------
MERRILL LYNCH & CO. DAIWA SECURITIES AMERICA INC.
----------
The date of this Prospectus Supplement is June __, 1997.
<PAGE>
(cover continued)
The Depositor will acquire the Mortgage Loans from Merrill Lynch Mortgage
Capital Inc., Daiwa Finance Corp. and from General Electric Capital Corporation
(each, a "Mortgage Loan Seller"). On or before the date the Certificates are
issued, the Depositor will transfer the Mortgage Loans, without recourse, to
LaSalle National Bank, as trustee of the Trust Fund (the "Trustee"), in exchange
for the Certificates.
As and to the extent described herein, the Private Certificates will be
subordinate to the Offered Certificates; the Class B, Class C, Class D and Class
E Certificates will be subordinate to the Class A-1, Class A-2, Class A-3 and
Class IO Certificates; the Class C, Class D and Class E Certificates will be
subordinate to the Class B Certificates; the Class D and Class E Certificates
will be subordinate to the Class C Certificates; and the Class E Certificates
will be subordinate to the Class D Certificates. Distributions of interest on
and principal of the Certificates will be made, to the extent of available
funds, on the 18th day of each month or, if any such 18th day is not a business
day, then on the next succeeding business day, commencing July 18, 1997 (each, a
"Distribution Date"). As described herein, distributions allocable to interest
accrued on each Class of Offered Certificates (other than the Class IO
Certificates) will be made on each Distribution Date based on the pass-through
rate (the "Pass-Through Rate") 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 interest
accrued on the Class IO Certificates will be made on each Distribution Date in
an amount equal to the sum of the amount of interest which has accrued on each
of its components (each, a "Component" and, separately, the "Class IO-1
Component" and the "Class IO-2 Component"). Interest will accrue on the notional
amount of each Component based on its respective Pass-Through Rate and the
notional amount of such Component outstanding immediately prior to a
Distribution Date. The notional amount of the Class IO-1 Component will equal
the aggregate principal balance of the Mortgage Loans outstanding from time to
time. The notional amount of the Class IO-2 Component will equal the aggregate
Certificate Balance of the Class A-1 and Class A-2 Certificates outstanding from
time to time. The Pass-Through Rate applicable to the Class IO-1 Component for
each Distribution Date will equal the Weighted Average Net Mortgage Rate (as
defined herein) minus ___% (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 (as defined below) and the Class
A-2 Strip Rate (as defined below), weighted by the Certificate Balances of the
corresponding Classes immediately prior to such Distribution Date. The Class A-1
Strip Rate will equal ___%, and the Class A-2 Strip Rate will equal ___%. As
described herein, distributions allocable to principal of the Offered
Certificates will be made sequentially to the Class A-1, Class A-2, Class A-3,
Class B, Class C, Class D and Class E Certificates, in that order, until the
respective Certificates are retired. The Class IO Certificates will not have a
Certificate Balance, nor will they entitle the holders thereof to distributions
of principal. The holders of the Certificates may also receive portions of any
Prepayment Premiums (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 IO 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 AND INVESTORS IN THE CLASS IO CERTIFICATES
SHOULD FULLY CONSIDER THE ASSOCIATED RISKS, INCLUDING THE RISK THAT A RAPID RATE
OF PREPAYMENT OF THE MORTGAGE LOANS COULD RESULT IN THE FAILURE OF SUCH
INVESTORS TO FULLY RECOUP THEIR INITIAL INVESTMENTS. The allocation to any
Offered Class of any Prepayment Premium 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
(as defined herein) due at the maturity of a Mortgage Loan or any delay in the
repayment of the principal balance of a Mortgage Loan by its respective Expected
Repayment Date (as defined herein) 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 or as of such
Expected Repayment Date. 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 "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
Underwriter 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.
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>
TABLE OF CONTENTS
PAGE
----
SUMMARY OF PROSPECTUS SUPPLEMENT ......................................... S-5
RISK FACTORS ............................................................. S-26
The Certificates ....................................................... S-26
Limited Liquidity .................................................... S-26
Certain Yield and Maturity Considerations ............................ S-26
Potential Conflicts of Interest ...................................... S-27
The Mortgage Loans ..................................................... S-28
Risks of Lending on Income-Producing Properties ...................... S-28
Nonrecourse Mortgage Loans ........................................... S-29
Environmental Law Considerations ..................................... S-29
Balloon Payments ..................................................... S-29
Risk of Subordinated Debt ............................................ S-30
DESCRIPTION OF THE MORTGAGE POOL ......................................... S-30
General ................................................................ S-30
Certain Terms and Conditions of the Mortgage Loans ..................... S-31
Mortgage Rates; Calculations of Interest ............................. S-31
Due Dates ............................................................ S-31
Amortization ......................................................... S-31
Prepayment Provisions ................................................ S-32
Defeasance ........................................................... S-32
Nonrecourse Obligations .............................................. S-32
"Due-on-Sale" and "Due-on-Encumbrance" Provisions .................... S-32
Cross-Default and Cross-Collateralization of Certain Mortgage Loans .. S-33
Assessments of Property Condition ...................................... S-33
Property Inspection .................................................. S-33
Appraisals ........................................................... S-33
Environmental Assessments ............................................ S-33
Engineering Assessments .............................................. S-33
Earthquake Analyses .................................................. S-33
Largest Mortgage Loans ................................................. S-34
Shilo Inn Mortgage Loans ............................................. S-34
Union Square Mortgage Loan ........................................... S-34
Boca Mortgage Loan ................................................... S-34
Rowland Mortgage Loan ................................................ S-35
Caruth Mortgage Loan ................................................. S-35
Additional Mortgage Loan Information ................................... S-35
The Mortgage Pool .................................................... S-35
The Mortgage Loan Sellers .............................................. S-45
Assignment of the Mortgage Loans; Repurchases .......................... S-45
Representations and Warranties; Repurchases ............................ S-45
Changes in Mortgage Pool Characteristics ............................... S-46
SERVICING OF THE MORTGAGE LOANS .......................................... S-47
General ................................................................ S-47
The Master Servicer .................................................... S-47
The Special Servicer ................................................... S-47
Servicing and Other Compensation and Payment of Expenses ............... S-49
Modifications, Waivers and Amendments .................................. S-51
The Controlling Class Representative ................................... S-51
Limitation on Liability of Controlling Class Representative ............ S-52
S-3
<PAGE>
PAGE
----
The Extension Adviser .................................................. S-52
Election of the Extension Adviser .................................... S-52
Duties of the Extension Adviser ...................................... S-52
Limitation on Liability of Extension Adviser ......................... S-53
REO Properties ......................................................... S-53
Inspections; Collection of Operating Information ....................... S-54
DESCRIPTION OF THE CERTIFICATES .......................................... S-54
General ................................................................ S-54
Registration and Denominations ......................................... S-54
Certificate Balances and Notional Amounts .............................. S-55
Pass-Through Rates ..................................................... S-56
Distributions .......................................................... S-56
General .............................................................. S-56
The Available Distribution Amount .................................... S-56
Application of the Available Distribution Amount ..................... S-57
Distributable Certificate Interest ................................... S-59
Principal Distribution Amount ........................................ S-60
Treatment of REO Properties .......................................... S-60
Allocation of Prepayment Premiums .................................... S-61
Subordination; Allocation of Losses and Certain Expenses ............... S-61
P&I Advances ........................................................... S-63
Appraisal Reductions ................................................... S-64
Reports to Certificateholders; Available Information ................... S-64
Voting Rights .......................................................... S-66
Termination ............................................................ S-66
The Trustee ............................................................ S-66
Duties of the Fiscal Agent ............................................. S-67
YIELD AND MATURITY CONSIDERATIONS ........................................ S-67
Yield Considerations ................................................... S-67
General .............................................................. S-6
Rate and Timing of Principal Payment ................................. S-67
Losses and Shortfalls ................................................ S-68
Pass-Through Rates ................................................... S-68
Certain Relevant Factors ............................................. S-68
Delay in Payment of Distributions .................................... S-69
Unpaid Distributable Certificate Interest ............................ S-69
Yield Sensitivity of the Class IO Certificates ....................... S-69
Weighted Average Life .................................................. S-70
USE OF PROCEEDS .......................................................... S-74
CERTAIN FEDERAL INCOME TAX CONSEQUENCES .................................. S-74
ERISA CONSIDERATIONS ..................................................... S-75
LEGAL INVESTMENT ......................................................... S-77
METHOD OF DISTRIBUTION ................................................... S-78
LEGAL MATTERS ............................................................ S-78
RATINGS .................................................................. S-78
INDEX OF PRINCIPAL DEFINITIONS ........................................... S-80
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS ............................ A-1
TERM SHEET ............................................................... B-1
FORM OF DISTRIBUTION DATE STATEMENT ...................................... C-1
S-4
<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. 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 are references to the percentages of the Initial Pool Balance
represented by the aggregate Cut-off Date Balance of the related Mortgage Loans.
All numerical information provided herein with respect to the Mortgage Loans is
approximate.
<TABLE>
<CAPTION>
WEIGHTED CASH FLOW
INITIAL PERCENTAGE OF PASS- AVERAGE OR
MOODY'S/S&P/FITCH CERTIFICATE INITIAL POOL CREDIT THROUGH LIFE PRINCIPAL
CLASS RATING(1) BALANCES(2) BALANCE(2) SUPPORT DESCRIPTION RATE (YEARS)(3) WINDOW(3)
----- ---------- ------------ ----------- ------- ----------- ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-1 ..... Aaa/AAA/AAA $ 252,440,000 30.0% 29.5% Fixed Coupon % 5.0 7/97-2/04
Class A-2 ..... Aaa/AAA/AAA $ 86,358,000 10.3% 29.5% Fixed Coupon % 7.5 2/04-6/06
Class A-3 ..... Aaa/AAA/AAA $ 254,984,000 30.3% 29.5% Fixed Coupon % 9.6 6/06-5/07
Class B ....... Aa2/AA/AA $ 46,323,000 5.5% 24.0% Fixed Coupon % 9.9 5/07-5/07
Class C ....... A2/A/A $ 46,324,000 5.5% 18.5% Fixed Coupon % 10.0 5/07-6/07
Class D ....... Baa2/BBB/NR $ 42,112,000 5.0% 13.5% Fixed Coupon % 10.5 6/07-4/09
Class E ....... Baa3/BBB-/NR $ 16,845,000 2.0% 11.5% Fixed Coupon % 12.1 4/09-4/10
Class F ....... (6) $ 50,535,000 6.0% 5.5% Fixed Coupon % 14.8 4/10-5/14
Class G ....... (6) $ 8,422,000 1.0% 4.5% Fixed Coupon % 17.3 5/14-3/15
Class H ....... (6) $ 16,845,000 2.0% 2.5% Fixed Coupon % 18.5 3/15-8/16
Class J ....... (6) $ 21,056,629 2.5% 0 Fixed Coupon % 21.1 8/16-6/22
Class IO ...... Aaa/NR/AAA (4) N/A N/A Variable I/O Strip (5) N/A 7/97-6/22
</TABLE>
- -----------------
(1) By each o f Moody's Investors Service, Inc., Standard & Poor's Ratings
Services (exc ept with respect to the Class IO Certificates) and Fitch
Investors Service, L.P. (except with respect to the Class D and Class E
Certificates).
(2) Subject to a permitted variance of plus or minus 5%.
(3) Based on Scenario (1) set forth under "YIELD AND MATURITY
CONSIDERATIONS--Weighted Average Life" herein.
(4) The Class IO Certificates will not have a Certificate Balance nor will
they entitle the holders thereof to receive distributions of principal.
See "--Description of the Certificates--Certificate Balances and Notional
Amounts" herein.
(5) Holders of the Class IO Certificates will be entitled to receive
distributions of interest in an amount equal to the aggregate interest
accrued on the notional amount of each of its Components, as described
herein. See "--Description of the Certificates--Pass-Through Rates"
herein.
(6) Not offered hereby. Accordingly, any information herein regarding the
terms of any such Class of Certificates is provided solely because of its
potential relevance to a prospective purchaser of an Offered Certificate.
- --------------------------------------------------------------------------------
S-5
<PAGE>
- --------------------------------------------------------------------------------
Title of Certificates ........... Merrill Lynch Mortgage Investors, Inc.,
Mortgage Pass-Through Certificates, Series
1997-C1 (the "Certificates"), to be issued
in fifteen classes (each, a "Class") to be
designated as: (i) the Class A-1, Class A-2,
Class A-3, Class B, Class C, Class D, Class
E, Class F, Class G, Class H and Class J
Certificates (collectively, the "Sequential
Pay Certificates"); (ii) the Class IO
Certificates (together with the Sequential
Pay Certificates, the "REMIC Regular
Certificates"); and (iii) 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 B, Class C, Class D,
Class E and Class IO Certificates
(collectively, the "Offered Certificates")
are offered hereby. The Class F, Class G,
Class H, Class J 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 Merrill Lynch Mortgage Capital
Inc., 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
("GECAM"), a Delaware corporation, and an
affiliate of the Special Servicer and
General Electric Capital Corporation
("GECC"), one of the Mortgage Loan Sellers.
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 and GECC. The Special Servicer 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,
for administering any REO Property (as
defined herein) and for performing certain
other servicing functions with respect to
the Mortgage Pool under the Pooling and
Servicing Agreement. The majority holder (or
holders) of the Class of Sequential Pay
Certificates having the latest alphabetical
Class designation will have the right,
subject to certain conditions described
herein, to replace the Special Servicer and
to select a representative (the "Controlling
Class Representative") from whom the Special
Servicer will seek advice and approval and
take direction under certain circumstances,
as described herein. It is anticipated that
GECC or an affiliate of GECC, the Master
Servicer and the Special Servicer will
purchase a portion of the Class F
Certificates and all of the Class G, Class H
and Class J Certificates on or about the
Closing Date. See "SERVICING OF THE MORTGAGE
LOANS--The Master Servicer and Special
Servicer,"
- --------------------------------------------------------------------------------
S-6
<PAGE>
- --------------------------------------------------------------------------------
"--Replacement of the Special Servicer" and
"--Servicing and Other Compensation and
Payment of Expenses" herein.
Trustee ......................... LaSalle National Bank, a nationally chartered
bank and a wholly owned subsidiary of the
Fiscal Agent.
Fiscal Agent..................... ABN AMRO Bank N.V., a Netherlands banking
corporation and the corporate parent of the
Trustee.
Mortgage Loan Sellers............ Merrill Lynch Mortgage Capital Inc. ("MLMCI"),
the Depositor's corporate parent and an
affiliate of Merrill Lynch, one of the
Underwriters; Daiwa Finance Corp. ("Daiwa"),
an affiliate of Daiwa Securities America
Inc. ("Daiwa Securities"), one of the
Underwriters; and GECC, an affiliate of the
Master Servicer and the Special Servicer.
See "DESCRIPTION OF THE MORTGAGE POOL--The
Mortgage Loan Sellers" herein.
Cut-off Date..................... June 1, 1997.
Closing Date .................... On or about June 26, 1997.
Registration of the Offered
Certificates................... The Offered Certificates of each Class 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 $100,000
actual or notional principal amount and in
integral multiples of $1 in excess thereof.
The Mortgage Pool................ The Mortgage Pool is expected to consist of
220 conventional, fixed rate Mortgage Loans
with an aggregate Cut-off Date Balance of
$842,244,629 (the "Initial Pool Balance"),
subject to a variance of plus or minus 5%.
The "Cut-off Date Balance" of each Mortgage
Loan will equal the unpaid principal balance
thereof as of the Cut-off Date, after
reduction for all payments of principal due
on or before such date, whether or not
received. For purposes
- --------------------------------------------------------------------------------
S-7
<PAGE>
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of the numerical information provided
herein, each of the Mortgage Loans is deemed
to be secured by one Mortgaged Property,
whether or not such Mortgaged Property is
comprised of more than one parcel.
All of the Mortgage Loans are generally
non-recourse obligations of the respective
borrowers. No Mortgage Loan will be insured
or guaranteed by any governmental entity or
private insurer.
Each Mortgage Loan is secured by a first
mortgage lien on the borrower's fee simple
estate (or, with respect to eight Mortgage
Loans, or 7%, on the borrower's leasehold
estate) in an income producing real property
(each, a "Mortgaged Property"). Two of the
Mortgage Loans, or 0.4%, are secured by the
same Mortgaged Property. Such Mortgage Loans
have equal payment priorities and relate to
the same borrower.
Set forth below are the number of Mortgage
Loans, and the approximate percentage of the
Initial Pool Balance represented by such
Mortgage Loans, that are secured by
Mortgaged Properties operated for each
indicated purpose:
NUMBER OF PERCENTAGE OF
MORTGAGE INITIAL POOL
PROPERTY TYPE LOANS BALANCE
------------- ----- -------
Multifamily ....... 99 40%
Retail
Anchored ......... 27 20%
Unanchored ....... 14 5%
------------------
41 25%
Hospitality ....... 35 14%
Mobile Home Park .. 16 6%
Industrial ........ 9 4%
Office ............ 11 4%
Self Storage ...... 5 4%
Mixed Use
Multifamily/Retail 1 *
Office/Retail .... 1 1%
------------------
2 1%
Health Care
Congregate Care .. 1 *
Skilled Nursing .. 1 *
------------------
2 1%
==================
Total ............. 220 100%
----------
*Less than 0.5%
The Mortgaged Properties are located
throughout 34 states. Set forth below are
the number of Mortgage Loans, and the
approximate percentage of the Initial Pool
Balance represented by such Mortgage Loans,
that are secured by Mortgage
- --------------------------------------------------------------------------------
S-8
<PAGE>
- --------------------------------------------------------------------------------
Properties located in the states with
concentrations of Mortgage Loans above 5%:
NUMBER OF PERCENTAGE OF
MORTGAGE INITIAL POOL
STATE LOANS BALANCE
----- ----- -------
California ......... 43 23%
Texas .............. 54 21%
Florida ............ 16 9%
Georgia ............ 17 7%
No Mortgage Loan or group of Mortgage Loans to
one borrower or group of related borrowers
exceeds 7% of the Initial Pool Balance. 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, except as described
herein. Scheduled payments of principal and
interest on the Mortgage Loans ("Monthly
Payments") are due monthly on the first day
of each month. One of the Mortgage Loans, or
1.2%, provides for Monthly Payments of only
interest until a date set for in the
respective Mortgage Note (as defined
herein), after which date, Monthly Payments
of principal and interest will be due, as
set forth therein. 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 seventy-five (175) of the Mortgage
Loans ("the Balloon Loans"), or 80%, provide
for Monthly Payments based on amortization
schedules significantly longer than their
respective remaining terms to maturity. As a
result, the Balloon Loans will have
substantial principal amounts due and
payable (each such amount, together with the
corresponding payment of interest, a
"Balloon Payment") on their respective
scheduled maturity dates, unless prepaid
prior thereto. Five of the Mortgage Loans
(the "Hyperamortization Loans"), or 5%,
fully amortize through their respective
remaining terms to maturity, but provide
that after a date set forth in the
respective Mortgage Note (each such date, an
"Expected Repayment Date"), interest will
accrue on each such Mortgage Loan at an
increased rate set forth in such Mortgage
Note and the borrower will be obligated to
apply all monthly cash flow generated by the
related Mortgaged Property in excess of
regular debt service payments and certain
other expenses (the "Remaining Cash Flow")
to the repayment of principal of such
Mortgage Loan. See "DESCRIPTION OF THE
MORTGAGE POOL--Certain Terms and Conditions
of the Mortgage Loans" and "--Amortization"
herein. The remaining forty (40) Mortgage
Loans (the "Fully Amortizing Loans"), or
16%, fully amortize through their respective
remaining terms to maturity, but do not
include the Hyperamortization Loans. See
"RISK FACTORS--The
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S-9
<PAGE>
- --------------------------------------------------------------------------------
Mortgage Loans--Balloon Payments" herein and
"RISK FACTORS--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) prohibit voluntary
prepayments of principal for a period (a
"Lockout Period") ending on a date specified
in the related Mortgage Note (as defined
herein) and, in general, thereafter impose a
Yield Maintenance Charge or Percentage
Premium (each as defined herein) for most of
their respective remaining terms to maturity
(196 Mortgage Loans, or 92%); (ii) prohibit
voluntary prepayments of principal for a
Lockout Period and thereafter permit
voluntary principal prepayments in whole
without material restrictions (11 Mortgage
Loans, or 4%); (iii) permit voluntary
principal prepayments provided that the
prepayment is accompanied by a Yield
Maintenance Charge, then a Percentage
Premium in excess of the amount prepaid for
most of their respective remaining terms to
maturity (ten Mortgage Loans, or 3%) or (iv)
permit voluntary principal prepayments
provided that the prepayment is accompanied
by a Yield Maintenance Charge or Percentage
Premium in excess of the amount prepaid for
most of their respective remaining terms to
maturity (three (3) Mortgage Loans, or 1%).
See "DESCRIPTION OF THE MORTGAGE
POOL--Certain Terms and Conditions of the
Mortgage Loans" and "--Additional Mortgage
Loan Information" herein. Theability of the
Master Servicer or the Special Servicer to
waiveor modify the terms of any Mortgage
Loan relating to the payment of a Prepayment
Premium 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 of
the collectability of any Prepayment
Premium.
With respect to five of the Mortgage Loans, or
2%, during the applicable Lockout Period
(which prohibits payment for most of the
term), but after a certain date set forth in
each such Mortgage Note (which date is not
within two years of the Closing Date), under
certain conditions, the related borrower may
substitute a pledge of "Defeasance
Collateral" in exchange for a release of the
Mortgaged Property from the lien of the
related Mortgage. In general, "Defeasance
Collateral" is non-callable United States
Treasury obligations that provide for
payments that reflect, as closely as
possible, the remaining scheduled payments
(including Balloon Payments) in respect of
the related Mortgage Loan. Such obligations
must provide for payments prior, but as
close as possible, to each successive Due
Date (as defined herein) and the scheduled
maturity date with respect to the defeased
Mortgage Loan, with each such payment being
equal to or greater than (with any excess to
be returned to the borrower)
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S-10
<PAGE>
- --------------------------------------------------------------------------------
the Monthly Payment with respect to such
defeased Mortgage Loan and, in the case of
the scheduled maturity date, the Balloon
Payment (if any), due on such date.
One hundred fourteen (114) of the Mortgage
Loans, or 54%, were originated in 1997, 97
of the Mortgage Loans, or 43% were
originated in 1996, and nine of the Mortgage
Loans, or 3%, were originated prior to 1996.
Set forth below is certain information
regarding the Mortgage Loans and the
Mortgaged Properties as of the Cut-off Date
(all weighted averages set forth below are
based on the Cut-off Date Balances of the
respective Mortgage Loans). Such information
is described, and additional information
regarding the Mortgage Loans and the
Mortgaged Properties is set forth, in the
tables under "Description of The Mortgage
Pool--Additional Mortgage Loan Information"
herein and in Annex A hereto. All terms used
below as otherwise defined herein.
Minimum Cut-off Date Balance .......................... $ 323,900
Maximum Cut-off Date Balance .......................... $14,926,238
Average Cut-off Date Balance .......................... $ 3,828,385
Minimum Mortgage Rate ................................. 8.030%
Maximum Mortgage Rate ................................. 10.350%
Weighted Average Mortgage Rate ........................ 8.893%
Minimum Remaining Term to Maturity (months) ........... 43
Maximum Remaining Term to Maturity (months) ........... 300
Weighted Average Remaining Term to Maturity (months) .. 126
Minimum Remaining Amortization Term (months) .......... 140
Maximum Remaining Amortization Term (months) .......... 360
Weighted Average Remaining Amortization Term (months) . 311
Minimum Cut-off Date DSCR ............................. 1.17x
Maximum Cut-off Date DSCR ............................. 2.17x
Weighted Average Cut-off Date DSCR .................... 1.37x
Minimum Cut-off Date LTV .............................. 41.70%
Maximum Cut-off Date LTV .............................. 82.26%
Weighted Average Cut-off Date LTV ..................... 69.88%
Minimum Repayment LTV ................................. 26.45%(1)
Maximum Repayment LTV ................................. 80.58%(1)
Weighted Average Repayment LTV ........................ 61.68%(1)
- ----------
(1) Does not include Fully Amortizing Loans.
One hundred thirty-three (133) of the Mortgage
Loans, or 59% (the "MLMCI Loans"), were
acquired by the Depositor from MLMCI, which
acquired such Mortgage Loans from one of the
participants in its commercial and
multifamily mortgage loan conduit program
concurrently with or shortly after
origination. Fifty-one (51) of the Mortgage
Loans, or 22%, were acquired by the
Depositor from Daiwa, which originated or
acquired such Mortgage Loans concurrently
with or shortly after origination or
acquired such Mortgage Loans in a
secondary market purchase (the "Daiwa
Loans"). Thirty-six (36) of the Mortgage
Loans, or 19%, were acquired by the
Depositor from GECC, which originated or
acquired such Mortgage Loans concurrently
with or shortly after origination or
acquired such Mortgage Loans in a
- --------------------------------------------------------------------------------
S-11
<PAGE>
- --------------------------------------------------------------------------------
secondary market purchase (the "GECC
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
(except as set forth in the next sentence),
to the Trustee for the benefit of the
holders of the Certificates (the
"Certificateholders"). In connection with
such assignment, each Mortgage Loan Seller
will make certain representations and
warranties regarding the characteristics of
the Mortgage Loans assigned by such Mortgage
Loan Seller and, as 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 June 1, 1997, among the Depositor, the
Master Servicer, the Special Servicer, GECC,
the Fiscal Agent 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 Amounts............... Upon initial issuance, and in each case
subject to a permitted variance of plus or
minus 5%, the Offered Certificates (other
than the Class IO 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
Sequential Pay 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 described
herein, the Certificate Balance of a Class
of 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 principal
of such Class of Certificates on such
Distribution Date pursuant to the terms of
the Pooling and Servicing Agreement.
The Class IO Certificates will not have a
Certificate Balance, but will represent the
right to receive distributions of interest
accrued on the notional amount of the Class
IO-1 Component and the Class IO-2 Component
(each a "Component"), as described herein.
As of any Distribution Date, the Class IO-1
Component will have
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S-12
<PAGE>
- --------------------------------------------------------------------------------
a notional amount equal to the aggregate
Stated Principal Balance of the Mortgage
Loans immediately prior to such Distribution
Date and the Class IO-2 Component will have
a notional amount equal to the aggregate
Certificate Balances of the Class A-1
Certificates and the Class A-2 Certificates
immediately prior to such Distribution Date.
Each Component will accrue interest at its
applicable Pass-Through Rate on its related
notional amount. The Class IO-1 Component
and the Class IO-2 Component do not
represent separate Classes of Certificates,
but rather separate components, each of
which is a part of the Class IO
Certificates. The notional amount of the
Class IO Certificates will equal the sum of
the notional amount of each of its
Components, which notional amount will
initially be equal to $1,181,042,629. See
"DESCRIPTION OF THE
CERTIFICATES--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 Sequential Pay Certificates for
each Distribution Date are set forth in the
table at the beginning of this Summary. 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 for such Distribution Date minus ___%
(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 immediately prior to
such Distribution Date. The Class A-1 Strip
Rate will equal ___%, and the Class A-2
Strip Rate will equal ___%.
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
immediately prior to such Distribution Date.
The "Net Mortgage Rate" for each Mortgage
Loan will equal the Mortgage Rate in effect
for such Mortgage Loan as of the Cut-off
Date, minus the applicable Initial Servicing
Fee Rate and the Trustee Fee Rate (each as
defined herein); provided that if any
Mortgage Loan does not accrue interest on
the basis of a 360-day year consisting of
twelve 30-day months (which is the basis on
which interest accrues in respect of the
REMIC Regular Certificates), then, solely
for purposes of calculating the Pass-Through
Rate for the Class IO-1 Component, such Net
Mortgage Rate will, to the extent
appropriate, be adjusted from accrual period
to accrual period to compensate for such
difference. The "Stated Principal Balance"
of each Mortgage Loan outstanding at any
time represents the principal balance of
such Mortgage Loan ultimately due and
payable thereon and generally will equal the
Cut-off Date Balance thereof, reduced
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S-13
<PAGE>
- --------------------------------------------------------------------------------
on each Distribution Date (to not less than
zero) 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 (as defined
herein) and distributed on the Certificates
on such date and (ii) the principal portion
of any Realized Loss incurred in respect of
such Mortgage Loan during the related
Collection Period for such Distribution
Date. Notwithstanding the foregoing, if any
Mortgage Loan is paid in full, liquidated or
otherwise removed from the Trust Fund,
commencing as of the first Distribution Date
following the Collection Period during which
such event occurred, the Stated Principal
Balance of such MortgageLoan will be zero.
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 18th day of each month or, if
any such 18th day is not a business day,
then on the next succeeding business day,
commencing July 18, 1997 (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 any Prepayment
Premiums and any Additional Interest (as
defined herein), which are separately
distributable in respect of the
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
CERTIFICATES--Distributions--The Available
Distribution Amount" herein.
On each Distribution Date, for so long as the
aggregate Certificate Balance of the Classes
of the Sequential Pay Certificates is
greater than zero, the Trustee will (except
as otherwise described under "DESCRIPTION OF
THE CERTIFICATES--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 Distributable
Certificate Interest (as defined
herein) 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-1
Certificates in an amount (not to
exceed the then outstanding
Certificate Balance of such Class
of Certificates) equal to the
Principal Distribution Amount (as
defined herein) for such
Distribution Date;
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S-14
<PAGE>
- --------------------------------------------------------------------------------
(3) after 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-1
Certificates;
(4) after 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-1 and/or
Class A-2 Certificates;
(5) to distributions to the holders of
the Class A-1, Class A-2 and Class
A-3 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;
(6) 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;
(7) after 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
and/or Class A-3 Certificates;
(8) to distributions to the holders of
the Class B Certificates to
reimburse such holders for all
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;
(9) 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;
(10) after 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
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S-15
<PAGE>
- --------------------------------------------------------------------------------
Amount for such Distribution Date,
less anyportion thereof distributed
in respect of the Class A-1, Class
A-2, Class A-3 and/or Class B
Certificates;
(11) to distributions to the holders of
the Class C Certificates to
reimburse such holders for all
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;
(12) 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;
(13) after 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 Amount for
such Distribution Date, less any
portion thereof distributed in
respect of the Class A-1, Class
A-2, Class A-3, Class B and/or
Class C Certificates;
(14) to distributions to the holders of
the Class D Certificates to
reimburse such holders for all
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;
(15) 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;
(16) after the Class A-1, Class A-2,
Class A-3, Class B, Class C and
Class D Certificates have been
retired, to distributions of
principal to the holders of the
Class E 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 B, Class C
and/or Class D Certificates;
(17) to distributions to the holders of
the Class E Certificates to
reimburse such holders for all
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
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S-16
<PAGE>
- --------------------------------------------------------------------------------
(18) 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, Class D and
Class E Certificates has been
reduced to zero). See "DESCRIPTION
OF THE CERTIFICATES--
Distributions--Application of the
Available Distribution Amount"
herein.
The "Distributable Certificate Interest" in
respect of any Class of the Sequential Pay
Certificates for any Distribution Date 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. The
"Distributable Certificate Interest" in
respect of the Class IO Certificates will
equal the sum of the interest due on each of
the Components. With respect to any Class of
REMIC Regular Certificates, the
Distributable Certificate Interest will be
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
defined herein) for such Distribution Date.
Interest payable on the REMIC Regular
Certificates on any Distribution Date will
accrue during the immediately preceding
calendar month and will be calculated on a
30/360 basis (as described herein). See
"SERVICING OF THE MORTGAGE LOANS--Servicing
and Other Compensation and Payment of
Expenses" and "DESCRIPTION OF THE
CERTIFICATES--Distributions--Distributable
Certificate Interest" herein.
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
Scheduled Payments (as defined below) (other
than Balloon Payments) and the principal
portion of any Assumed Scheduled Payments
(as defined herein) due or deemed due on or
in respect of the Mortgage Loans for their
respective Due Dates during the related
Collection Period; (b) the aggregate of all
principal prepayments received on the
Mortgage Loans during the related Collection
Period (including any Remaining Cash Flow);
(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
(including any Balloon Payment), 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
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S-17
<PAGE>
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proceeds and awards 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; and (e) for each Distribution
Date after 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.
The "Scheduled Payment" due on any Mortgage
Loan on any related Due Date is the amount
of the Monthly Payment that is or would have
been, as the case may be, due thereon on
such date, without regard to any waiver,
modification or amendment granted or agreed
to by the Master Servicer or the Special
Servicer in connection with a bankruptcy or
similar proceeding involving the related
borrower or the application of any Remaining
Cash Flow with respect to a
Hyperamortization Loan, and assuming that
each prior Scheduled Payment has been timely
made. The "Assumed Scheduled Payment" is an
amount deemed due in respect of a Balloon
Loan that is delinquent in respect of its
Balloon Payment beyond the first
Determination Date (as defined herein) after
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. The
"Determination Date" will be the 9th 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 may also
receive portions of any Prepayment Premiums,
to the extent described under "DESCRIPTION
OF THE CERTIFICATES--Distributions--
Allocation of Prepayment Premiums" herein.
Such distributions will be in addition to
the distributions of interest, if any, made
to
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such holders from the Available Distribution
Amount (as defined herein) 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 and certain
Mortgage Loans as to which the Monthly
Payment has been reduced as part of a
modification or otherwise, 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 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. Pursuant to
the terms of the Pooling and Servicing
Agreement, if the Master Servicer fails to
make a P&I Advance required to be made, the
Trustee shall then be required to make such
P&I Advance, and if the Trustee fails to
make a required P&I Advance, the Fiscal
Agent will be required to make such P&I
Advance. No default by the Trustee will be
deemed to have occurred if the Fiscal Agent
makes such P&I Advance in a timely manner,
as set forth in the Pooling and Servicing
Agreement. See "DESCRIPTION OF THE
CERTIFICATES"--"Appraisal Reductions"
herein.
As described herein, the Master Servicer (or
the Trustee or Fiscal Agent, as applicable)
will be entitled to interest on any P&I
Advance made by it, and the Master Servicer
will be entitled to interest on certain
reimbursable servicing expenses incurred by
it. 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"), compounded annually, and will be
paid, contemporaneously with the
reimbursement of the related P&I Advance or
servicing expense, from 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 With respect to any Distribution
Date, to the extent of an amount equal to
the Servicing Fee computed based upon the
Imputed Servicing Fee Rate and any
Prepayment Interest Excesses (each as
defined herein) received during such
Collection Period, the Master Servicer is
required to make a non-reimbursable payment
(a "Compensating Interest Payment") with
respect to each
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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 the related Servicing Fee and without
regard to any Prepayment Premium actually
collected) on any Mortgage Loan by reason of
a full or partial voluntary principal
prepayment made prior to its Due Date in any
Collection Period. A "Prepayment Interest
Excess" is a payment of interest (net of the
related Servicing Fee) made in connection
with any full or partial prepayment of a
Mortgage Loan after its Due Date in any
Collection Period, which payment of interest
is intended to cover the period on and after
such Due Date (exclusive of any Prepayment
Premium actually collected). 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 and the Private
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, Class A-3 and Class IO
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 on each Distribution Date, and
the ultimate receipt by the holders of the
Senior Certificates (other than the Class IO
Certificates) of principal equal to the
entire respective Certificate Balances of
the Class A-1, Class A-2 and Class A-3
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,
Class D and Class E Certificates (in such
order) 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 such Classes of
Certificates. The protection afforded to the
holders of the Senior Certificates and, to
an increasingly lesser extent, each Class of
Offered Certificates subordinate thereto by
means of the subordination referred to above
will be accomplished by (i) the application
of the Available Distribution Amount on each
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S-20
<PAGE>
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Distribution Date in the order described
above in this Summary under "--Description
of the Certificates--Distributions" and (ii)
the allocation of Realized Losses and
Additional Trust Fund Expenses as described
below. 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, subject to the limitations
described herein, first to the Private
Certificates in the order described in the
Pooling and Servicing Agreement, and then to
the 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 (in
each case in reduction of their respective
Certificate Balances as of the related
Distribution Date), 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.
Any Realized Loss allocated in reduction of
the aggregate outstanding principal balance
of the Mortgage Loans will result in a
corresponding reduction in the notional
amount of the Class IO-1 Component, and any
Realized Loss or Additional Trust Fund
Expenses allocated in reduction of the
Certificate Balance of the Class A-1 or
Class A-2 Certificates will also result in a
corresponding reduction in the notional
amount of the Class IO-2 Component.
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) allocating Realized
Losses and Additional Trust Fund Expenses to
the Certificates and (iii) determining 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 Special Servicer in
connection with the operation and
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<PAGE>
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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 be required to
make P&I Advances in respect of such
Mortgage Loan, in each case 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 an early termination
of the Trust Fund and an 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, Class D
and Class E Certificate purchased at a
discount or premium will be affected by the
rate and timing 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. THE YIELD TO MATURITY OF
THE CLASS IO CERTIFICATES WILL BE HIGHLY
SENSITIVE TO THE RATE AND TIMING OF
PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS,
DEFAULTS AND LIQUIDATIONS) ON THE MORTGAGE
LOANS, AND INVESTORS IN THE CLASS IO
CERTIFICATES SHOULD FULLY CONSIDER THE
ASSOCIATED RISKS, INCLUDING THE RISK THAT A
RAPID RATE OF PREPAYMENTS, DEFAULTS AND/OR
LIQUIDATIONS IN RESPECT OF THE MORTGAGE
LOANS COULD RESULT IN THE FAILURE OF SUCH
INVESTORS TO FULLY RECOUP THEIR INITIAL
INVESTMENTS. See "YIELD AND MATURITY
CONSIDERATIONS" herein and in the
Prospectus. The allocation to any Offered
Class of any Prepayment Premium 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" 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 Lockout Period,
subject, in most cases, to the payment of a
Yield Maintenance Charge or Percentage
Premium. See
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<PAGE>
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"DESCRIPTION OF THE MORTGAGE POOL--Certain
Terms and Conditions of the Mortgage
Loans--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 (3) 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 (other than rights to the
Additional Interest, as defined herein), 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 (or, in the case
of the Class IO Certificates, each Component
thereof) 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,
Class C and Class D Certificates will not,
and the Class E and IO 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 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 (as defined herein) 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
"real estate assets" within the meaning of
Section 856(c)(5)(A) of the Internal Revenue
Code of 1986, as amended (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.
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<PAGE>
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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 (a) and (b) and
407(a) 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.
The Depositor expects that the Prohibited
Transaction Exemption will generally apply
to the Class A-1, Class A-2, Class A-3 and
Class IO Certificates, but it will not apply
to the other Classes of Offered
Certificates. ACCORDINGLY, EXCEPT AS
DESCRIBED HEREIN, THE CLASS B, CLASS C,
CLASS D AND CLASS E CERTIFICATES MAY NOT BE
ACQUIRED BY A PLAN OR ANY INVESTOR HOLDING
ASSETS OF A PLAN. Purchasers using insurance
company general account funds to effect such
purchase should consider the availability of
Prohibited Transaction Class Exemption 95-60
issued by the U.S. Department of Labor. 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 Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings
Services, a division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's")
(except with respect to the Class IO
Certificates) and, except with respect to
the Class D and Class E Certificates, Fitch
Investors Service, L.P. ("Fitch," and
together with Moody's and Standard & Poor's,
the "Rating Agencies") set forth on the
cover page of this Prospectus Supplement.
The ratings on the Offered Certificates
address the likelihood of the timely receipt
by holders thereof of all distributions of
interest to which they are entitled and,
except in the case of the Class IO
Certificates, distributions of principal
sufficient to reduce the Certificate Balance
of each Class of Offered Certificates to
zero by its respective Rated Final
Distribution Date set forth on the cover
page of this Prospectus Supplement. A
security rating is not a
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S-24
<PAGE>
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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 represent any assessment of (i) the
likelihood or frequency of principal
prepayments or default interest on the
Mortgage Loans, (ii) the degree to which
such prepayments might differ from those
originally anticipated or (iii) whether and
to what extent Prepayment Premiums will be
received. Also, a security rating does not
represent any assessment of the yield to
maturity that investors may experience or
the possibility that the holders of the
Class IO Certificates might not fully
recover their investment in the event of
rapid prepayments of the Mortgage Loans
(including both voluntary and involuntary
prepayments). See "RATINGS" herein and "RISK
FACTORS--Limited Nature of Ratings" in the
Prospectus.
Legal Investment................. None of the Certificates will constitute
"mortgage related securities" for purposes
of the Secondary Mortgage Market Enhancement
Act ("SMMEA"). As a result, the appropriate
characterization of the Certificates under
various legal investment restrictions, and
thus the ability of investors subject to
these restrictions to purchase the
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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<PAGE>
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 the Underwriters 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 any Offered
Certificate that is purchased at a discount or premium will be affected by (i)
the rate and timing of principal payments and collections on the 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) 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, borrowers under the Mortgage
Loans will have an increased incentive to prepay. As described herein, the
Principal Distribution Amount for each Distribution Date will be distributable
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 Certificates
(except for the Class IO 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. Any payment of principal in reduction of the principal balance of
any Mortgage Loan will result in a corresponding reduction in the notional
amount of the Class IO-1 Component, and any payment of principal in reduction of
the Certificate Balance of the Class A-1 or Class A-2 Certificates will also
result in a corresponding reduction in the notional amount of the Class IO-2
Component. Thus, the yield on the Class IO Certificates will be extremely
sensitive to the rate and timing of principal payments on the Mortgage Loans,
and the faster the rate at which the notional amounts of the Components are
reduced, the greater will be the negative effect on the yield of the Class IO
Certificates, to the extent such effect is not offset by distributions of a
portion of any applicable Prepayment Premiums to the holders thereof, as
described under "DESCRIPTION OF THE CERTIFICATES--Distributions--Allocation of
Prepayment Premiums" herein. In addition, the Mortgage Loans may not require the
payment of Prepayment Premiums in the event of involuntary prepayments resulting
from casualty or condemnation. Accordingly, prospective investors in the Class
IO Certificates should consider the associated risks, including the risk that a
rapid rate of prepayments on the 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. To the extent described herein, the Private 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, Class D and
Class E Certificates are subordinate in right and time of payment to the Class
A-1, Class A-2, Class A-3, and Class IO Certificates and will bear such
shortfalls and losses prior to the Class A-1, Class A-2, Class A-3 and Class IO
Certificates, in reverse alphabetical order of Class designation. Even though
(i) the Class A-3 Certificates will receive
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<PAGE>
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
and Class A-3 Certificates will bear shortfalls in collections and losses
incurred in respect of the Mortgage Loans pro rata in proportion to their
outstanding Certificate Balances. 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 to the Certificates will be allocated, subject to
the limitations described herein, first to the Private Certificates in the order
described in the Pooling and Servicing Agreement, and then to the 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 (in each case in reduction of their respective
Certificate Balances as of the related Distribution Date), 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. Any Realized Loss allocated in reduction of the
aggregate outstanding principal balance of the Mortgage Loans will result in a
corresponding reduction in the notional amount of the Class IO-1 Component, and
any Realized Loss or Additional Trust Fund Expenses allocated in reduction of
the Certificate Balance of the Class A-1 or Class A-2 Certificates will also
result in a corresponding reduction in the notional amount of the Class IO-2
Component. 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.
The Pass-Through Rate applicable to the Class IO-1 Component for each
Distribution Date will equal the Weighted Average Net Mortgage Rate minus % (but
not less than zero), and the Pass-Through-Rate applicable to the Class IO-2
Component for each Distribution Date will equal to 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 immediately prior to such Distribution
Date. Accordingly, the Pass-Through Rate on the Components and, correspondingly,
the yieldon the Class IO Certificates will be sensitive to changes in the
relative composition of the Mortgage Pool as a result of scheduled amortization,
voluntary prepayments and liquidations. 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 holders of 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 and to select the Controlling Class Representative from whom the
Special Servicer will seek advice and approval and take direction under certain
circumstances, as described herein. The replacement Special Servicer may be a
Certificateholder of such Class or an affiliate of any such Certificateholder.
As described herein, the Special Servicer will have considerable latitude in
determining whether to liquidate or modify defaulted Mortgage Loans. In
addition, the Special Servicer will perform certain servicing functions with
respect to the Mortgage Loans pursuant to the Pooling and Servicing Agreement.
See "SERVICING OF THE MORTGAGE LOANS--Modifications, Waivers and Amendments"
herein. Although the 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 other Classes 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, such action could result in less proceeds to the Trust Fund than would
have been realized if earlier action had been taken. To the extent a Controlling
Class Representative has been elected with respect to any Specially Serviced
Mortgage Loans, the Special Servicer may, at the direction of the Controlling
Class
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Representative, take actions with respect to such Specially Serviced Mortgage
Loans that could adversely affect the holders of some or all of the Classes of
Offered Certificates.
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 repay 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 changes in interest rate levels that may adversely affect the
value of a project (and thus the borrower's ability to repay the loan at
maturity by sale or refinancing) 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. Because 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. 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, the risk that an
anchor tenant may vacate notwithstanding such tenants' continuing obligation to
pay rent, 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.
Various factors, including location, quality and franchise affiliation (or lack
thereof), affect the economic viability of a hotel. Adverse economic conditions,
either local, regional or national, may limit the amount that a consumer is
willing to pay for a room and may result in a reduction in occupancy levels. The
construction of competing hotels or motels can have similar effects. Because
hotel rooms generally are rented for short periods of time, hotel properties
tend to be more sensitive to adverse economic conditions and competition than
other commercial properties. In addition, 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
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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 or that the related Mortgage Property would be
adaptable to other uses. 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 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 not insured or
guaranteed by any governmental entity or private mortgage insurer. 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 nonrecourse 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 in certain
cases, additional environmental testing, as recommended by such "Phase I"
assessment, was performed. 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 taking
possession of the property through foreclosure or otherwise or assuming control
of 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 seventy-five (175) of the Mortgage Loans, or
80% (the "Balloon Loans"), do not fully amortize over their terms to maturity
and have a Balloon Payment due at maturity. Loans with Balloon
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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.
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.
Risk of Subordinated Debt. The Mortgaged Properties securing 11 Mortgage
Loans, or 5%, are encumbered by subordinated debt. In each such case, the holder
of the subordinate debt has agreed not to foreclose for as long as the related
Mortgage Loan is outstanding. The existence of subordinated debt encumbering any
Mortgaged Property may increase the difficulty of refinancing the related
Mortgage Loan at maturity and the possibility that reduced cash flow could
result in deferred maintenance. Also, in the event that the holder of the
subordinated debt has filed for bankruptcy or been placed in involuntary
receivership, foreclosure by any senior lienholder (including the Trust Fund) on
the Mortgaged Property could be delayed. See "Certain Legal Aspects of Mortgage
Loans and Leases-Subordinate Financing" and "--Due-on-Sale and
Due-on-Encumbrance" in the Prospectus.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool is expected to consist of 220 conventional, fixed rate
Mortgage Loans with an Initial Pool Balance of $842,244,629 (subject to a
variance of plus or minus 5%), which will equal the aggregate Cut-off Date
Balance of such Mortgage Loans. The Cut-off Date Balances of the Mortgage Loans
will range from $323,900 to $14,926,238 and the Mortgage Loans will have an
average Cut-off Date Balance of $3,828,385. 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, as shown on Annex A hereto,
each of the Mortgage Loans is deemed to be secured by one Mortgaged Property,
whether or not such Mortgaged Property is comprised of more than one parcel. All
numerical information provided herein with respect to the Mortgage Loans is
approximate.
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 (or with
respect to eight Mortgage Loans, or 7%, on the borrower's leasehold estate) in
an income-producing real property (each, a "Mortgaged Property"). Two of the
Mortgage Loans, or 0.4%, are secured by the same Mortgaged Property. Such
Mortgage Loans have equal payment priorities and relate to the same borrower.
Ninety-nine (99) of the Mortgage Loans, or 40%, are secured by multifamily
properties; forty-one (41) of the Mortgage Loans, or 25%, are secured by retail
properties; thirty-five (35) of the Mortgage Loans, or 14%, are secured by
hospitality properties; and sixteen (16) of the Mortgage Loans, or 6%, are
secured by mobile home parks. See "--Additional Mortgage Loan Information"
herein for a detailed list of property types.
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The Mortgaged Properties are located throughout 34 states. Set forth below
are the number of Mortgage Loans, and the approximate percentage of the Initial
Pool Balance represented by such Mortgage Loans, that are secured by Mortgaged
Properties located in the states with concentrations of Mortgage Loans above 5%:
PERCENTAGE OF
INITIAL POOL
STATE NUMBER OF MORTGAGE LOANS BALANCE
- ----- ------------------------ -------
California 43 23%
Texas 54 21%
Florida 16 9%
Georgia 17 7%
No Mortgage Loan or group of Mortgage Loans to one borrower or group of
related borrowers exceeds 7% of the Initial Pool Balance. See"--Additional
Mortgage Loan Information."
One hundred thirty-three (133) of the Mortgage Loans, or 59% (the "MLMCI
Loans") were acquired by the Depositor from MLMCI, which acquired such Mortgage
Loans concurrently with or shortly after origination from a participant in its
commercial and multifamily mortgage loan conduit program. Fifty-one (51) of the
Mortgage Loans, or 22%, were acquired by the Depositor from Daiwa, which
originated or acquired such Mortgage Loans concurrently with or shortly after
origination or acquired such Mortgage Loans in a secondary market purchase (the
"Daiwa Loans"). Thirty-six (36) of the Mortgage Loans, or 19%, were acquired by
the Depositor from GECC, which originated or acquired such Mortgage Loans
concurrently with or shortly after origination or acquired such Mortgage Loans
in a secondary market purchase (the "GECC Loans"). One hundred fourteen (114) of
the Mortgage Loans, or 54%, were originated in 1997, (ninety-seven (97) of the
Mortgage Loans, or 43%, were orginated in 1996, and nine of the Mortgage Loans,
or 3%, were orginated prior to 1996.
None of the Mortgage Loans will be 30 days or more delinquent as of the
Cut-off Date, and no Mortgage Loan has been more than 30 days delinquent since
the later of (a) 12 months prior to the Cut-off Date or (b) origination or
acquisition of such Mortgage Loan by the Mortgage Loan Seller.
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,
except with respect to the Hyperamortization Loans which provide for an increase
in the interest rate accruing on such Mortgage Loans after their respective
Expected Repayment Date. Such increase shall have no effect on the Net Mortgage
Rate of the related Mortgage Loan. One hundred ninety (190) of the Mortgage
Loans, or 84%, accrue interest on the basis (a "30/360 basis") of a 360-day year
consisting of twelve 30-day months, and thirty (30) of the Mortgage Loans, or
16%, accrue interest on the basis (an "actual/360 basis") of the actual number
of days elapsed over a 360 day year. One of the Mortgage Loans, or 1.2%,
provides for Monthly Payments of only interest until a date set forth in the
respective Mortgage Note, after which date, Monthly Payments of principal and
interest will be due, as set forth therein.
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 seventy-five (175) of the Mortgage Loans (the
"Balloon Loans"), or 80%, provide for Monthly Payments based on amortization
schedules significantly longer than their respective terms to maturity. As a
result, the Balloon Loans will have substantial principal amounts due and
payable (each such amount, together with the corresponding payment of interest,
a "Balloon Payment") on their respective scheduled maturity dates, unless
prepaid prior thereto. Five of the Mortgage Loans (the "Hyperamortization
Loans"), or 5%, fully amortize through their respective remaining terms to
maturity, but provide that if the unamortized principal amount thereof is not
repaid on a date prior to maturity set forth in the related Mortgage Note (the
"Expected Repayment Date"), the Mortgage Loan will accrue interest at a rate
equal to the greater of 2% above the Mortgage Rate or 2% above the treasury rate
set forth therein. The excess interest which accrues on each such
Hyperamortization Loan (the "Additional Interest") above the Mortgage Rate is
payable only upon repayment in full of such Mortgage Loan and the borrower will
be required to apply all monthly cash flow generated by the related Mortgaged
Property in excess of
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the related Monthly Payment and certain other expenses set forth in the related
Mortgage Note, and as determined in the related Mortgage (the "Remaining Cash
Flow") to the repayment of principal outstanding on the Mortgage Loan until such
principal is repaid in full. With respect to such Mortgage Loans, no Prepayment
Premiums will be due in connection with any principal prepayment on or after the
Expected Repayment Date. The remaining forty (40) of the Mortgage Loans, or 16%,
fully amortize through their respective remaining terms to maturity (the "Fully
Amortizing Loans") but do not include any Hyperamortization Loans. See "RISK
FACTORS--The Mortgage Loans--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 (i) prohibit voluntary prepayments of principal for a period (a "Lockout
Period") ending on a date specified in the related Mortgage Note and thereafter,
in general, require that prepayments made for most of their remaining respective
terms to maturity be accompanied by a Yield Maintenance Charge or Percentage
Premium (196 of the Mortgage Loans, or 92%); (ii) prohibit voluntary payments of
principal for a Lockout Period and thereafter permit voluntary principal
prepayments in whole without material restrictions (11 of the Mortgage Loans, or
4%), (iii) permit voluntary prepayments of principal provided that the
prepayment is accompanied by a Yield Maintenance Charge, then a Percentage
Premium in excess of the amount prepaid for most of their respective terms to
maturity (ten of the Mortgage Loans, or 3%); or (iv) permit voluntary principal
prepayments provided that the prepayment is accompanied by a Yield Maintenance
Charge or a Percentage Premium in excess of the amount prepaid for most of their
respective remaining terms to maturity (three Mortgage Loans, or 1%). See
"--Additional Mortgage Loan Information" herein. Prepayment Premiums, 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." The Depositor
makes no representation as to the enforceability of the provisions of any
Mortgage Note requiring the payment of a Prepayment Premium, or of the
collectability of any Prepayment Premium.
Defeasance. With respect to five of the Mortgage Loans, or 2%, during the
applicable Lockout Period (which prohibits payment for most of the term), but
after a certain date set forth in each such Mortgage Note (which date is not
within two years of the Closing Date), under certain conditions, the related
borrower may substitute a pledge of "Defeasance Collateral" in exchange for a
release of the Mortgaged Property from the lien of the related Mortgage. In
general, "Defeasance Collateral" is non-callable United States Treasury
obligations that provide for payments that reflect, as closely as possible, the
remaining scheduled payments (including Balloon Payments) in respect of the
related Mortgage Loan. Such obligations must provide for payments prior, but as
close as possible, to each successive Due Date and the scheduled maturity date
with respect to the defeased Mortgage Loan, with each such payment being equal
to or greater than (with any excess to be returned to the borrower) the Monthly
Payment with respect to such defeased Mortgage Loan and, in the case of the
scheduled maturity date, the Balloon Payment (if any), due on such date.
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 Lockout Period or requiring the payment of a Prepayment Premium except
under the circumstances described in "SERVICING OF THE MORTGAGE
LOANS--Modifications, Waivers and Amendments" herein.
Nonrecourse Obligations. The Mortgage Loans are generally nonrecourse
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 nonrecourse.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. Generally, the
Mortgages contain "due-on-sale" and "due-on-encumbrance" clauses that, in most
circumstances, 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
and 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
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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.
Eleven (11) of the Mortgage Loans, or 5%, are cross-collateralized and
cross-defaulted with one or more Mortgage Loans in the Mortgage Pool. Of such
Mortgage Loans, (i) six Mortgage Loans, or 4% (control numbers 43, 44, 45, 47,
48, and 49), are cross-collateralized and cross-defaulted with each other, (ii)
three Mortgage Loans, or 0.6% (control numbers 146, 147 and 148), are
cross-collateralized and cross-defaulted with each other, and (iii) two Mortgage
Loans, or 0.4% (control numbers 3 and 4), are cross-collateralized and
cross-defaulted with each other. In addition, two of the Mortgage Loans, or
0.4%, are secured by the same Mortgaged Property. No Mortgage Loans are
cross-collateralized or cross-defaulted with any loans which are not included in
the Mortgage Pool. The Master Servicer or the Special Servicer, as the case may
be, will determine whether to enforce the cross-default and
cross-collateralization rights upon a Mortgage Loan default with respect to any
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.
ASSESSMENTS OF PROPERTY CONDITION
Property Inspection. All of the Mortgaged Properties were inspected in
connection with the origination or acquisition of the related Mortgage Loans by
or on behalf of the originator or 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 by a state
certified appraiser or an appraiser belonging to the Appraisal Institute. The
purpose of each appraisal was to provide an opinion of the fair market value of
the related Mortgaged Property. There can be no assurance that another appraiser
would have arrived at the same opinion of value.
Environmental Assessments. A "Phase I" environmental site assessment was
performed with respect to all the Mortgaged Properties in connection with the
origination of the related Mortgage Loans. In certain cases, additional
environmental testing, as recommended by such "Phase I" assessment, was
performed. In each case where environmental assessments recommended further
action, the originator of the related Mortgage Loan determined that the
necessary remediation was being undertaken in a satisfactory manner or that such
remediation would be adequately addressed post-closing. In some instances, the
originator of the related Mortgage Loan required that reserves be established to
cover the estimated cost of such remediation. Generally, with respect to such
Mortgaged Properties, the related borrowers were required to deposit with the
lender at the origination of the related Mortgage Loans an amount equal to
approximately 125% of the licensed inspector's estimated cost of the recommended
action.
Engineering Assessments. A licensed engineer inspected the related
Mortgaged Property with respect to all the Mortgage Loans to assess the
structure, exterior walls, roofing, interior structure and mechanical and
electrical systems. Certain of the resulting reports indicated certain deferred
maintenance items and/or recommended capital improvements with respect to
certain of such Mortgaged Properties. Generally, with respect to such Mortgaged
Properties, the related borrowers generally deposited with the Lender at the
origination of the related Mortgage Loans an amount equal to approximately 125%
of the licensed engineer's estimated cost of the recommended repairs,
corrections or replacements to assure their completion.
Earthquake Analyses. An architectural and engineering consultant performed
an analysis on thirty-eight (38) of the forty-three (43) Mortgaged Properties
located in the State of California 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 six months prior to origination, concluded that in the event of an
earthquake, two of the Mortgaged Properties would suffer a bounded maximum loss
over a 50-year period in excess of 25% of the amount of the estimated
replacement cost of the improvements. One of those two Mortgaged Properties is
covered by earthquake insurance in an amount at least equal to amounts customary
for such policies and with respect to properties of a similar type. With respect
to the other such Mortgaged Property, the borrower established a reserve at
origination of the related Mortgage Loan, equal to 125% of the estimated cost of
certain seismic retrofitting recommended in the report to reduce the maximum
probable loss to less than 25% of such replacement cost. Of the five remaining
Mortgaged
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Properties located in the State of California, four Mortgaged Properties are
covered by earthquake insurance in an amount at least equal to 97% of the
outstanding principal balance of the related Mortgage Loan, and one Mortgaged
Property is a mobile home park.
LARGEST MORTGAGE LOANS
Set forth below is a description of the five largest Mortgage Loans or
cross-collateralized Mortgage Loans to related parties, by initial principal
balance, in the Mortgage Pool. Payment, prepayment, defeasance and reserve data
for such Mortgage Loans, to the extent applicable, are set forth on Annex A
hereto.
Shilo Inn Mortgage Loans. Six Mortgage Loans are secured by fee mortgages
encumbering six Shilo Inns (the "Shilo Inn Mortgage Loans"). All six loans are
cross-collateralized and cross-defaulted. Shilo Inns is one of the largest,
privately-owned and operated hospitality chains west of the Rocky Mountains with
holdings of approximately 46 hotel/resort properties. The Shilo Inn Mortgage
Loans were originated by KeyCorp Real Estate Capital Markets, Inc. on or about
October 31, 1996, and were acquired by MLMCI concurrently therewith. As of the
Cut-Off Date, the aggregate outstanding principal balance of the Shilo Inn
Mortgage Loans is $37,689,688 or 4.5%.
The six Mortgage Properties, located in four western states, contain a
total of 742 rooms and are further detailed as follows:
Shilo Inn of Salt Lake City was built in 1971 and renovated during
the period 1993-1994. Located in Salt Lake City, Utah, improvements
include one 12-story building which contains 200 rooms and a two-story
parking facility. As of June 1, 1996, the appraised value of the property
was $16,000,000. As of the Cut-Off Date, the outstanding principal balance
is $11,083,192.48.
Shilo Inn of Bend was built in two phases in 1988 and 1995. Located
in Bend, Oregon, improvements include 11 buildings which contain 151
rooms. As of June 1, 1996, the appraised value of the property was
$9,500,000. As of the Cut-Off Date, the outstanding principal balance is
$6,580,645.53.
Shilo Inn of Coeur d'Alene was built in two phases in 1990 and 1992.
Located in Coeur d'Alene, Idaho, improvements include two buildings which
contain 138 rooms. As of June 1, 1996, the appraised value of the property
was $8,200,000. As of the Cut-Off Date, the outstanding principal balance
is $5,680,136.14.
Shilo Inn of Tillamook was built in two phases in 1989 and 1990.
Located in Tillamook, Oregon, improvements include two buildings which
contain 100 rooms. As of June 1, 1996, the appraised value of the property
was $7,200,000. As of the Cut-Off Date, the outstanding principal balance
is $4,987,436.61.
Shilo Inn of Nampa was built in two phases in 1990 and 1992. Located
in Nampa, Idaho, improvements include three buildings which contain 83
rooms. As of June 1, 1996, the appraised value of the property was
$6,400,000. As of the Cut-Off Date, the outstanding principal balance is
$4,433,276.99.
Shilo Inn of Elko was built in 1990. Located in Elko, Nevada,
improvements include one building which contains 70 rooms. As of June 1,
1996, the appraised value of the property was $4,925,000. As of the
Cut-Off Date, the outstanding principal balance is $3,404,123.40.
Union Square Mortgage Loan. One of the Mortgage Loans is secured by a fee
mortgage encumbering Union Square Shopping Center, an anchored shopping center
located in Harrisburg, Pennsylvania (the "Union Square Mortgage Loan"). The
Union Square Mortgage Loan was originated by Merrill Lynch Credit Corporation on
or about November 21, 1996, and was acquired by MLMCI concurrently therewith. As
of the Cut-Off Date, the outstanding principal balance of the Union Square
Mortgage Loan is $14,926,238.37, or 1.8%.
The Union Square Mortgage Loan was made to Union Square Shopping Center,
L. P., a Pennsylvania limited partnership. The general partner of the borrowing
entity is Glenville Union Square, Inc.
Union Square Shopping Center, containing 288,833 net rentable square feet,
was completed in two phases in 1988 and 1990. Union Square Shopping Center is
located on approximately 36.72 acres along Union Deposit Road (State Highway
340) approximately 1 @ 4 mile from Interstate 83. Major tenants include
TJX-Gabriel Brothers, Phar Mor, Weis Markets, and Office Max. The tenants listed
in the immediately preceding sentence occupy 27.3%, 15.9%, 15.6%, and 8.4%,
respectively, of Union Square Shopping Center's net rentable area. As of January
14, 1997, the property was 98.38% occupied. As of May 22, 1996, the appraised
value of the property was $20,000,000.
Boca Mortgage Loan. One of the Mortgage Loans is secured by a fee mortgage
encumbering Boca/Deerfield Self Storage, two self storage properties located in
Florida (the "Boca Mortgage Loan"). The Boca Mortgage Loan
S-34
<PAGE>
was originated by GECC on or about May 5, 1997. As of the Cut-Off Date, the
outstanding principal balance of the Boca Mortgage Loan is $13,000,000.00, or
1.5%.
The Boca Mortgage Loan was made to Timothy R. and Jeanette M. Lewis,
individually.
The Boca/Deerfield Self Storage properties consist of Boca Storage in Boca
Raton, Florida and Deerfield Storage in Deerfield Beach, Florida. As of April
29, 1997, these properties had a combined occupancy rate of 88%.
Boca Storage, built in three phases between 1977 and 1979, contains
139,138 net rentable square feet comprised of 956 storage units. Boca Storage is
located on approximately 10.07 acres, along N.W. 2nd Avenue, approximately 1 @ 4
mile south of Spanish River Boulevard. Improvements include 25 rental buildings,
one of which includes a second story apartment occupied by the on-site manager.
Approximately 142 units are climate-controlled. Additionally, a parking area for
vehicle storage contains 123 rental spaces. As of May 1, 1997, the appraised
value of the property was $8,400,000.
Deerfield Storage, built in three phases between 1978 and 1997, contains
148,103 net rentable square feet comprised of 1,511 storage units. Deerfield
Storage is located on approximately 8.90 acres along Powerline Road at S.W. 10th
Street. The site is improved with 16 rental buildings. Approximately 786 units
are climate-controlled. Additionally, a parking area for vehicle storage
contains 94 rental spaces. As of May 1, 1997, the appraised value of the
property was $10,000,000.
Rowland Mortgage Loan. One of the Mortgage Loans is secured by a leasehold
mortgage encumbering Rowland Heights Shopping Center, an anchored shopping
center located in Rowland Heights (Los Angeles metropolitan area), California
(the "Rowland Mortgage Loan"). The Rowland Mortgage Loan was originated by
Merrill Lynch Credit Corporation on or about April 10, 1997, and was acquired by
MLMCI concurrently therewith. As of the Cut-Off Date, the outstanding principal
balance of the Rowland Mortgage Loan is $12,792,920.42, or 1.5%.
The Rowland Mortgage Loan was made to W and B Woo LLC, Alrichjoy
Investment LLC, DCC Holdings LLC, G and T Investment LLC, WKC Holdings LLC (each
a California limited liability company) and Edward Partners, Inc. (a California
corporation), as Tenants-in-Common.
Rowland Heights Shopping Center, containing 224,900 net rentable square
feet, was completed in phases during the period 1984 to 1989. Rowland Heights
Shopping Center is located on approximately 17.10 acres along the Pamona Freeway
(State Highway 60) and South Nogales Street which is approximately 25 miles east
of the Los Angeles Central Business District. Major tenants include Ranch 99
Supermarket, a sublessee of Alexander Haagen Company. As of January 1997, the
property was approximately 99.56% occupied. As of January 2, 1997, the appraised
value of the property was $17,250,000.
The Caruth Mortgage Loan. One of the Mortgage Loans is secured by a fee
mortgage encumbering Caruth Plaza Shopping Center, an anchored shopping center
located in Dallas, Texas (the "Caruth Mortgage Loan"). The Caruth Mortgage Loan
was originated by Merrill Lynch Credit Corporation on or about May 28, 1997, and
was acquired by MLMCI concurrently therewith. As of the Cut-Off Date, the
outstanding principal balance of the Caruth Mortgage Loan is $11,770,000.00, or
1.4%.
The Caruth Mortgage Loan was made to C.P. Associates, Ltd. (a special
purpose Texas limited partnership). The general partner of the borrowering
entity is Crow-Taylor #2 Limited Partnership whose general partner is Caruth
Plaza Associates, Inc.
Caruth Plaza Shopping Center, containing 184,134 net rentable square feet,
was completed in phases between 1979 and 1995. Caruth Plaza Shopping Center is
located on approximately 16.75 acres along Central Expressway (US 75) and Park
Lane. Major tenants include Bed, Bath & Beyond, Oshmans Sporting Goods, and TJ
Maxx. The tenants listed in the immediately preceding sentence occupy 26.6%,
20.5% and 12.4%, respectively, of Caruth Plaza Shopping Center's net rentable
area. As of April 3, 1997, the property was 96.36% occupied. As of April 22,
1997, the appraised value of the property was $16,200,000.
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
S-35
<PAGE>
"--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 set forth in the Summary, the following tables and Annex A:
(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 during the term of the Mortgage Loan)
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. The "Debt Service Coverage Ratio" for any Mortgage
Loan is the ratio of annual "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 after the origination date.
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 applicable
Mortgage Loan Seller on the basis of Mortgaged Property operating
statements, generally unaudited, and certified rent rolls or occupancy
reports (as applicable) supplied by the related borrower in the case of
multifamily, mixed use, retail, mobile home park, industrial, self
storage, hospitality, healthcare and office properties (each a "Rental
Property"). In general, the applicable Mortgage Loan Seller relied on full
year 1995 or 1996 operating statements, rolling 12-month operating
statements and/or applicable year-to-date financial statements, if
available, and on certified rent rolls or occupancy reports (as
applicable) 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. References to
"Cut-off Date DSCR" are references to the DSCR as of the Cut-off Date.
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 as insurance, real estate taxes and, if applicable,
ground lease payments) and replacement reserves. 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 supplied and certified by the related
borrower and, where the actual vacancy shown thereon and the market
vacancy was less than 5%, generally assumed a minimum of 5% vacancy in
determining revenue from rents, except that in the case of certain
anchored shopping centers and certain single tenant properties, space
occupied by such anchor or single tenants may have been disregarded in
performing the vacancy adjustment due to the length of the related leases
or creditworthiness of such tenants, in accordance with the 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 and reimbursement of
expenses shown on certified rent rolls or operating statements with
respect to the prior one 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, after
applying the vacancy factor, without further regard to the terms
(including expiration dates) of the leases shown thereon. In the case of
hospitality properties, gross receipts were determined on the basis of
historical operating levels shown on the borrower-supplied operating
statements, but in no case in excess of rolling 12-month 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 Mortgage Loan Seller generally relied on full-year
or year-to-date financial statements, rolling 12-month operating
statements and/or year-to-date financial statements supplied by the
related borrower, except that (a) if tax or
S-36
<PAGE>
insurance expense information more current than that reflected in the
financial statements was available, the newer information was used, (b)
property management fees were generally assumed to be 4% to 5% of
effective gross revenue (except with respect to hospitality properties,
where a minimum of 4% of gross receipts were assumed, single tenant
properties, where a minimum of 2% of gross receipts were assumed and self
storage properties, where a minimum of 6% of gross receipts was 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 $0.37 per square foot net rentable commercial
area, (2) in the case of multifamily and one mixed use multifamily/retail
properties, not less than $145 or more than $371 per residential unit per
year, depending on the condition of the property, (3) in the case of
hospitality properties, 4% of the gross revenues received by the property
owner on an ongoing basis or not less than $464 or more than $773 per
room, (4) in the case of residential healthcare facilities, $250 to $300
per bed per year, (5) in the case of the mobile home parks, not less than
$25 or more than $90 per pad per year and (6) in the case of self storage
facilities, not less than $0.15 or more than $0.20 per square foot. 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 borrower's financial information used to determine Net Cash Flow
was 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 "Repayment LTV" are references to the ratio,
expressed as a percentage, of the expected balance of a Balloon Loan or
Hyperamortization Loan on its scheduled maturity date or Expected
Repayment Date, as the case may be (prior to the payment of any Balloon
Payment or repayment of principal) 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 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
a mobile home park), self storage facility, hospitality property or
healthcare facility, respectively, references to the Cut-off Date Balance
are to such Mortgage Loan divided by the number of square feet, dwelling
units or pads, guest suites or rooms or beds, as applicable, that comprise
the related 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 set forth in the related Mortgage Note on the
Cut-off Date.
(ix) References to "Initial Reserves at Closing" represent reserves
escrowed at closing for needed maintenance, repairs, replacements and
corrections of engineering and environmetal issues as outlined in the
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 de minimus and a part of
ongoing maintenance, a reserve was not established.
(x) References to "Underwriting Reserves" represent amounts
underwritten on an annual basis to cover capital costs, as used by the
applicable Mortgage Loan Seller in determining net cash flow.
(xi) References to "Administrative Cost Rate" represent the sum of
the Initial Servicing Fee and the Trustee Fee of 0.005%.
S-37
<PAGE>
(xii) References to "Occupancy Percentage" are, with respect to any
Mortgaged Property, references to (a) in the case of multifamily
properties and assisted living/congregate care facilities, the percentage
of units rented, (b) in the case of hospitality properties, the average
annual occupancy rate (that is, for a specified year, the percentage
obtained by dividing the number of rooms actually rented for all nights in
such year by the number of rooms available to be rented for all nights in
such year), (c) in the case of office and retail properties, the
percentage of the net rentable square footage rented, and (d) in the case
of self-storage facilities, either the percentage of the net rentable
square footage rented or the percentage of units rented (depending on
borrower reporting).
(xiii) References to "Stated Remaining Term" are references to the
remaining term to maturity for each Mortgage Loan (or the remaining number
of months to the Expected Repayment Date with respect to each
Hyperamortization Loan).
The sum in any column of any of the following tables may not equal
the indicated total due to rounding.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
S-38
<PAGE>
PROPERTY TYPES
% OF AVERAGE HIGHEST
NUMBER OF INITIAL INITIAL CUT-OFF CUT-OFF
MORTGAGE POOL POOL DATE DATE
PROPERTY TYPES LOANS BALANCE BALANCE BALANCE BALANCE
- -------------- ----- ------- ------- ------- -------
MULTIFAMILY 99 $339,441,840 40.30% 3,428,705 10,372,056
RETAIL
Anchored 27 171,259,610 20.33% 6,342,949 14,926,238
Unanchored 14 42,114,988 5.00 3,008,213 6,490,779
- -------------------------------------------------------------------------------
41 213,374,598 25.33% 5,204,258 14,926,238
Hospitality 35 117,175,531 13.91% 3,347,872 11,083,192
MOBILE HOME PARK 16 49,906,090 5.93% 3,119,131 7,974,914
INDUSTRIAL 9 37,705,906 4.48% 4,189,545 9,500,000
OFFICE 11 36,658,895 4.35% 3,332,627 5,896,181
SELF STORAGE 5 32,924,768 3.91% 6,584,954 13,000,000
MIXED USE
Multifamily/Retail 1 708,991 0.08% 708,991 708,991
Office/Retail 1 7,770,812 0.92 7,770,812 7,770,812
- -------------------------------------------------------------------------------
2 8,479,803 1.01% 4,239,902 7,770,812
Health Care
Congregate Care 1 $ 3,089,015 0.37% 3,089,015 $ 3,089,015
Skilled Nursing 1 3,488,183 0.41 3,488,183 3,488,183
- -------------------------------------------------------------------------------
2 $ 6,577,198 0.78% 3,288,599 3,488,183
- -------------------------------------------------------------------------------
TOTAL 220 $842,244,629 100.00% 3,828,385 $ 14,926,238
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
--------------------------------------------------------------------------------------------------
STATED REMAINING CUT- LOAN PER
REMAINING AMORT. OFF OCCUPANCY SQ FT. UNIT, AVERAGE
MORTGAGE TERM TERM DATE REPAYMENT PERCENT- PAD, BED, KEY, PROPERTY
PROPERTY TYPES RATE (MO.) (MO.) DSCR LTV LTV AGE(A) OR ROOM SIZE(B)
- -------------- ---- ----- ----- ---- --- --- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MULTIFAMILY 8.679% 102 335 1.33x 72.94% 63.60% 93.85% 26,233 215
RETAIL
Anchored 8.785 117 318 1.32x 71.57% 60.54% 96.65% 62 151,168
Unanchored 9.162 114 294 1.39x 65.07 53.39 94.76% 80 59,100
- ------------------------------------------------------------------------------------------------------------------------
8.860 116 313 1.33x 70.29% 59.13% 96.28% 66 132,996
Hospitality 9.477% 212 236 1.49x 65.66% 8.02% NAP 35,563 149
MOBILE HOME PARK 8.868% 121 329 1.40x 66.82% 53.48% 94.45% 12,463 375
INDUSTRIAL 8.825% 109 308 1.33x 69.07% 57.11% 96.01% 35 230,585
OFFICE 8.993% 103 299 1.42x 63.11% 53.22% 98.00% 73 60,090
SELF STORAGE 9.199% 208 302 1.54x 63.63% 28.25% 90.76% 52 191,960
MIXED USE
Multifamily/Retail 9.570% 110 290 1.39x 64.45% 54.47% 100.00% 44,312 16
Office/Retail 8.690 79 325 1.33x 71.95 66.09 93.04 64 120,597
- ------------------------------------------------------------------------------------------------------------------------
8.764% 82 322 1.34x 71.33% 65.12% 93.62% 3,764 110,515
Health Care
Congregate Care 8.960% 113 293 1.68x 71.84% 59.77% 94.00% 44,129 70
Skilled Nursing 9.400 116 296 1.66x 67.08 56.19 NAP 29,068 120
- ------------------------------------------------------------------------------------------------------------------------
9.193% 115 295 1.67x 69.31% 57.87% 94.00% 36,141 97
- ------------------------------------------------------------------------------------------------------------------------
TOTAL 8.893% 126 311 1.37x 69.88% 51.98% 94.79% 16,602 55,379
</TABLE>
- ----------
(A) Weighted average of the occupancy percentage 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 properties, number of units with respect to
multifamily properties, number of pads with respect to mobile home parks,
number of guest rooms with respect to each hospitality property, number of
square feet with respect to self storage facilities and number of beds
with respect to residential health care facilities.
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF ------------------------------
INITIAL INITIAL CUT-OFF
NUMBER OF POOL POOL DATE REPAYMENT
STATE MORTGAGE LOANS BALANCE BALANCE DSCR LTV LTV
----- -------------- ------- ------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
California 43 $192,463,714 22.85% 1.33x 70.92% 56.67%
Texas 54 179,159,991 21.27 1.37x 69.98 51.60
Florida 16 73,270,951 8.70 1.43x 67.62 53.61
Georgia 17 57,607,486 6.84 1.39x 70.62 57.76
Arizona 12 36,884,779 4.38 1.33x 71.54 63.72
Virginia 5 31,244,459 3.71 1.32x 69.10 54.68
Pennsylvania 4 27,163,573 3.23 1.29x 73.60 65.58
North Carolina 5 26,643,421 3.16 1.44x 63.24 51.00
Washington 5 21,823,708 2.59 1.31x 64.63 35.80
Utah 3 18,855,990 2.24 1.55x 66.79 0.00
New Mexico 4 18,028,859 2.14 1.37x 70.10 49.52
New Jersey 5 17,013,317 2.02 1.29x 72.13 62.17
Michigan 3 16,122,443 1.91 1.30x 79.64 73.86
Oregon 5 15,836,300 1.88 1.53x 67.10 14.25
Alabama 4 13,566,685 1.61 1.29x 72.09 57.73
Idaho 2 10,113,413 1.20 1.56x 69.27 0.00
Colorado 4 9,425,440 1.12 1.76x 59.66 41.67
South Carolina 4 9,110,514 1.08 1.34x 71.46 45.18
West Virginia 1 8,629,348 1.02 1.32x 73.13 61.34
Maryland 4 7,501,280 0.89 1.37x 71.52 61.95
Missouri 4 7,436,391 0.88 1.35x 62.91 55.59
Nevada 2 7,039,899 0.84 1.37x 70.24 30.52
Connecticut 1 6,573,483 0.78 1.25x 73.86 65.95
Indiana 1 5,384,062 0.64 1.30x 79.18 64.86
Massachusetts 2 5,093,479 0.60 1.39x 69.85 48.27
New York 1 3,672,032 0.44 1.23x 72.00 59.30
Wisconsin 2 3,450,000 0.41 1.42x 67.12 0.00
Arkansas 1 2,500,000 0.30 1.57x 53.19 43.96
Mississippi 1 2,173,808 0.26 1.33x 66.89 56.06
Rhode Island 1 1,998,932 0.24 1.28x 79.96 71.68
Louisiana 1 1,956,168 0.23 1.55x 69.86 63.10
Nebraska 1 1,603,503 0.19 1.61x 69.72 0.00
Wyoming 1 1,593,544 0.19 1.44x 69.28 0.00
New Hampshire 1 1,303,659 0.15 1.47x 59.26 55.68
- --------------------------------------------------------------------------------------------
TOTALS 220 $842,244,629 100.00% 1.37x 69.88% 51.98%
</TABLE>
Total number of States is 34.
S-39
<PAGE>
YEARS BUILT
<TABLE>
<CAPTION>
CUMULATIVE WEIGHTED AVERAGES
% OF % OF -------------------------------------------------------------------
NUMBER OF INITIAL INITIAL INITIAL STATED REMAINING CUT-OFF
RANGE OF MORTGAGE POOL POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
YEARS BUILT LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ----------- ----- ------- ------- ------- ---- ---------- ---------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1870-1959 12 $ 33,778,773 4.01% 4.01% 8.962% 150 316 1.36x 69.89% 52.85%
1960-1969 33 98,799,338 11.73 15.74 8.885 108 289 1.39x 68.17 55.26
1970-1979 69 282,041,703 33.49 49.23 8.844 123 320 1.39x 70.34 53.92
1980-1989 61 274,257,368 32.56 81.79 8.851 119 320 1.34x 70.12 55.26
1990-1997 45 153,367,447 18.21 100.00 9.045 153 289 1.38x 69.72 40.26
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS 220 $842,244,629 100.00% 100.00% 8.893% 126 311 1.37x 69.88% 51.98%
</TABLE>
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
CUMULATIVE WEIGHTED AVERAGES
RANGE OF % OF % OF -------------------------------------------------------------------
DEBT SERVICE NUMBER OF INITIAL INITIAL INITIAL STATED REMAINING CUT-OFF
COVERAGE MORTGAGE POOL POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
RATIOS LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ----------- ----- ------- ------- ------- ---- ---------- ---------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.17x-1.19x 4 $ 16,163,570 1.92% 1.92% 9.445% 54 348 1.18x 77.16% 74.83%
1.20x-1.29x 79 307,019,853 36.45 38.37 8.753 110 330 1.25x 73.38 62.42
1.30x-1.39x 63 254,310,276 30.19 68.57 8.837 116 309 1.34x 69.52 56.34
1.40x-1.49x 37 136,245,029 16.18 84.74 9.015 138 298 1.44x 68.69 44.30
1.50x-1.59x 13 37,754,780 4.48 89.23 9.280 200 267 1.54x 64.79 18.15
1.60x-1.69x 11 46,742,988 5.55 94.77 9.017 168 277 1.64x 66.67 27.95
1.70x-1.79x 4 18,554,168 2.20 96.98 9.474 231 298 1.74x 61.11 18.79
1.80x-1.89x 5 15,471,859 1.84 98.81 8.986 144 273 1.84x 56.91 26.77
1.90x-1.99x 3 7,990,991 0.95 99.76 8.748 154 269 1.95x 47.45 26.72
2.00x-2.17x 1 1,991,115 0.24 100.00 8.780 115 295 2.17x 45.25 37.43
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS 220 $842,244,629 100.00% 100.00% 8.893% 126 311 1.37x 69.88% 51.98%
</TABLE>
CUT-OFF DATE LTV RATIOS
<TABLE>
<CAPTION>
CUMULATIVE WEIGHTED AVERAGES
RANGE % OF % OF -------------------------------------------------------------------
OF CUT-OFF NUMBER OF INITIAL INITIAL INITIAL STATED REMAINING CUT-OFF
DATE LTV MORTGAGE POOL POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
RATIOS LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ----------- ----- ------- ------- ------- ---- ---------- ---------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
41.70%-50.00% 4 $ 12,214,808 1.45% 1.45% 8.710% 118 277 1.95x 46.73% 32.42%
50.01%-60.00% 26 75,421,591 8.95 10.41 9.155 138 283 1.54x 57.65 36.04
60.01%-70.00% 89 308,916,076 36.68 47.08 9.130 157 290 1.41x 66.51 37.17
70.01%-80.00% 100 435,492,154 51.71 98.79 8.672 105 330 1.30x 74.76 65.13
80.01%-82.26% 1 10,200,000 1.21 100.00 9.380 50 360 1.19x 82.26 80.58
- --------------------------------------------------------------------------------------------------------------------------------
TOTALS 220 $842,244,629 100.00% 100.00% 8.893% 126 311 1.37x 69.88% 51.98%
</TABLE>
S-40
<PAGE>
REPAYMENT LTV RATIOS
<TABLE>
<CAPTION>
CUMULATIVE WEIGHTED AVERAGES
RANGE % OF % OF -------------------------------------------------------------------
OF REPAYMENT NUMBER OF INITIAL INITIAL INITIAL STATED REMAINING CUT-OFF
LTV MORTGAGE POOL POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
RATIOS LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ----------- ----- ------- ------- ------- ---- ---------- ---------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fully Amortizing 40 $132,458,609 15.73% 15.73% 9.374% 243 243 1.53x 64.87% 0.00%
0.01%-50.00% 23 61,194,681 7.27 22.99 9.225 144 293 1.50x 60.34 43.68
50.01%-60.00% 58 207,697,234 24.66 47.65 8.920 105 305 1.37x 65.76 56.39
60.01%-70.00% 79 351,794,400 41.77 89.42 8.720 103 331 1.32x 73.50 64.97
70.01%-80.00% 19 78,899,705 9.37 98.79 8.460 89 354 1.27x 78.86 72.49
80.01%-80.58% 1 10,200,000 1.21 100.00 9.380 50 360 1.19x 82.26 80.58
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS 220 $842,244,629 100.00% 100.00% 8.893% 126 311 1.37x 69.88% 51.98%
</TABLE>
MORTGAGE RATES
<TABLE>
<CAPTION>
CUMULATIVE WEIGHTED AVERAGES
% OF % OF -------------------------------------------------------------------
RANGE OF NUMBER OF INITIAL INITIAL INITIAL STATED REMAINING CUT-OFF
MORTGAGE MORTGAGE POOL POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
RATES LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ----------- ----- ------- ------- ------- ---- ---------- ---------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.030%- 8.124% 5 $ 28,621,120 3.40% 3.40% 8.064% 93 346 1.37x 75.66% 68.39%
8.125%- 8.249% 2 11,939,130 1.42 4.82 8.180 61 345 1.30x 77.71 73.26
8.250%- 8.374% 9 31,110,181 3.69 8.51 8.317 75 344 1.37x 70.87 65.78
8.375%- 8.499% 20 89,868,399 10.67 19.18 8.452 98 340 1.29x 75.03 67.16
8.500%- 8.624% 22 91,764,026 10.90 30.07 8.568 119 321 1.35x 70.92 59.05
8.625%- 8.749% 22 108,643,572 12.90 42.97 8.690 100 325 1.31x 71.80 63.26
8.750%- 8.874% 22 56,641,036 6.73 49.70 8.802 117 311 1.41x 69.25 57.33
8.875%- 8.999% 30 126,570,161 15.03 64.73 8.932 125 312 1.38x 68.50 54.43
9.000%- 9.124% 14 43,225,986 5.13 69.86 9.053 116 328 1.31x 70.51 58.07
9.125%- 9.249% 20 81,040,861 9.62 79.48 9.191 174 270 1.48x 68.75 28.18
9.250%- 9.374% 10 33,459,751 3.97 83.45 9.295 156 290 1.39x 66.53 40.15
9.375%- 9.499% 16 60,832,941 7.22 90.68 9.416 130 281 1.35x 66.94 41.79
9.500%- 9.624% 8 28,221,315 3.35 94.03 9.556 241 291 1.57x 62.11 14.73
9.625%- 9.749% 7 24,844,780 2.95 96.98 9.657 152 288 1.35x 64.22 36.41
9.750%- 9.874% 4 7,863,503 0.93 97.91 9.793 201 261 1.39x 67.51 15.36
9.875%- 9.999% 3 7,733,537 0.92 98.83 9.935 235 235 1.52x 67.30 0.00
10.000%-10.124% 3 5,136,275 0.61 99.44 10.000 171 231 1.30x 59.06 27.16
10.125%-10.350% 3 4,728,056 0.56 100.00 10.292 141 257 1.44x 62.65 38.02
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS 220 $842,244,629 100.00% 100.00% 8.893% 126 311 1.37x 69.88% 51.98%
</TABLE>
ORIGINAL TERMS
<TABLE>
<CAPTION>
CUMULATIVE WEIGHTED AVERAGES
% OF % OF ----------------------------------------------------------------
NUMBER OF INITIAL INITIAL INITIAL STATED REMAINING CUT-OFF
ORIGINAL MORTGAGE POOL POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
TERMS LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ----------- ----- ------- ------- ------- ---- ---------- ---------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 Year Balloon 108 $391,950,407 46.54% 8.850% 116 322 4 1.36x 70.21% 60.15%
10 Year Hyper Amort 4 36,915,828 4.38 8.783 119 338 1 1.33x 72.57 62.99
12 Year Balloon 2 15,325,526 1.82 8.705 142 319 2 1.26x 70.98 56.89
12 Year Hyper Amort 1 2,023,856 0.24 8.840 143 359 1 1.26x 74.96 64.21
15 Year Balloon 10 20,605,714 2.45 9.323 175 295 5 1.34x 68.86 45.33
20 Year Balloon 1 8,170,700 0.97 8.940 235 325 5 1.32x 69.66 37.28
5 Year Balloon 14 68,258,622 8.10 8.746 52 314 8 1.37x 70.41 66.81
6 Year Balloon 1 323,900 0.04 8.920 65 298 2 1.24x 74.39 66.93
7 Year Balloon 39 166,211,467 19.73 8.654 78 331 6 1.30x 72.27 66.52
Fully Amortizing 40 132,458,609 15.73 9.374 243 243 5 1.53x 64.87 0.00
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS 220 $842,244,629 100.00% 8.893% 126 311 5 1.37x 69.88% 51.98%
</TABLE>
- ----------
(A) Number of months elapsed since the first Due Date following origination.
S-41
<PAGE>
REMAINING TERMS TO MATURITY
<TABLE>
<CAPTION>
CUMULATIVE WEIGHTED AVERAGES
% OF % OF -------------------------------------------------------------------
RANGE OF NUMBER OF INITIAL INITIAL INITIAL STATED REMAINING CUT-OFF
REMAINING MORTGAGE POOL POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
TERMS (MO.) LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ----------- ----- ------- ------- ------- ---- ---------- ---------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
43- 47 1 $ 10,715,936 1.27% 1.27% 9.380% 43 223 1.36x 59.87% 55.26%
48- 71 19 68,430,724 8.12 9.40 8.673 55 328 1.36x 71.45 67.77
72- 83 31 144,042,329 17.10 26.50 8.654 78 332 1.31x 72.79 67.03
84-167 120 461,073,762 54.74 81.24 8.831 117 322 1.35x 70.35 59.99
168-227 14 28,769,250 3.42 84.66 9.209 180 266 1.46x 63.72 32.47
228-239 22 87,063,917 10.34 95.00 9.369 234 243 1.48x 67.28 3.50
240-295 9 19,850,327 2.36 97.35 9.421 251 251 1.54x 65.22 0.00
296-300 4 22,298,384 2.65 100.00 9.413 300 300 1.56x 63.80 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS 220 $842,244,629 100.00% 100.00% 8.893% 126 311 1.37x 69.88% 51.98%
</TABLE>
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
CUMULATIVE WEIGHTED AVERAGES
RANGE OF % OF % OF --------------------------------------------------------------
CUT-OFF NUMBER OF INITIAL INITIAL INITIAL STATED REMAINING CUT-OFF
DATE MORTGAGE POOL POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
BALANCES LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- --------------------- ----- ------- ------- ------- ---- ---------- ---------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 323,900-$ 999,999 7 $ 5,510,433 0.65% 0.65% 8.978% 109 319 1.31x 62.62% 52.83%
1,000,000- 1,999,999 57 91,563,289 10.87 11.53 9.107 142 287 1.40x 67.12 42.86
2,000,000- 2,999,999 50 125,017,978 14.84 26.37 9.000 133 298 1.42x 67.43 46.26
3,000,000- 3,999,999 28 97,336,189 11.56 37.93 8.819 128 310 1.36x 70.55 52.61
4,000,000- 4,999,999 25 111,122,278 13.19 51.12 8.925 131 305 1.36x 69.91 49.23
5,000,000- 5,999,999 15 82,492,848 9.79 60.91 8.795 119 319 1.36x 71.09 55.11
6,000,000- 6,999,999 12 77,837,331 9.24 70.16 8.960 123 318 1.34x 71.06 53.88
7,000,000- 7,999,999 7 52,472,494 6.23 76.39 8.667 94 342 1.39x 69.60 63.09
8,000,000- 8,999,999 4 33,195,368 3.94 80.33 8.985 135 317 1.28x 72.61 57.29
9,000,000- 9,999,999 4 38,699,106 4.59 84.92 8.620 103 333 1.32x 73.66 65.08
10,000,000- 14,926,238 11 126,997,314 15.08 100.00 8.831 129 313 1.38x 70.82 52.93
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS 220 $842,244,629 100.00% 100.00% 8.893% 126 311 1.37x 69.88% 51.98%
</TABLE>
- ----------
Average Cut-off Balance is $3,828,385.
YEARS OF SCHEDULED MATURITY
<TABLE>
<CAPTION>
CUMULATIVE WEIGHTED AVERAGES
% OF % OF -------------------------------------------------------------------
SCHEDULED NUMBER OF INITIAL INITIAL INITIAL STATED REMAINING CUT-OFF
MATURITY MORTGAGE POOL POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
YEAR LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ----------- ----- ------- ------- ------- ---- ---------- ---------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 1 $ 10,715,936 1.27% 1.27% 9.380% 43 223 1.36x 59.87% 55.26%
2001 5 23,538,558 2.79 4.07 9.118 50 335 1.29x 72.61 70.03
2002 13 42,367,219 5.03 9.10 8.465 58 323 1.40x 71.52 67.24
2003 12 66,953,559 7.95 17.05 8.708 76 332 1.35x 71.37 65.95
2004 23 91,218,716 10.83 27.88 8.568 81 332 1.27x 73.27 67.24
2005 1 1,956,168 0.23 28.11 8.875 100 340 1.55x 69.86 63.10
2006 37 117,625,345 13.97 42.08 9.048 112 324 1.39x 67.06 58.28
2007 74 309,284,721 36.72 78.80 8.767 118 323 1.34x 71.69 61.18
2009 4 18,751,537 2.23 81.02 8.732 142 310 1.27x 70.21 53.43
2011 6 12,759,350 1.51 82.54 9.509 171 266 1.35x 64.66 36.12
2012 8 14,952,403 1.78 84.31 9.081 177 262 1.45x 65.72 31.65
2015 1 2,908,489 0.35 84.66 8.500 222 222 1.92x 41.70 0.00
2016 11 57,301,008 6.80 91.46 9.354 233 233 1.53x 67.04 0.00
2017 16 42,162,909 5.01 96.47 9.391 237 254 1.46x 66.90 7.22
2019 3 5,847,343 0.69 97.16 9.559 264 264 1.39x 68.09 0.00
2021 1 1,602,984 0.19 97.35 9.250 285 285 1.56x 57.25 0.00
2022 4 22,298,384 2.65 100.00 9.413 300 300 1.56x 63.80 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS 220 $842,244,629 100.00% 100.00% 8.893% 126 311 1.37x 69.88% 51.98%
</TABLE>
S-42
<PAGE>
PREPAYMENT RESTRICTIONS BY CATEGORIES
<TABLE>
<CAPTION>
WEIGHTED
% OF AVERAGE LOCKOUT TERM (MO.)/ AVERAGE # OF
NUMBER OF INITIAL INITIAL STATED % OF WEIGHTED AVERAGE MONTHS OPEN TO
MORTGAGE POOL POOL REMAINING STATED REMAINING TERM PREPAYMENT PRIOR
PREPAYMENT RESTRICTION(A) LOANS BALANCE BALANCE TERM (MO.) OF LOCKOUT TO MATURITY
- ----------------------------- --------- ------------ ------- ---------- --------------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lockout, then YM 185 $709,526,839 84.24% 127 58 45.83% 4
Lockout, then PP 10 62,735,670 7.45 137 61 44.30 18
YM, then PP 10 21,342,329 2.53 125 0 0.00 21
Lockout, then D 5 19,063,873 2.26 118 112 95.17 6
Lockout Only 6 16,526,294 1.96 94 45 48.34 48
Lockout, then YM, then PP 1 708,991 0.08 110 50 45.45 6
PP Only 1 2,836,606 0.34 114 0 0.00 24
YM Only 2 9,504,028 1.13 74 0 0.00 4
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL 220 $842,244,629 100.00% 126 57 45.19% 6
</TABLE>
- ----------
(A) D=Defeasance Collateral, YM=Yield Maintenance, PP=Percentage Premium.
PREPAYMENT RESTRICTIONS BY ORIGINAL TERM
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------
% OF MONTHS
NUMBER OF INITIAL INITIAL STATED MONTHS MONTHS MONTHS OPEN
PREPAYMENT MORTGAGE POOL POOL MORTGAGE REMAINING LOCKED YIELD % PRIOR TO
ORIGINAL TERM RESTRICTION(A) LOANS BALANCE BALANCE RATE TERM (MO.) OUT MAINT PREMIUM MATURITY
------------- -------------- ----- ------- ------- ---- ---------- --- ----- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 Year Balloon Lockout Only 3 $ 10,258,586 1.22% 9.322% 110 56 0 0 54
10 Year Balloon Lockout, then D 5 19,063,873 2.26 9.193 118 112 0 0 6
10 Year Balloon Lockout, then YM 94 347,526,696 41.26 8.802 116 50 62 0 4
10 Year Balloon Lockout, then YM,
then PP 1 708,991 0.08 9.570 110 50 24 30 6
10 Year Balloon PP Only 1 2,836,606 0.34 8.890 114 0 0 90 24
10 Year Balloon YM Only 1 4,058,693 0.48 9.625 108 0 102 0 6
10 Year Balloon YM, then PP 3 7,496,962 0.89 9.071 106 0 61 30 15
- --------------------------------------------------------------------------------------------------------------------------------
108 391,950,407 46.54% 8.850% 116 51 58 1 6
10 Year Hyperamort Lockout, then YM 4 36,915,828 4.38% 8.783 119 52 63 0 4
12 Year Balloon Lockout, then PP 1 10,733,361 1.27% 8.450% 142 70 0 69 3
12 Year Balloon Lockout, then YM 1 4,592,165 0.55 9.300 142 70 69 0 3
- --------------------------------------------------------------------------------------------------------------------------------
2 15,325,526 1.82% 8.705% 142 70 21 48 3
12 Year Hyperamort Lockout, then YM 1 2,023,856 0.24% 8.840 143 35 105 0 3
15 Year Balloon Lockout, then YM 10 20,605,714 2.45% 9.323 175 82 89 0 3
20 Year Balloon Lockout, then YM 1 8,170,700 0.97% 8.940 235 115 117 0 3
5 Year Balloon Lockout Only 1 1,303,659 0.15% 8.910% 51 45 0 0 6
5 Year Balloon Lockout, then PP 3 20,666,751 2.45 8.955 49 28 0 17 3
5 Year Balloon Lockout, then YM 8 39,059,434 4.64 8.594 55 28 23 0 3
5 Year Balloon YM Only 1 5,445,335 0.65 8.720 48 0 45 0 3
5 Year Balloon YM, then PP 1 1,783,444 0.21 9.625 49 0 25 18 6
- --------------------------------------------------------------------------------------------------------------------------------
14 68,258,622 8.10% 8.746% 52 25 18 6 3
6 Year Balloon Lockout, then YM 1 323,900 0.04% 8.920% 65 5 60 0 0
7 Year Balloon Lockout Only 2 4,964,048 0.59% 8.570 71 23 0 0 48
7 Year Balloon Lockout, then PP 4 15,095,558 1.79 8.850 79 35 0 39 5
7 Year Balloon Lockout, then YM 30 140,452,401 16.68 8.609 79 40 34 0 4
7 Year Balloon YM, then PP 3 5,699,460 0.68 9.334 66 0 42 18 6
- --------------------------------------------------------------------------------------------------------------------------------
39 166,211,467 19.73% 8.654% 78 38 30 4 5
Fully Amortizing Lockout, then PP 2 16,240,000 1.93% 9.570 300 120 0 120 60
Fully Amortizing Lockout, then YM 35 109,856,145 13.04 9.374 236 113 120 0 3
Fully Amortizing YM, then PP 3 6,362,464 0.76 8.871 222 0 119 58 44
- --------------------------------------------------------------------------------------------------------------------------------
40 132,458,609 15.73% 9.374% 243 108 105 18 12
- --------------------------------------------------------------------------------------------------------------------------------
TOTALS 220 $842,244,629 100.00% 8.893% 126 57 57 6 6
</TABLE>
- ----------
(A) D=Defeasance Collateral, YM=Yield Maintenance, PP=Percentage Premium.
S-43
<PAGE>
PREPAYMENT LOCK-OUT/PREMIUM ANALYSIS(A)
<TABLE>
<CAPTION>
CURRENT 12 MO. 24 MO. 36 MO. 48 MO. 60 MO. 72 MO. 84 MO. 96 MO. 108 MO. 120 MO. 132 MO.
PREPAYMENT JUNE JUNE JUNE JUNE JUNE JUNE JUNE JUNE JUNE JUNE JUNE JUNE
RESTRICTIONS 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
------------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 95.7% 95.4% 93.3% 74.9% 50.4% 31.2% 22.2% 26.5% 23.0% 22.7% 3.4% 0.0%
Yield Maintenance 4.0% 4.3% 5.5% 20.1% 42.6% 63.8% 66.4% 68.6% 72.1% 60.9% 77.4% 80.5%
Percentage Premium
5.00% and greater 0.3% 0.0% 0.0% 0.0% 0.0% 0.0% 1.4% 1.8% 0.0% 0.6% 0.0% 0.0%
4.00 to 4.99% 0.0% 0.3% 0.3% 1.3% 0.5% 0.0% 0.0% 0.0% 1.8% 0.0% 12.2% 10.5%
3.00 to 3.99% 0.0% 0.0% 0.5% 0.3% 1.6% 0.6% 0.6% 0.6% 0.0% 1.9% 0.0% 1.8%
2.00 to 2.99% 0.0% 0.0% 0.0% 2.0% 0.5% 2.0% 0.9% 0.8% 0.6% 0.0% 6.9% 0.0%
1.00 to 1.99% 0.0% 0.0% 0.0% 0.6% 1.2% 0.0% 0.8% 0.5% 0.4% 0.0% 0.0% 7.1%
Open 0.0% 0.0% 0.3% 0.8% 3.2% 2.5% 7.6% 1.3% 2.1% 14.0% 0.0% 0.0%
- -------------------------------------------------------------------------------------------------------------------------------
TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mortgage Pool Balance
($ millions) $842.2 $833.0 $822.8 $811.7 $784.5 $721.1 $699.0 $542.4 $529.2 $503.1 $132.8 $125.4
% of Initial
Pool Balance(B) 100.0% 98.9% 97.7% 96.4% 93.1% 85.6% 83.0% 64.4% 62.8% 59.7% 15.8% 14.9%
</TABLE>
144 MO. 156 MO. 168 MO. 180 MO.
PREPAYMENT JUNE JUNE JUNE JUNE
RESTRICTIONS 2009 2010 2011 2012
------------ ---- ---- ---- ----
Locked Out 0.0% 0.0% 0.0% 0.0%
Yield Maintenance 85.8% 85.6% 79.3% 79.8%
Percentage Premium
5.00% and greater 0.0% 0.0% 1.2% 0.0%
4.00 to 4.99% 0.0% 0.0% 0.0% 1.6%
3.00 to 3.99% 12.3% 12.8% 13.5% 17.2%
2.00 to 2.99% 1.9% 0.0% 0.0% 0.0%
1.00 to 1.99% 0.0% 1.6% 0.0% 0.0%
Open 0.0% 0.0% 6.0% 1.5%
- ----------------------------------------------------------
TOTALS 100.0% 100.0% 100.0% 100.0%
Mortgage Pool Balance
($ millions) $103.4 $ 95.2 $ 86.3 $ 63.9
% of Initial
Pool Balance(B) 12.3% 11.3% 10.2% 7.6%
- ----------
(A) This table sets forth an analysis of the percentage of the declining
balance of the Mortgage Pool that, on June 1 of each of the years
indicated, will be within a Lockout Period or in which Principal
Prepayment must be accompanied by the indicated Prepayment Premium. 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" herein, except that it was assumed
in preparing the table that no Mortgage Loan will be prepaid, voluntary or
involuntarily.
(B) Represents the percentage of the Initial Pool Balance that will remain
outstanding at the indicated date based upon the assumptions in preparing
this table.
S-44
<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 and of any intervening
assignments thereof in favor of the Trustee and in recordable form; (v) an
original assignment of any related assignment of leases and of any intervening
assignments thereof (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 applicable Mortgage Rate) to but not including
the Due Date in the Collection Period in which the purchase is to occur, and
(iii) certain Additional Trust Fund Expenses in respect of such Mortgage Loan,
including but not limited to, servicing expenses that are reimbursable to the
Master Servicer or Special Servicer plus any interest thereon and on any related
P&I Advances; 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 that each of the
assignments described in clauses (iv) and (v) of the second preceding paragraph
be promptly (and in any event within 30 days after the Closing Date) 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.
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
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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 30 days or more
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-l(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 environmental
assessment of the Mortgaged Property performed by or on behalf of, or otherwise
relied upon by, 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 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.
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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, in the same manner in which, and with the same
care, skill, prudence and diligence with which, the Master Servicer or the
Special Servicer, as the case may be, generally services and administers similar
mortgage loans (a) (i) for other third-party's portfolios of a similar nature
with similar borrowers, giving due consideration to customary and usual
standards of practice of prudent institutional commercial mortgage lenders
servicing their own loans or (ii) held in its own portfolio, whichever standard
is higher and (b) to the maximization of the recovery on such Mortgage Loans on
a net present value basis, notwithstanding (i) any relationship that the Master
Servicer or the Special Servicer, as the case may be, or any affiliate thereof
may have with the related borrower, the Depositor or any other party to the
transaction; (ii) the ownership of any Certificate by the Master Servicer or the
Special Servicer, as the case may be, or by any affiliate thereof; (iii) the
right of the Master Servicer or the Special Servicer, as the case may be, to
receive compensation or other fees for its services rendered pursuant to the
Pooling and Servicing Agreement; (iv) the obligations of the Master Servicer or
the Special Servicer, as the case may be, to make Advances (as defined herein);
(v) the ownership, servicing or management for others of any other mortgage
loans or mortgaged properties; and (vi) any obligation of the Master Servicer or
the Special Servicer, as the case may be, as a Mortgage Loan Seller or as an
affiliate thereof, to pay any indemnity with respect to or repurchase any
Mortgage Loan.
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 Special Servicer generally will
have all of the rights to indemnity and reimbursement, and limitations on
liability, that the Master Servicer is described as having in the Prospectus and
the Special Servicer rather than the Master Servicer will perform certain of the
servicing duties in the Prospectus with respect to Specially Serviced Mortgage
Loans and REO Properties (each as described herein).
THE MASTER SERVICER
GECAM, in its capacity as master servicer under the Pooling and Servicing
Agreement (in such capacity, the "Master Servicer") 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
that are not Specially Serviced Mortgage Loans, the Master Servicer will remain
liable for its servicing obligations under the Pooling and Servicing Agreement.
The Master Servicer is a wholly owned subsidiary of GECIA Holdings, Inc., which
is itself a wholly-owned subsidiary of GE Capital Services Corporation, which is
itself a wholly-owned subsidiary of the General Electric Company, and is an
affiliate of the Special Servicer and GECC. The Master Servicer's principal
servicing offices are located at 363 N. Sam Houston Parkway E., Suite1200,
Houston, TX 77060.
As of May 1, 1997, the Master Servicer serviced approximately 12,960
commercial and multifamily loans, totaling approximately $10,909,000,000 in
aggregate outstanding principal amounts, including loans securitized in
mortgage-backed securitization transactions.
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.
THE SPECIAL SERVICER
The initial Special Servicer will be GE Capital Realty Group, Inc., a
Texas corporation. The Special Servicer is an affiliate of the Master Servicer
and a wholly-owned subsidiary of the General Electric Capital Corporation, which
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is a wholly-owned subsidiary of GE Capital Services Corporation, which is itself
a wholly-owned subsidiary of the General Electric Company. 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, for administering any REO Property and for performing certain other
servicing functions with respect to the Mortgage Pool under the Pooling and
Servicing Agreement. As of January 1, 1997, the Special Servicer was responsible
for the servicing of approximately $10 billion of commercial and multifamily
loans and REO properties. It is anticipated that GECC or an affiliate of GECC,
the Master Servicer and the Special Servicer will purchase a portion of the
Class F Certificates and all of the Class G, Class H and Class J Certificates on
or about the Closing Date. The Special Servicer's principal offices are located
at 2 Bent Tree Tower, 16479 Dallas Parkway, Suite 400, Dallas, Texas 75248.
The Pooling and Servicing Agreement permits the holder (or holders) of the
majority of the Voting Rights allocated to holders of the Controlling Class of
Sequential Pay Certificates to replace the Special Servicer and to select a
representative (the "Controlling Class Representative") from whom the Special
Servicer will seek advice and approval and take direction under certain
circumstances. See "--The Controlling Class Representative." 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
(or if no Classes of Sequential Pay Certificates has a Certificate Balance that
is greater then 20% of its original Certificate Balance, the Class of Sequential
Pay Certificates with the latest alphabetical Class designation). The 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
replacement of a Special Servicer by the Controlling Class of Sequential Pay
Certificates 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 successor 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 45 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 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 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; (g)
the Master Servicer shall have received notice of the commencement of
foreclosure or similar proceedings with respect to the related Mortgaged
Property; or (h) the borrower shall be materially delinquent with respect to
payment of insurance premiums or property taxes, including making escrow
payments for the payment of insurance premiums or property taxes.
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 cause 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,
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
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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 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 any of 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, but, with respect to any bankruptcy or insolvency
proceedings described in clauses (d), (e) and (f), no later than the entry
of an order or decree dismissing such proceeding;
(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 primary compensation to be paid to the Master Servicer in respect of
its servicing activities (including fees to be paid to any sub-servicer) will be
the Servicing Fee. The "Servicing Fee" will be payable monthly on a loan-by-loan
basis from amounts received in respect of interest on each Mortgage Loan or as
otherwise described herein, will accrue at the related Servicing Fee Rate and
will be computed on the basis of the same principal amount and on a 30/360
basis. The Servicing Fee Rate will be a per annum rate equal to the Initial
Servicing Fee Rate for as long as the initial Master Servicer is acting as
Master Servicer or the Successor Servicing Fee Rate thereafter. Eighty-nine (89)
of the Mortgage Loans (or 41%) will be initially directly serviced by a
third-party sub-servicer (the "Non-GECAM Mortgage Loans"), and 131 of the
Mortgage Loans (or 59%) will be initially directly serviced by the initial
Master Servicer (the "GECAM Mortgage Loans"). The initial Master Servicer has
agreed to service (a) the GECAM Mortgage Loans at a per annum rate equal to
0.000% and (b) the Non-GECAM Mortgage Loans at a per annum rate equal to 0.060%
in the case of 38 of the Mortgage Loans (or 20%), 0.125% in the case of 40 of
the Mortgage Loans (or 19%), 0.250% in the case of eight of the Mortgage Loans
(or 2%), 0.355% in the case of one of the Mortgage Loans (or 0.2%), 0.225% in
the case of one of the Mortgage Loans (or 0.2%) and 1.94% in the case of one of
the Mortgage Loans (or 0.2%) (the "Initial Servicing Fee Rate"). However, if the
initial Master Servicer resigns, is terminated or is otherwise removed pursuant
to the terms of the Pooling and Servicing Agreement, the Trustee is obligated to
act as Successor Master Servicer or to appoint a Successor Master Servicer to
service the Mortgage Loans at a rate (the "Successor Servicing Fee Rate") not to
exceed (a) 0.035% over the Initial Servicing Fee Rate with respect to the
Non-GECAM Mortgage Loans and to the extent GECAM continues as primary servicer
in respect thereof, the GECAM Mortgage Loans and (b) to the extent GECAM is no
longer the primary servicer in respect thereof, 0.075% with respect to the GECAM
Mortgage Loans (such rate, the "Imputed Servicing Fee Rate"). Upon its
termination, resignation or removal, the initial Master Servicer will be
obligated to pay monthly to the Trustee, with respect to each Mortgage Loan for
so long as such Mortgage Loan continues to be serviced pursuant to the terms of
the Pooling and Servicing Agreement, an amount computed on the same basis as the
Servicing Fee, but at a per annum rate equal to the difference between the
Successor Servicing Fee Rate and the Initial Servicing Fee Rate (the "Servicing
Fee Increase"). In the event of the resignation, termination or removal of GECAM
as initial Master Servicer, the Trustee shall in good faith attempt to appoint a
successor Master Servicer at a Successor Servicing Fee Rate intended to minimize
the amount of any Servicing Fee Increase. In the event the initial Master
Servicer fails to pay to the Trustee the Servicing Fee Increase, then in
accordance with the terms of the Pooling and Servicing Agreement, GECC shall,
upon the demand of the Trustee, remit to the Trustee the Servicing Fee Increase.
The weighted average Initial Servicing Fee Rate as of the Cut-off Date will be
____%. In addition, as additional servicing compensation, the Master Servicer
will be entitled to
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retain all assumption and modification fees, late charges, exit fees or
repayment fees and Prepayment Interest Excesses collected from borrowers on
Mortgage Loans. 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 interest or other income earned
on such funds, but shall be required to cover any losses from its own fund
without any right to reimbursement.
If borrower voluntarily prepays on a date that is prior to its Due Date in
a Collection Period, the amount of interest (net of related Servicing Fees) that
accrues on the Mortgage Loan during such Collection Period will be less (such
shortfall, a "Prepayment Interest Shortfall") than the amount of interest (net
of related Servicing Fees and without regard to any Prepayment Premium or Yield
Maintenance Charge actually collected) that would have accrued on the Mortgage
Loan through its Due Date. 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 Servicing Fees) that accrues and
is collected on the Mortgage Loans during such Collection Period will exceed
(such excess, a "Prepayment Interest Excess") the amount of interest (net of
related Servicing Fees and the Trustee Fee and without regard to any Prepayment
Premium or Yield Maintenance Charge actually collected) that would have been
collected on the Mortgage Loan during such Collection Period if the borrower had
not prepaid. 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 an amount equal to the
Servicing Fee computed based upon the Imputed Servicing Fee Rate, including any
Prepayment Interest Excesses received during such Collection Period 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. For purposes
of determining the amount of any Compensating Interest Payment required to be
made by the initial Master Servicer, on any Distribution Date, with respect to
each Mortgage Loan for which the initial Master Servicer has received the
Scheduled Payment for the related Due Date, the initial Master Servicer will be
deemed to have received a Servicing Fee computed based upon the Imputed
ServicingFee Rate.
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 on any
reimbursable servicing expenses incurred by it. Such interest will compound
annually and 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 and, under
the circumstances described herein, Principal Recovery Fees. 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, which Principal Recovery Fee generally will be in an
amount equal to 0.25% of all amounts received while such Mortgage Loan was a
Specially Serviced Mortgage Loan 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 set
forth in the Pooling and Servicing Agreement. As additional servicing
compensation, the Special Servicer will be entitled to retain all assumption
fees, modification fees and late payment charges received on or with respect to
the Specially Serviced Mortgage Loans.
The Pooling and Servicing Agreement will provide that the Special Servicer
will comply with the REMIC Provisions.
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The Master Servicer will, in general, 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, the Master
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 Lockout Period, (iii)
except as expressly provided by the related Mortgage or in connection with a
material adverse environmental condition at the related Mortgaged Property,
result in a release of the lien of the related Mortgage on any material portion
of such Mortgaged Property without a corresponding principal prepayment or (iv)
in the judgment of the Special Servicer or Master Servicer, as applicable,
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 Specially Serviced 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
Specially Serviced Mortgage Loan, including by way of a reduction in the related
Mortgage Rate, (iii) forbear in the enforcement of any right granted under any
Mortgage Note or Mortgage relating to a Specially Serviced Mortgage Loan,
including the extension of the date on which any Balloon Payment is due, and/or
(iv) accept a principal prepayment during any Lockout Period; provided that (x)
the related borrower is in default with respect to the Specially Serviced
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 net present value basis documented to the Trustee and
(z) such modification, waiver or amendment does not result in a tax being
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). However, in no event shall
the Special Servicer be permitted to extend the date on which any Balloon
Payment is due beyond a date which is two years prior to the Rated Final
Distribution Date. See "SERVICING OF THE MORTGAGE LOANS--The Extension Adviser."
The Special Servicer and Master Servicer, as applicable, will be required
to notify the Trustee, the Rating Agencies and, in the case of the Special
Servicer, 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 CONTROLLING CLASS REPRESENTATIVE
The Controlling Class Representative will be entitled to advise the
Special Servicer with respect to the following actions of the Special Servicer,
and the Special Servicer will not be permitted to take any of the following
actions as to which the Controlling Class Representative has objected in writing
within ten business days of being notified thereof (provided that if such
written objection has not been received by the Special Servicer within such ten
business days, then the Controlling Class Representative's approval will be
deemed to have been given):
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(i) any foreclosure upon or comparable conversion (which may include
acquisitions of an REO Property) of the ownership of properties securing
such of the Specially Serviced Mortgage Loans as come into and continue in
default;
(ii) any modification of a monetary term of a Specially Serviced
Mortgage Loan other than a modification consisting of the extension of the
maturity date of a Specially Serviced Mortgage Loan for one year or less;
(iii) any proposed sale of a Specially Serviced Mortgage Loan or REO
Property (other than in connection with the termination of the Trust Fund
as described under "DESCRIPTION OF THE CERTIFICATES--Termination" herein);
(iv) any determination to bring an REO Property into compliance with
applicable environmental laws;
(v) any acceptance of substitute or additional collateral for a
Specially Serviced Mortgage Loan;
(vi) any waiver of a "due-on-sale" or "due-on-encumbrance" clause;
and
(vii) any acceptance of an assumption agreement releasing a borrower
from liability under a Specially Serviced Mortgage Loan.
In addition, the Controlling Class Representative may direct the Special
Servicer to take or to refrain from taking, such other actions as the
Controlling Class Representative may deem advisable or as to which provision is
otherwise made in the Pooling and Servicing Agreement; provided that no such
direction and no objection contemplated by the prior paragraph may require or
cause the Special Servicer to violate any provision of the Pooling and Servicing
Agreement, including the Special Servicer's obligation to act in accordance with
the servicing standards described under "--General" above, expose the Master
Servicer, the Special Servicer, the Trust Fund or the Trustee to liability, or
materially expand the scope of the Special Servicer's responsibilities under the
Pooling and Servicing Agreement. Any out-of-pocket expenses incurred by the
Special Servicer in connection with its obtaining the approval of the
Controlling Class Representative shall be treated as an Advance and the Special
Servicer shall be entitled to reimbursement in respect thereof.
LIMITATION ON LIABILITY OF CONTROLLING CLASS REPRESENTATIVE
The Controlling Class Representative will have no liability to the
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Pooling and Servicing Agreement, or
for errors in judgment; provided, however, that the Controlling Class
Representative will not be protected against any liability which would otherwise
be imposed by reason of willful misfeasance, bad faith or gross negligence in
the performance of duties or by reason of reckless disregard of obligations or
duties. By its acceptance of a Certificate, each Certificateholder confirms its
understanding that the Controlling Class Representative may take actions that
favor the interests of one or more Classes of the Certificates over other
Classes of the Certificates, and that the Controlling Class Representative may
have special relationships and interests that conflict with holders of some
Classes of the Certificates and, absent willful misfeasance, bad faith or gross
negligence on the part of the Controlling Class Representative, each
Certificateholder agrees to take no action against the Controlling Class
Representative or any of its officers, directors, employees, principals or
agents as a result of such a special relationship or conflict.
THE EXTENSION ADVISER
Election of the Extension Adviser. The Certificateholders will be entitled
to elect a representative (the "Extension Adviser") from whom the Special
Servicer will seek approval as described below. The initial Extension Advisor is
expected to be LaSalle National Bank, from whom the Special Servicer will seek
approval as described below. An election of a successor Extension Advisor will
be held by the Certificateholder or Certificateholders of 51% or more of the
Offered Certificates (other than the Class IO Certificates) as soon as
practicable upon (i) the resignation or removal of the initial or any subsequent
Extension Adviser, or (ii) the receipt by the Trustee of written requests for
the election of an Extension Adviser from the Certificateholders of 51% or more
of the Offered Certificates (other than the Class IO Certificates). The
Extension Adviser may be removed at any time by the written vote of
Certificateholders of 51% or more of the Offered Certificates (other than the
Class IO Certificates). In the event that at any time an Extension Adviser 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 (or 20 days if such period shall be extended in accordance with
the terms of the Pooling and Servicing Agreement) after receiving from the
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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 any REMIC created pursuant to the Pooling and Servicing Agreement to fail
to qualify as a REMIC under the Code. Subject to the foregoing, the 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 or an independent contractor employed by
the Special Servicer at the expense of the Trust Fund will be obligated to
operate and manage any Mortgaged Property acquired as REO Property in a manner
that would, to the extent commercially reasonable, maximize the Trust Fund's net
after-tax proceeds from such property. After the Special Servicer reviews the
operation of such property and consults with the Trustee to determine the Trust
Fund's federal income tax reporting position with respect to the income it is
anticipated that the Trust Fund would derive from such property, the 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 reasonable to manage and operate such property in a manner that
would avoid the imposition of a tax on "net income from foreclosure property,"
within the meaning of Section 857(b)(4)(B) of the Code or a tax on "prohibited
transactions" under Section 860F of the Code (either such tax referred to 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.
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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, such Mortgaged Property has not already been
inspected by the Special Servicer; provided, however, that the MasterServicer
shall not be required to perform such inspection with respect to a Mortgage Loan
in calendar year 1997 to the extent an inspection was previously performed in
1997 in connection with the origination or acquisition of such Mortgage Loan.
The Master Servicer and the 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 that is apparent from such inspection.
The Master Servicer or the Special Servicer, as the case may be, is also
required to use reasonable efforts to collect from the related borrower and
review the annual, and to the extent required by the related Mortgage,
quarterly, 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 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 1997-C1 (the
"Certificates") will be issued pursuant to a Pooling and Servicing Agreement, to
be dated as of June 1, 1997, among the Depositor, the Master Servicer, the
Special Servicer, GECC, the Fiscal Agent, 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 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 fifteen 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 IO Certificates, the Class B Certificates, the
Class C Certificates, the Class D Certificates, the Class E Certificates, the
Class F Certificates, the Class G Certificates, the Class H Certificates and the
Class J 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 IO, Class B, Class C,
Class D and Class E Certificates (collectively, the "Offered Certificates") are
offered hereby. The Class F, Class G, Class H, Class J 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 Offered Certificate
will be issued in denominations of not less than $100,000 actual or notional
principal amount and in integral multiples of $1 in excess thereof.
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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.
CERTIFICATE BALANCES AND NOTIONAL AMOUNTS
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:
INITIAL PERCENT OF
CERTIFICATE INITIAL POOL
CLASS OF CERTIFICATES BALANCE BALANCE
- --------------------- ------- -------
Class A-1 Certificates ...................... $252,440,000 30.0%
Class A-2 Certificates ...................... $ 86,358,000 10.3%
Class A-3 Certificates ...................... $254,984,000 30.3%
Class B Certificates ........................ $ 46,323,000 5.5%
Class C Certificates ........................ $ 46,324,000 5.5%
Class D Certificates ........................ $ 42,112,000 5.0%
Class E Certificates ........................ $ 16,845,000 2.0%
Private Certificates (other than the
REMIC Residual Certificates) .............. $ 96,858,629 11.5%
The "Certificate Balance" of any Class of Certificates (other than the
Class IO 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 pursuant to
the terms of the Pooling and Servicing Agreement.
The Class IO Certificates will not have Certificate Balances, but will
represent the right to receive the sum of the interest accrued on the notional
amount of each of its Components, as described herein. As of any Distribution
Date, the Class IO-1 Component will have a notional amount equal to the
aggregate Stated Principal Balance of the Mortgage Loans immediately prior to
such Distribution Date and the Class IO-2 Component will have a notional amount
equal to the aggregate Certificate Balances of the Class A-1 Certificates and
the Class A-2 Certificates immediately prior to such Distribution Date (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. The Class
IO-1 Component and the Class IO-2 Component do not represent separate Classes of
Certificates, but rather separate components, each of which is a part of the
Class IO Certificates. The notional amount of the Class IO Certificates will
equal the sum of the notional amount of each of its Components, which notional
amount will initially be equal to $1,181,042,629.
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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 Offered Certificates
(other than the Class IO Certificates) for each Distribution Date is fixed at
the respective rate per annum set forth with respect to such Class in the table
at the beginning of the Summary.
The Pass-Through Rate applicable to the Class IO-1 Component for each
Distribution Date will equal the Weighted Average Net Mortgage Rate for such
Distribution Date minus ___% (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 immediately
prior to such Distribution Date. The Class A-1 Strip Rate will equal ___%, and
the Class A-2 Strip Rate will equal ___%.
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 immediately prior to
such Distribution Date. The "Net Mortgage Rate" for each Mortgage Loan will
equal the Mortgage Rate in effect for such Mortgage Loan as of the Cut-off Date,
minus the applicable Initial Servicing Fee Rate and the Trustee Fee Rate;
provided that if any Mortgage Loan does not accrue interest on the basis of a
360-day year consisting of twelve 30-day months (which is the basis on which
interest accrues in respect of the REMIC Regular Certificates), then, solely for
purposes of calculating the Pass-Through Rate for the Class IO Certificates,
such Net Mortgage Rate will, to the extent appropriate, be adjusted from accrual
period to accrual period to compensate for such difference. The "Stated
Principal Balance" of each Mortgage Loan outstanding at any time generally will
equal the Cut-off Date Balance thereof, reduced on each Distribution Date (to
not less than zero) 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 incurred in respect of such Mortgage Loan during the related
Collection Period for such Distribution Date. Notwithstanding the foregoing, if
any Mortgage Loan is paid in full, liquidated or otherwise removed from the
Trust Fund, commencing as of the first Distribution Date following the
Collection Period during which such event occurred, the Stated Principal Balance
of such Mortgage Loan will be zero.
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 9th 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 18th day of each month or, if any such
18th day is not a business day, then on the next succeeding business day with
the same force and effect and no additional interest shall accrue, commencing
July 18, 1997 (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 and shall be made by wire transfer of immediately available funds,
if such Certificateholder shall have provided wiring instructions no less than
five business days prior to such record date or otherwise by check mailed to the
address of such Certificateholder as it appears in the Certificate register. 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. 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:
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(a) the total amount of all cash received on or in respect of the
Mortgage Loans and any REO Properties by the Master Servicer 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 after
the related Collection Period,
(ii) any Prepayment Premiums,
(iii) Additional Interest, and
(iv) all amounts in the Certificate Account that are payable
or reimbursable to any person other than the Certificateholders,
including any Servicing Fees and Trustee Fees;
(b) all P&I Advances made by the Master Servicer, the Trustee or the
Fiscal Agent 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 actually collected will be distributed separately
from the Available Distribution Amount. See "--Distributions--Allocation of
Prepayment Premiums" herein.
Application of the Available Distribution Amount. 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 "--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 Distributable Certificate Interest in respect of
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-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;
(3) after 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-1 Certificates;
(4) after 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-1 and/or Class A-2 Certificates;
(5) to distributions to the holders of the Class A-1, Class A-2 and
Class A-3 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;
(6) 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;
(7) after 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 and/or Class A-3 Certificates on such
Distribution Date;
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(8) to distributions to the holders of the Class B Certificates to
reimburse such holders for all 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;
(9) 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;
(10) after 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/or Class B Certificates on such Distribution Date;
(11) to distributions to the holders of the Class C Certificates to
reimburse such holders for all 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;
(12) 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;
(13) after 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 B and/or Class C Certificates on such Distribution Date;
(14) to distributions to the holders of the Class D Certificates to
reimburse such holders for all 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;
(15) 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;
(16) after the Class A-1, Class A-2, Class A-3, Class B, Class C and
Class D Certificates have been retired, to distributions of principal to
the holders of the Class E 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 B, Class C and/or Class D Certificates;
(17) to distributions to the holders of the Class E Certificates to
reimburse such holders for all 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) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D and Class E Certificates have been retired, to distributions of
principal to the holders of the Class F 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 B, Class C, Class D and/or Class E
Certificates;
(20) to distributions to the holders of the Class F Certificates to
reimburse such holders for all 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;
(21) 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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(22) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D, Class E and Class F Certificates have been retired, to
distributions of principal to the holders of the Class G 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 B, Class C, Class D, Class E and/or
Class F Certificates;
(23) to distributions to the holders of the Class G Certificates to
reimburse such holders for all 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;
(24) to distributions of interest to the holders of the Class H
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;
(25) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D, Class E, Class F and Class G Certificates have been retired, to
distributions of principal to the holders of the Class H 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 B, Class C, Class D, Class E, Class
F and/or Class G Certificates;
(26) to distributions to the holders of the Class H Certificates to
reimburse such holders for all 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;
(27) to distributions of interest to the holders of the Class J
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;
(28) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D, Class E, Class F, Class G and Class H Certificates have been
retired, to distributions of principal to the holders of the Class J
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 B, Class C, Class D,
Class E, Class F, Class G and/or Class H Certificates;
(29) to distributions to the holders of the Class J Certificates to
reimburse such holders for all 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
(30) 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 (29) above.
Distributable Certificate Interest. The "Distributable Certificate
Interest" in respect of any Class of REMIC Regular Certificates, other than
Class IO Certificates, for each Distribution Date 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 "Distributable
Certificate Interest" in respect of the Class IO Certificates will equal the sum
of the interest due on the notional amount of each of the Components reduced (to
not less than zero) by such Class's allocable share of any Net Aggregate
Prepayment Interest Shortfall for each Distribution Date.
The "Accrued Certificate Interest" in respect of each Class of REMIC
Regular Certificates (other than Class IO 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 during the
immediately previous calendar month 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,
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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 the principal portions of
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 (including any
Remaining Cash Flow);
(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 (including any Balloon Payment), 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), 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; and
(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.
The "Scheduled Payment" due on any Mortgage Loan on any related Due Date
is the amount of the Monthly Payment that is or would have been, as the case may
be, 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 or the application of any Remaining Cash Flow with respect to a
Hyperamortization Loan, 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) allocating
of Realized Losses and Additional Trust Fund Expenses to the Certificates, and
(iii) determining 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 be required to make P&I Advances in respect of such Mortgage Loan,
in all cases as if such Mortgage Loan had remained outstanding. References to
"Mortgage
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Loan" or "Mortgage Loans" in the definitions of "Principal Distribution Amount"
and "Weighted Average Net Mortgage Rate" include any Mortgage Loan as to which
the related Mortgaged Property has become an REO Property (an "REO Mortgage
Loan").
Allocation of Prepayment Premiums. In the event a borrower is required to
pay any Prepayment Premium, the amount of such payments actually collected will
be distributed in respect of the Offered Certificates as set forth below. A
Prepayment Premium is any Yield Maintenance Charge, Treasury Spread Maintenance
or any other fees (each such fee a "Percentage Premium") 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. "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 difference between the Mortgage
Rate on such Mortgage Loan and the applicable treasury rate in effect on the
date of repayment (the "Rate Differential") with the aggregate payment of
interest which would have accrued on such Mortgage Loan at the Rate Differential
on each subsequent due date through the maturity date of such Mortgage Loan
discounted at a rate at or near the time of prepayment. The Treasury Spread
Maintenance is determined in the same manner as a Yield Maintenance Charge,
except that the Rate Differential is the difference between the treasury note
upon which the related Mortgage Rate is based and the applicable treasury rate
in effect on the date of repayment.
For any Distribution Date, with respect to any Percentage Premiums
actually collected during the relatedCollection Period, the holders of the Class
A-1, Class A-2, Class A-3, Class B, Class C, Class D, Class E, Class F, Class G,
Class H and Class J 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) 25% of the total amount
of each such Percentage Premium collected. Any remaining portion of such
Percentage 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,
Class D, Class E, Class F, Class G, Class H and Class J 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 or
Treasury Spread Maintenance actually collected 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, Class G, Class H and
Class J 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 or Treasury Spread Maintenance 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 or Treasury Spread Maintenance
collected. On each Distribution Date, the holders of the Class IO Certificates
are entitled to receive any remaining portion of such Yield Maintenance Charge
or Treasury Spread Maintenance received.
SUBORDINATION; ALLOCATION OF LOSSES AND CERTAIN EXPENSES
The rights of holders of the Class B, Class C, Class D and Class E
Certificates and each Class of the Private 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, Class A-3 and
Class IO 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 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, the Class C, the Class D and the Class E Certificates of the full amount of
Distributable Certificate Interest payable in respect of each such Class of
Certificates on each Distribution Date, and the ultimate receipt by the holders
of each such Class of Certificates of, principal equal to the entire related
Certificate Balance. The protection afforded to the holders of the Class E
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Certificates by means of the subordination of the Private Certificates, to the
holders of the Class D Certificates by means of the subordination of the Class E
and the Private Certificates, to the holders of the Class C Certificates by
means of the subordination of the Class D, the Class E and the Private
Certificates, to the holders of the Class B Certificates by means of the
subordination of the Class C, the Class D, the Class E and the Private
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 and Class IO
Certificates will bear shortfalls in collections and losses incurred in respect
of the Mortgage Loans pro rata. 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 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 J
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; second, to the Class H Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
third, to the Class G Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; fourth, to the Class F
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; fifth, to the Class E Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
sixth, to the Class D Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; seventh, to the Class C
Certificates, until the Remaining Certificate Balance of such Class of
Certificates is reduced to zero and eighth, 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.
Any Realized Loss allocated in reduction of the Certificate Balance of any
Class of the Sequential Pay Certificates will result in a corresponding
reduction in the notional amount of the Class IO-1 Component, and any Realized
Loss or Additional Trust Fund Expenses allocated in reduction of the Certificate
Balance of the Class A-1 or Class A-2 Certificates will also result in a
corresponding reduction in the notional amount for the Class IO-2 Component.
"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, the Trustee and/or the Fiscal
Agent 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
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"DESCRIPTION OF THE POOLING AGREEMENTS--Certain Matters Regarding the Master
Servicer and the Depositor" in the Prospectus (the Special Servicer having the
same rights to indemnity and reimbursement as described thereunder with respect
to the Master Servicer), 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 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, if
any, 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, if any, Principal Recovery Fees) in respect of subsequent
delinquencies. In addition, if it is determined that an Appraisal Reduction
Amount (as defined below) 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. Pursuant to the terms of the Pooling
and Servicing Agreement, if the Master Servicer fails to make a P&I Advance
required to be made, the Trustee shall then be required to make such P&I
Advance, and if the Trustee fails to make a P&I Advance required to be made, the
Fiscal Agent shall then be required to make such P&I Advance. No default by the
Trustee shall be deemed to have occurred if the Fiscal Agent makes such P&I
Advance in a timely manner, as set forth in the Pooling and Servicing Agreement.
See "--Appraisal Reductions" below.
The Master Servicer (or the Trustee or Fiscal Agent, as applicable) 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 (net of related Servicing Fees
with respect to collections of interest and net of related Principal Recovery
Fees with respect to collections of principal) 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 any other recovery of the related Mortgage
Loan or REO Property ("Related Proceeds"). Neither the Master Servicer, the
Trustee or the Fiscal Agent will be obligated to make any P&I Advance that it
determines in accordance with the servicing standards described herein, would,
if made, not be recoverable out of Related Proceeds (a "Nonrecoverable P&I
Advance"), and the Master Servicer (or the Trustee or the Fiscal Agent, as
applicable) will be entitled to recover, from general funds on deposit in the
Certificate Account, any P&I Advance made that it later determines to be a
Nonrecoverable P&I Advance. 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, the Trustee or the
Fiscal Agent of any P&I Advance made by it or the recovery by the Master
Servicer of any reimbursable servicing expense incurred by it (each such P&I
Advance or expense, an "Advance"), the Master Servicer, the Trustee or the
Fiscal Agent, as applicable, will be entitled to be paid, out of any amounts
then on deposit in the Certificate Account, interest compounded annually at a
per annum rate (the "Reimbursement Rate") equal to the "prime rate" published in
the "Money Rates" section of
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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
Upon the earliest of the date (each such date, a "Required Appraisal
Date") that (1) any Mortgage Loan is sixty (60) days delinquent in respect of
any Monthly Payment, (2) any REO Property is acquired on behalf of the Trust
Fund, (3) any Mortgage Loan has been modified by the Special Servicer to reduce
the amount of any Monthly Payment, other than a Balloon Payment, (4) a receiver
is appointed and continues in such capacity in respect of a Mortgaged Property
securing any Mortgage Loan, (5) a borrower with respect to any Mortgage Loan is
subject to any bankruptcy proceeding or (6) a Balloon Payment with respect to
any Mortgage Loan is due and has not been paid on its scheduled maturity date
(each such Mortgage Loan, including an REO Mortgage Loan, a "Required Appraisal
Loan"), the Special Servicer will be required to obtain (within 60 days of the
applicable Required Appraisal Date) an appraisal of the related Mortgaged
Property prepared in accordance with 12 CFR 225.62 and conducted in accordance
with the standards of the Appraisal Institute by a Qualified Appraiser, unless
such an appraisal had been previously obtained within the prior twelve months. A
"Qualified Appraiser" is an independent appraiser, selected by the Special
Servicer, that is a member in good standing of the Appraisal Institute, and,
that, if the state in which the subject Mortgaged Property is located certifies
or licenses appraisers, certified or licensed in such state, and in each such
case who has a minimum of five years experience in the subject property type and
market. The cost of such appraisal will be an Advance 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 with interest thereon at the Reimbursement Rate and
subject to the Master Servicer's determination that such Advance would not be a
nonrecoverable Advance. 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, such determination to be made upon the later of 30 days after
the Required Appraisal Date if no new appraisal is required or upon receipt of a
new appraisal. 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, the Trustee or the
Fiscal Agent, 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 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, the Trustee and the Fiscal Agent 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 (net of any amount escrowed therefor),
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. See "--P&I
Advances" above.
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 terms 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 (i) each holder of an Offered Certificate, (ii) the initial beneficial owners
of the Offered Certificates and (iii) subsequent beneficial owners of the
Offered Certificates upon their written request to the Trustee 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, similar in content to the form of Annex C, setting forth the recent
status of the Mortgage Pool based on information provided to it by the Master
Servicer and the Special Servicer. Although the form of the Distribution Date
Statement may change at the discretion of the Trustee, the content will be
consistent with the requirements of the Pooling and Servicing Agreement. 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
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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, the Special Servicer nor the Trustee will assume any
responsibility therefor.
Except as described above, 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. 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 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 Special Servicer will, promptly after a Mortgage Loan becomes a
Specially Serviced Mortgage Loan, give written notice to the Trustee, and the
Trustee will provide a copy to each Certificateholder, each Rating Agency, the
Depositor and the Underwriters, which notice will include an explanation as to
the reasons such Mortgage Loan became a Specially Serviced Mortgage Loan and the
Special Servicer's plan for servicing such Mortgage Loan.
The Pooling and Servicing Agreement requires that the Trustee 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 a Certificate or any person identified to the Trustee 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 Trustee 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
Trustee 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 Special Servicer in
respect of each Mortgaged Property and delivered to the Trustee, (f) the most
recent Mortgaged Property annual operating statements and rent roll, if any,
collected by or on behalf of the Special Servicer and delivered to the Trustee,
(g) any and all modifications, waivers and amendments of the terms of a Mortgage
Loan entered into by the Special Servicer, and delivered to the Trustee and (h)
any and all officers' certificates and other evidence delivered to the Trustee
to support the Master Servicer's (or the Trustee's and/or the Fiscal Agent'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 Trustee upon request; however, the Trustee will be permitted to require
payment of a sum sufficient to cover the reasonable costs and expenses of
providing such information to the Certificate Owners, including, without
limitation, copy charges and reasonable fees for employee time and for space.
A Certificate Owner may obtain certain information contained in each
Distribution Date Statement by calling the Trustee's ASAP System at
(312)904-2200 and requesting statement number 259 or such other mechanism as the
Trustee may have in place from time to time. Account numbers on the Trustee's
ASAP System may be obtained by calling (312) 904-2200 and following the voice
prompts for obtaining account numbers. Separately, bond factor information may
be obtained from the Trustee by calling (800) 246-5761. In addition, if the
Depositor so directs the Trustee and on terms acceptable to the Trustee, the
Trustee will make available through its electronic bulletin board system on a
confidential basis, certain information related to the Mortgage Loans. The
bulletin board is located at (714) 282-3990. Those who have an account on the
bulletin board may retrieve the loan level data file for each transaction in the
directory. An account number may be obtained by typing "NEW" upon logging into
the bulletin board.
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.
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The Master Servicer, the Special Servicer, the Trustee, the Fiscal Agent,
the Depositor and the Certificate Registrar are required to recognize as
Certificateholders only those persons in whose names the Certificates are
registered on the books and records of the Certificate Registrar.
VOTING RIGHTS
At all times during the term of the Pooling 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 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 and Class
A-3 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 upon the final distribution to the Certificateholders, which shall
follow the earlier 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, 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 (other than REO 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 1% of the Initial Pool Balance.
The purchase price paid in connection with the purchase of all Mortgage
Loans and REO Properties remaining in the Trust Fund, exclusive of any portion
thereof payable or reimbursable (as if such purchase price constituted
Liquidation Proceeds) to any person other than the Certificateholders, will
constitute part of the Available Distribution Amount for the final Distribution
Date. The Available Distribution Amount for the final Distribution Date will be
distributed by the Trustee generally as described herein under
"--Distributions--Application of the Available Distribution Amount", except that
the distributions of principal on any Class of Sequential Pay Certificates
described thereunder will be made, subject to available funds and the
distribution priorities described thereunder, in an amount equal to the entire
Certificate Balance of such Class remaining outstanding.
THE TRUSTEE
LaSalle National Bank, a national banking association, will act as Trustee
on behalf of the Certificateholders. The Corporate Trust Department of the
Trustee is located at 135South LaSalle Street, Suite 1740, Chicago, Illinois
60674-4107, Attention: Merrill Lynch 1997-C1. 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" for each Distribution Date will be equal to one-twelfth of the
product of (a) the Trustee Fee Rate and (b) the aggregate of the Certificate
Balance of the Sequential Pay Certificates immediately prior to such
Distribution Date. The "Trustee Fee Rate" will be a per annum rate equal to
.005%.
The Trustee will also have certain duties with respect to REMIC
administration (in such capacity the "REMIC Administrator"). See "Material
Federal Income Tax Consequences--REMICs--Reporting and Other Administra-
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tive Matters" and "Description of the Pooling Agreements--Certain Matters
Regarding the Master Servicer, the Special Servicer, the REMIC Administrator and
the Sponsor," "--Events of Default" and "--Rights Upon Event of Default" in the
Prospectus.
DUTIES OF THE FISCAL AGENT
ABN AMRO Bank N.V., a banking corporation organized under the laws of The
Netherlands, will act as Fiscal Agent pursuant to the Pooling and Servicing
Agreement. The Fiscal Agent's office is located at 135 South LaSalle Street,
Chicago, Illinois 60674-4107. The Fiscal Agent will make no representation as to
the validity or sufficiency of the Pooling and Servicing Agreement, the
Certificates, the Mortgage Loans, this Prospectus Supplement (except for the
first two sentences of this paragraph) or related documents. The duties and
obligations of the Fiscal Agent consist only of making P&I Advances as described
in "--P&I Advances" above. The Fiscal Agent shall not be liable except for the
performance of such duties and obligations. The Fiscal Agent will be entitled to
reimbursement for each P&I Advance made by it in the same manner and to the same
extent as the Trustee and the Master Servicer.
YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on the price at
which such Certificate is purchased by an investor and 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 IO
Certificates will be extremely sensitive to, and the yield to holders of any
other 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-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, the Class D and the Class E Certificates, in that
order, in each case until the Certificate Balance of such Class of Certificates
is reduced to zero. Payments made in reduction of the principal balance of any
Mortgage Loan will result in a corresponding reduction in the notional amount of
the Class IO-1 Component and any reduction of the Certificate Balance of the
Class A-1 or Class A-2 Certificate will result in a corresponding reduction in
the notional amount of the Class IO-2 Component. Consequently, the rate and
timing of principal payments that are distributed or otherwise result in
reduction of the aggregate outstanding principal balance of the Mortgage Loans
or 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 (other than the Class
IO 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.
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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 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 a
Class IO Certificate or any other 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 (or Notional Amount
of a Component) 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 subsequent like
reduction (or increase) in the rate of such principal payments. Investors in the
Class IO Certificates should fully consider the risk that a rapid rate of
principal payments on the 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 by the holders of the
respective Classes of Sequential Pay Certificates, to the extent of amounts
otherwise distributable in respect of their Certificates, in reverse
alphabetical order of their Class designations. 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. Any Realized Loss allocated in reduction of the aggregate
outstanding principal balance of the Mortgage Loans will result in a
corresponding reduction in the notional amount of the Class IO-1 Component, and
any Realized Loss or Additional Trust Fund Expense allocated in reduction of the
Certificate Balance of the Class A-1 or Class A-2 Certificates will also result
in a corresponding reduction in the notional amount for the Class IO-2
Component. 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.
Pass-Through Rates. The Pass-Through Rate applicable to the Class IO-1
Component for each Distribution Date will be variable and will be equal to the
Weighted Average Net Mortgage Rate for such Distribution Date minus ____% (but
not less than zero) and the Pass-Through Rate applicable to the Class IO-2
Component for each Distribution Date will be equal to 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 immediately prior to such
Distribution Date. Accordingly, the Pass-Through Rates on the Components and,
correspondingly, the yield on the Class IO Certificates, will be sensitive to
changes in the relative composition of the Mortgage Pool as a result of
scheduled amortization, voluntary prepayments and liquidations.
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, Lockout Periods, provisions requiring
the payment of Prepayment Premiums 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.
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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 either be
voluntarily prepaid or defeased at any time after the expiration of the
applicable Lockout Period, and/or any period when a borrower pledges Defeasance
Collateral in lieu of prepaying the related Mortgage Loan (a "Required
Defeasance Period"), subject, in most cases, to the payment of a Yield
Maintenance Charge or Percentage Premium. A requirement that a prepayment be
accompanied by a Prepayment Premium 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.
Delay in Payment of Distributions. Because monthly distributions will not
be made to Certificateholders until a date that is scheduled to be at least 18
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 IO Certificates. The yield to maturity on
the Class IO 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. Accordingly, investors in the Class IO
Certificates should fully consider the associated risks, including the risk that
a rapid rate of prepayment of the Mortgage Loans could result in the failure of
such investors to fully recoup their initial investments. The allocation of a
portion of collected Percentage Premiums or Yield Maintenance Charges to the
Class IO Certificates is intended to reduce those risks; however, such
allocation may be insufficient to offset fully the adverse effects on the yields
on such Classes of Certificates that the related prepayments may otherwise have.
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 Lockout Period, if
any.
The following table indicates the approximate pre-tax yields to maturity
(on a corporate bond equivalent basis ("CBE")) on the Class IO Certificates for
the specified CPRs. Such calculations are based on the following assumptions
("Table Assumptions"): (i) no Mortgage Loan prepays when any prepayment
restrictions would apply; otherwise each Mortgage Loan is assumed to prepay at
the indicated level of CPR, with the CPR in each case being applied on the first
day of each month to that portion of the scheduled principal amount of the
Mortgage Loan that is not assumed to be in default as described below, (ii) the
initial Certificate Balances of the Sequential Pay Certificates and the
Pass-Through Rates for the REMIC Regular Certificates are as described in the
Summary hereof, (iii) there are no delinquencies or Additional Trust Fund
Expenses, (iv) scheduled interest and principal payments on the Mortgage
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Loans are timely received, except as described above, 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 indicated levels of CPR set forth in the
tables, (v) partial prepayments on the Mortgage Loans are permitted, but are
assumed not to affect the amortization schedules, (vi) no Prepayment Premiums
are collected, (vii) neither the Master Servicer nor the Depositor exercises its
right of optional termination of the Trust Fund described herein, (viii) no
Mortgage Loan is required to be purchased from the Trust Fund, (ix) there are no
Prepayment Interest Shortfalls or Appraisal Reductions, (x) distributions on the
Certificates are made on the eighteenth day (each assumed to be a business day)
of each month, commencing in July 1997, and (xi) the Certificates will be issued
on the Closing Date.
It was further assumed that the aggregate purchase price of such Classes
of Certificates are as specified below, including accrued interest.
PRE-TAX YIELD TO MATURITY (CBE) OF THE CLASS IO CERTIFICATES
BREAK-EVEN PRE-TAX YIELD TO MATURITY AT
ASSUMED PURCHASE PRICE CPR% AT -------------------------------
(INCLUDING ACCRUED INTEREST) 0% YIELD (A) 0% CPR 5% CPR 10% CPR
- ---------------------------- ------------ ------ ------ -------
$ % % % %
$ % % % %
$ % % % %
- ----------
(A) The Break-Even CPR% is the approximate CPR% for each assumed purchase
price where the pre-tax yield to maturity (CBE) is approximately 0%.
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 IO Certificates, would cause the discounted
present value of such assumed stream of cash flows to equal the assumed
aggregate purchase price of the Class IO Certificates, which includes accrued
interest, and by converting such monthly rates to corporate bond equivalent
rates. Such calculation does not take into account shortfalls in collection of
interest due to prepayments (or other liquidations) 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 IO Certificates (and consequently does not purport
to reflect the return on any investment in the Class IO 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
Lockout Periods and/or Required Defeasance 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
IO Certificates will correspond to any of the pre-tax yields shown herein or
that the aggregate purchase prices of the Class IO Certificates will be those
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 IO Certificates.
WEIGHTED AVERAGE LIFE
The weighted average life of any Class A-1, Class A-2, Class A-3, Class B,
Class C, Class D or Class E 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
Any delay in collection of a Balloon Payment due at the maturity of a Mortgage
Loan or the repayment of the principal balance of a Mortgage Loan on its
respective Expected Repayment Date 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 or such
Expected Repayment Date. As described herein, the Principal Distribution Amount
for each Distribution Date will be
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distributable first 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, the Class D
Certificates and the Class E 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 (other than the Class IO
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, Class D and/or Class E 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 a month in
which a Lockout 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 (2), 10% CPR in the case of
Scenario (3) and 15% in the case of Scenario
(4).
Scenarios (5), (6) and (7): No Mortgage Loan prepays during its Lockout
Period. Thereafter, each Mortgage Loan prepays
each month at the rate of 5% CPR in the case
of Scenario (5), 10% CPR in the case of
Scenario (6) and 15% CPR 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 (other
than the Class IO 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 (other than the Class IO Certificates) 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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<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-1 CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT
OR YLD. MAINT.-OTHERWISE 0% CPR DURING
AT INDICATED CPR LOCKOUT-OTHERWISE 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
June 18, 1998 ..................... 96 96 96 96 96 95 94
June 18, 1999 ..................... 92 92 92 92 91 89 87
June 18, 2000 ..................... 88 87 87 86 84 81 77
June 18, 2001 ..................... 77 76 75 73 69 61 53
June 18, 2002 ..................... 52 50 49 48 38 25 13
June 18, 2003 ..................... 43 41 39 38 21 0 0
June 18, 2004 (and thereafter) .... 0 0 0 0 0 0 0
Weighted Average Life (in years) .. 5.0 4.9 4.9 4.8 4.5 4.1 3.8
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-2 CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT
OR YLD. MAINT.-OTHERWISE 0% CPR DURING
AT INDICATED CPR LOCKOUT-OTHERWISE 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
June 18, 1998 ..................... 100 100 100 100 100 100 100
June 18, 1999 ..................... 100 100 100 100 100 100 100
June 18, 2000 ..................... 100 100 100 100 100 100 100
June 18, 2001 ..................... 100 100 100 100 100 100 100
June 18, 2002 ..................... 100 100 100 100 100 100 100
June 18, 2003 ..................... 100 100 100 100 100 100 46
June 18, 2004 ..................... 45 41 38 35 0 0 0
June 18, 2005 ..................... 30 25 21 17 0 0 0
June 18, 2006 (and thereafter) .... 0 0 0 0 0 0 0
Weighted Average Life (in years) .. 7.5 7.4 7.3 7.2 6.6 6.4 5.9
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-3 CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT
OR YLD. MAINT.-OTHERWISE 0% CPR DURING
AT INDICATED CPR LOCKOUT-OTHERWISE 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
June 18, 1998 ..................... 100 100 100 100 100 100 100
June 18, 1999 ..................... 100 100 100 100 100 100 100
June 18, 2000 ..................... 100 100 100 100 100 100 100
June 18, 2001 ..................... 100 100 100 100 100 100 100
June 18, 2002 ..................... 100 100 100 100 100 100 100
June 18, 2003 ..................... 100 100 100 100 100 100 100
June 18, 2004 ..................... 100 100 100 100 93 74 57
June 18, 2005 ..................... 100 100 100 100 82 58 39
June 18, 2006 ..................... 100 98 96 95 68 41 20
June 18, 2007 (and thereafter) .... 0 0 0 0 0 0 0
Weighted Average Life (in years) .. 9.6 9.5 9.5 9.5 9.0 8.3 7.7
</TABLE>
S-72
<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS B CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT
OR YLD. MAINT.-OTHERWISE 0% CPR DURING
AT INDICATED CPR LOCKOUT-OTHERWISE 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
June 18, 1998 ..................... 100 100 100 100 100 100 100
June 18, 1999 ..................... 100 100 100 100 100 100 100
June 18, 2000 ..................... 100 100 100 100 100 100 100
June 18, 2001 ..................... 100 100 100 100 100 100 100
June 18, 2002 ..................... 100 100 100 100 100 100 100
June 18, 2003 ..................... 100 100 100 100 100 100 100
June 18, 2004 ..................... 100 100 100 100 100 100 100
June 18, 2005 ..................... 100 100 100 100 100 100 100
June 18, 2006 ..................... 100 100 100 100 100 100 100
June 18, 2007 (and thereafter) .... 0 0 0 0 0 0 0
Weighted Average Life (in years) .. 9.9 9.9 9.9 9.9 9.8 9.7 9.6
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS C CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT
OR YLD. MAINT.-OTHERWISE 0% CPR DURING
AT INDICATED CPR LOCKOUT-OTHERWISE 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
June 18, 1998 ..................... 100 100 100 100 100 100 100
June 18, 1999 ..................... 100 100 100 100 100 100 100
June 18, 2000 ..................... 100 100 100 100 100 100 100
June 18, 2001 ..................... 100 100 100 100 100 100 100
June 18, 2002 ..................... 100 100 100 100 100 100 100
June 18, 2003 ..................... 100 100 100 100 100 100 100
June 18, 2004 ..................... 100 100 100 100 100 100 100
June 18, 2005 ..................... 100 100 100 100 100 100 100
June 18, 2006 ..................... 100 100 100 100 100 100 100
June 18, 2007 (and thereafter) .... 0 0 0 0 0 0 0
Weighted Average Life (in years) .. 10.0 10.0 10.0 10.0 9.9 9.9 9.8
</TABLE>
<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS D CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT
OR YLD. MAINT.-OTHERWISE 0% CPR DURING
AT INDICATED CPR LOCKOUT-OTHERWISE 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
June 18, 1998 ..................... 100 100 100 100 100 100 100
June 18, 1999 ..................... 100 100 100 100 100 100 100
June 18, 2000 ..................... 100 100 100 100 100 100 100
June 18, 2001 ..................... 100 100 100 100 100 100 100
June 18, 2002 ..................... 100 100 100 100 100 100 100
June 18, 2003 ..................... 100 100 100 100 100 100 100
June 18, 2004 ..................... 100 100 100 100 100 100 100
June 18, 2005 ..................... 100 100 100 100 100 100 100
June 18, 2006 ..................... 100 100 100 100 100 100 100
June 18, 2007 ..................... 45 41 37 33 23 5 0
June 18, 2008 ..................... 28 21 15 9 0 0 0
June 18, 2009 (and thereafter) .... 0 0 0 0 0 0 0
Weighted Average Life (in years) .. 10.5 10.4 10.3 10.2 10.1 10.0 9.9
</TABLE>
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<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS E CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT
OR YLD. MAINT.-OTHERWISE 0% CPR DURING
AT INDICATED CPR LOCKOUT-OTHERWISE 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
June 18, 1998 ..................... 100 100 100 100 100 100 100
June 18, 1999 ..................... 100 100 100 100 100 100 100
June 18, 2000 ..................... 100 100 100 100 100 100 100
June 18, 2001 ..................... 100 100 100 100 100 100 100
June 18, 2002 ..................... 100 100 100 100 100 100 100
June 18, 2003 ..................... 100 100 100 100 100 100 100
June 18, 2004 ..................... 100 100 100 100 100 100 100
June 18, 2005 ..................... 100 100 100 100 100 100 100
June 18, 2006 ..................... 100 100 100 100 100 100 100
June 18, 2007 ..................... 100 100 100 100 100 100 73
June 18, 2008 ..................... 100 100 100 100 85 12 0
June 18, 2009 ..................... 39 30 21 13 0 0 0
June 18, 2010 (and thereafter) .... 0 0 0 0 0 0 0
Weighted Average Life (in years) .. 12.1 12.0 11.9 11.8 11.4 10.6 10.2
</TABLE>
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 Depositor, 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. The assets of REMIC I
will consist of the Mortgage Loans (other than rights to the Additional
Interest), any REO Properties acquired by the Trustee on behalf of the
Certificateholders and the Certificate Account. 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 interest" in
REMIC II, (e) the REMIC Regular Certificates (or, in the case of the Class IO
Certificates, each Component thereof) 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, Class C and Class D
Certificates will not, and the Class E and IO 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.
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period with respect to a
Certificateholder (in particular, the holder of a Class IO Certificate), the
amount of
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<PAGE>
original issue discount allocable to such period would be zero and such
Certificateholder will be permitted to offset such negative amount only against
future original issue discount (if any) attributable to such Certificates.
Although the matter is not free from doubt, a holder of a Class IO Certificate
may be permitted to deduct a loss to the extent that his or her respective
remaining basis in such Certificate exceeds the maximum amount of future
payments to which such Certificateholder is entitled, assuming no further
prepayments of the Mortgage Loans. Any such loss might be treated as a capital
loss.
The 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 "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, investment in the Offered Certificates may not be
suitable for certain thrift institutions.
Prepayment Premiums actually collected will be distributed to the holders
of the Offered Certificates as described herein. It is not entirely clear under
the Code when the amount of a Prepayment Premium should be taxed to the holder
of an Offered Certificate, but it is not expected, for federal income tax
reporting purposes, that Prepayment Premiums 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. It appears that Prepayment
Premiums, 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.
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(a) and (b) and 407(a) of ERISA, and the
excise taxes imposed on such prohibited transactions pursuant to Sections
4975(a) and (b) of the Code 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 Daiwa Securities.
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 IO Certificates to be eligible for exemptive relief
S-75
<PAGE>
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 or Fitch Investors Service, L.P. ("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
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 IO
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 IO Certificates that they be rated not lower than "Aaa" by
Moody's and "AAA" by Fitch and, except with respect to the Class IO
Certificates, Standard & Poor's; 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 continues 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 borrower 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 borrower with respect to 5% or less
of the fair market value of the Mortgage Loans or (b) an affiliate of such a
person,
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<PAGE>
(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 the Senior Certificates.
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 the Senior 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 Senior 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, CLASS D AND CLASS E
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, WHICH MAY BE ABLE TO RELY ON SECTION III OF
PTE 95-60 (DISCUSSED BELOW).
Section III of Prohibited Transaction Class Exemption 95-60 ("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, Class D and Class E Certificates)
which do not meet the requirements of the Exemption 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, Class D or Class E
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.
Insurance company general accounts purchasing any Class of Certificates
may also be able to rely on relief from certain fiduciary provisions of ERISA
provided under Section 401(c) of ERISA. Insurance companies seeking to rely on
such relief should independently determine whether, and the extent to which,
such relief is available.
LEGAL INVESTMENT
None of the Certificates will constitute "mortgage related securities" for
the purposes of the Secondary Mortgage Market Enhancement Act of 1984, as
amended ("SMMEA"). As a result, the appropriate characterization of the
Certificates under various legal investment restrictions, and thus the ability
of investors subject to these restrictions to purchase 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.
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
S-77
<PAGE>
subject to legal investment laws and regulations, regulatory capital
requirements or review by regulatory authorities should consult with their own
legal advisors in determining whether and to what extent the Offered
Certificates constitute legal investments for them or are subject to investment,
capital or other restrictions. 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 Merrill Lynch and Daiwa
Securities, and each of Merrill Lynch and Daiwa Securities has agreed to
purchase __% and __%, respectively, 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 $___, 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 Willkie
Farr & Gallagher, New York, New York, and certain legal matters will be passed
upon for the Underwriters by Orrick, Herrington & Sutcliffe LLP, 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 of Fitch and
Standard & Poor's and "Aaa" by Moody's, that the Class IO be rated not lower
than "AAA" by Fitch and "Aaa" by Moody's, that the Class B Certificates be rated
not lower than "AA" by each of Fitch and Standard & Poor's and Aa2 by Moody's,
that the Class C Certificates be rated not lower than "A" by each of Fitch and
Standard and Poor's and A2 by Moody's, that the Class D Certificates be rated
not lower than "BBB" by Standard and Poor's and Baa2 by Moody's and that the
Class E Certificates be rated not lower than "BBB-" by Standard and Poor's and
Baa3 by Moody's.
S-78
<PAGE>
The ratings on the Offered Certificates address the likelihood of timely
receipt by holders thereof of distributions of interest and principal to which
they are entitled by the Rated Final Distribution Date set forth on the cover
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. A security rating does not represent any assessment of (i) the
likelihood or frequency of principal prepayments or default interest on the
Mortgage Loans, (ii) the degree to which such prepayments might differ from
those originally anticipated or (iii) whether and to what extent Prepayment
Premiums will be received. Also, a security rating does not represent any
assessment of the yield to maturity that investors may experience or the
possibility that the holders of the Class IO Certificates might not fully
recover their investment in the event of rapid prepayments of the Mortgage Loans
(including both voluntary and involuntary prepayments). As described herein, the
amounts payable with respect to the Class IO Certificates consist only of
interest. If the Mortgage Pools were to prepay in the initial month, with the
result that holders of the Class IO Certificates receive only a single month's
interest and thus suffer a nearly complete loss of their investment, all amounts
"due" to such Certificateholders will nevertheless have been paid, and such
result is consistent with the ratings received on the Class IO Certificates. The
rating does not address the timing or magnitude of reductions of the notional
amounts of the Components of the Class IO Certificates, but only the obligation
to pay interest timely on the Notional Amount as reduced from time to time.
Accordingly, the ratings of the Class IO Certificates should be evaluated
independently from similar ratings on other types of securities.
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 any
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-79
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
PAGE
----
30/360 Basis ............................................................. S-31
Accrued Certificate Interest ............................................. S-59
Actual/360 basis ......................................................... S-31
Additional Interest ...................................................... S-31
Additional Trust Fund Expenses ........................................... S-12
Advance .................................................................. S-63
Appraisal Reduction Amount ............................................... S-64
Assumed Scheduled Payment ................................................ S-18
Available Distribution Amount ............................................ S-14
Balloon Loans ............................................................ S-9
Balloon Payment .......................................................... S-9
Boca Mortgage Loan ....................................................... S-34
CBE ...................................................................... S-69
Caruth Mortgage Loan ..................................................... S-35
Certificate Balance ...................................................... S-2
Certificate Owner ........................................................ S-7
Certificate Registrar .................................................... S-65
Certificateholders ....................................................... S-12
Certificates ............................................................. S-1
Class .................................................................... S-1
Class A-1 Strip Rate ..................................................... S-2
Class A-2 Strip Rate ..................................................... S-2
Class IO-1 Component ..................................................... S-2
Class IO-2 Component ..................................................... S-2
Class Prepayment Percentage .............................................. S-61
Closing Date ............................................................. S-7
Code ..................................................................... S-23
Collection Period ........................................................ S-56
Compensating Interest Payment ............................................ S-19
Component ................................................................ S-2
Constant Prepayment Rate or CPR .......................................... S-69
Controlling Class of Sequential Pay Certificates ......................... S-48
Controlling Class Representative ......................................... S-6
Corrected Mortgage Loan .................................................. S-49
CPR ...................................................................... S-69
Custodian ................................................................ S-45
Cut-off Date ............................................................. S-1
Cut-off Date Balance ..................................................... S-7
Cut-off Date LTV ......................................................... S-37
Cut-off Date LTV Ratios .................................................. S-40
Daiwa .................................................................... S-7
Daiwa Loans .............................................................. S-7
Daiwa Securities ......................................................... S-7
DCR ...................................................................... S-76
Debt Service Coverage Ratio .............................................. S-36
Defeasance Collateral .................................................... S-10
Definitive Offered Certificate ........................................... S-7
Depositor ................................................................ S-1
Determination Date ....................................................... S-18
Distributable Certificate Interest ....................................... S-17
Distribution Date ........................................................ S-2
Distribution Date Statement .............................................. S-64
DSCR ..................................................................... S-36
DTC ...................................................................... S-7
Due Dates ................................................................ S-31
ERISA .................................................................... S-24
Excluded Plan ............................................................ S-76
Exemption ................................................................ S-75
Expected Repayment Date .................................................. S-9
S-80
<PAGE>
PAGE
----
Extension Adviser ........................................................ S-52
Fiscal Agent ............................................................. S-7
Fitch .................................................................... S-24
Form 8-K ................................................................. S-47
Fully Amortizing Loans ................................................... S-9
GECAM .................................................................... S-6
GECC ..................................................................... S-6
Hyperamortization Loans .................................................. S-9
Imputed Servicing Fee Rate ............................................... S-49
Initial Servicing Fee Rate ............................................... S-49
Initial Pool Balance ..................................................... S-1
Initial Reserves at Closing .............................................. S-37
IRS ...................................................................... S-75
Loan per Sq ft, Unit, Bed, Key or Room ................................... S-37
Lockout Period ........................................................... S-10
Master Servicer .......................................................... S-6
Merrill Lynch ............................................................ S-6
MLMCI .................................................................... S-7
MLMCI Loans .............................................................. S-11
Monthly Payments ......................................................... S-9
Moody's .................................................................. S-24
Mortgage ................................................................. S-30
Mortgage File ............................................................ S-45
Mortgage Loan Purchase Agreements ........................................ S-45
Mortgage Loan Seller ..................................................... S-2
Mortgage Loans ........................................................... S-1
Mortgage Note ............................................................ S-30
Mortgage Pool ............................................................ S-1
Mortgage Rates ........................................................... S-9
Mortgaged Property ....................................................... S-1
Net Aggregate Prepayment Interest Shortfall .............................. S-20
Net Cash Flow ............................................................ S-36
Net Mortgage Rate ........................................................ S-13
Non-GECAM Mortgage Loans ................................................. S-49
Nonrecoverable P&I Advance ............................................... S-63
Occupancy Percentage ..................................................... S-38
Offered Certificates ..................................................... S-1
OID Regulations .......................................................... S-75
P&I Advance .............................................................. S-19
Participants ............................................................. S-7
Party in Interest ........................................................ S-76
Pass-Through Rate ........................................................ S-2
Percentage Premiums ...................................................... S-61
Plan ..................................................................... S-24
Pooling and Servicing Agreement .......................................... S-12
Prepayment Interest Excess ............................................... S-20
Prepayment Interest Shortfall ............................................ S-20
Prepayment Premium ....................................................... S-61
Principal Distribution Amount ............................................ S-17
Principal Recovery Fee ................................................... S-50
Private Certificates ..................................................... S-6
PTE 95-60 ................................................................ S-77
Purchase Price ........................................................... S-45
Qualified Appraiser ...................................................... S-64
Rate Differential ........................................................ S-61
Rated Final Distribution Date ............................................ S-1
Rating Agencies .......................................................... S-24
Realized Losses .......................................................... S-12
Reimbursement Rate ....................................................... S-19
S-81
<PAGE>
PAGE
----
Related Proceeds ......................................................... S-63
Remain Amort. Term ....................................................... S-36
Remaining Cash Flow ...................................................... S-9
REMIC .................................................................... S-2
REMIC I .................................................................. S-2
REMIC II ................................................................. S-2
REMIC III ................................................................ S-2
REMIC Administrator ...................................................... S-66
REMIC Regular Certificates ............................................... S-6
REMIC Residual Certificates .............................................. S-6
Rental Property .......................................................... S-36
REO Extension ............................................................ S-53
REO Mortgage Loan ........................................................ S-61
REO Property ............................................................. S-21
REO Tax .................................................................. S-53
Repayment LTV ............................................................ S-37
Required Appraisal Date .................................................. S-64
Required Appraisal Loan .................................................. S-64
Required Defeasance Period ............................................... S-69
Restricted Group ......................................................... S-80
Rowland Mortgage Loan .................................................... S-35
Scenario ................................................................. S-71
Scheduled Payment ........................................................ S-18
Securities Act ........................................................... S-6
Senior Certificates ...................................................... S-20
Sequential Pay Certificates .............................................. S-6
Servicing Fee ............................................................ S-49
Servicing Fee Increase ................................................... S-49
Servicing Fee Rate ....................................................... S-56
Shilo Inn Mortgage Loans ................................................. S-34
SMMEA .................................................................... S-25
Special Servicer ......................................................... S-6
Special Servicing Fee .................................................... S-50
Special Servicing Fee Rate ............................................... S-50
Specially Serviced Mortgage Loans ........................................ S-49
Specially Serviced Trust Fund Assets ..................................... S-49
Standard & Poor's ........................................................ S-24
Stated Principal Balance ................................................. S-13
Stated Remaining Term .................................................... S-38
Subordinate Certificates ................................................. S-20
Successor Servicing Fee Rate ............................................. S-49
Table Assumptions ........................................................ S-69
Treasury Spread Maintenance .............................................. S-61
Trust Fund ............................................................... S-1
Trustee .................................................................. S-2
Trustee Fee .............................................................. S-66
Trustee Fee Rate ......................................................... S-66
Underwriters ............................................................. S-1
Underwriting Agreement ................................................... S-78
Underwriting Reserves .................................................... S-37
Union Square Mortgage Loan ............................................... S-34
Voting Rights ............................................................ S-66
Weighted Average Net Mortgage Rate ....................................... S-13
Year Built ............................................................... S-37
Yield Maintenance Charges ................................................ S-61
S-82
<PAGE>
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
ANNEX A
<TABLE>
<CAPTION>
CONTROL
NO. PROPERTY NAME ADDRESS CITY STATE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
61 Union Square Shopping Center Union Deposit Road Harrisburg PA
219 Boca / Deerfield Self Storage 3604 NW 2nd & 950 S. Powerline Rd Boca Raton & Deerfield FL
85 Rowland Heights Shopping Ctr NWC of Nogales & Pomona Fwy Rowland Heights CA
133 Caruth Plaza Shopping 9000 N. Central Expressway Dallas TX
48 Shilo Inn-Salt Lake City 206 South West Temple Salt Lake City UT
- --------------------------------------------------------------------------------------------------------------------------------
168 Waverly Place Shopping Center SEC Kildaire Farm Rd &Tyron Rd Cary NC
46 Plaza Las Palmas West Valley Parkway Escondido CA
215 Holiday Inn/Hampton Inn 1813 W. Mercury Blvd. Hampton VA
132 AAAAA Rent-A-Space - Colma 3601 Junipero Serra Colma CA
186 Banyan Bay Apartments 703 NE 63rd Street Miami FL
- --------------------------------------------------------------------------------------------------------------------------------
214 Innsbrook Apartments 18800 Innsbrook Drive Northville MI
19 MacArthur Crossing 7750 North MacArthur Blvd. Irving TX
190 El Dorado/Pipers Cove Apartments 240/270 El Dorado Boulevard Houston TX
26 Riverview Apartments 2111 West 17th Street Santa Ana CA
126 Kasco Industrial Portfolio Various El Paso TX
- --------------------------------------------------------------------------------------------------------------------------------
150 Riverwalk Plaza 20 MacCorkle Ave., Southwest South Charleston WV
178 Tahoe North Apartments-PhaseII 1000 Holcomb Bridge Road Roswell GA
55 Hastings Ranch Plaza 3801-3883 E. Foothill Bl. Pasadena CA
212 Holden Crossing 3700 S. Holden Road Greensboro NC
189 Cottonwood Apartments 6441 Cypress Street Santa Fe NM
- --------------------------------------------------------------------------------------------------------------------------------
14 Salvio Pacheco Square 2151 Salvio Concord CA
28 Creekside Gardens Apartments 300 Bel Air Drive Vacaville CA
151 Ashley Gables Apartments 2225 131st Avenue East Tampa FL
174 The Thicket Apartments 5816 Covington Highway Decatur GA
76 Whitemarsh Shopping Center Ridge Pike & Butler Pike Montgomery County PA
- --------------------------------------------------------------------------------------------------------------------------------
74 The Marketplace in University City 3202-3368 Governor Drive San Diego CA
81 Aldrich Plaza Route #9 Howell Township NJ
197 Pines of Green Run 1302 Pine Cone Circle Virginia Beach VA
175 Lakeside Villa Apartments 3600 Ashford Dunwoody Road Atlanta GA
43 Shilo Inn-Bend 3105 O.B. Riley Road Bend OR
- --------------------------------------------------------------------------------------------------------------------------------
50 Crosspointe Plaza 799 New Haven Road Naugatuck CT
51 Back Bay Court 3601 Jamboree Road Newport Beach CA
42 McCallum Meadows Apts. 7760 McCallum Blvd. Dallas TX
217 Springfield Apartments 18500 Redmond Way Redmond WA
109 Quality Inn/Airport 5575 West Amelia Earhart Drive Salt Lake City UT
- --------------------------------------------------------------------------------------------------------------------------------
10 IRM-Glenbrook Apartments 8725 La Riviera Drive Sacramento CA
167 Enterprise Square Shopping Ctr Central Xpressway/Premier Dr Plano TX
166 Belleview Plaza Shopping Ctr NEC of Aaron Aronov Blvd & Belleview Drive Fairfield AL
181 Castro Commons Prof. Center 1172 and 1174 Castro Street Mountain View CA
177 Tahoe North Apartments-Phase I 1000 Holcomb Bridge Road Roswell GA
- --------------------------------------------------------------------------------------------------------------------------------
131 AAAAA Rent-A-Space - Foster City 1221 E. Hillsdale Blvd Foster City CA
44 Shilo Inn-Coeur d'Alene 702 W. Appleway Coeur d'Alene ID
7 Sunrise Commons Apartments 8123 Sunrise Boulevard Citrus Heights CA
8 IRM-Meadow Lakes Apartments 1401 Lakewood Ave Modesto CA
23 Lease-All Anaheim 1550-1600 South Anaheim Blvd. Anaheim CA
- --------------------------------------------------------------------------------------------------------------------------------
203 Bonita Vista 2175 West Southern Avenue Apache Junction AZ
63 Bryton Hill Manor Apartments 519 South Richey Pasadena TX
171 The Woods of Mandarin 3200 Hartley Road Jacksonville FL
130 Lincoln Menlo Phase VIII 1003-1005 Hamilton Court Menlo Park CA
191 Glen Apartments 2809 West Glen Drive Falls Church VA
- --------------------------------------------------------------------------------------------------------------------------------
69 Centlivre Village Apartments 2903 Westbrook Drive Ft. Wayne IN
169 Polo Grounds Shopping Center 890 South Military Trail West Palm Beach FL
105 Long Beach Avenue 1250 Long Beach Avenue Los Angeles CA
47 Shilo Inn-Tillamook 2515 N. Main Tillamook OR
13 Northaven Apartments 11457 Dennis Road Dallas TX
- --------------------------------------------------------------------------------------------------------------------------------
65 Meridian Executive Center 815 NW 57th Avenue Miami FL
57 Best Western - Federal Way Executel 31611 20th Avenue South Federal Way WA
205 Rock Shadows 600 S. Idaho Road Apache Junction AZ
1 INT - The Crescent City Apartments 8501 Broadway Street Houston TX
164 Capitol Plaza Shopping Center South Blvd. & Woodley Road Montgomery AL
- --------------------------------------------------------------------------------------------------------------------------------
220 Devonshire Apartments 12648 N.E. 144th Street Kirkland WA
41 SCO Training Facility 400 Encinal Street Santa Cruz CA
188 Collegiate Suites 1101A Patrick Henry Drive Blacksburg VA
92 St. Augustine Beach Holiday Inn 860 State Road A1A St. Augustine Beach FL
87 Oaks of Arlington Apartments 2100 Ascension Arlington TX
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% OF CUMULATIVE
CUT-OFF INITIAL INITIAL
CONTROL ZIP ORIGINAL DATE POOL % OF POOL
NO. PROPERTY NAME CODE BALANCE BALANCE BALANCE BALANCE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
61 Union Square Shopping Center 17109 $ 15,000,000 $ 14,926,238 1.77 1.77
219 Boca / Deerfield Self Storage 33431 & 33442 13,000,000 13,000,000 1.54 3.32
85 Rowland Heights Shopping Ctr 91748 12,800,000 12,792,920 1.52 4.83
133 Caruth Plaza Shopping 75215 11,770,000 11,770,000 1.40 6.23
48 Shilo Inn-Salt Lake City 84101 11,200,000 11,083,192 1.32 7.55
- -----------------------------------------------------------------------------------------------------------------------
168 Waverly Place Shopping Center 27511 10,880,000 10,853,610 1.29 8.84
46 Plaza Las Palmas 92029 10,750,000 10,733,361 1.27 10.11
215 Holiday Inn/Hampton Inn 23666 11,000,000 10,715,936 1.27 11.38
132 AAAAA Rent-A-Space - Colma 94014 10,550,000 10,550,000 1.25 12.64
186 Banyan Bay Apartments 33138 10,400,000 10,372,056 1.23 13.87
- -----------------------------------------------------------------------------------------------------------------------
214 Innsbrook Apartments 48167 10,200,000 10,200,000 1.21 15.08
19 MacArthur Crossing 75063 9,850,000 9,803,536 1.16 16.24
190 El Dorado/Pipers Cove Apartments 77598 9,791,000 9,779,433 1.16 17.40
26 Riverview Apartments 92706 9,635,000 9,616,137 1.14 18.55
126 Kasco Industrial Portfolio 79906 9,500,000 9,500,000 1.13 19.67
- -----------------------------------------------------------------------------------------------------------------------
150 Riverwalk Plaza 25315 8,690,000 8,629,348 1.02 20.70
178 Tahoe North Apartments-PhaseII 30076 8,335,000 8,295,321 0.98 21.68
55 Hastings Ranch Plaza 91107 8,200,000 8,170,700 0.97 22.65
212 Holden Crossing 27406 8,100,000 8,100,000 0.96 23.61
189 Cottonwood Apartments 85701 8,000,000 7,974,914 0.95 24.56
- -----------------------------------------------------------------------------------------------------------------------
14 Salvio Pacheco Square 94520 7,800,000 7,770,812 0.92 25.48
28 Creekside Gardens Apartments 95687 7,600,000 7,585,773 0.90 26.38
151 Ashley Gables Apartments 33612 7,400,000 7,361,948 0.87 27.26
174 The Thicket Apartments 30035 7,392,000 7,346,257 0.87 28.13
76 Whitemarsh Shopping Center 19428 7,250,000 7,245,768 0.86 28.99
- -----------------------------------------------------------------------------------------------------------------------
74 The Marketplace in University City 92122 7,200,000 7,187,022 0.85 29.84
81 Aldrich Plaza 07731 7,000,000 6,996,348 0.83 30.68
197 Pines of Green Run 23456 7,000,000 6,981,169 0.83 31.50
175 Lakeside Villa Apartments 30319 6,620,000 6,582,518 0.78 32.29
43 Shilo Inn-Bend 97701 6,650,000 6,580,646 0.78 33.07
- -----------------------------------------------------------------------------------------------------------------------
50 Crosspointe Plaza 06770 6,586,000 6,573,483 0.78 33.85
51 Back Bay Court 92660 6,500,000 6,490,779 0.77 34.62
42 McCallum Meadows Apts. 75252 6,500,000 6,488,273 0.77 35.39
217 Springfield Apartments 98052 6,400,000 6,361,564 0.76 36.14
109 Quality Inn/Airport 84116 6,370,000 6,316,542 0.75 36.89
- -----------------------------------------------------------------------------------------------------------------------
10 IRM-Glenbrook Apartments 95826 6,280,000 6,264,557 0.74 37.64
167 Enterprise Square Shopping Ctr 75075 6,180,000 6,158,337 0.73 38.37
166 Belleview Plaza Shopping Ctr 35064 6,065,000 6,043,116 0.72 39.09
181 Castro Commons Prof. Center 94043 5,900,000 5,896,181 0.70 39.79
177 Tahoe North Apartments-Phase I 30076 5,845,000 5,817,174 0.69 40.48
- -----------------------------------------------------------------------------------------------------------------------
131 AAAAA Rent-A-Space - Foster City 94404 5,690,000 5,690,000 0.68 41.15
44 Shilo Inn-Coeur d'Alene 83814 5,740,000 5,680,136 0.67 41.83
7 Sunrise Commons Apartments 95610 5,624,000 5,610,170 0.67 42.49
8 IRM-Meadow Lakes Apartments 95354 5,516,000 5,502,436 0.65 43.15
23 Lease-All Anaheim 92805 5,509,000 5,482,702 0.65 43.80
- -----------------------------------------------------------------------------------------------------------------------
203 Bonita Vista 85220 5,500,000 5,475,918 0.65 44.45
63 Bryton Hill Manor Apartments 77506 5,500,000 5,472,217 0.65 45.10
171 The Woods of Mandarin 32257 5,485,000 5,445,335 0.65 45.74
130 Lincoln Menlo Phase VIII 94025 5,400,000 5,400,000 0.64 46.38
191 Glen Apartments 22046 5,400,000 5,391,492 0.64 47.02
- -----------------------------------------------------------------------------------------------------------------------
69 Centlivre Village Apartments 46805 5,400,000 5,384,062 0.64 47.66
169 Polo Grounds Shopping Center 33406 5,200,000 5,185,025 0.62 48.28
105 Long Beach Avenue 90021 5,060,000 5,060,000 0.60 48.88
47 Shilo Inn-Tillamook 97141 5,040,000 4,987,437 0.59 49.47
13 Northaven Apartments 75229 5,000,000 4,984,186 0.59 50.06
- -----------------------------------------------------------------------------------------------------------------------
65 Meridian Executive Center 33026 4,833,000 4,806,120 0.57 50.64
57 Best Western - Federal Way Executel 98003 4,825,000 4,783,207 0.57 51.20
205 Rock Shadows 85220 4,800,000 4,771,985 0.57 51.77
1 INT - The Crescent City Apartments 77061 4,700,000 4,684,339 0.56 52.33
164 Capitol Plaza Shopping Center 36116 4,700,000 4,672,725 0.55 52.88
- -----------------------------------------------------------------------------------------------------------------------
220 Devonshire Apartments 98034 4,700,000 4,672,265 0.55 53.44
41 SCO Training Facility 95060 4,600,000 4,592,165 0.55 53.98
188 Collegiate Suites 24060 4,560,000 4,555,861 0.54 54.52
92 St. Augustine Beach Holiday Inn 32084 4,580,000 4,536,490 0.54 55.06
87 Oaks of Arlington Apartments 76006 4,520,000 4,517,284 0.54 55.60
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
STATED ORIG REM
ORIG REM AMORT AMORT
CONTROL MORTGAGE TERM TERM TERM TERM ORIG REPAYMENT
NO. PROPERTY NAME RATE (MOS.) (MOS.) (MOS.) (MOS.) DATE DATE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
61 Union Square Shopping Center 8.470 84 78 324 318 11/21/96 12/01/03
219 Boca / Deerfield Self Storage 8.730 120 (A) 120 (A) 300 300 05/05/97 06/01/07
85 Rowland Heights Shopping Ctr 8.940 120 (A) 119 (A) 360 359 04/10/97 05/01/07
133 Caruth Plaza Shopping 8.570 120 120 360 360 05/28/97 06/01/07
48 Shilo Inn-Salt Lake City 9.220 240 233 240 233 10/31/96 11/01/16
- -------------------------------------------------------------------------------------------------------------------------------
168 Waverly Place Shopping Center 8.550 120 117 300 297 02/20/97 03/01/07
46 Plaza Las Palmas 8.450 144 142 330 328 03/19/97 04/01/09
215 Holiday Inn/Hampton Inn 9.380 60 43 240 223 12/21/95 12/31/00
132 AAAAA Rent-A-Space - Colma 9.570 300 300 300 300 05/20/97 06/01/22
186 Banyan Bay Apartments 8.050 120 116 360 356 01/13/97 01/31/07
- -------------------------------------------------------------------------------------------------------------------------------
214 Innsbrook Apartments 9.380 60 50 360 360 (B) 07/29/96 08/01/01
19 MacArthur Crossing 8.750 120 115 300 295 12/06/96 01/01/07
190 El Dorado/Pipers Cove Apartments 8.640 120 (A) 118 (A) 360 358 03/24/97 04/01/07
26 Riverview Apartments 8.170 60 57 360 357 02/27/97 03/01/02
126 Kasco Industrial Portfolio 8.920 120 120 324 324 05/22/97 06/01/07
- -------------------------------------------------------------------------------------------------------------------------------
150 Riverwalk Plaza 9.295 120 112 300 292 09/20/96 10/01/06
178 Tahoe North Apartments-PhaseII 8.710 84 76 360 352 09/30/96 10/01/03
55 Hastings Ranch Plaza 8.940 240 235 330 325 12/31/96 01/01/17
212 Holden Crossing 8.980 120 120 300 300 05/02/97 06/01/07
189 Cottonwood Apartments 8.600 120 114 360 354 11/22/96 11/30/06
- -------------------------------------------------------------------------------------------------------------------------------
14 Salvio Pacheco Square 8.690 84 79 330 325 12/12/96 01/01/04
28 Creekside Gardens Apartments 8.390 84 81 360 357 02/27/97 03/01/04
151 Ashley Gables Apartments 8.330 84 76 360 352 09/16/96 10/01/03
174 The Thicket Apartments 9.040 84 73 360 349 06/27/96 07/01/03
76 Whitemarsh Shopping Center 8.680 120 119 360 359 04/01/97 05/01/07
- -------------------------------------------------------------------------------------------------------------------------------
74 The Marketplace in University City 8.960 120 118 300 298 03/24/97 04/01/07
81 Aldrich Plaza 9.220 120 119 360 359 04/09/97 05/01/07
197 Pines of Green Run 8.050 120 116 360 356 01/10/97 01/31/07
175 Lakeside Villa Apartments 8.990 84 74 360 350 07/24/96 08/01/03
43 Shilo Inn-Bend 9.220 240 233 240 233 10/31/96 11/01/16
- -------------------------------------------------------------------------------------------------------------------------------
50 Crosspointe Plaza 8.640 84 82 300 298 03/17/97 04/01/04
51 Back Bay Court 8.920 120 118 330 328 03/18/97 04/01/07
42 McCallum Meadows Apts. 8.570 120 117 360 357 02/04/97 03/01/07
217 Springfield Apartments 9.630 120 110 360 350 07/12/96 07/31/06
109 Quality Inn/Airport 9.690 240 234 240 234 11/01/96 12/01/16
- -------------------------------------------------------------------------------------------------------------------------------
10 IRM-Glenbrook Apartments 8.480 84 80 360 356 01/31/97 02/01/04
167 Enterprise Square Shopping Ctr 9.190 120 116 300 296 01/23/97 02/01/07
166 Belleview Plaza Shopping Ctr 9.000 84 80 300 296 01/14/97 02/01/04
181 Castro Commons Prof. Center 8.970 120 119 300 299 04/29/97 05/01/07
177 Tahoe North Apartments-Phase I 8.710 84 76 360 352 09/30/96 10/01/03
- -------------------------------------------------------------------------------------------------------------------------------
131 AAAAA Rent-A-Space - Foster City 9.570 300 300 300 300 05/20/97 06/01/22
44 Shilo Inn-Coeur d'Alene 9.220 240 233 240 233 10/31/96 11/01/16
7 Sunrise Commons Apartments 8.480 84 80 360 356 01/31/97 02/01/04
8 IRM-Meadow Lakes Apartments 8.480 84 80 360 356 01/31/97 02/01/04
23 Lease-All Anaheim 8.970 120 113 336 329 10/30/96 11/01/06
- -------------------------------------------------------------------------------------------------------------------------------
203 Bonita Vista 9.400 120 109 360 349 06/26/96 06/26/06
63 Bryton Hill Manor Apartments 8.330 60 55 300 295 12/31/96 01/01/02
171 The Woods of Mandarin 8.720 60 48 360 348 04/24/96 06/01/01
130 Lincoln Menlo Phase VIII 8.590 84 84 300 300 05/20/97 06/01/04
191 Glen Apartments 8.880 120 118 318 316 03/31/97 04/01/07
- -------------------------------------------------------------------------------------------------------------------------------
69 Centlivre Village Apartments 8.450 120 117 300 297 02/05/97 03/01/07
169 Polo Grounds Shopping Center 8.600 120 117 300 297 02/06/97 03/01/07
105 Long Beach Avenue 8.470 120 120 360 360 05/05/97 06/01/07
47 Shilo Inn-Tillamook 9.220 240 233 240 233 10/31/96 11/01/16
13 Northaven Apartments 8.630 120 116 324 320 01/09/97 02/01/07
- -------------------------------------------------------------------------------------------------------------------------------
65 Meridian Executive Center 8.880 60 54 300 294 11/01/96 12/01/01
57 Best Western - Federal Way Executel 9.440 240 234 240 234 11/06/96 12/01/16
205 Rock Shadows 9.040 119 106 360 347 03/31/96 03/27/06
1 INT - The Crescent City Apartments 8.100 60 55 360 355 12/02/96 01/01/02
164 Capitol Plaza Shopping Center 8.620 84 78 300 294 11/25/96 12/01/03
- -------------------------------------------------------------------------------------------------------------------------------
220 Devonshire Apartments 9.310 120 111 360 351 08/08/96 08/31/06
41 SCO Training Facility 9.300 144 142 300 298 03/13/97 04/01/09
188 Collegiate Suites 8.747 120 118 360 358 03/05/97 04/01/07
92 St. Augustine Beach Holiday Inn 9.960 240 233 240 233 10/25/96 11/01/16
87 Oaks of Arlington Apartments 8.540 120 119 360 359 04/24/97 05/01/07
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
BALLOON/
CONTROL REPAYMENT
NO. PROPERTY NAME BALANCE PROPERTY TYPE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
61 Union Square Shopping Center 13,621,664 Anchored Retail
219 Boca / Deerfield Self Storage 10,688,722 Self Storage
85 Rowland Heights Shopping Ctr 11,434,638 Anchored Retail
133 Caruth Plaza Shopping 10,458,293 Anchored Retail
48 Shilo Inn-Salt Lake City - Hospitality
- ---------------------------------------------------------------------------------------------------------------
168 Waverly Place Shopping Center 8,913,380 Anchored Retail
46 Plaza Las Palmas 8,693,461 Anchored Retail
215 Holiday Inn/Hampton Inn 9,891,849 Hospitality
132 AAAAA Rent-A-Space- Colma - Self Storage
186 Banyan Bay Apartments 9,132,740 Multifamily
- ---------------------------------------------------------------------------------------------------------------
214 Innsbrook Apartments 9,992,379 Multifamily
19 MacArthur Crossing 8,102,582 Anchored Retail
190 El Dorado/Pipers Cove Apartments 8,698,247 Multifamily
26 Riverview Apartments 9,174,092 Multifamily
126 Kasco Industrial Portfolio 8,142,017 Industrial
- ---------------------------------------------------------------------------------------------------------------
150 Riverwalk Plaza 7,238,134 Anchored Retail
178 Tahoe North Apartments-PhaseII 7,778,193 Multifamily
55 Hastings Ranch Plaza 4,373,267 Anchored Retail
212 Holden Crossing 6,698,799 Anchored Retail
189 Cottonwood Apartments 7,101,760 Mobile Home Park
- ---------------------------------------------------------------------------------------------------------------
14 Salvio Pacheco Square 7,137,938 Office/Retail
28 Creekside Gardens Apartments 7,064,215 Multifamily
151 Ashley Gables Apartments 6,873,052 Multifamily
174 The Thicket Apartments 6,925,097 Multifamily
76 Whitemarsh Shopping Center 6,445,692 Anchored Retail
- ---------------------------------------------------------------------------------------------------------------
74 The Marketplace in University City 5,951,747 Anchored Retail
81 Aldrich Plaza 6,284,462 Anchored Retail
197 Pines of Green Run 6,147,036 Multifamily
175 Lakeside Villa Apartments 6,198,280 Multifamily
43 Shilo Inn-Bend - Hospitality
- ---------------------------------------------------------------------------------------------------------------
50 Crosspointe Plaza 5,869,810 Anchored Retail
51 Back Bay Court 5,615,077 Unanchored Retail
42 McCallum Meadows Apts. 5,766,889 Multifamily
217 Springfield Apartments 5,779,912 Multifamily
109 Quality Inn/Airport - Hospitality
- ---------------------------------------------------------------------------------------------------------------
10 IRM-Glenbrook Apartments 5,843,902 Multifamily
167 Enterprise Square Shopping Ctr 5,131,462 Unanchored Retail
166 Belleview Plaza Shopping Ctr 5,435,158 Anchored Retail
181 Castro Commons Prof. Center 4,878,251 Office
177 Tahoe North Apartments-Phase I 5,454,533 Multifamily
- ---------------------------------------------------------------------------------------------------------------
131 AAAAA Rent-A-Space- Foster City - Self Storage
44 Shilo Inn-Coeur d'Alene - Hospitality
7 Sunrise Commons Apartments 5,233,456 Multifamily
8 IRM-Meadow Lakes Apartments 5,132,956 Multifamily
23 Lease-All Anaheim 4,799,336 Industrial
- ---------------------------------------------------------------------------------------------------------------
203 Bonita Vista 4,953,079 Mobile Home Park
63 Bryton Hill Manor Apartments 5,093,863 Multifamily
171 The Woods of Mandarin 5,247,252 Multifamily
130 Lincoln Menlo Phase VIII 4,809,034 Industrial
191 Glen Apartments 4,585,380 Multifamily
- ---------------------------------------------------------------------------------------------------------------
69 Centlivre Village Apartments 4,410,265 Multifamily
169 Polo Grounds Shopping Center 4,262,304 Anchored Retail
105 Long Beach Avenue 4,480,697 Multifamily
47 Shilo Inn-Tillamook - Hospitality
13 Northaven Apartments 4,258,751 Multifamily
- ---------------------------------------------------------------------------------------------------------------
65 Meridian Executive Center 4,502,346 Office
57 Best Western - Federal Way Executel - Hospitality
205 Rock Shadows 4,295,701 Mobile Home Park
1 INT - The Crescent City Apartments 4,472,353 Multifamily
164 Capitol Plaza Shopping Center 4,187,600 Anchored Retail
- ---------------------------------------------------------------------------------------------------------------
220 Devonshire Apartments 4,221,620 Multifamily
41 SCO Training Facility 3,573,035 Office
188 Collegiate Suites 4,061,285 Multifamily
92 St. Augustine Beach Holiday Inn - Hospitality
87 Oaks of Arlington Apartments 4,007,910 Multifamily
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
CONTROL
NO. PROPERTY NAME PREPAYMENT RESTRICTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
61 Union Square Shopping Center 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
219 Boca / Deerfield Self Storage 3 year lock, >1% or YM through yr 9 3/4, open last 3 months
85 Rowland Heights Shopping Ctr 5.25 yr lock, >1% or YM through yr 9 1/2, open last 6 months
133 Caruth Plaza Shopping 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
48 Shilo Inn-Salt Lake City 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
168 Waverly Place Shopping Center 4 yr lock, >1% or YM through yr 9.5, open last 6 months
46 Plaza Las Palmas 6 yr lock, yearly @ 6%, 5, 4, 3, 2, 9 mos @ 1%, open last 3 months
215 Holiday Inn/Hampton Inn 4 year lock, 2.5% through yr 5
132 AAAAA Rent-A-Space - Colma 10 yr lock, yr 11, 12@ 4%, 13, 14, 15, 16 @ 3%, 17, 18 @ 2%, 19, 20 @ 1%,
open last 60 months
186 Banyan Bay Apartments 3 year lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
214 Innsbrook Apartments 2 year lock, YM through yr 4 3/4, open last 3 months
19 MacArthur Crossing 5.5 yr lock, >1% or YM through yr 9 1/4, open last 9 months
190 El Dorado/Pipers Cove Apartments 5 year lock, >1% or YM through yr 9 3/4, open last 3 months
26 Riverview Apartments 3 yr lock, >1% or YM through yr 4 3/4, open last 3 months
126 Kasco Industrial Portfolio 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
150 Riverwalk Plaza 4 yr lock, >1% or YM through yr 9.75, open last 3 mos
178 Tahoe North Apartments-PhaseII 4 yr lock, >1% or YM through yr 6.5, open last 6 mos
55 Hastings Ranch Plaza 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
212 Holden Crossing 4 year lock, >1% or YM through yr 9 3/4, open last 3 months
189 Cottonwood Apartments 4 year lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
14 Salvio Pacheco Square 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
28 Creekside Gardens Apartments 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
151 Ashley Gables Apartments 3 yr lock, >1% or YM through yr 6.5, open last 6 mos
174 The Thicket Apartments 3 yr lock, >1% or YM through yr 6.5, open last 6 mos
76 Whitemarsh Shopping Center 5.25 yr lock, >1% or YM through yr 9 1/2, open last 6 months
- ------------------------------------------------------------------------------------------------------------------------------------
74 The Marketplace in University City 5.5 yr lock, >1% or YM through yr 9 1/4, open last 9 months
81 Aldrich Plaza 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
197 Pines of Green Run 3 year lock, >1% or YM through yr 9 3/4, open last 3 months
175 Lakeside Villa Apartments 4 yr lock, >1% or YM through yr 6.5, open last 6 mos
43 Shilo Inn-Bend 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
50 Crosspointe Plaza 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
51 Back Bay Court 4 yr lock, >1% or YM through yr 9 1/2, open last 6 months
42 McCallum Meadows Apts. 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
217 Springfield Apartments 5 year lock, YM through yr 9 3/4, open last 3 months
109 Quality Inn/Airport 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
10 IRM-Glenbrook Apartments 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
167 Enterprise Square Shopping Ctr 3 yr lock, Defeasance through yr 9.5, open last 6 mos
166 Belleview Plaza Shopping Ctr 3 yr lock, yearly @ 4%, 3%, 2%, 6 mos @ 1%, open last 6 mos
181 Castro Commons Prof. Center 3 yr lock, Defeasance through yr 9.5, open last 6 mos
177 Tahoe North Apartments-Phase I 4 yr lock, >1% or YM through yr 6.5, open last 6 mos
- ------------------------------------------------------------------------------------------------------------------------------------
131 AAAAA Rent-A-Space - Foster City 10 yr lock, yr 11, 12@ 4%, 13, 14, 15, 16 @ 3%, 17, 18 @ 2%, 19, 20 @ 1%,
open last 60 months
44 Shilo Inn-Coeur d'Alene 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
7 Sunrise Commons Apartments 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
8 IRM-Meadow Lakes Apartments 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
23 Lease-All Anaheim 5.25 yr lock, >1% or YM through yr 9 1/2, open last 6 months
- ------------------------------------------------------------------------------------------------------------------------------------
203 Bonita Vista 4 year lock, TSM through year 10 (C)
63 Bryton Hill Manor Apartments 3 yr lock, 18 months @ 1%, open last 6 months
171 The Woods of Mandarin >1% or YM through yr 4.75, open last 3 mos
130 Lincoln Menlo Phase VIII 4.25 yr lock, >1% or YM through yr 6 1/2, open last 6 months
191 Glen Apartments 3 year lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
69 Centlivre Village Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
169 Polo Grounds Shopping Center 4 yr lock, >1% or YM through yr 9.5, open last 6 mos
105 Long Beach Avenue 5.25 yr lock, >1% or YM through yr 9 1/2, open last 6 months
47 Shilo Inn-Tillamook 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
13 Northaven Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
65 Meridian Executive Center 3 yr lock, >1% or YM through yr 4 3/4, open last 3 months
57 Best Western - Federal Way Executel 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
205 Rock Shadows 4 year lock, YM through year 10
1 INT - The Crescent City Apartments 3 yr lock, >1% or YM through yr 4 3/4, open last 3 months
164 Capitol Plaza Shopping Center 3 yr lock, yearly @ 4%, 3%, 2%, 6 mos @ 1%, open last 6 mos
- ------------------------------------------------------------------------------------------------------------------------------------
220 Devonshire Apartments 5 year lock, YM through yr 9 3/4, open last 3 months
41 SCO Training Facility 6 yr lock, >1% or YM through yr 11 3/4, open last 3 months
188 Collegiate Suites 3 year lock, >1 % or YM through yr 9 3/4, open last 3 months
92 St. Augustine Beach Holiday Inn 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
87 Oaks of Arlington Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ANNUAL
CONTROL DEBT TOTAL TOTAL APPRAISED
NO. PROPERTY NAME SERVICE REVENUE EXPENSE NCF DSCR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
61 Union Square Shopping Center 1,415,441 2,417,486 515,669 1,815,583 1.28 20,000,000
219 Boca / Deerfield Self Storage 1,280,425 2,606,872 926,575 1,680,297 1.31 18,400,000
85 Rowland Heights Shopping Ctr 1,229,275 2,565,341 781,571 1,751,973 1.43 17,250,000
133 Caruth Plaza Shopping 1,093,028 2,342,093 836,184 1,445,892 1.32 16,200,000
48 Shilo Inn-Salt Lake City 1,228,313 4,352,821 2,325,215 2,027,607 1.65 16,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
168 Waverly Place Shopping Center 1,055,707 2,203,781 673,986 1,395,468 1.32 16,800,000
46 Plaza Las Palmas 1,007,857 1,673,185 357,593 1,255,983 1.25 14,350,000
215 Holiday Inn/Hampton Inn 1,220,088 9,197,340 7,540,826 1,656,515 1.36 17,900,000
132 AAAAA Rent-A-Space - Colma 1,112,266 2,740,008 795,666 1,944,342 1.75 18,300,000
186 Banyan Bay Apartments 920,088 2,890,890 1,650,890 1,239,911 1.35 13,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
214 Innsbrook Apartments 951,132 2,102,350 965,555 1,136,795 1.19 12,400,000
19 MacArthur Crossing 971,774 1,879,091 469,863 1,377,208 1.42 13,300,000
190 El Dorado/Pipers Cove Apartments 915,095 2,521,150 1,382,290 1,138,859 1.24 13,300,000
26 Riverview Apartments 862,120 1,925,580 788,398 1,137,182 1.32 12,100,000
126 Kasco Industrial Portfolio 931,991 2,022,943 751,735 1,215,917 1.30 14,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
150 Riverwalk Plaza 896,275 1,604,065 363,714 1,179,175 1.32 11,800,000
178 Tahoe North Apartments-PhaseII 784,002 2,024,112 929,364 1,003,248 1.28 11,365,000
55 Hastings Ranch Plaza 802,361 1,446,747 354,932 1,061,110 1.32 11,730,000
212 Holden Crossing 814,368 1,211,233 198,349 988,311 1.21 10,850,000
189 Cottonwood Apartments 744,971 1,591,949 496,847 1,095,103 1.47 11,900,000
- ------------------------------------------------------------------------------------------------------------------------------------
14 Salvio Pacheco Square 746,864 1,624,552 533,324 995,688 1.33 10,800,000
28 Creekside Gardens Apartments 694,152 1,470,801 605,378 865,423 1.25 9,900,000
151 Ashley Gables Apartments 672,126 2,924,581 1,710,435 1,076,146 1.60 12,300,000
174 The Thicket Apartments 716,287 1,832,032 712,168 1,056,364 1.47 9,950,000
76 Whitemarsh Shopping Center 680,084 1,251,749 348,050 879,346 1.29 9,700,000
- ------------------------------------------------------------------------------------------------------------------------------------
74 The Marketplace in University City 722,700 1,436,055 428,606 950,815 1.32 11,400,000
81 Aldrich Plaza 689,222 1,336,736 430,511 870,296 1.26 9,350,000
197 Pines of Green Run 619,296 1,748,732 893,192 855,539 1.38 9,200,000
175 Lakeside Villa Apartments 638,621 1,462,177 548,331 857,894 1.34 9,200,000
43 Shilo Inn-Bend 729,311 2,631,139 1,507,830 1,123,309 1.54 9,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
50 Crosspointe Plaza 643,861 1,085,482 257,277 804,917 1.25 8,900,000
51 Back Bay Court 634,924 1,181,404 287,259 863,924 1.36 9,300,000
42 McCallum Meadows Apts. 603,626 1,502,732 769,552 733,179 1.21 8,160,000
217 Springfield Apartments 660,606 1,498,488 682,437 816,052 1.25 10,150,000
109 Quality Inn/Airport 722,032 2,837,034 1,789,687 1,047,347 1.45 10,200,000
- ------------------------------------------------------------------------------------------------------------------------------------
10 IRM-Glenbrook Apartments 578,385 1,170,370 444,050 726,320 1.26 7,850,000
167 Enterprise Square Shopping Ctr 632,025 1,364,906 378,253 901,900 1.43 10,500,000
166 Belleview Plaza Shopping Ctr 610,767 1,287,202 376,827 792,702 1.30 8,200,000
181 Castro Commons Prof. Center 592,697 1,429,580 553,387 822,695 1.39 8,900,000
177 Tahoe North Apartments-Phase I 549,789 1,405,039 672,638 679,523 1.24 8,025,000
- ------------------------------------------------------------------------------------------------------------------------------------
131 AAAAA Rent-A-Space - Foster City 599,886 1,455,752 533,200 922,552 1.54 8,800,000
44 Shilo Inn-Coeur d'Alene 629,510 2,137,059 1,104,981 1,032,078 1.64 8,200,000
7 Sunrise Commons Apartments 517,968 1,057,485 435,900 621,585 1.20 7,500,000
8 IRM-Meadow Lakes Apartments 508,021 1,155,056 542,234 612,822 1.21 7,350,000
23 Lease-All Anaheim 538,239 957,101 243,009 672,729 1.25 7,450,000
- ------------------------------------------------------------------------------------------------------------------------------------
203 Bonita Vista 550,152 968,364 290,699 677,665 1.23 7,710,000
63 Bryton Hill Manor Apartments 523,910 2,413,366 1,635,218 778,148 1.49 7,600,000
171 The Woods of Mandarin 516,397 1,828,748 973,415 755,083 1.46 7,820,000
130 Lincoln Menlo Phase VIII 525,723 972,505 269,506 672,715 1.28 8,300,000
191 Glen Apartments 530,379 1,059,250 403,569 655,681 1.24 7,600,000
- ------------------------------------------------------------------------------------------------------------------------------------
69 Centlivre Village Apartments 519,606 1,824,975 1,148,861 676,114 1.30 6,800,000
169 Polo Grounds Shopping Center 506,674 1,147,476 337,069 726,765 1.43 7,550,000
105 Long Beach Avenue 465,594 1,014,150 336,278 677,872 1.46 6,780,000
47 Shilo Inn-Tillamook 552,741 1,736,776 849,282 887,494 1.61 7,200,000
13 Northaven Apartments 478,435 1,715,551 1,124,866 590,685 1.23 6,700,000
- ------------------------------------------------------------------------------------------------------------------------------------
65 Meridian Executive Center 481,943 1,309,376 601,596 630,936 1.31 7,700,000
57 Best Western - Federal Way Executel 537,437 2,932,121 2,171,856 760,265 1.41 7,740,000
205 Rock Shadows 465,121 1,407,447 838,427 569,020 1.22 7,505,000
1 INT - The Crescent City Apartments 417,782 1,323,905 798,558 525,347 1.26 6,000,000
164 Capitol Plaza Shopping Center 458,718 896,977 184,206 580,613 1.27 6,300,000
- ------------------------------------------------------------------------------------------------------------------------------------
220 Devonshire Apartments 471,746 1,029,734 461,904 567,831 1.20 6,900,000
41 SCO Training Facility 474,629 753,060 82,913 607,474 1.28 7,400,000
188 Collegiate Suites 430,365 772,824 253,403 519,421 1.21 5,700,000
92 St. Augustine Beach Holiday Inn 528,920 3,291,234 2,485,399 805,835 1.52 6,900,000
87 Oaks of Arlington Apartments 418,597 879,532 375,763 503,769 1.20 5,700,000
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CUT-OFF SQ FT, UNITS
CONTROL APPRAISAL DATE REPAYMENT YEAR BEDS, PADS
NO. PROPERTY NAME YEAR LTV LTV BUILT OR ROOM
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
61 Union Square Shopping Center 1996 74.63 68.11 1988 288,833 sqft
219 Boca / Deerfield Self Storage 1997 70.65 58.09 1997 287,241 sqft
85 Rowland Heights Shopping Ctr 1997 74.16 66.29 1984 224,900 sqft
133 Caruth Plaza Shopping 1997 72.65 64.56 1979 184,134 sqft
48 Shilo Inn-Salt Lake City 1996 69.27 - 1971 200 rooms
- --------------------------------------------------------------------------------------------------------------
168 Waverly Place Shopping Center 1996 64.60 53.06 1988 177,355 Sq Ft
46 Plaza Las Palmas 1997 74.80 60.58 1985 108,150 sqft
215 Holiday Inn/Hampton Inn 1997 59.87 55.26 1962 452 rooms
132 AAAAA Rent-A-Space - Colma 1997 57.65 - 1979 155,799 sqft
186 Banyan Bay Apartments 1996 76.83 67.65 1975 402 units
- --------------------------------------------------------------------------------------------------------------
214 Innsbrook Apartments 1997 82.26 80.58 1973 280 units
19 MacArthur Crossing 1996 73.71 60.92 1996 109,890 sqft
190 El Dorado/Pipers Cove Apartments 1997 73.53 65.40 1982 408 units
26 Riverview Apartments 1997 79.47 75.82 1987 240 units
126 Kasco Industrial Portfolio 1997 67.86 58.16 1986 551,641 sqft
- --------------------------------------------------------------------------------------------------------------
150 Riverwalk Plaza 1996 73.13 61.34 1988 134,943 Sq Ft
178 Tahoe North Apartments-PhaseII 1996 72.99 68.44 1981 300 Units
55 Hastings Ranch Plaza 1996 69.66 37.28 1958 260,068 sqft
212 Holden Crossing 1997 74.65 61.74 1991 162,529 sq ft
189 Cottonwood Apartments 1996 67.02 59.68 1988 460 pads
- --------------------------------------------------------------------------------------------------------------
14 Salvio Pacheco Square 1996 71.95 66.09 1984 120,597 sqft
28 Creekside Gardens Apartments 1996 76.62 71.36 1978 194 units
151 Ashley Gables Apartments 1996 59.85 55.88 1974 552 Units
174 The Thicket Apartments 1996 73.83 69.60 1989 254 Units
76 Whitemarsh Shopping Center 1997 74.70 66.45 1974 76,331 sqft
- --------------------------------------------------------------------------------------------------------------
74 The Marketplace in University City 1996 63.04 52.21 1963 88,025 sqft
81 Aldrich Plaza 1997 74.83 67.21 1968 98,981 sqft
197 Pines of Green Run 1996 75.88 66.82 1971 300 units
175 Lakeside Villa Apartments 1996 71.55 67.37 1975 208 Units
43 Shilo Inn-Bend 1996 69.27 - 1995 151 rooms
- --------------------------------------------------------------------------------------------------------------
50 Crosspointe Plaza 1997 73.86 65.95 1990 89,217 sqft
51 Back Bay Court 1997 69.79 60.38 1990 34,983 sqft
42 McCallum Meadows Apts. 1996 79.51 70.67 1988 296 units
217 Springfield Apartments 1997 62.68 56.94 1985 184 units
109 Quality Inn/Airport 1996 61.93 - 1984 189 rooms
- --------------------------------------------------------------------------------------------------------------
10 IRM-Glenbrook Apartments 1996 79.80 74.44 1972 206 units
167 Enterprise Square Shopping Ctr 1996 58.65 48.87 1985 100,777 Sq Ft
166 Belleview Plaza Shopping Ctr 1996 73.70 66.28 1972 222,865 Sq Ft
181 Castro Commons Prof. Center 1997 66.25 54.81 1993 43,287 Sq Ft
177 Tahoe North Apartments-Phase I 1996 72.49 67.97 1979 208 Units
- --------------------------------------------------------------------------------------------------------------
131 AAAAA Rent-A-Space - Foster City 1997 64.66 - 1976 108,824 sqft
44 Shilo Inn-Coeur d'Alene 1996 69.27 - 1992 138 rooms
7 Sunrise Commons Apartments 1996 74.80 69.78 1986 168 units
8 IRM-Meadow Lakes Apartments 1996 74.86 69.84 1985 196 units
23 Lease-All Anaheim 1996 73.59 64.42 1975 196,910 sqft
- --------------------------------------------------------------------------------------------------------------
203 Bonita Vista 1996 71.02 64.24 1970 403 pads
63 Bryton Hill Manor Apartments 1996 72.00 67.02 1972 609 units
171 The Woods of Mandarin 1996 69.63 67.10 1972 401 Units
130 Lincoln Menlo Phase VIII 1997 65.06 57.94 1996 54,586 sqft
191 Glen Apartments 1997 70.94 60.33 1978 152 units
- --------------------------------------------------------------------------------------------------------------
69 Centlivre Village Apartments 1997 79.18 64.86 1967 455 units
169 Polo Grounds Shopping Center 1996 68.68 56.45 1966 137,923 Sq Ft
105 Long Beach Avenue 1997 74.63 66.09 1915 74 units
47 Shilo Inn-Tillamook 1996 69.27 - 1989 100 rooms
13 Northaven Apartments 1996 74.39 63.56 1975 344 units
- --------------------------------------------------------------------------------------------------------------
65 Meridian Executive Center 1996 62.42 58.47 1986 90,442 sqft
57 Best Western - Federal Way Executel 1996 61.80 - 1983 112 rooms
205 Rock Shadows 1997 63.58 57.24 1972 680 pads
1 INT - The Crescent City Apartments 1996 78.07 74.54 1976 328 units
164 Capitol Plaza Shopping Center 1996 74.17 66.47 1970 201,390 Sq Ft
- --------------------------------------------------------------------------------------------------------------
220 Devonshire Apartments 1996 67.71 61.18 1985 140 units
41 SCO Training Facility 1996 62.06 48.28 1984 46,000 sqft
188 Collegiate Suites 1996 79.93 71.25 1996 78 units
92 St. Augustine Beach Holiday Inn 1996 65.75 - 1974 151 rooms
87 Oaks of Arlington Apartments 1997 79.25 70.31 1996 107 units
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
LOAN PER
SQ FT, UNIT INITIAL
CONTROL BED, PAD OCCUPANCY RESERVES
NO. PROPERTY NAME OR ROOM PERCENTAGE AT CLOSING
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
61 Union Square Shopping Center 51.68 / sqft 98.38% 30,250
219 Boca / Deerfield Self Storage 45.26 / sqft 88.00% 432,077
85 Rowland Heights Shopping Ctr 56.88 / sqft 99.56% -
133 Caruth Plaza Shopping 63.92 / sqft 96.36% -
48 Shilo Inn-Salt Lake City 55,415.96 / room NAP -
- ----------------------------------------------------------------------------------------------------------------------
168 Waverly Place Shopping Center 61.20 / sqft 88.00% 23,141
46 Plaza Las Palmas 99.25 / sqft 97.09% -
215 Holiday Inn/Hampton Inn 23,707.82 / room NAP 450,000
132 AAAAA Rent-A-Space - Colma 67.72 / sqft 95.36% -
186 Banyan Bay Apartments 25,801.13 / unit 89.50% 41,500
- ----------------------------------------------------------------------------------------------------------------------
214 Innsbrook Apartments 36,428.57 / unit 98.00% 60,000
19 MacArthur Crossing 89.21 / sqft 96.83% -
190 El Dorado/Pipers Cove Apartments 23,969.20 / unit 96.00% 26,506
26 Riverview Apartments 40,067.24 / unit 93.75% 46,500
126 Kasco Industrial Portfolio 17.22 / sqft 92.52% -
- ----------------------------------------------------------------------------------------------------------------------
150 Riverwalk Plaza 63.95 / sqft 100.00% 51,091
178 Tahoe North Apartments-PhaseII 27,651.07 / unit 86.00% 288,133
55 Hastings Ranch Plaza 31.42 / sqft 99.27% -
212 Holden Crossing 49.84 / sq ft 100.00% 21,398
189 Cottonwood Apartments 17,336.77 / pad 100.00% -
- ----------------------------------------------------------------------------------------------------------------------
14 Salvio Pacheco Square 64.44 / sqft 93.04% 23,156
28 Creekside Gardens Apartments 39,101.92 / unit 97.42% 113,313
151 Ashley Gables Apartments 13,336.86 / unit 92.00% 11,500
174 The Thicket Apartments 28,922.27 / unit 98.00% 116,792
76 Whitemarsh Shopping Center 94.93 / sqft 100.00% 165,000
- ----------------------------------------------------------------------------------------------------------------------
74 The Marketplace in University City 81.65 / sqft 98.73% -
81 Aldrich Plaza 70.68 / sqft 98.82% 3,750
197 Pines of Green Run 23,270.56 / unit 96.00% 112,500
175 Lakeside Villa Apartments 31,646.72 / unit 89.00% 4,663
43 Shilo Inn-Bend 43,580.43 / room NAP -
- ----------------------------------------------------------------------------------------------------------------------
50 Crosspointe Plaza 73.68 / sqft 87.19% -
51 Back Bay Court 185.54 / sqft 92.02% -
42 McCallum Meadows Apts. 21,919.84 / unit 94.26% 44,250
217 Springfield Apartments 34,573.72 / unit 99.00% 86,200
109 Quality Inn/Airport 33,420.85 / room NAP 5,000
- ----------------------------------------------------------------------------------------------------------------------
10 IRM-Glenbrook Apartments 30,410.47 / unit 96.12% 261,125
167 Enterprise Square Shopping Ctr 61.11 / sqft 89.00% 70,243
166 Belleview Plaza Shopping Ctr 27.12 / sqft 95.00% -
181 Castro Commons Prof. Center 136.21 / sqft 100.00% 1,476
177 Tahoe North Apartments-Phase I 27,967.18 / unit 85.00% 182,532
- ----------------------------------------------------------------------------------------------------------------------
131 AAAAA Rent-A-Space - Foster City 52.29 / sqft 86.05% -
44 Shilo Inn-Coeur d'Alene 41,160.41 / room NAP -
7 Sunrise Commons Apartments 33,393.87 / unit 95.24% 20,938
8 IRM-Meadow Lakes Apartments 28,073.65 / unit 92.86% 44,875
23 Lease-All Anaheim 27.84 / sqft 94.85% -
- ----------------------------------------------------------------------------------------------------------------------
203 Bonita Vista 13,587.89 / pad 85.80% 1,750
63 Bryton Hill Manor Apartments 8,985.58 / unit 87.52% 544,095
171 The Woods of Mandarin 13,579.39 / unit 95.00% 8,804
130 Lincoln Menlo Phase VIII 98.93 / sqft 100.00% 200,000
191 Glen Apartments 35,470.34 / unit 98.00% 11,894
- ----------------------------------------------------------------------------------------------------------------------
69 Centlivre Village Apartments 11,833.10 / unit 92.75% 16,250
169 Polo Grounds Shopping Center 37.59 / sqft 98.00% 157,230
105 Long Beach Avenue 68,378.38 / unit 100.00% 22,500
47 Shilo Inn-Tillamook 49,874.37 / room NAP -
13 Northaven Apartments 14,488.91 / unit 95.74% 310,000
- ----------------------------------------------------------------------------------------------------------------------
65 Meridian Executive Center 53.14 / sqft 98.80% -
57 Best Western - Federal Way Executel 42,707.20 / room NAP -
205 Rock Shadows 7,017.63 / pad 82.00% 180,864
1 INT - The Crescent City Apartments 14,281.52 / unit 90.35% -
164 Capitol Plaza Shopping Center 23.20 / sqft 88.08% 221,517
- ----------------------------------------------------------------------------------------------------------------------
220 Devonshire Apartments 33,373.32 / unit 100.00% 69,000
41 SCO Training Facility 99.83 / sqft 100.00% -
188 Collegiate Suites 58,408.48 / unit 97.00% 8,750
92 St. Augustine Beach Holiday Inn 30,042.98 / room NAP 53,000
87 Oaks of Arlington Apartments 42,217.61 / unit 94.39% -
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
ADMINISTRATIVE
CONTROL UNDERWRITING COST
NO. PROPERTY NAME RESERVES RATE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
61 Union Square Shopping Center 0.18 per sq. ft. 0.005
219 Boca / Deerfield Self Storage 0.15 per sq ft 0.005
85 Rowland Heights Shopping Ctr 0.15 per sq. ft. 0.005
133 Caruth Plaza Shopping 0.15 per sq. ft. 0.005
48 Shilo Inn-Salt Lake City 4% of gross rev. 0.065
- ---------------------------------------------------------------------------------------------------------------------------
168 Waverly Place Shopping Center 0.15 Per Sq Ft 0.130
46 Plaza Las Palmas 0.22 per sq. ft. 0.005
215 Holiday Inn/Hampton Inn 4 %EGI 0.005
132 AAAAA Rent-A-Space - Colma 0.15 per sq. ft. 0.005
186 Banyan Bay Apartments 285 per unit 0.005
- ---------------------------------------------------------------------------------------------------------------------------
214 Innsbrook Apartments 200 per unit 0.005
19 MacArthur Crossing 0.15 per sq. ft. 0.005
190 El Dorado/Pipers Cove Apartments 242.54 per unit 0.005
26 Riverview Apartments 250 per unit 0.005
126 Kasco Industrial Portfolio 0.15 per sq. ft. 0.005
- ---------------------------------------------------------------------------------------------------------------------------
150 Riverwalk Plaza 0.15 Per Sq Ft 0.130
178 Tahoe North Apartments-PhaseII 305 Per Unit 0.130
55 Hastings Ranch Plaza 0.15 per sq. ft. 0.065
212 Holden Crossing 0.15 per sq ft 0.005
189 Cottonwood Apartments 28.65 per pad 0.005
- ---------------------------------------------------------------------------------------------------------------------------
14 Salvio Pacheco Square 0.15 per sq. ft. 0.065
28 Creekside Gardens Apartments 300.73 per unit 0.065
151 Ashley Gables Apartments 250 Per Unit 0.130
174 The Thicket Apartments 250 Per Unit 0.130
76 Whitemarsh Shopping Center 0.15 per sq. ft. 0.005
- ---------------------------------------------------------------------------------------------------------------------------
74 The Marketplace in University City 0.15 per sq. ft. 0.005
81 Aldrich Plaza 0.15 per sq. ft. 0.005
197 Pines of Green Run 342.33 per unit 0.005
175 Lakeside Villa Apartments 269 Per Unit 0.130
43 Shilo Inn-Bend 4% of gross rev. 0.065
- ---------------------------------------------------------------------------------------------------------------------------
50 Crosspointe Plaza 0.15 per sq. ft. 0.005
51 Back Bay Court 0.15 per sq. ft. 0.005
42 McCallum Meadows Apts. 250 per unit 0.005
217 Springfield Apartments 200 per unit 0.005
109 Quality Inn/Airport 4% of gross rev. 0.005
- ---------------------------------------------------------------------------------------------------------------------------
10 IRM-Glenbrook Apartments 290 per unit 0.065
167 Enterprise Square Shopping Ctr 0.15 Per Sq Ft 0.130
166 Belleview Plaza Shopping Ctr 0.19 Per Sq Ft 0.130
181 Castro Commons Prof. Center 0.15 Per Sq Ft 0.130
177 Tahoe North Apartments-Phase I 254.22 Per Unit 0.130
- ---------------------------------------------------------------------------------------------------------------------------
131 AAAAA Rent-A-Space - Foster City 0.15 per sq. ft. 0.005
44 Shilo Inn-Coeur d'Alene 4% of gross rev. 0.065
7 Sunrise Commons Apartments 321 per unit 0.065
8 IRM-Meadow Lakes Apartments 250 per unit 0.065
23 Lease-All Anaheim 0.18 per sq. ft. 0.065
- ---------------------------------------------------------------------------------------------------------------------------
203 Bonita Vista 25 per pad 0.005
63 Bryton Hill Manor Apartments 250 per unit 0.065
171 The Woods of Mandarin 250 Per Unit 0.130
130 Lincoln Menlo Phase VIII 0.15 per sq. ft. 0.005
191 Glen Apartments 250 per unit 0.005
- ---------------------------------------------------------------------------------------------------------------------------
69 Centlivre Village Apartments 250 per unit 0.005
169 Polo Grounds Shopping Center 0.16 Per Sq Ft 0.130
105 Long Beach Avenue 250 per unit 0.005
47 Shilo Inn-Tillamook 4% of gross rev. 0.065
13 Northaven Apartments 286 per unit 0.005
- ---------------------------------------------------------------------------------------------------------------------------
65 Meridian Executive Center 0.15 per sq. ft. 0.065
57 Best Western - Federal Way Executel 4% of gross rev. 0.065
205 Rock Shadows 25 per pad 0.005
1 INT - The Crescent City Apartments 225 per unit 0.065
164 Capitol Plaza Shopping Center 0.15 Per Sq Ft 0.130
- ---------------------------------------------------------------------------------------------------------------------------
220 Devonshire Apartments 200 per unit 0.005
41 SCO Training Facility 0.15 per sq. ft. 0.005
188 Collegiate Suites 250 per unit 0.005
92 St. Augustine Beach Holiday Inn 4% of gross rev. 0.065
87 Oaks of Arlington Apartments 225 per unit 0.005
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LARGEST RETAIL TENANT
-----------------------------------------------------------------------------
CONTROL AREA LEASED LEASE CONTROL
NO. PROPERTY NAME NAME (SQ. FT.) EXP DATE NO.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
61 Union Square Shopping Center TJX-Gabriel Bros 78,823 09/30/08 61
219 Boca / Deerfield Self Storage 219
85 Rowland Heights Shopping Ctr Gemco/Tawa 106,262 03/31/15 85
133 Caruth Plaza Shopping Bed Bath & Beyond 53,500 09/30/05 133
48 Shilo Inn-Salt Lake City 48
- ------------------------------------------------------------------------------------------------------------------------------------
168 Waverly Place Shopping Center Harris Teeter, Inc. (Not in Occupancy) 29,500 10/28/08 168
46 Plaza Las Palmas Circuit City 26,780 01/31/06 46
215 Holiday Inn/Hampton Inn 215
132 AAAAA Rent-A-Space - Colma 132
186 Banyan Bay Apartments 186
- ------------------------------------------------------------------------------------------------------------------------------------
214 Innsbrook Apartments 214
19 MacArthur Crossing Stein Mart 34,000 07/30/11 19
190 El Dorado/Pipers Cove Apartments 190
26 Riverview Apartments 26
126 Kasco Industrial Portfolio Owens-Illinois 120,000 11/30/01 126
- ------------------------------------------------------------------------------------------------------------------------------------
150 Riverwalk Plaza The Kroger Company 49,319 04/30/08 150
178 Tahoe North Apartments-PhaseII 178
55 Hastings Ranch Plaza Sears 200,000 04/30/24 55
212 Holden Crossing K-Mart 86,479 08/31/16 212
189 Cottonwood Apartments 189
- ------------------------------------------------------------------------------------------------------------------------------------
14 Salvio Pacheco Square Regional Center 12,430 09/30/06 14
28 Creekside Gardens Apartments 28
151 Ashley Gables Apartments 151
174 The Thicket Apartments 174
76 Whitemarsh Shopping Center Clemens 39,513 12/31/16 76
- ------------------------------------------------------------------------------------------------------------------------------------
74 The Marketplace in University City Boney's Marketplace 22,275 03/31/04 74
81 Aldrich Plaza Grand Union 41,550 09/27/10 81
197 Pines of Green Run 197
175 Lakeside Villa Apartments 175
43 Shilo Inn-Bend 43
- ------------------------------------------------------------------------------------------------------------------------------------
50 Crosspointe Plaza Waldbaum 52,582 02/28/10 50
51 Back Bay Court Relax the Back 3,199 12/31/01 51
42 McCallum Meadows Apts. 42
217 Springfield Apartments 217
109 Quality Inn/Airport 109
- ------------------------------------------------------------------------------------------------------------------------------------
10 IRM-Glenbrook Apartments 10
167 Enterprise Square Shopping Ctr American Multi-Cinema, Inc. 27,011 06/30/06 167
166 Belleview Plaza Shopping Ctr Wal-Mart (Woolco/Kimco Sublet) 103,161 01/31/03 166
181 Castro Commons Prof. Center Karakas Van Sickle Ou 14,237 12/31/06 181
177 Tahoe North Apartments-Phase I 177
- ------------------------------------------------------------------------------------------------------------------------------------
131 AAAAA Rent-A-Space - Foster City 131
44 Shilo Inn-Coeur d'Alene 44
7 Sunrise Commons Apartments 7
8 IRM-Meadow Lakes Apartments 8
23 Lease-All Anaheim Industrial Plastic Supply / 11,500 / 11,500 / 05/31/98 / 05/31/98 /
Hani Teebi / School Book Fair
/ Drafting Graphics 11,500 / 11,500 08/31/97 / 06/30/97 23
- ------------------------------------------------------------------------------------------------------------------------------------
203 Bonita Vista 203
63 Bryton Hill Manor Apartments 63
171 The Woods of Mandarin 171
130 Lincoln Menlo Phase VIII Progressive Angiopl 28,938 06/30/01 130
191 Glen Apartments 191
- ------------------------------------------------------------------------------------------------------------------------------------
69 Centlivre Village Apartments 69
169 Polo Grounds Shopping Center Publix Supermarket 36,040 12/31/02 169
105 Long Beach Avenue 105
47 Shilo Inn-Tillamook 47
13 Northaven Apartments 13
- ------------------------------------------------------------------------------------------------------------------------------------
65 Meridian Executive Center Airport Executive Office 14,973 09/30/06 65
57 Best Western - Federal Way Executel 57
205 Rock Shadows 205
1 INT - The Crescent City Apartments 1
164 Capitol Plaza Shopping Center Service Merchandise Company 73,500 02/28/01 164
- ------------------------------------------------------------------------------------------------------------------------------------
220 Devonshire Apartments 220
41 SCO Training Facility The Santa Cruz Operation, Inc. 46,000 06/30/05 41
188 Collegiate Suites 188
92 St. Augustine Beach Holiday Inn 92
87 Oaks of Arlington Apartments 87
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
ANNEX A
<TABLE>
<CAPTION>
CONTROL
NO. PROPERTY NAME ADDRESS CITY STATE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
179 Century American Insurance Blg 2828 Croasdaile Drive Durham NC
45 Shilo Inn-Nampa 1401 Shilo Drive Nampa ID
68 Maple Leaf Building 23 East Street Cambridge MA
60 Waterford Marketplace 503-555 Capital Expressway San Jose CA
39 The Highlands Apartments 11201 Lake Highlands Drive Dallas TX
- --------------------------------------------------------------------------------------------------------------------------------
12 Rush Creek Apartments 2625 Community Drive Dallas TX
5 Towne Center Apartments 65 East Olive Gilbert AZ
184 Atlantic Square Shopping Ctr. 2500 - 2780 E. Atlantic Blvd. Pompano Beach FL
30 Callens Corner Phase II 18637-18729 Brookhurst Street Fountain Valley CA
141 Northrich Village Shopping Ctr 510-520 Arapaho Road Richardson TX
- --------------------------------------------------------------------------------------------------------------------------------
2 INT - The Park Apartments 4040 Schannen Boulevard Corpus Christi TX
56 Pirani Best Western - Airport Executel 20717 Pacific Highway South Seattle WA
172 Kristopher Woods Apartments 762-792 Jolly Avenue South Clarkston GA
122 Parkwood Apartments 2450 Peach Tree Drive Fairfield CA
201 Vista Village 5000 Butte Street Boulder CO
- --------------------------------------------------------------------------------------------------------------------------------
104 Thunderbird Business Park 3001 West Indian School Phoenix AZ
153 Brook Apartments 5328 Montgomery Boulevard N.E. Albuquerque NM
187 Bentsen Grove 810 N. Bentsen Palm Drive Mission TX
185 264 Water Street 264 Water Street New York NY
31 Driftwood Apartments 800 West Grant Line Road Tracy CA
- --------------------------------------------------------------------------------------------------------------------------------
207 Sandy Lakes Apartments 3650 E. Lake Mead Blvd. Las Vegas NV
173 Lantern Ridge Apartments 1810 Roswell Road Marietta GA
102 Fairfield Inn by Marriott 150 Crossways Boulevard Chesapeake VA
101 Elkins Park Square 8080 Old York Road Cheltenham Township PA
97 The Trails Apartments - Multifamily 3109 Chapel Creek Drive Dallas TX
- --------------------------------------------------------------------------------------------------------------------------------
27 Walnut Woods Apartments 275 E. Minnesota Avenue Turlock CA
20 Carondelet Building 7710-7730 Carondelet Avenue Clayton MO
193 Las Brisas 302 E. Union Avenue Las Cruces NM
96 Ridgeway Village Apartments 6033 W. Bethany Home Rd. Glendale AZ
71 Southbrooke Manor 1105 West Main Street Edna (Victoria) TX
- --------------------------------------------------------------------------------------------------------------------------------
49 Shilo Inn-Elko 2401 Mountain City Highway Elko NV
66 North View Business Center 4665 North Avenue Oceanside CA
138 Highland Point Shopping Center 1900-1952 FM Road 407 Highland Village TX
59 Ramada Inn 5526 North Interstate 35 North Austin TX
129 Pompano Plaza 1401 South Federal Highway Pompano Beach FL
- --------------------------------------------------------------------------------------------------------------------------------
88 Quail Meadows Apartments 10201 Telephone Road Houston TX
15 Roosevelt Center 2800-2820 Roosevelt Street Carlsbad CA
9 Diablo View Apartments 4265 Clayton Road Concord CA
152 Plymouth Towne Apartments 107 Haggerty Road Plymouth MI
67 Palisades Business Park Summit Avenue Plano TX
- --------------------------------------------------------------------------------------------------------------------------------
216 Terrace View 600 Trillo Road Baltimore MD
216 Terrace View
- --------------------------------------------------------------------------------------------------------------------------------
119 Moors Landing Apartments 294 Merion Avenue Carney's Point NJ
199 Stockdale Villa 3535 Stine Road Bakersfield CA
176 Shoreham Apartments 2001 Dawson Road Albany GA
183 Morristown Plaza Shopping Ctr 30 Lafayette Ave Morristown NJ
158 Lochhaven Apartments 2900 NW 56th Avenue Lauderhill FL
- --------------------------------------------------------------------------------------------------------------------------------
140 Rustic Village Apartments 9303 Town Park Drive Houston TX
198 Quail Hill 5102 Galley Road Colorado Springs CO
22 Lease-All Orangethorpe 920-980 E. Orangethorpe Ave. Anaheim CA
210 The Landings Apartment 3306 West Main Street Kalamazoo MI
154 Woodridge Plaza Shopping Ctr 6969 Gulf Freeway Houston TX
- --------------------------------------------------------------------------------------------------------------------------------
144 Del Norte Apartments 6134 4th Street, NW Village of Los Ranchos NM
18 Southpoint Apartments 4002 E. Southern Ave. Phoenix AZ
108 Holiday Inn Express-Plano 5021 West Plano Parkway Plano TX
120 Best Western - Park Suites 640 Park Blvd East Plano TX
33 Country Glen Apartments 7575 Power Inn Road Sacramento CA
- --------------------------------------------------------------------------------------------------------------------------------
160 Landmark Towers Apartments 601 NW 42nd Avenue Plantation FL
125 Riverview Manor Apartments 715-903 Donaldson Street Highland Park NJ
196 Pepper Hill Apartment 3484 Mountainbrook Ave N. Charleston SC
107 Best Western Inn 13700 LBJ Freeway Garland TX
54 Westway Business Plaza 8000 Harwin Drive Houston TX
- --------------------------------------------------------------------------------------------------------------------------------
118 Greenfield Apartments 2105 Cedar Bayou Baytown TX
103 Wildwood Apartments 3321 Peppertree Circle Decatur GA
165 9343 North Loop East 9343 North Loop East Houston TX
72 Hampton Inn-Anderson 120 Interstate Boulevard Anderson SC
202 Arizona Acres 9421 E. Apache Trail Mesa AZ
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% OF CUMULATIVE
CUT-OFF INITIAL INITIAL
CONTROL ZIP ORIGINAL DATE POOL % OF POOL
NO. PROPERTY NAME CODE BALANCE BALANCE BALANCE BALANCE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
179 Century American Insurance Blg 27705 4,500,000 4,478,598 0.53 56.13
45 Shilo Inn-Nampa 83687 4,480,000 4,433,277 0.53 56.65
68 Maple Leaf Building 02141 4,400,000 4,384,488 0.52 57.18
60 Waterford Marketplace 95136 4,400,000 4,380,206 0.52 57.70
39 The Highlands Apartments 75218 4,200,000 4,192,469 0.50 58.19
- -----------------------------------------------------------------------------------------------------------------------
12 Rush Creek Apartments 75220 4,200,000 4,187,765 0.50 58.69
5 Towne Center Apartments 85234 4,150,000 4,142,389 0.49 59.18
184 Atlantic Square Shopping Ctr. 33062 4,100,000 4,100,000 0.49 59.67
30 Callens Corner Phase II 92708 4,087,500 4,081,392 0.48 60.15
141 Northrich Village Shopping Ctr 75080 4,100,000 4,058,693 0.48 60.64
- -----------------------------------------------------------------------------------------------------------------------
2 INT - The Park Apartments 78413 4,080,000 4,058,609 0.48 61.12
56 Pirani Best Western - Airport Executel 98198 4,075,000 4,039,703 0.48 61.60
172 Kristopher Woods Apartments 30021 4,045,000 4,020,626 0.48 62.07
122 Parkwood Apartments 94533 3,955,000 3,955,000 0.47 62.54
201 Vista Village 80301 3,879,000 3,864,084 0.46 63.00
- -----------------------------------------------------------------------------------------------------------------------
104 Thunderbird Business Park 85017 3,845,000 3,841,644 0.46 63.46
153 Brook Apartments 87109 3,785,500 3,761,047 0.45 63.91
187 Bentsen Grove 78572 3,734,000 3,719,891 0.44 64.35
185 264 Water Street 10038 3,682,500 3,672,032 0.44 64.78
31 Driftwood Apartments 95376 3,650,000 3,645,376 0.43 65.22
- -----------------------------------------------------------------------------------------------------------------------
207 Sandy Lakes Apartments 89115 3,639,000 3,635,776 0.43 65.65
173 Lantern Ridge Apartments 30062 3,650,000 3,627,413 0.43 66.08
102 Fairfield Inn by Marriott 23320 3,600,000 3,600,000 0.43 66.51
101 Elkins Park Square 19027 3,600,000 3,600,000 0.43 66.93
97 The Trails Apartments - Multifamily 75220 3,600,000 3,586,708 0.43 67.36
- -----------------------------------------------------------------------------------------------------------------------
27 Walnut Woods Apartments 95832 3,580,000 3,573,298 0.42 67.78
20 Carondelet Building 63105 3,550,000 3,533,635 0.42 68.20
193 Las Brisas 88001 3,500,000 3,493,628 0.41 68.62
96 Ridgeway Village Apartments 85301 3,500,000 3,491,411 0.41 69.03
71 Southbrooke Manor 77957 3,500,000 3,488,183 0.41 69.45
- -----------------------------------------------------------------------------------------------------------------------
49 Shilo Inn-Elko 89801 3,440,000 3,404,123 0.40 69.85
66 North View Business Center 92056 3,400,000 3,389,512 0.40 70.25
138 Highland Point Shopping Center 75067 3,350,000 3,329,755 0.40 70.65
59 Ramada Inn 78751 3,300,000 3,276,334 0.39 71.04
129 Pompano Plaza 33062 3,250,000 3,250,000 0.39 71.42
- -----------------------------------------------------------------------------------------------------------------------
88 Quail Meadows Apartments 77471 3,200,000 3,197,059 0.38 71.80
15 Roosevelt Center 92008 3,150,000 3,136,042 0.37 72.17
9 Diablo View Apartments 94521 3,098,000 3,090,382 0.37 72.54
152 Plymouth Towne Apartments 48170 3,109,000 3,089,015 0.37 72.91
67 Palisades Business Park 75074 3,100,000 3,084,841 0.37 73.27
- -----------------------------------------------------------------------------------------------------------------------
216 Terrace View 21225 2,779,000 2,725,966
216 Terrace View 325,090 323,900
--------------------------------
3,104,090 3,049,865 0.36 73.64
- -----------------------------------------------------------------------------------------------------------------------
119 Moors Landing Apartments 08069 3,000,000 3,000,000 0.36 73.99
199 Stockdale Villa 93309 2,978,000 2,968,148 0.35 74.35
176 Shoreham Apartments 31707 2,978,000 2,959,572 0.35 74.70
183 Morristown Plaza Shopping Ctr 07960 2,940,000 2,938,245 0.35 75.05
158 Lochhaven Apartments 33313 3,000,000 2,908,489 0.35 75.39
- -----------------------------------------------------------------------------------------------------------------------
140 Rustic Village Apartments 77036 2,900,000 2,880,433 0.34 75.73
198 Quail Hill 80915 2,850,000 2,836,606 0.34 76.07
22 Lease-All Orangethorpe 92801 2,850,000 2,835,715 0.34 76.41
210 The Landings Apartment 49006 2,836,000 2,833,428 0.34 76.74
154 Woodridge Plaza Shopping Ctr 77087 2,850,000 2,819,978 0.33 77.08
- -----------------------------------------------------------------------------------------------------------------------
144 Del Norte Apartments 87107 2,814,000 2,799,270 0.33 77.41
18 Southpoint Apartments 85040 2,800,000 2,793,658 0.33 77.74
108 Holiday Inn Express-Plano 75093 2,780,000 2,759,216 0.33 78.07
120 Best Western - Park Suites 75074 2,750,000 2,750,000 0.33 78.40
33 Country Glen Apartments 95828 2,700,000 2,696,608 0.32 78.72
- -----------------------------------------------------------------------------------------------------------------------
160 Landmark Towers Apartments 33317 2,700,000 2,660,360 0.32 79.03
125 Riverview Manor Apartments 08904 2,600,000 2,600,000 0.31 79.34
196 Pepper Hill Apartment 29420 2,595,000 2,585,222 0.31 79.65
107 Best Western Inn 75041 2,600,000 2,581,378 0.31 79.95
54 Westway Business Plaza 77036 2,600,000 2,579,176 0.31 80.26
- -----------------------------------------------------------------------------------------------------------------------
118 Greenfield Apartments 77520 2,580,000 2,578,440 0.31 80.57
103 Wildwood Apartments 30034 2,567,000 2,564,756 0.30 80.87
165 9343 North Loop East 77029 2,575,000 2,563,533 0.30 81.18
72 Hampton Inn-Anderson 29621 2,542,000 2,528,143 0.30 81.48
202 Arizona Acres 85207 2,550,000 2,524,947 0.30 81.78
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
STATED ORIG REM
ORIG REM AMORT AMORT
CONTROL MORTGAGE TERM TERM TERM TERM ORIG REPAYMENT
NO. PROPERTY NAME RATE (MOS.) (MOS.) (MOS.) (MOS.) DATE DATE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
179 Century American Insurance Blg 8.700 60 55 300 295 12/31/96 01/01/02
45 Shilo Inn-Nampa 9.220 240 233 240 233 10/31/96 11/01/16
68 Maple Leaf Building 9.140 180 176 300 296 01/22/97 02/01/12
60 Waterford Marketplace 8.700 120 114 330 324 11/13/96 12/01/06
39 The Highlands Apartments 8.600 120 117 360 357 02/10/97 03/01/07
- -------------------------------------------------------------------------------------------------------------------------------
12 Rush Creek Apartments 8.530 120 117 300 297 02/18/97 03/01/07
5 Towne Center Apartments 8.490 120 117 360 357 02/04/97 03/01/07
184 Atlantic Square Shopping Ctr. 8.910 120 120 300 300 05/02/97 06/01/07
30 Callens Corner Phase II 8.640 120 118 330 328 03/04/97 04/01/07
141 Northrich Village Shopping Ctr 9.625 120 108 300 288 05/16/96 06/01/06
- -------------------------------------------------------------------------------------------------------------------------------
2 INT - The Park Apartments 8.100 60 55 300 295 12/02/96 01/01/02
56 Pirani Best Western - Airport Executel 9.440 240 234 240 234 11/06/96 12/01/16
172 Kristopher Woods Apartments 9.170 120 109 360 349 06/20/96 07/01/06
122 Parkwood Apartments 8.280 84 84 360 360 05/09/97 06/01/04
201 Vista Village 8.869 120 112 360 352 09/30/96 09/30/06
- -------------------------------------------------------------------------------------------------------------------------------
104 Thunderbird Business Park 9.130 84 83 300 299 04/30/97 05/01/04
153 Brook Apartments 8.930 120 113 300 293 10/18/96 11/01/06
187 Bentsen Grove 8.720 120 116 300 296 01/31/97 01/31/07
185 264 Water Street 8.680 120 117 300 297 02/10/97 03/01/07
31 Driftwood Apartments 8.300 84 82 360 358 03/05/97 04/01/04
- -------------------------------------------------------------------------------------------------------------------------------
207 Sandy Lakes Apartments 9.040 120 119 300 299 04/30/97 05/01/07
173 Lantern Ridge Apartments 9.040 120 109 360 349 06/28/96 07/01/06
102 Fairfield Inn by Marriott 9.280 240 240 240 240 05/02/97 06/01/17
101 Elkins Park Square 8.850 120 120 300 300 05/02/97 06/01/07
97 The Trails Apartments - Multifamily 8.510 180 174 360 354 11/15/96 12/01/11
- -------------------------------------------------------------------------------------------------------------------------------
27 Walnut Woods Apartments 8.390 84 81 360 357 02/27/97 03/01/04
20 Carondelet Building 8.890 84 79 300 295 12/12/96 01/01/04
193 Las Brisas 8.900 301 299 301 299 04/01/97 05/01/22
96 Ridgeway Village Apartments 8.490 120 116 360 356 01/24/97 02/01/07
71 Southbrooke Manor 9.400 120 116 300 296 01/21/97 02/01/07
- -------------------------------------------------------------------------------------------------------------------------------
49 Shilo Inn-Elko 9.220 240 233 240 233 10/31/96 11/01/16
66 North View Business Center 8.480 84 79 360 355 12/30/96 01/01/04
138 Highland Point Shopping Center 8.740 120 113 312 305 10/22/96 11/01/06
59 Ramada Inn 9.460 240 235 240 235 12/16/96 01/01/17
129 Pompano Plaza 8.810 120 120 300 300 05/12/97 06/01/07
- -------------------------------------------------------------------------------------------------------------------------------
88 Quail Meadows Apartments 8.820 120 119 300 299 04/16/97 05/01/07
15 Roosevelt Center 9.130 120 115 300 295 12/19/96 01/01/07
9 Diablo View Apartments 8.480 84 80 360 356 01/31/97 02/01/04
152 Plymouth Towne Apartments 8.960 120 113 300 293 10/16/96 11/01/06
67 Palisades Business Park 8.530 120 115 300 295 12/31/96 01/01/07
- -------------------------------------------------------------------------------------------------------------------------------
216 Terrace View 8.680 84 65 300 281 10/31/95 10/31/02
216 Terrace View 8.920 67 65 300 298
- -------------------------------------------------------------------------------------------------------------------------------
119 Moors Landing Apartments 8.620 120 120 300 300 05/06/97 06/01/07
199 Stockdale Villa 9.110 120 113 360 353 10/11/96 10/31/06
176 Shoreham Apartments 9.040 120 109 360 349 06/28/96 07/01/06
183 Morristown Plaza Shopping Ctr 9.260 120 119 300 299 04/23/97 05/01/07
158 Lochhaven Apartments 8.500 240 222 240 222 11/28/95 12/01/15
- -------------------------------------------------------------------------------------------------------------------------------
140 Rustic Village Apartments 9.500 120 112 300 292 09/25/96 10/01/06
198 Quail Hill 8.890 120 114 300 294 11/06/96 11/30/06
22 Lease-All Orangethorpe 8.970 120 113 330 323 10/30/96 11/01/06
210 The Landings Apartment 8.900 120 119 300 299 04/21/97 05/01/07
154 Woodridge Plaza Shopping Ctr 9.140 84 77 240 233 10/23/96 11/01/03
- -------------------------------------------------------------------------------------------------------------------------------
144 Del Norte Apartments 8.840 120 111 360 351 08/06/96 09/01/06
18 Southpoint Apartments 8.880 120 116 360 356 01/31/97 02/01/07
108 Holiday Inn Express-Plano 9.130 240 235 240 235 12/13/96 01/01/17
120 Best Western - Park Suites 9.310 240 240 240 240 05/08/97 06/01/17
33 Country Glen Apartments 8.340 84 82 360 358 03/05/97 04/01/04
- -------------------------------------------------------------------------------------------------------------------------------
160 Landmark Towers Apartments 8.750 120 105 300 285 02/27/96 03/01/06
125 Riverview Manor Apartments 8.660 120 120 300 300 05/09/97 06/01/07
196 Pepper Hill Apartment 8.750 120 116 300 296 01/30/97 01/31/07
107 Best Western Inn 9.470 240 235 240 235 12/12/96 01/01/17
54 Westway Business Plaza 8.970 180 177 180 177 02/05/97 03/01/12
- -------------------------------------------------------------------------------------------------------------------------------
118 Greenfield Apartments 8.510 120 119 360 359 04/30/97 05/01/07
103 Wildwood Apartments 9.120 300 299 300 299 04/30/97 05/01/22
165 9343 North Loop East 9.100 120 115 300 295 12/12/96 01/01/07
72 Hampton Inn-Anderson 9.830 240 236 240 236 01/28/97 02/01/17
202 Arizona Acres 8.030 84 68 360 344 01/26/96 01/26/03
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
BALLOON/
CONTROL REPAYMENT
NO. PROPERTY NAME BALANCE PROPERTY TYPE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
179 Century American Insurance Blg 4,184,300 Office
45 Shilo Inn-Nampa - Hospitality
68 Maple Leaf Building 2,930,707 Office
60 Waterford Marketplace 3,783,606 Anchored Retail
39 The Highlands Apartments 3,728,424 Multifamily
- ---------------------------------------------------------------------------------------------------------------
12 Rush Creek Apartments 3,436,850 Multifamily
5 Towne Center Apartments 3,676,298 Multifamily
184 Atlantic Square Shopping Ctr. 3,385,276 Anchored Retail
30 Callens Corner Phase II 3,510,422 Anchored Retail
141 Northrich Village Shopping Ctr 3,439,735 Unanchored Retail
- ---------------------------------------------------------------------------------------------------------------
2 INT - The Park Apartments 3,769,055 Multifamily
56 Pirani Best Western - Airport Executel - Hospitality
172 Kristopher Woods Apartments 3,628,353 Multifamily
122 Parkwood Apartments 3,671,007 Multifamily
201 Vista Village 3,460,760 Mobile Home Park
- ---------------------------------------------------------------------------------------------------------------
104 Thunderbird Business Park 3,452,334 Industrial
153 Brook Apartments 3,127,047 Multifamily
187 Bentsen Grove 3,069,405 Mobile Home Park
185 264 Water Street 3,024,206 Multifamily
31 Driftwood Apartments 3,388,781 Multifamily
- ---------------------------------------------------------------------------------------------------------------
207 Sandy Lakes Apartments 3,013,640 Multifamily
173 Lantern Ridge Apartments 3,266,522 Multifamily
102 Fairfield Inn by Marriott - Hospitality
101 Elkins Park Square 2,968,296 Unanchored Retail
97 The Trails Apartments- Multifamily 2,811,903 Multifamily
- ---------------------------------------------------------------------------------------------------------------
27 Walnut Woods Apartments 3,327,617 Multifamily
20 Carondelet Building 3,176,093 Office
193 Las Brisas - Mobile Home Park
96 Ridgeway Village Apartments 3,100,492 Multifamily
71 Southbrooke Manor 2,922,026 Skilled Nursing
- ---------------------------------------------------------------------------------------------------------------
49 Shilo Inn-Elko - Hospitality
66 North View Business Center 3,163,896 Industrial
138 Highland Point Shopping Center 2,810,426 Anchored Retail
59 Ramada Inn - Hospitality
129 Pompano Plaza 2,677,210 Anchored Retail
- ---------------------------------------------------------------------------------------------------------------
88 Quail Meadows Apartments 2,636,638 Multifamily
15 Roosevelt Center 2,614,020 Unanchored Retail
9 Diablo View Apartments 2,882,868 Multifamily
152 Plymouth Towne Apartments 2,569,997 Congregate Care
67 Palisades Business Park 2,536,723 Industrial
- ---------------------------------------------------------------------------------------------------------------
216 Terrace View 2,445,638 Mobile Home Park
216 Terrace View 298,684
- ---------------------------------------------------------------------------------------------------------------
119 Moors Landing Apartments 2,460,197 Multifamily
199 Stockdale Villa 2,668,439 Mobile Home Park
176 Shoreham Apartments 2,665,125 Multifamily
183 Morristown Plaza Shopping Ctr 2,446,894 Anchored Retail
158 Lochhaven Apartments - Multifamily
- ---------------------------------------------------------------------------------------------------------------
140 Rustic Village Apartments 2,426,414 Multifamily
198 Quail Hill 2,352,089 Mobile Home Park
22 Lease-All Orangethorpe 2,464,517 Industrial
210 The Landings Apartment 2,341,078 Multifamily
154 Woodridge Plaza Shopping Ctr 2,359,354 Unanchored Retail
- ---------------------------------------------------------------------------------------------------------------
144 Del Norte Apartments 2,509,256 Multifamily
18 Southpoint Apartments 2,498,601 Multifamily
108 Holiday Inn Express-Plano - Hospitality
120 Best Western - Park Suites - Hospitality
33 Country Glen Apartments 2,508,057 Multifamily
- ---------------------------------------------------------------------------------------------------------------
160 Landmark Towers Apartments 2,221,012 Multifamily
125 Riverview Manor Apartments 2,134,203 Multifamily
196 Pepper Hill Apartment 2,134,640 Multifamily
107 Best Western Inn - Hospitality
54 Westway Business Plaza - Industrial
- ---------------------------------------------------------------------------------------------------------------
118 Greenfield Apartments 2,286,385 Multifamily
103 Wildwood Apartments - Multifamily
165 9343 North Loop East 2,135,405 Office
72 Hampton Inn-Anderson - Hospitality
202 Arizona Acres 2,359,125 Mobile Home Park
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
CONTROL
NO. PROPERTY NAME PREPAYMENT RESTRICTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
179 Century American Insurance Blg 2 yr lock, yearly @ 3%, 2%, 6 mos @ 1%, open last 6 mos
45 Shilo Inn-Nampa 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
68 Maple Leaf Building 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months
60 Waterford Marketplace 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
39 The Highlands Apartments 5.5 yr lock, >1% or YM through yr 9 1/4, open last 9 months
- ------------------------------------------------------------------------------------------------------------------------------------
12 Rush Creek Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
5 Towne Center Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
184 Atlantic Square Shopping Ctr. 3 yrs lock, >YM or 1% through yr 9.5, open last 6 mos
30 Callens Corner Phase II 5.25 yr lock, >1% or YM through yr 9 1/2, open last 6 months
141 Northrich Village Shopping Ctr >1% or YM through yr 9.5, open last 6 mos
- ------------------------------------------------------------------------------------------------------------------------------------
2 INT - The Park Apartments 3 yr lock, >1% or YM through yr 4 3/4, open last 3 months
56 Pirani Best Western - Airport Executel 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
172 Kristopher Woods Apartments 4 yr lock, >1% or YM through yr 9.5, open last 6 mos
122 Parkwood Apartments 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
201 Vista Village 4 year lock or YM through yr 9 1/2, open last 6 months
- ------------------------------------------------------------------------------------------------------------------------------------
104 Thunderbird Business Park 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
153 Brook Apartments 4 yr lock, >1% or YM through yr 9.5, open last 6 mos
187 Bentsen Grove 3 year lock, >1% or YM through yr 9 1/3, open last 4 months
185 264 Water Street 5 year lock, >1% or YM through yr 9 3/4, open last 3 months
31 Driftwood Apartments 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
207 Sandy Lakes Apartments 3 year lock, >1% or YM through yr 9 3/4, open last 3 months
173 Lantern Ridge Apartments 4 yr lock, >1% or YM through yr 9.5, open last 6 mos
102 Fairfield Inn by Marriott 8 yr lock, >1% or YM through yr 19 3/4, open last 3 months
101 Elkins Park Square 3 yr lock, >1% or YM through yr 9 3/4, open last 3 months
97 The Trails Apartments - Multifamily 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
27 Walnut Woods Apartments 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
20 Carondelet Building 4 yr lock, yearly @ 4%, 3, 6 mos @ 2%, 3 mos @ 1%, open last 3 months
193 Las Brisas 10 year lock, >1% or YM through yr 24 3/4, open last 3 months
96 Ridgeway Village Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
71 Southbrooke Manor 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
49 Shilo Inn-Elko 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
66 North View Business Center 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
138 Highland Point Shopping Center 4 yr lock, >1% or YM through yr 9.75, open last 3 mos
59 Ramada Inn 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
129 Pompano Plaza 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
88 Quail Meadows Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
15 Roosevelt Center 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
9 Diablo View Apartments 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
152 Plymouth Towne Apartments 9.5 yr lock, open last 6 mos
67 Palisades Business Park 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
216 Terrace View 2 year lock, >1% or YM through yr 7
216 Terrace View
- ------------------------------------------------------------------------------------------------------------------------------------
119 Moors Landing Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
199 Stockdale Villa 4 year lock, >1% or YM through yr 9 1/2, open last 6 months
176 Shoreham Apartments 4 yr lock, >1% or YM through yr 9.5, open last 6 mos
183 Morristown Plaza Shopping Ctr 4 yr lock, Defeasance through yr 9.5, open last 6 mos
158 Lochhaven Apartments 10 yrs @ YM, yearly @ 5%, 4%, 3%, 2%, 1%, open last 60 mos
- ------------------------------------------------------------------------------------------------------------------------------------
140 Rustic Village Apartments 5 yrs @ YM, 0% or open for 24 mos, yearly @ 3%, 2%, 6 mos @ 1%, 6 mos open
198 Quail Hill 5% Year 1, 4% Year 2-3, 3% Year 4-5, 2% Year 6-7, 1% Year 8, Open Last
2 Years
22 Lease-All Orangethorpe 5.25 yr lock, >1% or YM through yr 9 1/2, open last 6 months
210 The Landings Apartment 3 year lock, >1% or YM through yr 9 3/4, open last 3 months
154 Woodridge Plaza Shopping Ctr 3 yr lock, >1% or YM through yr 6.5, open last 6 mos
- ------------------------------------------------------------------------------------------------------------------------------------
144 Del Norte Apartments 7 yr lock, >1% or YM through yr 9.75, open last 3 mos
18 Southpoint Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
108 Holiday Inn Express-Plano 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
120 Best Western - Park Suites 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
33 Country Glen Apartments 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
160 Landmark Towers Apartments 7 yrs @ YM, yearly @ 3%, 2%, 6 mos @ 1%, open last 6 mos
125 Riverview Manor Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
196 Pepper Hill Apartment 3 year lock, >1% or YM through yr 9 3/4, open last 3 months
107 Best Western Inn 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
54 Westway Business Plaza 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
118 Greenfield Apartments 4 yr lock, >1% or YM through yr 9 3/4, open last 3 months
103 Wildwood Apartments 10 yr lock, >1% or YM through yr 24 3/4, open last 3 months
165 9343 North Loop East 2.5 yr lock, >1% or YM through yr 9.5, open last 6 mos
72 Hampton Inn-Anderson 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
202 Arizona Acres 3 year lock, TSM through year 7(C)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ANNUAL
CONTROL DEBT TOTAL TOTAL APPRAISED
NO. PROPERTY NAME SERVICE REVENUE EXPENSE NCF DSCR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
179 Century American Insurance Blg 442,125 1,238,391 404,667 823,564 1.86 9,000,000
45 Shilo Inn-Nampa 491,325 1,494,880 783,504 711,376 1.45 6,400,000
68 Maple Leaf Building 448,169 1,147,776 485,528 622,829 1.39 6,200,000
60 Waterford Marketplace 421,676 776,855 192,604 569,862 1.35 6,300,000
39 The Highlands Apartments 391,110 1,013,560 511,989 501,571 1.28 5,300,000
- ------------------------------------------------------------------------------------------------------------------------------------
12 Rush Creek Apartments 406,854 1,491,112 934,148 556,964 1.37 5,600,000
5 Towne Center Apartments 382,566 804,109 325,853 478,256 1.25 5,350,000
184 Atlantic Square Shopping Ctr. 409,857 824,328 209,506 558,794 1.36 5,900,000
30 Callens Corner Phase II 389,679 1,032,223 503,182 500,539 1.28 5,450,000
141 Northrich Village Shopping Ctr 434,142 853,196 233,167 539,293 1.24 6,040,000
- ------------------------------------------------------------------------------------------------------------------------------------
2 INT - The Park Apartments 381,130 1,264,870 715,609 549,261 1.44 5,100,000
56 Pirani Best Western - Airport Executel 453,898 2,991,756 2,355,344 636,412 1.40 6,500,000
172 Kristopher Woods Apartments 396,516 1,346,712 617,453 675,759 1.70 5,950,000
122 Parkwood Apartments 357,553 765,642 336,567 429,074 1.20 5,100,000
201 Vista Village 370,157 1,150,228 467,573 682,655 1.84 6,490,000
- ------------------------------------------------------------------------------------------------------------------------------------
104 Thunderbird Business Park 391,321 1,226,245 607,365 514,425 1.31 5,300,000
153 Brook Apartments 379,038 982,229 475,830 472,399 1.25 5,070,000
187 Bentsen Grove 367,473 1,076,958 603,169 473,789 1.29 5,150,000
185 264 Water Street 361,212 755,833 311,953 443,880 1.23 5,100,000
31 Driftwood Apartments 330,596 672,686 264,344 408,342 1.24 4,700,000
- ------------------------------------------------------------------------------------------------------------------------------------
207 Sandy Lakes Apartments 367,657 843,568 402,352 473,551 1.20 5,100,000
173 Lantern Ridge Apartments 353,686 1,040,953 553,081 450,372 1.27 5,310,000
102 Fairfield Inn by Marriott 396,495 1,254,313 710,402 543,911 1.37 5,375,000
101 Elkins Park Square 358,106 867,326 350,694 484,755 1.35 5,350,000
97 The Trails Apartments - Multifamily 332,477 1,598,222 1,153,902 444,320 1.34 4,650,000
- ------------------------------------------------------------------------------------------------------------------------------------
27 Walnut Woods Apartments 326,982 645,010 246,478 398,532 1.22 4,500,000
20 Carondelet Building 354,294 1,141,753 562,192 495,836 1.40 5,600,000
193 Las Brisas 349,591 761,604 311,476 450,128 1.29 5,000,000
96 Ridgeway Village Apartments 322,646 1,137,345 591,272 546,073 1.69 5,100,000
71 Southbrooke Manor 364,037 3,506,861 2,903,874 602,986 1.66 5,200,000
- ------------------------------------------------------------------------------------------------------------------------------------
49 Shilo Inn-Elko 377,268 1,212,778 629,735 583,043 1.55 4,925,000
66 North View Business Center 313,139 547,392 121,780 394,311 1.26 4,800,000
138 Highland Point Shopping Center 326,744 578,895 132,001 429,423 1.31 5,100,000
59 Ramada Inn 368,090 1,506,209 1,041,435 464,774 1.26 4,900,000
129 Pompano Plaza 322,227 706,941 256,938 409,632 1.27 4,400,000
- ------------------------------------------------------------------------------------------------------------------------------------
88 Quail Meadows Apartments 317,531 1,276,606 867,251 409,354 1.29 5,100,000
15 Roosevelt Center 320,588 678,573 223,334 430,163 1.34 4,500,000
9 Diablo View Apartments 285,325 583,258 240,837 342,421 1.20 3,925,000
152 Plymouth Towne Apartments 312,066 1,215,552 668,791 525,761 1.68 4,300,000
67 Palisades Business Park 300,297 617,207 175,770 418,880 1.39 4,200,000
- ------------------------------------------------------------------------------------------------------------------------------------
216 Terrace View 280,480 624,256 235,210 389,046 1.24 4,100,000
216 Terrace View 32,530
- ------------------------------------------------------------------------------------------------------------------------------------
119 Moors Landing Apartments 292,799 836,106 454,701 381,405 1.30 4,400,000
199 Stockdale Villa 290,373 658,570 289,901 368,669 1.27 4,590,000
176 Shoreham Apartments 288,569 886,938 489,000 351,650 1.22 4,520,000
183 Morristown Plaza Shopping Ctr 302,375 776,557 347,167 391,803 1.30 4,400,000
158 Lochhaven Apartments 312,416 1,505,646 848,248 599,158 1.92 6,975,000
- ------------------------------------------------------------------------------------------------------------------------------------
140 Rustic Village Apartments 304,046 1,002,139 467,748 460,223 1.51 5,100,000
198 Quail Hill 284,433 858,783 305,357 553,426 1.95 5,890,000
22 Lease-All Orangethorpe 279,590 530,338 152,800 355,120 1.27 3,800,000
210 The Landings Apartment 283,269 908,772 545,699 363,073 1.28 3,600,000
154 Woodridge Plaza Shopping Ctr 310,792 725,098 236,664 419,798 1.35 4,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
144 Del Norte Apartments 267,827 556,793 172,294 358,499 1.34 3,800,000
18 Southpoint Apartments 267,457 637,545 243,581 393,964 1.47 3,500,000
108 Holiday Inn Express-Plano 302,943 1,096,510 657,465 439,045 1.45 4,000,000
120 Best Western - Park Suites 303,521 1,522,302 969,536 552,766 1.82 4,100,000
33 Country Glen Apartments 245,463 513,734 210,899 302,835 1.23 3,800,000
- ------------------------------------------------------------------------------------------------------------------------------------
160 Landmark Towers Apartments 266,375 1,028,062 559,751 430,463 1.62 4,250,000
125 Riverview Manor Apartments 254,604 843,704 515,402 328,302 1.29 3,300,000
196 Pepper Hill Apartment 256,016 908,900 569,192 339,708 1.33 3,700,000
107 Best Western Inn 290,214 1,709,333 1,280,610 428,723 1.48 3,750,000
54 Westway Business Plaza 315,895 830,055 226,541 586,115 1.86 4,800,000
- ------------------------------------------------------------------------------------------------------------------------------------
118 Greenfield Apartments 238,275 655,218 326,007 329,211 1.38 3,250,000
103 Wildwood Apartments 261,042 820,229 506,875 313,353 1.20 3,250,000
165 9343 North Loop East 261,431 773,556 356,010 368,611 1.41 3,900,000
72 Hampton Inn-Anderson 290,943 1,205,930 789,116 416,814 1.43 3,850,000
202 Arizona Acres 225,172 502,293 173,055 329,238 1.46 4,250,000
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CUT-OFF SQ FT, UNITS
CONTROL APPRAISAL DATE REPAYMENT YEAR BEDS, PADS
NO. PROPERTY NAME YEAR LTV LTV BUILT OR ROOM
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
179 Century American Insurance Blg 1996 49.76 46.49 1988 67,730 Sq Ft
45 Shilo Inn-Nampa 1996 69.27 - 1992 83 rooms
68 Maple Leaf Building 1996 70.72 47.27 1929 60,157 sqft
60 Waterford Marketplace 1996 69.53 60.06 1996 31,731 sqft
39 The Highlands Apartments 1996 79.10 70.35 1979 216 units
- --------------------------------------------------------------------------------------------------------------
12 Rush Creek Apartments 1996 74.78 61.37 1966 310 units
5 Towne Center Apartments 1997 77.43 68.72 1984 120 units
184 Atlantic Square Shopping Ctr. 1997 69.49 57.38 1960 71,749 Sq Ft
30 Callens Corner Phase II 1996 74.89 64.41 1989 48,650 sqft
141 Northrich Village Shopping Ctr 1996 67.20 56.95 1973 102,640 Sq Ft
- --------------------------------------------------------------------------------------------------------------
2 INT - The Park Apartments 1996 79.58 73.90 1967 226 units
56 Pirani Best Western - Airport Executel 1996 62.15 - 1981 137 rooms
172 Kristopher Woods Apartments 1996 67.57 60.98 1971 214 Units
122 Parkwood Apartments 1997 77.55 71.98 1986 107 units
201 Vista Village 1996 59.54 53.32 1971 305 pads
- --------------------------------------------------------------------------------------------------------------
104 Thunderbird Business Park 1997 72.48 65.14 1972 163,466 sqft
153 Brook Apartments 1995 74.18 61.68 1973 136 Units
187 Bentsen Grove 1996 72.23 59.60 1978 915 pads
185 264 Water Street 1996 72.00 59.30 1870 27 units
31 Driftwood Apartments 1996 77.56 72.10 1973 94 units
- --------------------------------------------------------------------------------------------------------------
207 Sandy Lakes Apartments 1996 71.29 59.09 1986 144 units
173 Lantern Ridge Apartments 1996 68.31 61.52 1973 150 Units
102 Fairfield Inn by Marriott 1997 66.98 - 1995 105 rooms
101 Elkins Park Square 1997 67.29 55.48 1979 50,995 sqft
97 The Trails Apartments - Multifamily 1996 77.13 60.47 1970 302 units
- --------------------------------------------------------------------------------------------------------------
27 Walnut Woods Apartments 1996 79.41 73.95 1987 100 units
20 Carondelet Building 1996 63.10 56.72 1961 76,395 sqft
193 Las Brisas 1997 69.87 - 1989 295 pads
96 Ridgeway Village Apartments 1996 68.46 60.79 1975 200 units
71 Southbrooke Manor 1996 67.08 56.19 1991 120 beds
- --------------------------------------------------------------------------------------------------------------
49 Shilo Inn-Elko 1996 69.12 - 1990 70 rooms
66 North View Business Center 1996 70.61 65.91 1990 89,994 sqft
138 Highland Point Shopping Center 1996 65.29 55.11 1992 55,445 Sq Ft
59 Ramada Inn 1996 66.86 - 1986 140 rooms
129 Pompano Plaza 1997 73.86 60.85 1989 145,088 sqft
- --------------------------------------------------------------------------------------------------------------
88 Quail Meadows Apartments 1997 62.69 51.70 1972 356 units
15 Roosevelt Center 1996 69.69 58.09 1960 35,991 sqft
9 Diablo View Apartments 1996 78.74 73.45 1984 73 units
152 Plymouth Towne Apartments 1996 71.84 59.77 1979 70 beds
67 Palisades Business Park 1996 73.45 60.40 1982 137,812 sqft
- --------------------------------------------------------------------------------------------------------------
216 Terrace View 1997 74.39 66.93 1960 160 Pads
216 Terrace View
- --------------------------------------------------------------------------------------------------------------
119 Moors Landing Apartments 1997 68.18 55.91 1973 144 units
199 Stockdale Villa 1996 64.67 58.14 1979 196 pads
176 Shoreham Apartments 1996 65.48 58.96 1969 176 Units
183 Morristown Plaza Shopping Ctr 1996 66.78 55.61 1977 48,293 Sq Ft
158 Lochhaven Apartments 1995 41.70 - 1978 208 Units
- --------------------------------------------------------------------------------------------------------------
140 Rustic Village Apartments 1996 56.48 47.58 1974 292 Units
198 Quail Hill 1996 48.16 39.93 1965 282 pads
22 Lease-All Orangethorpe 1996 74.62 64.86 1975 102,390 sqft
210 The Landings Apartment 1997 78.71 65.03 1967 180 units
154 Woodridge Plaza Shopping Ctr 1996 70.50 58.98 1985 71,280 Sq Ft
- --------------------------------------------------------------------------------------------------------------
144 Del Norte Apartments 1996 73.66 66.03 1986 104 Units
18 Southpoint Apartments 1996 79.82 71.39 1986 113 units
108 Holiday Inn Express-Plano 1996 68.98 - 1994 65 rooms
120 Best Western - Park Suites 1997 67.07 - 1995 84 rooms
33 Country Glen Apartments 1996 70.96 66.00 1991 80 units
- --------------------------------------------------------------------------------------------------------------
160 Landmark Towers Apartments 1995 62.60 52.26 1963 167 Units
125 Riverview Manor Apartments 1996 78.79 64.67 1967 102 units
196 Pepper Hill Apartment 1996 69.87 57.69 1971 214 units
107 Best Western Inn 1996 68.84 - 1970 196 rooms
54 Westway Business Plaza 1996 53.73 - 1970 143,208 sqft
- --------------------------------------------------------------------------------------------------------------
118 Greenfield Apartments 1997 79.34 70.35 1987 104 units
103 Wildwood Apartments 1997 78.92 - 1974 168 units
165 9343 North Loop East 1996 65.73 54.75 1979 60,000 Sq Ft
72 Hampton Inn-Anderson 1996 65.67 - 1995 71 rooms
202 Arizona Acres 1996 59.41 55.51 1960 200 pads
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
LOAN PER
SQ FT, UNIT INITIAL
CONTROL BED, PAD OCCUPANCY RESERVES
NO. PROPERTY NAME OR ROOM PERCENTAGE AT CLOSING
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
179 Century American Insurance Blg 66.12 / sqft 100.00% 662,540
45 Shilo Inn-Nampa 53,412.98 / room NAP 3,848
68 Maple Leaf Building 72.88 / sqft 96.68% 42,000
60 Waterford Marketplace 138.04 / sqft 100.00% 1,000
39 The Highlands Apartments 19,409.58 / unit 97.84% 270,000
- ----------------------------------------------------------------------------------------------------------------------
12 Rush Creek Apartments 13,508.92 / unit 90.65% 114,625
5 Towne Center Apartments 34,519.91 / unit 95.00% -
184 Atlantic Square Shopping Ctr. 57.14 / sqft 98.00% 3,315
30 Callens Corner Phase II 83.89 / sqft 89.52% -
141 Northrich Village Shopping Ctr 39.54 / sqft 98.00% 527,804
- ----------------------------------------------------------------------------------------------------------------------
2 INT - The Park Apartments 17,958.45 / unit 94.54% -
56 Pirani Best Western - Airport Executel 29,486.88 / room NAP -
172 Kristopher Woods Apartments 18,787.97 / unit 97.00% 134,689
122 Parkwood Apartments 36,962.62 / unit 94.70% 98,750
201 Vista Village 12,669.13 / pad 100.00% -
- ----------------------------------------------------------------------------------------------------------------------
104 Thunderbird Business Park 23.50 / sqft 93.95% 100,000
153 Brook Apartments 27,654.76 / unit 99.00% 4,021
187 Bentsen Grove 4,065.45 / pad 87.20% 315,228
185 264 Water Street 136,001.18 / unit 92.60% -
31 Driftwood Apartments 38,780.60 / unit 95.74% 18,375
- ----------------------------------------------------------------------------------------------------------------------
207 Sandy Lakes Apartments 25,248.44 / unit 93.80% 46,875
173 Lantern Ridge Apartments 24,182.75 / unit 93.00% 129,500
102 Fairfield Inn by Marriott 34,285.71 / room NAP -
101 Elkins Park Square 70.60 / sqft 97.84% 27,731
97 The Trails Apartments - Multifamily 11,876.52 / unit 92.38% 64,839
- ----------------------------------------------------------------------------------------------------------------------
27 Walnut Woods Apartments 35,732.98 / unit 98.00% -
20 Carondelet Building 46.25 / sqft 95.91% -
193 Las Brisas 11,842.81 / pad 98.90% 9,340
96 Ridgeway Village Apartments 17,457.05 / unit 96.00% -
71 Southbrooke Manor 29,068.19 / bed NAP 42,500
- ----------------------------------------------------------------------------------------------------------------------
49 Shilo Inn-Elko 48,630.33 / room NAP 4,075
66 North View Business Center 37.66 / sqft 100.00% 225,000
138 Highland Point Shopping Center 60.06 / sqft 92.00% 8,317
59 Ramada Inn 23,402.38 / room NAP -
129 Pompano Plaza 22.40 / sqft 95.02% 20,375
- ----------------------------------------------------------------------------------------------------------------------
88 Quail Meadows Apartments 8,980.50 / unit 94.94% 30,625
15 Roosevelt Center 87.13 / sqft 100.00% 19,070
9 Diablo View Apartments 42,334.00 / unit 93.15% -
152 Plymouth Towne Apartments 44,128.79 / bed 94.00% 21,000
67 Palisades Business Park 22.38 / sqft 97.14% 246,375
- ----------------------------------------------------------------------------------------------------------------------
216 Terrace View 17,037.29 / pad 97.00% 90,750
216 Terrace View
- ----------------------------------------------------------------------------------------------------------------------
119 Moors Landing Apartments 20,833.33 / unit 93.10% 49,813
199 Stockdale Villa 15,143.61 / pad 96.90% -
176 Shoreham Apartments 16,815.75 / unit 89.00% 104,357
183 Morristown Plaza Shopping Ctr 60.84 / sqft 100.00% 20,741
158 Lochhaven Apartments 13,983.12 / unit 98.00% 305,997
- ----------------------------------------------------------------------------------------------------------------------
140 Rustic Village Apartments 9,864.50 / unit 80.00% 207,128
198 Quail Hill 10,058.89 / pad 99.00% -
22 Lease-All Orangethorpe 27.70 / sqft 96.86% -
210 The Landings Apartment 15,741.27 / unit 89.00% 118,115
154 Woodridge Plaza Shopping Ctr 39.56 / sqft 100.00% 48,079
- ----------------------------------------------------------------------------------------------------------------------
144 Del Norte Apartments 26,916.05 / unit 89.00% 3,967
18 Southpoint Apartments 24,722.63 / unit 96.46% -
108 Holiday Inn Express-Plano 42,449.47 / room NAP -
120 Best Western - Park Suites 32,738.10 / room NAP -
33 Country Glen Apartments 33,707.60 / unit 95.00% -
- ----------------------------------------------------------------------------------------------------------------------
160 Landmark Towers Apartments 15,930.30 / unit 93.00% 71,295
125 Riverview Manor Apartments 25,490.20 / unit 98.04% 46,975
196 Pepper Hill Apartment 12,080.47 / unit 88.00% 187,625
107 Best Western Inn 13,170.29 / room NAP 52,954
54 Westway Business Plaza 18.01 / sqft 97.94% 18,750
- ----------------------------------------------------------------------------------------------------------------------
118 Greenfield Apartments 24,792.69 / unit 95.19% -
103 Wildwood Apartments 15,266.40 / unit 88.10% 159,550
165 9343 North Loop East 42.73 / sqft 92.00% 2,313
72 Hampton Inn-Anderson 35,607.65 / room NAP -
202 Arizona Acres 12,624.73 / pad 98.00% -
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
ADMINISTRATIVE
CONTROL UNDERWRITING COST
NO. PROPERTY NAME RESERVES RATE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
179 Century American Insurance Blg 0.15 Per Sq Ft 0.130
45 Shilo Inn-Nampa 4% of gross rev. 0.065
68 Maple Leaf Building 0.15 per sq. ft. 0.005
60 Waterford Marketplace 0.15 per sq. ft. 0.065
39 The Highlands Apartments 200 per unit 0.005
- ---------------------------------------------------------------------------------------------------------------------------
12 Rush Creek Apartments 250 per unit 0.005
5 Towne Center Apartments 270 per unit 0.005
184 Atlantic Square Shopping Ctr. 0.15 Per Sq Ft 0.130
30 Callens Corner Phase II 0.15 per sq. ft. 0.065
141 Northrich Village Shopping Ctr 0.15 Per Sq Ft 0.130
- ---------------------------------------------------------------------------------------------------------------------------
2 INT - The Park Apartments 265 per unit 0.065
56 Pirani Best Western - Airport Executel 4% of gross rev. 0.065
172 Kristopher Woods Apartments 250 Per Unit 0.130
122 Parkwood Apartments 250 per unit 0.065
201 Vista Village 25 per pad 0.005
- ---------------------------------------------------------------------------------------------------------------------------
104 Thunderbird Business Park 0.15 per sq. ft. 0.005
153 Brook Apartments 250 Per Unit 0.130
187 Bentsen Grove 56.41 per pad 0.005
185 264 Water Street 200 per unit 0.005
31 Driftwood Apartments 250 per unit 0.065
- ---------------------------------------------------------------------------------------------------------------------------
207 Sandy Lakes Apartments 273.08 per unit 0.005
173 Lantern Ridge Apartments 250 Per Unit 0.130
102 Fairfield Inn by Marriott 4% of gross rev. 0.005
101 Elkins Park Square 0.15 per sq. ft. 0.005
97 The Trails Apartments - Multifamily 250 per unit 0.005
- ---------------------------------------------------------------------------------------------------------------------------
27 Walnut Woods Apartments 263.45 per unit 0.065
20 Carondelet Building 0.15 per sq. ft. 0.005
193 Las Brisas 25 per pad 0.005
96 Ridgeway Village Apartments 250 per unit 0.005
71 Southbrooke Manor 250 per bed 0.005
- ---------------------------------------------------------------------------------------------------------------------------
49 Shilo Inn-Elko 4% of gross rev. 0.065
66 North View Business Center 0.15 per sq. ft. 0.005
138 Highland Point Shopping Center 0.15 Per Sq Ft 0.130
59 Ramada Inn 4% of gross rev. 0.005
129 Pompano Plaza 0.15 per sq. ft. 0.005
- ---------------------------------------------------------------------------------------------------------------------------
88 Quail Meadows Apartments 250 per unit 0.065
15 Roosevelt Center 0.15 per sq. ft. 0.005
9 Diablo View Apartments 250 per unit 0.065
152 Plymouth Towne Apartments 300 per bed 0.130
67 Palisades Business Park 0.15 per sq. ft. 0.005
- ---------------------------------------------------------------------------------------------------------------------------
216 Terrace View 25 per pad 0.005
216 Terrace View 25 per pad 0.005
- ---------------------------------------------------------------------------------------------------------------------------
119 Moors Landing Apartments 250 per unit 0.005
199 Stockdale Villa 25 per pad 0.005
176 Shoreham Apartments 263 Per Unit 0.130
183 Morristown Plaza Shopping Ctr 0.18 Per Sq Ft 0.130
158 Lochhaven Apartments 280 Per Unit 0.255
- ---------------------------------------------------------------------------------------------------------------------------
140 Rustic Village Apartments 254 Per Unit 0.130
198 Quail Hill 25 per pad 0.005
22 Lease-All Orangethorpe 0.18 per sq. ft. 0.065
210 The Landings Apartment 224.38 per unit 0.005
154 Woodridge Plaza Shopping Ctr 0.2 Per Sq Ft 0.130
- ---------------------------------------------------------------------------------------------------------------------------
144 Del Norte Apartments 250 Per Unit 0.130
18 Southpoint Apartments 250 per unit 0.065
108 Holiday Inn Express-Plano 4% of gross rev. 0.005
120 Best Western - Park Suites 4% of gross rev. 0.005
33 Country Glen Apartments 250 per unit 0.065
- ---------------------------------------------------------------------------------------------------------------------------
160 Landmark Towers Apartments 226.63 Per Unit 0.255
125 Riverview Manor Apartments 300 per unit 0.005
196 Pepper Hill Apartment 350.56 per unit 0.005
107 Best Western Inn 4% of gross rev. 0.005
54 Westway Business Plaza 0.15 per sq. ft. 0.065
- ---------------------------------------------------------------------------------------------------------------------------
118 Greenfield Apartments 250 per unit 0.005
103 Wildwood Apartments 250 per unit 0.005
165 9343 North Loop East 0.15 Per Sq Ft 0.130
72 Hampton Inn-Anderson 4% of gross rev. 0.005
202 Arizona Acres 25 per pad 0.005
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LARGEST RETAIL TENANT
-----------------------------------------------------------------------------
CONTROL AREA LEASED LEASE CONTROL
NO. PROPERTY NAME NAME (SQ. FT.) EXP DATE NO.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
179 Century American Insurance Blg Coastal Group, Inc. 67,730 07/31/03 179
45 Shilo Inn-Nampa 45
68 Maple Leaf Building Sumner Schein Arch & 30,780 09/14/06 68
60 Waterford Marketplace Hollywood Video 6,000 06/01/06 60
39 The Highlands Apartments 39
- ------------------------------------------------------------------------------------------------------------------------------------
12 Rush Creek Apartments 12
5 Towne Center Apartments 5
184 Atlantic Square Shopping Ctr. Bealls Outlet 21,010 04/30/00 184
30 Callens Corner Phase II Orange Cnty Teacher's 6,600 08/31/99 30
141 Northrich Village Shopping Ctr Interactive Cable Systems, Inc 63,609 09/14/02 141
- ------------------------------------------------------------------------------------------------------------------------------------
2 INT - The Park Apartments 2
56 Pirani Best Western - Airport Executel 56
172 Kristopher Woods Apartments 172
122 Parkwood Apartments 122
201 Vista Village 201
- ------------------------------------------------------------------------------------------------------------------------------------
104 Thunderbird Business Park ABCO 19,730 12/31/97 104
153 Brook Apartments 153
187 Bentsen Grove 187
185 264 Water Street 185
31 Driftwood Apartments 31
- ------------------------------------------------------------------------------------------------------------------------------------
207 Sandy Lakes Apartments 207
173 Lantern Ridge Apartments 173
102 Fairfield Inn by Marriott 102
101 Elkins Park Square Fishbein CPAs 12,471 08/31/99 101
97 The Trails Apartments - Multifamily 97
- ------------------------------------------------------------------------------------------------------------------------------------
27 Walnut Woods Apartments 27
20 Carondelet Building Diekemper, H. 8,598 01/01/01 20
193 Las Brisas 193
96 Ridgeway Village Apartments 96
71 Southbrooke Manor 71
- ------------------------------------------------------------------------------------------------------------------------------------
49 Shilo Inn-Elko 49
66 North View Business Center Med-Safe Systems 89,994 02/28/99 66
138 Highland Point Shopping Center Food Lion 29,000 06/02/18 138
59 Ramada Inn 59
129 Pompano Plaza Service Merchandise 86,000 01/31/00 129
- ------------------------------------------------------------------------------------------------------------------------------------
88 Quail Meadows Apartments 88
15 Roosevelt Center Jazzercise 10,760 12/31/99 15
9 Diablo View Apartments 9
152 Plymouth Towne Apartments 152
67 Palisades Business Park A.M. Medical, Inc. 9,389 10/30/99 67
- ------------------------------------------------------------------------------------------------------------------------------------
216 Terrace View 216
216 Terrace View 216
- ------------------------------------------------------------------------------------------------------------------------------------
119 Moors Landing Apartments 119
199 Stockdale Villa 199
176 Shoreham Apartments 176
183 Morristown Plaza Shopping Ctr Staples 24,092 07/31/05 183
158 Lochhaven Apartments 158
- ------------------------------------------------------------------------------------------------------------------------------------
140 Rustic Village Apartments 140
198 Quail Hill 198
22 Lease-All Orangethorpe Enduro Products / Gregory Brown 5,275 / 5,275 11/30/99 / 11/30/98 22
210 The Landings Apartment 210
154 Woodridge Plaza Shopping Ctr Houston Training Schools 8,160 09/01/97 154
- ------------------------------------------------------------------------------------------------------------------------------------
144 Del Norte Apartments 144
18 Southpoint Apartments 18
108 Holiday Inn Express-Plano 108
120 Best Western - Park Suites 120
33 Country Glen Apartments 33
- ------------------------------------------------------------------------------------------------------------------------------------
160 Landmark Towers Apartments 160
125 Riverview Manor Apartments 125
196 Pepper Hill Apartment 196
107 Best Western Inn 107
54 Westway Business Plaza Jung Lee 16,633 12/31/01 54
- ------------------------------------------------------------------------------------------------------------------------------------
118 Greenfield Apartments 118
103 Wildwood Apartments 103
165 9343 North Loop East Dr. Hellerstein, M.D. 5,349 03/31/00 165
72 Hampton Inn-Anderson 72
202 Arizona Acres 202
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
ANNEX A
<TABLE>
<CAPTION>
CONTROL
NO. PROPERTY NAME ADDRESS CITY STATE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
117 Huntington Apartments 5700 Boca Raton Blvd. Fort Worth TX
124 Days Inn-Union City 6840 Shannon Pkwy South Union City GA
213 West Chase 301 N. Shackleford Road Little Rock AR
155 El Royale Apartments 1414 N. Riverside Avenue Rialto CA
93 Barkwood Apartments 5050 Yale Houston TX
- --------------------------------------------------------------------------------------------------------------------------------
204 Country Club 5600 S. Country Club Road Tucson AZ
149 Flower Avenue Shopping Center 8701-8749 Flower Avenue Silver Spring MD
77 Hampton Inn - Houston 20035 N.W. Freeway Houston TX
40 10 Corporate Park 10 Corporate Park Irvine CA
180 Apopka Square Center 823 Semoran Blvd. S.R.436/441 Apopka FL
- --------------------------------------------------------------------------------------------------------------------------------
163 Harker Heights Shopping Center 702-706 Edwards Drive Killeen TX
123 Peachwood Apartments 2215 Peach Tree Drive Fairfield CA
34 Mountain Park Apartments 1350-1421 Custer Avenue Atlanta GA
106 Ball Park Inn - Arlington 903 N. Collins Arlington TX
139 Holiday Inn - St. Augustine 1300 Ponce de Leon Boulevard St. Augustine FL
- --------------------------------------------------------------------------------------------------------------------------------
32 Lincoln Village Apartments 2211 W. Campbell Avenue Phoenix AZ
145 Budgetel Inn - Atlanta Airport 2480 Old National Parkway College Park GA
182 Markham Building 2301 14th Street Gulfport MS
17 Lochwood Apartments 11117 Lochwood Boulevard Dallas TX
35 Foxworth Apartments 4789 Manzanita Avenue Carmichael CA
- --------------------------------------------------------------------------------------------------------------------------------
78 Holiday Inn Express 1610 W. Nugent Avenue Temple TX
86 Goose Creek Plaza S. C. 6900 Garth Road Baytown TX
209 6550 Collins 6550 Collins Avenue Miami Beach FL
52 Park Central 7901-7963 Central Ave. Capitol Heights MD
115 BDR - Sierra Point Apartments 1439 North Lilac Avenue Rialto CA
- --------------------------------------------------------------------------------------------------------------------------------
208 Tuckertown Village 41 Little Pond Road S. Kingstown RI
83 Springwood Apartments 410 Sulphur Springs Road Greenville SC
211 Claire Tower 1041 Marion Street Columbia SC
194 Morningstar Self Storage 10833 Monroe Road Matthews NC
70 Pinewood Place Mobile Home Park 8539 Monterey Pine Place Tomball TX
- --------------------------------------------------------------------------------------------------------------------------------
58 Blue Mountain View Apartments 150 South Wilbur Walla Walla WA
156 Terrytown Village Apartments 733 Carrollwood Village Drive Gretna LA
148 Holiday Inn Express-Fresno 6051 North Thesta Street Fresno CA
100 Cherrywood Square Apartments 6077 S. Norcross Tucker Road Norcross GA
29 Willowbrook Business Park 11515 - 11555 SW Durham Road Tigard OR
- --------------------------------------------------------------------------------------------------------------------------------
170 Marshall Plaza 919 West College Street Marshall MO
159 Valle Sereno Apartments 9133 Kernel Circle El Paso TX
36 New Peachtree Apartments 3354 Burk Drive Chamblee GA
75 Greenview Apartments 7141 North 16th Street Phoenix AZ
99 Comfort Inn - Richardson 220 W. Spring Valley Road Richardson TX
- --------------------------------------------------------------------------------------------------------------------------------
157 Santa Fe Square 5231 Blanco Road San Antonio TX
127 Best Western-Courtyard Inn 1225 Janesville Ave Ft. Atkinson WI
121 Comfort Inn - Plano 621 Central Parkway East Plano TX
95 Parkside Aparments 325 W. 5th Avenue Mesa AZ
137 Brookside Apartments 3661 North Decatur Road Decatur GA
- --------------------------------------------------------------------------------------------------------------------------------
162 Danubia Apartments 5301-5325 North 17th Street McAllen TX
128 Super 8 - Whitewater, WI 917 E. Milwaukee Ave. Whitewater WI
218 Lakehurst Shurguard Mini-Storage 6040 Lakehurst Drive Orlando FL
147 Holiday Inn Express-Mariposa 5059 Highway 140 Mariposa CA
73 Creekview Apartments 151 Little Creek Road Cedar Hill TX
- --------------------------------------------------------------------------------------------------------------------------------
94 Wing Ong Plaza Thomas Road Phoenix AZ
4 Days Inn-Norfolk 1001 Omaha Norfolk NE
161 Spring Ridge Apartments 3604 Legendary Drive Dallas TX
90 Three Fountains Apartments 2400 Buffalo Gap Rd Abilene TX
3 PP-Days Inn-Cody 524 Yellowstone Cody WY
- --------------------------------------------------------------------------------------------------------------------------------
24 Westlake Business Center 31200 - 31220 La Baya Drive Westlake Village CA
114 Whispering Oaks Apartments 10010 Greenfork Drive Houston TX
116 Falls of Maplewood Apts. 9600 Glenfield Court Houston TX
64 Greeley Super 8 Motel 2423 West 29th Street Greeley CO
136 Wyncreek Apartments 588 Little Street Marietta GA
- --------------------------------------------------------------------------------------------------------------------------------
146 Holiday Inn Express-Oakhurst 40662 Highway 41 Oakhurst CA
113 BDR - Francis Court V - Multifamily 160 N. Linden Avenue Rialto CA
91 Avenel Blockbuster 1392 Route 35 North Woodbridge NJ
110 Cinnamon Tree Apartments 111 South 1400 West Cedar City UT
192 Hyde Park Mobile Estates 2934 W. 1st Street Santa Ana CA
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% OF CUMULATIVE
CUT-OFF INITIAL INITIAL
CONTROL ZIP ORIGINAL DATE POOL % OF POOL
NO. PROPERTY NAME CODE BALANCE BALANCE BALANCE BALANCE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
117 Huntington Apartments 76112 2,510,000 2,508,438 0.30 82.07
124 Days Inn-Union City 30294 2,500,000 2,500,000 0.30 82.37
213 West Chase 72211 2,500,000 2,500,000 0.30 82.67
155 El Royale Apartments 92376 2,500,000 2,471,310 0.29 82.96
93 Barkwood Apartments 77018 2,475,000 2,458,535 0.29 83.25
- -----------------------------------------------------------------------------------------------------------------------
204 Country Club 85706 2,450,000 2,439,102 0.29 83.54
149 Flower Avenue Shopping Center 20901 2,450,000 2,433,332 0.29 83.83
77 Hampton Inn - Houston 77065 2,400,000 2,397,343 0.28 84.12
40 10 Corporate Park 92714 2,390,000 2,386,260 0.28 84.40
180 Apopka Square Center 32703 2,335,000 2,322,993 0.28 84.67
- -----------------------------------------------------------------------------------------------------------------------
163 Harker Heights Shopping Center 76543 2,300,000 2,287,271 0.27 84.95
123 Peachwood Apartments 94533 2,250,000 2,250,000 0.27 85.21
34 Mountain Park Apartments 30316 2,250,000 2,245,897 0.27 85.48
106 Ball Park Inn - Arlington 76011 2,250,000 2,233,884 0.27 85.74
139 Holiday Inn - St. Augustine 32804 2,236,000 2,233,541 0.27 86.01
- -----------------------------------------------------------------------------------------------------------------------
32 Lincoln Village Apartments 85015 2,200,000 2,195,915 0.26 86.27
145 Budgetel Inn - Atlanta Airport 30349 2,200,000 2,185,376 0.26 86.53
182 Markham Building 39501 2,175,000 2,173,808 0.26 86.79
17 Lochwood Apartments 75218 2,180,000 2,173,660 0.26 87.05
35 Foxworth Apartments 95608 2,130,000 2,127,285 0.25 87.30
- -----------------------------------------------------------------------------------------------------------------------
78 Holiday Inn Express 76504 2,100,000 2,097,162 0.25 87.55
86 Goose Creek Plaza S. C. 77521 2,070,000 2,068,293 0.25 87.79
209 6550 Collins 33141 2,025,000 2,023,856 0.24 88.03
52 Park Central 20743 2,030,000 2,018,083 0.24 88.27
115 BDR - Sierra Point Apartments 92376 2,020,000 2,015,348 0.24 88.51
- -----------------------------------------------------------------------------------------------------------------------
208 Tuckertown Village 02879 2,000,000 1,998,932 0.24 88.75
83 Springwood Apartments 29617 2,000,000 1,998,866 0.24 88.99
211 Claire Tower 29201 2,000,000 1,998,283 0.24 89.22
194 Morningstar Self Storage 28105 2,000,000 1,991,115 0.24 89.46
70 Pinewood Place Mobile Home Park 77375 2,000,000 1,988,822 0.24 89.70
- -----------------------------------------------------------------------------------------------------------------------
58 Blue Mountain View Apartments 99362 1,975,000 1,966,969 0.23 89.93
156 Terrytown Village Apartments 70056 1,980,000 1,956,168 0.23 90.16
148 Holiday Inn Express-Fresno 93710 1,980,000 1,955,735 0.23 90.40
100 Cherrywood Square Apartments 30093 1,950,000 1,950,000 0.23 90.63
29 Willowbrook Business Park 97223 1,930,000 1,926,718 0.23 90.86
- -----------------------------------------------------------------------------------------------------------------------
170 Marshall Plaza 65340 1,900,000 1,897,302 0.23 91.08
159 Valle Sereno Apartments 79907 1,925,000 1,850,991 0.22 91.30
36 New Peachtree Apartments 30341 1,850,000 1,846,513 0.22 91.52
75 Greenview Apartments 85020 1,850,000 1,846,461 0.22 91.74
99 Comfort Inn - Richardson 75081 1,800,000 1,800,000 0.21 91.95
- -----------------------------------------------------------------------------------------------------------------------
157 Santa Fe Square 78213 1,800,000 1,783,444 0.21 92.16
127 Best Western-Courtyard Inn 53538 1,750,000 1,750,000 0.21 92.37
121 Comfort Inn - Plano 75074 1,750,000 1,750,000 0.21 92.58
95 Parkside Aparments 85201 1,750,000 1,743,190 0.21 92.79
137 Brookside Apartments 30032 1,750,000 1,730,840 0.21 92.99
- -----------------------------------------------------------------------------------------------------------------------
162 Danubia Apartments 78504 1,718,000 1,708,816 0.20 93.20
128 Super 8 - Whitewater, WI 53190 1,700,000 1,700,000 0.20 93.40
218 Lakehurst Shurguard Mini-Storage 32819 1,700,000 1,693,653 0.20 93.60
147 Holiday Inn Express-Mariposa 95338 1,700,000 1,679,167 0.20 93.80
73 Creekview Apartments 75104 1,650,000 1,648,137 0.20 93.99
- -----------------------------------------------------------------------------------------------------------------------
94 Wing Ong Plaza 85006 1,625,000 1,618,161 0.19 94.19
4 Days Inn-Norfolk 68701 1,610,000 1,603,503 0.19 94.38
161 Spring Ridge Apartments 74224 1,625,000 1,602,984 0.19 94.57
90 Three Fountains Apartments 79605 1,600,000 1,598,608 0.19 94.76
3 PP-Days Inn-Cody 82414 1,600,000 1,593,544 0.19 94.95
- -----------------------------------------------------------------------------------------------------------------------
24 Westlake Business Center 91361 1,600,000 1,592,315 0.19 95.13
114 Whispering Oaks Apartments 77036 1,560,000 1,552,446 0.18 95.32
116 Falls of Maplewood Apts. 77096 1,550,000 1,544,172 0.18 95.50
64 Greeley Super 8 Motel 80631 1,540,000 1,529,382 0.18 95.68
136 Wyncreek Apartments 30060 1,550,000 1,519,333 0.18 95.86
- -----------------------------------------------------------------------------------------------------------------------
146 Holiday Inn Express-Oakhurst 91301 1,520,000 1,501,373 0.18 96.04
113 BDR - Francis Court V - Multifamily 92376 1,500,000 1,494,313 0.18 96.22
91 Avenel Blockbuster 07001 1,480,000 1,478,723 0.18 96.40
110 Cinnamon Tree Apartments 84720 1,470,000 1,456,256 0.17 96.57
192 Hyde Park Mobile Estates 92702 1,472,000 1,455,773 0.17 96.74
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
STATED ORIG REM
ORIG REM AMORT AMORT
CONTROL MORTGAGE TERM TERM TERM TERM ORIG REPAYMENT
NO. PROPERTY NAME RATE (MOS.) (MOS.) (MOS.) (MOS.) DATE DATE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
117 Huntington Apartments 8.370 60 59 360 359 04/30/97 05/01/02
124 Days Inn-Union City 9.570 240 240 240 240 05/09/97 06/01/17
213 West Chase 8.950 120 120 300 300 05/02/97 06/01/07
155 El Royale Apartments 9.375 84 63 360 339 08/29/95 09/01/02
93 Barkwood Apartments 8.750 84 77 300 293 10/23/96 11/01/03
- -------------------------------------------------------------------------------------------------------------------------------
204 Country Club 9.130 84 74 360 350 07/17/96 07/17/03
149 Flower Avenue Shopping Center 9.450 120 112 300 292 09/05/96 10/01/06
77 Hampton Inn - Houston 9.630 264 263 264 263 04/07/97 05/01/19
40 10 Corporate Park 8.390 60 58 330 328 03/11/97 04/01/02
180 Apopka Square Center 8.220 84 79 300 295 12/02/96 01/01/04
- -------------------------------------------------------------------------------------------------------------------------------
163 Harker Heights Shopping Center 8.910 120 114 300 294 11/08/96 12/01/06
123 Peachwood Apartments 8.280 84 84 360 360 05/09/97 06/01/04
34 Mountain Park Apartments 8.890 120 118 300 298 03/12/97 04/01/07
106 Ball Park Inn - Arlington 9.470 240 235 240 235 12/12/96 01/01/17
139 Holiday Inn - St. Augustine 9.700 120 119 240 239 05/01/97 05/01/07
- -------------------------------------------------------------------------------------------------------------------------------
32 Lincoln Village Apartments 8.430 120 117 360 357 02/28/97 03/01/07
145 Budgetel Inn - Atlanta Airport 10.320 180 171 300 291 08/07/96 09/01/11
182 Markham Building 9.550 120 119 300 299 04/21/97 05/01/07
17 Lochwood Apartments 8.540 84 81 300 297 02/21/97 03/01/04
35 Foxworth Apartments 8.270 84 82 360 358 03/05/97 04/01/04
- -------------------------------------------------------------------------------------------------------------------------------
78 Holiday Inn Express 9.800 240 239 240 239 04/22/97 05/01/17
86 Goose Creek Plaza S. C. 9.470 120 119 300 299 04/18/97 05/01/07
209 6550 Collins 8.840 144 (A) 143 (A) 360 359 04/24/97 04/23/09
52 Park Central 9.510 120 113 300 293 10/21/96 11/01/06
115 BDR - Sierra Point Apartments 8.800 120 116 360 356 01/27/97 02/01/07
- -------------------------------------------------------------------------------------------------------------------------------
208 Tuckertown Village 9.110 120 119 360 359 04/04/97 05/01/07
83 Springwood Apartments 8.820 120 119 360 359 04/09/97 05/01/07
211 Claire Tower 9.230 120 119 300 299 04/30/97 05/01/07
194 Morningstar Self Storage 8.780 120 115 300 295 12/20/96 12/31/06
70 Pinewood Place Mobile Home Park 8.850 120 114 300 294 11/12/96 12/01/06
- -------------------------------------------------------------------------------------------------------------------------------
58 Blue Mountain View Apartments 8.810 120 113 360 353 10/31/96 11/01/06
156 Terrytown Village Apartments 8.875 120 100 360 340 09/21/95 10/01/05
148 Holiday Inn Express-Fresno 10.000 180 171 240 231 08/07/96 09/01/11
100 Cherrywood Square Apartments 8.720 120 120 300 300 05/01/97 06/01/07
29 Willowbrook Business Park 9.310 120 118 300 298 03/05/97 04/01/07
- -------------------------------------------------------------------------------------------------------------------------------
170 Marshall Plaza 9.380 120 118 300 298 03/07/97 04/01/07
159 Valle Sereno Apartments 9.125 180 166 180 166 03/27/96 04/01/11
36 New Peachtree Apartments 8.690 120 118 300 298 03/12/97 04/01/07
75 Greenview Apartments 8.600 120 118 300 298 03/31/97 04/01/07
99 Comfort Inn - Richardson 9.480 240 240 240 240 05/02/97 06/01/17
- -------------------------------------------------------------------------------------------------------------------------------
157 Santa Fe Square 9.625 60 49 300 289 06/26/96 07/01/01
127 Best Western-Courtyard Inn 9.460 264 264 264 264 05/14/97 06/01/19
121 Comfort Inn - Plano 9.310 240 240 240 240 05/08/97 06/01/17
95 Parkside Aparments 8.540 120 116 300 296 01/22/97 02/01/07
137 Brookside Apartments 8.830 120 113 240 233 10/30/96 11/01/06
- -------------------------------------------------------------------------------------------------------------------------------
162 Danubia Apartments 9.750 84 73 360 349 06/03/96 07/01/03
128 Super 8 - Whitewater, WI 9.560 264 264 264 264 05/14/97 06/01/19
218 Lakehurst Shurguard Mini-Storage 9.730 120 110 360 350 07/26/96 07/31/06
147 Holiday Inn Express-Mariposa 10.000 180 171 240 231 08/07/96 09/01/11
73 Creekview Apartments 8.860 180 178 360 358 03/19/97 04/01/12
- -------------------------------------------------------------------------------------------------------------------------------
94 Wing Ong Plaza 9.440 120 115 300 295 12/24/96 01/01/07
4 Days Inn-Norfolk 9.900 240 237 240 237 02/04/97 03/01/17
161 Spring Ridge Apartments 9.250 300 285 300 285 02/05/96 03/01/21
90 Three Fountains Apartments 9.150 120 119 300 299 04/29/97 05/01/07
3 PP-Days Inn-Cody 9.900 240 237 240 237 02/04/97 03/01/17
- -------------------------------------------------------------------------------------------------------------------------------
24 Westlake Business Center 8.640 120 115 300 295 12/19/96 01/01/07
114 Whispering Oaks Apartments 8.590 120 115 300 295 12/31/96 01/01/07
116 Falls of Maplewood Apts. 8.750 84 80 300 296 01/31/97 02/01/04
64 Greeley Super 8 Motel 9.770 240 235 240 235 12/31/96 01/01/17
136 Wyncreek Apartments 8.800 84 64 300 280 09/25/95 10/01/02
- -------------------------------------------------------------------------------------------------------------------------------
146 Holiday Inn Express-Oakhurst 10.000 180 171 240 231 08/07/96 09/01/11
113 BDR - Francis Court V - Multifamily 8.380 120 114 360 354 11/26/96 12/01/06
91 Avenel Blockbuster 9.200 84 83 300 299 04/24/97 05/01/04
110 Cinnamon Tree Apartments 8.830 240 234 240 234 11/05/96 12/01/16
192 Hyde Park Mobile Estates 8.620 181 176 181 176 12/31/96 02/01/12
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
BALLOON/
CONTROL REPAYMENT
NO. PROPERTY NAME BALANCE PROPERTY TYPE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
117 Huntington Apartments 2,394,137 Multifamily
124 Days Inn-Union City - Hospitality
213 West Chase 2,066,102 Unanchored Retail
155 El Royale Apartments 2,350,904 Multifamily
93 Barkwood Apartments 2,209,607 Multifamily
- ---------------------------------------------------------------------------------------------------------------
204 Country Club 2,297,611 Mobile Home Park
149 Flower Avenue Shopping Center 2,047,663 Unanchored Retail
77 Hampton Inn - Houston - Hospitality
40 10 Corporate Park 2,251,665 Office
180 Apopka Square Center 2,067,223 Anchored Retail
- ---------------------------------------------------------------------------------------------------------------
163 Harker Heights Shopping Center 1,899,058 Anchored Retail
123 Peachwood Apartments 2,088,436 Multifamily
34 Mountain Park Apartments 1,856,912 Multifamily
106 Ball Park Inn - Arlington - Hospitality
139 Holiday Inn - St. Augustine 1,619,627 Hospitality
- ---------------------------------------------------------------------------------------------------------------
32 Lincoln Village Apartments 1,946,620 Multifamily
145 Budgetel Inn - Atlanta Airport 1,529,899 Hospitality
182 Markham Building 1,821,788 Office
17 Lochwood Apartments 1,939,905 Multifamily
35 Foxworth Apartments 1,976,798 Multifamily
- ---------------------------------------------------------------------------------------------------------------
78 Holiday Inn Express - Hospitality
86 Goose Creek Plaza S. C. 1,730,824 Unanchored Retail
209 6550 Collins 1,733,561 Unanchored Retail
52 Park Central 1,698,859 Unanchored Retail
115 BDR - Sierra Point Apartments 1,799,918 Multifamily
- ---------------------------------------------------------------------------------------------------------------
208 Tuckertown Village 1,792,101 Mobile Home Park
83 Springwood Apartments 1,782,754 Multifamily
211 Claire Tower 1,663,438 Multifamily
194 Morningstar Self Storage 1,647,128 Self Storage
70 Pinewood Place Mobile Home Park 1,649,054 Mobile Home Park
- ---------------------------------------------------------------------------------------------------------------
58 Blue Mountain View Apartments 1,760,145 Multifamily
156 Terrytown Village Apartments 1,766,707 Multifamily
148 Holiday Inn Express-Fresno 899,298 Hospitality
100 Cherrywood Square Apartments 1,602,930 Multifamily
29 Willowbrook Business Park 1,608,085 Unanchored Retail
- ---------------------------------------------------------------------------------------------------------------
170 Marshall Plaza 1,585,544 Anchored Retail
159 Valle Sereno Apartments - Multifamily
36 New Peachtree Apartments 1,519,649 Multifamily
75 Greenview Apartments 1,516,396 Multifamily
99 Comfort Inn - Richardson - Hospitality
- ---------------------------------------------------------------------------------------------------------------
157 Santa Fe Square 1,689,150 Multifamily
127 Best Western-Courtyard Inn - Hospitality
121 Comfort Inn - Plano - Hospitality
95 Parkside Aparments 1,432,366 Multifamily
137 Brookside Apartments 1,236,855 Multifamily
- ---------------------------------------------------------------------------------------------------------------
162 Danubia Apartments 1,621,978 Multifamily
128 Super 8 - Whitewater, WI - Hospitality
218 Lakehurst Shurguard Mini-Storage 1,539,341 Self Storage
147 Holiday Inn Express-Mariposa 772,124 Hospitality
73 Creekview Apartments 1,303,279 Multifamily
- ---------------------------------------------------------------------------------------------------------------
94 Wing Ong Plaza 1,357,847 Anchored Retail
4 Days Inn-Norfolk - Hospitality
161 Spring Ridge Apartments - Multifamily
90 Three Fountains Apartments 1,328,357 Multifamily
3 PP-Days Inn-Cody - Hospitality
- ---------------------------------------------------------------------------------------------------------------
24 Westlake Business Center 1,312,731 Industrial
114 Whispering Oaks Apartments 1,278,385 Multifamily
116 Falls of Maplewood Apts. 1,383,794 Multifamily
64 Greeley Super 8 Motel - Hospitality
136 Wyncreek Apartments 1,384,853 Multifamily
- ---------------------------------------------------------------------------------------------------------------
146 Holiday Inn Express-Oakhurst 690,370 Hospitality
113 BDR - Francis Court V - Multifamily 1,325,948 Multifamily
91 Avenel Blockbuster 1,330,217 Unanchored Retail
110 Cinnamon Tree Apartments - Multifamily
192 Hyde Park Mobile Estates - Mobile Home Park
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
CONTROL
NO. PROPERTY NAME PREPAYMENT RESTRICTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
117 Huntington Apartments 3.25 yr lock, >1% or YM through yr 4 1/2, open last 6 months
124 Days Inn-Union City 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
213 West Chase 3 year lock, >1% or YM through yr 9 3/4, open last 3 months
155 El Royale Apartments 5 yrs @ YM, yearly @ 2%, 6 mos @ 1%, open last 6 mos
93 Barkwood Apartments 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
204 Country Club 3 year lock, TSM through year 7 (C)
149 Flower Avenue Shopping Center 4 yr lock, >1% or YM through yr 9.5, open last 6 mos
77 Hampton Inn - Houston 11 yr lock, >1% or YM through 21 3/4, open last 3 months
40 10 Corporate Park 3.25 yr lock, >1% or YM through yr 4 1/2, open last 6 months
180 Apopka Square Center 3 yr lock, >1% or YM through yr 6.75, open last 3 mos
- ------------------------------------------------------------------------------------------------------------------------------------
163 Harker Heights Shopping Center 4 yr lock, >1% or YM through yr 9.75, open last 3 mos
123 Peachwood Apartments 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
34 Mountain Park Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
106 Ball Park Inn - Arlington 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
139 Holiday Inn - St. Augustine 4 yr lock, >1% or YM through yr. 9.5, open last 6 mos.
- ------------------------------------------------------------------------------------------------------------------------------------
32 Lincoln Village Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
145 Budgetel Inn - Atlanta Airport 4 yr lock, >1% or YM through yr 14.75, open last 3 mos
182 Markham Building 4 yr lock, Defeasance through yr 9.5, open last 6 mos.
17 Lochwood Apartments 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
35 Foxworth Apartments 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
78 Holiday Inn Express 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
86 Goose Creek Plaza S. C. 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
209 6550 Collins 3 year lock, >1% or YM through yr 11 3/4, open last 3 months
52 Park Central 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
115 BDR - Sierra Point Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
208 Tuckertown Village 3 year lock, >1% or YM through yr 9 3/4, open last 3 months
83 Springwood Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
211 Claire Tower 4 year lock, >1% or YM through yr 9 3/4, open last 3 months
194 Morningstar Self Storage 3 year lock, >1% or YM through yr 9 3/4, open last 3 months
70 Pinewood Place Mobile Home Park 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
58 Blue Mountain View Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
156 Terrytown Village Apartments 7 yrs @ YM, yearly @ 3%, 2%, 6 mos @ 1%, open last 6 mos
148 Holiday Inn Express-Fresno 7 yr lock, >1% or YM through yr 14.75, open last 3 mos
100 Cherrywood Square Apartments 5.5 yr lock, >1% or YM through yr 9 1/2, open last 6 months
29 Willowbrook Business Park 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
170 Marshall Plaza 4 year lock, Defeasance through yr 9.75, open last 3 mos
159 Valle Sereno Apartments 10 yrs @ YM, yearly @ 5%, 4%, 3%, 2%, 6 mos @ 1%, open last 6 mos
36 New Peachtree Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
75 Greenview Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
99 Comfort Inn - Richardson 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
157 Santa Fe Square 3 yrs @ YM, yearly @ 2%, 6 mos @ 1%, open last 6 mos
127 Best Western-Courtyard Inn 11 yr lock, >1% or YM through yr 21 3/4, open last 3 months
121 Comfort Inn - Plano 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
95 Parkside Aparments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
137 Brookside Apartments 3 yr lock, >1% or YM through yr 9.5, open last 6 mos
- ------------------------------------------------------------------------------------------------------------------------------------
162 Danubia Apartments 5 yrs @ YM, yearly @ 2%, 6 mos @ 1%, open last 6 mos
128 Super 8 - Whitewater, WI 11 yr lock, >1% or YM through yr 21 3/4, open last 3 months
218 Lakehurst Shurguard Mini-Storage 3 year lock, TSM through yr 10 (C)
147 Holiday Inn Express-Mariposa 7 yr lock, >1% or YM through yr 14.75, open last 3 mos
73 Creekview Apartments 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
94 Wing Ong Plaza 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
4 Days Inn-Norfolk 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
161 Spring Ridge Apartments 15 yrs @ YM, yearly @ 5%, 4%, 3%, 2%, 1, open last 60 mos
90 Three Fountains Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
3 PP-Days Inn-Cody 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
24 Westlake Business Center 5.5 yr lock, >1% or YM through yr 9 1/4, open last 9 months
114 Whispering Oaks Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
116 Falls of Maplewood Apts. 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
64 Greeley Super 8 Motel 10 yr lock, >1% or YM through 19 3/4, open last 3 months
136 Wyncreek Apartments >1% or YM through yr 5, 12 mos @ 2%, 6 mos @ 1%, open last 6 mos
- ------------------------------------------------------------------------------------------------------------------------------------
146 Holiday Inn Express-Oakhurst 7 yr lock, >1% or YM through yr 14.75, open last 3 mos
113 BDR - Francis Court V - Multifamily 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
91 Avenel Blockbuster 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months
110 Cinnamon Tree Apartments 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
192 Hyde Park Mobile Estates 10 year lock, >1% or YM through yr 14 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ANNUAL
CONTROL DEBT TOTAL TOTAL APPRAISED
NO. PROPERTY NAME SERVICE REVENUE EXPENSE NCF DSCR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
117 Huntington Apartments 228,828 909,608 613,789 295,819 1.29 3,530,000
124 Days Inn-Union City 281,012 1,368,750 973,395 395,355 1.41 3,830,000
213 West Chase 250,733 629,666 177,445 394,888 1.57 4,700,000
155 El Royale Apartments 249,525 665,993 338,737 290,898 1.17 3,650,000
93 Barkwood Apartments 244,177 1,085,683 764,910 320,773 1.31 3,300,000
- ------------------------------------------------------------------------------------------------------------------------------------
204 Country Club 239,316 616,728 284,305 332,423 1.39 3,350,000
149 Flower Avenue Shopping Center 255,846 547,329 134,244 370,516 1.45 3,500,000
77 Hampton Inn - Houston 263,001 1,042,574 687,379 355,195 1.35 3,450,000
40 10 Corporate Park 222,885 549,626 207,946 304,203 1.36 3,450,000
180 Apopka Square Center 220,362 481,591 151,919 264,932 1.20 3,300,000
- ------------------------------------------------------------------------------------------------------------------------------------
163 Harker Heights Shopping Center 229,920 487,733 114,268 338,726 1.47 3,750,000
123 Peachwood Apartments 203,412 461,265 217,071 244,194 1.20 3,000,000
34 Mountain Park Apartments 224,553 983,348 537,500 445,848 1.99 4,160,000
106 Ball Park Inn - Arlington 251,147 1,931,214 1,592,206 339,009 1.35 3,600,000
139 Holiday Inn - St. Augustine 253,624 1,485,248 1,046,169 439,079 1.73 3,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
32 Lincoln Village Apartments 201,685 551,130 303,170 247,960 1.23 2,750,000
145 Budgetel Inn - Atlanta Airport 245,878 1,235,287 877,435 357,852 1.46 3,200,000
182 Markham Building 228,943 848,946 483,857 304,662 1.33 3,250,000
17 Lochwood Apartments 211,353 952,012 618,656 333,356 1.58 3,475,000
35 Foxworth Apartments 192,383 403,944 161,960 241,984 1.26 2,850,000
- ------------------------------------------------------------------------------------------------------------------------------------
78 Holiday Inn Express 239,856 971,455 633,923 337,531 1.41 3,350,000
86 Goose Creek Plaza S. C. 216,508 536,413 202,327 295,406 1.36 3,800,000
209 6550 Collins 192,732 334,724 85,483 242,578 1.26 2,700,000
52 Park Central 213,002 471,598 131,566 312,168 1.47 2,900,000
115 BDR - Sierra Point Apartments 191,562 596,772 355,073 241,699 1.26 2,575,000
- ------------------------------------------------------------------------------------------------------------------------------------
208 Tuckertown Village 195,012 388,025 138,537 249,488 1.28 2,500,000
83 Springwood Apartments 190,009 599,943 344,876 255,067 1.34 2,600,000
211 Claire Tower 205,200 727,410 475,569 251,842 1.23 2,650,000
194 Morningstar Self Storage 197,804 761,850 331,333 430,517 2.17 4,400,000
70 Pinewood Place Mobile Home Park 198,948 478,837 220,195 258,642 1.30 2,800,000
- ------------------------------------------------------------------------------------------------------------------------------------
58 Blue Mountain View Apartments 187,464 488,274 237,066 251,208 1.34 2,600,000
156 Terrytown Village Apartments 189,045 825,413 502,576 293,437 1.55 2,800,000
148 Holiday Inn Express-Fresno 229,289 968,929 655,107 313,822 1.37 3,400,000
100 Cherrywood Square Apartments 191,905 434,383 193,003 241,380 1.26 2,460,000
29 Willowbrook Business Park 199,298 574,181 222,910 321,124 1.61 3,320,000
- ------------------------------------------------------------------------------------------------------------------------------------
170 Marshall Plaza 197,304 500,480 143,611 257,309 1.30 3,300,000
159 Valle Sereno Apartments 236,016 821,497 465,385 326,620 1.38 3,580,000
36 New Peachtree Apartments 181,612 560,359 282,283 278,076 1.53 2,480,000
75 Greenview Apartments 180,259 464,168 239,496 224,671 1.25 2,375,000
99 Comfort Inn - Richardson 201,058 998,316 630,774 367,542 1.83 3,100,000
- ------------------------------------------------------------------------------------------------------------------------------------
157 Santa Fe Square 190,599 580,399 332,060 224,139 1.18 2,800,000
127 Best Western-Courtyard Inn 189,374 859,242 592,206 267,036 1.41 2,725,000
121 Comfort Inn - Plano 193,149 1,406,351 1,063,096 343,255 1.78 2,750,000
95 Parkside Aparments 169,664 496,312 273,423 222,889 1.31 2,390,000
137 Brookside Apartments 186,653 547,430 287,136 238,814 1.28 2,440,000
- ------------------------------------------------------------------------------------------------------------------------------------
162 Danubia Apartments 177,123 350,942 128,892 207,420 1.17 2,295,000
128 Super 8 - Whitewater, WI 185,332 644,623 378,120 266,503 1.44 2,425,000
218 Lakehurst Shurguard Mini-Storage 174,968 387,800 152,178 235,622 1.35 2,600,000
147 Holiday Inn Express-Mariposa 196,864 649,708 410,778 238,930 1.21 2,800,000
73 Creekview Apartments 157,325 447,300 231,068 216,232 1.37 2,450,000
- ------------------------------------------------------------------------------------------------------------------------------------
94 Wing Ong Plaza 169,558 403,849 180,201 213,589 1.26 2,350,000
4 Days Inn-Norfolk 185,164 652,949 354,135 298,814 1.61 2,300,000
161 Spring Ridge Apartments 166,994 1,008,954 693,991 261,063 1.56 2,800,000
90 Three Fountains Apartments 163,102 693,951 448,472 245,479 1.51 2,640,000
3 PP-Days Inn-Cody 184,014 596,651 332,512 264,139 1.44 2,300,000
- ------------------------------------------------------------------------------------------------------------------------------------
24 Westlake Business Center 156,419 308,268 104,077 197,258 1.26 2,300,000
114 Whispering Oaks Apartments 151,876 664,500 439,438 225,062 1.48 2,100,000
116 Falls of Maplewood Apts. 152,919 483,850 291,191 192,659 1.26 2,175,000
64 Greeley Super 8 Motel 175,529 634,419 363,026 271,394 1.55 2,200,000
136 Wyncreek Apartments 153,551 607,541 364,032 221,109 1.44 2,325,000
- ------------------------------------------------------------------------------------------------------------------------------------
146 Holiday Inn Express-Oakhurst 176,020 606,862 375,514 231,348 1.31 2,500,000
113 BDR - Francis Court V - Multifamily 136,877 550,393 366,164 184,229 1.35 2,650,000
91 Avenel Blockbuster 151,481 309,365 90,930 206,683 1.36 2,230,000
110 Cinnamon Tree Apartments 156,788 293,015 102,555 190,460 1.21 2,110,000
192 Hyde Park Mobile Estates 175,189 547,278 275,355 271,923 1.55 2,400,000
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CUT-OFF SQ FT, UNITS
CONTROL APPRAISAL DATE REPAYMENT YEAR BEDS, PADS
NO. PROPERTY NAME YEAR LTV LTV BUILT OR ROOM
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
117 Huntington Apartments 1997 71.06 67.82 1978 220 units
124 Days Inn-Union City 1997 65.27 - 1990 100 rooms
213 West Chase 1997 53.19 43.96 1985 64,709 sq ft
155 El Royale Apartments 1995 67.71 64.41 1990 98 Units
93 Barkwood Apartments 1996 74.50 66.96 1971 250 units
- --------------------------------------------------------------------------------------------------------------
204 Country Club 1996 72.81 68.59 1985 246 pads
149 Flower Avenue Shopping Center 1996 69.52 58.50 1950 50,798 Sq Ft
77 Hampton Inn - Houston 1997 69.49 - 1996 62 rooms
40 10 Corporate Park 1997 69.17 65.27 1989 36,182 sqft
180 Apopka Square Center 1996 70.39 62.64 1979 70,134 Sq Ft
- --------------------------------------------------------------------------------------------------------------
163 Harker Heights Shopping Center 1996 60.99 50.64 1979 143,724 Sq Ft
123 Peachwood Apartments 1997 75.00 69.61 s 66 units
34 Mountain Park Apartments 1997 53.99 44.64 1966 212 units
106 Ball Park Inn - Arlington 1996 62.05 - 1965 186 rooms
139 Holiday Inn - St. Augustine 1996 63.82 46.28 1962 122 Rooms
- --------------------------------------------------------------------------------------------------------------
32 Lincoln Village Apartments 1997 79.85 70.79 1980 115 units
145 Budgetel Inn - Atlanta Airport 1996 68.29 47.81 1988 101 Rooms
182 Markham Building 1996 66.89 56.06 1926 80,038 Sq Ft
17 Lochwood Apartments 1996 62.55 55.82 1958 198 units
35 Foxworth Apartments 1996 74.64 69.36 1986 64 units
- --------------------------------------------------------------------------------------------------------------
78 Holiday Inn Express 1997 62.60 - 1996 61 rooms
86 Goose Creek Plaza S. C. 1997 54.43 45.55 1984 74,215 sqft
209 6550 Collins 1997 74.96 64.21 1996 13,089 sq ft
52 Park Central 1997 69.59 58.58 1991 47,037 sqft
115 BDR - Sierra Point Apartments 1996 78.27 69.90 1991 100 units
- --------------------------------------------------------------------------------------------------------------
208 Tuckertown Village 1997 79.96 71.68 1985 155 pads
83 Springwood Apartments 1997 76.88 68.57 1981 152 units
211 Claire Tower 1997 75.41 62.77 1951 121 units
194 Morningstar Self Storage 1996 45.25 37.43 1983 131,555 sqft
70 Pinewood Place Mobile Home Park 1996 71.03 58.89 1985 216 pads
- --------------------------------------------------------------------------------------------------------------
58 Blue Mountain View Apartments 1996 75.65 67.70 1978 115 units
156 Terrytown Village Apartments 1995 69.86 63.10 1973 196 Units
148 Holiday Inn Express-Fresno 1996 57.52 26.45 1994 56 Rooms
100 Cherrywood Square Apartments 1997 79.27 65.16 1969 60 units
29 Willowbrook Business Park 1996 58.03 48.44 1980 50,585 sqft
- --------------------------------------------------------------------------------------------------------------
170 Marshall Plaza 1996 57.49 48.05 1974 131,868 Sq Ft
159 Valle Sereno Apartments 1995 51.70 - 1983 203 Units
36 New Peachtree Apartments 1997 74.46 61.28 1962 80 units
75 Greenview Apartments 1997 77.75 63.85 1970 68 units
99 Comfort Inn - Richardson 1997 58.06 - 1995 56 rooms
- --------------------------------------------------------------------------------------------------------------
157 Santa Fe Square 1996 63.69 60.33 1968 110 Units
127 Best Western-Courtyard Inn 1997 64.22 - 1990 60 rooms
121 Comfort Inn - Plano 1997 63.64 - 1987 104 rooms
95 Parkside Aparments 1996 72.94 59.93 1962 87 units
137 Brookside Apartments 1996 70.94 50.69 1968 86 Units
- --------------------------------------------------------------------------------------------------------------
162 Danubia Apartments 1996 74.46 70.67 1991 55 Units
128 Super 8 - Whitewater, WI 1997 70.10 - 1991 52 rooms
218 Lakehurst Shurguard Mini-Storage 1997 65.14 59.21 1989 36,176 sqft
147 Holiday Inn Express-Mariposa 1996 59.97 27.58 1994 46 Rooms
73 Creekview Apartments 1996 67.27 53.20 1986 66 units
- --------------------------------------------------------------------------------------------------------------
94 Wing Ong Plaza 1996 68.86 57.78 1986 28,340 sqft
4 Days Inn-Norfolk 1996 69.72 - 1992 61 rooms
161 Spring Ridge Apartments 1995 57.25 - 1963 196 Units
90 Three Fountains Apartments 1997 60.55 50.32 1974 170 units
3 PP-Days Inn-Cody 1996 69.28 - 1994 52 rooms
- --------------------------------------------------------------------------------------------------------------
24 Westlake Business Center 1996 69.23 57.08 1978 38,686 sqft
114 Whispering Oaks Apartments 1996 73.93 60.88 1977 180 units
116 Falls of Maplewood Apts. 1996 71.00 63.62 1974 108 units
64 Greeley Super 8 Motel 1996 69.52 - 1994 49 rooms
136 Wyncreek Apartments 1995 65.35 59.56 1964 112 Units
- --------------------------------------------------------------------------------------------------------------
146 Holiday Inn Express-Oakhurst 1996 60.05 27.61 1990 42 Rooms
113 BDR - Francis Court V - Multifamily 1996 56.39 50.04 1988 100 units
91 Avenel Blockbuster 1997 66.31 59.65 1991 11,435 sqft
110 Cinnamon Tree Apartments 1996 69.02 - 1996 64 units
192 Hyde Park Mobile Estates 1996 60.66 - 1965 118 pads
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
LOAN PER
SQ FT, UNIT INITIAL
CONTROL BED, PAD OCCUPANCY RESERVES
NO. PROPERTY NAME OR ROOM PERCENTAGE AT CLOSING
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
117 Huntington Apartments 11,401.99 / unit 90.45% -
124 Days Inn-Union City 25,000.00 / room NAP 22,344
213 West Chase 38.63 / sq ft 87.00% -
155 El Royale Apartments 25,217.45 / unit 89.00% 4,500
93 Barkwood Apartments 9,834.14 / unit 92.13% 241,688
- ----------------------------------------------------------------------------------------------------------------------
204 Country Club 9,915.05 / pad 100.00% 9,120
149 Flower Avenue Shopping Center 47.90 / sqft 97.00% 155,243
77 Hampton Inn - Houston 38,666.83 / room NAP -
40 10 Corporate Park 65.95 / sqft 100.00% -
180 Apopka Square Center 33.12 / sqft 97.00% -
- ----------------------------------------------------------------------------------------------------------------------
163 Harker Heights Shopping Center 15.91 / sqft 100.00% 12,072
123 Peachwood Apartments 34,090.91 / unit 94.90% 49,375
34 Mountain Park Apartments 10,593.85 / unit 91.04% 266,625
106 Ball Park Inn - Arlington 12,010.13 / room NAP 23,333
139 Holiday Inn - St. Augustine 18,307.72 / room NAP 5,626
- ----------------------------------------------------------------------------------------------------------------------
32 Lincoln Village Apartments 19,094.91 / unit 95.65% -
145 Budgetel Inn - Atlanta Airport 21,637.38 / room NAP 140,295
182 Markham Building 27.16 / sqft 94.00% 29,325
17 Lochwood Apartments 10,978.08 / unit 88.22% 201,864
35 Foxworth Apartments 33,238.83 / unit 95.31% 13,906
- ----------------------------------------------------------------------------------------------------------------------
78 Holiday Inn Express 34,379.71 / room NAP -
86 Goose Creek Plaza S. C. 27.87 / sqft 93.19% 107,875
209 6550 Collins 154.62 / sq ft 92.70% -
52 Park Central 42.90 / sqft 100.00% -
115 BDR - Sierra Point Apartments 20,153.48 / unit 78.97% -
- ----------------------------------------------------------------------------------------------------------------------
208 Tuckertown Village 12,896.34 / pad 94.00% 70,125
83 Springwood Apartments 13,150.43 / unit 92.76% 68,700
211 Claire Tower 16,514.74 / unit 98.00% -
194 Morningstar Self Storage 15.14 / sq ft 96.00% -
70 Pinewood Place Mobile Home Park 9,207.51 / pad 92.59% -
- ----------------------------------------------------------------------------------------------------------------------
58 Blue Mountain View Apartments 17,104.08 / unit 93.04% 54,569
156 Terrytown Village Apartments 9,980.45 / unit 97.00% 9,992
148 Holiday Inn Express-Fresno 34,923.85 / room NAP -
100 Cherrywood Square Apartments 32,500.00 / unit 90.00% 15,025
29 Willowbrook Business Park 38.09 / sqft 95.08% 82,949
- ----------------------------------------------------------------------------------------------------------------------
170 Marshall Plaza 14.39 / sqft 100.00% 87,942
159 Valle Sereno Apartments 9,118.18 / unit 95.00% 9,180
36 New Peachtree Apartments 23,081.41 / unit 98.75% 21,825
75 Greenview Apartments 27,153.84 / unit 95.59% 15,250
99 Comfort Inn - Richardson 32,142.86 / room NAP -
- ----------------------------------------------------------------------------------------------------------------------
157 Santa Fe Square 16,213.12 / unit 96.00% 17,625
127 Best Western-Courtyard Inn 29,166.67 / room NAP -
121 Comfort Inn - Plano 16,826.92 / room NAP 36,250
95 Parkside Aparments 20,036.66 / unit 91.95% 27,694
137 Brookside Apartments 20,126.05 / unit 92.00% 93,665
- ----------------------------------------------------------------------------------------------------------------------
162 Danubia Apartments 31,069.39 / unit 93.00% 802
128 Super 8 - Whitewater, WI 32,692.31 / room NAP -
218 Lakehurst Shurguard Mini-Storage 46.82 / sqft 93.00% -
147 Holiday Inn Express-Mariposa 36,503.63 / room NAP 81,027
73 Creekview Apartments 24,971.78 / unit 90.91% 32,500
- ----------------------------------------------------------------------------------------------------------------------
94 Wing Ong Plaza 57.10 / sqft 100.00% -
4 Days Inn-Norfolk 26,286.94 / room NAP -
161 Spring Ridge Apartments 8,178.49 / unit 96.00% 86,175
90 Three Fountains Apartments 9,403.58 / unit 88.43% 72,656
3 PP-Days Inn-Cody 30,645.07 / room NAP 29,912
- ----------------------------------------------------------------------------------------------------------------------
24 Westlake Business Center 41.16 / sqft 96.90% 18,975
114 Whispering Oaks Apartments 8,624.70 / unit 97.59% 28,935
116 Falls of Maplewood Apts. 14,297.89 / unit 95.37% 41,278
64 Greeley Super 8 Motel 31,211.88 / room NAP -
136 Wyncreek Apartments 13,565.47 / unit 98.00% 124,867
- ----------------------------------------------------------------------------------------------------------------------
146 Holiday Inn Express-Oakhurst 35,746.97 / room NAP 72,573
113 BDR - Francis Court V - Multifamily 14,943.13 / unit 99.00% 213,012
91 Avenel Blockbuster 129.32 / sqft 100.00% -
110 Cinnamon Tree Apartments 22,754.00 / unit 98.44% -
192 Hyde Park Mobile Estates 12,337.06 / pad 94.00% 109,638
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
ADMINISTRATIVE
CONTROL UNDERWRITING COST
NO. PROPERTY NAME RESERVES RATE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
117 Huntington Apartments 250 per unit 0.005
124 Days Inn-Union City 4% of gross rev. 0.005
213 West Chase 0.15 per sq ft 0.005
155 El Royale Apartments 371 Per Unit 0.255
93 Barkwood Apartments 275 per unit 0.065
- ---------------------------------------------------------------------------------------------------------------------------
204 Country Club 25 per pad 0.005
149 Flower Avenue Shopping Center 0.15 Per Sq Ft 0.130
77 Hampton Inn - Houston 4% of gross rev. 0.005
40 10 Corporate Park 0.15 per sq. ft. 0.065
180 Apopka Square Center 0.15 Per Sq Ft 0.130
- ---------------------------------------------------------------------------------------------------------------------------
163 Harker Heights Shopping Center 0.23 Per Sq Ft 0.130
123 Peachwood Apartments 250 per unit 0.065
34 Mountain Park Apartments 250 per unit 0.005
106 Ball Park Inn - Arlington 4% of gross rev. 0.005
139 Holiday Inn - St. Augustine 464.8 Per Room 0.130
- ---------------------------------------------------------------------------------------------------------------------------
32 Lincoln Village Apartments 253 per unit 0.005
145 Budgetel Inn - Atlanta Airport 489.22 Per Room 0.130
182 Markham Building 0.37 Per Sq Ft 0.130
17 Lochwood Apartments 300 per unit 0.005
35 Foxworth Apartments 250 per unit 0.065
- ---------------------------------------------------------------------------------------------------------------------------
78 Holiday Inn Express 4% of gross rev. 0.005
86 Goose Creek Plaza S. C. 0.16 per sq. ft. 0.005
209 6550 Collins 0.15 per sq ft 0.005
52 Park Central 0.15 per sq. ft. 0.005
115 BDR - Sierra Point Apartments 225 per unit 0.005
- ---------------------------------------------------------------------------------------------------------------------------
208 Tuckertown Village 89.25 per pad 0.005
83 Springwood Apartments 303.39 per unit 0.005
211 Claire Tower 275 per unit 0.005
194 Morningstar Self Storage 0.15 per sq ft 0.005
70 Pinewood Place Mobile Home Park 50 per pad 0.005
- ---------------------------------------------------------------------------------------------------------------------------
58 Blue Mountain View Apartments 250 per unit 0.005
156 Terrytown Village Apartments 150 Per Unit 0.255
148 Holiday Inn Express-Fresno 769 Per Room 0.130
100 Cherrywood Square Apartments 250 per unit 0.005
29 Willowbrook Business Park 0.15 per sq. ft. 0.005
- ---------------------------------------------------------------------------------------------------------------------------
170 Marshall Plaza 0.2 Per Sq Ft 0.130
159 Valle Sereno Apartments 145.28 Per Unit 0.255
36 New Peachtree Apartments 250 per unit 0.005
75 Greenview Apartments 250 per unit 0.005
99 Comfort Inn - Richardson 4% of gross rev. 0.005
- ---------------------------------------------------------------------------------------------------------------------------
157 Santa Fe Square 220 Per Unit 0.255
127 Best Western-Courtyard Inn 4% of gross rev. 0.005
121 Comfort Inn - Plano 4% of gross rev. 0.005
95 Parkside Aparments 250 per unit 0.005
137 Brookside Apartments 249.77 Per Unit 0.130
- ---------------------------------------------------------------------------------------------------------------------------
162 Danubia Apartments 266 Per Unit 0.255
128 Super 8 - Whitewater, WI 4% of gross rev. 0.005
218 Lakehurst Shurguard Mini-Storage 0.2 per sq ft 0.005
147 Holiday Inn Express-Mariposa 744 Per Room 0.130
73 Creekview Apartments 200 per unit 0.005
- ---------------------------------------------------------------------------------------------------------------------------
94 Wing Ong Plaza 0.15 per sq. ft. 0.005
4 Days Inn-Norfolk 4% of gross rev. 0.005
161 Spring Ridge Apartments 275 Per Unit 0.255
90 Three Fountains Apartments 275 per unit 0.005
3 PP-Days Inn-Cody 4% of gross rev. 0.005
- ---------------------------------------------------------------------------------------------------------------------------
24 Westlake Business Center 0.19 per sq. ft. 0.005
114 Whispering Oaks Apartments 250 per unit 0.005
116 Falls of Maplewood Apts. 250 per unit 0.005
64 Greeley Super 8 Motel 4% of gross rev. 0.005
136 Wyncreek Apartments 200 Per Unit 0.360
- ---------------------------------------------------------------------------------------------------------------------------
146 Holiday Inn Express-Oakhurst 773 Per Room 0.130
113 BDR - Francis Court V - Multifamily 251 per unit 0.005
91 Avenel Blockbuster 0.15 per sq. ft. 0.065
110 Cinnamon Tree Apartments 250 per unit 0.005
192 Hyde Park Mobile Estates 58.35 per pad 0.005
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LARGEST RETAIL TENANT
-----------------------------------------------------------------------------
CONTROL AREA LEASED LEASE CONTROL
NO. PROPERTY NAME NAME (SQ. FT.) EXP DATE NO.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
117 Huntington Apartments 117
124 Days Inn-Union City 124
213 West Chase Tans You 6,322 11/01/99 213
155 El Royale Apartments 155
93 Barkwood Apartments 93
- ------------------------------------------------------------------------------------------------------------------------------------
204 Country Club 204
149 Flower Avenue Shopping Center Entertainment Unlimited, Inc. 11,000 05/31/06 149
77 Hampton Inn - Houston 77
40 10 Corporate Park Sign Biz Inc. 6,203 04/14/99 40
180 Apopka Square Center Winn Dixie Stores, Inc 32,907 12/14/00 180
- ------------------------------------------------------------------------------------------------------------------------------------
163 Harker Heights Shopping Center Winn-Dixie Texas, Inc. 45,924 03/07/16 163
123 Peachwood Apartments 123
34 Mountain Park Apartments 34
106 Ball Park Inn - Arlington 106
139 Holiday Inn - St. Augustine 139
- ------------------------------------------------------------------------------------------------------------------------------------
32 Lincoln Village Apartments 32
145 Budgetel Inn - Atlanta Airport 145
182 Markham Building Global Financial Aid 6,212 03/31/97 182
17 Lochwood Apartments 17
35 Foxworth Apartments 35
- ------------------------------------------------------------------------------------------------------------------------------------
78 Holiday Inn Express 78
86 Goose Creek Plaza S. C. Plitt Cinema 18,000 10/31/97 86
209 6550 Collins Blockbuster Video 6,780 08/31/06 209
52 Park Central Salvation Army 9,230 05/31/02 52
115 BDR - Sierra Point Apartments 115
- ------------------------------------------------------------------------------------------------------------------------------------
208 Tuckertown Village 208
83 Springwood Apartments 83
211 Claire Tower 211
194 Morningstar Self Storage 194
70 Pinewood Place Mobile Home Park 70
- ------------------------------------------------------------------------------------------------------------------------------------
58 Blue Mountain View Apartments 58
156 Terrytown Village Apartments 156
148 Holiday Inn Express-Fresno 148
100 Cherrywood Square Apartments 100
29 Willowbrook Business Park Ale Blazers Grandstand 5,440 07/31/98 29
- ------------------------------------------------------------------------------------------------------------------------------------
170 Marshall Plaza Fleming Supermarkets, Inc. 43,121 02/28/05 170
159 Valle Sereno Apartments 159
36 New Peachtree Apartments 36
75 Greenview Apartments 75
99 Comfort Inn - Richardson 99
- ------------------------------------------------------------------------------------------------------------------------------------
157 Santa Fe Square 157
127 Best Western-Courtyard Inn 127
121 Comfort Inn - Plano 121
95 Parkside Aparments 95
137 Brookside Apartments 137
- ------------------------------------------------------------------------------------------------------------------------------------
162 Danubia Apartments 162
128 Super 8 - Whitewater, WI 128
218 Lakehurst Shurguard Mini-Storage 218
147 Holiday Inn Express-Mariposa 147
73 Creekview Apartments 73
- ------------------------------------------------------------------------------------------------------------------------------------
94 Wing Ong Plaza Walgreen 13,560 12/31/14 94
4 Days Inn-Norfolk 4
161 Spring Ridge Apartments 161
90 Three Fountains Apartments 90
3 PP-Days Inn-Cody 3
- ------------------------------------------------------------------------------------------------------------------------------------
24 Westlake Business Center Delson 5,230 01/31/98 24
114 Whispering Oaks Apartments 114
116 Falls of Maplewood Apts. 116
64 Greeley Super 8 Motel 64
136 Wyncreek Apartments 136
- ------------------------------------------------------------------------------------------------------------------------------------
146 Holiday Inn Express-Oakhurst 146
113 BDR - Francis Court V - Multifamily 113
91 Avenel Blockbuster Blockbuster 6,969 12/14/00 91
110 Cinnamon Tree Apartments 110
192 Hyde Park Mobile Estates 192
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
ANNEX A
<TABLE>
<CAPTION>
CONTROL
NO. PROPERTY NAME ADDRESS CITY STATE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
200 The Chalet 6115 Jack Finney Boulevard Greenville TX
84 Woodley Downs Apartments 3923 Wodley Road Montgomery AL
134 River Oaks Village Shopping Cr 3700 Lorna Road Hoover AL
37 Ashdale Garden Apartments 2450 Ashdale Drive Austin TX
62 Club Secane Apartments 100 Oak Lane Darby Township PA
- --------------------------------------------------------------------------------------------------------------------------------
6 Ramada Limited - Austin 9102 Burnett Road Austin TX
16 Eastgate Square Shopping Center 164 U.S. Highway 17 East Palatka FL
111 BDR - Francis Court III - Multifamily 1621 West Rialto Avenue Rialto CA
195 Oak Meadow Park 31750 NW Pacific North Plains OR
135 Wyncove Apartments 3251 Commerce Drive East Point GA
- --------------------------------------------------------------------------------------------------------------------------------
143 Riverview Apartments 78 Pheasant Road Peterborough NH
80 Mill Run Apartments 2732 W. Colorado Dallas TX
82 Ho Jo Inn - Wilmington 3901 Market Street Wilmington NC
11 Casa Del Sol Apartments 14250 Borego Road Victorville CA
38 Western Apartments 411 North Avenue Trinidad CO
- --------------------------------------------------------------------------------------------------------------------------------
89 Sherwood Court Apartments 4503-4531 McPherson Ave. St Louis MO
53 Lindberg Station 711 Morosgo Drive, N.E. Atlanta GA
25 Oregon Building 494 State Street Salem OR
79 Telstar Apartments 510 Westmount Dallas TX
112 BDR - Francis Court IV - Multifamily 1680 West Rialto Avenue Rialto CA
- --------------------------------------------------------------------------------------------------------------------------------
21 Guild Building 7912 Bonhomme Ave. St. Louis MO
98 Crestridge Apartments 6417 Ridgecrest Road Dallas TX
142 2-8 Washington Avenue 2-8 Washington Avenue Chelsea MA
<CAPTION>
% OF CUMULATIVE
CUT-OFF INITIAL INITIAL
CONTROL ZIP ORIGINAL DATE POOL % OF POOL
NO. PROPERTY NAME CODE BALANCE BALANCE BALANCE BALANCE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
200 The Chalet 75402 1,462,000 1,455,097 0.17 96.91
84 Woodley Downs Apartments 36116 1,450,000 1,448,689 0.17 97.09
134 River Oaks Village Shopping Cr 35216 1,600,000 1,402,154 0.17 97.25
37 Ashdale Garden Apartments 78757 1,400,000 1,396,585 0.17 97.42
62 Club Secane Apartments 19036 1,400,000 1,391,566 0.17 97.58
- -----------------------------------------------------------------------------------------------------------------------
6 Ramada Limited - Austin 78758 1,400,000 1,389,664 0.16 97.75
16 Eastgate Square Shopping Center 32131 1,376,000 1,371,084 0.16 97.91
111 BDR - Francis Court III - Multifamily 92376 1,350,000 1,344,882 0.16 98.07
195 Oak Meadow Park 97133 1,345,000 1,343,474 0.16 98.23
135 Wyncove Apartments 30344 1,350,000 1,322,582 0.16 98.39
- -----------------------------------------------------------------------------------------------------------------------
143 Riverview Apartments 03458 1,315,000 1,303,659 0.15 98.54
80 Mill Run Apartments 75211 1,230,000 1,228,914 0.15 98.69
82 Ho Jo Inn - Wilmington 28403 1,223,000 1,220,098 0.14 98.83
11 Casa Del Sol Apartments 92392 1,200,000 1,195,781 0.14 98.97
38 Western Apartments 81082 1,200,000 1,195,368 0.14 99.12
- -----------------------------------------------------------------------------------------------------------------------
89 Sherwood Court Apartments 63108 1,160,000 1,159,373 0.14 99.25
53 Lindberg Station 30324 1,100,000 1,093,309 0.13 99.38
25 Oregon Building 97301 1,000,000 998,025 0.12 99.50
79 Telstar Apartments 75211 988,000 987,128 0.12 99.62
112 BDR - Francis Court IV - Multifamily 92376 850,000 846,778 0.10 99.72
- -----------------------------------------------------------------------------------------------------------------------
21 Guild Building 63105 850,000 846,082 0.10 99.82
98 Crestridge Apartments 75231 800,000 799,530 0.09 99.92
142 2-8 Washington Avenue 02150 715,000 708,991 0.08 100.00
<CAPTION>
STATED ORIG REM
ORIG REM AMORT AMORT
CONTROL MORTGAGE TERM TERM TERM TERM ORIG REPAYMENT
NO. PROPERTY NAME RATE (MOS.) (MOS.) (MOS.) (MOS.) DATE DATE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
200 The Chalet 8.450 120 115 300 295 12/30/96 01/01/07
84 Woodley Downs Apartments 8.920 180 179 300 299 04/09/97 05/01/12
134 River Oaks Village Shopping Cr 8.875 180 140 180 140 01/12/94 02/01/09
37 Ashdale Garden Apartments 8.520 120 116 360 356 01/08/97 02/01/07
62 Club Secane Apartments 8.390 120 114 300 294 11/26/96 12/01/06
- -------------------------------------------------------------------------------------------------------------------------------
6 Ramada Limited - Austin 9.230 240 235 240 235 12/17/96 01/01/17
16 Eastgate Square Shopping Center 9.060 120 116 300 296 01/29/97 02/01/07
111 BDR - Francis Court III - Multifamily 8.380 120 114 360 354 11/26/96 12/01/06
195 Oak Meadow Park 8.840 120 (A) 118 (A) 360 358 03/24/97 04/01/07
135 Wyncove Apartments 10.350 84 58 300 274 03/14/95 04/01/02
- -------------------------------------------------------------------------------------------------------------------------------
143 Riverview Apartments 8.910 60 51 300 291 08/14/96 09/01/01
80 Mill Run Apartments 9.060 180 179 300 299 04/16/97 05/01/12
82 Ho Jo Inn - Wilmington 10.180 180 179 180 179 04/09/97 05/01/12
11 Casa Del Sol Apartments 8.750 120 114 360 354 11/20/96 12/01/06
38 Western Apartments 8.590 120 116 300 296 01/09/97 02/01/07
- -------------------------------------------------------------------------------------------------------------------------------
89 Sherwood Court Apartments 9.050 120 119 360 359 04/24/97 05/01/07
53 Lindberg Station 8.330 120 114 300 294 11/26/96 12/01/06
25 Oregon Building 9.340 120 117 330 327 02/05/97 03/01/07
79 Telstar Apartments 9.060 180 179 300 299 04/15/97 05/01/12
112 BDR - Francis Court IV - Multifamily 8.380 120 114 360 354 11/26/96 12/01/06
- -------------------------------------------------------------------------------------------------------------------------------
21 Guild Building 8.890 84 79 300 295 12/12/96 01/01/04
98 Crestridge Apartments 8.650 60 59 360 359 04/30/97 05/01/02
142 2-8 Washington Avenue 9.570 120 110 300 290 07/30/96 08/01/06
<CAPTION>
BALLOON/
CONTROL REPAYMENT
NO. PROPERTY NAME BALANCE PROPERTY TYPE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
200 The Chalet 1,194,038 Multifamily
84 Woodley Downs Apartments 957,597 Multifamily
134 River Oaks Village Shopping Cr - Unanchored Retail
37 Ashdale Garden Apartments 1,240,912 Multifamily
62 Club Secane Apartments 1,141,732 Multifamily
- ---------------------------------------------------------------------------------------------------------------
6 Ramada Limited - Austin - Hospitality
16 Eastgate Square Shopping Center 1,140,056 Anchored Retail
111 BDR - Francis Court III - Multifamily 1,193,353 Multifamily
195 Oak Meadow Park 1,199,343 Mobile Home Park
135 Wyncove Apartments 1,232,520 Multifamily
- ---------------------------------------------------------------------------------------------------------------
143 Riverview Apartments 1,224,969 Multifamily
80 Mill Run Apartments 816,743 Multifamily
82 Ho Jo Inn - Wilmington - Hospitality
11 Casa Del Sol Apartments 1,068,269 Multifamily
38 Western Apartments 983,373 Multifamily
- ---------------------------------------------------------------------------------------------------------------
89 Sherwood Court Apartments 1,038,313 Multifamily
53 Lindberg Station 895,757 Multifamily
25 Oregon Building 871,154 Office
79 Telstar Apartments 656,051 Multifamily
112 BDR - Francis Court IV - Multifamily 751,371 Multifamily
- ---------------------------------------------------------------------------------------------------------------
21 Guild Building 760,473 Office
98 Crestridge Apartments 764,883 Multifamily
142 2-8 Washington Avenue 599,145 Multifamily/Retail
<CAPTION>
CONTROL
NO. PROPERTY NAME PREPAYMENT RESTRICTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
200 The Chalet 3 year lock, >1% or YM through yr 9 3/4, open last 3 months
84 Woodley Downs Apartments 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months
134 River Oaks Village Shopping Cr 2 yr lock, >1% or YM through yr 14.75, open last 3 mos
37 Ashdale Garden Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
62 Club Secane Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
6 Ramada Limited - Austin 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months
16 Eastgate Square Shopping Center 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
111 BDR - Francis Court III - Multifamily 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
195 Oak Meadow Park 5 year lock, >1% or YM through yr 9 3/4, open last 3 months
135 Wyncove Apartments 2 yr lock, >1% or YM through yr 6.5, open last 6 mos
- ------------------------------------------------------------------------------------------------------------------------------------
143 Riverview Apartments 4.5 yr lock, open last 6 mos
80 Mill Run Apartments 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months
82 Ho Jo Inn - Wilmington 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months
11 Casa Del Sol Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
38 Western Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
89 Sherwood Court Apartments 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
53 Lindberg Station 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
25 Oregon Building 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
79 Telstar Apartments 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months
112 BDR - Francis Court IV - Multifamily 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months
- ------------------------------------------------------------------------------------------------------------------------------------
21 Guild Building 4 yr lock, yearly @ 4%, 3, 6 mos @ 2%, 3 mos @ 1%, open last 3 months
98 Crestridge Apartments 3 yr lock, >1% or YM through yr 4 1/2, open last 6 months
142 2-8 Washington Avenue 5 yr lock, >1%orYM through yr 7, yearly @ 3%, 2%, 6 mos @ 1%, open last 6 mos
<CAPTION>
ANNUAL
CONTROL DEBT TOTAL TOTAL APPRAISED
NO. PROPERTY NAME SERVICE REVENUE EXPENSE NCF DSCR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
200 The Chalet 140,678 510,979 333,543 177,436 1.26 1,950,000
84 Woodley Downs Apartments 145,068 512,660 325,845 186,814 1.29 1,925,000
134 River Oaks Village Shopping Cr 193,314 451,800 161,280 263,256 1.36 2,550,000
37 Ashdale Garden Apartments 129,416 335,367 175,373 159,994 1.24 1,750,000
62 Club Secane Apartments 134,035 443,092 279,037 164,055 1.22 1,900,000
- ------------------------------------------------------------------------------------------------------------------------------------
6 Ramada Limited - Austin 153,648 573,222 357,123 216,099 1.41 2,020,000
16 Eastgate Square Shopping Center 139,247 386,217 135,242 235,204 1.69 2,235,000
111 BDR - Francis Court III - Multifamily 123,189 427,723 252,650 175,073 1.42 2,000,000
195 Oak Meadow Park 128,016 240,728 87,103 153,625 1.20 1,950,000
135 Wyncove Apartments 151,225 574,516 329,115 223,801 1.48 2,165,000
- ------------------------------------------------------------------------------------------------------------------------------------
143 Riverview Apartments 131,454 427,700 206,050 192,850 1.47 2,200,000
80 Mill Run Apartments 124,472 648,876 490,242 158,634 1.27 1,725,000
82 Ho Jo Inn - Wilmington 159,329 603,838 388,605 215,232 1.35 2,250,000
11 Casa Del Sol Apartments 113,285 303,697 154,323 149,374 1.32 2,000,000
38 Western Apartments 116,827 301,382 147,337 154,044 1.32 1,600,000
- ------------------------------------------------------------------------------------------------------------------------------------
89 Sherwood Court Apartments 112,505 295,812 153,272 142,540 1.27 1,500,000
53 Lindberg Station 104,782 278,274 127,278 150,996 1.44 1,430,000
25 Oregon Building 101,237 314,231 145,457 133,209 1.32 1,750,000
79 Telstar Apartments 99,983 527,333 402,242 125,091 1.25 1,350,000
112 BDR - Francis Court IV - Multifamily 77,563 261,760 160,356 101,404 1.31 1,250,000
- ------------------------------------------------------------------------------------------------------------------------------------
21 Guild Building 84,831 281,476 140,391 112,979 1.33 1,550,000
98 Crestridge Apartments 74,839 390,139 291,252 98,887 1.32 1,500,000
142 2-8 Washington Avenue 75,381 193,487 79,049 104,465 1.39 1,100,000
<CAPTION>
CUT-OFF SQ FT, UNITS
CONTROL APPRAISAL DATE REPAYMENT YEAR BEDS, PADS
NO. PROPERTY NAME YEAR LTV LTV BUILT OR ROOM
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
200 The Chalet 1996 74.62 61.23 1978 120 units
84 Woodley Downs Apartments 1997 75.26 49.75 1978 120 units
134 River Oaks Village Shopping Cr 1993 54.99 - 1978 37,514 Sq Ft
37 Ashdale Garden Apartments 1996 79.80 70.91 1981 58 units
62 Club Secane Apartments 1996 73.24 60.09 1972 72 units
- --------------------------------------------------------------------------------------------------------------
6 Ramada Limited - Austin 1996 68.80 - 1986 40 rooms
16 Eastgate Square Shopping Center 1996 61.35 51.01 1978 57,864 sqft
111 BDR - Francis Court III - Multifamily 1996 67.24 59.67 1990 68 units
195 Oak Meadow Park 1997 68.90 61.50 1992 57 pads
135 Wyncove Apartments 1995 61.09 56.93 1974 108 Units
- --------------------------------------------------------------------------------------------------------------
143 Riverview Apartments 1996 59.26 55.68 1971 96 Units
80 Mill Run Apartments 1997 71.24 47.35 1969 112 units
82 Ho Jo Inn - Wilmington 1996 54.23 - 1987 80 rooms
11 Casa Del Sol Apartments 1996 59.79 53.41 1993 56 units
38 Western Apartments 1996 74.71 61.46 1968 60 units
- --------------------------------------------------------------------------------------------------------------
89 Sherwood Court Apartments 1997 77.29 69.22 1906 66 units
53 Lindberg Station 1996 76.46 62.64 1961 42 units
25 Oregon Building 1996 57.03 49.78 1912 31,470 sqft
79 Telstar Apartments 1997 73.12 48.60 1969 100 units
112 BDR - Francis Court IV - Multifamily 1996 67.74 60.11 1990 44 units
- --------------------------------------------------------------------------------------------------------------
21 Guild Building 1996 54.59 49.06 1954 22,555 sqft
98 Crestridge Apartments 1997 53.30 50.99 1981 110 units
142 2-8 Washington Avenue 1996 64.45 54.47 1910 16 Units
<CAPTION>
LOAN PER
SQ FT, UNIT INITIAL
CONTROL BED, PAD OCCUPANCY RESERVES
NO. PROPERTY NAME OR ROOM PERCENTAGE AT CLOSING
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
200 The Chalet 12,125.81 / unit 97.50% 1,000
84 Woodley Downs Apartments 12,072.41 / unit 85.00% 49,750
134 River Oaks Village Shopping Cr 37.38 / sqft 95.00% 313
37 Ashdale Garden Apartments 24,079.06 / unit 98.28% 3,773
62 Club Secane Apartments 19,327.31 / unit 94.44% 8,219
- ----------------------------------------------------------------------------------------------------------------------
6 Ramada Limited - Austin 34,741.60 / room NAP -
16 Eastgate Square Shopping Center 23.69 / sqft 96.89% -
111 BDR - Francis Court III - Multifamily 19,777.68 / unit 97.06% -
195 Oak Meadow Park 23,569.73 / pad 100.00% -
135 Wyncove Apartments 12,246.13 / unit 96.00% 23,800
- ----------------------------------------------------------------------------------------------------------------------
143 Riverview Apartments 13,579.78 / unit 90.00% 221,450
80 Mill Run Apartments 10,972.44 / unit 91.37% -
82 Ho Jo Inn - Wilmington 15,251.22 / room NAP -
11 Casa Del Sol Apartments 21,353.24 / unit 87.50% -
38 Western Apartments 19,922.80 / unit 100.00% -
- ----------------------------------------------------------------------------------------------------------------------
89 Sherwood Court Apartments 17,566.26 / unit 100.00% -
53 Lindberg Station 26,031.16 / unit 97.62% 17,348
25 Oregon Building 31.71 / sqft 97.39% -
79 Telstar Apartments 9,871.28 / unit 93.00% 45,000
112 BDR - Francis Court IV - Multifamily 19,244.94 / unit 96.97% -
- ----------------------------------------------------------------------------------------------------------------------
21 Guild Building 37.51 / sqft 97.07% 5,375
98 Crestridge Apartments 7,268.46 / unit 91.82% 20,691
142 2-8 Washington Avenue 44,311.95 / unit 100.00% 568
<CAPTION>
ADMINISTRATIVE
CONTROL UNDERWRITING COST
NO. PROPERTY NAME RESERVES RATE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
200 The Chalet 200 per unit 0.005
84 Woodley Downs Apartments 250 per unit 0.005
134 River Oaks Village Shopping Cr 0.1 Per Sq Ft 0.230
37 Ashdale Garden Apartments 250 per unit 0.005
62 Club Secane Apartments 250 per unit 0.005
- ---------------------------------------------------------------------------------------------------------------------------
6 Ramada Limited - Austin 4% of gross rev. 0.005
16 Eastgate Square Shopping Center 0.15 per sq. ft. 0.005
111 BDR - Francis Court III - Multifamily 250 per unit 0.005
195 Oak Meadow Park 25 per pad 0.005
135 Wyncove Apartments 200 Per Unit 1.940
- ---------------------------------------------------------------------------------------------------------------------------
143 Riverview Apartments 300 Per Unit 0.130
80 Mill Run Apartments 250 per unit 0.005
82 Ho Jo Inn - Wilmington 4% of gross rev. 0.005
11 Casa Del Sol Apartments 200 per unit 0.065
38 Western Apartments 250 per unit 0.005
- ---------------------------------------------------------------------------------------------------------------------------
89 Sherwood Court Apartments 200 per unit 0.005
53 Lindberg Station 250 per unit 0.005
25 Oregon Building 0.24 per sq. ft. 0.065
79 Telstar Apartments 250 per unit 0.005
112 BDR - Francis Court IV - Multifamily 250 per unit 0.005
- ---------------------------------------------------------------------------------------------------------------------------
21 Guild Building 0.15 per sq. ft. 0.005
98 Crestridge Apartments 250 per unit 0.005
142 2-8 Washington Avenue 322 Per Unit 0.130
<CAPTION>
LARGEST RETAIL TENANT
-----------------------------------------------------------------------------
CONTROL AREA LEASED LEASE CONTROL
NO. PROPERTY NAME NAME (SQ. FT.) EXP DATE NO.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
200 The Chalet 200
84 Woodley Downs Apartments 84
134 River Oaks Village Shopping Cr M/H Dunham dba Enchanted Attic 4,029 12/31/97 134
37 Ashdale Garden Apartments 37
62 Club Secane Apartments 62
- ------------------------------------------------------------------------------------------------------------------------------------
6 Ramada Limited - Austin 6
16 Eastgate Square Shopping Center Miller Grocery 24,800 06/14/14 16
111 BDR - Francis Court III - Multifamily 111
195 Oak Meadow Park 195
135 Wyncove Apartments 135
- ------------------------------------------------------------------------------------------------------------------------------------
143 Riverview Apartments 143
80 Mill Run Apartments 80
82 Ho Jo Inn - Wilmington 82
11 Casa Del Sol Apartments 11
38 Western Apartments 38
- ------------------------------------------------------------------------------------------------------------------------------------
89 Sherwood Court Apartments 89
53 Lindberg Station 53
25 Oregon Building Bagel Basket 7,000 01/31/01 25
79 Telstar Apartments 79
112 BDR - Francis Court IV - Multifamily 112
- ------------------------------------------------------------------------------------------------------------------------------------
21 Guild Building Metropolitan Title 3,922 04/30/00 21
98 Crestridge Apartments 98
142 2-8 Washington Avenue Store 24 2,310 02/28/01 142
</TABLE>
- ----------
(A) These Mortgage Loans are Hyperamortization Loans. Each of their Original
Terms and Stated Remaining Terms are based upon their respective Expected
Repayment Dates and not their Maturity Dates.
(B) The Monthly Payments currently provide for interest only payments.
Beginning on August 1, 1999 through the Maturity Date thereof, payment of
interest and principal will be due.
(C) Provides for payments of Treasury Spread Maintenance, which are not
considered a form of call protection.
<PAGE>
<TABLE>
<CAPTION>
[LOGO MERRILL LYNCH] MORTGAGE SECURITY NEW ISSUE TERM SHEET JUNE 5, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
$745,386,000 (APPROXIMATE) ANNEX B
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C1
CLASS A-1, A-2, A-3, B, C, D, E AND IO
Moody's/S&P/ Initial Weighted Cash Flow or
Fitch Certificate % of Credit Pass- Average Principal
Class Rating (1) Balances(2) Initial Pool(2) Support Bond Type Through Rate Life (years) Window(3)
- ----- ---------- ----------- --------------- ------- ------------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 Aaa/AAA/AAA $252.4 30.0% 29.5% Fixed Coupon % 5.0 07/97 - 02/04
A-2 Aaa/AAA/AAA 86.4 10.3 29.5 Fixed Coupon % 7.5 02/04 - 06/06
A-3 Aaa/AAA/AAA 255.0 30.3 29.5 Fixed Coupon % 9.6 06/06 - 05/07
B Aa2/AA/AA 46.3 5.5 24.0 Fixed Coupon % 9.9 05/07 - 05/07
C A2/A/A 46.3 5.5 18.5 Fixed Coupon % 10.0 05/07 - 06/07
D Baa2/BBB/NR 42.1 5.0 13.5 Fixed Coupon % 10.5 06/07 - 04/09
E Baa3/BBB-/NR 16.8 2.0 11.5 Fixed Coupon % 12.1 04/09 - 04/10
F (6) 50.5 6.0 5.5 Fixed Coupon % 14.8 04/10 - 05/14
G (6) 8.4 1.0 4.5 Fixed Coupon % 17.3 05/14 - 03/15
H (6) 16.8 2.0 2.5 Fixed Coupon % 18.5 03/15 - 08/16
J (6) 21.1 2.5 0.0 Fixed Coupon % 21.0 08/16 - 06/22
IO Aaa/NR/AA (4) N/A N/A Variable I/O Strip (5) N/A 07/97 - 06/22
<FN>
- ----------
(1) By each of Moody's Investors Service, Inc., Standard & Poor's Ratings Services (except with respect to the Class IO
Certificates) and Fitch Investors Service, L.P. (except with respect to the Class D and Class E Certificates).
(2) Subject to a permitted variance of plus or minus 5%.
(3) Based on Scenario (1) set forth under "YIELD AND MATURITY CONSIDERATIONS-Weighted Average Life" in the Prospectus Supplement.
(4) The Class IO Certificates will not have a Certificate Balance nor will they entitle the holders thereof to receive distributions
of principal.
(5) Holders of the Class IO Certificates will be entitled to receive distributions of interest in an amount equal to the aggregate
interest accrued on the notional amount of each of its Components, as described herein.
(6) Not offered hereby. Accordingly, any information regarding the terms of any such Class of Certificates is provided solely
because of its potential relevance to a prospective purchaser of an Offered Certificate.
- ------------------------------------------------------------------------------------------------------------------------------------
</FN>
</TABLE>
KEY FEATURES:
o PASS-THROUGH STRUCTURE: Senior/subordinated, sequential pay pass-through
bonds.
o UNDERWRITERS: Merrill Lynch & Co., Daiwa Securities America Inc.
o DEPOSITOR: Merrill Lynch Mortgage Investors, Inc.
o MASTER SERVICER: GE Capital Asset Management Corporation
o SPECIAL SERVICER: GE Capital Realty Group, Inc.
o TRUSTEE: LaSalle National Bank
o INITIAL EXTENSION ADVISER: LaSalle National Bank
o INTEREST ACCRUAL PERIOD: 1st to the 1st (17 day delay).
o DISTRIBUTION: 18th day of the month.
o DELIVERY: The Depository Trust Company ("DTC") through Cede & Co.
o ERISA: Only Classes A-1, A-2, A-3 and Class IO Certificates are ERISA
eligible subject to certain conditions for eligibility.
o SMMEA: None of the Offered Securities is SMMEA eligible.
o TAX TREATMENT: REMIC.
o OPTIONAL TERMINATION: 1% clean up call.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
[LOGO MERRILL LYNCH] THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY PURSUANT TO A DEFINITIVE PROSPECTUS AND
(212) 449-3860 PRELIMINARY PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS WHO CONSIDER PURCHASING ANY SUCH
SECURITIES ARE ADVISED TO CAREFULLY READ, AND SHOULD RELY SOLELY ON THE DETAILED INFORMATION
APPEARING IN THE PROSPECTUS AND PRELIMINARY PROSPECTUS SUPPLEMENT. THIS ANNEX B DOES NOT INCLUDE
DAIWA SECURITIES ALL RELEVANT INFORMATION RELATING TO THE SECURITIES AND UNDERLYING ASSETS DESCRIBED HEREIN,
AMERICA INC. PARTICULARLY WITH RESPECT TO THE RISKS AND SPECIAL CONSIDERATIONS INVOLVED WITH AN INVESTMENT IN
(212) 612-6976 SUCH SECURITIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED INFORMATION SET
FORTH IN THE PROSPECTUS AND PRELIMINARY PROSPECTUS SUPPLEMENT. CERTAIN CAPITALIZED TERMS USED
HEREIN MAY BE DEFINED IN THE PROSPECTUS OR PRELIMINARY PROSPECTUS SUPPLEMENT.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-1
<PAGE>
[LOGO MERRILL LYNCH] MORTGAGE SECURITY NEW ISSUE TERM SHEET JUNE 5, 1997
- --------------------------------------------------------------------------------
$745,386,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C1
CLASS A-1, A-2, A-3, B, C, D, E AND IO
OVERVIEW
- --------
o The transaction is collateralized by 220 multifamily and commercial loans
with an aggregate principal balance of approximately $842.2 million located
throughout 34 states.
o Merrill Lynch's Commercial and Multifamily Conduit Program originated or
acquired 133 of the mortgage loans, making up 59% of the total pool
balance. Fifty-one (51) loans, or 22% of the pool balance, were originated
or acquired through Daiwa Securities and 36 loans, or 19% of the pool
balance, were originated or acquired through GECC.
o Except where otherwise indicated, percentages (%) represent principal
amount of loan or loans compared to the Initial Pool Balance.
- --------------------------------------------------------------------------------
LOAN INFORMATION
----------------
INITIAL POOL BALANCE: $842.2 million (220 loans)
AVG./MAX BALANCE: $3.8 million/$14.9 million
LOAN TYPES(1): All fixed rate; 80% balloons, 5% hyperamortizing,
16% fully amortizing
GROSS WAC: 8.893% (Range = 8.030% -10.350%)
NET WAC: 8.843%
WTD. AVG. SEASONING: 5 months (3% originated prior to 1996, 43%
originated in 1996, 54% originated in 1997)
WTD. AVG. RTM: 10.5 years
WTD. AVG. DSCR: 1.37x
CALL PROTECTION: Generally, all loans are currently locked out
(96%) or have yield maintenance (4%)
BORROWER CONCENTRATION: None greater than 7% of the pool
CROSS COLLATERALIZATION: 11 of the Mortgage Loans (5%), are
cross-collateralized and cross-defaulted with one
or more Mortgage Loans in the Mortgage Pool.
WAC = Weighted Average Mortgage Rate
RTM = Remaining Term to Maturity
(1) Percentages reflect rounding to the nearest whole number.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY TYPE DISTRIBUTION
--------------------------
# OF % OF
TYPE LOANS POOL DSCR
---- ----- ---- ----
Multifamily: 99 40.3% 1.33x
Retail: 41 25.3 1.33x
Hospitality: 35 13.9 1.49x
MH Parks: 16 5.9 1.40x
Industrial: 9 4.5 1.33x
Office: 11 4.4 1.42x
Self Storage: 5 3.9 1.54x
Mixed Use: 2 1.0 1.34x
Health Care: 2 0.8 1.67x
TOT/AVG. 220 100.0% 1.37x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATE DISTRIBUTION
------------------
(Total of 34 States)
# OF % OF
STATE LOANS POOL
----- ----- ----
California: 43 22.9%
Texas: 54 21.3
Florida: 16 8.7
Georgia: 17 6.8
All others [less than] 5%: 90 40.3
--- -----
TOTALS 220 100.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CUT-OFF LTV'S
-------------
# OF % OF CUMULATIVE
LTV RANGE LOANS POOL % OF POOL
-----------------------------------------------------------
41.70% - 50.00% 4 1.45% 1.45%
50.01% - 60.00% 26 8.95 10.41
60.01% - 70.00% 89 36.68 47.08
70.01% - 80.00% 100 51.71 98.79
80.01% - 82.26% 1 1.21 100.00
-----------------------------------------------------------
TOTALS 220 100.00% 100.00%
Weighted Average Cut-Off LTV = 69.88%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEBT SERVICE COVERAGE RATIOS
----------------------------
# OF % OF CUMULATIVE %
DSCR RANGE LOANS POOL OF POOL
----------------------------------------------------------
1.17x - 1.19x 4 1.92% 1.92%
1.20x - 1.29x 79 36.45 38.37
1.30x - 1.39x 63 30.19 68.57
1.40x - 1.49x 37 16.18 84.74
1.50x - 1.59x 13 4.48 89.23
1.60x - 1.69x 11 5.55 94.77
1.70x - 1.79x 4 2.20 96.98
1.80x - 1.89x 5 1.84 98.81
1.90x - 1.99x 3 0.95 99.76
2.00x - 2.17x 1 0.24 100.00
----------------------------------------------------------
TOTALS 220 100.00% 100.00%
Weighted Average DSCR = 1.37x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ORIGINAL TERM
-------------
# OF LOANS % OF POOL
---------------------------------------------------------------
10 Yr Balloon 108 46.54%
10 Yr Hyperamortization 4 4.38
12 Yr Balloon 2 1.82
12 Yr Hyperamortization 1 0.24
15 Yr Balloon 10 2.45
20 Yr Balloon 1 0.97
5 Yr Balloon 14 8.10
6 Yr Balloon 1 0.04
7 Yr Balloon 39 19.73
Fully Amortizing 40 15.73
---------------------------------------------------------------
TOTALS 220 100.00%
- --------------------------------------------------------------------------------
B-2
<PAGE>
<TABLE>
<CAPTION>
[LOGO MERRILL LYNCH] MORTGAGE SECURITY NEW ISSUE TERM SHEET JUNE 5, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
$745,386,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C1
CLASS A-1, A-2, A-3, B, C, D, E AND IO
DESCRIPTION OF PROPERTY TYPES
LOAN/CREDIT CHARACTERISTICS BY PROPERTY TYPE
- --------------------------------------------------------------------------------------------------------------------------
WTD. AVG.
AVG. INITIAL
INITIAL NUMBER % OF CUT-OFF WTD. AVG. POOL
POOL OF INITIAL WTD. DATE REPAYMENT BALANCE
PROPERTY TYPES BALANCE MORTGAGE POOL AVG. LTV (%) LTV (%) (MM)
(MM) LOANS BALANCE DSCR
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MULTIFAMILY $339.4 99 40.30% 1.33x 72.94% 63.60% $3.4
RETAIL
ANCHORED 171.3 27 20.33 1.32x 71.57 60.54 6.3
UNANCHORED 42.1 14 5.00 1.39x 65.07 53.39 3.0
------- ---- ------- ------ ------- ------- -----
SUBTOTALS 213.4 41 25.33 1.33x 70.29 59.13 5.2
HOSPITALITY 117.2 35 13.91 1.49x 65.66 8.02 3.3
MH PARKS 49.9 16 5.93 1.40x 66.82 53.48 3.1
INDUSTRIAL 37.7 9 4.48 1.33x 69.07 57.11 4.2
OFFICE 36.7 11 4.35 1.42x 63.11 53.22 3.3
SELF STORAGE 32.9 5 3.91 1.54x 63.63 28.25 6.6
MIXED USE
MULTIFAMILY/RETAIL 0.7 1 0.08 1.39x 64.45 54.47 0.7
OFFICE/RETAIL 7.8 1 0.92 1.33x 71.95 66.09 7.8
------- ---- ------- ------ ------- ------- -----
SUBTOTALS 8.5 2 1.01 1.34x 71.33 65.12 4.2
HEALTHCARE
CONGREGATE CARE 3.1 1 0.37 1.68x 71.84 59.77 3.1
SKILLED NURSING 3.5 1 0.41 1.66x 67.08 56.19 3.5
------- ---- ------- ------ ------- ------- -----
SUBTOTALS 6.6 2 0.78 1.67x 69.31 57.87 3.3
- --------------------------------------------------------------------------------------------------------------------------
TOTALS/WTD. AVG./
AVERAGES $842.2 220 100.00% 1.37x 69.88% 51.98% $3.8
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HIGHEST LOAN PER
CUT-OFF SQ. FT.
DATE UNIT,
BALANCE AVG. OCCU- PAD, BED,
PROPERTY TYPES (MM) PROPERTY PANCY OR ROOM
SIZE (%)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MULTIFAMILY $10.4 215 units 93.9% 26,233
RETAIL
ANCHORED 14.9 151,168 sq. ft. 96.7 62
UNANCHORED 6.5 59,100 sq. ft. 94.8 80
------ --------------- ------ -------
SUBTOTALS 14.9 132,996 sq. ft. 96.3 66
HOSPITALITY 11.1 149 rooms N/A 35,563
MH PARKS 8.0 375 pads 94.5 12,463
INDUSTRIAL 9.5 230,585 sq. ft. 96.0 35
OFFICE 5.9 60,090 sq. ft. 98.0 73
SELF STORAGE 13.0 191,960 sq. ft. 90.8 52
MIXED USE
MULTIFAMILY/RETAIL 0.7 16 units 100.0 44,312
OFFICE/RETAIL 7.8 120,597 sq. ft. 93.0 64
------ --------------- ------ -------
SUBTOTALS 7.8 110,515 sq. ft. 93.6 3,764
HEALTHCARE
CONGREGATE CARE 3.1 70 beds 94.00 44,129
SKILLED NURSING 3.5 120 beds N/A 29,068
------ --------------- ------ -------
SUBTOTALS 3.5 97 beds 94.00 36,141
- --------------------------------------------------------------------------------
TOTALS/WTD. AVG./
AVERAGES $14.9 55,379 94.79% $16,602
- --------------------------------------------------------------------------------
</TABLE>
B-3
<PAGE>
[LOGO MERRILL LYNCH] MORTGAGE SECURITY NEW ISSUE TERM SHEET JUNE 5, 1997
- --------------------------------------------------------------------------------
$745,386,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C1
CLASS A-1, A-2, A-3, B, C, D, E AND IO
PREPAYMENT PROTECTION
- ---------------------
o Currently 96% of the loans are locked out and 4% are subject to yield
maintenance charges.
o As described further, 84.3% of the loans are currently locked out, followed
by yield maintenance charges.
o All of the loans have yield maintenance charges which use a formula based
on the Treasury Rate.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 1
PREPAYMENT PREMIUM CATEGORIES
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER INITIAL % OF WTD. AVG. % OF WTD. AVG/ AVERAGE # OF
OF POOL INITIAL STATED LOCKOUT STATED REMAINING MONTHS OPEN TO
MORTGAGE BALANCE POOL REMAINING TERM TERM OF PREPAYMENT
PREPAYMENT RESTRICTION (A) LOANS (MM) BALANCE TERM (MO.) LOCKOUT PRIOR TO MATURITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lockout, then Yield Maintenance 185 $709.5 84.2% 127 58 46% 4
Lockout, then Percentage Premium 10 62.7 7.5 137 61 44 18
YM, then PP 10 21.3 2.5 125 0 0 21
Lockout, then Defeasance 5 19.1 2.3 118 112 95 6
Lockout Only 6 16.5 2.0 94 45 48 48
Lockout, then YM, then PP 1 0.7 0.1 110 50 45 6
Yield Maintenance Only 2 9.5 1.1 74 0 0 4
Percentage Premium Only 1 2.8 0.3 114 0 0 24
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/WTD. AVG./AVG. 220 $842.2 100.0% 126 57 45% 6
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Average Term to End of Lockout: 57 months
Weighted Average Number of Months Loans are Open to Prepayment Prior to Maturity: 6 months
(A) YM = Yield Maintenance, PP = Percentage Premium
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ALLOCATION OF PREPAYMENT PREMIUMS
- ---------------------------------
Prepayment premiums will be allocated between the REMIC Regular Certificates as
follows:
Yield Maintenance Charges:
--------------------------
o Any yield maintenance charges will be allocated between the REMIC
Regular Certificates based upon a formula which is based, in part, on
the relationship between the Pass-Through Rate of the Class currently
receiving principal, the mortgage rate of the loan that has prepaid,
and the discount rate used in calculating the borrower's yield
maintenance penalty.
- --------------------------------------------------------------------------------
% of Yield Maintenance Charge (Pass-Through Rate - Discount Rate)
= -------------------------------------
Allocated to Non-IO Certificates (Mortgage Rate - Discount Rate)
- --------------------------------------------------------------------------------
o In general, this formula provides for an increase in the allocation of
yield maintenance charges to the Sequential Pay Certificates as
interest rates decrease and a decrease in the allocation to such
classes as interest rates rise.
Penalties allocated to the Sequential Pay Certificates will be distributed
sequentially to the Class currently receiving principal.
Percentage Prepayment Premium:
------------------------------
o Allocation: 25% to the Sequential Pay Certificates and 75% to Class
IO. Distributions to the Sequential Pay Certificates will be made
sequentially to the Class currently receiving principal.
B-4
<PAGE>
<TABLE>
<CAPTION>
[LOGO MERRILL LYNCH] MORTGAGE SECURITY NEW ISSUE TERM SHEET JUNE 5, 1997
- -----------------------------------------------------------------------------------------------------------------------------
$745,386,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C1
CLASS A-1, A-2, A-3, B, C, D, E AND IO
- -----------------------------------------------------------------------------------------------------------------------------
PREPAYMENT LOCK-OUT/PREMIUM ANALYSIS
- -----------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT RESTRICTION ASSUMING NO PREPAYMENT
----------------------------------------------------------------------------------------------------
CURRENT 12 MO. 24 MO. 36 MO. 48 MO. 60 MO. 72 MO. 84 MO.
PREPAYMENT JUN. JUN. JUN. JUN. JUN. JUN. JUN. JUN.
RESTRICTION 1997 1998 1999 2000 2001 2002 2003 2004
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 95.7% 95.4% 93.3% 74.9% 50.4% 31.2% 22.2% 26.5%
Yield Maintenance 4.0% 4.3% 5.5% 20.1% 42.6% 63.8% 66.4% 68.6%
- -----------------------------------------------------------------------------------------------------------------------------
Subtotal 99.7% 99.7% 98.8% 95.0% 93.0% 95.0% 88.6% 95.1%
% Premium
5.00% - greater 0.3% 0.0% 0.0% 0.0% 0.0% 0.0% 1.4% 1.8%
4.00 - 4.99% 0.0% 0.3% 0.3% 1.3% 0.5% 0.0% 0.0% 0.0%
3.00 - 3.99% 0.0% 0.0% 0.5% 0.3% 1.6% 0.6% 0.6% 0.6%
2.00 - 2.99% 0.0% 0.0% 0.0% 2.0% 0.5% 2.0% 0.9% 0.8%
1.00 - 1.99% 0.0% 0.0% 0.0% 0.6% 1.2% 0.0% 0.8% 0.5%
Open 0.0% 0.0% 0.3% 0.8% 3.2% 2.5% 7.6% 1.3%
- -----------------------------------------------------------------------------------------------------------------------------
TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mortgage Pool
Balance ($ millions) $842.2 $833.0 $822.8 $811.7 $784.5 $721.1 $699.0 $542.4
% of Initial Pool
Balance 100.00% 98.9% 97.7% 96.4% 93.1% 85.6% 83.0% 64.4%
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PREPAYMENT LOCK-OUT/PREMIUM ANALYSIS
- ----------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT RESTRICTION ASSUMING NO PREPAYMENT
--------------------------------------------------------------------------------------------------
96 MO. 108 MO. 120 MO. 132 MO. 144 MO. 156 MO. 168 MO. 180 MO.
PREPAYMENT JUN. JUN. JUN. JUN. JUN. JUN. JUN. JUN.
RESTRICTION 2005 2006 2007 2008 2009 2010 2011 2012
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 23.0% 22.7% 3.4% 0.0% 0.0% 0.0% 0.0% 0.0%
Yield Maintenance 72.1% 60.9% 77.4% 80.5% 85.8% 85.6% 79.3% 79.8%
- ----------------------------------------------------------------------------------------------------------------------------
Subtotal 95.1% 83.6% 80.8% 80.5% 85.8% 85.6% 79.3% 79.8%
% Premium
5.00% - greater 0.0% 0.6% 0.0% 0.0% 0.0% 0.0% 1.2% 0.0%
4.00 - 4.99% 1.8% 0.0% 12.2% 10.5% 0.0% 0.0% 0.0% 1.6%
3.00 - 3.99% 0.0% 1.9% 0.0% 1.8% 12.3% 12.8% 13.5% 17.2%
2.00 - 2.99% 0.6% 0.0% 6.9% 0.0% 1.9% 0.0% 0.0% 0.0%
1.00 - 1.99% 0.4% 0.0% 0.0% 7.1% 0.0% 1.6% 0.0% 0.0%
Open 2.1% 14.0% 0.0% 0.0% 0.0% 0.0% 6.0% 1.5%
- ------------------------------------------------------------------------------------------------------------------ ---------
TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mortgage Pool
Balance ($ millions) $529.2 $503.1 $132.8 $125.4 $103.4 $95.2 $86.3 $63.9
% of Initial Pool
Balance 62.8% 59.7% 15.8% 14.9% 12.3% 11.3% 10.2% 7.6%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-5
<PAGE>
[LOGO MERRILL LYNCH] MORTGAGE SECURITY NEW ISSUE TERM SHEET JUNE 5, 1997
- --------------------------------------------------------------------------------
$745,386,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C1
CLASS A-1, A-2, A-3, B, C, D, E AND IO
SPECIAL SERVICER/LOAN MODIFICATIONS
- -----------------------------------
The initial Special Servicer will be GE Capital Realty Group, Inc. The Special
Servicer will be responsible for servicing loans that, in general, are in
default or are in imminent default and for administering REO properties. The
Special Servicer may modify such loans, if among other things, such
modification, in the sole good faith of the Special Servicer, increases the
recovery to Certificateholders on a present value basis.
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.
EXTENSION ADVISER
- -----------------
The initial Extension Adviser is expected to be LaSalle National Bank. No
balloon loan may be extended beyond three (3) years after its original maturity
date without the consent of the Extension Adviser (provided that if a written
objection to such extension from the Extension Adviser has not been received by
the Special Servicer within a stated period, then the Extension Adviser's
approval will be deemed to have been given).
The Extension Adviser may be removed at any time by a written vote of
Certificateholders of 51% or more of the Offered Certificates (other than the
Class IO Certificates). In the event that at any time an Extension Adviser has
resigned or has been removed and a successor has not been elected, no extension
of a balloon loan beyond three (3) years may occur during such period that there
is no Extension Adviser.
REMOVAL OF THE SPECIAL SERVICER/CONTROLLING CLASS REPRESENTATIVE
- ----------------------------------------------------------------
The Pooling and Servicing Agreement permits 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 and to select a representative
(the "Controlling Class Representative") from whom the Special Servicer will
seek advice and approval and take direction under certain circumstances. The
"Controlling Class of Sequential Pay Certificates" is the most junior class of
certificates (not including Class IO) currently outstanding which has a
principal balance exceeding 20% of its original balance (or if no Class shall
have a principal balance, exceeding 20%, then Classes A-1, A-2 and A-3 shall be
treated as one Class).
APPRAISAL REDUCTION
- -------------------
Upon the earliest of the date (each such date, a "Required Appraisal Date") that
(1) any Mortgage Loan is sixty (60) days delinquent in respect of any Monthly
Payment, (2) any REO Property is acquired on behalf of the Trust Fund, (3) any
Mortgage Loan has been modified by the Special Servicer to reduce the amount of
any Monthly Payment, other than a Balloon Payment, (4) a receiver is appointed
and continues in such capacity in respect of a Mortgaged Property securing any
Mortgage Loan, (5) a borrower with respect to any Mortgage Loan is subject to
any bankruptcy proceeding or (6) a Balloon Payment with respect to any Mortgage
Loan is due and has not been paid on its scheduled maturity date (each such
Mortgage Loan, including an REO Mortgage Loan, a "Required Appraisal Loan"), the
Special Servicer will be required to obtain (within 60 days of the applicable
Required Appraisal Date) an appraisal of the related Mortgage Property.
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,
such determination to be made upon the later of 30 days after the Required
Appraisal Date if no new appraisal is required or upon receipt of a new
appraisal.
If any Required Appraisal Loan becomes a Corrected Mortgage Loan, then the
Appraisal Reduction Amount shall be deemed to be zero.
B-6
<PAGE>
<TABLE>
<CAPTION>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C1
- ------------------------------------------------------------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS A-1
BOND TYPE - FIXED
Settlement Date: 6/26/97 Current Balance: $252,440,000
Next Payment: 7/18/97 Current Coupon: 7.20%
-----------------------------------------------------------------
*0% CPR While Subject to Lockout or Yield Maintenance Premium;
Otherwise at Indicated CPR Percentage
- ------ --------------- -----------------------------------------------------------------
0.00 CPR 5.00 CPR 10.00 CPR 15.00 CPR 25.00 CPR
Price Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur
- ------ --------------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
99-16 7.35 3.97 7.35 3.93 7.36 3.89 7.36 3.86 7.36 3.80
99-20 7.32 7.32 7.32 7.33 7.33
99-24 7.29 7.29 7.29 7.29 7.30
99-28 7.26 7.26 7.26 7.26 7.27
100-00 7.22 3.98 7.23 3.94 7.23 3.90 7.23 3.87 7.23 3.80
100-04 7.19 7.19 7.20 7.20 7.20
100-08 7.16 7.16 7.16 7.17 7.17
100-12 7.13 7.13 7.13 7.13 7.14
100-16 7.10 3.99 7.10 3.95 7.10 3.91 7.10 3.87 7.10 3.81
100-20 7.07 7.07 7.07 7.07 7.07
100-24 7.04 7.04 7.04 7.04 7.04
100-28 7.01 7.01 7.01 7.01 7.01
101-00 6.98 3.99 6.98 3.95 6.97 3.91 6.97 3.88 6.97 3.82
101-04 6.94 6.94 6.94 6.94 6.94
101-08 6.91 6.91 6.91 6.91 6.91
101-12 6.88 6.88 6.88 6.88 6.88
101-16 6.85 4.00 6.85 3.96 6.85 3.92 6.85 3.89 6.85 3.83
101-20 6.82 6.82 6.82 6.82 6.81
101-24 6.79 6.79 6.79 6.78 6.78
101-28 6.76 6.76 6.76 6.75 6.75
102-00 6.73 4.01 6.73 3.97 6.72 3.93 6.72 3.89 6.72 3.83
102-04 6.70 6.70 6.69 6.69 6.69
102-08 6.67 6.67 6.66 6.66 6.65
102-12 6.64 6.64 6.63 6.63 6.62
102-16 6.61 4.01 6.60 3.97 6.60 3.94 6.60 3.90 6.59 3.84
WAL 5.0 4.9 4.9 4.8 4.7
1st Prin 7/18/97 7/18/97 7/18/97 7/18/97 7/18/97
Mat. 2/18/04 2/18/04 2/18/04 2/18/04 2/18/04
<CAPTION>
------------------------------------------------------------------
*0% CPR While Subject to Lockout;
Otherwise at Indicated CPR Percentage
- ------ ------------------------------------------------------------------
5.00 CPR 10.00 CPR 15.00 CPR 25.00 CPR
Price Yield Dur Yield Dur Yield Dur Yield Dur
- ------ ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
99-16 7.51 3.62 7.65 3.33 7.73 3.13 7.85 2.86
99-20 7.48 7.61 7.69 7.81
99-24 7.44 7.58 7.65 7.76
99-28 7.41 7.54 7.61 7.72
100-00 7.37 3.62 7.50 3.34 7.57 3.13 7.68 2.86
100-04 7.34 7.46 7.53 7.63
100-08 7.30 7.43 7.49 7.59
100-12 7.27 7.39 7.45 7.55
100-16 7.24 3.63 7.35 3.35 7.41 3.14 7.50 2.87
100-20 7.20 7.32 7.37 7.46
100-24 7.17 7.28 7.33 7.42
100-28 7.13 7.24 7.29 7.37
101-00 7.10 3.64 7.21 3.35 7.26 3.15 7.33 2.87
101-04 7.07 7.17 7.22 7.29
101-08 7.03 7.13 7.18 7.25
101-12 7.00 7.10 7.14 7.20
101-16 6.96 3.64 7.06 3.36 7.10 3.15 7.16 2.88
101-20 6.93 7.02 7.06 7.12
101-24 6.90 6.99 7.02 7.08
101-28 6.86 6.95 6.98 7.03
102-00 6.83 3.65 6.91 3.36 6.94 3.16 6.99 2.88
102-04 6.80 6.88 6.91 6.95
102-08 6.76 6.84 6.87 6.91
102-12 6.73 6.80 6.83 6.86
102-16 6.70 3.66 6.77 3.37 6.79 3.16 6.82 2.89
WAL 4.5 4.0 3.8 3.4
1st Prin 7/18/97 7/18/97 7/18/97 7/18/97
Mat. 12/18/03 7/18/03 11/18/02 4/18/02
</TABLE>
- --------------------------------------------------------------------------------
* Assumes required application of prepayment penalties allocated to bondholders
- --------------------------------------------------------------------------------
These tables have been based upon the assumptions described above. These
assumptions will most likely not represent the actual experience of the Mortgage
Pool in the future.
The tables are intended to illustrate variations in yield on the Offered
Securities under such assumptions.
No representation is made herein as to the actual rate or timing of principal
payments on any of the underlying Mortgage Loans in the Mortgage Pool or the
performance characteristics of the Offered Securities.
B-7
<PAGE>
<TABLE>
<CAPTION>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C1
- ------------------------------------------------------------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS A-2
BOND TYPE - FIXED
Settlement Date: 6/26/97 Current Balance: $86,358,000
Next Payment: 7/18/97 Current Coupon: 7.25%
---------------------------------------------------------------------
*0% CPR While Subject to Lockout or Yield Maintenance Premium;
Otherwise at Indicated CPR Percentage
--------------- ---------------------------------------------------------------------
- ------ 0.00 CPR 5.00 CPR 10.00 CPR 15.00 CPR 25.00 CPR
Price Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur
- ----- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
99-16 7.39 5.56 7.39 5.50 7.39 5.46 7.39 5.42 7.40 5.36
99-20 7.37 7.37 7.37 7.37 7.37
99-24 7.34 7.35 7.35 7.35 7.35
99-28 7.32 7.32 7.32 7.33 7.33
100-00 7.30 5.57 7.30 5.51 7.30 5.46 7.30 5.42 7.30 5.37
100-04 7.28 7.28 7.28 7.28 7.28
100-08 7.25 7.26 7.26 7.26 7.26
100-12 7.23 7.23 7.23 7.23 7.23
100-16 7.21 5.58 7.21 5.52 7.21 5.47 7.21 5.43 7.21 5.37
100-20 7.19 7.19 7.19 7.19 7.19
100-24 7.17 7.17 7.17 7.17 7.17
100-28 7.14 7.14 7.14 7.14 7.14
101-00 7.12 5.58 7.12 5.52 7.12 5.48 7.12 5.44 7.12 5.38
101-04 7.10 7.10 7.10 7.10 7.10
101-08 7.08 7.08 7.08 7.07 7.07
101-12 7.06 7.05 7.05 7.05 7.05
101-16 7.03 5.59 7.03 5.53 7.03 5.48 7.03 5.44 7.03 5.39
101-20 7.01 7.01 7.01 7.01 7.01
101-24 6.99 6.99 6.99 6.98 6.98
101-28 6.97 6.97 6.96 6.96 6.96
102-00 6.95 5.60 6.94 5.54 6.94 5.49 6.94 5.45 6.94 5.39
102-04 6.92 6.92 6.92 6.92 6.91
102-08 6.90 6.90 6.90 6.90 6.89
102-12 6.88 6.88 6.88 6.87 6.87
102-16 6.86 5.61 6.86 5.55 6.85 5.50 6.85 5.46 6.85 5.40
WAL 7.5 7.4 7.3 7.2 7.1
1st Prin 2/18/04 2/18/04 2/18/04 2/18/04 2/18/04
Mat. 6/18/06 5/18/06 4/18/06 3/18/06 1/18/06
<CAPTION>
---------------------------------------------------------------------
*0% CPR While Subject to Lockout;
Otherwise at Indicated CPR Percentage
---------------------------------------------------------------------
- ------ 5.00 CPR 10.00 CPR 15.00 CPR 25.00 CPR
Price Yield Dur Yield Dur Yield Dur Yield Dur
- ----- ---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
99-16 7.42 5.09 7.48 4.92 7.63 4.65 7.80 4.19
99-20 7.40 7.45 7.61 7.77
99-24 7.37 7.43 7.58 7.74
99-28 7.35 7.40 7.55 7.71
100-00 7.32 5.10 7.38 4.92 7.53 4.66 7.68 4.19
100-04 7.30 7.35 7.50 7.65
100-08 7.27 7.33 7.47 7.62
100-12 7.25 7.30 7.45 7.59
100-16 7.23 5.11 7.28 4.93 7.42 4.66 7.57 4.20
100-20 7.20 7.25 7.39 7.54
100-24 7.18 7.23 7.37 7.51
100-28 7.15 7.20 7.34 7.48
101-00 7.13 5.11 7.18 4.93 7.31 4.67 7.45 4.20
101-04 7.10 7.15 7.29 7.42
101-08 7.08 7.13 7.26 7.39
101-12 7.06 7.10 7.23 7.36
101-16 7.03 5.12 7.08 4.94 7.21 4.67 7.33 4.21
101-20 7.01 7.05 7.18 7.30
101-24 6.98 7.03 7.16 7.27
101-28 6.96 7.00 7.13 7.24
102-00 6.94 5.12 6.98 4.95 7.10 4.68 7.21 4.21
102-04 6.91 6.95 7.08 7.19
102-08 6.89 6.93 7.05 7.16
102-12 6.87 6.91 7.03 7.13
102-16 6.84 5.13 6.88 4.95 7.00 4.69 7.10 4.22
WAL 6.6 6.4 5.9 5.2
1st Prin 12/18/03 7/18/03 11/18/02 4/18/02
Mat. 5/18/04 2/18/04 10/18/03 1/18/03
</TABLE>
- --------------------------------------------------------------------------------
* Assumes required application of prepayment penalties allocated to bondholders
- --------------------------------------------------------------------------------
These tables have been based upon the assumptions described above. These
assumptions will most likely not represent the actual experience of the Mortgage
Pool in the future.
The tables are intended to illustrate variations in yield on the Offered
Securities under such assumptions.
No representation is made herein as to the actual rate or timing of principal
payments on any of the underlying Mortgage Loans in the Mortgage Pool or the
performance characteristics of the Offered Securities.
B-8
<PAGE>
<TABLE>
<CAPTION>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C1
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS A-3
BOND TYPE - FIXED
Settlement Date: 6/26/97 Current Balance: $254,984,000
Next Payment: 7/18/97 Current Coupon: 7.35%
---------------------------------------------------------------------
*0% CPR While Subject to Lockout or Yield Maintenance Premium;
Otherwise at Indicated CPR Percentage
--------------- ---------------------------------------------------------------------
- ------ 0.00 CPR 5.00 CPR 10.00 CPR 15.00 CPR 25.00 CPR
Price Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur
- ------ --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
99-16 7.49 6.63 7.49 6.62 7.49 6.61 7.49 6.61 7.49 6.60
99-20 7.47 7.47 7.47 7.47 7.47
99-24 7.45 7.45 7.45 7.45 7.45
99-28 7.43 7.43 7.43 7.43 7.43
100-00 7.41 6.64 7.41 6.63 7.41 6.62 7.41 6.62 7.41 6.61
100-04 7.39 7.39 7.39 7.39 7.39
100-08 7.37 7.37 7.37 7.37 7.37
100-12 7.36 7.36 7.36 7.36 7.36
100-16 7.34 6.65 7.34 6.64 7.34 6.63 7.34 6.63 7.34 6.62
100-20 7.32 7.32 7.32 7.32 7.32
100-24 7.30 7.30 7.30 7.30 7.30
100-28 7.28 7.28 7.28 7.28 7.28
101-00 7.26 6.66 7.26 6.65 7.26 6.64 7.26 6.64 7.26 6.63
101-04 7.24 7.24 7.24 7.24 7.24
101-08 7.23 7.23 7.23 7.23 7.23
101-12 7.21 7.21 7.21 7.21 7.21
101-16 7.19 6.67 7.19 6.66 7.19 6.65 7.19 6.65 7.19 6.64
101-20 7.17 7.17 7.17 7.17 7.17
101-24 7.15 7.15 7.15 7.15 7.15
101-28 7.13 7.13 7.13 7.13 7.13
102-00 7.12 6.68 7.12 6.67 7.12 6.66 7.12 6.66 7.11 6.65
102-04 7.10 7.10 7.10 7.10 7.10
102-08 7.08 7.08 7.08 7.08 7.08
102-12 7.06 7.06 7.06 7.06 7.06
102-16 7.04 6.69 7.04 6.68 7.04 6.67 7.04 6.67 7.04 6.66
WAL 9.6 9.5 9.5 9.5 9.5
1st Prin 6/18/06 5/18/06 4/18/06 3/18/06 1/18/06
Mat. 5/18/07 4/18/07 4/18/07 4/18/07 4/18/07
<CAPTION>
---------------------------------------------------------------------
*0% CPR While Subject to Lockout;
Otherwise at Indicated CPR Percentage
---------------------------------------------------------------------
- ------ 5.00 CPR 10.00 CPR 15.00 CPR 25.00 CPR
Price Yield Dur Yield Dur Yield Dur Yield Dur
- ------ --------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
99-16 7.52 6.33 7.55 5.97 7.59 5.65 7.70 5.12
99-20 7.50 7.53 7.57 7.68
99-24 7.48 7.51 7.55 7.65
99-28 7.46 7.49 7.53 7.63
100-00 7.44 6.34 7.47 5.98 7.51 5.66 7.61 5.13
100-04 7.42 7.45 7.48 7.58
100-08 7.40 7.43 7.46 7.56
100-12 7.38 7.41 7.44 7.53
100-16 7.36 6.35 7.39 5.98 7.42 5.67 7.51 5.14
100-20 7.34 7.37 7.40 7.49
100-24 7.32 7.35 7.38 7.46
100-28 7.30 7.33 7.35 7.44
101-00 7.28 6.35 7.31 5.99 7.33 5.67 7.41 5.14
101-04 7.27 7.29 7.31 7.39
101-08 7.25 7.26 7.29 7.37
101-12 7.23 7.24 7.27 7.34
101-16 7.21 6.36 7.22 6.00 7.25 5.68 7.32 5.15
101-20 7.19 7.20 7.22 7.29
101-24 7.17 7.18 7.20 7.27
101-28 7.15 7.16 7.18 7.25
102-00 7.13 6.37 7.14 6.01 7.16 5.69 7.22 5.16
102-04 7.11 7.12 7.14 7.20
102-08 7.09 7.10 7.12 7.18
102-12 7.07 7.08 7.09 7.15
102-16 7.05 6.38 7.06 6.02 7.07 5.70 7.13 5.16
WAL 9.0 8.3 7.7 6.7
1st Prin 5/18/04 2/18/04 10/18/03 1/18/03
Mat. 4/18/07 2/18/07 12/18/06 12/18/05
</TABLE>
- --------------------------------------------------------------------------------
* Assumes required application of prepayment penalties allocated to bondholders
- --------------------------------------------------------------------------------
These tables have been based upon the assumptions described above. These
assumptions will most likely not represent the actual experience of the Mortgage
Pool in the future.
The tables are intended to illustrate variations in yield on the Offered
Securities under such assumptions.
No representation is made herein as to the actual rate or timing of principal
payments on any of the underlying Mortgage Loans in the Mortgage Pool or the
performance characteristics of the Offered Securities.
B-9
<PAGE>
<TABLE>
<CAPTION>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C1
- ------------------------------------------------------------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS B
BOND TYPE - FIXED
Settlement Date: 6/26/97 Current Balance: $46,323,000
Next Payment: 7/18/97 Current Coupon: 7.35%
---------------------------------------------------------------------
*0% CPR While Subject to Lockout or Yield Maintenance Premium;
Otherwise at Indicated CPR Percentage
--------------- ---------------------------------------------------------------------
- ------ 0.00 CPR 5.00 CPR 10.00 CPR 15.00 CPR 25.00 CPR
Price Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur
- ------ --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
99-04 7.54 6.78 7.54 6.78 7.54 6.78 7.54 6.78 7.54 6.77
99-08 7.52 7.52 7.52 7.52 7.52
99-12 7.50 7.50 7.50 7.50 7.51
99-16 7.49 7.49 7.49 7.49 7.49
99-20 7.47 6.79 7.47 6.79 7.47 6.79 7.47 6.79 7.47 6.78
99-24 7.45 7.45 7.45 7.45 7.45
99-28 7.43 7.43 7.43 7.43 7.43
100-00 7.41 7.41 7.41 7.41 7.41
100-04 7.39 6.80 7.39 6.80 7.39 6.80 7.39 6.80 7.39 6.79
100-08 7.38 7.38 7.38 7.38 7.38
100-12 7.36 7.36 7.36 7.36 7.36
100-16 7.34 7.34 7.34 7.34 7.34
100-20 7.32 6.81 7.32 6.81 7.32 6.81 7.32 6.81 7.32 6.80
100-24 7.30 7.30 7.30 7.30 7.30
100-28 7.29 7.29 7.29 7.29 7.29
101-00 7.27 7.27 7.27 7.27 7.27
101-04 7.25 6.82 7.25 6.82 7.25 6.82 7.25 6.82 7.25 6.81
101-08 7.23 7.23 7.23 7.23 7.23
101-12 7.21 7.21 7.21 7.21 7.21
101-16 7.20 7.20 7.20 7.20 7.20
101-20 7.18 6.83 7.18 6.83 7.18 6.83 7.18 6.83 7.18 6.82
101-24 7.16 7.16 7.16 7.16 7.16
101-28 7.14 7.14 7.14 7.14 7.14
102-00 7.12 7.12 7.12 7.12 7.12
102-04 7.11 6.84 7.11 6.84 7.11 6.84 7.11 6.84 7.11 6.83
WAL 9.9 9.9 9.9 9.9 9.9
1st Prin 5/18/07 4/18/07 4/18/07 4/18/07 4/18/07
Mat. 5/18/07 5/18/07 5/18/07 5/18/07 5/18/07
<CAPTION>
---------------------------------------------------------------------
*0% CPR While Subject to Lockout;
Otherwise at Indicated CPR Percentage
---------------------------------------------------------------------
- ------ 5.00 CPR 10.00 CPR 15.00 CPR 25.00 CPR
Price Yield Dur Yield Dur Yield Dur Yield Dur
- ------ --------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
99-04 7.55 6.76 7.56 6.71 7.57 6.65 7.65 6.32
99-08 7.53 7.54 7.55 7.63
99-12 7.51 7.52 7.53 7.61
99-16 7.49 7.50 7.51 7.59
99-20 7.47 6.77 7.48 6.72 7.49 6.66 7.57 6.33
99-24 7.46 7.46 7.47 7.55
99-28 7.44 7.44 7.46 7.53
100-00 7.42 7.43 7.44 7.51
100-04 7.40 6.78 7.41 6.73 7.42 6.67 7.49 6.34
100-08 7.38 7.39 7.40 7.47
100-12 7.36 7.37 7.38 7.45
100-16 7.35 7.35 7.36 7.43
100-20 7.33 6.79 7.33 6.74 7.34 6.68 7.41 6.35
100-24 7.31 7.32 7.33 7.39
100-28 7.29 7.30 7.31 7.37
101-00 7.27 7.28 7.29 7.35
101-04 7.25 6.80 7.26 6.75 7.27 6.69 7.33 6.36
101-08 7.24 7.24 7.25 7.31
101-12 7.22 7.22 7.23 7.29
101-16 7.20 7.21 7.21 7.27
101-20 7.18 6.81 7.19 6.76 7.20 6.70 7.25 6.37
101-24 7.16 7.17 7.18 7.24
101-28 7.15 7.15 7.16 7.22
102-00 7.13 7.13 7.14 7.20
102-04 7.11 6.82 7.12 6.77 7.12 6.71 7.18 6.38
WAL 9.8 9.7 9.6 8.9
1st Prin 4/18/07 2/18/07 12/18/06 12/18/05
Mat. 5/18/07 4/18/07 3/18/07 11/18/06
</TABLE>
- --------------------------------------------------------------------------------
* Assumes required application of prepayment penalties allocated to bondholders
- --------------------------------------------------------------------------------
These tables have been based upon the assumptions described above. These
assumptions will most likely not represent the actual experience of the Mortgage
Pool in the future.
The tables are intended to illustrate variations in yield on the Offered
Securities under such assumptions.
No representation is made herein as to the actual rate or timing of principal
payments on any of the underlying Mortgage Loans in the Mortgage Pool or the
performance characteristics of the Offered Securities.
B-10
<PAGE>
<TABLE>
<CAPTION>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C1
- ------------------------------------------------------------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS C
BOND TYPE - FIXED
Settlement Date: 6/26/97 Current Balance: $46,234,000
Next Payment: 7/18/97 Current Coupon: 7.35%
--------------------------------------------------------------------
*0% CPR While Subject to Lockout or Yield Maintenance Premium;
Otherwise at Indicated CPR Percentage
--------------- --------------------------------------------------------------------
- ------ 0.00 CPR 5.00 CPR 10.00 CPR 15.00 CPR 25.00 CPR
Price Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur
- ------ --------------- -------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
98-14 7.64 6.80 7.64 6.80 7.64 6.79 7.64 6.79 7.64 6.79
98-18 7.62 7.62 7.62 7.62 7.62
98-22 7.61 7.61 7.61 7.61 7.61
98-26 7.59 7.59 7.59 7.59 7.59
98-30 7.57 6.81 7.57 6.81 7.57 6.80 7.57 6.80 7.57 6.80
99-02 7.55 7.55 7.55 7.55 7.55
99-06 7.53 7.53 7.53 7.53 7.53
99-10 7.51 7.51 7.51 7.51 7.51
99-14 7.50 6.82 7.50 6.82 7.50 6.82 7.50 6.81 7.50 6.81
99-18 7.48 7.48 7.48 7.48 7.48
99-22 7.46 7.46 7.46 7.46 7.46
99-26 7.44 7.44 7.44 7.44 7.44
99-30 7.42 6.83 7.42 6.83 7.42 6.83 7.42 6.82 7.42 6.82
100-02 7.40 7.40 7.40 7.40 7.40
100-06 7.39 7.39 7.39 7.39 7.39
100-10 7.37 7.37 7.37 7.37 7.37
100-14 7.35 6.84 7.35 6.84 7.35 6.84 7.35 6.83 7.35 6.83
100-18 7.33 7.33 7.33 7.33 7.33
100-22 7.31 7.31 7.31 7.31 7.31
100-26 7.30 7.30 7.30 7.30 7.30
100-30 7.28 6.85 7.28 6.85 7.28 6.85 7.28 6.84 7.28 6.84
101-02 7.26 7.26 7.26 7.26 7.26
101-06 7.24 7.24 7.24 7.24 7.24
101-10 7.22 7.22 7.22 7.22 7.22
101-14 7.21 6.86 7.21 6.86 7.21 6.86 7.21 6.85 7.21 6.85
WAL 10.0 10.0 10.0 9.9 9.9
1st Prin 5/18/07 5/18/07 5/18/07 5/18/07 5/18/07
Mat. 6/18/07 6/18/07 6/18/07 6/18/07 6/18/07
<CAPTION>
---------------------------------------------------------------------
*0% CPR While Subject to Lockout;
Otherwise at Indicated CPR Percentage
---------------------------------------------------------------------
- ------ 5.00 CPR 10.00 CPR 15.00 CPR 25.00 CPR
Price Yield Dur Yield Dur Yield Dur Yield Dur
- ------ --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
98-14 7.65 6.78 7.66 6.76 7.67 6.73 7.70 6.61
98-18 7.63 7.64 7.65 7.68
98-22 7.61 7.62 7.63 7.66
98-26 7.59 7.60 7.61 7.64
98-30 7.57 6.79 7.58 6.77 7.59 6.74 7.62 6.62
99-02 7.56 7.56 7.57 7.60
99-06 7.54 7.54 7.55 7.58
99-10 7.52 7.53 7.54 7.56
99-14 7.50 6.80 7.51 6.78 7.52 6.75 7.54 6.63
99-18 7.48 7.49 7.50 7.53
99-22 7.46 7.47 7.48 7.51
99-26 7.45 7.45 7.46 7.49
99-30 7.43 6.81 7.43 6.79 7.44 6.76 7.47 6.64
100-02 7.41 7.41 7.42 7.45
100-06 7.39 7.40 7.41 7.43
100-10 7.37 7.38 7.39 7.41
100-14 7.35 6.82 7.36 6.80 7.37 6.77 7.39 6.65
100-18 7.34 7.34 7.35 7.38
100-22 7.32 7.32 7.33 7.36
100-26 7.30 7.31 7.32 7.34
100-30 7.28 6.83 7.29 6.81 7.30 6.78 7.32 6.66
101-02 7.26 7.27 7.28 7.30
101-06 7.25 7.25 7.26 7.28
101-10 7.23 7.23 7.24 7.27
101-14 7.21 6.84 7.22 6.82 7.22 6.79 7.25 6.67
WAL 9.9 9.9 9.8 9.6
1st Prin 5/18/07 4/18/07 3/18/07 11/18/06
Mat. 6/18/07 5/18/07 5/18/07 3/18/07
</TABLE>
- --------------------------------------------------------------------------------
* Assumes required application of prepayment penalties allocated to bondholders
- --------------------------------------------------------------------------------
These tables have been based upon the assumptions described above. These
assumptions will most likely not represent the actual experience of the Mortgage
Pool in the future.
The tables are intended to illustrate variations in yield on the Offered
Securities under such assumptions.
No representation is made herein as to the actual rate or timing of principal
payments on any of the underlying Mortgage Loans in the Mortgage Pool or the
performance characteristics of the Offered Securities.
B-11
<PAGE>
<TABLE>
<CAPTION>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C1
- ------------------------------------------------------------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS E
BOND TYPE - FIXED
Settlement Date: 6/26/97 Current Balance: $16,845,000
Next Payment: 7/18/97 Current Coupon: 7.35%
---------------------------------------------------------------------
*0% CPR While Subject to Lockout or Yield Maintenance Premium;
Otherwise at Indicated CPR Percentage
--------------- ---------------------------------------------------------------------
- -------- 0.00 CPR 5.00 CPR 10.00 CPR 15.00 CPR 25.00 CPR
Price Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur
- -------- --------------- --------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
94-28 8.10 7.60 8.11 7.57 8.11 7.54 8.11 7.51 8.12 7.43
95-00 8.08 8.09 8.09 8.10 8.11
95-04 8.07 8.07 8.07 8.08 8.09
95-08 8.05 8.05 8.06 8.06 8.07
95-12 8.03 7.61 8.04 7.58 8.04 7.55 8.04 7.52 8.05 7.45
95-16 8.02 8.02 8.02 8.03 8.04
95-20 8.00 8.00 8.01 8.01 8.02
95-24 7.98 7.99 7.99 7.99 8.00
95-28 7.96 7.63 7.97 7.59 7.97 7.57 7.98 7.53 7.98 7.46
96-00 7.95 7.95 7.95 7.96 7.97
96-04 7.93 7.93 7.94 7.94 7.95
96-08 7.91 7.92 7.92 7.92 7.93
96-12 7.90 7.64 7.90 7.61 7.90 7.58 7.91 7.55 7.92 7.47
96-16 7.88 7.88 7.89 7.89 7.90
96-20 7.86 7.87 7.87 7.87 7.88
96-24 7.85 7.85 7.85 7.86 7.86
96-28 7.83 7.66 7.83 7.62 7.83 7.59 7.84 7.56 7.85 7.49
97-00 7.81 7.82 7.82 7.82 7.83
97-04 7.80 7.80 7.80 7.80 7.81
97-08 7.78 7.78 7.78 7.79 7.79
97-12 7.76 7.67 7.77 7.64 7.77 7.61 7.77 7.57 7.78 7.50
97-16 7.75 7.75 7.75 7.75 7.76
97-20 7.73 7.73 7.73 7.74 7.74
97-24 7.71 7.72 7.72 7.72 7.73
97-28 7.70 7.68 7.70 7.65 7.70 7.62 7.70 7.59 7.71 7.51
WAL 12.1 12.0 11.9 11.8 11.6
1st Prin 4/18/09 4/18/09 2/18/09 11/18/08 7/18/08
Mat. 4/18/10 2/18/10 11/18/09 9/18/09 6/18/09
<CAPTION>
---------------------------------------------------------------------
*0% CPR While Subject to Lockout;
Otherwise at Indicated CPR Percentage
---------------------------------------------------------------------
- -------- 5.00 CPR 10.00 CPR 15.00 CPR 25.00 CPR
Price Yield Dur Yield Dur Yield Dur Yield Dur
- -------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
94-28 8.18 7.36 8.28 7.02 8.29 6.84 8.23 6.73
95-00 8.16 8.26 8.27 8.21
95-04 8.14 8.24 8.25 8.19
95-08 8.12 8.22 8.23 8.17
95-12 8.11 7.37 8.21 7.04 8.22 6.85 8.15 6.74
95-16 8.09 8.19 8.20 8.13
95-20 8.07 8.17 8.18 8.11
95-24 8.05 8.15 8.16 8.09
95-28 8.04 7.38 8.13 7.05 8.14 6.86 8.08 6.75
96-00 8.02 8.11 8.12 8.06
96-04 8.00 8.10 8.10 8.04
96-08 7.98 8.08 8.08 8.02
96-12 7.97 7.40 8.06 7.06 8.06 6.87 8.00 6.76
96-16 7.95 8.04 8.05 7.98
96-20 7.93 8.02 8.03 7.96
96-24 7.91 8.00 8.01 7.94
96-28 7.90 7.41 7.99 7.07 7.99 6.89 7.92 6.78
97-00 7.88 7.97 7.97 7.90
97-04 7.86 7.95 7.95 7.88
97-08 7.84 7.93 7.93 7.87
97-12 7.83 7.42 7.91 7.08 7.92 6.90 7.85 6.79
97-16 7.81 7.90 7.90 7.83
97-20 7.79 7.88 7.88 7.81
97-24 7.78 7.86 7.86 7.79
97-28 7.76 7.43 7.84 7.10 7.84 6.91 7.77 6.80
WAL 11.4 10.6 10.2 10.0
1st Prin 4/18/08 8/18/07 6/18/07 5/18/07
Mat. 4/18/09 8/18/08 1/18/08 7/18/07
</TABLE>
- --------------------------------------------------------------------------------
* Assumes required application of prepayment penalties allocated to bondholders
- --------------------------------------------------------------------------------
These tables have been based upon the assumptions described above. These
assumptions will most likely not represent the actual experience of the Mortgage
Pool in the future.
The tables are intended to illustrate variations in yield on the Offered
Securities under such assumptions.
No representation is made herein as to the actual rate or timing of principal
payments on any of the underlying Mortgage Loans in the Mortgage Pool or the
performance characteristics of the Offered Securities.
B-13
<PAGE>
<TABLE>
<CAPTION>
ANNEX C
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740 WAC:
Chicago, IL 60603 WAMM:
================================================================================================================================
================================================================================================================================
Number Of Pages
---------------
Table Of Contents 1
REMIC Certificate Report 1
Other Related Information 4
Asset Backed Facts Sheets 1
Delinquency Loan Detail 1
Mortgage Loan Characteristics 2
Loan Level Listing Part I 1
Loan Level Listing Part II
Loan Level Listing Part III 1
--
TOTAL PAGES INCLUDED IN THIS PACKAGE 12
Specially Serviced Loan Detail Appendix A
Modified Loan Detail Appendix B
Realized Loss Detail Appendix C
================================================================================================================================
================================================================================================================================
PAGE 1 OF 12
07/30/96 - 08:54 (M399-M599) (C) 1997 LaSalle National Bank
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740 WAC:
Chicago, IL 60603 WAMM:
================================================================================================================================
ORIGINAL OPENING PRINCIPAL PRINCIPAL NEGATIVE CLOSING INTEREST INTEREST PASS-THROUGH
CLASS FACE VALUE(1) BALANCE PAYMENT ADJ. OR LOSS AMORTIZATION BALANCE PAYMENT ADJUSTMENT RATE (2)
CUSIP Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Next Rate (3)
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
=================================================================================================================================
=======================
Total P&I Payment
=======================
PAGE 2 OF 12
Notes: (1) N denotes notional balance not included in total
(2) Interest Paid minus Interest Adjustment minus Deferred Interest equals Accrual
(3) Estimated
07/30/96 - 08:54 (M399-M599) (C) 1997 LaSalle National Bank
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740 WAC:
Chicago, IL 60603 WAMM:
OTHER RELATED INFORMATION
================================================================================================================================
=======================================================================================
AGGREGATE POOL SUMMARY
---------------------------------------------------------------------------------------
Stated Principal Balance Of The Mortgage Pool Prior to Current Distribution Date:
Stated Principal Balance Of The Mortgage Pool Subsequent to Current Distribution Date:
Class Notional Amount Prior to Current Distribution Date:
Class Notional Amount Subsequent to Current Distribution Date:
Available Distribution Amount
Beginning Loan Count:
Ending Count:
Weighted Average Remaining Term To Maturity:
Weighted Average Mortgage Rate:
Weighted Average Effective Net Mortgage Rate:
=======================================================================================
=======================================================================================
AGGREGATE POOL INTEREST SUMMARY
---------------------------------------------------------------------------------------
Component Current Shortfall Delinquent Total Rate
---------------------------------------------------------------------------------------
Gross
Servicing
Trustee
Remittance
Less PPIS
Less Int on Adv
Less Special Serv
Plus Penalties
Net Remittance
=======================================================================================
================================================================================================================================
PAGE 3 OF 12
07/30/96 - 08:54 (M399-M599) (C) 1997 LaSalle National Bank
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
OTHER RELATED INFORMATION
================================================================================================================================
================================================================================================================================
======================================================
ADVANCE SUMMARY
------------------------------------------------------
Master Servicer P&I Advances Made:
Master Servicer Unreimbursed P&I Advances Outstanding
======================================================
======================================================
SERVICING FEE BREAKDOWN
------------------------------------------------------
Current Period Accrued Servicing Fees
Less Delinquent Servicing Fees
Plus Additional Servicing Fees
Less Reductions To Servicing Fees
Total Servicing Fees Collected
======================================================
===========================================================================================================
ALLOCATION OF INTEREST SHORTFALLS, LOSSES & EXPENSES
Accrued Prepayment Beginning Ending
Certificate Interest Unpaid Interest Unpaid
Class Interest Shortfall Interest Loss Expenses Distributable Interest
----- ----------- ---------- --------- -------- -------- ------------- --------
===========================================================================================================
================================================================================================================================
================================================================================================================================
PAGE 4 OF 12
07/30/96 - 08:54 (M399-M599) (C) 1997 LaSalle National Bank
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
OTHER RELATED INFORMATION
================================================================================================================================
================================================================================================================================
============================================================================
AGGREGATE POOL PRINCIPAL ALLOCATION SUMMARY
-------------------------------------------
Balance Count
------- -----
Beginning Pool:
Scheduled Principal Payments (Non Balloon):
Assumed Schedule Payments:
Partial Prepayments:
Payoffs:
Balloon Payments:
Liquidation/Insurance Proceeds:
Assumed Payments on REO's:
Liquidation/Insurance Proceeds on REO's:
Ending Pool:
============================================================================
====================================================================
CURRENT PERIOD LISTING OF LIQUIDATING LOANS
--------------------------------------------------------------------
Beginning Principal Ending Maturity Prepayment
Loan Number Balance Amount Balance Date Premium
--------------------------------------------------------------------
====================================================================
================================================================================================================================
================================================================================================================================
PAGE 5 OF 12
07/30/96 - 08:54 (M399-M599) (C) 1997 LaSalle National Bank
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603 OTHER RELATED INFORMATION
================================================================================================================================
================================================================================================================================
===========================================
CLASS PRINCIPAL BALANCE INFORMATION
-------------------------------------------
Optimal Scheduled Required
Principal Principal Credit
Class Balance Distribution % Support %
-------------------------------------------
=================================
REIMBURSED REALIZED LOSSES
=================================
Class Reimbursement
---------------------------------
================================================================================================================================
================================================================================================================================
PAGE 6 OF 12
07/30/96 - 08:54 (M399-M599) (C) 1997 LaSalle National Bank
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
=======================================================================================
=======================================================================================
Distribution Delinq 1 Month Delinq 2 Months Delinq 3+ Months Foreclosure/Bankruptcy
---------------------------------------------------------------------------
Date # Balance # Balance # Balance # Balance
- ---------------------------------------------------------------------------------------
07/18/97 0 0 0 0 0 0 0 0
0.00% 0.000% 0.00% 0.000% 0.00% 0.000% 0.00% 0.000%
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
=======================================================================================
<CAPTION>
========================================================================================
========================================================================================
Distribution REO Modifications Prepayments Curr Weighted Avg.
----------------------------------------------------------------------------
Date # Balance # Balance # Balance Coupon Remit
- ---------------------------------------------------------------------------------------
07/18/97 0 0 0 0 0 0
0.00% 0.000% 0.00% 0.000% 0.00% 0.000%
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
========================================================================================
PAGE 7 OF 12
Note: Foreclosure and REO Totals are Included in the Appropriate Delinquency Aging Category
07/30/96 - 08:54 (M399-M599) (C) 1997 LaSalle National Bank
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
DELINQUENT LOAN DETAIL
====================================================================================================================================
Paid Outstanding Out. Property Special
Disclosure Doc Thru Current P&I P&I Protection Advance Servicer Foreclosure Bankruptcy REO
Control # Date Advance Advances** Advances Description(1) Transfer Date Date Date Date
====================================================================================================================================
TOTAL
====================================================================================================================================
A. P&I Advance - Loan in Grace Period
B. P&I Advance - Late Payment but (left angle bracket) one month delinq
1. P&I Advance - Loan delinquent 1 month
2. P&I Advance - Loan delinquent 2 months
3. P&I Advance - Loan delinquent 3 months or More
4. Matured Balloon/Assumed Scheduled Payment
====================================================================================================================================
** Outstanding P&I Advances include the current period P&I Advance PAGE 8 OF 12
07/30/96 - 08:54 (M399-M599) (c) 1997 LaSalle National Bank
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
DISTRIBUTION OF PRINCIPAL BALANCES
- ---------------------------------------------------------------
Current Scheduled Number Scheduled Based on
Balances of Loans Balance Balance
===============================================================
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
&
================================================================
Total 0 0 0.00%
- ---------------------------------------------------------------
Average Scheduled Balance is
Maximum Scheduled Balance is
Minimum Scheduled Balance is
DISTRIBUTION OF PROPERTY TYPES
- -------------------------------------------------
Number Scheduled Based on
Property Types of Loans Balance Balance
=================================================
=================================================
Total 0 0 0.00%
- -------------------------------------------------
DISTRIBUTION OF MORTGAGE INTEREST RATES
- -------------------------------------------------
Current Number
Mortgage of Scheduled Based on
Interest Rate Loans Balance Balance
=================================================
or less
to
to
to
to
to
to
to
to
to
to
to
to
to
&
=================================================
Total 0 0 0.00%
- -------------------------------------------------
W/Avg Mortgage Interest Rate is
Minimum Mortgage Interest Rate is
Maximum Mortgage Interest Rate is
GEOGRAPHIC DISTRIBUTION
- -----------------------------------------------------
Number Scheduled Based on
Geographic Location of Loans Balance Balance
=====================================================
=====================================================
Total 0 0 0.00%
- -----------------------------------------------------
07/30/96 - 08:54 (M399-M599)(C) 1997 LaSalle National Bank PAGE 9 OF 12
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
LOAN SEASONING
- -----------------------------------------------------------------
Number Scheduled Based on
Number of Years of Loans Balance Balance
=================================================================
1 year or less
1+ to 2 years
2+ to 3 years
3+ to 4 years
4+ to 5 years
5+ to 6 years
6+ to 7 years
7+ to 8 years
8+ to 9 years
9+ to 10 years
10 years or more
=================================================================
Total 0 0 0.00%
- -----------------------------------------------------------------
Weighted Average Seasoning is
DISTRIBUTION OF REMAINING TERM
FULLY AMORTIZING
- -------------------------------------------------
Fully Amortizing Number Scheduled Based on
Mortgage Loans of Loans Balance Balance
=================================================
60 months or less
61 to 120 months
121 to 180 months
181 to 240 months
241 to 360 months
=================================================
Total 0 0 0.00%
- -------------------------------------------------
Weighted Average Months to Maturity is
DISTRIBUTION OF DSCR
- ---------------------------------------------------------------
Debt Service Number Scheduled Based on
Coverage Ratio (1) of Loans Balance Balance
================================================================
or less
to
to
to
to
to
to
to
to
to
to
to
to
to
&
================================================================
Total 0 0 0.00%
- ---------------------------------------------------------------
Weighted Average Debt Service Coverage Ratio is
DISTRIBUTION OF AMORTIZATION TYPE
- ---------------------------------------------------------------
Number Scheduled Based on
Amortization Type of Loans Balance Balance
===============================================================
===============================================================
Total 0 0 0.00%
- ---------------------------------------------------------------
DISTRIBUTION OF REMAINING TERM
BALLOON LOANS
- ------------------------------------------------------------
Balloon Number Scheduled Based on
Mortgage Loans of Loans Balance Balance
============================================================
12 months or less
13 to 24 months
25 to 36 months
37 to 48 months
49 to 60 months
61 to 120 months
121 to 180 months
181 to 240 months
============================================================
Total 0 0 0.00%
- ------------------------------------------------------------
Weighted Average Months to Maturity is
NOI AGING
- -----------------------------------------------------
Number Scheduled Based on
NOI Date of Loans Balance Balance
====================================================
1 year or less
1 to 2 years
2 Years or More
Unknown
=====================================================
Total 0 0 0.00%
- -----------------------------------------------------
(1) Debt Service Coverage Ratios are calculated as described in the prospectus,
values are updated periodically as new NOI figures became available from
borrowers on an asset level.
Neither the Trustee, Servicer, Special Servicer or Underwriter makes any
representation as to the accuracy of the data provided by the borrower for
this calculation.
07/30/96 - 08:54 (M399-M599)(C) 1997 LaSalle National Bank PAGE 10 OF 12
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
LOAN LEVEL DETAIL PART I
================================================================================
Disclosure Terms as of Cutoff Date
Control # ------------------------------------------------------------------
Maturity Remaining
Balance Rate Date Term P&I
================================================================================
================================================================================
<CAPTION>
=======================================================================================================
Disclosure Current Terms
Control # -----------------------------------------------------------------------------------------
Maturity Remaining
DSCR Balance Rate Date Term P&I DSCR
=======================================================================================================
=======================================================================================================
* NOI and DSCR, if available and reportable under the terms of the trust
agreement, are based on information obtained from the related borrower, and
no other party to the agreement shall be held liable for the accuracy of
methodology used to determine such figures.
- --------------------------------------------------------------------------------------------------------
(1) Legend: A. P&I Adv - in Grace Period
B. P&I Adv - (left angle bracket) one month delinq
1. P&I Adv - delinquent 1 month 3. P&I Adv - delinquent 3+ months
2. P&I Adv - delinquent 2 months 4. Mat. Balloon/Assumed P&I
5. Prepaid in Full 6. Specially Serviced
7. Foreclosure 8. Bankruptcy
9. REO 10. DPO 11. Modification
===================================================================================================================================
07/30/96 - 08:54 (M399-M599)(C) 1997 LaSalle National Bank PAGE 11 OF 12
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
LOAN LEVEL DETAIL PART II
====================================================================================================================================
Number of Times
Loan Delinquent In Modifi- In In
Disclosure Property Property Status ----------------- Special cation Fore- Bank-
Control # Group Name City State Type Code(1) 30 60 90+ Servicing Date closure ruptcy REO
====================================================================================================================================
===================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Legend: A. P&I Adv - in Grace Period 1. P&I Adv - delinquent 1 month
B. P&I Adv - (left angle bracket) one month delinq 2. P&I Adv - delinquent 2 months
3. P&I Adv - delinquent 3+ months
4. Mat. Balloon/Assumed P&I
====================================================================================================================================
07/30/96 - 08:54 (M399-M599)(C) 1997 LaSalle National Bank PAGE 12 OF 12
</TABLE>
C-12
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
SPECIALLY SERVICED LOAN DETAIL
====================================================================================================================================
Beginning Specially
Disclosure Scheduled Interest Maturity Property Serviced
Control # Balance Rate Date Type Status Code (1) Comments
====================================================================================================================================
====================================================================================================================================
(1) Legend :
1) Request for waiver of Prepayment Penalty 4) Loan with Borrower Bankruptcy 7) Loans Paid Off
2) Payment default 5) Loan in Process of Foreclosure 8) Loans Returned to Master Servicer
3) Request for Loan Modification or Workout 6) Loan now REO Property
====================================================================================================================================
07/30/96 - 08:54 (M399-M599)(C) 1997 LaSalle National Bank APPENDIX A
</TABLE>
C-13
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
MODIFIED LOAN DETAIL
====================================================================================================================================
Disclosure Modification Modification
Control # Date Description
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
07/30/96 - 08:54 (M399-M599) (C) 1997 LaSalle National Bank APPENDIX B
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABN AMRO MERRILL LYNCH MORTGAGE INVESTORS, INC. Statement Date: 07/18/97
LaSalle National Bank GE CAPITAL ASSET MANAGEMENT CORPORATION, AS MASTER SERVICER Payment Date: 07/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C1 Record Date: 06/30/97
Linda Wirfel (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
REALIZED LOSS DETAIL
============================================================================================
Beginning
Dist. Disclosure Appraisal Appraisal Scheduled Gross
Date Control # Date Value Balance Proceeds
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
CURRENT TOTAL 0.00 0.00
CUMULATIVE 0.00 0.00
============================================================================================
<CAPTION>
==============================================================================================
Gross Proceeds Aggregate Net Net Proceeds
Dist. as a % of Liquidation Liquidation as a % of Realized
Date Sched Principal Expenses * Proceeds Sched. Balance Loss
- -----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
CURRENT TOTAL 0.00 0.00 0.00
CUMULATIVE 0.00 0.00 0.00
==============================================================================================
APPENDIX C
* Aggregate liquidation expenses also include outstanding P&I advances and
unpaid servicing fees, unpaid trustee fees, etc..
07/30/96 - 08:54 (M399-M599) (C) 1997 LaSalle National Bank
</TABLE>
C-15
<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.
JUNE 5, 1997
<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 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.
2
<PAGE>
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>
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 ............................................ 16
Limited Nature of Ratings .................................................................... 17
Risks Associated with Certain Mortgage Loans and Mortgaged Properties ........................ 18
Balloon Payments; Borrower Default ........................................................... 19
Credit Support Limitations ................................................................... 19
Leases and Rents ............................................................................. 19
Environmental Risks .......................................................................... 20
ERISA Considerations ......................................................................... 20
Certain Federal Tax Considerations Regarding REMIC Residual Certificates ..................... 20
Book-Entry Registration ...................................................................... 20
Delinquent and Non-Performing Mortgage Loans ................................................. 21
DESCRIPTION OF THE TRUST FUNDS ................................................................. 21
General ...................................................................................... 21
Mortgage Loans ............................................................................... 21
General .................................................................................... 21
Default and Loss Considerations with Respect to the Mortgage Loans ......................... 22
Payment Provisions of the Mortgage Loans ................................................... 23
Mortgage Loan Information in Prospectus Supplements ........................................ 23
MBS .......................................................................................... 24
Certificate Accounts ......................................................................... 24
Credit Support ............................................................................... 24
Cash Flow Agreements ......................................................................... 25
YIELD AND MATURITY CONSIDERATIONS .............................................................. 25
General ...................................................................................... 25
Pass-Through Rate ............................................................................ 25
Payment Delays ............................................................................... 25
Certain Shortfalls in Collections of Interest ................................................ 25
Yield and Prepayment Considerations .......................................................... 26
Weighted Average Life and Maturity ........................................................... 27
Controlled Amortization Classes and Companion Classes ........................................ 28
Other Factors Affecting Yield, Weighted Average Life and Maturity ............................ 28
Balloon Payments; Extensions of Maturity ................................................... 28
Negative Amortization ...................................................................... 28
Foreclosures and Payment Plans ............................................................. 29
Losses and Shortfalls on the Mortgage Assets ............................................... 29
Additional Certificate Amortization ........................................................ 29
4
<PAGE>
<CAPTION>
PAGE
----
<S> <C>
THE DEPOSITOR .................................................................................. 30
USE OF PROCEEDS ................................................................................ 30
DESCRIPTION OF THE CERTIFICATES ................................................................ 30
General ...................................................................................... 30
Distributions ................................................................................ 30
Distributions of Interest on the Certificates ................................................ 31
Distributions of Certificate Principal ....................................................... 32
Distributions on the Certificates in Respect of Prepayment Premiums or in Respect of
Equity Participations ....................................................................... 32
Allocation of Losses and Shortfalls .......................................................... 32
Advances in Respect of Delinquencies ......................................................... 33
Reports to Certificateholders ................................................................ 33
Voting Rights ................................................................................ 34
Termination .................................................................................. 34
Book-Entry Registration and Definitive Certificates .......................................... 35
DESCRIPTION OF THE POOLING AGREEMENTS .......................................................... 37
General ...................................................................................... 37
Assignment of Mortgage Loans; Repurchases .................................................... 37
Representations and Warranties; Repurchases .................................................. 38
Certificate Account .......................................................................... 39
General .................................................................................... 39
Deposits ................................................................................... 39
Withdrawals ................................................................................ 40
Collection and Other Servicing Procedures .................................................... 41
Modifications, Waivers and Amendments of Mortgage Loans ...................................... 41
Sub-Servicers ................................................................................ 41
Special Servicers ............................................................................ 42
Realization Upon Defaulted Mortgage Loans .................................................... 42
Hazard Insurance Policies .................................................................... 43
Due-On-Sale and Due-On-Encumbrance Provisions ................................................ 44
Servicing Compensation and Payment of Expenses ............................................... 44
Evidence as to Compliance .................................................................... 45
Certain Matters Regarding the Master Servicer and the Depositor .............................. 45
Events of Default ............................................................................ 46
Rights Upon Event of Default ................................................................. 46
Amendment .................................................................................... 47
List of Certificateholders ................................................................... 47
The Trustee .................................................................................. 47
Duties of the Trustee ........................................................................ 47
Certain Matters Regarding the Trustee ........................................................ 48
Resignation and Removal of the Trustee ....................................................... 48
DESCRIPTION OF CREDIT SUPPORT .................................................................. 48
General ...................................................................................... 48
Subordinate Certificates ..................................................................... 49
Cross-Support Provisions ..................................................................... 49
5
<PAGE>
<CAPTION>
PAGE
----
<S> <C>
Insurance or Guarantees with Respect to Mortgage Loans ....................................... 49
Letter of Credit ............................................................................. 49
Certificate Insurance and Surety Bonds ....................................................... 49
Reserve Funds ................................................................................ 50
Credit Support with Respect to MBS ........................................................... 50
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS ........................................................ 50
General ...................................................................................... 50
Types of Mortgage Instruments ................................................................ 51
Leases and Rents ............................................................................. 51
Personalty ................................................................................... 51
Junior Mortgages; Rights of Senior Lenders ................................................... 51
Foreclosure .................................................................................. 52
General .................................................................................... 52
Foreclosure procedures vary from state to state ............................................ 52
Judicial Foreclosure ....................................................................... 52
Non-Judicial Foreclosure/Power of Sale ..................................................... 53
Limitations on the Rights of Mortgage Lenders .............................................. 53
Rights of Redemption ....................................................................... 54
Anti-Deficiency Legislation ................................................................ 54
Leasehold Considerations ................................................................... 54
Bankruptcy Laws .............................................................................. 55
Environmental Considerations ................................................................. 56
General .................................................................................... 56
Superlien Laws ............................................................................. 56
CERCLA ..................................................................................... 56
Certain Other Federal and State Laws ....................................................... 56
Additional Considerations .................................................................. 57
Due-On-Sale and Due-On-Encumbrance ........................................................... 57
Subordinate Financing ........................................................................ 57
Default Interest and Limitations on Prepayments .............................................. 58
Applicability of Usury Laws .................................................................. 58
Soldiers' and Sailors' Civil Relief Act of 1940 .............................................. 58
Americans with Disabilities Act .............................................................. 58
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ........................................................ 59
General ...................................................................................... 59
REMICs ....................................................................................... 59
Classification of REMICs ................................................................... 59
Characterization of Investments in REMIC Certificates ...................................... 60
Tiered REMIC Structures .................................................................... 60
Taxation of Owners of REMIC Regular Certificates ............................................. 61
General .................................................................................... 61
Original Issue Discount .................................................................... 61
Market Discount ............................................................................ 63
Premium .................................................................................... 64
Realized Losses ............................................................................ 64
6
<PAGE>
<CAPTION>
PAGE
----
<S> <C>
Taxation of Owners of REMIC Residual Certificates ............................................ 64
General .................................................................................... 64
Taxable Income of the REMIC ................................................................ 65
Basis Rules, Net Losses and Distributions .................................................. 66
Excess Inclusions .......................................................................... 67
Noneconomic REMIC Residual Certificates .................................................... 68
Mark-to-Market Rules ....................................................................... 69
Possible Pass-Through of Miscellaneous Itemized Deductions ................................. 69
Sales of REMIC Certificates ................................................................ 70
Prohibited Transactions Tax and Other Taxes ................................................ 70
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain Organizations .. 71
Termination ................................................................................ 72
Reporting and Other Administrative Matters ................................................. 72
Backup Withholding with Respect to REMIC Certificates ...................................... 73
Foreign Investors in REMIC Certificates .................................................... 73
Grantor Trust Funds .......................................................................... 73
Classification of Grantor Trust Funds ...................................................... 73
Characterization of Investments in Grantor Trust Certificates ................................ 74
Grantor Trust Fractional Interest Certificates ............................................. 74
Grantor Trust Strip Certificates ........................................................... 74
Taxation of Owners of Grantor Trust Fractional Interest Certificates ......................... 74
General .................................................................................... 74
If Stripped Bond Rules Apply ............................................................... 75
If Stripped Bond Rules Do Not Apply ........................................................ 76
Market Discount ............................................................................ 78
Premium .................................................................................... 79
Taxation of Owners of Grantor Trust Strip Certificates ..................................... 79
Possible Application of Proposed Contingent Payment Rules .................................. 80
Sales of Grantor Trust Certificates ........................................................ 80
Grantor Trust Reporting .................................................................... 81
Backup Withholding ......................................................................... 81
Foreign Investors .......................................................................... 81
STATE AND OTHER TAX CONSEQUENCES ............................................................. 81
ERISA CONSIDERATIONS ......................................................................... 82
General .................................................................................... 82
Plan Asset Regulations ..................................................................... 82
Prohibited Transaction Exemptions .......................................................... 82
LEGAL INVESTMENT ............................................................................. 84
METHOD OF DISTRIBUTION ....................................................................... 85
LEGAL MATTERS ................................................................................ 86
FINANCIAL INFORMATION ........................................................................ 86
RATING ....................................................................................... 86
INDEX OF PRINCIPAL DEFINITIONS ............................................................... 87
</TABLE>
7
<PAGE>
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.
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 adjustable to a fixed Mortgage
Rate, or from a fixed to
8
<PAGE>
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."
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
9
<PAGE>
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 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) pro-
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vide 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, 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
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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.
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
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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 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 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.
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<PAGE>
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 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, (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
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 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
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.
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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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<PAGE>
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.
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,
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<PAGE>
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.
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
riskthat 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
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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; 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.
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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 therelated 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 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."
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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. 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 site assessments, 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 hazardous substances, 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, 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
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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 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
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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 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
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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 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 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
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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.
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
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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 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
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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 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.
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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.
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
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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.
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
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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 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 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
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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 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
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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 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.
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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 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;
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(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, (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;
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(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."
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
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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-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
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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 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
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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; 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 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
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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 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");
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(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
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";
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(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 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
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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 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
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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 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
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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 (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
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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 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
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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 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.
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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 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 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
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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.
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.
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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 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
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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.
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
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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.
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 or in a
subordination or intercreditor agreement, no notice of default is required to be
given to the junior lender.
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The form of the mortgage instrument used by many institutional lenders
confers on the lender 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, 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 certain
new leases and the termination or modification of certain existing leases, the
performance of certain 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
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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, 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
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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.
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
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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 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 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
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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, disposal or
certain commercial 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. Excluded from CERCLA's definition of "owner" or "operator,"
however, is a lender that, "without participating in the management" of the
facility, holds indicia of ownership primarily to protect his security interest
in the facility. This so-called secured creditor exemption is intended to
provide a lender protection from liability under CERCLA as an owner or operator
of contaminated property. The secured creditor exemption, however, does not
necessarily protect a lender from liability for cleanup of hazardous substances
in every situation. A secured lender may be liable as an "owner" or "operator"
of a contaminated mortgaged property if agents or employees of the lender are
deemed to 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.
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 deemed to be the "owners" or "operators" of facilities in which they
have a security interest or upon which they have foreclosed.
The federal Asset Conservation, Lender Liability and Deposit Insurance
Protection Act of 1996 (the "Act") seeks to clarify the actions a lender may
take without incurring liability as an "owner" or "operator" of contaminated
property or underground petroleum storage tanks. The Act amends CERCLA and RCRA
to provide guidance on actions that do or do not constitute "participation in
management."
Importantly, the Act does not, among other things: (1) completely
eliminate potential liability to lenders under CERCLA or RCRA; (2) reduce credit
risks associated with lending to borrowers having significant environmental
liabilities or potential liabilities, (3) eliminate environmental risks
associated with taking possession of contaminated property or underground
storage tanks or assuming control of the operations thereof, or (4) affect
liabilities or potential liabilities under state environmental laws. Further,
application or the Act to specific situation has not yet been tested through
litigation.
Certain Other Federal and State Laws. Many states have statutes similar
to CERCLA and RCRA, and not all of those statutes provide for a secured creditor
exemption.
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.
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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 other potentially liable parties,
but such parties 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 take
possession of 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 site assessments, 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.
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.
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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
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
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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 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
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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 "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
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 Section
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
"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.
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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 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
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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 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
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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.
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.
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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 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. On June 27, 1996, the IRS published in the
Federal Register proposed regulations on the amortization of bond premium. Under
those regulations, if a holder elects to amortize bond premium, bond premium
would be amortized on a constant yield method and would be applied against
qualified stated interest. The proposed regulations generally would be effective
for REMIC Regular Certificates acquired on or after the date 60 days after the
date final regulations are published in the Federal Register. 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 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
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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 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.
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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 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.
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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 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,
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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 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
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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
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.
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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.
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)
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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 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,
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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 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, an estate 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, or a trust if a court
within the U.S. is able to exercise primary supervision over the administration
of the trust and one or more U.S. fiduciaries have the authority to control all
substantial decisions of the trust. It is possible that the IRS may assert the
foregoing withholding tax exemption should not apply with respect to interest
distributed on a REMIC Regular Certificate that is held by (i) a REMIC Residual
Certificateholder that owns directly or indirectly a 10% or greater interest in
the REMIC Residual Certificates or (ii) to the extent of the amount of interest
paid by the related Mortgagor on a particular Mortgage Loan, (A) a REMIC Regular
Certificateholder that owns a 10% or greater ownership interest in such
Mortgagor or (B) a REMIC Regular Certificateholder that is a controlled foreign
corporation as to the United States of which such Mortgagor is a "United States
shareholder" within the meaning of Section 951(b) of the Code. 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
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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
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) assets described in Section 7701(a)(19)(C) of the Code; (ii)
"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 (iii)
"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 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
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either Section 67 or Section 68 of the Code may be substantial. Further,
Certificateholders (other than corporations) subject 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.
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
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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 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.
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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
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
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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.
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
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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
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
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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 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.
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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 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.
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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 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
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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 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.
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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 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.
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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 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 retained by the
Depositor, and may be sold by the Depositor at any time to one or more
institutional investors.
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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.
86
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
PAGE
----
Accrual Certificates .......................................... 11
Accrued Certificate Interest .................................. 31
Act ........................................................... 56
ADA ........................................................... 58
ARM Loans ..................................................... 23
Available Distribution Amount ................................. 30
Bankruptcy Code ............................................... 53
Book-Entry Certificates ....................................... 13
Cash Flow Agreement ........................................... 1
CERCLA ........................................................ 20
Certificate ................................................... 1
Certificate Account ........................................... 9
Certificate Balance ........................................... 2
Certificate Owner ............................................. 13
Certificateholder ............................................. 1
Closing Date .................................................. 61
Code .......................................................... 13
Commercial Properties ......................................... 8
Commission .................................................... 2
Committee Report .............................................. 61
Companion Class ............................................... 12
Contributions Tax ............................................. 71
Controlled Amortization Class ................................. 12
Cooperatives .................................................. 21
CPR ........................................................... 27
Credit Support ................................................ 1
Cut-off Date .................................................. 12
Debt Service Coverage Ratio ................................... 22
Definitive Certificate ........................................ 13
Depositor ..................................................... 8
Determination Date ............................................ 31
Direct Participants ........................................... 36
Distribution Date ............................................. 11
Distribution Date Statement ................................... 33
DOL ........................................................... 82
DTC ........................................................... 2
Due Dates ..................................................... 23
Due Period .................................................... 33
Duff & Phelps ................................................. 83
Equity Participation .......................................... 23
ERISA ......................................................... 15
Event of Default .............................................. 46
Excess Funds .................................................. 29
Exchange Act .................................................. 2
Exemption ..................................................... 82
FAMC .......................................................... 9
FHLMC ......................................................... 9
Fitch ......................................................... 83
FNMA .......................................................... 9
Garn Act ...................................................... 57
GNMA .......................................................... 9
Grantor Trust Certificates .................................... 13
Grantor Trust Fractional Interest Certificates ................ 14
Grantor Trust Fund ............................................ 59
Grantor Trust Strip Certificate ............................... 74
87
<PAGE>
PAGE
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Indirect Participants ......................................... 36
Insurance Proceeds ............................................ 39
IRS ........................................................... 61
Issue Premium ................................................. 66
L/C Bank ...................................................... 49
Liquidation Proceeds .......................................... 39
Loan-to-Value Ratio ........................................... 22
Lock-out Expiration Date ...................................... 23
Lock-out Period ............................................... 23
Master Servicer ............................................... 2
MBS ........................................................... 1
MBS Agreement ................................................. 24
MBS Issuer .................................................... 24
MBS Servicer .................................................. 24
MBS Trustee ................................................... 24
Merrill Lynch ................................................. 85
Moody's ....................................................... 83
Mortgage Asset Seller ......................................... 9
Mortgage Assets ............................................... 1
Mortgage Loan ................................................. 1
Mortgage Notes ................................................ 21
Mortgage Rate ................................................. 8
Mortgaged Properties .......................................... 21
Mortgages ..................................................... 21
Multifamily Properties ........................................ 8
Net Leases .................................................... 22
Net Operating Income .......................................... 22
Nonrecoverable Advance ........................................ 33
Notional Amount ............................................... 11
Offered Certificates .......................................... 1
OID Regulations ............................................... 59
Originator .................................................... 21
PAC ........................................................... 28
Participants .................................................. 20
Parties in Interest ........................................... 82
Pass-Through Rate ............................................. 2
Permitted Investments ......................................... 39
Plans ......................................................... 82
Pooling Agreement ............................................. 10
Prepayment Assumption ......................................... 61
Prepayment Interest Shortfall ................................. 26
Prepayment Premium ............................................ 23
Prohibited Transactions Tax ................................... 70
Proposed Mark-to-Market Regulations ........................... 69
Prospectus Supplement ......................................... 1
Rating Agency ................................................. 15
RCRA .......................................................... 56
Record Date ................................................... 31
Related Proceeds .............................................. 33
Relief Act .................................................... 58
REMIC ......................................................... 1
REMIC Certificates ............................................ 59
REMIC Provisions .............................................. 59
REMIC Regular Certificates .................................... 13
REMIC Regulations ............................................. 59
REMIC Residual Certificates ................................... 13
88
<PAGE>
PAGE
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REO Property .................................................. 34
Senior Certificates ........................................... 10
Servicing Standard ............................................ 41
SMMEA ......................................................... 84
SPA ........................................................... 27
Special Servicer .............................................. 2
Standard & Poor's ............................................. 83
Stripped Interest Certificates ................................ 10
Stripped Principal Certificates ............................... 10
Sub-Servicer .................................................. 41
Sub-Servicing Agreement ....................................... 42
Subordinate Certificates ...................................... 10
TAC ........................................................... 28
Temporary Mark-to-Market Regulations .......................... 69
Tiered REMICs ................................................. 60
Title V ....................................................... 58
Trust Assets .................................................. 2
Trust Fund .................................................... 1
Trustee ....................................................... 2
UCC ........................................................... 51
Value ......................................................... 22
Voting Rights ................................................. 35
Warranting Party .............................................. 38
89
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[GRAPHIC OMITTED]
This diskette contains a file: The file "MLMI97C1.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.
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.
(1) Microsoft Excel is a registered trademark of Microsoft Corporation.
<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
PAGE
----
PROSPECTUS SUPPLEMENT
Summary ................................................................ S-5
Risk Factors ........................................................... S-26
Description of the Mortgage Pool ....................................... S-30
Servicing of the Mortgage Loans ........................................ S-47
Description of the Certificates ........................................ S-54
Yield and Maturity Considerations ...................................... S-67
Use of Proceeds ........................................................ S-74
Certain Federal Income Tax
Consequences .......................................................... S-74
ERISA Considerations ................................................... S-75
Legal Investment ....................................................... S-77
Method of Distribution ................................................. S-78
Legal Matters .......................................................... S-78
Ratings ................................................................ S-78
Index of Principal Definitions ......................................... S-80
Annex A ................................................................ A-1
Annex B ................................................................ B-1
Annex C ................................................................ C-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 ......................................... 21
Yield and Maturity Considerations ...................................... 25
The Depositor .......................................................... 30
Use of Proceeds ........................................................ 30
Description of the Certificates ........................................ 30
Description of the Pooling Agreements .................................. 37
Description of Credit Support .......................................... 48
Certain Legal Aspects of Mortgage Loans ................................ 50
Certain Federal Income Tax Consequences ................................ 59
State and Other Tax Considerations ..................................... 81
ERISA Considerations ................................................... 82
Legal Investment ....................................................... 84
Method of Distribution ................................................. 85
Legal Matters .......................................................... 86
Financial Information .................................................. 86
Rating ................................................................. 86
Index of Principal Definitions ......................................... 87
================================================================================
================================================================================
MERRILL LYNCH MORTGAGE
INVESTORS, INC.
(DEPOSITOR)
$745,386,000
(APPROXIMATE)
MORTGAGE PASS-THROUGH
CERTIFICATES
SERIES 1997-C1
---------------------
PROSPECTUS SUPPLEMENT
---------------------
MERRILL LYNCH & CO.
DAIWA SECURITIES AMERICA INC.
JUNE __, 1997
================================================================================
