Information contained herein is subject to completion or amendment. Offers to
buy these securities may not be accepted without the 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 qualification
under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED DECEMBER 9, 1997
PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED DECEMBER 9, 1997)
$618,448,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-C2
----------------
The Mortgage Pass-Through Certificates, Series 1997-C2 (the "Certificates") will
consist of sixteen classes (each, a "Class") of Certificates, including the
seven Classes of Certificates offered hereby (collectively, the "Offered
Certificates"). The Certificates, in the aggregate, will represent the entire
undivided beneficial ownership interest in a trust fund (the "Trust Fund") to be
established by Merrill Lynch Mortgage Investors, Inc. (the "Depositor"), that is
expected to consist primarily of a segregated pool (the "Mortgage Pool") of 148
conventional, fixed rate mortgage loans (the "Mortgage Loans") secured by first
liens on 155 commercial and multifamily properties (each, a "Mortgaged
Property"). The Depositor will acquire approximately 74% by Initial Pool Balance
(as defined below) of the the Mortgage Loans from GE Capital Access, Inc. and
approximately 26% by Initial Pool Balance of the Mortgage Loans from Merrill
Lynch Mortgage Capital Inc. As of December 1, 1997 (the "Cut-Off Date"), the
Mortgage Loans had an aggregate principal balance (the "Initial Pool Balance")
of approximately $696,842,931, after application of all payments of
(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 OBLIGATIONOF THE DEPOSITOR, THE UNDERWRITER, THE
MASTER SERVICER, THE SPECIAL SERVICER, THE TRUSTEE, GENERAL
ELECTRIC COMPANY, GENERAL ELECTRIC CAPITAL CORPORATION,
THE MORTGAGE LOAN SELLERS 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 .................. $124,018,000 17.8% % December 10, 2029 Aaa/AAA/AAA
Class A-2 .................. $377,708,000 54.2% % December 10, 2029 Aaa/AAA/AAA
Class B .................... $ 27,874,000 4.0% (4) December 10, 2029 Aa2/AA/AA
Class C .................... $ 41,811,000 6.0% (4) December 10, 2029 A2/A/A
Class D .................... $ 34,842,000 5.0% (4) December 10, 2029 Baa2/BBB/NR
Class E .................... $ 12,195,000 1.7% (4) December 10, 2029 Baa3/BBB-/NR
Class IO ................... N/A N/A (5) December 10, 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 and Fitch Investors Service, L.P. "NR" denotes no rating will be
assigned to such Class of Certificates by the indicated Rating Agency.
(4) The Pass-Through Rates applicable to the Class B, Class C, Class D and
Class E Certificates will equal the Weighted Average Net Mortgage Rate (as
defined herein) minus __%, __%, __%, and __%, respectively.
(5) The Class IO Certificates will not have a Certificate Balance nor will they
entitle the holders thereof to receive distributions of principal, but will
entitle such holders to receive payments of 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 (the "Underwriter") 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 Underwriter when, as and if
issued and delivered to and accepted by the Underwriter, subject to prior sale
and subject to the Underwriter's 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 December 19, 1997.
----------------
MERRILL LYNCH & CO.
----------------
The date of this Prospectus Supplement is December __, 1997.
<PAGE>
(cover continued)
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 on the prior page. Simultaneously with the issuance of the Offered
Certificates, the Private Certificates (as defined herein) will be issued. Only
the Offered Certificates are offered hereby.
On or before the date the Certificates are issued, the Depositor will
transfer the Mortgage Loans, without recourse, to State Street Bank and Trust
Company, 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 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 10th day of each month or, if any such 10th day is not a business day, then
on the next succeeding business day, commencing January 12, 1998 (each, a
"Distribution Date"); provided, however, that the Distribution Date will be no
earlier than the fourth business day following the related Determination Date
(as defined herein). 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 Class
of Offered Certificates of any Prepayment Premium may be insufficient to offset
fully the adverse 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 Anticipated 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 Anticipated 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 REMIC III. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" herein and in the
Prospectus.
There is currently no secondary market for the Offered Certificates. The
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-28
The Mortgage Loans .................................................... S-28
Risks of Lending on Income-Producing Properties ................... S-28
Nonrecourse Mortgage Loans ........................................ S-29
Environmental Law Considerations .................................. S-30
Balloon Payments .................................................. S-30
Risk of Subordinated Debt and Other Financing ..................... S-30
Related Borrowers ................................................. S-31
Concentration of Mortgage Loans ................................... S-31
Risks of Different Timing of Mortgage Loan Amortization ........... S-31
Ground Leases and Other Leasehold Interests ....................... S-31
Mortgage Loan Sellers ............................................. S-31
DESCRIPTION OF THE MORTGAGE POOL ...................................... S-32
General ............................................................. S-32
Certain Terms and Conditions of the Mortgage Loans .................. S-33
Mortgage Rates; Calculations of Interest .......................... S-33
Due Dates ......................................................... S-33
Amortization ...................................................... S-33
Prepayment Provisions ............................................. S-34
Defeasance ........................................................ S-34
Nonrecourse Obligations ........................................... S-34
"Due-on-Sale" and "Due-on-Encumbrance" Provisions ............. S-34
Cross-Default and Cross-Collateralization of Certain Mortgage Loans S-34
Assessments of Property Condition ................................... S-35
Property Inspection ............................................... S-35
Appraisals ........................................................ S-35
Environmental Assessments ......................................... S-35
Engineering Assessments ........................................... S-35
Earthquake Analyses ............................................... S-35
Zoning Compliance ................................................. S-35
Additional Mortgage Loan Information ................................ S-36
The Mortgage Pool ................................................. S-36
The Mortgage Loan Sellers ........................................... S-45
Assignment of the Mortgage Loans; Repurchases ....................... S-45
Representations and Warranties; Repurchases ......................... S-46
Changes in Mortgage Pool Characteristics ............................ S-47
SERVICING OF THE MORTGAGE LOANS ....................................... S-47
General ............................................................. S-47
The Master Servicer ................................................. S-47
The Special Servicer ................................................ S-48
Servicing and Other Compensation and Payment of Expenses ............ S-49
Modifications, Waivers and Amendments ............................... S-51
REO Properties ...................................................... S-52
Inspections; Collection of Operating Information .................... S-52
S-3
<PAGE>
PAGE
----
DESCRIPTION OF THE CERTIFICATES ........................................ S-53
General .............................................................. S-53
Registration and Denominations ....................................... S-53
Certificate Balances and Notional Amounts ............................ S-54
Pass-Through Rates ................................................... S-54
Distributions ........................................................ S-55
General ............................................................ S-55
The Available Distribution Amount .................................. S-55
Application of the Available Distribution Amount ................... S-56
Distributable Certificate Interest ................................. S-58
Principal Distribution Amount ...................................... S-58
Treatment of REO Properties ........................................ S-59
Allocation of Prepayment Premiums .................................. S-60
Subordination; Allocation of Losses and Certain Expenses ............. S-60
P&I Advances ......................................................... S-62
Appraisal Reductions ................................................. S-63
Reports to Certificateholders; Available Information ................. S-63
Voting Rights ........................................................ S-65
Termination .......................................................... S-65
The Trustee .......................................................... S-65
YIELD AND MATURITY CONSIDERATIONS ...................................... S-66
Yield Considerations ................................................. S-66
General ............................................................ S-66
Rate and Timing of Principal Payment ............................... S-66
Losses and Shortfalls .............................................. S-67
Pass-Through Rates ................................................. S-67
Certain Relevant Factors ........................................... S-67
Delay in Payment of Distributions .................................. S-68
Unpaid Distributable Certificate Interest .......................... S-68
Yield Sensitivity of the Class IO Certificates ..................... S-68
Weighted Average Life ................................................ S-69
USE OF PROCEEDS ........................................................ S-73
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ................................ S-73
ERISA CONSIDERATIONS ................................................... S-74
LEGAL INVESTMENT ....................................................... S-76
METHOD OF DISTRIBUTION ................................................. S-76
LEGAL MATTERS .......................................................... S-77
RATINGS ................................................................ S-77
INDEX OF PRINCIPAL DEFINITIONS ......................................... S-79
ANNEX A--CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS ................. A-1
ANNEX B--TERM SHEET .................................................... B-1
ANNEX C--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
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>
Offered Certificates
- --------------------
Class A-1 .......... Aaa/AAA/AAA $124,018,000 17.8% 28.0% Fixed Coupon % 5.0 01/98-05/05
Class A-2 .......... Aaa/AAA/AAA $377,708,000 54.2% 28.0% Fixed Coupon % 9.7 05/05-12/07
Class B ............ Aa2/AA/AA $ 27,874,000 4.0% 24.0% Net WAC (4) 9.9 12/07-12/07
Class C ............ A2/A/A $ 41,811,000 6.0% 18.0% Net WAC (4) 10.4 12/07-11/09
Class D ............ Baa2/BBB/NR $ 34,842,000 5.0% 13.0% Net WAC (4) 12.4 11/09-08/11
Class E ............ Baa3/BBB-/NR $ 12,195,000 1.7% 11.3% Net WAC (4) 13.7 08/11-05/12
Private Certificates
- --------------------
Class F ............ (5) $ 38,326,000 5.5% 5.8% Fixed Coupon % 15.3 05/12-10/15
Class G ............ (5) $ 6,968,000 1.0% 4.8% Fixed Coupon % 18.5 10/15-02/17
Class H ............ (5) $ 12,195,000 1.8% 3.0% Fixed Coupon % 19.8 02/17-02/19
Class J ............ (5) $ 6,969,000 1.0% 2.0% Fixed Coupon % 22.1 02/19-02/21
Class K ............ (5) $ 13,936,931 2.0% 0% Fixed Coupon % 24.4 02/21-12/22
Class IO ........... Aaa/NR/AAA (6) N/A N/A Variable (7) 01/98-12/22
Class L ............ (5) (8) N/A N/A Variable (8) N/A N/A
</TABLE>
- -----------------
(1) By each of Moody's Investors Service, Inc., Standard & Poor's Ratings
Services and Fitch Investors Service, L.P. "NR" denotes no rating will be
assigned to such Class of Certificates by the indicated Rating Agency.
(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 Pass-Through Rates applicable to the Class B, Class C, Class D and
Class E Certificates will equal the Weighted Average Net Mortgage Rate
minus ___%, ___%, ___% and ___%, respectively.
(5) Not offered hereby. Accordingly, any information herein regarding the terms
of such Class of Certificates is provided solely because of its potential
relevance to a prospective purchaser of an Offered Certificate.
(6) 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" in this Summary.
(7) 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" in this
Summary.
(8) The Class L Certificates will not have a Certificate Balance nor will they
entitle the holders thereof to receive distributions of principal or
interest, other than certain amounts described herein. See "DESCRIPTION OF
THE MORTGAGE POOL--Certain Terms and Conditions of the Mortgage
Loans--Amortization" herein.
- --------------------------------------------------------------------------------
S-5
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Title of Certificates .......................... Merrill Lynch Mortgage Investors, Inc., Mortgage Pass-Through
Certificates, Series 1997-C2 (the "Certificates"), to be issued
in the following classes (each, a "Class") to be designated as:
(i) the Class A-1, Class A-2, Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class J and Class K Certificates
(collectively, the "Sequential Pay Certificates"); (ii) the
Class IO Certificates (together with the Sequential Pay
Certificates, the "REMIC Regular Certificates"); (iii) the Class
L Certificates and (iv) 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 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, Class K, Class L 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"), the
Underwriter. Neither the Depositor nor any of its affiliates has
insured or guaranteed the Offered Certificates. See "THE
DEPOSITOR" in the Prospectus.
Mortgage Loan Sellers .......................... GE Capital Access, Inc. ("GECA"), a subsidiary of GE Capital
Corporation ("GECC"), and Merrill Lynch Mortgage Capital
Inc. ("MLMCI"), the Depositor's corporate parent and an
affiliate of Merrill Lynch, the Underwriter. See
"DESCRIPTION OF THE MORTGAGE POOL--The Mortgage Loan
Sellers" herein.
Master Servicer ................................ GE Capital Loan Services, Inc. ("GECLS"), a Delaware
Corporation, an affiliate of GECA, one of the Mortgage Loan
Sellers, and formerly known as GE Capital Asset Management
Corporation. See "SERVICING OF THE MORTGAGE LOANS--The
Master Servicer" and "--Servicing and Other Compensation and
Payment of Expenses" herein.
Special Servicer ............................... CRIIMI MAE Services Limited Partnership, a Maryland limited
partnership. 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 with an outstanding
Certificate Balance equal to at least 20% of the initial
Certificate Balance of such Class and 1% of the aggregate
Certificate Balance of all Sequential Pay Certificates, and
having the latest alphabetical Class designation will have the
right, subject to certain conditions described herein, to replace
the Special Servicer, as described herein. It is anticipated that
the Special Servicer or an
- -----------------------------------------------------------------------------------------------------------------------------------
S-6
<PAGE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
affiliate of the Special Servicer will purchase a significant portion
of the Private Certificates on or about the Closing Date. See
"SERVICING OF THE MORTGAGE LOANS--The Special Servicer" and
"--Servicing and Other Compensation and Payment of Expenses" herein.
Trustee ........................................ State Street Bank and Trust Company, a trust company chartered
under the laws of the Commonwealth of Massachusetts.
Cut-Off Date ................................... December 1, 1997
Closing Date ................................... On or about December 19, 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 $1,000 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 148 conventional, fixed rate
Mortgage Loans with an aggregate Cut-Off Date Balance of $696,842,931
(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. All percentages of the Mortgage Loans, or of
any specified group of Mortgage Loans, referred to herein without
further description are approximate percentages by Initial Pool
Balance. References to percentages of Mortgaged Properties are
references to the percentages of the Initial Pool Balance represented
by the portion of the Cut-off Date Balance of the related Mortgage
Loans represented by such Mortgaged Properties.
Security for the Mortgage Loans ............ 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.
- -----------------------------------------------------------------------------------------------------------------------------------
S-7
<PAGE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Each Mortgage Loan is secured by a first mortgage lien on the borrower's fee
simple estate, except as set forth below, in one or more income producing
real properties (each a "Mortgaged Property"). One of the Mortgage Loans,
or 1%, Each Mortgage Loan is secured by the first mortgage lien on the
borrower's fee simple estate, except as set forth below, in one or more
incomee producing real properties (each, a "Mortgage Loans, or 1%, is
secured by the first mortgage liens on both the borrower's leasehold estate
and a fee simple estate held by an affiliate of such borrowers. Two of the
Mortgage Loans, or 3%, are secured by first mortgage liens on the respective
borrower's fee simple estate on a portion of the Mortgaged Property and on
such borrower's leasehold estate on the remainder of the Mortgaged Property.
With respect to six Mortgage Loans, or 11%, such Mortgage Loans are secured
by a first mortgage lien on the borrower's leasehold estate in the Mortgaged
Property. However, in the case of two such leasehold estate Mortgage Loans,
or 4% , the related borrowers or an affiliate thereof have executed a
binding contract to acquire the related fee interest in 1998, and have
provided reserves in the aggregate amount of $6,500,000 for the purpose of
completing such acquisition. The documents evidencing such Mortgage Loans
provided that upon the acquisitions, the fee interest will also secure the
related Mortgage Loans. See "DESCRIPTION OF THE MORTGAGE POOL--General"
herein.
Property ................................... Types Set forth below are the number of Mortgaged Properties and the
approximate percentage of the Initial Pool Balance represented by such
Mortgaged Properties, that are secured by Mortgaged Properties operated for
each indicated purpose:
NUMBER OF % OF
MORTGAGED INITIAL POOL
PROPERTY TYPE PROPERTIES BALANCE
------------- ---------- ------------
Multifamily ................... 50 35%
Retail
Anchored ..................... 25 27%
Unanchored ................... 12 4%
Credit Net Lease ............. 1 *
--------------------
38 31%
Self Storage .................. 29 10%
Manufactured Housing
Community .................... 10 8%
Hospitality ................... 15 6%
Industrial .................... 8 6%
Office ........................ 3 2%
Medical Office ................ 2 1%
---------------------
Total ......................... 155 100%
=====================
----------
*Less than 0.3%
Geographical Concentration ................. The Mortgaged Properties are located throughout 32 states. Set forth
below are the number of Mortgaged Properties, and the approximate percentage
of the Initial Pool Balance represented by such Mortgaged Properties, that
are located in the states with concentrations of Mortgaged Properties above
5%:
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NUMBER OF % OF
MORTGAGED INITIAL POOL
STATE PROPERTIES BALANCE
----- ---------- ------------
Texas ............................ 32 15%
California ....................... 26 14%
Pennsylvania ..................... 8 8%
Florida .......................... 9 7%
Borrower Concentration ..................... No Mortgage Loan or group of Mortgage Loans to one borrower or group of
related borrowers exceeds 5% of the Initial Pool Balance. See "DESCRIPTION OF
THE MORTGAGE POOL--Additional Mortgage Loan Information" herein.
Loan ....................................... Size Set forth below are the number of Mortgage Loans and the approximate
percentage of the Initial Pool Balance represented by such Mortgage Loans
which have Cut-Off Date Balances within the indicated range:
RANGE OF % OF
CUT-OFF NUMBER OF INITIAL
DATE MORTGAGE POOL
BALANCE LOANS BALANCE
------- --------- -------
$ 800,000-- $ 999,999 ......... 6 1%
1,000,000-- 1,999,999 ......... 38 9%
2,000,000-- 2,999,999 ......... 28 10%
3,000,000-- 3,999,999 ......... 15 7%
4,000,000-- 4,999,999 ......... 10 6%
5,000,000-- 5,999,999 ......... 15 11%
6,000,000-- 6,999,999 ......... 6 5%
7,000,000-- 7,999,999 ......... 3 3%
8,000,000-- 8,999,999 ......... 9 11%
9,000,000-- 9,999,999 ......... 1 1%
10,000,000-- 14,999,999 ......... 11 20%
$15,000,000--$17,600,000 ......... 6 14%
-------------------
148 100%
===================
Mortgage Loan Sellers ...................... Ninety-five (95) of the Mortgage Loans, or 74%, will be acquired by the
Depositor from GECA, which acquired such Mortgage Loans as a capital
contribution from GECC, which originated such Mortgage Loans or, in the case
of one Mortgage Loan, or 0.1%, acquired such Mortgage Loan in a secondary
market purchase. Fifty-three (53) of the Mortgage Loans, or 26%, will be
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, or in the
case of eight Mortgage Loans, or 4%, acquired such Mortgage Loans in a
secondary market purchase. 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 its Mortgage Loans assigned by
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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.
Monthly Payments ............................. 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. See "DESCRIPTION OF THE MORTGAGE POOL--Certain Terms and
Conditions of the Mortgage Loans--Due Dates" and "--Mortgage Rates;
Calculations of Interest" herein.
Amortization Characteristic .................. Certain of the Mortgage Loans (the "ARD Loans") fully amortize through
their respective remaining terms to maturity, but provide that after a date
set forth in the respective Mortgage Loan documents (each such date, an
"Anticipated Repayment Date"), interest will accrue on each ARD Loan at an
interest rate above the Mortgage Rate (the "Adjusted Mortgage Rate") and, in
addition to its obligation to make its scheduled Monthly Payments, the
related borrower will be obligated to apply all monthly cash flow generated
by the related Mortgaged Property in excess of regular debt service payments
(without giving effect to the Adjusted Mortgage Rate), reserves and certain
other property 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. Certain of the Mortgage Loans (the "Fully Amortizing
Loans"), other than the ARD Loans, fully or substantially amortize through
their respective remaining terms to maturity. Certain of the Mortgage Loans
provide for Monthly Payments based on amortization schedules significantly
longer than their respective remaining terms to maturity. As a result, such
Mortgage Loans (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. See "RISK FACTORS-- The Mortgage Loans--Balloon
Payments" herein and "RISK FACTORS--Balloon Payments; Borrower Default" in
the Prospectus.
Set forth below are the number of Mortgage Loans and the approximate
percentage of the Initial Pool Balance represented by Mortgage Loans which
are ARD Loans, Fully Amortizing Loans and Balloon Loans.
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NUMBER OF % OF
MORTGAGE INITIAL POOL
LOANS BALANCE
--------- ------------
ARD Loans ........................ 79 59%
Fully Amortizing ................. 19 12%
Balloon .......................... 50 29%
-------------------
148 100%
===================
Prepayment Provisions ......................... 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 (138 Mortgage Loans, or 94%);(ii) prohibit voluntary prepayments of
principal for most of its remaining term to maturity (one Mortgage Loan, or
1%);(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 (five 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 (four Mortgage Loans, or
2%). See "DESCRIPTION OF THE MORTGAGE POOL--Certain Terms and Conditions of
the Mortgage Loans" and "--Additional Mortgage Loan Information" herein. With
respect to ARD Loans, voluntary principal prepayments after the Anticipated
Repayment Date are permitted without material restrictions. The ability of
the Master Servicer or the Special Servicer to waive or modify the terms of
any Mortgage Loan relating to the payment of a Prepayment Premium 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.
One of the Mortgage Loans, or 1%, during its Lockout Period (which prohibits
prepayment for most of the term), but after two years from the Closing Date,
provides that 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 in respect of the related Mortgage Loan. Such obligations must
provide for payments on or prior, but as close as possible, to each
successive Due Date (as defined herein) and the Anticipated Repayment Date
with respect to the defeased Mortgage Loan, with each such
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payment being equal to or greater than (with any excess to be returned to the
borrower) the Monthly Payment with respect to such defeased Mortgaged Loan,
and, in the case of the Anticipated Repayment Date, the payment anticipated
to be made on such date.
Dates of Origination ........................... One hundred forty-seven (147) of the Mortgage Loans, or 99%, were originated
in 1997 and the remaining Mortgage Loan was originated in 1996.
Additional Mortgage
Loan Characteristics ......................... 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 more fully 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 ................................. $ 800,000
Maximum Cut-off Date Balance ................................. $17,600,000
Average Cut-off Date Balance ................................. $ 4,708,398
Minimum Mortgage Rate ........................................ 6.97%
Maximum Mortgage Rate ........................................ 9.74%
Weighted Average Mortgage Rate ............................... 7.861%
Minimum Remaining Term (months)(1) ........................... 57
Maximum Remaining Term (months)(1) ........................... 300
Weighted Average Remaining Term (months)(1) .................. 141
Minimum Remaining Amortization Term (months) ................. 175
Maximum Remaining Amortization Term (months) ................. 360
Weighted Average Remaining Amortization Term (months) ........ 328
Minimum Cut-off Date DSCR .................................... 1.20x(2)
Maximum Cut-off Date DSCR .................................... 2.06x
Weighted Average Cut-off Date DSCR ........................... 1.37x(2)
Minimum Cut-off Date LTV ..................................... 47.95%
Maximum Cut-off Date LTV ..................................... 81.01%
Weighted Average Cut-off Date LTV ............................ 73.67%(2)
Minimum Repayment LTV(3) ..................................... 29.95%(4)
Maximum Repayment LTV(3) ..................................... 72.10%(4)
Weighted Average Repayment LTV(3) ............................ 61.75%(4)
---------
(1) Term to maturity with respect to Balloon Loans and Fully Amortizing Loans and term to
Anticipated Repayment Date with respect to ARD Loans.
(2) Calculations do not include the Credit Lease Loan (as defined herein).
(3) At maturity with respect to Balloon Loans or at Anticipated Repayment Date with respect
to ARD Loans.
(4) Does not include Fully Amortizing Loans or the Credit Lease Loan.
Description of the Certificates .............. The Certificates will be issued pursuant to a Pooling and Servicing
Agreement, to be dated as of December 1, 1997, among the Depositor, the
Master Servicer, the Special Servicer and the Trustee (the "Pooling and
Servicing Agreement"), and will represent in the aggregate the entire
beneficial ownership
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interest in a trust fund (the "Trust Fund") consisting of the Mortgage Pool
and certain related assets.
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 Sequential Pay
Certificates will be reduced on each Distribution Date by (i) any
distributions of principal actually made on such Class of Sequential Pay
Certificates on such Distribution Date, and (ii) 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 Sequential Pay 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
respective notional amounts of its Components (each, a "Component"), as
described herein. As of any Distribution Date, each Component will have a
notional amount equal to the Certificate Balance of the related Class of
Certificates immediately prior to such Distribution Date. Each Component will
accrue interest at its applicable Strip Rate (as set forth below) on its
related notional amount. The Components 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 amounts of each of its Components, which total
notional amount will initially be equal to $696,842,931. See "DESCRIPTION OF
THE CERTIFICATES--Certificate Balances and Notional Amounts" herein.
Neither the REMIC Residual Certificates nor the Class L Certificates will
have Certificate Balances.
Pass-Through Rates ............................. The Pass-Through Rate applicable to each Class of Sequential Pay Certificates
for each Distribution Date is set forth in the table at the beginning of this
Summary.
The Strip Rate applicable to the Class A-1 and Class A-2 Components for each
Distribution Date will equal the Weighted Average Net Mortgage Rate for such
Distribution Date minus ____% and __%, respectively (but not less than zero);
the Strip Rate applicable to the Class B, Class C, Class D and Class E
Components for each Distribution Date will equal __%, __%, __% and __%,
respectively; and the Strip Rate applicable to the
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Class F, Class G, Class H, Class J and Class K Components for each
Distribution Date will each equal the Weighted Average Net Mortgage Rate for
such Distribution Date minus ____% (but not less than zero).
The REMIC Residual Certificates will not bear interest, but will represent
the right to receive certain limited amounts not otherwise payable on the
REMIC Regular Certificates. The Class L Certificates will not bear interest,
but will represent the right to receive certain amounts described herein.
The "Weighted Average Net Mortgage Rate" for each Distribution Date is the
weighted average of the Net Mortgage Rates for the Mortgage Loans as of the
commencement of the related Collection Period (as defined herein), weighted
on the basis of their respective Stated Principal Balances outstanding
immediately prior to such Distribution Date. The "Net Mortgage Rate" for each
Mortgage Loan will equal the Mortgage Rate in effect for such Mortgage Loan
as of the Cut-Off Date, minus the Administrative Cost Rate (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, 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 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 Mortgage Loan will be
zero. See "DESCRIPTION OF THE CERTIFICATES--Pass-Through Rates" herein.
Distributions ................................ Distributions on the Certificates will be made by the Trustee, to the extent
of available funds, on the 10th day of each month or, if any such 10th day is
not a business day, then on the next succeeding business day, commencing
January 12, 1998 (each, a "Distribution Date"); provided, however, that the
Distribution Date will be no earlier than the fourth business day following
the related Determination 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 and Net
Default Interest, which are separately distributable in respect of the
Certificates) that are available for distribution to Certificateholders on
any Distribution
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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--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 Distri bution 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
and Class IO Certificates (in each case, so long as any such Class
remain 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;
(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) to distributions to the holders of the Class A-1 and Class A-2
Certificates, pro rata, in accordance with the amount of Realized Losses
and dditional Trust Fund Expenses, if any, previously allocated to such
Classes of Certificates and for which no reimbursement has previously
been received, to reimburse such holders for such Realized Losses and
Additional Trust Fund Expenses, if any;
(5) 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;
(6) after the Class A-1 and Class A-2 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
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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;
(7) 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;
(8) 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;
(9) after the Class A-1, Class A-2 and Class B Certificates have been
retired, to distributions of principal to the holders of the Class C
Certificates in an amount (not to exceed the then outstanding
Certificate Balance of such Class of Certificates) equal to the
Principal Distribution Amount for such Distribution Date, less any
portion thereof distributed in respect of the Class A-1, Class A-2
and/or Class B Certificates;
(10) 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;
(11) 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;
(12) after the Class A-1, Class A-2, 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 B and/or Class C Certificates;
(13) 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;
(14) 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;
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(15) after the Class A-1, Class A-2, 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 B, Class C and/or Class D Certificates;
(16) 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
(17) to distributions to the holders of the respective Classes of Private
Certificates (other than the REMIC Residual Certificates, which are not
expected to receive distributions, and the Class L 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 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 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 suchDistribution Date. Interest payable on the REMIC
RegularCertificates, 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 "DESCRIPTIONOF THE
CERTIFICATES--Distributions--DistributableCertificate 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 (as defined herein) during the related
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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
awards and proceeds of Mortgage Loan repurchases that were received on or in
respect of the Mortgage Loans during the related Collection Period and that
were identified and applied by the Master Servicer as recoveries of
principal, 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 (i) any waiver, modification
or amendment granted or agreed to by the Master Servicer or the Special
Servicer or otherwise resulting from a bankruptcy or similar proceeding
involving the related borrower or (ii) the application of any Remaining Cash
Flow with respect to an ARD Loan, and assuming that each prior Scheduled
Payment has been timely made. The "Assumed Scheduled Payment" is an amount
deemed due (i) 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 and (ii) in respect of each REO Loan (as
defined herein). 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 Assumed Scheduled
Payment deemed due on any REO Loan on each Due Date that the related REO
Property (as defined herein) remains part of the Trust Fund
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will equal the Scheduled Payment that would have been due in respect of such
predecessor Mortgage Loan on such Due Date had it remained outstanding or,
if such Mortgage Loan was a Balloon Loan and such Due Date coincides with or
follows what had been its stated maturity date, the Assumed Scheduled
Payment that would have been deemed due in respect of such Mortgage Loan on
such Due Date had it remained outstanding. The "Determination Date" will be
the 5th day of each month (or, if not a business day, the next succeeding
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 "DESCRIP-TION OF THE
CERTIFICATES--Distributions--Allocation of Prepayment Premiums" herein. Such
distributions will be in addition to the distributions of interest, if any,
made to such holders from the Available Distribution Amount (as defined
herein) on each Distribution Date.
Advances ......................................... Subject to a recoverability determination, as described herein, and further
subject to the reduced advancing obligations in respect of certain Required
Appraisal Loans (as defined herein) 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 required P&I Advance, the
Trustee shall then be obligated to make such P&I Advance, in each case
subject to a recoverability determination, as described herein. See
"DESCRIPTION OF THE CERTIFICATES--Appraisal Reductions" herein.
As described herein, the Master Servicer (or the Trustee, as applicable)
will be entitled to interest on any P&I Advance made by it, and each of the
Master Servicer, the Special Servicer and the Trustee will be entitled to
interest on certain reimbursable servicing expenses incurred by each of them
(each such P&I Advance or expense, an "Advance"). Such interest will accrue
from the date any such Advance is made or such servicing expense is
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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, first, out of collections with respect to default interest
paid with respect to the related Mortgage Loan, and second, out of general
collections on the Mortgage Pool then on deposit in the Certificate Account,
contemporaneously with the reimbursement of the related Advance. 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
Master Servicing Fee, including any Prepayment Interest Excesses (each as
defined herein) received during the related Collection Period, the Master
Servicer is required to make a non-reimbursable payment (a "Compensating
Interest Payment") with respect to each Distribution Date to cover the
aggregate of any Prepayment Interest Shortfalls incurred during such
Collection Period. A "Prepayment Interest Shortfall" is a shortfall in the
collection of a full month's interest (net of the related Master Servicing
Fee and Additional 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 Master Servicing Fee, Additional Servicing Fee and the
Trustee 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, Class F, Class
G, Class H, Class J and Class K Certificates (collectively, the
"Subordinated Certificates") to receive distributions of amounts collected
or advanced on the Mortgage Loans will, in each case, be subordinated, to
the extent described herein, to the rights of holders of the Class A-1,
Class A-2 and Class IO Certificates (collectively, the "Senior
Certificates") and each other such Class of Subordinated Certificates, if
any, with an earlier alphabetical class designation. This subordination is
intended to
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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 each Class of the Class A
Certificates of principal equal to the entire respective Certificate
Balances of the Class A-1 and Class A-2 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 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 (other than the REMIC Residual
Certificates and the Class L 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,
subject to the limitations described herein, to the Class A-1 and Class A-2
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 or Additional Trust Fund Expenses allocated in reductionf
of the Certificate Balance of any Class of Certificates will result in a
corresponding reduction in the notional amount of the related Component.
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Treatment of REO Properties ...................... Notwithstanding that a Mortgaged Property may be acquired on behalf of the
Certificateholders through foreclosure, deed in lieu of foreclosure or
otherwise (such Mortgaged Property, 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 the Special Servicer in connection with the operation and
disposition of such REO Property) will be "applied" by the Master Servicer
as principal, interest and other amounts that would have been "due" on such
Mortgage Loan, and the Master Servicer will 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, the Master Servicer and the Special 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 B, Class C, Class D or
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 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 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 Class of
Offered Certificates of any Prepayment Premium may be insufficient to offset
fully any adverse effects on the reduction to the anticipated yield to
maturity resulting from the
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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 (other than the Class IO Certificates) 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
"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 generally consist of
the Mortgage Loans, any REO Properties acquired on behalf of the
Certificateholders and the Certificate Account (see "DESCRIPTION OF THE
POOLING AGREEMENTS--Certificate Account" in the Prospectus). For federal
income tax purposes, (a) the separate noncertificated regular interests in
REMIC I will be the "regular interests" in REMIC I and will constitute the
assets of REMIC II, (b) the Class R-I Certificates will be the sole class of
"residual interests" in REMIC I, (c) the separate noncertficated 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 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
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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.
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 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 Class A-1, Class A-2, Class B,
Class C, Class D, Class E and Class IO Certificates receive the ratings from
Moody's Investors Service, Inc. ("Moody's"); the Class A-1, Class A-2,
Class B, Class C, Class D and Class E Certificates receive the ratings from
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. ("Standard & Poor's"); and the Class A-1, Class A-2, Class B,
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Class C and Class IO Certificates receive the ratings from 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 the
Rated Final Distribution Date, which is the first Distribution Date 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. A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. A security rating does not represent any
assessment of (i) the likelihood or frequency of principal prepayments 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, Additional Interest and Net Default Interest 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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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 the Underwriter currently intends to make a secondary market
in the Offered Certificates, it is not 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 promissory notes (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 Certificate Balance
of any Class of Sequential Pay Certificates will also result in a corresponding
reduction in the notional amount of the related 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 ofthe Class IO Certificates, to the extent such effect is
not offset by distributions of a portion of any applicablePrepayment 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.
Furthermore, in the event of a liquidation of a Mortgage Loan following a
default, the liquidation proceeds may be insufficient to cover any Prepayment
Premium, together with all principal, interest and other sums that may be due
and owing in respect of such Mortgage Loan, and the obligations to pay such
Prepayment Premium under those circumstances may be unenforceable. 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. If a purchaser of a class of Offered Certificates calculates
its anticipated yield based on an assumed rate of default and amount of losses
on the Mortgage Loans that is lower than the default rate and amount of losses
actually experienced and such additional losses are allocable to such class of
Certificates, such purchaser's actual yield
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to maturity will be lower than that so calculated and could, under certain
extreme scenarios, be negative. The timing of any loss on a liquidated Mortgage
Loan will also affect the actual yield to maturity of the class of Offered
Certificates to which a portion of such loss is allocable, even if the rate of
defaults and severity of losses are consistent with an investor's expectations.
In general, the earlier a loss borne by an investor occurs, the greater is the
effect on such investor's yield to maturity. To the extent described herein, the
Private Certificates (other than the Class L 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, and
Class IO Certificates and will bear such shortfalls and losses prior to the
Class A-1, Class A-2 and Class IO Certificates, in reverse alphabetical order of
Class designation. Even though (i) the Class A-3 Certificates will receive
principal payments only after the Certificate Balances of the Class A-2 and
Class A-1 Certificates have been reduced to zero and (ii) the Class A-2
Certificates will receive principal payment only after the Certificate Balance
of the Class A-1 Certificates has been reduced to zero, the Class A-1 and Class
A-2 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 (other than the
Class L 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 and Class A-2 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 or Additional Trust Fund Expenses allocated in reduction of
the Certificate Balance of any Class of Sequential Pay Certificates will also
result in a corresponding reduction in the notional amount of the related
Component, and will therefore have an adverse effect on the yield of the Class
IO Certificates. 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 B, Class C, Class D and Class
E Certificates for each Distribution Date will equal the Weighted Average Net
Mortgage Rate minus ____%, __%, __% and __%, respectively (but not less than
zero), the Strip Rate applicable to the Class A-1 and Class A-2 Components for
each Distribution Date will equal the Weighted Average Net Mortgage Rate minus
__% and __% respectively (but not less than zero), and the Strip Rate applicable
to the Class F, Class G, Class H, Class J and Class K Component for each
Distribution Date will each equal the Weighted Average Net Mortgage Rate minus
__% (but not less than zero). Accordingly, the Pass-Through Rate on such Classes
of Certificates and the Strip Rate on such 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 and involuntary 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.
As and to the extent described herein, the Master Servicer will be entitled
to receive interest on unreimbursed P&I Advances, and the Master Servicer and
the Special Servicer will be entitled to receive interest on unreimbursed
advances of servicing expenses. See "DESCRIPTION OF THE CERTIFICATES--P&I
Advances" herein. The Master Servicer's and the Special Servicer's right to
receive such payments of interest is prior to the rights of Certificateholders
to receive distributions on the Certificates and, consequently, is likely to
result in losses being allocated to the Offered Certificates that would not
otherwise have resulted absent the accrual of such interest.
The Special Servicer will be entitled to receive (among other
compensation), compensation with respect to each Mortgage Loan which is or was
at some time a Specially Serviced Mortgage Loan or an REO Loan, prior to the
right of Certificateholders to receive distributions on the Certificates. In
addition, the Special Servicer will be entitled to receive the Special Servicing
Fee, based upon the outstanding principal balance of each Specially Serviced
Mortgage
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Loan or an REO Loan. Consequently, it is possible that shortfalls will be
allocated to the Offered Certificates with respect to any Mortgage Loan which
was at some time a Specially Serviced Mortgage Loan notwithstanding the fact
that such Mortgage Loan has returned to a performing status. See "SERVICING OF
THE MORTGAGE LOANS --Servicing and Other Compensation and Payment of Expenses"
herein.
Regardless of whether losses ultimately result, delinquencies and defaults
on the Mortgage Loans may significantly delay the receipt of payments by the
holder of a class of Offered Certificates, to the extent that P&I Advances or
the subordination of another class of Certificates does not fully offset the
effects of any such delinquency or default. To the extent provided in the
Pooling and Servicing Agreement, the Special Servicer or the Master Servicer, as
applicable, has the ability to modify, waive or amend any term of any Mortgage
Loan, including the ability to extend the date on which a Balloon Payment is
due, subject to certain conditions described in the Pooling and Servicing
Agreement. Until such time as any Mortgage Loan delinquent in respect of its
Balloon Payment is liquidated, the entitlement of the holders of any class of
Offered Certificates on each Distribution Date in respect of principal of such
Mortgage Loan will be limited to any payment made by the related borrower and
any related P&I Advance made by the Master Servicer. Consequently, any delay in
the receipt of a Balloon Payment that is payable, in whole or in part, to
holders of the Offered Certificates will extend the weighted average life of the
Offered Certificates.
Potential Conflicts of Interest. An affiliate of the Master Servicer and
GECA may purchase all or a portion of the Class C, Class D, Class E and Class F
Certificates and it is anticipated the initial Special Servicer, or an affiliate
thereof, may purchase a portion of the Class F Certificates, and will purchase
all of the Class G, Class H, Class J and Class K Certificates, including the
initial Controlling Class of Sequential Pay Certificates, and the Special
Servicer or an affiliate thereof is not prohibited from purchasing the
Certificates of any other Class. 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 initial Certificate
Balance and 1% of the aggregate Certificate Balance of all Sequential Pay
Certificates (or if no Class of Sequential Pay Certificates has a Certificate
Balance that is greater than 20% of its initial Certificate Balance and 1% of
the aggregate Certificate Balance of all Sequential Pay Certificates, the Class
of Sequential Pay Certificates with the latest alphabetical Class designation)
to replace the Special Servicer or any successor thereafter appointed. The
replacement Special Servicer may be a Certificateholder of such Class or an
affiliate of any such Certificateholder. As described herein, any such Special
Servicer will have considerable latitude in determining whether to liquidate or
modify defaulted Mortgage Loans. See "SERVICING OF THE MORTGAGE
LOANS--Modifications, Waivers and Amendments" herein. The Master Servicer is
also not prohibited from purchasing any Class of Certificates.
An affiliate of the Master Servicer has acquired a majority limited
liability company membership interest in two of the borrowers or their
affiliates, which are the borrowers (or affiliates) with respect to two of the
Mortgage Loans, or 3% (control numbers 35 and 61, respectively). Affiliates of
the Master Servicer may also have in the future additional financing
relationships with other borrowers (or affiliates). Additionally, with respect
to one Mortgage Loan, or 2% (control number 28), an affiliate of the Master
Servicer has made a "mezzanine" loan to partners of the related borrower. Such
"mezzanine" loan is secured by such partners' interests in the related borrower.
Although the initial Master Servicer and Special Servicer will be obligated to
observe the terms of the Pooling and Servicing Agreement and will be governed by
the servicing standard described in the Pooling and Servicing Agreement , it
may, especially if it or an affiliate is a Certificateholder, or has financial
interests in the related borrower, 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.
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
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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 tenant's 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.
Self storage facilities are also part of a market that contains low barriers to
entry and due to the privacy considerations applicable to self storage
facilities, may increase environmental risks.
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 do 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 any franchise license agreement. The
transferability of a franchise license agreement may be restricted, and a lender
or other person that acquires title to a hotel property as a result of
foreclosure may be unable to succeed to the borrower's rights under the
franchise license agreement. Moreover, the transferability of a hotel's
operating, liquor and other licenses upon a transfer of the hotel, whether
through purchase or foreclosure, is subject to local law requirements and may
not be transferable. See "RISK FACTORS--Risks Associated with Certain Mortgage
Loans and Mortgaged Properties" in the Prospectus.
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
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provisions of Mortgage Loans that may permit 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. Fifty (50) of the Mortgage Loans, or 29% (the "Balloon
Loans"), do not fully amortize over their terms to maturity and have a Balloon
Payment due at maturity. Loans with Balloon Payments involve a greater risk to a
lender than fully-amortizing loans because the ability of a borrower to make a
Balloon Payment typically will depend upon its ability either to fully refinance
the loan or to sell the related mortgaged property at a price sufficient to
permit the borrower to make the Balloon Payment. Moreover, and whether or not
losses are ultimately sustained, any delay in the collection of a Balloon
Payment that would otherwise be distributable in respect of a Class of Offered
Certificates will likely extend the weighted average life of such Class. The
ability of a borrower to effect a refinancing or sale will be affected by a
number of factors, including the value of the related Mortgaged Property, the
level of available mortgage rates at the time of sale or refinancing, the
borrower's equity in the Mortgaged Property, the financial condition and
operating history of the borrower and the Mortgaged Property, tax laws,
prevailing general economic conditions and the availability of credit for loans
secured by multifamily or commercial, as the case may be, real properties
generally. See "RISK FACTORS--Balloon Payments; Borrower Default" in the
Prospectus.
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 and Other Financing. The Mortgaged Property
securing one Mortgage Loan, or 1% (control number 59), is encumbered by secured
subordinated debt held by an affiliate of the related borrower. Additionally,
with respect to two other Mortgage Loans, or 1% (control numbers 72 and 201
respectively), the related borrowers have incurred unsecured subordinated debt.
In each such case, the holder of the secured or unsecured subordinated debt has
agreed not to foreclose (in the case of secured subordinated debt) or exercise
any other remedy for as long as the related Mortgage Loan is outstanding. The
existence of secured 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. With respect to one Mortgage Loan, or 2% (control number 28), an
affiliate of the Master Servicer has made a "mezzanine" loan to a partner of the
related borrower. Such "mezzanine" loan is secured by such partner's interest in
the related borrower. See
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"CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS--Subordinate Financing" and
"--Due-on-Sale and Due-on-Encumbrance" in the Prospectus.
Related Borrowers. While there are no related borrowers concentrations in
excess of 5% of the Initial Pool Balance, certain borrowers under the Mortgage
Loans are affiliated or under common control with one another. In such
circumstances, any adverse circumstances relating to a borrower or an affiliate
thereof and affecting one of the related Mortgage Loans or Mortgaged Properties
could also affect other Mortgage Loans or Mortgaged Properties of the related
borrower. In particular, the bankruptcy or insolvency of any such borrower or
affiliate could have an adverse effect on the operation of all of the Mortgaged
Properties of that borrower and its affiliates and on the ability of such
related Mortgaged Properties to produce sufficient cash flow to make required
payments on the Mortgage Loans. For example, if a person that owns or directly
or indirectly controls several Mortgaged Properties experiences financial
difficulty at one Mortgaged Property, it could defer maintenance at one or more
other Mortgaged Properties in order to satisfy current expenses with respect to
the Mortgaged Property experiencing financial difficulty, or it could attempt to
avert foreclosure by filing a bankruptcy petition that might have the effect of
interrupting payments for an indefinite period on all the related Mortgage
Loans. See Annex A, attached hereto which indicates the Mortgage Loans with
affiliated borrowers.
Concentration of Mortgage Loans. Several of the Mortgage Loans,
individually or together with other Mortgage Loans with which they are
cross-collateralized, have Cut-Off Date Balances that are substantially higher
than the average Cut-Off Date Balance. In general, concentrations in a mortgage
pool of loans with larger-than-average balances can result in losses that are
more severe, relative to the size of the pool, than would be the case if the
aggregate balance of the pool were more evenly distributed.
Risks of Different Timing of Mortgage Loan Amortization. If and as
principal payments, property releases, or prepayments are made on a Mortgage
Loan, the remaining Mortgage Pool may be subject to more concentrated risk with
respect to the diversity of properties, types of properties and property
characteristics and with respect to the number of borrowers. See the table
entitled "Stated Remaining Terms to Maturity" under "DESCRIPTION OF THE MORTGAGE
POOL--Additional Mortgage Loan Information" for a description of the respective
maturity dates of the Mortgage Loans. Because principal on the Offered
Certificates (other than the Class IO Certificates) is payable in sequential
order, and no class receives principal until the aggregate Certificate Balance
of the preceding class or classes has been reduced to zero, classes that have a
lower sequential priority are more likely to be exposed to the risk of
concentration discussed under "--Concentration of Mortgage Loans" above than
classes with a higher sequential priority.
Ground Leases and Other Leasehold Interests. Certain of the Mortgage Loans,
are secured in whole or in part by leasehold interests. Pursuant to Section
365(h) of the Bankruptcy Code, ground lessees are currently afforded rights not
to treat a ground lease as terminated and to remain in possession of their
leased premises upon the bankruptcy of their ground lessor and the rejection of
the ground lease by the representative of such ground lessor's bankruptcy
estate. The leasehold mortgages provide that the borrower may not elect to treat
the ground lease as terminated on account of any such bankruptcy of, and
rejection by, the ground lessor without the prior approval of the holder of the
Mortgage Note. In the event of a bankruptcy of a ground lessee/borrower, the
ground lessee/borrower under the protection of the Bankruptcy Code has the right
to assume (continue) or reject (terminate) any or all of its ground leases. In
the event of concurrent bankruptcy proceedings involving the ground lessor and
the ground lessee/borrower, the Trustee may be unable to enforce the bankrupt
ground lessee/borrower's obligation to refuse to treat a ground lease rejected
by a bankrupt ground lessor as terminated. In such circumstances, a ground lease
could be terminated notwithstanding lender protection provisions contained
therein or in the related Mortgage.
Mortgage Loan Sellers. 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 Mortgage Loan in connection with
either a breach of the applicable Mortgage Loan Seller's representations and
warranties or any document defects, if the applicable Mortgage Loan Seller
defaults on its obligation to do so. There can be no assurance that any of the
Mortgage Loan Sellers will have the financial ability to effect such
repurchases. See "DESCRIPTION OF THE MORTGAGE POOL--Assignment of the Mortgage
Loans; Repurchases" and "--Representations and Warranties; Repurchases" herein
and "DESCRIPTION OF THE POOLING AGREEMENTS--Representations and Warranties;
Repurchases"in the Prospectus.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool is expected to consist of 148 conventional, fixed rate
Mortgage Loans with an aggregate Cut-Off Date Balance of $696,842,931 (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. All percentages of the
Mortgage Loans, or of any specified group of Mortgage Loans, referred to herein
without further description are approximate percentages by Initial Pool Balance.
References to percentages of Mortgaged Properties are references to the
percentages of the Initial Pool Balance represented by the portion of the
Cut-Off Date Balance of the related Mortgage Loans represented by such Mortgaged
Properties.
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 (except as set forth below) in one or more income producing
real properties (each, a "Mortgaged Property"). One of the Mortgage Loans, or 1%
(control number 92), is secured by first mortgage liens on both the borrower's
leasehold estate and a fee simple estate held by an affiliate of such borrower.
Two of the Mortgage Loans, or 3% (control numbers 20 and 69), are secured by
first mortgage liens on the respective borrower's fee simple estate on a portion
of the Mortgaged Property and on such borrower's leasehold estate on the
remainder of the Mortgaged Property. With respect to six Mortgage Loans, or 11%
(control numbers 35, 29, 55, 63, 85, 96), such Mortgage Loans are secured by a
first mortgage lien on the borrower's leasehold estate in the Mortgaged
Property. However, in the case of two such leasehold estate Mortgage Loans, or
4%, the related borrowers or an affiliate thereof have executed a binding
contract to acquire the related fee interest in 1998, and have provided reserves
in the aggregate amount of $6,500,000 for the purpose of completing such
acquisition. The documents evidencing such Mortgage Loans provided that upon the
acquisitions, the fee interest will also secure the related Mortgage Loans.
Set forth below are the number of Mortgaged Properties and the approximate
percentage of the Initial Pool Balance represented by such Mortgaged Properties,
that are secured by Mortgaged Properties operated for each indicated purpose:
NUMBER OF % OF
MORTGAGED INITIAL POOL
PROPERTY TYPE PROPERTIES BALANCE
------------- ---------- ------------
Multifamily ........ 50 35%
Retail
Anchored .......... 25 27%
Unanchored ........ 12 4%
Credit Net Lease .. 1 *
--- ---
38 31%
Self Storage ....... 29 10%
Manufactured Housing
Community ......... 10 8%
Hospitality ........ 15 6%
Industrial ......... 8 6%
Office ............. 3 2%
Medical Office ..... 2 1%
--- ---
Total .............. 155 100%
=== ===
---------
*Less than 0.3%
See "--Additional Mortgage Loan Information" herein for a detailed list of
property types.
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The Mortgaged Properties are located throughout 32 states. Set forth below
are the number of Mortgaged Properties, and the approximate percentage of the
Initial Pool Balance represented by such Mortgaged Properties, that are located
in the states with concentrations of Mortgaged Properties above 5%:
% OF
NUMBER OF INITIAL POOL
STATE MORTGAGED PROPERTIES BALANCE
----- -------------------- ------------
Texas ....................... 32 15%
California .................. 26 14%
Pennsylvania ................ 8 8%
Florida ..................... 9 7%
Ninety-five (95) of the Mortgage Loans, or 74%, will be acquired by the
Depositor from GECA, which acquired such Mortgage Loans as a capital
contribution from GECC, which originated such Mortgage Loans or, in the case of
one Mortgage Loan, or 0.1%, acquired such Mortgage Loan in a secondary market
purchase. Fifty-three (53) of the Mortgage Loans, or 26%, will be 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, or in the case of eight Mortgage
Loans, or 4%, acquired such Mortgage Loans in a secondary market purchase.
One hundred forty-seven (147) of the Mortgage Loans, or 99%, were
originated in 1997 and the remaining Mortgage Loan was originated in 1996.
None of the Mortgage Loans will be 30 days or more delinquent as of the
Cut-Off Date.
No Mortgage Loan or group of Mortgage Loans to one borrower or group of
related borrowers exceeds 5% of the Initial Pool Balance. Mortgage Loans to one
borrower or a group or related borrowers are identified on Annex A hereto. See
"--Additional Mortgage Loan Information," "RISK FACTORS--Related Borrowers"
herein.
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 ARD Loans which provide for an increase in the
interest rate accruing on such Mortgage Loans after their respective Anticipated
Repayment Date. Such increase shall have no effect on the Net Mortgage Rate of
the related Mortgage Loan. One hundred twelve (112) of the Mortgage Loans, or
71%, accrue interest on the basis (a "30/360 basis") of a 360-day year
consisting of twelve 30-day months, and 36 of the Mortgage Loans, or 29%, accrue
interest on the basis (an "actual/360 basis") of the actual number of days
elapsed over a 360 day year.
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. Seventy-nine (79) of the Mortgage Loans (the "ARD Loans"), or
59%, fully amortize through their respective remaining terms to maturity, but
provide that after a date set forth in the respective Mortgage Loan documents
(each such date, an "Anticipated Repayment Date"), interest will accrue on each
ARD Loan at an interest rate above the Mortgage Rate (the "Adjusted Mortgage
Rate") and, in addition to its obligation to make its scheduled Monthly
Payments, the related borrower will be obligated to apply all monthly cash flow
generated by the related Mortgaged Property in excess of regular debt service
payments (without giving effect to the Adjusted Mortgage Rate), reserves and
certain other property expenses (the "Remaining Cash Flow") to the repayment of
principal of such Mortgage Loan. The excess interest which accrues on each ARD
Loan and is attributable to the difference between the Adjusted Mortgage Rate
and the related original Mortgage Rate (the "Additional Interest") will be
deferred until the principal balance of such ARD Loan has been reduced to zero
and bears interest at the Adjusted Mortgage Rate to the extent permitted by law.
With respect to such Mortgage Loans, no Prepayment Premiums will be due in
connection with any principal prepayment on or after the Anticipated Repayment
Date. No holders of REMIC Regular Certificates will be entitled to receive
distributions of Additional Interest. Nineteen (19) of the Mortgage Loans, or
12%, other than the ARD Loans (the "Fully Amortizing Loans"), fully or
substantially amortize through their respective remaining terms to maturity.
Fifty (50) of the Mortgage Loans, or 29%, provide for Monthly Payments based on
amortization schedules significantly longer than their respective remaining
terms to maturity. As
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a result, such Mortgage Loans (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. See "RISK FACTORS--The
Mortgage Loans--Balloon Payments" herein and "RISK FACTORS--Balloon Payments;
Borrower Default" in the Prospectus.
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 (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 (138 of the Mortgage Loans, or 94%); (ii) prohibit
voluntary prepayments of principal for most of its remaining term to maturity
(one of the Mortgage Loans, or 1%), (iii) permit voluntary 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
terms to maturity (five 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 (four Mortgage Loans, or
2%). See "--Additional Mortgage Loan Information" herein. With respect to ARD
Loans, voluntary principal prepayments after the Anticipated Repayment Date are
permitted without material restrictions. The ability of the Master Servicer or
the Special Servicer to waive or modify the terms of any Mortgage Loan relating
to the payment of a Prepayment Premium 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 provisions
of any Mortgage Note requiring the payment of a Prepayment Premium, or as to the
collectability of any Prepayment Premium.
Defeasance. One of the Mortgage Loans, or 1%, during its Lockout Period
(which prohibits prepayment for most of the term), but after two years from the
Closing Date, provides that 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 in respect of the related Mortgage Loan. Such obligations
must provide for payments on or prior, but as close as possible, to each
successive Due Date (as defined herein) and the Anticipated Repayment 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
Anticipated Repayment Date, the payment anticipated to be made on such date.
Nonrecourse Obligations. The Mortgage Loans are generally non-recourse
obligations of the respective 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. No
Mortgage Loan will be insured or guaranteed by any governmental entity or
private insurer.
"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, which consent, in certain
cases, may not be unreasonably withheld if certain conditions are met. 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 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. Three
of the Mortgage Loans, or 1%, (control numbers 78, 79, and 80), are
cross-collateralized and cross-defaulted with each other. No Mortgage Loans are
cross-collateralized or cross-defaulted with any loans which are not included in
the Mortgage Pool. The Master
S-34
<PAGE>
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
primary 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 or architect 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 or architect's estimated cost of the recommended
repairs not completed by closing, corrections or replacements to assure their
completion.
Earthquake Analyses. An architectural and engineering consultant performed
an analysis on all of the 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 (i) with respect to the Mortgage Loans
originated or acquired by MLMCI, in the event of an earthquake, none of the
related Mortgaged Properties would suffer a bounded maximum loss over a 50-year
period in excess of 15% of the amount of the estimated replacement cost of the
improvements and (ii) with respect to the Mortgage Loans originated or acquired
by GECA, that in the event of an earthquake, none of the related Mortgaged
Properties would suffer a probable maximum loss in excess of 25% except with
respect to one Mortgage Loan, or 1%, the related Mortgaged Property of which is
improved by more than one structure, the average probable maximum loss of all
such structures does not exceed 25%.
Zoning Compliance. Due to changes in applicable building and zoning
ordinances and codes ("Zoning Laws") affecting certain of the Mortgaged
Properties which have come into effect after the construction of improvements on
such Mortgaged Properties and to other reasons, certain improvements thereon may
not comply fully with current Zoning Laws, including density, use, parking and
set back requirements, but qualify as permitted non-conforming uses. Such
changes may limit the ability of the borrower to rebuild the premises "as is" in
the event of a substantial casualty loss with respect thereto and may adversely
affect the ability of the borrower to meet its Mortgage Loan obligations from
cash flow. While it is expected that insurance proceeds would be available for
application to the related Mortgage Loan if a substantial casualty were to
occur, no assurance can be given that such proceeds would be sufficient to pay
off such Mortgage Loan in full or that, if the Mortgaged Property were to be
repaired or restored in conformity with current law, whether the value of the
related Mortgaged Property or its revenue producing potential would be
diminished.
S-35
<PAGE>
ADDITIONAL MORTGAGE LOAN INFORMATION
The Mortgage Pool. For a detailed presentation of certain of the
characteristics of the Mortgage Loans and the Mortgaged Properties, on an
individual basis, see Annex A hereto. Certain additional information regarding
the Mortgage Loans is contained herein under "--Assignment of the Mortgage
Loans; Repurchases" and "--Representations and Warranties; Repurchases," and in
the Prospectus under "DESCRIPTION OF THE TRUST FUNDS" and "CERTAIN LEGAL ASPECTS
OF MORTGAGE LOANS."
Each of the following tables sets forth certain characteristics of the
Mortgage Pool presented, where applicable, as of the Cut-Off Date. For purposes
of the tables 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,
manufactured housing community, industrial, self storage, hospitality 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 12-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. 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.
S-36
<PAGE>
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 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 5% of gross receipts was
assumed, single tenant properties, where a minimum of 4% of gross receipts
was assumed and self-storage properties, where a minimum of 5% 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 $0.15 and not more than $0.46 per square foot net
rentable commercial area (except with respect to two Mortgage Loans, or 2%,
where $0.12 and $0.10 was assumed, respectively, (2) in the case of
multifamily and one mixed use multifamily/retail properties, not less than
$150 or more than $374 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, (4)
in the case of the manufactured housing communities, not less than $25 or
more than $51 per pad per year and (5) in the case of self-storage
facilities, not less than $0.05 or more than $0.34 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 on its
scheduled maturity date or an ARD Loan on its Anticipated 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, Pad or Room" are, for each
Mortgage Loan secured by a lien on (1) a multifamily property, (2) a
retail, industrial, self storage, medical offce or office property, (3) a
manufactured housing community or if a hospitality property, respectively,
references to the Cut-Off Date Balance are to such Mortgage Loan divided by
the number of dwelling units, pads, guest suites or rooms, as applicable,
that comprise the related Mortgaged Property, and, for each Mortgage Loan
secured by a lien on a retail, industrial, self-storage, medical office or
office property, references to the Cut-Off Date Balance of such Mortgage
Loan divided by the net rentable square footage 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 environmental 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.
S-37
<PAGE>
(xi) References to "Administrative Cost Rate" represent the sum of the
Master Servicing Fee, the Additional Servicing Fee and the Trustee Fee.
(xii) References to "Occupancy Percentage" are, with respect to any
Mortgaged Property, references to (a) in the case of multifamily properties
and manufactured housing communities the percentage of units or pads
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 medical office, office, industrial 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 Anticipated Repayment Date with respect to each ARD Loan).
The sum in any column of any of the following tables may not equal the
indicated total due to rounding.
The DSCR and Cut-Off Date LTV calculations for the Mortgage Loans are
exclusive of the Mortgage Loan backed by a net lease obligation of a tenant
(the "Credit Lease Loan") because such Mortgage Loan was originated
primarily on the basis of the creditworthiness of the guarantor.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
S-38
<PAGE>
<TABLE>
<CAPTION>
PROPERTY TYPES
WEIGHTED AVERAGES
---------------------------------------
% OF AVERAGE HIGHEST STATED REMAINING
NUMBER OF INITIAL INITIAL CUT-OFF CUT-OFF REMAINING AMORT.
MORTGAGED POOL POOL DATE DATE MORTGAGE TERM TERM
PROPERTY TYPES PROPERTIES BALANCE BALANCE BALANCE BALANCE RATE (MO.) (MO.)
- -------------- ---------- ------- ------- ------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MULTIFAMILY 50 $246,284,785 35.34% $4,925,696 $15,750,000 7.586% 156 342
RETAIL
Anchored Retail 25 189,902,277 27.25 7,596,091 17,600,000 7.878 133 332
Unanchored Retail 12 25,195,045 3.62 2,099,587 3,400,000 7.977 116 321
Credit Lease Loan 1 1,461,359 0.21 1,461,359 1,461,359 7.510 239 239
- ------------------------------------------------------------------------------------------------------------------------------------
38 216,558,681 31.08 5,698,913 17,600,000 7.887 131 330
SELF STORAGE 29 70,689,987 10.14 2,437,586 6,075,279 8.100 132 298
MANUFACTURED
HOUSING 10 58,687,810 8.42 5,868,781 15,200,000 7.988 103 357
HOSPITALITY 15 44,441,556 6.38 2,962,770 8,808,000 8.636 186 256
INDUSTRIAL 8 42,216,440 6.06 5,277,055 9,353,357 7.947 125 315
OFFICE 3 11,345,971 1.63 3,781,990 7,150,000 7.823 122 349
MEDICAL OFFICE 2 6,617,702 0.95 3,308,851 3,900,000 7.842 118 323
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/
WTG. AVGS 155 $696,842,931 100.00% $4,495,761 $17,600,000 7.861 141 328
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------------------------------
LOAN PER
CUT-OFF OCCUPANCY SQ FT. UNIT, AVERAGE
DATE REPAYMENT PERCENT- PAD, PROPERTY
PROPERTY TYPES DSCR LTV LTV AGE(A) OR ROOM SIZE (B)
- -------------- ---- ------ --------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
MULTIFAMILY 1.32x 77.77% 54.68% 96.86% $31,237 271
RETAIL
Anchored Retail 1.37x 72.64 57.83 96.48 60 191,179
Unanchored Retail 1.41x 69.30 58.64 96.75 63 43,082
Credit Lease Loan N/A N/A N/A 100.00 144 10,125
- --------------------------------------------------------------------------------------------------
1.38x 72.24 57.92 96.54 61 172,727
SELF STORAGE 1.46x 68.73 51.65 88.21 42 79,808
MANUFACTURED
HOUSING 1.33x 74.20 66.67 96.86 23,184 441
HOSPITALITY 1.49x 66.15 20.40 N/A 35,179 112
INDUSTRIAL 1.40x 72.66 59.30 96.54 41 183,557
OFFICE 1.40x 70.35 61.26 95.84 64 81,035
MEDICAL OFFICE 1.45x 77.76 65.47 96.36 87 39,368
- --------------------------------------------------------------------------------------------------
TOTALS/
WTG. AVGS 1.37x(C) 73.67%(C) 54.69%(C) 89.66% $15,264 74,728
</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 manufacturered
housing communities, number of guest rooms with respect to each hospitality
property and number of square feet with respect to self-storage facilities.
(C) Does not reflect the Credit Lease Loan which represents 0.2% of the Initial
Pool Balance.
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION
WEIGHTED AVERAGES
% OF -------------------------------------------
NUMBER OF AGGREGATE AGGREGATE CUT-OFF SCHEDULED
MORTGAGED CUT-OFF DATE CUT-OFF DATE DATE MATURITY
STATE PROPERTIES BALANCE BALANCE DSCR (A) LTV (A) LTV (A)
- ----- ---------- ------------ ------------ -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Texas 32 $101,780,318 14.61% 1.36x 74.48% 57.17%
California 26 98,911,934 14.19 1.35x 71.59 57.46
Pennsylvania 8 56,553,105 8.12 1.50x 68.34 56.40
Florida 9 50,370,856 7.23 1.33x 74.21 58.52
North Carolina 7 33,104,155 4.75 1.36x 72.34 52.67
Ohio 7 31,294,433 4.49 1.38x 74.99 57.38
South Carolina 7 27,042,160 3.88 1.35x 75.29 11.51
Nevada 4 24,959,477 3.58 1.23x 76.69 70.94
Arkansas 2 24,731,410 3.55 1.27x 78.39 0.00
Georgia 3 24,642,546 3.54 1.45x 79.49 64.31
Louisiana 3 23,663,606 3.40 1.37x 78.33 51.84
Maryland 4 20,596,995 2.96 1.44x 73.65 63.50
New Jersey 5 19,425,035 2.79 1.46x 65.92 49.83
Oklahoma 3 17,053,548 2.45 1.32x 77.21 68.41
Michigan 2 16,073,726 2.31 1.31x 77.99 67.31
Delaware 1 15,200,000 2.18 1.28x 73.08 64.37
Connecticut 3 13,222,104 1.90 1.56x 60.47 49.47
Indiana 4 12,688,445 1.82 1.29x 74.79 42.62
Massachusetts 1 12,509,597 1.80 1.31x 74.91 66.29
Colorado 4 11,214,395 1.61 1.42x 73.77 61.07
Alabama 3 11,209,527 1.61 1.42x 78.22 68.89
New York 2 10,861,332 1.56 1.35x 79.02 63.53
Mississippi 2 10,175,079 1.46 1.40x 76.81 49.20
Arizona 4 8,302,903 1.19 1.57x 63.48 53.72
Illinois 1 4,543,619 0.65 1.28x 74.49 65.96
Washington 1 3,295,047 0.47 1.25x 70.86 61.54
Wisconsin 1 3,040,000 0.44 1.40x 80.00 64.88
New Mexico 1 3,037,923 0.44 1.34x 81.01 70.98
Oregon 2 2,650,000 0.38 1.38x 70.49 56.39
Tennessee 1 2,250,000 0.32 1.29x 75.00 61.50
Missouri 1 1,475,327 0.21 1.45x 73.77 60.01
Kansas 1 964,330 0.14 1.45x 70.39 62.72
- -------------------------------------------------------------------------------------------------------------------------
TOTALS/WTG. AVGS. 155 $696,842,931 100.00% 1.37x 73.67% 54.69%
</TABLE>
Total number of States is 32.
(A) Does not reflect the Credit Lease Loan which represents 0.2% of the Initial
Pool Balance.
S-39
<PAGE>
<TABLE>
<CAPTION>
YEARS BUILT
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 (A) LTV (A) LTV (A)
- ----------- ---------- ------- ------- ------- -------- ---------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1920-1959 6 $ 33,413,964 4.80% 4.80% 7.841% 128 301 1.51x 67.64% 52.73%
1960-1969 22 96,044,434 13.78 18.58 7.988 140 328 1.38x 72.57 54.89
1970-1979 36 135,427,204 19.43 38.01 7.938 133 332 1.36x 72.83 55.83
1980-1989 61 301,883,984 43.32 81.33 7.813 136 337 1.36x 74.62 58.46
1990-1997 30 130,073,344 18.67 100.00 7.802 164 311 1.35x 74.69 44.99
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS/
WTG. AVGS. 155 $696,842,931 100.00% 100.00% 7.861% 141 328 1.37x 73.67% 54.69%
</TABLE>
- --------
(A) Does not reflect the Credit Lease Loan which represents 0.2% of the Initial
Pool Balance.
<TABLE>
<CAPTION>
DEBT SERVICE COVERAGE RATIOS
CUMULATIVE WEIGHTED AVERAGES
% OF % OF ------------------------------------------------------------------
RANGE OF NUMBER OF INITIAL INITIAL INITIAL STATED REMAINING CUT-OFF
DEBT SERVICE MORTGAGE POOL POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
COVERAGE RATIOS LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR (A) LTV (A) LTV (A)
- --------------- --------- ------- ------- ------- -------- ---------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Credit Lease Loan 1 $ 1,461,359 0.21% 0.21% 7.510% 239 239 1.16x 74.90% 0.00%
1.20-1.29 39 235,981,830 33.86 34.07 7.842 156 334 1.26x 76.83 52.00
1.30-1.39 48 208,159,630 29.87 63.95 7.983 134 329 1.34x 73.59 57.86
1.40-1.49 33 160,809,706 23.08 87.02 7.715 129 334 1.43x 74.32 59.53
1.50-1.59 13 38,527,396 5.53 92.55 7.895 129 302 1.54x 67.19 50.42
1.60-1.69 7 38,487,072 5.52 98.07 7.747 151 294 1.63x 64.90 41.18
1.70-1.79 4 7,946,814 1.14 99.22 8.371 125 318 1.77x 52.64 43.01
1.90-1.99 2 3,869,124 0.56 99.77 8.341 118 298 1.93x 59.50 48.54
2.00-2.06 1 1,600,000 0.23 100.00 7.850 84 360 2.06x 57.14 52.74
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS/
WTG. AVGS. 148 $696,842,931 100.00% 100.00% 7.861% 141 328 1.37x(A) 73.67%(A) 54.69%(A)
</TABLE>
- ---------
(A) Does not reflect the Credit Lease Loan which represents 0.2% of the Initial
Pool Balance.
<TABLE>
<CAPTION>
CUT-OFF DATE LTV RATIOS
CUMULATIVE WEIGHTED AVERAGES
% OF % OF ------------------------------------------------------------------
RANGE OF NUMBER OF INITIAL INITIAL INITIAL STATED REMAINING CUT-OFF
CUT-OFF DATE MORTGAGE POOL POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
LTV RATIOS LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR (A) LTV (A) LTV (A)
- ------------ --------- ------- ------- ------- -------- ---------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Credit Lease Loan 1 $ 1,461,359 0.21% 0.21% 7.510% 239 239 1.16x 74.90% 0.00%
47.95-50.00 1 1,198,726 0.17 0.38 7.940 119 299 1.77x 47.95 38.71
50.01-60.00 8 25,763,536 3.70 4.08 8.002 119 309 1.68x 56.30 46.32
60.01-70.00 39 134,224,899 19.26 23.34 8.052 154 292 1.46x 65.38 38.13
70.01-80.00 94 482,652,265 69.26 92.60 7.834 134 338 1.34x 76.25 60.48
80.01-81.01 5 51,542,146 7.40 100.00 7.551 184 341 1.27x 80.35 48.11
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS/
WTG. AVGS. 148 $696,842,931 100.00% 100.00% 7.861% 141 328 1.37x(A) 73.67%(A) 54.69%(A)
</TABLE>
- ---------
(A) Does not reflect the Credit Lease Loan which represents 0.2% of the Initial
Pool Balance.
S-40
<PAGE>
<TABLE>
<CAPTION>
REPAYMENT LTV RATIOS
CUMULATIVE WEIGHTED AVERAGES
RANGE NUMBER % OF % OF -------------------------------------------------------------------
OF REPAYMENT 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 (A) LTV (A) TV (A)
----------- ------- ------- ------- ------- -------- ---------- ---------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fully Amortizing 19 $ 80,897,856 11.61% 11.61% 8.148% 267 267 1.36x 73.33% N/A
29.95%-50.00% 19 83,674,459 12.01 23.62 7.758 158 309 1.50x 64.07 44.41%
50.01%-60.00% 28 3,289,860 11.95 35.57 7.839 126 308 1.44x 67.94 54.81
60.01%-70.00% 73 395,519,610 56.76 92.33 7.822 119 345 1.34x 76.25 65.61
70.01%-72.10% 9 53,461,146 7.67 100.00 7.910 103 357 1.26x 78.96 71.02
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/
WTG. AVGS. 148 $696,842,931 100.00% 100.00% 7.861% 141 328 1.37x 73.67% 54.69%
</TABLE>
- -----------
(A) Does not reflect the Credit Lease Loan which represents 0.2% of the Initial
Pool Balance.
<TABLE>
<CAPTION>
MORTGAGE RATES
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 (A) LTV (A) LTV (A
-------- -------- ------- ------- ------- -------- ---------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6.970%-6.999% 2 $ 28,970,322 4.16% 4.16% 6.980% 119 330 1.51x 70.50% 59.00%
7.125%-7.249% 4 35,347,606 5.07 9.23 7.143 200 305 1.40x 71.32 29.51
7.250%-7.374% 4 25,748,270 3.69 12.92 7.314 224 314 1.33x 78.86 27.19
7.375%-7.499% 9 62,359,889 8.95 21.87 7.435 119 359 1.31x 76.60 66.87
7.500%-7.624% 18 98,016,850 14.07 35.94 7.564 160 343 1.35x 75.00 54.42
7.625%-7.749% 15 88,330,603 12.68 48.62 7.679 121 335 1.39x 74.40 62.95
7.750%-7.874% 20 87,000,631 12.48 61.10 7.813 131 341 1.35x 74.96 62.44
7.875%-7.999% 9 39,434,794 5.66 66.76 7.938 122 339 1.36x 75.17 63.71
8.000%-8.124% 19 51,577,282 7.40 74.16 8.073 125 296 1.36x 70.49 51.00
8.125%-8.249% 10 46,543,876 6.68 80.84 8.191 119 348 1.36x 71.28 61.91
8.250%-8.374% 8 33,523,707 4.81 85.65 8.315 103 341 1.38x 72.32 64.27
8.375%-8.499% 4 17,895,838 2.57 88.22 8.439 122 300 1.37x 77.54 62.92
8.500%-8.624% 3 10,161,746 1.46 89.68 8.518 167 296 1.35x 70.12 47.51
8.625%-8.749% 7 32,071,491 4.60 94.28 8.710 105 320 1.32x 72.62 63.05
8.750%-8.874% 3 8,835,943 1.27 95.55 8.791 192 266 1.33x 73.81 27.66
8.875%-8.999% 3 4,574,777 0.66 96.20 8.909 200 264 1.32x 68.7 22.91
9.125%-9.249% 4 10,202,714 1.46 97.67 9.232 238 238 1.49x 67.40 0.00
9.250%-9.374% 2 7,211,611 1.03 98.70 9.298 264 264 1.61x 66.50 0.00
9.375%-9.499% 2 6,108,280 0.88 99.58 9.391 242 242 1.41x 68.80 0.00
9.500%-9.624% 1 1,042,546 0.15 99.73 9.540 235 235 1.55x 67.92 0.00
9.625%-9.740% 1 1,884,156 0.27 100.00 9.740 234 234 1.45x 65.76 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/
WTG. AVGS. 148 $696,842,931 100.00% 100.00% 7.861% 141 3 28 1.37x 73.67% 54.69%
</TABLE>
- ------------
(A) Does not reflect the Credit Lease Loan which represents 0.2% of the Initial
Pool Balance.
<TABLE>
<CAPTION>
ORIGINAL TERMS
WEIGHTED AVERAGES
% OF ------------------------------------------------------------------------------
NUMBER OF INITIAL INITIAL STATED REMAINING CUT-OFF
ORIGINAL MORTGAGE POOL POOL MORTGAGE REMAINING AMORT. SEASONING DATE REPAYMENT
TERMS LOANS BALANCE BALANCE RATE TERM (MO.) TERM (MO.) (MO.)(A) DSCR (B) LTV (B) LTV (B)
-------- --------- ------- ------- -------- ---------- ---------- --------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 Year Balloon 1 $ 1,495,252 0.21% 8.020% 57 297 3 1.27x 69.55% 64.39%
6 to 9 Year Balloon 5 23,892,159 3.43 8.522 77 321 7 1.34x 73.25 67.39
10 Year Balloon 33 126,985,182 18.22 7.764 117 330 3 1.42x 71.57 60.78
11 to 14 Year Balloon 1 13,861,085 1.99 7.840 164 356 4 1.27x 80.12 63.42
15 Year Balloon 6 19,890,282 2.85 8.172 177 321 3 1.32x 74.23 52.00
16 to 20 Year Balloon 2 7,165,704 1.03 8.765 234 319 6 1.34x 74.65 37.08
21 to 25 Year Balloon 2 9,984,238 1.43 7.518 299 359 1 1.25x 78.94 33.12
6 to 9 Year ARD 529,933,636 4.30 7.994 80 343 4 1.25x 75.98 69.78
10 Year ARD 68 333,591,204 47.87 7.751 119 339 1 1.38x 73.54 62.94
11 to 14 Year ARD 5 40,459,106 5.81 7.838 140 332 1 1.39x 78.01 63.00
15 Year ARD1 1 8,687,226 1.25 7.570 178 358 2 1.36x 67.34 52.92
Fully Amortizing 19 80,897,856 11.61 8.148 267 267 2 1.36x 73.33 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/
WTG. AVGS. 148 $696,842,931 100.00% 7.861% 141 328 2 1.37x 73.67% 54.69%
- ------------
</TABLE>
(A) Number of months elapsed since the first Due Date following origination.
(B) Does not reflect the Credit Lease Loan which represents 0.2% of the Initial
Pool Balance.
S-41
<PAGE>
<TABLE>
<CAPTION>
STATED REMAINING TERMS
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 (A) LTV (A) LTV (A)
- ----------- ---------- ------- ------- ------- -------- ---------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
57- 72 1 $ 1,495,252 0.21% 0.21% 8.020% 57 297 1.27x 69.55% 64.39%
73- 84 10 53,825,794 7.72 7.94 8.229 79 333 1.29x 74.77 68.72
109-120 101 460,576,386 66.09 74.03 7.755 118 336 1.39x 73.00 62.35
121-228 16 92,851,460 13.32 87.36 7.961 161 321 1.35x 75.42 53.01
229-240 11 26,483,225 3.80 91.16 9.056 236 259 1.43x 69.12 10.62
241-300 9 61,610,813 8.84 100.00 7.662 294 304 1.31x 77.00 5.37
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS/
WTG. AVGS. 148 $696,842,931 100.00% 100.00% 7.861% 141 328 1.37x 73.67% 54.69%
</TABLE>
- ----------
(A) Does not reflect the Credit Lease Loan which represents 0.2% of the Initial
Pool Balance.
<TABLE>
<CAPTION>
CUT-OFF DATE BALANCES
CUMULATIVE WEIGHTED AVERAGES
% OF % OF ------------------------------------------------------------------
RANGE OF NUMBER OF INITIAL INITIAL INITIAL STATED REMAINING CUT-OFF
CUT-OFF DATE MORTGAGE POOL POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
BALANCES LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR (A) LTV (A) LTV (A)
- ------------ ---------- ------- ------- ------- -------- ---------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 800,000-$ 999,999 6 $ 5,386,297 0.77% 0.77% 8.022% 125 319 1.50x 67.43% 55.02%
$ 1,000,000-$ 1,999,999 3 861,053,522 8.76 9.53 8.239 130 305 1.42x 70.54 52.42
$ 2,000,000-$ 2,999,999 2 871,534,545 10.27 19.80 8.274 155 303 1.42x 69.68 42.59
$ 3,000,000-$ 3,999,999 15 50,530,771 7.25 27.05 8.021 130 312 1.39x 71.91 55.64
$ 4,000,000-$ 4,999,999 10 44,489,895 6.38 33.44 8.017 150 322 1.34x 72.44 53.90
$ 5,000,000-$ 5,999,999 15 79,810,467 11.45 44.89 7.761 153 331 1.39x 74.81 53.73
$ 6,000,000-$ 6,999,999 6 37,883,029 5.44 50.33 7.628 119 349 1.37x 75.34 65.26
$ 7,000,000-$ 7,999,999 3 21,455,670 3.08 53.40 7.643 119 359 1.34x 77.27 68.13
$ 8,000,000-$ 8,999,999 9 76,919,164 11.04 64.44 7.787 145 325 1.36x 72.59 52.83
$ 9,000,000-$ 9,999,999 1 9,353,357 1.34 65.78 8.440 127 295 1.36x 79.60 63.06
$10,000,000-$14,999,999 11 142,401,350 20.44 86.22 7.540 138 341 1.34x 74.60 56.77
$15,000,000-$17,600,000 6 96,024,863 13.78 100.00 7.848 145 342 1.35x 76.91 56.16
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/
WTG. AVGS. 148 $696,842,931 100.00% 100.00% 7.861% 141 328 1.37x 73.67% 54.69%
</TABLE>
- -----------
Average Cut-off Balance is $4,708,398.
(A) Does not reflect the Credit Lease Loan which represents 0.2% of the Initial
Pool Balance.
<TABLE>
<CAPTION>
YEARS OF SCHEDULED MATURITY OR ANTICIPATED REPAYMENT DATE
CUMULATIVE WEIGHTED AVERAGES
% OF % OF ------------------------------------------------------------------
NUMBER OF INITIAL INITIAL INITIAL STATED REMAINING CUT-OFF
MORTGAGE POOL POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
YEAR LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR (A) LTV (A) LTV (A)
- ----------- ---------- ------- ------- ------- -------- ---------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2002 1 $ 1,495,252 0.21% 0.21% 8.020% 57 297 1.27x 69.55% 64.39%
2004 10 53,825,794 7.72 7.94 8.229 79 333 1.29x 74.77 68.72
2007 101 460,576,386 66.09 74.03 7.755 118 336 1.39x 73.00 62.35
2008 2 11,528,357 1.65 75.69 8.306 128 307 1.34x 78.26 62.83
2009 2 25,890,749 3.72 79.40 7.640 144 340 1.41x 77.67 62.85
2010 1 3,040,000 0.44 79.84 7.750 156 360 1.40x 80.00 64.88
2011 1 13,861,085 1.99 81.83 7.840 164 356 1.27x 80.12 63.42
2012 9 33,463,003 4.80 86.63 8.139 177 309 1.34x 71.72 44.65
2015 1 5,068,265 0.73 87.36 8.100 213 213 1.27x 66.25 0.00
2017 11 26,483,225 3.80 91.16 9.056 236 259 1.43x 69.12 10.62
2018 2 5,264,929 0.76 91.91 8.783 248 248 1.31x 71.40 0.00
2019 1 1,444,595 0.21 92.12 8.875 261 261 1.39x 67.19 0.00
2022 6 54,901,290 7.88 100.00 7.523 299 310 1.31x 77.80 6.02
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/
WTG. AVGS. 148 $696,842,931 100.00% 100.00% 7.861% 141 328 1.37x 73.67% 54.69%
</TABLE>
- ---------
(A) Does not reflect the Credit Lease Loan which represents 0.2% of the Initial
Pool Balance.
S-42
<PAGE>
<TABLE>
<CAPTION>
PREPAYMENT RESTRICTIONS BY CATEGORIES
WEIGHTED
% OF AVERAGE LOCKOUT TERM (MO.)/ WEIGHTED 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>
Locked, then Defeasance 1 $ 7,150,000 1.03% 120 117 97.50% 3
Locked, then PP 4 9,719,558 1.39 200 74 36.86 34
Locked, then YM 134 648,167,164 93.01 141 53 37.83 9
PP Only 2 4,709,421 0.68 118 0 0.00 24
YM Only 2 6,861,141 0.98 116 0 0.00 6
YM, then PP 5 20,235,647 2.90 118 0 0.00 11
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/WTG. AVGS. 148 $696,842,931 100.00% 141 52 36.90% 9
</TABLE>
- -------
(A) YM=Yield Maintenance, PP=Percentage Premium.
<TABLE>
<CAPTION>
PREPAYMENT RESTRICTIONS BY ORIGINAL TERM
WEIGHTED AVERAGES
----------------------------------------------------
% OF STATED MONTHS
NUMBER OF INITIAL INITIAL REMAINING MONTHS OPEN
PREPAYMENT MORTGAGE POOL POOL MORTGAGE TERM LOCKED MONTHS MONTHS PRIOR TO
ORIGINAL TERM RESTRICTION (A) LOANS BALANCE BALANCE RATE (MO.) OUT YM PP MATURITY
------------- --------------- --------- ------- ------- -------- ------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 Year Balloon Locked, then YM 1 $ 1,495,252 0.21% 8.020% 57 36 15 0 6
6 to 9 Year Balloon Locked, then PP 2 2,400,000 0.34 7.850 84 12 0 68 4
6 to 9 Year Balloon Locked, then YM 3 21,492,159 3.08 8.597 76 40 33 0 3
- ------------------------------------------------------------------------------------------------------------------------------------
SubTotal 5 23,892,159 3.43 8.522 77 37 30 7 3
10 Year Balloon Locked, then YM 25 97,126,940 13.94 7.733 117 44 69 0 4
10 Year Balloon PP Only 1 2,761,454 0.40 8.240 118 0 0 94 24
10 Year Balloon YM, Only 2 6,861,141 0.98 8.177 116 0 110 0 6
10 Year Balloon YM, then PP 5 20,235,647 2.90 7.709 118 0 96 11 11
- ------------------------------------------------------------------------------------------------------------------------------------
SubTotal 33 126,985,182 18.22 7.764 117 34 74 4 5
11 to 14 Year Balloon Locked, then YM 1 13,861,085 1.99 7.840 164 44 117 0 3
15 Year Balloon Locked, then YM 6 19,890,282 2.85 8.172 177 93 81 0 3
16 to 20 Year Balloon Locked, then YM 2 7,165,704 1.03 8.765 234 114 117 0 3
21 to 25 Year Balloon Locked, then YM 2 9,984,238 1.43 7.518 299 119 177 0 3
6 to 9 Year ARD Locked, then PP 1 2,007,917 0.29 8.090 83 35 0 45 3
6 to 9 Year ARD Locked, then YM 4 27,925,718 4.01 7.988 80 44 27 0 9
- ------------------------------------------------------------------------------------------------------------------------------------
SubTotal 5 29,933,636 4.30 7.994 80 44 25 3 9
10 Year ARD Locked, then D 1 7,150,000 1.03 7.700 120 117 0 0 3
10 Year ARD Locked, then YM 66 324,493,238 46.57 7.751 119 42 74 0 4
10 Year ARD PP Only 1 1,947,966 0.28 8.050 119 0 0 95 24
- ------------------------------------------------------------------------------------------------------------------------------------
SubTotal 68 333,591,204 47.87 7.751 119 43 72 1 4
11 to 14 Year ARD Locked, then YM 5 40,459,106 5.81 7.838 140 39 90 0 11
15 Year ARD Locked, then YM 1 8,687,226 1.25 7.570 178 34 139 0 5
Fully Amortizing Locked, then PP 1 5,311,641 0.76 9.280 296 116 0 120 60
Fully Amortizing Locked, then YM 18 75,586,215 10.85 8.068 265 111 110 0 45
- ------------------------------------------------------------------------------------------------------------------------------------
SubTotal 19 80,897,856 11.61 8.148 267 111 103 8 46
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/WTG. AVGS 148 $696,842,931 100.00% 7.861% 141 52 77 2 9
</TABLE>
- -------------
(A) D=Defeasance, YM=Yield Maintenance, PP=Percentage Premium.
S-43
<PAGE>
<TABLE>
<CAPTION>
PREPAYMENT LOCK-OUT/PREMIUM ANALYSIS(A)
.
CURRENT 12 MO. 24 MO. 36 MO. 48 MO. 60 MO. 72 MO. 84 MO. 96 MO. 108 MO. 120 MO. 132 MO.
PREPAYMENT DEC. DEC. DEC. DEC. DEC. DEC. DEC. DEC. DEC. DEC. DEC. DEC.
RESTRICTIONS 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
------------ ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 95.4% 95.1% 91.2% 57.3% 32.9% 17.9% 17.5% 18.8% 12.8% 12.0% 2.2% 0.0%
Yield Maintenance 3.9% 3.9% 7.8% 41.4% 65.8% 79.6% 77.6% 80.4% 83.7% 83.6% 88.3% 89.8%
Percentage Premium
5.00% and greater 0.7% 0.7% 0.4% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
4.00 to 4.99% 0.0% 0.3% 0.3% 0.3% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 3.0% 3.2%
3.00 to 3.99% 0.0% 0.0% 0.3% 0.3% 0.3% 0.4% 0.0% 0.0% 2.8% 0.0% 0.0% 0.0%
2.00 to 2.99% 0.0% 0.0% 0.0% 0.3% 0.3% 0.3% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0%
1.00 to 1.99% 0.0% 0.0% 0.0% 0.0% 0.3% 0.6% 0.9% 0.7% 0.0% 0.3% 0.0% 0.0%
Open 0.0% 0.0% 0.0% 0.0% 0.0% 1.2% 3.6% 0.0% 0.7% 4.1% 6.5% 7.0%
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mortgage Pool Balance
($ millions) $696.8 $689.1 $680.8 $671.8 $662.0 $650.1 $638.6 $577.3 $564.8 $551.3 $145.7 $131.1
% of Initial
Pool Balance(B) 100.0% 98.9% 97.7% 96.4% 95.0% 93.3% 91.6% 82.8% 81.1% 79.1% 20.9% 18.8%
<CAPTION>
144 Mo. 156 Mo. 168 Mo. 180 Mo.
PREPAYMENT Dec. Dec. Dec. Dec.
RESTRICTIONS 2009 2010 2011 2012
------------ ----- ----- ----- -----
Locked Out 0.0% 0.0% 0.0% 0.0%
Yield Maintenance 93.7% 96.0% 95.4% 76.0%
Percentage Premium
5.00% and greater 0.0% 0.0% 0.0% 0.0%
4.00 to 4.99% 0.0% 0.0% 0.0% 0.0%
3.00 to 3.99% 3.9% 4.0% 4.6% 6.4%
2.00 to 2.99% 0.0% 0.0% 0.0% 0.0%
1.00 to 1.99% 0.0% 0.0% 0.0% 0.0%
Open 2.4% 0.0% 0.0% 17.6%
- --------------------------------------------------------
TOTALS 100.0% 100.0% 100.0% 100.0%
Mortgage Pool Balance
($ millions) 104.7 $97.0 $80.4 $54.4
% of Initial
Pool Balance(B) 15.0% 13.9% 11.5% 7.8%
- ------------
(A) This table sets forth an analysis of the percentage of the declining balance of the Mortgage Pool that, on December 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.
</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), together with an original or a copy of any
intervening assignments of any such assignments of leases, in each case with
evidence of recording indicated thereon; (iv) an original assignment of the
Mortgage in favor of the Trustee and in recordable form; (v) an original
assignment of any related assignment of leases (if such item is a document
separate from the Mortgage) in favor of the Trustee and in recordable form; (vi)
originals or copies of all written modification agreements in those instances in
which the terms or provisions of the Mortgage or Mortgage Note have been
modified; (vii) the original or a copy of the policy or certificate of lender's
title insurance issued on the date of the origination of such Mortgage Loan, or,
if such policy has not been issued, an irrevocable, binding commitment to issue
such title insurance policy; (viii) any file copies of any UCC financing
statements in the possession of the applicable Mortgage Loan Seller; and (ix) an
original assignment in favor of the Trustee of any financing statement executed
and filed in favor of the related Mortgage Loan Seller in the relevant
jurisdiction.
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 (other than omissions solely due to a document not having been
returned by the related recording office) 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 the 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, 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, and such
defect does not relate to any Mortgage Loan not being treated as a "qualified
mortgage" within the meaning of the REMIC Provisions. 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), (v) and (ix) of the second preceding
paragraph be promptly (and in any event within 60 days after the later of the
delivery of a complete Mortgage File or 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.
S-45
<PAGE>
REPRESENTATIONS AND WARRANTIES; REPURCHASES
In each Mortgage Loan Purchase Agreement, the applicable Mortgage Loan
Seller will represent and warrant with respect to each related Mortgage Loan
(subject to certain exceptions specified in the related Mortgage Loan Purchase
Agreement), as of the Closing Date, or as of such other date specifically
provided in the representation and warranty, among other things, generally that:
(i) the information set forth in the schedule of Mortgage Loans attached to the
applicable Mortgage Loan Purchase Agreement (which contains certain of the
information set forth in Annex A) is true and correct in all material respects
as of the Cut-Off Date; (ii) the applicable Mortgage Loan Seller owns the
Mortgage Loan and is transferring the Mortgage Loan free and clear of any and
all liens, pledges, charges or security interests; (iii) the proceeds of the
Mortgage Loan have been fully disbursed and there is no requirement for future
advances thereunder; (iv) each of the related Mortgage Note, related Mortgage
and other agreements executed in connection therewith is the legal, valid and
binding obligation of the maker thereof (subject to any non-recourse provisions
contained in any of the foregoing agreements and any applicable state
anti-deficiency legislation), enforceable in accordance with its terms, except
as such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium 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, except as the enforcement of such assignment may be limited by
bankruptcy, insolvency, reorganization, liquidation, receivership, moratorium or
other laws relating to or affecting creditors' rights generally or by general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law); (vi) the related Mortgage is a valid first
priority lien in the outstanding principal amount of the related Mortgage Loan,
except for (A) the lien of current real property taxes, ground rents, water
charges, sewer rents and assessments not yet due and payable, (B) covenants,
conditions and restrictions, rights of way, easements and other matters that are
of public record, and (C) the exceptions set forth in the related title
insurance policy ; (vii) taxes that would be a lien on the related Mortgaged
Property and that prior to the Cut-Off Date had become due and owing 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 pending for the total or
partial condemnation of any material portion of the related Mortgaged Property
and the Mortgaged Property is free and clear of any material 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 Regulations 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
generally 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.
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CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the time the Offered Certificates are issued. Prior to the
issuance of the Offered Certificates, a Mortgage Loan may be removed from the
Mortgage Pool if the Depositor deems such removal necessary or appropriate or if
it is prepaid. A limited number of other mortgage loans may be included in the
Mortgage Pool prior to the issuance of the Offered Certificates, unless
including such mortgage loans would materially alter the characteristics of the
Mortgage Pool as described herein. The Depositor believes that the information
set forth herein will be representative of the characteristics of the Mortgage
Pool as it will be constituted at the time the Offered Certificates are issued,
although the range of Mortgage Rates, maturities and certain other
characteristics of the Mortgage Loans in the Mortgage Pool may vary.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates on or shortly after the Closing Date and
will be filed, together with the Pooling and Servicing Agreement, with the
Securities and Exchange Commission within fifteen days after the initial
issuance of the Offered Certificates. If Mortgage Loans are removed from or
added to the Mortgage Pool as described in the preceding paragraph, such removal
or addition will be noted in the Form 8-K.
SERVICING OF THE MORTGAGE LOANS
GENERAL
The Master Servicer and the Special Servicer, either directly or through
sub-servicers, will be required to service and administer the Mortgage Loans on
behalf of the Trustee 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, (a) 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
with similar borrowers (i) for other third-party's portfolios, 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, (b) with a view to the
maximization of the recovery on such Mortgage Loans on a net present value
basis, and (c) without regard to (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, or of any affiliate thereof, as a Mortgage
Loan Seller, to pay any indemnity with respect to or repurchase any Mortgage
Loan.
Set forth below, following the subsection captioned "--The 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
GECLS, 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. The Master Servicer will conduct property
inspections, collect financial statements, rent-rolls and other financial data
on the Mortgaged Properties, and prepare reports, as set forth in the Pooling
and Servicing Agreement. Although the Master Servicer is authorized to employ
agents, including sub-servicers, to directly service the Mortgage Loans that are
not Specially Serviced Mortgage
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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 an affiliate of GECA and GECC. The Master
Servicer's principal servicing offices are located at 363 N. Sam Houston Parkway
E., Suite 1200, Houston, TX 77060.
As of December 1, 1997, the Master Servicer serviced approximately 2,000
commercial and multifamily loans, totaling approximately $11,500,000,000 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 neither of the Depositor nor the Underwriter makes any
representation or warranty as to the accuracy or completeness of such
information.
THE SPECIAL SERVICER
The initial Special Servicer will be CRIIMI MAE Services Limited
Partnership, a Maryland limited partnership, the general partner of which is
CRIIMI MAE Management, Inc. 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 functions with respect to all
Specially Serviced Mortgage Loans and REO Loans, such as (i) conducting property
inspections, (ii) collecting financial statements, rent-rolls and other
financial data on the related Mortgaged Properties, and (iii) preparing related
reports, as set forth in the Pooling and Servicing Agreement. The Special
Servicer will be entitled to a monthly fee (the "Additional Servicing Fee")
payable monthly on a loan-by-loan basis from amounts received in respect of
interest on each Mortgage Loan, accrued at the Additional Servicing Fee Rate and
computed on the basis of the same principal amount and for the same period
respecting which any related interest payment due on the Mortgage Loan is
computed. The "Additional Servicing Fee Rate" will be a per annum rate equal to
0.015%. As of September 30, 1997, the Special Servicer was responsible for
performing certain servicing functions with respect to approximately 2,700
commercial and multifamily loans with an aggregate principal balance of
approximately $11 billion, the real property securing which is located in 49
states, Puerto Rico and the District of Columbia. It is anticipated that the
Special Servicer or an affiliate of the Special Servicer will purchase all or a
significant portion of certain Classes of the Private Certificates on or about
the Closing Date. The Special Servicer's principal offices are located at 11200
Rockville Pike, Rockville, Maryland 20852.
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. 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 initial Certificate Balance
and 1% of the aggregate Certificate Balance of all Sequential Pay Certificates
(or if no Class of Sequential Pay Certificates has a Certificate Balance that is
greater than 20% of its initial Certificate Balance and 1% of the aggregate
Certificate Balance of all Sequential Pay Certificates, the Class of Sequential
Pay Certificates with the latest alphabetical Class designation). The Class A-1
and Class A-2 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 60 or
more days (or, in the case of a Balloon Payment, if the Master Servicer
determines that the related borrower has obtained a commitment to refinance,
such longer period of delinquency (not to exceed 120 days) within which such
refinancing is expected to occur); (b) the Master Servicer shall have determined
that a default in making a Monthly Payment is likely to occur within 30 days and
is likely to remain unremedied for at least 60 days (or, in the case of a
Balloon Payment, if the Master Servicer determines that the related borrower has
obtained 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
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(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 have consented to (or be
subject 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 have admitted in writing its inability to pay its debts generally
as they become due, filed a petition to take advantage of any applicable
insolvency or reorganization statute, made an assignment for the benefit of its
creditors, or voluntarily suspended 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 have been 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 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):
(v) 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);
(w) 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;
(x) with respect to the circumstances described in clause (c) of the
second preceding paragraph, when such default is cured;
(y) with respect to the circumstances described in clause (g) of the
second preceding paragraph, when such proceedings are terminated; and
(z) with respect to the circumstances described in clause (h) of the
second preceding paragraph, when such delinquency is cured;
so long as at that time no circumstance identified in such clauses (a) through
(h) 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 Master Servicing Fee (together with the Special Servicing Fee and the
Additional Servicing Fee, the "Servicing Fees"). The "Master Servicing Fee" will
be payable monthly on a loan-by-loan basis from amounts received in respect of
interest on each Mortgage Loan or as otherwise described herein, will accrue at
the related Master Servicing Fee Rate and will be computed on the basis of the
same principal
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amount and for the same period respecting which any related interest payment due
on the Mortgage Loan is computed. The "Master Servicing Fee Rate" will be a per
annum rate equal to 0.055% in the case of 95 Mortgage Loans (or 74%), 0.0850% in
the case of 45 Mortgage Loans (or 22%) .125 in the case of three Mortgage Loans
(or 2%), and ranging from .325% to 1.1880% in the case of five Mortgage Loans
(or 2%). The weighted average Master Servicing Fee Rate as of the Cut-Off Date
will be .0724%. In addition, as additional servicing compensation, the Master
Servicer, in addition to Prepayment Interest Excesses and with respect to
Mortgage Loans that are not Specially Serviced Mortgage Loans, and the Special
Servicer, with respect to Specially Serviced Mortgage Loans, will be entitled to
retain all assumption and modification fees, late charges, exit fees or
repayment fees collected from borrowers on the related 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 a Mortgage Loan on a date that is prior to
its Due Date in a Collection Period, the amount of interest (net of the related
Master Servicing Fee and Additional Servicing Fee) 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 Additional 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,
Additional Servicing Fees and the Trustee Fee) 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
Fee, Additional Servicing Fee 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 total servicing compensation for the related Collection
Period, 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.
As and to the extent described herein under "DESCRIPTION OF THE
CERTIFICATES--P&I Advances," the Master Servicer will be entitled to receive
interest, at the Reimbursement Rate, on any P&I Advances made by it and each of
the Master Servicer and the Special Servicer will be entitled to interest, at
the Reimbursement Rate, on any reimbursable servicing expenses incurred by it.
Such interest will compound annually and will be paid, first, out of collections
with respect to default interest paid with respect to the related Mortgage Loan,
and second, out of general collections on the Mortgage Pool then on deposit in
the Certificate Account, 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 (which shall include the Additional Servicing Fee) 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 or REO Loan is computed. However, earned Special Servicing Fees
will be payable out of general collections on the Mortgage Loans then on deposit
in the Certificate Account. The Special Servicing Fee with respect to any
Specially Serviced Mortgage Loan will cease to accrue if such loan is liquidated
or becomes a Corrected Mortgage Loan. The Special Servicer will be entitled to a
"Principal Recovery Fee" with respect to each Specially Serviced Trust Fund
Asset and Corrected Mortgage Loan, which Principal Recovery Fee generally will
be in an amount equal to 0.25% of all amounts received in respect thereof and
allocable as a recovery of principal. However, no Principal Recovery Fee will be
payable in connection with, or out of Liquidation Proceeds (as defined in the
Prospectus) resulting from, the purchase of any Specially Serviced Trust Fund
Asset or Corrected Mortgage Loan (i) by a Mortgage Loan Seller (as
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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 provisions of the Code and the Treasury Regulations
thereunder relating to REMICs.
Each of the Master Servicer and the Special 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, each of the Master Servicer and the Special Servicer will be
permitted to pay certain of such expenses (including certain expenses incurred
as a result of a Mortgage Loan default) directly out of the Certificate Account
and at times without regard to the relationship between the expense and the
funds from which it is being paid. See "DESCRIPTION OF THE
CERTIFICATES--Distributions" herein and "DESCRIPTION OF THE POOLING
AGREEMENTS--Certificate Account" and "--Servicing Compensation and Payment of
Expenses" in the Prospectus.
MODIFICATIONS, WAIVERS AND AMENDMENTS
The Pooling and Servicing Agreement will permit the Special Servicer or
Master Servicer, as applicable, to modify, waive or amend any term of any
Mortgage Loan if (a) it determines, in accordance with the servicing standard
described under "--General" above, that it is appropriate to do so and (b)
except as described in the following paragraph, such modification, waiver or
amendment will not (i) affect the amount or timing of any scheduled payments of
principal, interest or other amount (including Prepayment Premiums) payable
under the Mortgage Loan, (ii) affect the obligation of the related borrower to
pay a Prepayment Premium 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; provided,
however, with respect to any determination to be made by the Master Servicer,
the Master Servicer will notify the Special Servicer of its intent to modify,
waive or amend any term of any Mortgage Loan no less than five business days
prior to taking such action. Notwithstanding the foregoing, the Master Servicer
may take any action prior to the expiration of such five business day period if,
in the Master Servicer's sole reasonable judgment, a delay in taking such action
would be inconsistent with the servicing standard.
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, (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 any
of the REMICs created pursuant to the Pooling and Servicing Agreement to fail to
qualify as a REMIC at any time the Certificates are outstanding. 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"
herein.
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
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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.
REO PROPERTIES
If title to any Mortgaged Property is acquired by the Trustee for the
benefit of the Certificateholders pursuant to foreclosure proceedings instituted
by the Special Servicer or otherwise, the Special Servicer, on behalf of the
Trust Fund, will be required to sell the Mortgaged Property prior to the close
of the third taxable year following the taxable year of acquisition, unless (i)
the Internal Revenue Service grants an extension of time to sell such property
(an "REO Extension") or (ii) the Special Servicer obtains an opinion of counsel
generally to the effect that the holding of the property for more than three
years after the end of the taxable year in which the Trust Fund acquires such
property 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.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Special Servicer will be required to perform or cause to be performed a
physical inspection of a Mortgaged Property as soon as practicable after the
related Mortgage Loan becomes a Specially Serviced Mortgage Loan. In addition,
the Master Servicer will be required to inspect or cause the inspection of 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.
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.
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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 the 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 Trustee. 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-C2 (the
"Certificates") will be issued pursuant to a Pooling and Servicing Agreement, to
be dated as of December 1, 1997, among the Depositor, the Master Servicer, the
Special Servicer and the Trustee (the "Pooling and Servicing Agreement"). The
Certificates will represent in the aggregate the entire beneficial ownership
interest in a trust fund (the "Trust Fund") consisting primarily of: (i) the
Mortgage Loans and all payments and 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, and principal prepayments received, 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 the following classes (each, a "Class") to
be designated as: (i) the Class A-1 Certificates, the Class A-2 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, the Class J Certificates and
the Class K Certificates (collectively, the "REMIC Regular Certificates"); (ii)
the Class L Certificates (iii) 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 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, Class K, Class L 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 $1,000 actual or notional
principal amount and in integral multiples of $1 in excess thereof.
Each Class of Offered Certificates will initially be represented by one or
more global Certificates registered in the name of the nominee of DTC. The
Depositor has been informed by DTC that DTC's nominee will be Cede & Co. No
beneficial owner of an Offered Certificate (each, a "Certificate Owner") will be
entitled to receive a fully registered, certificated form of such Certificate (a
"Definitive Offered Certificate"), except under the limited circumstances
described in the Prospectus under "DESCRIPTION OF THE CERTIFICATES--Book-Entry
Registration and Definitive Certificates." Unless and until Definitive Offered
Certificates are issued in respect of a Class of Offered Certificates,
beneficial ownership interests in such Class will be recorded and transferred on
the book-entry records of DTC and its participating organizations (the
"Participants"), and all references to actions by holders of a Class of Offered
Certificates will refer to actions taken by DTC upon instructions received from
the related Certificate Owners through the Participants in accordance with DTC
procedures, and all references herein to payments, notices, reports and
statements to the holders of a Class of Offered Certificates will refer to
payments, notices, reports and statements to DTC or Cede & Co., as the
registered holder thereof, for distribution to the related
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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:
<TABLE>
<CAPTION>
INITIAL PERCENT OF
CERTIFICATE INITIAL POOL
CLASS OF CERTIFICATES BALANCE BALANCE
--------------------- --------- ------------
<S> <C> <C>
Class A-1 Certificates ....................................................... $124,018,000 17.8%
Class A-2 Certificates ....................................................... $377,708,000 54.2%
Class B Certificates ......................................................... $ 27,874,000 4.0%
Class C Certificates ......................................................... $ 41,811,000 6.0%
Class D Certificates ......................................................... $ 34,842,000 5.0%
Class E Certificates ......................................................... $ 12,195,000 1.7%
Private Certificates (other than the Class L Certificates and REMIC
Residual Certificates) ...................................................... $ 78,394,931 11.0%
</TABLE>
The "Certificate Balance" of any Class of Certificates (other than the
Class L Certificates and 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 (i) any
distributions of principal actually made on such Class of Certificates on such
Distribution Date and (ii) 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 a Certificate Balance, but will
represent the right to receive distributions of interest accrued on the
respective notional amount of its Components (each a "Component"), as described
herein. As of any Distribution Date, each Component will have a notional amount
equal to the Certificate Balance of the related Class of Certificates
immediately prior to such Distribution Date. Each Component will accrue interest
at its applicable Strip Rate on its related notional amount. The Components 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 $696,842,931.
The Class L Certificates will not have Certificate Balances, but will
represent the right to receive Additional Interest in respect of ARD Loans and
Net Default Interest in accordance with the Pooling and Servicing Agreement.
Except as described in the preceding sentence, the holders of the Class L
Certificates will not be entitled to distributions of interest or principal.
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 REMIC Regular
Certificates.
PASS-THROUGH RATES
The Pass-Through Rates applicable to each Class of Sequential Pay
Certificates for each Distribution Date is set forth in the table at the
beginning of the Summary.
The Strip Rate applicable to the Class A-1 and Class A-2 Components for
each Distribution Date will equal the Weighted Average Net Mortgage Rate for
such Distribution Date minus _____% and ___%, respectively (but not less
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than zero); the Strip Rate applicable to the Class B, Class C, Class D and Class
E Components for each Distribution Date will equal ___%, ___%, ___% and ___%,
respectively; and the Strip Rate applicable to the Class F, Class G, Class H,
Class J and Class K Components for each Distribution Date will each equal the
Weighted Average Net Mortgage Rate for such Distribution Date minus ___% (but
not less than zero).
The "Weighted Average Net Mortgage Rate" for each Distribution Date is the
weighted average of the Net Mortgage Rates for the Mortgage Loans, as of the
commencement of the related Collection Period, weighted on the basis of their
respective Stated Principal Balances outstanding immediately prior to such
Distribution Date. The "Net Mortgage Rate" for each Mortgage Loan will equal the
Mortgage Rate in effect for such Mortgage Loan as of the Cut-Off Date, minus the
applicable 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 Sequential Pay Certificates), then 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 5th day of each month (or, if not a business
day, the next succeeding business day).
DISTRIBUTIONS
General. Distributions on the Certificates will be made by the Trustee, to
the extent of available funds, on the 10th day of each month or, if any such
10th 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
January 12, 1998 (each, a "Distribution Date"); provided, however, that the
Distribution Date will be no earlier than the fourth business day following the
related Determination 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:
(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 default interest, and
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(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 or the Trustee 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 the
Sequential Pay Certificates is greater than zero, the Trustee will (except as
otherwise described under "--Termination" below) 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 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 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) to distributions to the holders of the Class A-1 and Class A-2
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 and for which no reimbursement has previously been
received, to reimburse such holders for such Realized Losses and Additional
Trust Fund Expenses, if any;
(5) 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;
(6) after the Class A-1 and Class A-2 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 and/or Class A-2 Certificates;
(7) 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;
(8) 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;
(9) after the Class A-1, Class A-2 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 and/or Class B Certificates on such
Distribution Date;
(10) 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;
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(11) 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;
(12) after the Class A-1, Class A-2, 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 B and/or Class C
Certificates;
(13) 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;
(14) 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;
(15) after the Class A-1, Class A-2, 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 B, Class
C and/or Class D Certificates;
(16) 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;
(17) 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;
(18) after the Class A-1, Class A-2, 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
B, Class C, Class D and/or Class E Certificates;
(19) 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;
(20) to distributions of interest to the holders of the Class G
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(21) after the Class A-1, Class A-2, 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
B, Class C, Class D, Class E and/or Class F Certificates;
(22) 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;
(23) 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;
(24) after the Class A-1, Class A-2, 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 B, Class C, Class D, Class E, Class F and/or
Class G Certificates;
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(25) 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;
(26) 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;
(27) after the Class A-1, Class A-2, 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 B, Class C, Class D, Class E, Class F, Class G
and/or Class H Certificates;
(28) 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;
(29) to distributions of interest to the holders of the Class K
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;
(30) after the Class A-1, Class A-2, Class B, Class C, Class D, Class
E, Class F, Class G, Class H and Class J Certificates have been retired, to
distributions of principal to the holders of the Class K 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 B, Class C, Class D, Class E, Class F, Class G,
Class H and/or Class J Certificates;
(31) to distributions to the holders of the Class K 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
(32) 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 (31) above.
Distributable Certificate Interest. The "Distributable Certificate
Interest" in respect of any Class of REMIC Regular Certificates, other than the
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 the 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
other than the Class L Certificates and the Class IO Certificates will equal the
product of (a) such Net Aggregate Prepayment Interest Shortfall, multiplied by
(b) a fraction, the numerator of which is equal to the Accrued Certificate
Interest in respect of such Class of Certificates for such Distribution Date,
and the denominator of which is equal to the aggregate Accrued Certificate
Interest for all the REMIC Regular Certificates for such Distribution Date.
Principal Distribution Amount. The "Principal Distribution Amount" for each
Distribution Date will generally equal the aggregate of the following (without
duplication):
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(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
an ARD Loan, and assuming that each prior Scheduled Payment has been made in a
timely manner. The "Assumed Scheduled Payment" is an amount deemed due (i) 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 and
(ii) in respect of each REO Loan. 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 Assumed Scheduled Payment deemed due on
any REO Loan on each Due Date that the related REO Property remains part of the
Trust Fund will equal the Scheduled Payment that would have been due in respect
of such predecessor Mortgage Loan on such Due Date had it remained outstanding
or, if such Mortgage Loan was a Balloon Loan and such Due Date coincides with or
follows what had been its stated maturity date, the Assumed Scheduled Payment
that would have been deemed due in respect of such Mortgage Loan on such Due
Date had it remained outstanding.
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
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 or the Trustee 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 Loan" or "Mortgage Loans" in the definitions of
"Principal Distribution Amount" and "Weighted
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Average Net Mortgage Rate" include any Mortgage Loan as to which the related
Mortgaged Property has become an REO Property (an "REO 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 or any other fees (each
such other 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 payments 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 aggregate payment of interest
which would have accrued on such Mortgage Loan on each subsequent due date
through the maturity date of such Mortgage Loan, at a rate calculated as the
difference between the Mortgage Rate on such Mortgage Loan and the applicable
treasury rate in effect on the date of prepayment (the "Rate Differential"),
discounted at a rate at or near the time of prepayment.
On each Distribution Date, any Prepayment Premium or Yield Maintenance
Charge collected on a Mortgage Loan during the related Collection Period will be
distributed as follows: The holders of each Class of Sequential Pay Certificates
then entitled to distributions of principal on such Distribution Date will be
entitled to an amount equal to the amount of such Prepayment Premium or Yield
Maintenance Charge, multiplied by (a) a fraction (which in no event may be
greater than one) the numerator of which is equal to the excess, if any, of the
Pass-Through Rate of such Class of Sequential Pay Certificates, over the
relevant Discount Rate (as defined below), and the denominator of which is equal
to the excess, if any, of the Mortgage Rate of the prepaid Mortgage Loan, over
the relevant Discount Rate, and (b) a fraction, the numerator of which is equal
to the amount of principal distributable on such Class of Sequential Pay
Certificates on such Distribution Date, and the denominator of which is the
Principal Distribution Amount for such Distribution Date. If there is more than
one Class of Sequential Pay Certificates entitled to distributions of principal
on any particular Distribution Date on which a Prepayment Premium or Yield
Maintenance Charge is distributable, the aggregate amount of such Prepayment
Premium or Yield Maintenance Charge will be allocated among all such Classes up
to, and on a pro rata basis in accordance with their respective entitlements
thereto in accordance with, the foregoing sentence. The portion, if any, of the
Prepayment Premium or Yield Maintenance Charge remaining after any such payments
to the holders of the Sequential Pay Certificates will be distributed to the
holders of the Class IO Certificates.
The "Discount Rate" applicable to any Class of Offered Certificates will be
equal to the yield (when compounded monthly) on the U.S. Treasury issue (primary
issue) with a maturity date closest to the maturity date for the prepaid
Mortgage Loan. In the event that there are two such U.S. Treasury issues (a)
with the same coupon, the issue with the lower yield will be utilized, and (b)
with maturity dates equally close to the maturity date for the prepaid Mortgage
Loan, the issue with the earliest maturity date will be utilized.
The Depositor makes no representation as to the enforceability of the
provision of any Mortgage Note requiring the payment of a Prepayment Premium or
Yield Maintenance Charge, or of the collectability of any Prepayment Premium or
Yield Maintenance Charge. See "Description of the Mortgage Pool--Certain Terms
and Conditions of the Mortgage Loans-Prepayment Provisions" herein.
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 other than the Class L
Certificates (collectively, the "Subordinated Certificates") to receive
distributions of amounts collected or advanced on the Mortgage Loans will be
subordinated, to the extent described herein, to the rights of holders of the
Class A-1, Class A-2 and Class IO Certificates (collectively, the "Senior
Certificates") and each other such Class of Subordinated 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 and Class A-2 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
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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 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 Subordinated
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-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 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 K
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; second, to the Class J Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
third, to the Class H Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; fourth, to the Class G
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; fifth, to the Class F Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
sixth, to the Class E Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; seventh, to the Class D
Certificates, until the Remaining Certificate Balance of such Class of
Certificates is reduced to zero, eighth, to the Class C Certificates until the
remaining Certificate Balance of such Class of Certificates is reduced to zero,
and ninth, 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 and the Class A-2 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 or Additional Trust Fund Expense allocated in reduction
of the Certificate Balance of any Class of Certificates will also result in a
corresponding reduction in the notional amount of the related 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 Special Servicer and/or the
Trustee 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
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"DESCRIPTION OF THE POOLING AGREEMENTS--Certain Matters Regarding the Trustee"
in the Prospectus, certain reimbursements to the Master Servicer, the Special
Servicer and the Depositor of the type described under "DESCRIPTION OF THE
POOLING AGREEMENTS--Certain Matters Regarding the Master Servicer and the
Depositor" in the Prospectus (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.
The Master Servicer (or the Trustee, 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 nor the Trustee 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, 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 or the Trustee of
any P&I Advance made by it or the recovery by the Master Servicer or the Special
Servicer of any reimbursable servicing expense incurred by it (each such P&I
Advance or expense, an "Advance"), the Master Servicer, the Special Servicer or
the Trustee, as applicable, will be entitled to be paid, first, out of
collections with respect to default interest paid with respect to the related
Mortgage Loan, and second, out of any amounts then on deposit in the Certificate
Account, interest compounded
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annually at a per annum rate (the "Reimbursement Rate") equal to the "prime
rate" published in the "Money Rates" section of The Wall Street Journal, as such
"prime rate" may change from time to time, accrued on the amount of such Advance
from the date made to but not including the date of reimbursement. To the extent
not offset or covered by amounts otherwise payable on the Private Certificates,
interest accrued on outstanding Advances will result in a reduction in amounts
payable on the Offered Certificates, subject to the distribution priorities
described herein.
APPRAISAL REDUCTIONS
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 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
is, 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 or the Trustee, all
unpaid interest on the Required Appraisal Loan through the most recent Due Date
prior to such Determination Date at a per annum rate equal to the related Net
Mortgage Rate, (iii) all accrued but unpaid 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 and the Trustee with respect to such Required Appraisal Loan and (v)
all currently due and unpaid real estate taxes and assessments, insurance
premiums, and, if applicable, ground rents in respect of the related Mortgaged
Property (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; provided that prior to the completion
of the required appraisal of the related Mortgaged Property, the Appraisal
Reduction Amount shall be deemed to be the product of (x) the value of such
Mortgaged Property, as indicated in the appraisal included in the related
Mortgage File and (y) 0.30. 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 provide or make
available 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 request to the Trustee a statement
(a "Distribution Date Statement"), providing
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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 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 Underwriter, 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) 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 Street Fax System at (617)
664-5600 and requesting an account application through the system. A Certificate
Owner may also receive such information via the Trustee's home page on the world
wide web. To visit the web page, interested parties should access
"corporatetrust.statestreet.com" using any java-enabled web browser, click on
the "Investor Information & Reporting" button and then select the appropriate
transaction. In addition, if the Depositor so directs the Trustee and on terms
acceptable to the Trustee, the Trustee will make certain information related to
the mortgage loans available through its Corporate Trust web site and through
its Trade Winds electronic
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bulletin board. To register for the Trade Winds bulletin board, a Certificate
Owner should call the Trustee at (617) 664-5443.
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.
The Master Servicer, the Special Servicer, the Trustee, 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 Certificates (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 and Class A-2
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, the Master Servicer or
the Special 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, the Special 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 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 or the Special Servicer, the aggregate of
amounts payable or reimbursable to the Master Servicer or the Special Servicer,
as applicable, 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, the Special 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
State Street Bank and Trust Company, a trust company chartered under the
laws of the Commonwealth of Massachusetts, will act as Trustee on behalf of the
Certificateholders. The Corporate Trust Department of the Trustee is located at
Two International Place, 5th Floor, Boston, Massachusetts 02110, Attention:
Corporate Trust
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<PAGE>
Department, Ref. Merrill Lynch 1997-C2. 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 Balances of the Sequential Pay Certificates immediately prior to
such Distribution Date. The "Trustee Fee Rate" will be a per annum rate equal to
0.005%.
The Trustee will also have certain duties with respect to REMIC
administration (in such capacity, the "REMIC Administrator"). See "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES--REMICs--Reporting and Other Administrative
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.
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 any Class of Sequential Pay Certificates and,
correspondingly, the notional amount of any Component. 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 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 Certificate Balance of any Class of
Certificates will result in a corresponding reduction in the notional amount of
the related Component. Consequently, the rate and timing of principal payments
that are distributed or otherwise result in reduction of the the Certificate
Balance 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.
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
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<PAGE>
degree, payments of principal on the Mortgage Loans in turn are distributed or
otherwise result in reduction of the Certificate Balance of such Certificate or
notional amount of a Component, as the case may be. 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 or Additional Trust Fund Expense allocated
in reduction of the Certificate Balance of any Class of Certificates will also
result in a corresponding reduction in the notional amount of the related
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 Strip Rate applicable to the Class A-1 and Class
A-2 Components for each Distribution Date will equal the Weighted Average Net
Mortgage Rate for such Distribution Date minus ____% and __% respectively (but
not less than zero); the Strip Rate applicable to the Class B, Class C, Class D
and Class E Components for each Distribution Date will equal ___%, ___%, ___%
and ___%, respectively; and the Strip Rate applicable to the Class F, Class G,
Class H, Class J and Class K Components for each Distribution Date will each
equal the Weighted Average Net Mortgage Rate for such Distribution Date minus
___% (but not less than zero).
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 or comparable commercial space, as
applicable, in such areas, the quality of management of the Mortgaged
Properties, the servicing of the Mortgage Loans, possible changes in tax laws
and other opportunities for investment. See "RISK FACTORS--The Mortgage Loans"
and "DESCRIPTION OF THE MORTGAGE POOL" herein and "YIELD AND MATURITY
CONSIDERATIONS--Principal Prepayments" in the Prospectus.
The rate of prepayment on the Mortgage Pool is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
interest rate, the related borrower has an incentive to refinance its mortgage
loan. As of the Cut-Off Date, all of the Mortgage Loans may 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
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<PAGE>
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, 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 9
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 prepayment restrictions apply; and 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, (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 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) none of the Master Servicer, the
Special Servicer or 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
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<PAGE>
Trust Fund, (ix) there are no Prepayment Interest Shortfalls or Appraisal
Reduction Amounts, (x) distributions on the Certificates are made on the tenth
day (each assumed to be a business day) of each month, commencing in January
1998 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.
<TABLE>
<CAPTION>
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
---------------------------- ------------ ------ ------ -------
<S> <C> <C> <C> <C>
$ % % % %
$ % % % %
$ % % % %
</TABLE>
- --------
(A) The Break-Even CPR% is the approximate CPR% for each assumed purchase price
where the pre-tax yield to maturity (CBE) is approximately __%.
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 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
Anticipated 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 Anticipated
Repayment Date. 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 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
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<PAGE>
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 B, Class C, Class D and/or Class E Certificates may mature earlier or
later than indicated by the tables. 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:
<TABLE>
<CAPTION>
<S> <C>
Scenario (1): No Mortgage Loan prepays; that is, the CPR for the Mortgage Pool is 0%.
Scenarios (2), (3), (4)
and (5): 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),
15% in the case of Scenario (4) and 25% in the case of Scenario (5).
</TABLE>
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.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-1 CERTIFICATES UNDER EACH DESIGNATED SCENARIO
0% CPR DURING LOCKOUT
OR YLD. MAINT.-OTHERWISE
AT INDICATED CPR
----------------------------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (25% CPR)
DISTRIBUTION DATE 1 2 3 4 5
----------------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Closing Date ............................. 100 100 100 100 100
December 10, 1998 ........................ 94 94 93 93 93
December 10, 1999 ........................ 87 87 86 86 85
December 10, 2000 ........................ 80 79 78 78 77
December 10, 2001 ........................ 72 71 70 69 68
December 10, 2002 ........................ 62 61 60 59 57
December 10, 2003 ........................ 53 51 49 48 46
December 10, 2004 ........................ 4 3 2 1 1
December 10, 2005 (and thereafter) ....... 0 0 0 0 0
Weighted Average Life (in years) ......... 5.0 4.9 4.9 4.8 4.7
<CAPTION>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-2 CERTIFICATES UNDER EACH DESIGNATED SCENARIO
0% CPR DURING LOCKOUT
OR YLD. MAINT.-OTHERWISE
AT INDICATED CPR
----------------------------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (25% CPR)
DISTRIBUTION DATE 1 2 3 4 5
----------------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Closing Date ............................. 100 100 100 100 100
December 10, 1998 ........................ 100 100 100 100 100
December 10, 1999 ........................ 100 100 100 100 100
December 10, 2000 ........................ 100 100 100 100 100
December 10, 2001 ........................ 100 100 100 100 100
December 10, 2002 ........................ 100 100 100 100 100
December 10, 2003 ........................ 100 100 100 100 100
December 10, 2004 ........................ 100 100 100 100 100
December 10, 2005 ........................ 98 97 97 97 97
December 10, 2006 ........................ 94 94 93 93 92
December 10, 2007 (and thereafter) ....... 0 0 0 0 0
Weighted Average Life (in years) ......... 9.7 9.7 9.6 9.6 9.6
<CAPTION>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS B CERTIFICATES UNDER EACH DESIGNATED SCENARIO
0% CPR DURING LOCKOUT
OR YLD. MAINT.-OTHERWISE
AT INDICATED CPR
----------------------------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (25% CPR)
DISTRIBUTION DATE 1 2 3 4 5
----------------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100
December 10, 1998 100 100 100 100 100
December 10, 1999 100 100 100 100 100
December 10, 2000 100 100 100 100 100
December 10, 2001 100 100 100 100 100
December 10, 2002 100 100 100 100 100
December 10, 2003 100 100 100 100 100
December 10, 2004 100 100 100 100 100
December 10, 2005 100 100 100 100 100
December 10, 2006 100 100 100 100 100
December 10, 2007 (and thereafter) 0 0 0 0 0
Weighted Average Life (in years) 9.9 9.9 9.9 9.9 9.9
</TABLE>
S-71
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS C CERTIFICATES UNDER EACH DESIGNATED SCENARIO
0% CPR DURING LOCKOUT
OR YLD. MAINT.-OTHERWISE
AT INDICATED CPR
--------------------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (25% CPR)
DISTRIBUTION DATE 1 2 3 4 5
- ----------------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Closing Date ....................................... 100 100 100 100 100
December 10, 1998 .................................. 100 100 100 100 100
December 10, 1999 .................................. 100 100 100 100 100
December 10, 2000 .................................. 100 100 100 100 100
December 10, 2001 .................................. 100 100 100 100 100
December 10, 2002 .................................. 100 100 100 100 100
December 10, 2003 .................................. 100 100 100 100 100
December 10, 2004 .................................. 100 100 100 100 100
December 10, 2005 .................................. 100 100 100 100 100
December 10, 2006 .................................. 100 100 100 100 100
December 10, 2007 .................................. 48 48 47 46 44
December 10, 2008 .................................. 14 11 9 7 3
December 10, 2009 (and thereafter) ................. 0 0 0 0 0
Weighted Average Life (in years) ................... 10.4 10.3 10.3 10.3 10.2
<CAPTION>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS D CERTIFICATES UNDER EACH DESIGNATED SCENARIO
0% CPR DURING LOCKOUT
OR YLD. MAINT.-OTHERWISE
AT INDICATED CPR
-------------------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (25% CPR)
DISTRIBUTION DATE 1 2 3 4 5
- ----------------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Closing Date ....................................... 100 100 100 100 100
December 10, 1998 .................................. 100 100 100 100 100
December 10, 1999 .................................. 100 100 100 100 100
December 10, 2000 .................................. 100 100 100 100 100
December 10, 2001 .................................. 100 100 100 100 100
December 10, 2002 .................................. 100 100 100 100 100
December 10, 2003 .................................. 100 100 100 100 100
December 10, 2004 .................................. 100 100 100 100 100
December 10, 2005 .................................. 100 100 100 100 100
December 10, 2006 .................................. 100 100 100 100 100
December 10, 2007 .................................. 100 100 100 100 100
December 10, 2008 .................................. 100 100 100 100 100
December 10, 2009 .................................. 41 39 37 35 31
December 10, 2010 .................................. 18 17 15 14 11
December 10, 2011 (and thereafter) ................. 0 0 0 0 0
Weighted Average Life (in years) ................... 12.4 12.3 12.3 12.2 12.1
<CAPTION>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS E CERTIFICATES UNDER EACH DESIGNATED SCENARIO
0% CPR DURING LOCKOUT
OR YLD. MAINT.-OTHERWISE
AT INDICATED CPR
----------------------------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (25% CPR)
DISTRIBUTION DATE 1 2 3 4 5
- ----------------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Closing Date ............................. 100 100 100 100 100
December 10, 1998 ........................ 100 100 100 100 100
December 10, 1999 ........................ 100 100 100 100 100
December 10, 2000 ........................ 100 100 100 100 100
December 10, 2001 ........................ 100 100 100 100 100
December 10, 2002 ........................ 100 100 100 100 100
December 10, 2003 ........................ 100 100 100 100 100
December 10, 2004 ........................ 100 100 100 100 100
December 10, 2005 ........................ 100 100 100 100 100
December 10, 2006 ........................ 100 100 100 100 100
December 10, 2007 ........................ 100 100 100 100 100
December 10, 2008 ........................ 100 100 100 100 100
December 10, 2009 ........................ 100 100 100 100 100
December 10, 2010 ........................ 100 100 100 100 100
December 10, 2011 ........................ 17 11 5 1 0
December 10, 2012 (and thereafter) ....... 0 0 0 0 0
Weighted Average Life (in years) ......... 13.7 13.7 13.7 13.6 13.6
</TABLE>
S-72
<PAGE>
USE OF PROCEEDS
Substantially all of the proceeds from the sale of the Offered Certificates
will be used by the Depositor to purchase the Mortgage Loans and to pay certain
expenses in connection with the issuance of the Certificates.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the Offered Certificates, Willkie Farr & Gallagher,
counsel to the 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 generally consist of the Mortgage Loans, 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 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 original issue discount allocable to such period would be zero and
such Certificateholder would 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
S-73
<PAGE>
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.
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
and Class IO Certificates to be eligible for exemptive relief thereunder. First,
the acquisition of the Certificates by a Plan must be on terms that are at least
as favorable to the Plan as they would be in an arm's-length transaction with an
unrelated party. Second, the rights and interests evidenced by such Certificates
must not be subordinated to the rights and interests evidenced by the other
certificates of the same trust. Third, such Certificates at the time of
acquisition by the Plan must be rated in one of the three highest generic rating
categories by Standard & Poor's, Duff & Phelps Credit Rating Co. ("DCR"),
Moody's or Fitch. Fourth, the Trustee cannot be an affiliate of any other member
of the "Restricted Group," which consists of the 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 the 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 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 and Class IO
Certificates that they be rated not lower than "AAA" by Fitch and "Aaa" by
Moody's and, except with respect to the Class IO Certificates, "AAA" by 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
S-74
<PAGE>
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, (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).
S-75
<PAGE>
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 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") between the Depositor and the Underwriter, the
Depositor has agreed to sell to the Underwriter and the Underwriter has agreed
to purchase each class of Offered Certificates.
In the Underwriting Agreement, the Underwriter has agreed to purchase all
of the Offered Certificates if any are purchased. 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 the Underwriter
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. The 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 Underwriter may be deemed to have received
compensation from the Depositor in the form of underwriting discounts. The
Underwriter and any dealers that participate with the 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.
S-76
<PAGE>
An affiliate of the Master Servicer and GECA may purchase all or a portion
of the Class C, Class D and Class E Certificates from the Underwriter in a
negotiated transaction. To the extent the Underwriter offers a portion of such
Classes to other purchasers, such offering may be made at different prices than
those offered to such affiliate of the Master Servicer and GECA.
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 Underwriter that it, through one
or more of its affiliates, currently intends to make a market in the Offered
Certificates; however, the Underwriter does not have 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 the Underwriter and each person, if
any, who controls the Underwriter within the meaning of Section 15 of the
Securities Act against, or make contributions to the 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 and the
Underwriter by Willkie Farr & Gallagher, New York, New York.
RATINGS
It is a condition of their issuance that the Class A-1 and Class A-2
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.
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 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 the Rated Final Distribution Date,
which is the first Distribution Date 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 largest amortization term. 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 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, Additional Interest and
Net Default Interest 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.
S-77
<PAGE>
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.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
S-78
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
PAGE
----
30/360 Basis ......................................... S-33
Accrued Certificate Interest ......................... S-58
Actual/360 basis ..................................... S-33
Additional Interest .................................. S-33
Additional Servicing Fee ............................. S-48
Additional Servicing Fee Rate ........................ S-48
Additional Trust Fund Expenses ....................... S-13, S-61
Administrative Cost Rate ............................. S-38
Adjusted Mortgage Rate ............................... S-10, S-33
Advance .............................................. S-19, S-62
Anticipated Repayment Date ........................... S-10, S-33
Appraisal Reduction Amount ........................... S-63
ARD Loans ............................................ S-10, S-33
Assumed Scheduled Payment ............................ S-18, S-59
Available Distribution Amount ........................ S-55
Balloon Loans ........................................ S-10, S-15, S-30, S-34
Balloon Payment ...................................... S-10, S-34
CBE .................................................. S-68
Certificate Balance .................................. S-13, S-54
Certificate Owner .................................... S-7, S-53
Certificate Registrar ................................ S-64
Certificateholders ................................... S-9, S-55
Certificates ......................................... S-1, S-6, S-53
Class ................................................ S-1, S-6, S-53
Closing Date ......................................... S-7
Code ................................................. S-24
Collection Period .................................... S-55
Compensating Interest Payment ........................ S-20, S-50
Component ............................................ S-13, S-54
Constant Prepayment Rate or CPR ...................... S-68
Controlling Class of Sequential Pay Certificates ..... S-48
Corrected Mortgage Loan .............................. S-49
CPR .................................................. S-68
Credit Lease Loan .................................... S-38
Custodian ............................................ S-45
Cut-Off Date ......................................... S-1
Cut-Off Date Balance ................................. S-7, S-32
Cut-Off Date DSCR .................................... S-36
Cut-Off Date LTV ..................................... S-37
DCR .................................................. S-74
Debt Service Coverage Ratio .......................... S-36
Defeasance Collateral ................................ S-11, S-34
Definitive Offered Certificate ....................... S-7, S-53
Depositor ............................................ S-1
Determination Date ................................... S-19, S-55
Discount Rate ........................................ S-60
Distributable Certificate Interest ................... S-17, S-58
Distribution Date .................................... S-2, S-14, S-55
Distribution Date Statement .......................... S-63
DSCR ................................................. S-36
DTC .................................................. S-7, S-53
Due Dates ............................................ S-33
ERISA ................................................ S-24, S-74
S-79
<PAGE>
PAGE
----
Excluded Plan ........................................ S-75
Exemption ............................................ S-74
Fitch ................................................ S-25
Form 8-K ............................................. S-47
Fully Amortizing Loans ............................... S-10, S-33
GECA ................................................. S-6
GECC ................................................. S-6
GECLS ................................................ S-6
Initial Pool Balance ................................. S-1, S-7, S-32
Initial Reserves at Closing .......................... S-33
IRS .................................................. S-73
Loan per Sq ft, Unit, Bed, Key or Room ............... S-37
Lockout Period ....................................... S-11, S-34
Master Servicer ...................................... S-47
Master Servicing Fee ................................. S-50
Merrill Lynch ........................................ S-6
MLMCI ................................................ S-6
Monthly Payments ..................................... S-10
Moody's .............................................. S-24
Mortgage File ........................................ S-45
Mortgage Loan Purchase Agreements .................... S-45
Mortgage Loans ....................................... S-1
Mortgage Note ........................................ S-26
Mortgage Pool ........................................ S-1
Mortgage Rates ....................................... S-10, S-37
Mortgaged Property ................................... S-1, S-8, S-32
Net Aggregate Prepayment Interest Shortfall .......... S-20, S-58
Net Cash Flow ........................................ S-36
Net Default Interest ................................. S-14
Net Mortgage Rate .................................... S-14, S-55
Nonrecoverable P&I Advance ........................... S-62
Occupancy Percentage ................................. S-38
Offered Certificates ................................. S-1, S-6, S-53
OID Regulations ...................................... S-73
P&I Advance .......................................... S-19, S-62
Participants ......................................... S-7, S-53
Party in Interest .................................... S-75
Percentage Premiums .................................. S-60
Plan ................................................. S-24, S-74
Pooling and Servicing Agreement ...................... S-12, S-53
Prepayment Interest Excess ........................... S-20, S-50
Prepayment Interest Shortfall ........................ S-20, S-50
Prepayment Premium ................................... S-60
Principal Distribution Amount ........................ S-17, S-58
Principal Recovery Fee ............................... S-50
Private Certificates ................................. S-6, S-53
PTE 95-60 ............................................ S-76
Purchase Price ....................................... S-45
Qualified Appraiser .................................. S-63
Rate Differential .................................... S-60
Rated Final Distribution Date ........................ S-25
Rating Agencies ...................................... S-25
Realized Losses ...................................... S-13, S-61
S-80
<PAGE>
PAGE
----
Reimbursement Rate ................................... S-20, S-63
Related Proceeds ..................................... S-62
Remain Amort. Term ................................... S-36
Remaining Cash Flow .................................. S-10, S-33
REMIC ................................................ S-2, S-23. S-73
REMIC I .............................................. S-2, S-23. S-73
REMIC II ............................................. S-2, S-23. S-73
REMIC III ............................................ S-2, S-23. S-73
REMIC Administrator .................................. S-66
REMIC Regular Certificates ........................... S-6, S-53
REMIC Residual Certificates .......................... S-6
Rental Property ...................................... S-36
REO Extension ........................................ S-52
REO Loan ............................................. S-60
REO Property ......................................... S-22, S-49
REO Tax .............................................. S-52
Repayment LTV ........................................ S-37
Required Appraisal Date .............................. S-63
Required Appraisal Loan .............................. S-63
Required Defeasance Period ........................... S-67
Restricted Group ..................................... S-74
Scenario ............................................. S-70
Scheduled Payment .................................... S-18, S-59
Securities Act ....................................... S-6
Senior Certificates .................................. S-20, S-60
Sequential Pay Certificates .......................... S-6
Servicing Fees ....................................... S-50
Servicing Fee Rate ................................... S-50
SMMEA ................................................ S-25, S-76
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-14, S-55
Stated Remaining Term ................................ S-38
Strip Rate ........................................... S-13
Subordinated Certificates ............................ S-20, S-60
Table Assumptions .................................... S-68
Trust Fund ........................................... S-1, S-13, S-53
Trustee .............................................. S-2
Trustee Fee .......................................... S-66
Trustee Fee Rate ..................................... S-66
Underwriter .......................................... S-1
Underwriting Agreement ............................... S-76
Underwriting Reserves ................................ S-37
Voting Rights ........................................ S-65
Weighted Averages .................................... S-37
Weighted Average Net Mortgage Rate ................... S-14, S-55
Year Built ........................................... S-37
Yield Maintenance Charges ............................ S-60
Zoning Laws .......................................... S-35
S-81
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX A
<TABLE>
<CAPTION>
Mtg.
Loan Control Zip
Seller No. Property Name Address City State Code
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
GECA 63 Northlake Tower Festival 3983-4073 LaVista Road Tucker GA 30084
ML 146 Rancho Bernardo Plaza 16759-16707 Bernardo Center Drive Rancho Bernardo CA 92128
GECA 91 The Links at Joneboro 1424 Links Circle Jonesboro AR 72404
GECA 35 Free State Mall 15528 Annapolis Road Bowie MD 20715
ML 127 Oaks at Centreport 14300 Statler Court Fort Worth TX 76156
- ------------------------------------------------------------------------------------------------------------------------------------
GECA 39 Glasgow Mobile Home Park 268 Cornell Drive Newark DE 19702
GECA 18 Citrus Creek Apartments 5301 Citrus Blvd. Harahan LA 70123
GECA 70 Polo Club Apartments 39352 Polo Club Drive Farmington Hills MI 48334
GECA 46 Harbor Pointe Apartments 331 Harbor Pointe Dr. Mt. Pleasant (Charleston) SC 29464
GECA 29 Doylestown Shpg Cntr 400 North Main Street Doylestown PA 18901
- ------------------------------------------------------------------------------------------------------------------------------------
GECA 69 Pine Trail Shopping Center 4576 Okeechobee Blvd. West Palm Beach FL 33401
GECA 71 Pueblo Del Sol 3751 Nellis Blvd. Las Vegas NV 89121
GECA 47 Haymarket Square 1690 - 1750 Boston Road Springfield MA 01129
GECA 28 Dover Farms Apartments 8290 Royalton Road North Royalton OH 44133
GECA 96 West Goshen Shopping Center 997 Paoli Pike @ Route 202 West Chester PA 19380
- ------------------------------------------------------------------------------------------------------------------------------------
GECA 55 Lincoln Village Shopping Center 6406 North IH-35 Austin TX 78752
GECA 93 Twin Rivers Mall 3100 Claredon Blvd New Bern NC 28562
GECA 1 1601 Bronxdale Avenue 1601 Bronxdale Avenue Bronx NY 10462
GECA 27 Dogwood Lakes Apartments 1907 Highway 5 North Benton AR 72015
GECA 20 Courtyard - Waterbury 63 Grand Street Waterbury CT 06702
- ------------------------------------------------------------------------------------------------------------------------------------
GECA 59 Melody Lakes 1045 N West End Blvd. Quakertown PA 18951
GECA 7 All Aboard-N.Hollywood 7400 Coldwater Canyyon Avenue N. Hollywood CA 91605
GECA 7 All Aboard-Concord 1599 Solano Way Concord CA 94520
- ------------------------------------------------------------------------------------------------------------------------------------
GECA 7 All Aboard-Northridge 18500 Eddy Street Northridge CA 91324
GECA 82 Shoppes of Deer Creek Hillsboro Blvd & Powerline Rd. Deerfield Beach FL 33073
ML 160 Bucks County Industrial (95 Expressway) Progress & Marshall Drives Bensalem PA 19020
- ------------------------------------------------------------------------------------------------------------------------------------
GECA 32 Federal Express Building 12600 Prairie Avenue Hawthorne CA 90250
GECA 77 Security Portfolio IIA - Plano 1919 West 15th Street Plano TX 75075
GECA 77 Security Portfolio IIA - Aurora - Iliff 10661 Iliff Avenue Aurora (Denver) CO 80014
- ------------------------------------------------------------------------------------------------------------------------------------
GECA 77 Security Portfolio IIA - Aurora - Buckley 4480 South Buckley Aurora (Denver) CO 80015
GECA 77 Security Portfolio IIA - Austin 10210 North Lamar Austin TX 78753
GECA 84 Stadium MHP 6700 E Russell Road Las Vegas NV 89122
- ------------------------------------------------------------------------------------------------------------------------------------
GECA 22 Cypress Pointe Apartments 1227 Pin Oak Drive Flowood MS 39208
GECA 60 Metro Center II 555 Metro Place South Dublin OH 43017
ML 154 Windsail Apartments 9808 East 73rd Street South Tulsa OK 74133
GECA 87 Summer Lake 4929 Tuckasseegee Road Charlotte NC 28208
GECA 200 Willow Pond Apartments 8402 Waterford Avenue Tampa FL 33604
- ------------------------------------------------------------------------------------------------------------------------------------
GECA 49 Hunt Club 1500 Sparkman Drive Huntsville AL 35816
GECA 8 Amber Ridge 2421 Foothill Blvd. La Verne CA 91750
GECA 5 All Aboard - Sunnyvale 106 Lawrence Station Road Sunnyvale CA 94086
GECA 34 Fountain Park Shopping Center 4231 Macon Rd @ Reese Rd. Columbus GA 31907
- ------------------------------------------------------------------------------------------------------------------------------------
GECA 90 The Bluffs at Northwoods 1850 Yellowstone Court Gastonia NC 28054
ML 120 Fountains of Woodmeadow Apartments 10950 Woodmeadow Parkway Dallas TX 75228
GECA 92 Town Center Shopping Center Route 202 & Lenape Drive New Britain PA 18901
ML 116 Town & Country Business Park 4060, 4110 - 4190 East Bijou Street Colorado Springs CO 80909
GECA 99 Westwood Village 6777 Rasberry Lane Shreveport LA 71129
- ------------------------------------------------------------------------------------------------------------------------------------
ML 152 Brandywine Apartments 4020 South 130th East Ave. Tulsa OK 74134
GECA 42 Hampton Inn - Allentown 7471 Keebler Way Allentown PA 18106
GECA 14 Canyon Point Apartments 16550 Henderson Pass San Antonio TX 78232
ML 109 AAAAA Rent-A-Space-San Leandro 2000 Doolittle Dr San Leandro CA 94577
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Cumulative
% of % of
Cut-off Initial Initial Interest
Control Original Date Pool Pool Borrower Accrual Mortgage
No. Property Type Balance Balance Balance Balance Affiliated Crossed Method Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
63 Anchored Retail $17,600,000 $17,600,000.00 2.53% 2.53% Cntl #'s 28 & 61 30/360 7.640%
146 Anchored Retail 16,500,000 16,463,424.83 2.36 4.89 30/360 8.720
91 Multifamily 15,750,000 15,750,000.00 2.26 7.15 Cntl #27 Actual/360 7.140
35 Anchored Retail 15,550,000 15,516,994.68 2.23 9.38 Cntl # 61 30/360 7.770
127 Multifamily 15,540,000 15,494,443.57 2.22 11.60 30/360 7.610
- ------------------------------------------------------------------------------------------------------------------------------------
39 Manufactured Housing 15,200,000 15,200,000.00 2.18 13.78 30/360 8.200
18 Multifamily 15,000,000 14,987,631.66 2.15 15.93 Actual/360 6.970
70 Multifamily 14,875,000 14,875,000.00 2.13 18.07 30/360 7.390
46 Multifamily 14,874,000 14,874,000.00 2.13 20.20 Actual/360 7.300
29 Anchored Retail 14,000,000 13,982,690.20 2.01 22.21 Cntl #'s 92 & 96 30/360 6.990
- ------------------------------------------------------------------------------------------------------------------------------------
69 Anchored Retail 13,900,000 13,861,085.35 1.99 24.20 30/360 7.840
71 Manufactured Housing 13,600,000 13,561,075.89 1.95 26.14 30/360 7.730
47 Anchored Retail 12,550,000 12,509,596.67 1.80 27.94 30/360 8.270
28 Multifamily 11,800,000 11,783,982.91 1.69 29.63 Cntl #'s 61& 63 30/360 7.960
96 Anchored Retail 11,000,000 10,986,719.13 1.58 31.20 Cntl #'s 29 & 92 30/360 7.140
- ------------------------------------------------------------------------------------------------------------------------------------
55 Anchored Retail 10,500,000 10,500,000.00 1.51 32.71 Actual/360 7.420
93 Anchored Retail 10,500,000 10,479,568.36 1.50 34.22 30/360 8.200
1 Industrial 9,400,000 9,353,356.91 1.34 35.56 30/360 8.440
27 Multifamily 9,000,000 8,981,410.39 1.29 36.85 Cntl # 91 Actual/360 7.530
20 Hospitality 8,808,000 8,808,000.00 1.26 38.11 Cntl #'s 31& 42 Actual/360 7.700
- ------------------------------------------------------------------------------------------------------------------------------------
59 Manufactured Housing 8,800,000 8,800,000.00 1.26 39.37 30/360 7.920
7 Self Storage 3,496,552 3,489,304.99
7 Self Storage 2,787,107 2,781,330.06
- ------------------------------------------------------------------------------------------------------------------------------------
7 Self Storage 2,461,341 2,456,239.54
-------------------------
8,745,000 8,726,874.59 1.25 40.63 Cntl #'s 3,4,5,6 & 62 30/360 8.110
82 Anchored Retail 8,700,000 8,687,226.40 1.25 41.87 Actual/360 7.570
160 Industrial 8,450,000 8,443,057.48 1.21 43.08 Actual/360 7.460
- ------------------------------------------------------------------------------------------------------------------------------------
32 Industrial 8,300,000 8,290,749.24 1.19 44.27 Actual/360 7.640
77 Self Storage 2,362,500 2,357,367.88
77 Self Storage 2,062,500 2,058,019.57
- ------------------------------------------------------------------------------------------------------------------------------------
77 Self Storage 1,875,000 1,870,926.89
77 Self Storage 1,875,000 1,870,926.89
-------------------------
8,175,000 8,157,241.22 1.17 45.44 Cntl #76 30/360 7.820
84 Manufactured Housing 8,050,000 8,024,604.92 1.15 46.60 Cntl #51 30/360 8.370
- ------------------------------------------------------------------------------------------------------------------------------------
22 Multifamily 7,200,000 7,189,555.06 1.03 47.63 30/360 7.630
60 Office 7,150,000 7,150,000.00 1.03 48.65 Actual/360 7.700
154 Multifamily 7,125,000 7,116,115.23 1.02 49.67 Cntl #'s 153, 152 Actual/360 7.600
87 Multifamily 6,600,000 6,600,000.00 0.95 50.62 30/360 7.780
200 Multifamily 6,500,000 6,490,475.59 0.93 51.55 Cntl #'s 49 & 68 30/360 7.580
- ------------------------------------------------------------------------------------------------------------------------------------
49 Multifamily 6,450,000 6,445,126.24 0.92 52.48 Cntl #'s 68 & 200 Actual/360 7.410
8 Multifamily 6,280,000 6,272,148.77 0.90 53.38 Actual/360 7.590
5 Self Storage 6,088,000 6,075,278.73 0.87 54.25 Cntl #'s 3,4,6,7 & 62 30/360 8.060
34 Anchored Retail 6,000,000 6,000,000.00 0.86 55.11 30/360 7.350
- ------------------------------------------------------------------------------------------------------------------------------------
90 Multifamily 5,650,000 5,641,570.73 0.81 55.92 30/360 7.490
120 Multifamily 5,600,000 5,588,350.57 0.80 56.72 Cntl #119 30/360 7.870
92 Anchored Retail 5,500,000 5,493,359.56 0.79 57.51 Cntl #'s 29 & 96 30/360 7.140
116 Industrial 5,475,000 5,456,045.25 0.78 58.29 30/360 8.125
99 Multifamily 5,440,000 5,440,000.00 0.78 59.07 Actual/360 7.500
- ------------------------------------------------------------------------------------------------------------------------------------
152 Multifamily 5,350,000 5,343,242.53 0.77 59.84 Cntl #'s 153, 154 Actual/360 7.550
42 Hospitality 5,325,000 5,325,000.00 0.76 60.61 Cntl #'s 20 & 31 Actual/360 7.700
14 Multifamily 5,328,000 5,320,035.24 0.76 61.37 30/360 7.480
109 Self Storage 5,330,000 5,311,640.92 0.76 62.13 30/360 9.280
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Admini- Stated Orig Rem
strative Orig Rem Amort Amort
Control Cost Term Term Term Term Origination Repayment Balloon/Repayment Maturity
No. Rate (Mos.) (Mos.) (Mos.) (Mos.) Date Date Balance Term
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
63 0.075 144 144 360 360 11/12/97 12/01/2009 $14,619,786 ARD
146 0.105 84 75 330 321 02/07/97 03/01/2004 15,256,910 Balloon
91 0.075 300 300 300 300 11/07/97 12/01/2022 NAP Full Amort
35 0.075 120 117 360 357 08/29/97 09/01/2007 13,575,701 ARD
127 0.105 120 116 360 356 07/14/97 08/01/2007 13,520,426 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
39 0.075 120 120 360 360 11/13/97 12/01/2007 13,388,464 ARD
18 0.075 120 119 360 359 10/31/97 11/01/2007 13,067,824 ARD
70 0.075 120 120 360 360 11/07/97 12/01/2007 12,879,278 ARD
46 0.075 300 300 300 300 11/07/97 12/01/2022 NAP Full Amort
29 0.075 120 119 300 299 10/31/97 11/01/2007 11,005,586 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
69 0.075 168 164 360 356 08/01/97 08/01/2011 10,971,090 Balloon
71 0.075 84 80 360 356 07/31/97 08/01/2004 12,530,399 ARD
47 0.075 120 115 360 355 06/13/97 07/01/2007 11,069,741 ARD
28 0.075 120 118 360 358 09/26/97 10/01/2007 10,342,966 ARD
96 0.075 120 119 300 299 10/31/97 11/01/2007 8,683,487 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
55 0.075 120 120 360 360 11/05/97 12/01/2007 9,255,869 ARD
93 0.075 120 117 360 357 08/25/97 09/01/2007 9,248,610 ARD
1 0.075 132 127 300 295 06/25/97 07/01/2008 7,409,178 ARD
27 0.075 300 298 300 298 09/26/97 10/01/2022 NAP Full Amort
20 0.075 120 120 300 300 11/14/97 12/01/2007 7,195,481 ARD
- ------------------------------------------------------------------------------------------------------------------------------------
59 0.075 120 120 360 360 11/05/97 12/01/2007 7,706,993 ARD
7 2,831,795
7 2,257,228
- ------------------------------------------------------------------------------------------------------------------------------------
7 1,993,396
---------
0.075 120 118 300 298 09/11/97 10/01/2007 7,082,419 ARD
82 0.075 180 178 360 358 09/30/97 10/01/2012 6,827,123 ARD
160 0.105 120 119 360 359 10/16/97 11/01/2007 7,356,658 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
32 0.075 144 143 300 299 10/24/97 11/01/2009 6,292,631 ARD
77 1,899,234
77 1,658,062
- ------------------------------------------------------------------------------------------------------------------------------------
77 1,507,329
77 1,507,329
---------
0.075 120 118 300 298 09/26/97 10/01/2007 6,571,953 ARD
84 0.075 84 79 360 355 06/04/97 07/01/2004 7,480,588 ARD
- ------------------------------------------------------------------------------------------------------------------------------------
22 0.075 120 118 360 358 09/05/97 10/01/2007 6,267,007 ARD
60 0.075 120 120 360 360 11/14/97 12/01/2007 6,346,985 ARD
154 0.145 120 118 360 358 09/25/97 10/01/2007 6,309,444 Balloon
87 0.075 120 120 360 360 11/13/97 12/01/2007 5,763,258 ARD
200 0.075 120 118 360 358 09/18/97 10/01/2007 5,651,629 ARD
- ------------------------------------------------------------------------------------------------------------------------------------
49 0.075 120 119 360 359 10/29/97 11/01/2007 5,683,603 ARD
8 0.075 120 118 360 358 09/16/97 10/01/2007 5,559,785 ARD
5 0.075 120 118 300 298 09/11/97 10/01/2007 4,924,353 ARD
34 0.075 120 120 360 360 11/13/97 12/01/2007 5,190,348 ARD
- ------------------------------------------------------------------------------------------------------------------------------------
90 0.075 120 118 360 358 09/18/97 10/01/2007 4,902,836 ARD
120 0.105 180 177 360 357 08/13/97 09/01/2012 4,280,327 Balloon
92 0.075 120 119 300 299 10/31/97 11/01/2007 4,341,744 ARD
116 0.105 120 116 324 320 07/25/97 08/01/2007 4,610,821 Balloon
99 0.075 300 300 360 360 11/13/97 12/01/2022 2,276,057 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
152 0.145 120 118 360 358 09/25/97 10/01/2007 4,731,718 Balloon
42 0.075 120 120 300 300 11/14/97 12/01/2007 4,350,129 ARD
14 0.075 120 118 360 358 09/25/97 10/01/2007 4,622,397 ARD
109 0.105 300 296 300 296 07/11/97 08/01/2022 NAP Full Amort
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Annual Und. Und.
Control Debt Total Total
No. Prepayment Restrictions Service Revenue Expense
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
63 3 yr lock, > 1% or YM through yr 11 3/4, open last 3 months $1,497,040 $4,377,124 $2,103,434
146 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months 1,584,043 2,787,609 669,535
91 10 yr lock, > 1% or YM through yr 20, open last 60 months 1,352,740 2,489,076 781,102
35 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 1,339,405 2,905,938 864,500
127 2 yr lock, >1% or YM through yr 9 1/2, open last 6 months 1,317,970 3,915,045 2,060,270
- ------------------------------------------------------------------------------------------------------------------------------------
39 5 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 1,363,904 2,840,984 1,088,822
18 3 yr lock, > 1% or YM through yr 9 1/2, open last 6 months 1,193,920 2,382,288 711,644
70 3 yr lock, > 1% or YM through yr 9 1/2, open last 6 months 1,234,680 2,546,216 977,712
46 7 1/2 yr lock, > 1% or YM through yr 15, open last 120 months 1,295,879 2,735,557 1,082,804
29 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 1,186,318 2,899,364 800,086
- ------------------------------------------------------------------------------------------------------------------------------------
69 4 yr lock, > 1% or YM through yr 13 3/4, open last 3 months 1,205,366 2,630,479 1,054,432
71 5 yr lock, > 1% or YM through yr 6 3/4, open last 3 months 1,166,930 2,163,162 763,259
47 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 1,133,526 2,140,390 598,729
28 5 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 1,035,065 2,560,201 1,235,358
96 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 944,770 2,264,995 744,736
- ------------------------------------------------------------------------------------------------------------------------------------
55 3 yr lock, > 1% or YM through yr 9 1/2, open last 6 months 874,118 2,404,077 1,150,831
93 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 942,171 2,596,245 1,241,323
1 3 yr lock, > 1% or YM through yr 10 3/4, open last 3 months 903,740 1,873,825 550,676
27 10 yr lock, > 1% or YM through yr 20, open last 60 months 800,219 1,546,820 511,743
20 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 794,886 5,172,226 3,933,765
- ------------------------------------------------------------------------------------------------------------------------------------
59 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 768,974 1,775,906 778,523
7 659,696 206,040
7 588,598 199,284
- ------------------------------------------------------------------------------------------------------------------------------------
7 517,294 203,797
4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 817,606 1,765,589 609,121
82 3 yr lock, > 1% or YM through yr 14 7/12, open last 5 months 734,991 1,528,492 492,455
160 5 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 713,680 2,065,852 1,064,141
- ------------------------------------------------------------------------------------------------------------------------------------
32 4 yr lock, > 1% or YM through yr 9.5, open last 30 months 745,129 1,026,777 22,068
77 474,925 181,297
77 434,635 173,841
- ------------------------------------------------------------------------------------------------------------------------------------
77 387,505 155,740
77 320,610 104,789
2 yr lock, > 1% or YM through yr 9 1/2, open last 6 months 745,488 1,617,675 615,667
84 3 yr lock, > 1% or YM through yr 5, open last 24 months 733,889 1,385,016 449,322
- ------------------------------------------------------------------------------------------------------------------------------------
22 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 611,831 1,387,368 522,744
60 3 yr lock, > Defeasance through yr 9 3/4, open last 3 months 611,720 1,552,493 627,335
154 >1% or YM through yr 8, 3% yr 9,open last 12 months 603,694 1,537,786 746,660
87 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 569,041 1,489,733 690,203
200 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 549,672 1,784,151 1,037,530
- ------------------------------------------------------------------------------------------------------------------------------------
49 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 536,430 1,620,250 871,282
8 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 531,580 1,188,627 530,147
5 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 566,765 1,023,708 271,836
34 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 496,060 938,705 199,422
- ------------------------------------------------------------------------------------------------------------------------------------
90 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 473,603 1,133,916 516,750
120 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months 487,013 1,214,097 609,975
92 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 472,385 1,443,682 609,187
116 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months 501,134 1,053,948 255,984
99 10 yr lock, > 1% or YM through yr 24 3/4, open last 3 months 456,447 1,340,481 766,258
- ------------------------------------------------------------------------------------------------------------------------------------
152 >1% or YM through yr 8, 3% yr 9,open last 12 months 451,096 1,237,935 657,762
42 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 480,559 2,425,786 1,641,613
14 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 446,175 1,374,186 752,503
109 10 yr lock, yr 11, 12 @4%, 13, 14, 15, 16 @3%, 17, 18@2%, 19, 20@1%, open last 60 months. 549,066 1,666,022 743,871
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Loan per
Cut-off Ap- Cut-off Re- Sq Ft, Units, Sq Ft, Unit,
Control Und. Date Appraised praisal Date payment Year Pads Pad Occupancy
No. NCF DSCR Value Year LTV LTV Built or Room or Room Percentage
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
63 $2,156,115 1.44x $22,000,000 1997 80.00% 66.45% 1983 321,623sq.ft. $54.72/ sq. ft. 99%
146 2,021,787 1.28 22,000,000 1997 74.83 69.35 1982 167,407sq.ft. 98.34/ sq. ft. 95
91 1,707,974 1.26 20,200,000 1997 77.97 0.00 1997 432units 36,458/ unit 95
35 1,923,339 1.44 20,500,000 1997 75.69 66.22 1969 322,301sq.ft. 48.14/ sq. ft. 99
127 1,854,774 1.41 19,480,000 1997 79.54 69.41 1985 726units 21,342/ unit 96
- ------------------------------------------------------------------------------------------------------------------------------------
39 1,752,162 1.28 20,800,000 1997 73.08 64.37 1964 776pads 19,588/ pad 95
18 1,670,644 1.40 18,750,000 1997 79.93 69.70 1997 246units 60,925/ unit 100
70 1,568,504 1.27 18,500,000 1997 80.41 69.62 1986 281units 52,936/ unit 94
46 1,652,753 1.28 18,500,000 1997 80.40 0.00 1986 344units 43,238/ unit 98
29 1,931,101 1.63 23,150,000 1997 60.40 47.54 1959 261,406sq.ft. 53.49/ sq. ft. 99
- ------------------------------------------------------------------------------------------------------------------------------------
69 1,530,008 1.27 17,300,000 1997 80.12 63.42 1981 269,057sq.ft. 56.02/ sq. ft. 97
71 1,399,903 1.20 17,380,000 1997 78.03 72.10 1975 451pads 30,069/ pad 99
47 1,485,893 1.31 16,700,000 1997 74.91 66.29 1981 135,212sq.ft. 92.52/ sq. ft. 95
28 1,324,843 1.28 15,000,000 1997 78.56 68.95 1990 300units 39,280/ unit 98
96 1,404,924 1.49 17,900,000 1997 61.38 48.51 1960 277,414sq.ft. 39.60/ sq. ft. 98
- ------------------------------------------------------------------------------------------------------------------------------------
55 1,103,217 1.26 14,700,000 1997 71.43 62.97 1984 178,700sq.ft. 58.76/ sq. ft. 93
93 1,221,738 1.30 15,000,000 1997 69.86 61.66 1979 206,294sq.ft. 50.80/ sq. ft. 93
1 1,228,093 1.36 11,750,000 1997 79.60 63.06 1930 319,743sq.ft. 29.25/ sq. ft. 97
27 1,035,077 1.29 11,350,000 1997 79.13 0.00 1996 276units 32,541/ unit 100
20 1,238,461 1.56 15,300,000 1997 57.57 47.03 1989 199rooms 44,261/ room N/A
- ------------------------------------------------------------------------------------------------------------------------------------
59 997,383 1.30 11,000,000 1997 80.00 70.06 1965 353pads 24,929/ pad 100
7 453,656 4,830,000 1997 1993 57,060sq.ft. 61.15/ sq. ft. 94
7 389,314 3,850,000 1997 1992 49,332sq.ft. 56.38/ sq. ft. 95
- ------------------------------------------------------------------------------------------------------------------------------------
7 313,497 3,400,000 1997 1991 58,830sq.ft. 41.75/ sq. ft. 85
------------------------- -------------------------------
1,156,468 1.41 12,080,000 72.24 58.63 165,222sq.ft. 52.82/ sq. ft.
82 1,002,331 1.36 12,900,000 1997 67.34 52.92 1984 209,059sq.ft. 41.55/ sq. ft. 91
160 943,181 1.32 11,500,000 1997 73.42 63.97 1972 240,722sq.ft. 35.07/ sq. ft. 87
- ------------------------------------------------------------------------------------------------------------------------------------
32 1,004,710 1.35 11,400,000 1997 72.73 55.20 1997 118,012sq.ft. 70.25/ sq. ft. 100
77 293,628 3,150,000 1997 1994 52,945sq.ft. 44.52/ sq. ft. 92
77 260,794 2,750,000 1997 1995 61,555sq.ft. 33.43/ sq. ft. 97
- ------------------------------------------------------------------------------------------------------------------------------------
77 231,765 2,500,000 1997 1995 52,500sq.ft. 35.64/ sq. ft. 98
77 215,821 2,500,000 1997 1995 52,460sq.ft. 35.66/ sq. ft. 81
------------------------- -------------------------------
1,002,008 1.34 10,900,000 74.84 60.29 225,215sq.ft. 37.17 / sq. ft. 90
84 935,694 1.27 10,500,000 1997 76.42 71.24 1981 282pads 28,456/ pad 100
- ------------------------------------------------------------------------------------------------------------------------------------
22 864,624 1.41 9,000,000 1997 79.88 69.63 1996 192units 37,446/ unit 100
60 792,958 1.30 9,700,000 1997 73.71 65.43 1982 100,113sq.ft. 71.42/ sq. ft. 94
154 791,127 1.31 9,100,000 1997 78.20 69.33 1984 297units 23,960/ unit 97
87 799,529 1.41 8,850,000 1997 74.58 65.12 1974 288units 22,917/ unit 97
200 746,622 1.36 8,900,000 1997 72.93 63.50 1974 324units 20,032/ unit 92
- ------------------------------------------------------------------------------------------------------------------------------------
49 748,967 1.40 8,100,000 1997 79.57 70.17 1974 395units 16,317/ unit 97
8 658,480 1.24 8,100,000 1997 77.43 68.64 1973 136units 46,119/ unit 95
5 751,872 1.33 9,000,000 1997 67.50 54.72 1992 78,000sq.ft. 77.89/ sq. ft. 99
34 722,791 1.46 7,500,000 1997 80.00 69.20 1983 107,106sq.ft. 56.02/ sq. ft. 100
- ------------------------------------------------------------------------------------------------------------------------------------
90 617,165 1.30 7,400,000 1997 76.24 66.25 1985 176units 32,054/ unit 97
120 604,122 1.24 7,000,000 1997 79.83 61.15 1985 241units 23,188/ unit 95
92 762,870 1.61 8,100,000 1997 67.82 53.60 1969 126,313sq.ft. 43.49/ sq. ft. 96
116 764,047 1.52 7,500,000 1997 72.75 61.48 1982 123,223sq.ft. 44.28/ sq. ft. 100
99 574,222 1.26 6,800,000 1997 80.00 33.47 1986 248units 21,935/ unit 96
- ------------------------------------------------------------------------------------------------------------------------------------
152 580,173 1.29 6,800,000 1997 78.58 69.58 1983 296units 18,051/ unit 99
42 784,173 1.63 7,100,000 1997 75.00 61.27 1987 124rooms 42,944/ room N/A
14 621,683 1.39 6,700,000 1997 79.40 68.99 1984 214units 24,860/ unit 96
109 922,151 1.68 8,100,000 1997 65.58 0.00 1978 210,189sq.ft. 25.27/ unit 61
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Largest Retail/Commercial Tenant
Initial --------------------------------
Control Reserves Underwriting Area Leased Lease Control
No. At Closing Reserves Name (Sq. Ft.) Exp Date No.
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
63 $269,563 $0.15 per sq. ft. Toys R Us 43,000 01/31/2009 63
146 58,526 0.17per sq. ft. Sav-on-Drugs 45,000 05/14/2012 146
91 15,338 304per unit 91
35 633,000 0.20per sq. ft. Sears 87,400 12/01/2004 35
127 13,731 250per unit 127
- -------------------------------------------------------------------------------------------------------------
39 509,063 50per pad 39
18 -- 200per unit 18
70 4,750 200per unit 70
46 33,438 174per unit 46
29 50,000 0.15per sq. ft. Acme Markets 69,795 02/08/2007 29
- -------------------------------------------------------------------------------------------------------------
69 98,000 0.15per sq. ft. Service Merchandise 67,104 01/31/2012 69
71 56,056 25per pad 71
47 68,437 0.15per sq. ft. Staples 25,175 03/31/2006 47
28 12,500 250per unit 28
96 42,500 0.15per sq. ft. K-Mart 105,172 05/02/2011 96
- -------------------------------------------------------------------------------------------------------------
55 21,700 0.24per sq. ft. Lincoln Theatre VI 28,926 11/26/2010 55
93 625,000 0.15per sq. ft. J.C. Penney 69,125 08/31/1999 93
1 -- 0.15per sq. ft. Woodbury Automotive Inc. 135,800 02/28/2006 1
27 11,563 252per unit 27
20 -- 4%per room 20
- -------------------------------------------------------------------------------------------------------------
59 -- 51per pad 59
7 0.10per sq. ft. 7
7 0.10per sq. ft. 7
- -------------------------------------------------------------------------------------------------------------
7 0.10per sq. ft. 7
19,200 7
82 36,800 0.17per sq. ft. Kmart 89,062 10/31/2008 82
160 5,000 0.17per sq. ft. Xenotechnix 15,737 12/31/1998 160
- -------------------------------------------------------------------------------------------------------------
32 -- 0.10per sq. ft. Federal Express 118,012 05/31/2007 32
77 0.05per sq. ft. 77
77 0.06per sq. ft. 77
- -------------------------------------------------------------------------------------------------------------
77 0.06per sq. ft. 77
77 0.05per sq. ft. 77
2,500 77
84 -- 25per pad 84
- -------------------------------------------------------------------------------------------------------------
22 6,875 200per unit 22
60 -- 0.18per sq. ft. Kalmar AC 9,786 08/31/1998 60
154 17,188 225per unit 154
87 72,312 250per unit 87
200 233,044 259per unit 200
- -------------------------------------------------------------------------------------------------------------
49 378,600 250per unit 49
8 11,650 298per unit 8
5 2,500 0.15per sq. ft. 5
34 95,666 0.21per sq. ft. Winn-Dixie #443 41,125 11/14/2017 34
- -------------------------------------------------------------------------------------------------------------
90 250,825 374per unit 90
120 68,750 235per unit 120
92 413,980 0.28per sq. ft. Clemens Market 36,000 11/10/2009 92
116 27,175 0.17per sq. ft. Allied Signal 46,897 09/30/1999 116
99 10,000 250per unit 99
- -------------------------------------------------------------------------------------------------------------
152 27,500 200per unit 152
42 2,656 4%per room 42
14 101,000 291per unit 14
109 -- 0.15per sq. ft. 109
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Mtg.
Loan Control Zip
Seller No. Property Name Address City State Code
------ --- ------------- ------- ---- ----- ----
<C> <S> <C> <C> <C> <C> <C>
GECA 85 Stone Creek Apts 1750 W. Romneya Drive Anaheim CA 92801
GECA 85 Stone Creek Plaza 1155 - 1199 North Euclid Anaheim CA 92801
- ----------------------------------------------------------------------------------------------------------------------------
GECA 72 Raintree Apartments 3300 Rollingbrook Drive Baytown TX 77521
GECA 201 Willow Spring Apartments 3402 Preston Road Pasadena TX 77505
GECA 16 Cheron Village 13202 SW 9th Court Davie FL 33325
- ----------------------------------------------------------------------------------------------------------------------------
ML 107 Midway Plaza Shopping Center 12801 Midway Road Dallas TX 75244
ML 156 Rolling Ridge Apartments 100 Rollling Ridge Way Bloomington IN 47403
GECA 89 The Atriums 1900 Lake Atriums Circle Orlando FL 32839
ML 134 Food Circus - Red Bank 362 Broad Street Red Bank NJ 07701
ML 153 Country Hollow Apartments 4605 East 80th Street Tulsa OK 74136
- ----------------------------------------------------------------------------------------------------------------------------
GECA 10 Bay Pointe North Apartments 14003 Saulk Court Tampa FL 33613
GECA 61 Mid-Oak Plaza 147th and Cicero Midlothian IL 60452
GECA 50 Kroger Woodforest Shopping Center 11037 IH 10 East Houston TX 77029
ML 145 Frelinghuysen Industrial 640 Frelinghuysen Avenue Newark NJ 07114
- ----------------------------------------------------------------------------------------------------------------------------
GECA 3 All Aboard - San Francisco 1700 Egbert Avenue San Francisco CA 94124
ML 148 Lima Plaza 2154 Elida Road Lima OH 45805
GECA 62 Midtown Mini Storage 3808 Cedar Street San Diego CA 92105
- ----------------------------------------------------------------------------------------------------------------------------
GECA 52 Lake West Medical Cntr 36100 Euclid Avenue Willoughby OH 44094
ML 144 Serra Mesa Shopping Center 3202-3340 Greyling Drive San Diego CA 92123
ML 133 Food Circus - Wall 18th Avenue & Highway 35 Wall NJ 07719
ML 135 Franklin Township Shopping Center 83 and 87 Veronica Avenue Franklin Township NJ 08873
- ----------------------------------------------------------------------------------------------------------------------------
GECA 78 Sentry Self Storage - Chula Vista 3885 Main Street Chula Vista CA 91911
GECA 19 Columbia Junction Center 8610 Baltimore Washington Bivd. Jessup MD 20794
GECA 4 All Aboard - San Ramon 9180 Alcosta Blvd. San Ramon CA 94583
GECA 48 Hidden Lake Apartments 5419 110th Street SW Lakewood WA 98499
- ----------------------------------------------------------------------------------------------------------------------------
GECA 31 Fairfield Inn - Jacksonville 8050 Baymeadows Circle West Jacksonville FL 32256
ML 129 Shoney's Inn 234 Lobdell Highway Port Allen LA 70767
- ----------------------------------------------------------------------------------------------------------------------------
GECA 76 Security Portfolio IIB - Dallas 10664 Kingsley Road Dallas TX 75238
GECA 76 Security Portfolio IIB - Ft. Worth 2600 South Hulen Street Ft. Worth TX 76109
GECA 68 Park Chateau 515 Chateau Drive, SW Huntsville AL 35801
- ----------------------------------------------------------------------------------------------------------------------------
GECA 13 Calumet Square 2213-2233 Calumet Drive Sheboygan WI 53083
GECA 81 Shoppes at Taylor Ranch 4801 Montano Rd NW Albuquerque NM 87120
GECA 79 Sentry Self Storage - Eastgate 8440 Eastgate Court San Diego CA 92121
GECA 202 Yorba Ranch Village 4905 Yorba Ranch Road Yorba Linda CA 92887
ML 122 Brynn Marr Shopping Center 106 Western Boulevard Jacksonville NC 28540
- ----------------------------------------------------------------------------------------------------------------------------
GECA 2 A-1 Self Storage 345 10th Street Jersey City NJ 07302
ML 136 Comfort Inn Suites - Hattiesburg 122 Plaza Drive Hattiesburg MS 39402
ML 142 Westpoint Commons Shopping Ctr. 8202-58 Rockville Road Indianapolis IN 46214
GECA 24 Del Pine Terrace 4301 Belle Terrace Bakersfield CA 93309
ML 132 Days Inn Downtown - Indianapolis 401 East Washington Street Indianapolis IN 46204
- ----------------------------------------------------------------------------------------------------------------------------
GECA 65 Pack Rat Charleston 616 Johnnie Dodds Blvd. Mt. Pleasant SC 29464
GECA 11 Bonaventure MHP 19401 N. 7th Street Phoenix AZ 85024
GECA 37 Gateway Medical Center 995 Gateway Center Way San Diego CA 92102
ML 114 Crossview Courts Apartments 2929 Crossview Houston TX 77063
- ----------------------------------------------------------------------------------------------------------------------------
ML 139 Holiday Inn Express-Carowinds 3560 Lakemont Blvd. Fort Mill SC 29715
ML 140 Super 8 - Raleigh 3804 New Bern Avenue Raleigh NC 27610
ML 117 Autumn Sunrise Apartments 1825 Airline Dr. Corpus Christi TX 78412
ML 158 Village at Lakeside 9703 Winter Gardens Blvd Lakeside CA 92040
ML 119 Fountains of Jupiter Apartments 12993 Jupiter Road Dallas TX 75238
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Cut-off Cumulative % of Interest
Control Original Date % of Initial Initial Pool Borrower Accrual Mortgage
No. Property Type Balance Balance Pool Balance Balance Affiliated Crossed Method Rate
--- ------------- ------- ------- ------------ ------- ---------- ------- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
85 Multifamily $3,955,986 $3,955,985.92
85 Unanchored Retail 1,294,014 1,294,014.08
--------------------------
5,250,000 5,250,000.00 0.75 62.88 Actual/360 7.610%
- ------------------------------------------------------------------------------------------------------------------------------------
72 Multifamily 5,200,000 5,200,000.00 0.75 63.63 Cntl #201 30/360 7.500
201 Multifamily 5,200,000 5,200,000.00 0.75 64.38 Cntl #72 30/360 7.500
16 Manufactured Housing 5,150,000 5,146,131.80 0.74 65.12 Actual/360 7.440
- ------------------------------------------------------------------------------------------------------------------------------------
107 Anchored Retail 5,100,000 5,068,265.45 0.73 65.84 30/360 8.100
156 Multifamily 5,040,000 5,026,825.40 0.72 66.56 30/360 8.180
89 Multifamily 4,900,000 4,894,137.94 0.70 67.27 Actual/360 7.760
134 Anchored Retail 4,800,000 4,781,259.13 0.69 67.95 Cntl #133 30/360 8.520
153 Multifamily 4,600,000 4,594,189.84 0.66 68.61 Cntl #'s 152, 154 Actual/360 7.550
- ------------------------------------------------------------------------------------------------------------------------------------
10 Multifamily 4,550,000 4,544,238.25 0.65 69.26 Actual/360 7.540
61 Anchored Retail 4,558,000 4,543,619.14 0.65 69.92 Cntl #'s 28, 63 & 35 30/360 8.040
50 Anchored Retail 4,400,000 4,393,743.88 0.63 70.55 30/360 7.730
145 Industrial 4,300,000 4,286,477.00 0.62 71.16 30/360 8.060
- ------------------------------------------------------------------------------------------------------------------------------------
3 Self Storage 4,218,000 4,218,000.00 0.61 71.77 Cnlt #'s 4,5,6,7 & 62 30/360 7.840
148 Anchored Retail 4,200,000 4,176,294.10 0.60 72.37 Cntl # 122 30/360 8.790
62 Self Storage 4,070,000 4,057,935.74 0.58 72.95 Cntl #'s 3, 4, 5, 6 & 7 30/360 8.424
- ------------------------------------------------------------------------------------------------------------------------------------
52 Medical Office 3,900,000 3,900,000.00 0.56 73.51 Actual/360 7.690
144 Anchored Retail 3,862,500 3,830,058.24 0.55 74.06 30/360 8.700
133 Anchored Retail 3,800,000 3,785,163.47 0.54 74.60 Cntl #134 30/360 8.520
135 Anchored Retail 3,600,000 3,583,452.82 0.51 75.12 30/360 8.330
- ------------------------------------------------------------------------------------------------------------------------------------
78 Self Storage 3,450,000 3,446,348.69 0.49 75.61 Cntl #'s 79 & 80 Yes 30/360 7.960
19 Unanchored Retail 3,400,000 3,400,000.00 0.49 76.10 Actual/360 7.970
4 Self Storage 3,386,000 3,386,000.00 0.49 76.58 Cntl #'s 3,5,6,7 & 62 30/360 7.840
48 Multifamily 3,300,000 3,295,047.13 0.47 77.06 30/360 7.460
- ------------------------------------------------------------------------------------------------------------------------------------
31 Hospitality 3,250,000 3,250,000.00 0.47 77.52 Cntl #'s 20 & 42 Actual/360 7.700
129 Hospitality 3,250,000 3,235,974.46 0.46 77.99 30/360 9.375
- ------------------------------------------------------------------------------------------------------------------------------------
76 Self Storage 1,674,419 1,672,592.02
76 Self Storage 1,525,581 1,523,917.18
---------------------------
3,200,000 3,196,509.20 0.46 78.45 Cntl #77 30/360 7.820
68 Multifamily 3,120,000 3,117,527.13 0.45 78.89 Cntl #'s 49 & 200 Actual/360 7.170
- ------------------------------------------------------------------------------------------------------------------------------------
13 Anchored Retail 3,040,000 3,040,000.00 0.44 79.33 30/360 7.750
81 Unanchored Retail 3,040,000 3,037,922.66 0.44 79.77 30/360 7.910
79 Self Storage 3,030,000 3,026,767.08 0.43 80.20 Cntl #'s 78 & 80 Yes 30/360 7.910
202 Unanchored Retail 3,000,000 2,995,768.66 0.43 80.63 30/360 7.770
122 Anchored Retail 3,000,000 2,989,409.99 0.43 81.06 Cntl #148 30/360 8.730
- ------------------------------------------------------------------------------------------------------------------------------------
2 Self Storage 3,000,000 2,988,683.02 0.43 81.49 30/360 8.730
136 Hospitality 3,010,000 2,985,524.34 0.43 81.92 30/360 8.800
142 Anchored Retail 2,650,000 2,889,343.38 0.41 82.33 30/360 8.492
24 Multifamily 2,880,000 2,876,604.89 0.41 82.74 Actual/360 7.290
132 Hospitality 2,891,000 2,872,305.40 0.41 83.16 30/360 9.410
- ------------------------------------------------------------------------------------------------------------------------------------
65 Self Storage 2,800,000 2,800,000.00 0.40 83.56 Cntl #'s 66 & 67 30/360 7.590
11 Manufactured Housing 2,765,000 2,761,454.36 0.40 83.95 30/360 8.240
37 Medical Office 2,725,000 2,717,701.82 0.39 84.34 30/360 8.060
114 Multifamily 2,700,000 2,693,920.78 0.39 84.73 30/360 7.480
- ------------------------------------------------------------------------------------------------------------------------------------
139 Hospitality 2,680,000 2,672,176.36 0.38 85.11 Cntl #'s 140 & 138 30/360 9.230
140 Hospitality 2,560,000 2,552,526.67 0.37 85.48 Cntl #'s 139, 138 30/360 9.230
117 Multifamily 2,550,000 2,538,559.20 0.36 85.84 30/360 7.660
158 Multifamily 2,500,000 2,498,288.20 0.36 86.20 30/360 7.900
119 Multifamily 2,500,000 2,494,799.36 0.36 86.56 Cntl #120 30/360 7.870
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Stated Orig Rem
Orig Rem Amort Amort
Control Administrative Term Term Term Term Origination Repayment Balloon/Repayment Maturity
No. Cost Rate (Mos.) (Mos.) (Mos.) (Mos.) Date Date Balance Term
--- --------- ------ ------ ------ ------ ---- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
85 $3,223,159
85 1,054,304
------------
0.075 120 120 300 300 11/04/97 12/01/2007 4,277,464 ARD
- ------------------------------------------------------------------------------------------------------------------------------------
72 0.075 120 120 360 360 11/07/97 12/01/2007 4,513,339 ARD
201 0.075 120 120 360 360 11/07/97 12/01/2007 4,513,339 ARD
16 0.075 120 119 360 359 10/24/97 11/01/2007 4,541,513 ARD
- ------------------------------------------------------------------------------------------------------------------------------------
107 0.105 216 213 216 213 08/29/97 09/01/2015 NAP Full Amort
156 0.435 120 116 360 356 07/25/97 08/01/2007 4,437,551 Balloon
89 0.075 120 118 360 358 09/11/97 10/01/2007 4,356,269 ARD
134 0.105 180 176 300 296 07/14/97 08/01/2012 3,119,895 Balloon
153 0.145 120 118 360 358 09/25/97 10/01/2007 4,068,394 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
10 0.075 300 298 360 358 10/01/97 10/01/2022 1,913,301 Balloon
61 0.075 84 81 300 297 08/26/97 09/01/2004 4,023,353 ARD
50 0.075 120 118 360 358 09/23/97 10/01/2007 3,838,083 ARD
145 0.105 120 117 300 297 08/27/97 09/01/2007 3,478,107 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
3 0.075 120 120 300 300 11/13/97 12/01/2007 3,392,657 ARD
148 0.105 240 234 300 294 05/30/97 06/01/2017 1,677,153 Balloon
62 0.075 120 117 300 297 08/13/97 09/01/2007 3,321,912 ARD
- ------------------------------------------------------------------------------------------------------------------------------------
52 0.075 120 120 300 300 11/12/97 12/01/2007 3,185,071 ARD
144 0.105 120 109 330 319 12/09/96 01/01/2007 3,321,404 Balloon
133 0.105 180 176 300 296 07/14/97 08/01/2012 2,469,917 Balloon
135 0.105 84 79 312 307 06/13/97 07/01/2004 3,229,504 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
78 0.075 120 119 300 299 10/27/97 11/01/2007 2,783,497 ARD
19 0.075 120 120 300 300 11/07/97 12/01/2007 2,799,488 ARD
4 0.075 120 120 300 300 11/13/97 12/01/2007 2,723,456 ARD
48 0.075 120 118 360 358 10/01/97 10/01/2007 2,861,705 ARD
- ------------------------------------------------------------------------------------------------------------------------------------
31 0.075 120 120 300 300 11/14/97 12/01/2007 2,655,008 ARD
129 0.105 240 237 240 237 08/28/97 09/01/2017 NAP Full Amort
- ------------------------------------------------------------------------------------------------------------------------------------
76 0.105 1,347,545
76 1,227,763
------------
0.075 120 118 300 298 09/26/97 10/01/2007 2,575,309 ARD
68 0.075 120 119 360 359 10/29/97 11/01/2007 2,732,413 ARD
- ------------------------------------------------------------------------------------------------------------------------------------
13 0.075 156 156 360 360 11/07/97 12/01/2010 2,465,294 ARD
81 0.075 120 119 360 359 10/10/97 11/01/2007 2,661,861 ARD
79 0.075 120 119 300 299 10/27/97 11/01/2007 2,441,510 ARD
202 0.075 120 118 360 358 09/30/97 10/01/2007 2,619,106 ARD
122 0.105 240 234 360 354 05/30/97 06/01/2017 1,881,355 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
2 0.075 120 116 300 296 07/03/97 08/01/2007 2,466,628 ARD
136 0.105 180 177 180 177 08/06/97 09/01/2012 NAP Full Amort
142 0.105 120 115 330 325 06/06/97 07/01/2007 2,488,325 Balloon
24 0.075 120 119 300 299 10/23/97 11/01/2007 2,323,718 ARD
132 0.105 252 247 252 247 06/24/97 07/01/2018 NAP Full Amort
- ------------------------------------------------------------------------------------------------------------------------------------
65 0.075 120 120 300 300 11/04/97 12/01/2007 2,237,441 ARD
11 0.075 120 118 360 358 09/09/97 10/01/2007 2,437,416 Balloon
37 0.075 120 116 360 356 07/30/97 08/01/2007 2,393,443 ARD
114 0.105 120 117 360 357 08/07/97 09/01/2007 2,342,431 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
139 0.105 240 238 240 238 09/11/97 10/01/2017 NAP Full Amort
140 0.105 240 238 240 238 09/10/97 10/01/2017 NAP Full Amort
117 0.105 120 116 300 296 07/30/97 08/01/2007 2,041,437 Balloon
158 0.105 120 119 360 359 10/03/97 11/01/2007 2,188,574 Balloon
119 0.105 180 177 360 357 08/13/97 09/01/2012 1,910,860 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNEX A
Annual Und. Und.
Control Debt Total Total
No. Prepayment Restrictions Service Revenue Expense
--- ----------------------- ------- ------- -------
<S> <C> <C> <C> <C>
85 $984,242 $554,744
85 348,821 145,408
-----------------------
4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months $470,081 1,333,063 700,152
- --------------------------------------------------------------------------------------------------------------------------
72 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 436,310 1,559,168 954,320
201 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 436,310 1,530,875 915,783
16 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 429,578 841,733 282,303
- --------------------------------------------------------------------------------------------------------------------------
107 9 yr lock, >1% or YM through yr 17 3/4, open last 3 months 539,185 1,174,853 459,963
156 > 1% or YM through yr 9 1/2, open last 6 months 451,393 854,367 312,144
89 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 421,657 1,188,423 675,846
134 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months 464,587 833,545 206,510
153 >1% or YM through yr 8, 3% yr 9,open last 12 months 387,858 1,194,670 667,474
- --------------------------------------------------------------------------------------------------------------------------
10 10 yr lock, > 1% or YM through yr 24 2/3, open last 4 months 383,268 1,063,569 592,078
61 3 yr lock, > 1% or YM through yr 6 3/4, open last 3 months 423,603 1,144,919 541,246
50 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 377,536 753,508 183,687
145 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months 400,310 936,831 264,234
- --------------------------------------------------------------------------------------------------------------------------
3 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 385,313 785,016 264,084
148 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months 415,731 759,709 156,515
62 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 390,766 828,792 300,777
- --------------------------------------------------------------------------------------------------------------------------
52 5 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 351,652 890,389 320,558
144 5 yr lock, >1% or Ym through yr 9 3/4, open last 3 months 370,164 707,761 212,040
133 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months 367,798 642,702 148,809
135 4 yr lock, >1% or YM through yr 6 3/4, open last 3 months 339,046 898,990 409,155
- --------------------------------------------------------------------------------------------------------------------------
78 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 318,436 698,831 212,688
19 5 yr lock, > 1% or YM through yr 9 2/3, open last 4 months 314,091 691,823 199,266
4 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 309,310 630,661 212,369
48 5 yr lock, > 1% or YM through yr 9 1/2, open last 6 months 275,805 779,412 434,727
- --------------------------------------------------------------------------------------------------------------------------
31 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 293,299 1,634,914 1,201,914
129 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months 360,354 1,303,525 792,787
- --------------------------------------------------------------------------------------------------------------------------
76 339,268 125,505
76 320,025 137,419
---------------------
2 yr lock, > 1% or YM through yr 9 1/2, open last 6 months 292,130 659,293 262,924
68 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 253,378 845,288 473,007
- --------------------------------------------------------------------------------------------------------------------------
13 3 yr lock, > 1% or YM through yr 9 3/4, open last 39 months 261,347 538,326 167,177
81 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 265,392 505,846 119,534
79 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 278,468 705,600 299,520
202 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 258,406 558,459 161,520
122 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months 282,698 570,180 169,045
- --------------------------------------------------------------------------------------------------------------------------
2 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 295,483 749,259 228,923
136 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months 362,068 1,359,608 861,414
142 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months 272,952 466,836 102,078
24 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 250,693 581,919 277,621
132 11 yr lock, >1% or YM through yr 20 3/4, open last 3 months 316,212 1,279,467 840,860
- --------------------------------------------------------------------------------------------------------------------------
65 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 250,271 609,762 211,905
11 Yrs 1-4 = 5%, Yr 5 = 4%, Yr 6 = 3%, Yr 7 = 2%, Yr 8 = 1%, Yrs 9&10 - Open 249,037 867,880 423,165
37 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 241,310 605,051 218,252
114 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months 226,102 873,419 527,891
- --------------------------------------------------------------------------------------------------------------------------
139 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months 294,126 1,276,208 848,472
140 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months 280,956 1,238,335 857,747
117 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months 229,326 745,434 456,527
158 5 yr lock, > 1% or YM through yr 9 1/2, open last 6 months 218,042 510,987 244,854
119 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months 217,417 551,151 287,534
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Loan per
Cut-off Cut-off Sq Ft, Units, Sq Ft, Unit,
Control Und. Date Appraised Appraisal Date Repayment Year Pads Pad Occupancy
No. NCF DSCR Value Year LTV LTV Built or Room or Room Percentage
--- --- ---- ----- ---- --- --- ----- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
85 $429,498 $5,350,000 1997 1980 120 units $32,967 / unit 97%
85 188,493 1,750,000 1997 1979 19,080 sq. ft. 67.82/ sq. ft. 100
---------- --------------------------------
617,991 1.31x 7,100,000 73.94% 60.25% 120 units 43,750/ unit 97
- ------------------------------------------------------------------------------------------------------------------------
72 604,848 1.39 7,100,000 1997 73.24 63.57 1985 248 units 20,968/ unit 98
201 615,092 1.41 7,000,000 1997 74.29 64.48 1984 252 units 20,635/ unit 97
16 559,431 1.30 6,500,000 1997 79.17 69.87 1973 205 pads 25,103/ pad 93
- ------------------------------------------------------------------------------------------------------------------------
107 686,275 1.27 7,650,000 1997 66.25 0.00 1979 82,316 sq. ft. 61.57/ sq. ft. 98
156 542,223 1.20 6,300,000 1997 79.79 70.44 1991 114 units 44,095/ unit 96
89 512,577 1.22 6,100,000 1997 80.23 71.41 1987 200 units 24,471/ unit 99
134 627,035 1.35 6,800,000 1997 70.31 45.88 1951 44,963 sq. ft. 98.84/ sq. ft. 100
153 527,196 1.36 6,200,000 1997 74.10 65.62 1977 280 units 16,408/ unit 98
- ------------------------------------------------------------------------------------------------------------------------
10 471,491 1.23 5,850,000 1997 77.68 32.71 1967 230 units 19,758/ unit 99
61 541,079 1.28 6,100,000 1997 74.49 65.96 1984 77,942 sq. ft. 58.29/ sq. ft. 91
50 526,482 1.39 5,950,000 1997 73.84 64.51 1979 81,950 sq. ft. 53.61/ sq. ft. 91
145 638,735 1.60 7,300,000 1997 58.72 47.65 1986 156,900 sq. ft. 27.32/ sq. ft. 100
- ------------------------------------------------------------------------------------------------------------------------
3 520,932 1.35 6,740,000 1997 62.58 50.34 1996 60,548 sq. ft. 69.66/ sq. ft. 88
148 542,727 1.31 5,600,000 1997 74.58 29.95 1960 154,637 sq. ft. 27.01/ sq. ft. 95
62 528,016 1.35 5,300,000 1997 76.56 62.68 1982 126,095 sq. ft. 32.18/ sq. ft. 86
- ------------------------------------------------------------------------------------------------------------------------
52 535,389 1.52 4,880,000 1997 79.92 65.27 1979 39,013 sq. ft. 99.97/ sq. ft. 98
144 462,386 1.25 5,150,000 1996 74.37 64.49 1965 57,685 sq. ft. 66.40/ sq. ft. 97
133 492,435 1.34 5,300,000 1997 71.42 46.60 1973 39,415 sq. ft. 96.03/ sq. ft. 100
135 437,596 1.29 5,000,000 1997 71.67 64.59 1978 69,118 sq. ft. 51.85/ sq. ft. 96
- ------------------------------------------------------------------------------------------------------------------------
78 486,144 1.53 4,600,000 1997 74.92 60.51 1984 124,430 sq. ft. 27.70/ sq. ft. 91
19 448,767 1.43 5,100,000 1997 66.67 54.89 1988 46,830 sq. ft. 72.60/ sq. ft. 98
4 418,292 1.35 5,620,000 1997 60.25 48.46 1996 60,520 sq. ft. 55.95/ sq. ft. 77
48 344,685 1.25 4,650,000 1997 70.86 61.54 1974 144 units 22,882/ unit 90
- ------------------------------------------------------------------------------------------------------------------------
31 433,000 1.48 5,200,000 1997 62.50 51.06 1981 102 rooms 31,863/ room N/A
129 510,738 1.42 4,750,000 1997 68.13 0.00 1975 104 rooms 31,115/ room N/A
- ------------------------------------------------------------------------------------------------------------------------
76 213,763 2,250,000 1997 1996 44,660 sq. ft. 37.45/ sq. ft. 98
76 182,606 2,050,000 1997 1996 41,980 sq. ft. 36.30/ sq. ft. 100
----------- -----------------------------------------------
396,369 1.36 4,300,000 74.34 59.89 86,640 sq. ft. 36.89/ sq. ft. 99
68 372,280 1.47 3,950,000 1997 78.92 69.18 1968 160 units 19,485/ unit 98
- ------------------------------------------------------------------------------------------------------------------------
13 364,772 1.40 3,800,000 1997 80.00 64.88 1988 69,947 sq. ft. 43.46/ sq. ft. 96
81 355,929 1.34 3,750,000 1997 81.01 70.98 1990 51,791 sq. ft. 58.66/ sq. ft. 100
79 406,080 1.46 4,800,000 1997 63.06 50.86 1984 70,716 sq. ft. 36.45/ sq. ft. 97
202 366,504 1.42 4,700,000 1997 63.74 55.73 1985 36,433 sq. ft. 82.23/ sq. ft. 97
122 387,750 1.37 4,000,000 1997 74.74 47.03 1971 124,553 sq. ft. 24.00/ sq. ft. 100
- ------------------------------------------------------------------------------------------------------------------------
2 520,336 1.76 5,400,000 1997 55.35 45.68 1920 55,138 sq. ft. 54.20/ sq. ft. 87
136 498,193 1.38 4,300,000 1997 69.43 0.00 1995 67 rooms 44,560/ room N/A
142 346,386 1.27 3,850,000 1997 75.05 64.63 1996 31,640 sq. ft. 91.32/ sq. ft. 95
24 304,298 1.21 3,600,000 1997 79.91 64.55 1985 112 units 25,684/ unit 96
132 438,607 1.39 4,130,000 1997 69.55 0.00 1960 99 rooms 29,013/ room N/A
- ------------------------------------------------------------------------------------------------------------------------
65 397,857 1.59 4,315,000 1997 64.89 51.85 1981 127,235 sq. ft. 22.01/ sq. ft. 83
11 444,715 1.79 5,505,000 1997 50.16 44.28 1970 281 pads 9,827/ pad 100
37 327,999 1.36 3,640,000 1997 74.66 65.75 1988 39,878 sq. ft. 68.15/ sq. ft. 94
114 345,529 1.53 3,550,000 1997 75.89 65.98 1971 167 units 16,131/ unit 97
- ------------------------------------------------------------------------------------------------------------------------
139 427,736 1.45 3,850,000 1997 69.41 0.00 1995 68 rooms 39,297/ room N/A
140 380,594 1.35 3,700,000 1997 68.99 0.00 1986 124 rooms 20,585/ room N/A
117 288,907 1.26 3,258,000 1997 77.92 62.66 1972 142 units 17,877/ unit 96
158 266,133 1.22 3,325,000 1997 75.14 65.82 1988 100 units 24,983/ unit 95
119 263,617 1.21 3,125,000 1997 79.83 61.15 1986 108 units 23,100/ unit 98
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Largest Retail/Commercial Tenant
Initial --------------------------------------------------------
Control Reserves Underwriting Area Leased Lease Control
No. At Closing Reserves Name (Sq. Ft.) Exp Date No.
--- ---------- -------- ---- --------- -------- ---
<S> <C> <C> <C> <C> <C> <C>
85 $155 per unit 85
85 0.46 per sq. ft. Family Dental 2,200 09/30/2002 85
----------------
$2,413 229 per unit 85
- ---------------------------------------------------------------------------------------------------------------------------
72 68,625 232 per unit 72
201 174,875 200 per unit 201
16 -- 25 per pad 16
- ---------------------------------------------------------------------------------------------------------------------------
107 -- 0.28 per sq. ft. Drug Emporium(Nortex Dist.) 22,417 12/31/2002 107
156 -- 150 per unit 156
89 40,250 274 per unit 89
134 -- 0.27 per sq. ft. Food Circus Supermarket 44,963 04/30/2017 134
153 24,125 225 per unit 153
- ---------------------------------------------------------------------------------------------------------------------------
10 154,022 200 per unit 10
61 73,350 0.15 per sq. ft. Walgreen's 19,000 10/31/2024 61
50 15,781 0.20 per sq. ft. Kroger 30,979 11/30/1998 50
145 27,700 0.17 per sq. ft. Personality HDKS Inc. 95,680 07/31/2012 145
- ---------------------------------------------------------------------------------------------------------------------------
3 -- 0.10 per sq. ft. 3
148 12,500 0.15 per sq. ft. Toys R Us 46,003 08/31/2013 148
62 8,306 0.10 per sq. ft. 62
- ---------------------------------------------------------------------------------------------------------------------------
52 13,188 0.15 per sq. ft. Prime Health 2,971 05/31/2001 52
144 89,650 0.15 per sq. ft. Boney's Marketplace 15,534 01/31/2002 144
133 23,129 0.24 per sq. ft. Food Circus Supermarket 35,000 04/30/2017 133
135 -- 0.15 per sq. ft. Foodarama 41,400 08/31/2000 135
- ---------------------------------------------------------------------------------------------------------------------------
78 -- 0.10 per sq. ft. 78
19 12,981 0.19 per sq. ft. Signet Bank 3,536 11/30/1998 19
4 -- 0.10 per sq. ft. 4
48 54,875 262 per unit 48
- ---------------------------------------------------------------------------------------------------------------------------
31 31,375 4% per room 31
129 16,938 4% per room 129
- ---------------------------------------------------------------------------------------------------------------------------
76 0.05 per sq. ft. 76
76 0.05 per sq. ft. 76
2,250 76
68 66,125 225 per unit 68
- ---------------------------------------------------------------------------------------------------------------------------
13 3,000 0.15 per sq. ft. Pick N Save 53,182 05/31/2009 13
81 4,688 0.26 per sq. ft. Walgreens 14,000 12/31/2040 81
79 -- 0.10 per sq. ft. 79
202 11,275 0.20 per sq. ft. Farrell Dance Studio 3,600 08/14/1999 202
122 44,663 0.16 per sq. ft. Roses 50,100 03/21/2002 122
- ---------------------------------------------------------------------------------------------------------------------------
2 11,250 0.15 per sq. ft. 2
136 -- 4% per room 136
142 -- 0.21 per sq. ft. Video Update 6,000 09/30/2006 142
24 19,125 340 per unit 24
132 118,394 4% per room 132
- ---------------------------------------------------------------------------------------------------------------------------
65 19,125 0.15 per sq. ft. 65
11 -- 35 per pad 11
37 9,625 0.21 per sq. ft. San Diego Hospital Association 17,243 12/31/2003 37
114 -- 250 per unit 114
- ---------------------------------------------------------------------------------------------------------------------------
139 -- 4% per room 139
140 96,000 4% per room 140
117 47,700 250 per unit 117
158 14,000 250 per unit 158
119 -- 220 per unit 119
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Mtg.
Loan Control Zip
Seller No. Property Name Address City State Code
- ------ --- ------------- ------- ---- ----- ----
<C> <S> <C> <C> <C> <C> <C>
ML 138 Days Inn - Woodlawn 118 East Woodlawn Road Charlotte NC 28217
ML 124 Comfort Inn & Suites - Las Colinas 1223 Greenway Circle Irving TX 75038
ML 101 Wallingford Industrial 69 North Plains Highway Wallingford CT 06492
GECA 83 Sports Authority 7800 Rivers Avenue N. Charleston(Charleston) SC 29418
- ------------------------------------------------------------------------------------------------------------------------------------
GECA 98 Westover Plaza Shopping Center 2920 Highway 127 South Hickory NC 28602
GECA 94 University Creek Shopping Center 5905-5983 S. University Drive Davie FL 33328
GECA 74 Rivergate Plaza 758 Two Mile Pkwy Goodlettsville(Nashville) TN 37072
ML 108 Moulin Rouge Apartments 1250 &1251 Moulin Rouge Drive Dallas TX 75211
GECA 73 Regal Gardens 8625 King George Drive Dallas TX 75235
- ------------------------------------------------------------------------------------------------------------------------------------
ML 151 Tiffanywood/Harmonyrick Apartments 1301 S. Maddox Dumas TX 79029
GECA 64 Old Hill Offices 120 Post Road West & 19 Ludlow Road Westport CT 06880
GECA 17 Cherry Creek Plaza 5700 Manchaca Road Austin TX 78745
GECA 88 Superior Industrial Center 4116-4202 East Superior Avenue Phoenix AZ 85040
ML 123 Tanglewood Place Apartments 5920 Beverly Hills Houston TX 77057
- ------------------------------------------------------------------------------------------------------------------------------------
ML 102 Lake Forest Business Center 22511 - 22515 Aspan Street Lake Forest CA 92630
GECA 58 Mason Place 430 South Mason Road Houston TX 77450
GECA 9 American Self Storage 1150 N. Hamilton Street Chandler AZ 85225
- ------------------------------------------------------------------------------------------------------------------------------------
ML 137 Comfort Inn - Rochester 289 McDonalds Drive Rochester IN 46975
ML 131 Days Inn Defiance 1835 North Clinton Street Defiance OH 43512
GECA 12 Bristol Plaza Self Storage 2900 Ford Road Bristol PA 19007
ML 150 Britain Way Apartments 1954 Shoaf Drive Irving TX 75061
ML 126 Entrada Apartments 1325 Garfield Denver CO 80206
- ------------------------------------------------------------------------------------------------------------------------------------
GECA 33 Forrest Apartments 4265 S. Bruce St and 1880 E. Rochelle Ave Las Vegas NV 89119
GECA 6 All Aboard Self Storage - Anaheim I 155 South Adams Street Anaheim CA 92801
ML 157 Stonywood Terrace Apartments 2525 Welsh Road Philadelphia PA 01607
GECA 41 Halcyon Village Shopping Center 7825 Vaughn Road Montgomery AL 36117
ML 111 Lamar Springs Court Apartments 9146 Lamar Spring Valley CA 91977
- ------------------------------------------------------------------------------------------------------------------------------------
ML 149 Archways Apartments 2504-2506 Manor Road Austin TX 78722
GECA 56 Lockbourne Lodge 10610 Ashville Pike Rd. Lockbourne OH 43137
GECA 67 Pack Rat Summerville 1713 Old Trolley Road Summerville SC 29485
GECA 51 La Casita Mobile Home Park 425 East McKellips Road Mesa AZ 85203
GECA 36 G.T.Henderson Center(aka El Camino Real) 1053 - 1063 El Camino Real Sunnyvale CA 94086
- ------------------------------------------------------------------------------------------------------------------------------------
ML 106 Longmire Self Storage 3400 Longmire Drive College Station TX 77845
GECA 23 Decatur Pines 3920 S. Decatur Blvd. Las Vegas NV 89103
ML 128 Seabreeze Apartments 2401 Manor Road Austin TX 78722
ML 155 91-61 193rd Street Apts. 91-61 193rd Street Queens NY 11423
ML 159 Tidwell Park Apartments 9400 Bauman Road Houston TX 77076
- ------------------------------------------------------------------------------------------------------------------------------------
ML 104 South Madison Apartments 215 South Madison Pasadena CA 91109
ML 121 Comfort Inn - San Antonio 4 Piano Place San Antonio TX 78228
GECA 40 Grandview Shopping Center 11902-11906 S. Blue Ridge Blvd. Grandview MO 64030
GECA 21 CVS Pharmacy 1008 Lake Murray Blvd Irmo (Columbia) SC 29212
ML 105 Establishment Apartments 4411 Dickason Avenue Dallas TX 75219
- ------------------------------------------------------------------------------------------------------------------------------------
ML 125 Days Inn - Orange 4301 27th Street Orange TX 77632
GECA 75 Save & Lock 3210 W. 11th Avenue Eugene OR 97402
ML 112 Spring Rose Apartments 10000 Club Creek Houston TX 77036
GECA 30 Eugene Mini Storage 3550 W. 11th Avenue Eugene OR 97402
GECA 66 Pack Rat North 2170 Green Ridge Road North Charleston SC 29406
- ------------------------------------------------------------------------------------------------------------------------------------
GECA 97 West Shore Estates 3201 South Euclid Bay City MI 48706
GECA 26 Dip N Donut Plaza 2060 N. University Drive Pembroke Pines FL 33024
ML 130 Days Inn- Augusta 3654 Wheeler Road Augusta GA 30909
ML 115 Graycliff Apartments 2235 Graycliff Drive Dallas TX 75228
GECA 38 Gazebo Apartments 2434 W. 24th Terrace Lawrence KS 66046
- ------------------------------------------------------------------------------------------------------------------------------------
GECA 80 Sentry Self Storage - Lakeside 13542 Business Highway 8 Lakeside CA 92040
GECA 95 Waldorf Self Storage 3150 Leonardtown Road (Route 5) Waldorf MD 20601
GECA 54 Lexington Park Self Storage 448 Great Mills Road Lexington Park MD 21323
GECA 57 Maplewood Village 3609 Westerville Road Columbus OH 43224
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Cut-off Cumulative % of Interest
Control Original Date % of Initial Initial Pool Borrower Accrual Mortgage
No. Property Type Balance Balance Pool Balance Balance Affiliated Crossed Method Rate
--- ------------- ------- ------- -------- ------- ---------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
138 Hospitality $2,500,000 $2,492,701.82 0.36 86.92 Cntl #'s 140 & 139 30/360 9.230%
124 Hospitality 2,500,000 2,485,309.53 0.36 87.28 30/360 9.240
101 Industrial 2,400,000 2,393,133.60 0.34 87.62 30/360 8.640
83 Anchored Retail 2,400,000 2,392,623.98 0.34 87.96 Cntl #21 30/360 8.030
- ------------------------------------------------------------------------------------------------------------------------------------
98 Anchored Retail 2,350,000 2,348,377.83 0.34 88.30 30/360 7.860
94 Unanchored Retail 2,300,000 2,300,000.00 0.33 88.63 Actual/360 7.530
74 Unanchored Retail 2,250,000 2,250,000.00 0.32 88.95 Actual/360 7.830
108 Multifamily 2,250,000 2,242,758.50 0.32 89.27 Actual/360 7.930
73 Office 2,175,000 2,175,000.00 0.31 89.59 30/360 7.730
- ------------------------------------------------------------------------------------------------------------------------------------
151 Multifamily 2,100,000 2,098,685.34 0.30 89.89 30/360 8.340
64 Office 2,025,000 2,020,970.52 0.29 90.18 30/360 8.360
17 Unanchored Retail 2,010,000 2,007,917.22 0.29 90.47 30/360 8.090
88 Industrial 2,000,000 1,997,664.76 0.29 90.75 30/360 7.350
123 Multifamily 2,000,000 1,997,327.95 0.29 91.04 Actual/360 7.820
- ------------------------------------------------------------------------------------------------------------------------------------
102 Industrial 2,000,000 1,995,955.41 0.29 91.33 30/360 8.010
58 Unanchored Retail 2,000,000 1,994,337.31 0.29 91.61 30/360 8.230
9 Self Storage 1,950,000 1,947,966.19 0.28 91.89 Actual/360 8.050
- ------------------------------------------------------------------------------------------------------------------------------------
137 Hospitality 1,925,000 1,899,970.50 0.27 92.16 30/360 9.350
131 Hospitality 1,900,000 1,884,155.58 0.27 92.43 30/360 9.740
12 Self Storage 1,850,000 1,848,153.70 0.27 92.70 30/360 8.320
150 Multifamily 1,840,000 1,834,315.72 0.26 92.96 Actual/360 8.170
126 Multifamily 1,840,000 1,829,403.74 0.26 93.23 30/360 8.670
- ------------------------------------------------------------------------------------------------------------------------------------
33 Multifamily 1,800,000 1,796,418.35 0.26 93.48 30/360 8.090
6 Self Storage 1,795,000 1,791,369.36 0.26 93.74 Cntl #'s 3,4,5,7 & 62 30/360 8.260
157 Multifamily 1,680,000 1,674,124.65 0.24 93.98 30/360 8.775
41 Unanchored Retail 1,650,000 1,646,873.19 0.24 94.22 30/360 8.330
111 Multifamily 1,650,000 1,646,427.21 0.24 94.45 30/360 7.840
- ------------------------------------------------------------------------------------------------------------------------------------
149 Multifamily 1,650,000 1,639,411.13 0.24 94.69 Actual/360 8.970
56 Manufactured Housing 1,600,000 1,600,000.00 0.23 94.92 Cntl # 57 30/360 7.850
67 Self Storage 1,600,000 1,600,000.00 0.23 95.15 Cntl #'s 65 & 66 30/360 7.590
51 Manufactured Housing 1,600,000 1,595,817.67 0.23 95.38 Cntl # 84 30/360 8.180
36 Unanchored Retail 1,600,000 1,595,323.74 0.23 95.61 30/360 8.510
- ------------------------------------------------------------------------------------------------------------------------------------
106 Self Storage 1,600,000 1,595,202.09 0.23 95.83 Actual/360 8.375
23 Multifamily 1,583,000 1,577,377.57 0.23 96.06 30/360 8.700
128 Multifamily 1,550,000 1,543,468.16 0.22 96.28 30/360 8.050
155 Multifamily 1,512,000 1,507,974.94 0.22 96.50 30/360 8.090
159 Multifamily 1,500,000 1,498,919.79 0.22 96.71 30/360 7.650
- ------------------------------------------------------------------------------------------------------------------------------------
104 Multifamily 1,500,000 1,495,252.04 0.21 96.93 30/360 8.020
121 Hospitality 1,500,000 1,490,771.10 0.21 97.14 30/360 8.875
40 Unanchored Retail 1,481,500 1,475,327.06 0.21 97.35 30/360 8.120
21 Credit Net Lease 1,464,000 1,461,359.36 0.21 97.56 Cntl # 83 30/360 7.510
105 Multifamily 1,450,000 1,445,281.29 0.21 97.77 Actual/360 7.860
- ------------------------------------------------------------------------------------------------------------------------------------
125 Hospitality 1,450,000 1,444,594.52 0.21 97.98 30/360 8.875
75 Self Storage 1,400,000 1,400,000.00 0.20 98.18 Cntl #30 30/360 7.630
112 Multifamily 1,375,000 1,372,145.46 0.20 98.38 30/360 8.100
30 Self Storage 1,250,000 1,250,000.00 0.18 98.56 Cntl # 75 30/360 7.630
66 Self Storage 1,242,000 1,242,000.00 0.18 98.73 Cntl #'s 65 & 67 30/360 7.590
- ------------------------------------------------------------------------------------------------------------------------------------
97 Manufactured Housing 1,200,000 1,198,725.85 0.17 98.91 30/360 7.940
26 Unanchored Retail 1,200,000 1,197,560.93 0.17 99.08 30/360 8.230
130 Hospitality 1,050,000 1,042,545.82 0.15 99.23 30/360 9.540
115 Multifamily 1,000,000 997,950.81 0.14 99.37 30/360 8.180
38 Multifamily 965,000 964,329.83 0.14 99.51 Actual/360 7.830
- ------------------------------------------------------------------------------------------------------------------------------------
80 Self Storage 945,000 944,015.99 0.14 99.64 Cntl #'s 78, 79 Yes 30/360 8.060
95 Self Storage 880,000 880,000.00 0.13 99.77 Cntl #54 30/360 8.100
54 Self Storage 800,000 800,000.00 0.11 99.89 Cntl # 95 30/360 8.100
57 Manufactured Housing 800,000 800,000.00 0.11 100.00 Cntl # 56 30/360 7.850
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Stated Orig Rem
Orig Rem Amort Amort
Control Administrative Term Term Term Term Origination Repayment Balloon/Repayment
No. Cost Rate (Mos.) (Mos.) (Mos.) (Mos.) Date Date Balance Maturity Term
--- --------- ------ ------ ------ ------ ---- ---- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
138 0.105 240 238 240 238 09/10/97 10/01/2017 N/A Full Amort
124 0.105 240 236 240 236 07/03/97 08/01/2017 N/A Full Amort
101 0.105 120 117 300 297 08/19/97 09/01/2007 $1,969,096 Balloon
83 0.075 252 250 252 250 09/11/97 10/01/2018 N/A Full Amort
- ------------------------------------------------------------------------------------------------------------------------------------
98 0.075 120 119 360 359 10/31/97 11/01/2007 2,055,537 ARD
94 0.075 120 120 300 300 11/14/97 12/01/2007 1,869,480 ARD
74 0.075 120 120 300 300 11/14/97 12/01/2007 1,845,098 ARD
108 0.105 180 177 300 297 08/22/97 09/01/2012 1,441,733 Balloon
73 0.075 132 132 360 360 11/03/97 12/01/2008 1,855,821 ARD
- ------------------------------------------------------------------------------------------------------------------------------------
151 0.105 120 119 360 359 10/03/97 11/01/2007 1,854,871 Balloon
64 0.075 120 118 300 298 09/30/97 10/01/2007 1,650,222 Balloon
17 0.075 84 83 300 299 10/09/97 11/01/2004 1,775,701 ARD
88 0.075 120 119 300 299 10/31/97 11/01/2007 1,587,926 ARD
123 0.105 120 118 360 358 09/19/97 10/01/2007 1,751,901 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
102 0.105 120 117 360 357 08/01/97 09/01/2007 1,754,855 Balloon
58 0.075 120 116 348 344 08/01/97 08/01/2007 1,740,342 ARD
9 0.075 120 119 300 299 10/31/97 11/01/2007 1,609,017 ARD
- ------------------------------------------------------------------------------------------------------------------------------------
137 0.105 180 175 180 175 06/17/97 07/01/2012 N/A Full Amort
131 0.105 240 234 240 234 05/28/97 06/01/2017 N/A Full Amort
12 0.075 120 119 300 299 10/31/97 11/01/2007 1,506,133 ARD
150 0.415 120 117 300 297 08/25/97 09/01/2007 1,496,646 Balloon
126 0.105 120 114 300 294 05/19/97 06/01/2007 1,510,718 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
33 0.075 84 81 360 357 08/15/97 09/01/2004 1,666,598 ARD
6 0.075 120 118 300 298 09/11/97 10/01/2007 1,459,190 ARD
157 1.027 120 114 360 354 05/05/97 06/01/2007 1,496,269 Balloon
41 0.075 120 117 360 357 08/18/97 09/01/2007 1,457,112 ARD
111 0.105 120 118 300 298 09/10/97 10/01/2007 1,327,142 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
149 1.208 120 113 300 293 04/07/97 05/01/2007 1,367,844 Balloon
56 0.075 84 84 360 360 11/10/97 12/01/2004 1,476,622 Balloon
67 0.075 120 120 300 300 11/04/97 12/01/2007 1,278,537 ARD
51 0.075 120 116 360 356 07/02/97 08/01/2007 1,408,746 ARD
36 0.075 120 117 300 297 08/14/97 09/01/2007 1,308,645 ARD
- ------------------------------------------------------------------------------------------------------------------------------------
106 0.105 120 117 300 297 08/21/97 09/01/2007 1,311,497 Balloon
23 0.075 120 114 360 354 05/20/97 06/01/2007 1,407,911 ARD
128 0.105 120 116 300 296 07/28/97 08/01/2007 1,253,419 Balloon
155 0.345 120 116 360 356 07/29/97 08/01/2007 1,328,844 Balloon
159 0.105 120 119 360 359 10/10/97 11/01/2007 1,306,191 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
104 0.105 60 57 300 297 08/22/97 09/01/2002 1,384,425 Balloon
121 0.105 240 236 240 236 07/25/97 08/01/2017 N/A Full Amort
40 0.075 120 116 300 296 07/31/97 08/01/2007 1,200,142 ARD
21 0.075 240 239 240 239 10/31/97 11/01/2017 N/A Full Amort
105 0.105 84 81 300 297 08/25/97 09/01/2004 1,281,079 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
125 0.105 264 261 264 261 08/06/97 09/01/2019 N/A Full Amort
75 0.075 120 120 300 300 11/05/97 12/01/2007 1,119,904 ARD
112 0.105 120 118 300 298 09/11/97 10/01/2007 1,113,308 Balloon
30 0.075 120 120 300 300 11/05/97 12/01/2007 999,914 ARD
66 0.075 120 120 300 300 11/04/97 12/01/2007 992,465 ARD
- ------------------------------------------------------------------------------------------------------------------------------------
97 0.075 120 119 300 299 10/17/97 11/01/2007 967,678 Balloon
26 0.075 120 118 300 298 09/25/97 10/01/2007 974,777 Balloon
130 0.105 240 235 240 235 06/05/97 07/01/2017 N/A Full Amort
115 0.105 180 178 300 298 09/12/97 10/01/2012 640,966 Balloon
38 0.075 120 119 360 359 10/31/97 11/01/2007 859,225 ARD
- ------------------------------------------------------------------------------------------------------------------------------------
80 0.075 120 119 300 299 10/27/97 11/01/2007 764,375 ARD
95 0.075 120 120 300 300 11/17/97 12/01/2007 712,517 ARD
54 0.075 120 120 300 300 11/17/97 12/01/2007 647,743 ARD
57 0.075 84 84 360 360 11/10/97 12/01/2004 738,311 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Annual Und. Und.
Control Debt Total Total
No. Prepayment Restrictions Service Revenue Expense
--- ----------------------- ------- ------- -------
<S> <C> <C> <C> <C>
138 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months $274,371 $1,185,891 $738,902
124 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months 274,566 1,062,255 644,366
101 5 1/4 yr lock, >1% or YM through yr 9 3/4, open last 3 months 234,629 398,132 85,708
83 10 yr lock, > 1% or YM through yr 20 3/4, open last 3 months 236,829 411,185 109,698
- ------------------------------------------------------------------------------------------------------------------------------------
98 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 204,176 383,525 86,896
94 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 204,500 594,216 239,621
74 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 205,359 422,648 122,046
108 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months 209,181 848,088 556,059
73 6 yr lock, > 1% or YM through yr 10 3/4, open last 3 months 186,623 636,770 366,743
- ------------------------------------------------------------------------------------------------------------------------------------
151 5 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 190,916 557,914 303,688
64 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 193,383 573,651 177,111
17 3 yr lock, Year 4 = 4%, Year 5 = 3%, Year 6 = 2%, 1% through Yr 6 3/4, open last 3 months 187,602 525,674 182,525
88 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 175,023 421,103 127,655
123 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months 174,995 485,506 274,007
- ------------------------------------------------------------------------------------------------------------------------------------
102 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months 176,271 358,400 105,241
58 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 181,414 386,509 104,671
9 Yr 1 = 6%, Yr 2 = 5%, Yr 3 = 4%, Yr 4 = 3%, Yr 5= 2%, Yrs 6-8 = 1%, Yrs 9&10 - Open 181,381 404,239 142,416
- ------------------------------------------------------------------------------------------------------------------------------------
137 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months 239,129 898,766 555,766
131 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months 216,112 1,078,009 765,304
12 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 176,076 590,112 247,252
150 > 1% or YM through yr 9 1/2, open last 6 months 172,911 909,431 693,918
126 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months 180,330 418,138 188,410
- ------------------------------------------------------------------------------------------------------------------------------------
33 4 yr lock, > 1% or YM through yr 6 3/4, open last 3 months 159,850 350,113 144,527
6 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 169,976 411,028 171,110
157 > 1% or YM through yr 9 1/2, 1% in months 115-117, open last 3 months 158,959 352,635 145,886
41 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 149,866 295,304 72,262
111 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months 150,727 358,557 150,000
- ------------------------------------------------------------------------------------------------------------------------------------
149 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months 165,754 425,196 225,884
56 1 yr lock, Year 2 = 4%, Year 3 = 3%, Year 4 = 2%, Years 5-6 2/3 = 1%, open last 4 months 138,880 588,214 302,629
67 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 143,012 365,365 145,537
51 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 143,299 310,505 113,337
36 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 154,733 287,797 59,193
- ------------------------------------------------------------------------------------------------------------------------------------
106 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months 154,546 376,972 119,026
23 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 148,764 314,942 136,384
128 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months 144,174 440,498 252,729
155 > 1% or YM through yr 9 1/2, 1% in months 115-117, open last 3 months 134,274 364,965 189,319
159 5 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 127,713 537,161 359,248
- ------------------------------------------------------------------------------------------------------------------------------------
104 3 1/4 yr lock, >1% or YM through yr 4 1/2, open last 6 months 139,165 285,884 109,224
121 10 yr lock, >1% or YM through yr 19 3/4. open last 3 months 160,506 606,538 386,413
40 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 138,630 328,863 103,295
21 10 yr lock, > 1% or YM through yr 19 3/4, open last 3 months 141,634 173,644 9,582
105 4 yr lock, >1% or YM through yr 6 1/2, open last 6 months 133,987 397,636 223,818
- ------------------------------------------------------------------------------------------------------------------------------------
125 11 yr lock, >1% or YM through yr 21 3/4, open last 3 months 150,150 535,384 326,403
75 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 125,575 271,999 99,527
112 5 yr lock, >1% or YM through yr 9 3/4, open last 3 months 128,445 628,482 461,690
30 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 112,120 261,679 104,859
66 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 111,013 262,536 101,009
- ------------------------------------------------------------------------------------------------------------------------------------
97 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 110,570 409,160 213,128
26 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 113,344 272,084 87,891
130 10 yr lock, >1% or YM through yr 19 3/4, open last 3 months 117,778 472,017 289,255
115 8 yr lock, >1% or YM through yr 14 3/4, open last 3 months 94,053 714,911 553,443
38 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 83,602 217,165 96,053
- ------------------------------------------------------------------------------------------------------------------------------------
80 4 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 87,975 216,077 93,221
95 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 82,205 212,728 95,380
54 3 yr lock, > 1% or YM through yr 9 3/4, open last 3 months 74,731 224,745 118,496
57 1 yr lock, Year 2 = 4%, Year 3 = 3%, Year 4 = 2%, Years 5-6 2/3 = 1%, open last 4 months 69,440 304,463 196,950
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Loan per
Cut-off Cut-off Sq Ft, Units, Sq Ft, Unit,
Control Und. Date Appraised Appraisal Date Repayment Year Pads Pad Occupancy
No. NCF DSCR Value Year LTV LTV Built or Room or Room Percentage
--- --- ---- ----- ---- --- --- ----- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
138 $446,990 1.63x $3,750,000 1997 66.47% 0.00% 1970 96 rooms $25,966 / room N/A
124 417,889 1.52 3,850,000 1997 64.55 0.00 1996 54 rooms 46,024 / room N/A
101 295,433 1.26 3,200,000 1997 74.79 61.53 1969 67,423 sq. ft. 35.49 / sq. ft. 100%
83 285,487 1.21 3,250,000 1997 73.62 0.00 1988 62,040 sq. ft. 38.57 / sq. ft. 100
- ------------------------------------------------------------------------------------------------------------------------------------
98 275,935 1.35 3,150,000 1997 74.55 65.26 1987 58,705 sq. ft. 40.00 / sq. ft. 100
94 318,257 1.56 4,200,000 1997 54.76 44.51 1986 59,837 sq. ft. 38.44 / sq. ft. 90
74 265,192 1.29 3,000,000 1997 75.00 61.50 1973 58,550 sq. ft. 38.43 / sq. ft. 100
108 292,029 1.40 3,000,000 1997 74.76 48.06 1968 141 units 15,906 / unit 96
73 236,896 1.27 3,000,000 1997 72.50 61.86 1972 68,000 sq. ft. 31.99 / sq. ft. 98
- ------------------------------------------------------------------------------------------------------------------------------------
151 254,225 1.33 2,800,000 1997 74.95 66.25 1967 142 units 14,779 / unit 99
64 368,971 1.91 3,600,000 1997 56.14 45.84 1988 27,569 sq. ft. 73.31 / sq. ft. 100
17 274,719 1.46 3,100,000 1997 64.77 57.28 1973 92,473 sq. ft. 21.71 / sq. ft. 92
88 267,678 1.53 3,200,000 1997 62.43 49.62 1987 80,079 sq. ft. 24.95 / sq. ft. 100
123 211,499 1.21 2,500,000 1997 79.89 70.08 1974 86 units 23,225 / unit 97
- ------------------------------------------------------------------------------------------------------------------------------------
102 240,834 1.37 2,700,000 1997 73.92 64.99 1981 40,800 sq. ft. 48.92 / sq. ft. 97
58 259,765 1.43 2,800,000 1997 71.23 62.16 1994 23,542 sq. ft. 84.71 / sq. ft. 93
9 261,823 1.44 2,600,000 1997 74.92 61.89 1987 75,650 sq. ft. 25.75 / sq. ft. 83
- ------------------------------------------------------------------------------------------------------------------------------------
137 343,000 1.43 2,750,000 1997 69.09 0.00 1991 60 rooms 31,666 / room N/A
131 312,705 1.45 2,865,000 1997 65.76 0.00 1963 117 rooms 15,572 / room N/A
12 342,860 1.95 2,925,000 1997 63.18 51.49 1988 80,025 sq. ft. 23.20 / sq. ft. 88
150 215,512 1.25 2,500,000 1997 73.37 59.87 1963 168 units 10,919 / unit 94
126 229,728 1.27 2,455,000 1997 74.52 61.54 1965 78 units 23,454 / unit 95
- ------------------------------------------------------------------------------------------------------------------------------------
33 205,586 1.29 2,400,000 1997 74.85 69.44 1983 60 units 29,940 / unit 100
6 239,918 1.41 2,870,000 1997 62.42 50.84 1993 65,545 sq. ft. 27.33 / sq. ft. 73
157 206,749 1.30 2,100,000 1997 79.72 71.25 1985 48 units 34,878 / unit 96
41 207,324 1.38 2,300,000 1996 71.60 63.35 1987 25,200 sq. ft. 65.35 / sq. ft. 100
111 208,558 1.38 2,200,000 1997 74.84 60.32 1985 50 units 32,929 / unit 100
- ------------------------------------------------------------------------------------------------------------------------------------
149 199,311 1.20 2,140,000 1996 76.61 63.92 1971 104 units 15,764 / unit 95
56 285,585 2.06 2,800,000 1997 57.14 52.74 1960 183 pads 8,743 / pad 89
67 219,828 1.54 2,458,000 1997 65.09 52.02 1988 79,035 sq. ft. 20.24 / sq. ft. 93
51 197,168 1.38 2,160,000 1997 73.88 65.22 1963 117 pads 13,639 / pad 89
36 212,724 1.37 2,400,000 1997 66.47 54.53 1966 13,260 sq. ft. 120.31 / sq. ft. 100
- ------------------------------------------------------------------------------------------------------------------------------------
106 257,947 1.67 2,200,000 1997 72.51 59.61 1995 42,975 sq. ft. 37.12 / sq. ft. 98
23 178,558 1.20 2,300,000 1997 68.58 61.21 1983 60 units 26,290 / unit 100
128 187,769 1.30 2,100,000 1997 73.50 59.69 1961 78 units 19,788 / unit 86
155 175,646 1.31 2,000,000 1997 75.40 66.44 1939 45 units 33,511 / unit 100
159 177,912 1.39 1,975,000 1997 75.89 66.14 1972 129 units 11,620 / unit 96
- ------------------------------------------------------------------------------------------------------------------------------------
104 176,661 1.27 2,150,000 1997 69.55 64.39 1972 34 units 43,978 / unit 100
121 220,125 1.37 2,420,000 1997 61.60 0.00 1994 56 rooms 26,621 / room N/A
40 200,974 1.45 2,000,000 1997 73.77 60.01 1987 34,140 sq. ft. 43.21 / sq. ft. 96
21 164,062 1.16 1,951,000 1997 74.90 0.00 1997 10,125 sq. ft. 144.33 / sq. ft. 100
105 173,818 1.30 1,830,000 1997 78.98 70.00 1964 68 units 21,254 / unit 99
- ------------------------------------------------------------------------------------------------------------------------------------
125 208,981 1.39 2,150,000 1997 67.19 0.00 1964 53 rooms 26,752 / room N/A
75 172,472 1.37 1,960,000 1997 71.43 57.14 1975 40,400 sq. ft. 34.65 / sq. ft. 88
112 166,792 1.30 1,720,000 1997 79.78 64.73 1980 182 units 7,539 / unit 98
30 156,821 1.40 1,800,000 1997 69.44 55.55 1975 36,844 sq. ft. 33.93 / sq. ft. 86
66 161,527 1.46 1,865,000 1997 66.60 53.22 1988 46,625 sq. ft. 26.64 / sq. ft. 96
- ------------------------------------------------------------------------------------------------------------------------------------
97 196,032 1.77 2,500,000 1997 47.95 38.71 1973 150 pads 7,992 / pad 97
26 177,761 1.57 1,650,000 1997 72.58 59.08 1977 16,732 sq. ft. 71.57 / sq. ft. 94
130 182,761 1.55 1,535,000 1997 67.92 0.00 1986 55 rooms 18,955 / room N/A
115 161,468 1.72 1,750,000 1997 57.03 36.63 1970 130 units 7,677 / unit 98
38 121,112 1.45 1,370,000 1997 70.39 62.72 1986 45 units 21,430 / unit 98
- ------------------------------------------------------------------------------------------------------------------------------------
80 122,856 1.40 1,330,000 1997 70.98 57.47 1977 36,390 sq. ft. 25.94 / sq. ft. 90
95 117,348 1.43 1,200,000 1997 73.33 59.38 1984 25,925 sq. ft. 33.94 / sq. ft. 100
54 106,248 1.42 1,250,000 1997 64.00 51.82 1984 28,350 sq. ft. 28.22 / sq. ft. 95
57 107,513 1.55 1,150,000 1997 69.57 64.20 1946 111 pads 7,207 / pad 75
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Largest Retail/Commercial Tenant
Initial -----------------------------------------------------
Control Reserves Underwriting Area Leased Lease Control
No. At Closing Reserves Name (Sq. Ft.) Exp Date No.
--- ---------- -------- ---- --------- -------- ---
<S> <C> <C> <C> <C> <C> <C>
138 -- 4% per room 138
124 -- 4% per room 124
101 45,038 0.16 per sq. ft. Reynolds, Inc. 67,423 12/31/1998 101
83 23,063 0.12 per sq. ft. Sports Authority 45,540 01/31/2013 83
- ------------------------------------------------------------------------------------------------------------------------------------
98 26,750 0.15 per sq. ft. Lowes Food Stores, Inc 27,360 05/31/2007 98
94 29,233 0.24 per sq. ft. A Nu You Salon & Spa 8,734 05/31/2002 94
74 23,953 0.36 per sq. ft. Goodwill Industries 10,200 11/30/2002 74
108 5,000 263 per unit 108
73 145,500 0.20 per sq. ft. Medical Control, Inc. ( 300 &400) 28,421 09/10/2007 73
- ------------------------------------------------------------------------------------------------------------------------------------
151 3,750 250 per unit 151
64 1,500 0.18 per sq. ft. Westport Mgmt - 202 Post Road 2,680 04/30/1998 64
17 20,000 0.16 per sq. ft. Thrift Town 22,584 10/31/2003 17
88 3,500 0.16 per sq. ft. Artistic Stairs, Ltd. 14,196 01/31/1998 88
123 -- 225 per unit 123
- ------------------------------------------------------------------------------------------------------------------------------------
102 -- 0.16 per sq. ft. Pacificsport Print 3,836 05/19/1999 102
58 -- 0.20 per sq. ft. OneCare 6,445 10/31/2001 58
9 -- 0.15 per sq. ft. 9
- ------------------------------------------------------------------------------------------------------------------------------------
137 -- 4% per room 137
131 29,125 4% per room 131
12 29,313 0.15 per sq. ft. 12
150 161,175 225 per unit 150
126 -- 250 per unit 126
- ------------------------------------------------------------------------------------------------------------------------------------
33 32,438 301 per unit 33
6 7,125 0.10 per sq. ft. 6
157 6,624 225 per unit 157
41 45,800 0.19 per sq. ft. Prudential Ballard 6,000 10/31/1998 41
111 -- 250 per unit 111
- ------------------------------------------------------------------------------------------------------------------------------------
149 32,325 228 per unit 149
56 50,625 46 per pad 56
67 1,563 0.15 per sq. ft. 67
51 35,385 44 per pad 51
36 7,500 0.23 per sq. ft. 7-Eleven 2,400 08/31/2001 36
- ------------------------------------------------------------------------------------------------------------------------------------
106 -- 0.15 per sq. ft. 106
23 15,500 306 per unit 23
128 -- 260 per unit 128
155 34,500 225 per unit 155
159 24,419 278 per unit 159
- ------------------------------------------------------------------------------------------------------------------------------------
104 -- 250 per unit 104
121 -- 4% per room 121
40 13,594 0.20 per sq. ft. Blockbuster Video 6,000 09/01/1999 40
21 -- 0.26 per sq. ft. College Street CVS, Inc 10,125 10/14/2017 21
105 -- 225 per unit 105
- ------------------------------------------------------------------------------------------------------------------------------------
125 -- 4% per room 125
75 9,825 0.22 per sq. ft. 75
112 95,000 261 per unit 112
30 26,100 0.34 per sq. ft. 30
66 1,313 0.15 per sq. ft. 66
- ------------------------------------------------------------------------------------------------------------------------------------
97 38,313 25 per pad 97
26 2,000 0.15 per sq. ft. Kenny Rogers Roasters 2,400 05/31/2002 26
130 -- 4% per room 130
115 91,500 250 per unit 115
38 16,500 257 per unit 38
- ------------------------------------------------------------------------------------------------------------------------------------
80 -- 0.16 per sq. ft. 80
95 -- 0.15 per sq. ft. 95
54 -- 0.15 per sq. ft. 54
57 13,125 45 per pad 57
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNEX B
- ------------------------------------------------------------------------------------------------------------------------------------
[LOGO MERRILL LYNCH] MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 9, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
$ 618,448,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
TOTAL POOL SIZE = $696.8 MILLION (148 LOANS / 155 PROPERTIES)
- ---------------------------------------------------------------------------------------------------------------------------------
Moody's/S&P/ Initial
Fitch Certificate % of. Credit Pass-
Class Rating (1) Balances(2) Initial Pool(2) Support Bond Type Through Rate
----- ---------- ----------- --------------- ------- --------- ------------
Offered Certificates:
<S> <C> <C> <C> <C> <C> <C>
A-1 Aaa/AAA/AAA $124,018,000 17.8% 28.0% Fixed Coupon %
A-2 Aaa/AAA/AAA 377,708,000 54.2 28.0 Fixed Coupon %
B Aa2/AA/AA 27,874,000 4.0 24.0 Net WAC Coupon (7)
C A2/A/A 41,811,000 6.0 18.0 Net WAC Coupon (7)
D Baa2/BBB/NR 34,842,000 5.0 13.0 Net WAC Coupon (7)
E Baa3/BBB-/NR 12,195,000 1.7 11.3 Net WAC Coupon (7)
Private Certificates:
F (6) 38,326,000 5.5 5.8 Fixed Coupon %
G (6) 6,968,000 1.0 4.8 Fixed Coupon %
H (6) 12,195,000 1.8 3.0 Fixed Coupon %
J (6) 6,969,000 1.0 2.0 Fixed Coupon %
K (6) 13,936,931 2.0 0 Fixed Coupon %
IO Aaa/NR/AAA (4) N/A N/A Variable I/O Strip (5)
<CAPTION>
- ------------------------------------------------------------------------------
Moody's/S&P/ Weighted Cash Flow or
Fitch Average Principal
Class Rating (1) Life (years)(3) Window(3)
----- ---------- --------------- ---------
Offered Certificates:
<S> <C> <C> <C>
A-1 Aaa/AAA/AAA 5.0 01/98-05/05
A-2 Aaa/AAA/AAA 9.7 05/05-12/07
B Aa2/AA/AA 9.9 12/07-12/07
C A2/A/A 10.4 12/07-11/09
D Baa2/BBB/NR 12.4 11/09-08/11
E Baa3/BBB-/NR 13.7 08/11-05/12
Private Certificates:
F (6) 15.3 05/12-10/15
G (6) 18.5 10/15-02/17
H (6) 19.8 02/17-02/19
J (6) 22.1 02/19-02/21
K (6) 24.4 02/21-12/22
IO Aaa/NR/AAA 10.1 01/98-12/22
- ----------------
<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 in the prospectus supplement.
(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.
(7) The Pass-Through Rates applicable to the Class B, Class C, Class D and Class E Certificates will equal the Weighted Average Net
Mortgage Rate minus --%, --%, --% and --%, respectively.
- ------------------------------------------------------------------------------------------------------------------------------------
</FN>
</TABLE>
KEY FEATURES:
o PASS-THROUGH STRUCTURE: Senior/subordinated, sequential pay pass-through
bonds.
o UNDERWRITER: Merrill Lynch & Co.
o DEPOSITOR: Merrill Lynch Mortgage Investors, Inc.
o MASTER SERVICER: GE Capital Loan Services, Inc. (formerly GE Capital Asset
Management Corporation)
o SPECIAL SERVICER: CRIIMI MAE Services Limited Partnership.
o TRUSTEE: State Street Bank and Trust Company
o MORTGAGE LOAN SELLERS: GE Capital Access, Inc. (74%) ("GECA"), Merrill
Lynch Mortgage Capital, Inc. (26%) ("MLMC").
o INTEREST ACCRUAL PERIOD: 1st to the 1st.
o DISTRIBUTION: The latter of the 10th day of the month or the 4th business
day after the Determination Date.
o DETERMINATION DATE: The 5th business day of the month.
o DELIVERY: The Depository Trust Company ("DTC") through Cede & Co.
o ERISA: Only Classes A-1, A-2 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.
- ------------------
[LOGO MERRILL LYNCH]
(212) 449-3860
- ------------------
- --------------------------------------------------------------------------------
THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY PURSUANT TO A DEFINITIVE
PROSPECTUS AND 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 ALL RELEVANT
INFORMATION RELATING TO THE SECURITIES AND UNDERLYING ASSETS DESCRIBED HEREIN,
PARTICULARLY WITH RESPECT TO THE RISKS AND SPECIAL CONSIDERATIONS INVOLVED WITH
AN INVESTMENT IN 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.
- --------------------------------------------------------------------------------
B-1
<PAGE>
ANNEX B
- --------------------------------------------------------------------------------
[LOGO MERRILL LYNCH] MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 9, 1997
- --------------------------------------------------------------------------------
$ 618,448,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
TOTAL POOL SIZE = $696.8 MILLION (148 LOANS / 155 PROPERTIES)
OVERVIEW
o The transaction is collateralized by 148 multifamily and commercial loans
with an aggregate principal balance of approximately $696.8 million located
throughout 32 states.
o 95 of the loans, or 74% of the pool balance, were originated or acquired
through GECA. Merrill Lynch's Commercial and Multifamily Conduit Program
originated or acquired fifty-three (53) of the mortgage loans, making up
26% of the total pool balance.
o Except where otherwise indicated, percentages (%) represent principal
amount of loan or loans compared to the Initial Pool Balance.
- --------------------------------------------------------------------------------
LOAN INFORMATION
INITIAL POOL BALANCE: $696.8 million (148 loans / 155
properties)
AVG./MAX BALANCE: $4.7 million/$17.6 million
LOAN TYPES(1): All fixed rate; 29% balloons, 59%
ARD, 12% fully amortizing
GROSS WAC: 7.86% (Range = 6.97% - 9.74%)
NET WAC: 7.79%
WTD. AVG. SEASONING: 2 months (99% originated in 1997)
WTD. AVG. RTM: 11.75 years
WTD. AVG. AMORTIZATION: 27.33 years
WTD. AVG. DSCR: 1.37x
CALL PROTECTION: Generally, all loans are currently locked
out or have yield maintenance.
BORROWER CONCENTRATION: None greater than 5% of the pool
CROSS COLLATERALIZATION: Three of the Mortgage Loans (1%), are
cross-collateralized or cross-defaulted
with one or more Mortgage Loans in
the Mortgage Pool.
WAC = Weighted Average Mortgage Rate
RTM = Remaining Term to Maturity or Anticipated Repayment Date
(1) Percentages reflect rounding to the nearest whole number.
- --------------------------------------------------------------------------------
- -------------------------------------------------
PROPERTY TYPE DISTRIBUTION
# OF % OF
TYPE PROPS. POOL DSCR
---- ------ ---- ----
Multifamily: 50 35.3% 1.32x
Retail: 38 31.1 1.38x
Self Storage: 29 10.1 1.46x
Man. Housing: 10 8.4 1.33x
Hospitality: 15 6.4 1.49x
Industrial: 8 6.1 1.40x
Office: 3 1.6 1.40x
Med. Office: 2 1.0 1.45x
TOT/AVG. 155 100.0% 1.37X
- -------------------------------------------------
STATE DISTRIBUTION
(Total of 32 States)
# OF % OF
STATE PROPS. POOL
----- ------ ----
Texas: 32 14.6%
California: 26 14.2
Pennsylvania: 8 8.1
Florida: 9 7.2
All others <5%: 80 55.9
-- -----
TOTALS 155 100.0%
- -------------------------------------------------
- --------------------------------------------------------------------------------
CUT-OFF LTV'S
# OF % OF CUMULATIVE
LTV RANGE LOANS POOL % OF POOL
-----------------------------------------------------------
Credit Lease 1 .21 .21
47.94% - 50.00% 1 .17 .38
50.01% - 60.00% 8 3.70 4.08
60.01% - 70.00% 39 19.26 23.34
70.01% - 80.00% 94 69.26 92.60
80.01% - 81.01% 5 7.40 100.00
-------------------------------------------------------------
TOTALS 148 100.00% 100.00%
Weighted Average Cut-Off LTV = 73.67%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEBT SERVICE COVERAGE RATIOS
# OF % OF CUMULATIVE %
DSCR RANGE LOANS POOL OF POOL
--------------------------------------------------------------
Credit Lease 1 .21 .21
1.20x - 1.29x 39 33.86 34.07
1.30x - 1.39x 48 29.87 63.95
1.40x - 1.49x 33 23.08 87.02
1.50x - 1.59x 13 5.53 92.55
1.60x - 1.69x 7 5.52 98.07
1.70x - 1.79x 4 1.14 99.22
1.90x - 1.99x 2 0.56 99.77
2.00x - 2.18x 1 0.23 100.00
--------------------------------------------------------------
TOTALS 148 100.00% 100.00%
Weighted Average DSCR = 1.37X
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ORIGINAL TERM
# OF LOANS % OF POOL
---------------------------------------------------------------
5 Yr Balloon 1 .21
6 to 9 Yr Balloon / ARD 10 7.73
10 Yr Balloon / ARD 101 66.09
11 to 14 Yr Balloon / ARD 6 7.80
15 Yr Balloon / ARD 7 4.10
16 to 20 Yr Balloon 2 1.03
21 to 25 Yr Balloon 2 1.43
Fully Amortizing 19 11.61
----------------------------- ---------------- ----------------
TOTALS 148 100.00%
- --------------------------------------------------------------------------------
B-2
<PAGE>
<TABLE>
<CAPTION>
ANNEX B
- ------------------------------------------------------------------------------------------------------------------------------------
[LOGO MERRILL LYNCH] MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 9, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
$ 618,448,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
TOTAL POOL SIZE = $696.8 MILLION (148 LOANS / 155 PROPERTIES)
DESCRIPTION OF PROPERTY TYPES
LOAN/CREDIT CHARACTERISTICS BY PROPERTY TYPE
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER % OF
INITIAL POOL OF INITIAL WTD. WTD. AVG. WTD. AVG.
BALANCE MORTGAGE POOL AVG. CUT-OFF REPAYMENT
PROPERTY TYPES (MM) PROPS. BALANCE DSCR DATE LTV (%) LTV (%0)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MULTIFAMILY $246.3 50 35.34 1.32x 77.77% 54.68%
RETAIL
ANCHORED 189.9 25 27.25 1.37x 72.64 57.83
UNANCHORED 25.2 12 3.62 1.41x 69.30 58.64
CREDIT NET LEASE 1.5 1 0.21 0.00 0.00 0.00
------ ---- ------ --- ----- -----
RETAIL SUBTOTALS 216.6 38 31.08 1.38x 72.24 57.92
SELF STORAGE 70.7 29 10.14 1.46x 68.73 51.65
MAN. HOUSING 58.7 10 8.42 1.33x 74.20 66.67
HOSPITALITY 44.4 15 6.38 1.49x 66.15 20.40
INDUSTRIAL 42.2 8 6.06 1.40x 72.66 59.30
OFFICE 11.3 3 1.63 1.40x 70.35 61.26
MED. OFFICE 6.6 2 .95 1.45x 77.76 65.47
- -----------------------------------------------------------------------------------------------------------------------------------
TOTALS/WTD. AVG./
AVERAGES $696.8 155 100.00% 1.37X 73.67% 54.69%
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
AVG. INITIAL HIGHEST LOAN PER SQ.
POOL CUT-OFF DATE AVG. OCCU- FT. UNIT,
BALANCE BALANCE PROPERTY PANCY PAD, OR
PROPERTY TYPES (MM) (MM) SIZE (%) ROOM
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MULTIFAMILY $4.9 $15.8 271 units 96.9% 31,237
RETAIL
ANCHORED 7.6 17.6 191,179 sq. ft. 96.5 60
UNANCHORED 2.1 3.4 43,082 sq. ft. 96.8 63
CREDIT NET LEASE 1.5 1.5 10,125 sq. ft. 100.0 144
---- ----- --------------- ----- ------
RETAIL SUBTOTALS 5.7 17.6 172,727 sq. ft. 96.5 61
SELF STORAGE 2.4 6.1 79,808 sq. ft. 88.2 42
MAN. HOUSING 5.9 15.2 441 pads 96.9 23,184
HOSPITALITY 3.0 8.8 112 rooms 0.0 35,179
INDUSTRIAL 5.3 9.4 183,557 sq. ft. 96.5 41
OFFICE 3.8 7.2 81,035 sq. ft. 95.84 64
MED. OFFICE 3.3 3.9 39,368 sq. ft. 96.36 87
- --------------------------------------------------------------------------------------------------------------
TOTALS/WTD. AVG./
AVERAGES $4.5 $17.6 74,728 89.7% $15,264
- --------------------------------------------------------------------------------------------------------------
</TABLE>
B-3
<PAGE>
ANNEX B
[LOGO MERRILL LYNCH] MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 9, 1997
- --------------------------------------------------------------------------------
$ 618,448,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
TOTAL POOL SIZE = $696.8 MILLION (148 LOANS / 155 PROPERTIES)
PREPAYMENT PROTECTION
o Currently 95% of the loans are locked out and 4% are subject to yield
maintenance charges.
o As described further, 93% of the loans are currently locked out, followed
by yield maintenance charges.
o All of the loans have yield maintenance charges which are calculated at
flat-to-treasuries.
<TABLE>
<CAPTION>
TABLE 1
PREPAYMENT PREMIUM CATEGORIES
- ------------------------------------------------------------------------------------------------------------
NUMBER INITIAL % OF WTD. AVG.
OF POOL INITIAL STATED LOCKOUT
MORTGAGE BALANCE POOL REMAINING TERM
PREPAYMENT RESTRICTION (A) LOANS (MM) BALANCE TERM (MO.) (MO.)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lockout, then Yield Maintenance 134 $648.2 93.0% 141 53
Yield Maintenance, then Percentage 5 20.2 2.9 118 0
Premium
Lockout, then Percentage Premium 4 9.7 1.4 200 74
Lockout, then Defeasance 1 7.2 1.0 120 117
Yield Maintenance Only 2 6.9 1.0 116 0
Percentage Premium Only 2 4.7 0.7 118 0
- ------------------------------------------------------------------------------------------------------------
TOTALS/WTD. AVG./AVG. 148 $696.8 100.0% 141 52
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------
% OF WTD. AVG/ AVERAGE # OF
STATED REMAINING MONTHS OPEN TO
TERM OF PREPAYMENT
PREPAYMENT RESTRICTION (A) LOCKOUT PRIOR TO MATURITY
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Lockout, then Yield Maintenance 38% 9
Yield Maintenance, then Percentage 0 11
Premium
Lockout, then Percentage Premium 37 34
Lockout, then Defeasance 30 3
Yield Maintenance Only 0 6
Percentage Premium Only 0 24
- ---------------------------------------------------------------------------------------------
TOTALS/WTD. AVG./AVG. 36% 9
- ---------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Average Term to End of Lockout: 52 months
Weighted Average Number of Months Loans are Open to Prepayment Prior to Maturity: 9 months
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ALLOCATION OF PREPAYMENT PREMIUMS
Prepayment premiums will be allocated between the REMIC Regular Certificates as
follows:
o Any yield maintenance charges and percentage prepayment premiums 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.
- --------------------------------------------------------------------------------
% of Prepayment Premium (Pass-Through Rate - Discount Rate)
= -------------------------------------
Allocated to Non-IO Certificates (Mortgage Rate - Discount Rate)
- --------------------------------------------------------------------------------
o Remainder distributed to Class IO.
o In general, this formula provides for an increase in the allocation of
prepayment premiums to the Sequential Pay Certificates as interest rates
decrease and a decrease in the allocation to such classes as interest rates
rise.
o The "Discount Rate" applicable to any Class of Certificates will be equal
to the yield (when compounded monthly) on the U.S. Treasury issue (primary
issue) with a maturity date closest to the maturity date for the prepaid
Mortgage Loan. In the event that there are two such U.S. Treasury issues
(a) with the same coupon, the issue with the lower yield will be utilized,
and (b) with maturity dates equally close to the maturity date for the
prepaid Mortgage Loan, the issue with the earliest maturity date will be
utilized.
B-4
<PAGE>
ANNEX B
[LOGO MERRILL LYNCH] MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 9, 1997
- --------------------------------------------------------------------------------
$ 618,448,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
TOTAL POOL SIZE = $696.8 MILLION (148 LOANS / 155 PROPERTIES)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT LOCK-OUT /PREMIUM ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT RESTRICTION ASSUMING NO PREPAYMENT
--------------------------------------------------------------------------------------------------------
CURRENT 12 MO. 24 MO. 36 MO. 48 MO. 60 MO. 72 MO. 84 MO.
PREPAYMENT DEC DEC DEC DEC DEC DEC DEC DEC
RESTRICTION 1997 1998 1999 2000 2001 2002 2003 2004
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 95.4% 95.1% 91.2% 57.3% 32.9% 17.9% 17.5% 18.8%
Yield Maintenance 3.9 3.9 7.8 41.4 65.8 79.6 77.6 80.4
- ---------------------------------------------------------------------------------------------------------------------------------
% Premium
5.00% - greater 0.7 0.7 0.4 0.4 0.0 0.0 0.0 0.0
4.00 - 4.99% 0.0 0.3 0.3 0.3 0.4 0.0 0.0 0.0
3.00 - 3.99% 0.0 0.0 0.3 0.3 0.3 0.4 0.0 0.0
2.00 - 2.99% 0.0 0.0 0.0 0.3 0.3 0.3 0.4 0.0
1.00 - 1.99% 0.0 0.0 0.0 0.0 0.3 0.6 0.9 0.7
Open 0.0 0.0 0.0 0.0 0.0 1.2 3.6 0.0
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mortgage Pool
Balance ($ millions) $696.8 $689.1 $680.8 $671.8 $662.0 $650.1 $638.6 $577.3
% of Initial Pool
Balance 100.00% 98.9% 97.7% 96.4% 95.0% 93.3% 91.6% 82.8%
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT LOCK-OUT/PREMIUM ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT RESTRICTION ASSUMING NO PREPAYMENT
------------------------------------------------------------------------------------------------------
96 MO. 108 MO. 120 MO. 132 MO. 144 MO. 156 MO. 168 MO. 180 MO.
PREPAYMENT DEC DEC DEC DEC DEC DEC DEC DEC
RESTRICTION 2005 2006 2007 2008 2009 2010 2011 2012
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 12.8% 12.0% 2.2% 0.0% 0.0% 0.0% 0.0% 0.0%
Yield Maintenance 83.7 83.6 88.3 89.8 93.7 96.0 95.4 76.0
- --------------------------------------------------------------------------------------------------------------------------------
% Premium
5.00% - greater 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
4.00 - 4.99% 0.0 0.0 3.0 3.2 0.0 0.0 0.0 0.0
3.00 - 3.99% 2.8 0.0 0.0 0.0 3.9 4.0 4.6 6.4
2.00 - 2.99% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1.00 - 1.99% 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0
Open 0.7 4.1 6.5 7.0 2.4 0.0 0.0 17.6
- --------------------------------------------------------------------------------------------------------------------------------
TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mortgage Pool
Balance ($ millions) $564.8 $551.3 $145.7 $131.1 $104.7 $97.0 $80.4 $54.4
% of Initial Pool
Balance 81.1% 79.1% 20.9% 18.8% 15.0% 13.9% 11.5% 7.8%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-5
<PAGE>
ANNEX B
[LOGO MERRILL LYNCH] MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 9, 1997
- --------------------------------------------------------------------------------
$ 618,448,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
TOTAL POOL SIZE = $696.8 MILLION (148 LOANS / 155 PROPERTIES)
SPECIAL SERVICER/LOAN MODIFICATIONS
The initial Special Servicer will be CRIIMI MAE Services Limited Partnership.
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 be permitted to extend the date on which any Balloon
Payment is scheduled to be due.
REMOVAL OF THE SPECIAL SERVICER/CONTROLLING CLASS REPRESENTATIVE
The Pooling and Servicing Agreement permits the holder (or holders) or the
majority of the Voting Rights allocated to holders of the Controlling Class of
Sequential Pay Certificates to replace the Special Servicer. The "Controlling
Class of Sequential Pay Certificates" is the Class of Sequential Pay
Certificates that has the latest alphabetical Class designation and that has a
Certificate Balance that is greater than 20% of its initial Certificate Balance
and 1% of the aggregate Certificate Balance of all Sequential Pay Certificates
(or if no Class of Sequential Pay Certificates has a certificate Balance that is
greater than 20% of its initial Certificate Balance and 1% of the aggregate
certificate Balance of all Sequential Pay Certificates, the Class of Sequential
Pay Certificates with the latest alphabetical class designation). The Class A-1
and Class A-2 Certificates will 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-C2
- ------------------------------------------------------------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS A-1
BOND TYPE - FIXED
Settlement Date: 12/30/97 Current Balance: $124,018,000
Next Payment: 1/10/98 Current Coupon: 6.712%
*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 50.00 CPR
------------- ------------- ------------- ------------- ------------- -------------
Price Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur
----- ----- --- ----- --- ----- --- ----- --- ----- --- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
99-16 6.89 4.00 6.90 3.95 6.90 3.91 6.90 3.87 6.91 3.81 6.92 3.72
99-20 6.86 6.86 6.87 6.87 6.88 6.89
99-24 6.83 6.83 6.84 6.84 6.85 6.86
99-28 6.80 6.80 6.80 6.81 6.81 6.82
100-00 6.76 4.01 6.77 3.96 6.77 3.92 6.78 3.88 6.78 3.82 6.79 3.72
100-04 6.73 6.74 6.74 6.74 6.75 6.76
100-08 6.70 6.71 6.71 6.71 6.72 6.72
100-12 6.67 6.68 6.68 6.68 6.68 6.69
100-16 6.64 4.02 6.64 3.97 6.65 3.92 6.65 .3.89 6.65 3.83 6.66 3.73
100-20 6.61 6.61 6.62 6.62 6.62 6.62
100-24 6.58 6.58 6.58 6.59 6.59 6.59
100-28 6.55 6.55 6.55 6.55 6.56 6.56
101-00 6.52 4.03 6.52 3.98 6.52 3.93 6.52 3.90 6.52 3.84 6.52 3.74
101-04 6.49 6.49 6.49 6.49 6.49 6.49
101-08 6.46 6.46 6.46 6.46 6.46 6.46
101-12 6.43 6.43 6.43 6.43 6.43 6.43
101-16 6.40 4.03 6.40 3.98 6.40 3.94 6.40 3.90 6.40 3.85 6.39 3.75
101-20 6.37 6.37 6.37 6.36 6.36 6.36
101-24 6.34 6.33 6.33 6.33 6.33 6.33
101-28 6.31 6.30 6.30 6.30 6.30 6.30
102-00 6.28 4.04 6.27 3.99 6.27 3.95 6.27 3.91 6.27 3.85 6.26 3.76
102-04 6.25 6.24 6.24 6.24 6.24 6.23
102-08 6.22 6.21 6.21 6.21 6.20 6.20
102-12 6.19 6.18 6.18 6.18 6.17 6.17
102-16 6.16 4.05 6.15 4.00 6.15 3.96 6.15 3.92 6.14 3.86 6.13 3.77
WAL 5.0 4.9 4.9 4.8 4.7 4.6
1st Prin 1/10/98 1/10/98 1/10/98 1/10/98 1/10/98 1/10/98
Mat. 5/10/05 4/10/05 3/10/05 2/10/05 1/10/05 1/10/05
</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-7
<PAGE>
<TABLE>
<CAPTION>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
- ------------------------------------------------------------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS A-2
BOND TYPE - FIXED
Settlement Date: 12/30/97 Current Balance: $377,708,000
Next Payment: 1/10/98 Current Coupon: 6.796%
*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 50.00 CPR
------------- ------------- ------------- ------------- ------------- -------------
Price Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur
----- ----- --- ----- --- ----- --- ----- --- ----- --- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
99-16 6.94 6.84 6.94 6.84 6.94 6.83 6.94 6.82 6.94 6.81 6.94 6.80
99-20 6.92 6.92 6.92 6.92 6.92 6.93
99-24 6.90 6.90 6.91 6.91 6.91 6.91
99-28 6.89 6.89 6.89 6.89 6.89 6.89
100-00 6.87 6.85 6.87 6.85 6.87 6.84 6.87 6.83 6.87 6.82 6.87 6.81
100-04 6.85 6.85 6.85 6.85 6.85 6.85
100-08 6.83 6.83 6.83 6.83 6.83 6.83
100-12 6.81 6.81 6.81 6.81 6.82 6.82
100-16 6.80 6.86 6.80 6.86 6.80 6.85 6.80 6.84 6.80 6.83 6.80 6.82
100-20 6.78 6.78 6.78 6.78 6.78 6.78
100-24 6.76 6.76 6.76 6.76 6.76 6.76
100-28 6.74 6.74 6.74 6.74 6.74 6.74
101-00 6.72 6.87 6.72 6.87 6.72 6.86 6.72 6.85 6.72 6.84 6.73 6.83
101-04 6.71 6.71 6.71 6.71 6.71 6.71
101-08 6.69 6.69 6.69 6.69 6.69 6.69
101-12 6.67 6.67 6.67 6.67 6.67 6.67
101-16 6.65 6.88 6.65 6.87 6.65 6.87 6.65 6.86 6.65 6.85 6.65 6.84
101-20 6.63 6.63 6.63 6.64 6.64 6.64
101-24 6.62 6.62 6.62 6.62 6.62 6.62
101-28 6.60 6.60 6.60 6.60 6.60 6.60
102-00 6.58 6.89 6.58 6.88 6.58 6.88 6.58 6.87 6.58 6.86 6.58 6.84
102-04 6.56 6.56 6.56 6.56 6.56 6.57
102-08 6.55 6.55 6.55 6.55 6.55 6.55
102-12 6.53 6.53 6.53 6.53 6.53 6.53
102-16 6.51 6.90 6.51 6.89 6.51 6.89 6.51 6.88 6.51 6.87 6.51 6.85
WAL 9.7 9.7 9.6 9.6 9.6 9.6
1st Prin 5/10/05 4/10/05 3/10/05 2/10/05 1/10/05 1/10/05
Mat. 12/10/07 12/10/07 12/10/07 12/10/07 12/10/07 12/10/07
</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-8
<PAGE>
<TABLE>
<CAPTION>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
- ------------------------------------------------------------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS B
BOND TYPE - NET WAC
Settlement Date: 12/30/97 Current Balance: $27,874,000
Next Payment: 1/10/98 Current Coupon: 6.786%
*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 50.00 CPR
------------- ------------- ------------- ------------- ------------- -------------
Price Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur
----- ----- --- ----- --- ----- --- ----- --- ----- --- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
98-16 7.02 6.98 7.02 6.98 7.02 6.98 7.02 6.98 7.02 6.98 7.02 6.98
98-20 7.00 7.00 7.00 7.00 7.00 7.00
98-24 6.98 6.98 6.98 6.98 6.98 6.98
98-28 6.96 6.96 6.96 6.96 6.96 6.96
99-00 6.95 6.99 6.95 6.99 6.95 6.99 6.94 6.99 6.94 6.99 6.94 6.99
99-04 6.93 6.93 6.93 6.93 6.93 6.93
99-08 6.91 6.91 6.91 6.91 6.91 6.91
99-12 6.89 6.89 6.89 6.89 6.89 6.89
99-16 6.87 7.00 6.87 7.00 6.87 7.00 6.87 7.00 6.87 7.00 6.87 7.00
99-20 6.86 6.86 6.86 6.86 6.85 6.85
99-24 6.84 6.84 6.84 6.84 6.84 6.84
99-28 6.82 6.82 6.82 6.82 6.82 6.82
100-00 6.80 7.01 6.80 7.01 6.80 7.01 6.80 7.01 6.80 7.01 6.80 7.01
100-04 6.79 6.78 6.78 6.78 6.78 6.78
100-08 6.77 6.77 6.77 6.77 6.77 6.77
100-12 6.75 6.75 6.75 6.75 6.75 6.75
100-16 6.73 7.02 6.73 7.02 6.73 7.02 6.73 7.02 6.73 7.02 6.73 7.02
100-20 6.71 6.71 6.71 6.71 6.71 6.71
100-24 6.70 6.70 6.70 6.70 6.70 6.70
100-28 6.68 6.68 6.68 6.68 6.68 6.68
101-00 6.66 7.03 6.66 7.03 6.66 7.03 6.66 7.03 6.66 7.03 6.66 7.03
101-04 6.64 6.64 6.64 6.64 6.64 6.64
101-08 6.63 6.63 6.63 6.63 6.63 6.63
101-12 6.61 6.61 6.61 6.61 6.61 6.61
101-16 6.59 7.04 6.59 7.04 6.59 7.04 6.59 7.04 6.59 7.04 6.59 7.04
WAL 9.9 9.9 9.9 9.9 9.9 9.9
1st Prin 12/10/07 12/10/07 12/10/07 12/10/07 12/10/07 12/10/07
Mat. 12/10/07 12/10/07 12/10/07 12/10/07 12/10/07 12/10/07
</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-9
<PAGE>
<TABLE>
<CAPTION>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
- ------------------------------------------------------------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS C
BOND TYPE - NET WAC
Settlement Date: 12/30/97 Current Balance: $41,811,000
Next Payment: 1/10/98 Current Coupon: 6.913%
*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 50.00 CPR
------------- ------------- ------------- ------------- ------------- -------------
Price Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur
----- ----- --- ----- --- ----- --- ----- --- ----- --- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
98-16 7.15 7.14 7.15 7.12 7.15 7.10 7.15 7.09 7.15 7.07 7.15 7.03
98-20 7.13 7.13 7.13 7.13 7.13 7.13
98-24 7.11 7.11 7.11 7.11 7.11 7.11
98-28 7.10 7.10 7.10 7.10 7.10 7.10
99-00 7.08 7.15 7.08 7.13 7.08 7.11 7.08 7.10 7.08 7.08 7.08 7.04
99-04 7.06 7.06 7.06 7.06 7.06 7.06
99-08 7.04 7.04 7.04 7.04 7.04 7.04
99-12 7.03 7.03 7.03 7.03 7.03 7.03
99-16 7.01 7.16 7.01 7.14 7.01 7.12 7.01 7.11 7.01 7.09 7.01 7.05
99-20 6.99 6.99 6.99 6.99 6.99 6.99
99-24 6.97 6.97 6.97 6.97 6.97 6.97
99-28 6.96 6.96 6.96 6.96 6.95 6.95
100-00 6.94 7.17 6.94 7.15 6.94 7.13 6.94 7.12 6.94 7.10 6.94 7.07
100-04 6.92 6.92 6.92 6.92 6.92 6.92
100-08 6.90 6.90 6.90 6.90 6.90 6.90
100-12 6.89 6.89 6.89 6.89 6.88 6.88
100-16 6.87 7.18 6.87 7.16 6.87 7.15 6.87 7.13 6.87 7.11 6.87 7.08
100-20 6.85 6.85 6.85 6.85 6.85 6.85
100-24 6.83 6.83 6.83 6.83 6.83 6.83
100-28 6.82 6.82 6.82 6.82 6.82 6.81
101-00 6.80 7.19 6.80 7.17 6.80 7.16 6.80 7.14 6.80 7.12 6.80 7.09
101-04 6.78 6.78 6.78 6.78 6.78 6.78
101-08 6.77 6.77 6.76 6.76 6.76 6.76
101-12 6.75 6.75 6.75 6.75 6.75 6.75
101-16 6.73 7.20 6.73 7.18 6.73 7.17 6.73 7.15 6.73 7.13 6.73 7.10
WAL 10.4 10.3 10.3 10.3 10.2 10.1
1st Prin 12/10/07 12/10/07 12/10/07 12/10/07 12/10/07 12/10/07
Mat. 11/10/09 10/10/09 8/10/09 6/10/09 2/10/09 11/10/08
</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-C2
- ------------------------------------------------------------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS D
BOND TYPE - NET WAC
Settlement Date: 12/30/97 Current Balance: $34,842,000
Next Payment: 1/10/98 Current Coupon: 7.176%
*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 50.00 CPR
------------- ------------- ------------- ------------- ------------- -------------
Price Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur
----- ----- --- ----- --- ----- --- ----- --- ----- --- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
98-16 7.41 7.89 7.41 7.87 7.41 7.86 7.41 7.84 7.42 7.80 7.42 7.73
98-20 7.40 7.40 7.40 7.40 7.40 7.40
98-24 7.38 7.38 7.38 7.38 7.38 7.38
98-28 7.37 7.37 7.37 7.37 7.37 7.37
99-00 7.35 7.90 7.35 7.89 7.35 7.87 7.35 7.85 7.35 7.82 7.35 7.74
99-04 7.34 7.34 7.33 7.33 7.33 7.33
99-08 7.32 7.32 7.32 7.32 7.32 7.32
99-12 7.30 7.30 7.30 7.30 7.30 7.30
99-16 7.29 7.92 7.29 7.90 7.29 7.88 7.29 7.87 7.29 7.83 7.29 7.75
99-20 7.27 7.27 7.27 7.27 7.27 7.27
99-24 7.26 7.26 7.26 7.26 7.26 7.25
99-28 7.24 7.24 7.24 7.24 7.24 7.24
100-00 7.22 7.93 7.22 7.91 7.22 7.90 7.22 7.88 7.22 7.84 7.22 7.77
100-04 7.21 7.21 7.21 7.21 7.21 7.21
100-08 7.19 7.19 7.19 7.19 7.19 7.19
100-12 7.18 7.18 7.18 7.18 7.18 7.17
100-16 7.16 7.94 7.16 7.93 7.16 7.91 7.16 7.89 7.16 7.86 7.16 7.78
100-20 7.15 7.15 7.15 7.15 7.14 7.14
100-24 7.13 7.13 7.13 7.13 7.13 7.13
100-28 7.12 7.12 7.11 7.11 7.11 7.11
101-00 7.10 7.96 7.10 7.94 7.10 7.92 7.10 7.91 7.10 7.87 7.09 7.79
101-04 7.08 7.08 7.08 7.08 7.08 7.08
101-08 7.07 7.07 7.07 7.07 7.07 7.06
101-12 7.05 7.05 7.05 7.05 7.05 7.05
101-16 7.04 7.97 7.04 7.95 7.04 7.94 7.04 7.92 7.04 7.88 7.03 7.81
WAL 12.4 12.3 12.3 12.2 12.1 12.0
1st Prin 11/10/09 10/10/09 8/10/09 6/10/09 2/10/09 11/10/08
Mat. 8/10/11 8/10/11 8/10/11 8/10/11 8/10/11 6/10/11
</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-C2
- ------------------------------------------------------------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS E
BOND TYPE - NET WAC
Settlement Date: 12/30/97 Current Balance: $12,195,000
Next Payment: 1/10/98 Current Coupon: 7.372%
*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 50.00 CPR
------------- ------------- ------------- ------------- ------------- -------------
Price Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur Yield Dur
----- ----- --- ----- --- ----- --- ----- --- ----- --- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
98-16 7.62 8.31 7.62 8.30 7.62 8.29 7.61 8.28 7.61 8.27 7.61 8.26
98-20 7.60 7.60 7.60 7.60 7.60 7.60
98-24 7.59 7.59 7.58 7.58 7.58 7.58
98-28 7.57 7.57 7.57 7.57 7.57 7.56
99-00 7.56 8.33 7.56 8.31 7.55 8.30 7.55 8.30 7.55 8.29 7.55 8.28
99-04 7.54 7.54 7.54 7.54 7.54 7.53
99-08 7.53 7.53 7.52 7.52 7.52 7.52
99-12 7.51 7.51 7.51 7.51 7.51 7.50
99-16 7.50 8.34 7.50 8.33 7.49 8.32 7.49 8.31 7.49 8.30 7.49 8.29
99-20 7.48 7.48 7.48 7.48 7.48 7.47
99-24 7.47 7.47 7.46 7.46 7.46 7.46
99-28 7.45 7.45 7.45 7.45 7.45 7.44
100-00 7.44 8.36 7.44 8.34 7.43 8.33 7.43 8.33 7.43 8.32 7.43 8.31
100-04 7.42 7.42 7.42 7.42 7.42 7.41
100-08 7.41 7.41 7.40 7.40 7.40 7.40
100-12 7.39 7.39 7.39 7.39 7.39 7.38
100-16 7.38 8.37 7.38 8.36 7.38 8.35 7.37 8.34 7.37 8.34 7.37 8.33
100-20 7.36 7.36 7.36 7.36 7.36 7.35
100-24 7.35 7.35 7.35 7.34 7.34 7.34
100-28 7.33 7.33 7.33 7.33 7.33 7.33
101-00 7.32 8.39 7.32 8.38 7.32 8.37 7.31 8.36 7.31 8.35 7.31 8.34
101-04 7.30 7.30 7.30 7.30 7.30 7.30
101-08 7.29 7.29 7.29 7.29 7.28 7.28
101-12 7.27 7.27 7.27 7.27 7.27 7.27
101-16 7.26 8.40 7.26 8.39 7.26 8.38 7.26 8.37 7.25 8.37 7.25 8.36
WAL 13.7 13.7 13.7 13.6 13.6 13.6
1st Prin 8/10/11 8/10/11 8/10/11 8/10/11 8/10/11 6/10/11
Mat. 5/10/12 3/10/12 2/10/12 1/10/12 11/10/11 9/10/11
</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-12
<PAGE>
ANNEX C
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-C2
[LOGO STATE STREET]
REPORT TO CERTIFICATEHOLDERS FOR PAYMENT DATE:
PAYMENT SUMMARY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Pass-Through Interest Original Beginning Principal Class Interest Total P&I Ending
Class CUSIP Rate Type Balance Balance Distrib. Amount Distribution Amt Payable Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Totals:
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS PER CERTIFICATE
<CAPTION>
-----------------------------------------------------------------------------------------
Beginning Principal Interest Ending
Class Certificate Factor Distribution(1) Distribution(1) Certificate Factor
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
</TABLE>
-------------------------------------------------------------
For additional information or with questions, please contact:
-------------------------------------------------------------
STATE STREET CORPORATE TRUST
-------------------------------------------------------------
Bond Analyst:
Account Officer:
Street Connection:(factor and rate by cusip) (617)664-5500
Street Fax: (617) 664-5600
Web Site: corporatetrust.statestreet.com
-------------------------------------------------------------
Disclaimer Notice: This report has been prepared by or based on information
furnished to State Street Bank and Trust Company ("State Street") by one or more
third parties (e.g., Servicer, Master Servicer, etc.). State Street shall not
have and does not undertake responsibility for the accuracy or completeness of
information provided by such third parties, and makes no representations or
warranties with respect to the accuracy or completeness thereof or the
sufficiency thereof for any particular purpose. State Street has not
independently verified information received from third parties, and shall have
no liability for any inaccuracies therein or caused thereby.
PAGE 1
C-1
<PAGE>
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-C2
[LOGO STATE STREET]
REPORT TO CERTIFICATEHOLDERS FOR PAYMENT DATE:
PAYMENT DETAILS
PRINCIPAL DETAIL
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning Principal Realized Appraisal Reimbrs Add Trust Ending
Class Balance Distribution Losses Reduction Amts Exp/Realzd Losses Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS:
--------------------------------------------------------------------------------------------------------------------------
INTEREST DETAIL
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ending
Accrued Prepymt Balance
Certificate Excess Prepaymt Distributable Current Unpaid Payment to Class Interest Prems/ Unpaid
Class Interest Interest Shortfalls Certifcate Interest Interest Unpaid Interest Dist Amount YMC Interest
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS:
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 2
C-2
<PAGE>
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-C2
[LOGO STATE STREET]
REPORT TO CERTIFICATEHOLDERS FOR PAYMENT DATE:
<TABLE>
<CAPTION>
ADDITIONAL REPORTING INFORMATION
MORTGAGE LOAN ACTIVITY FOR RELATED PAYMENT DATE:
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning
Agg Stated
# of Mortgage Weighted Average Re- Weighted Average Principal Ending Agg Stated Ending Unpaid Available
Loans Outs maining Term to Maturity Mortgage Rate Balance Principal Balance Principal Balance Distribution Amt
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------
Current Current Additional Principal
Realized Losses Trust Fund Exp # of Payoffs Prepayments
- --------------------------------------------------------------------------
<S> <C> <C> <C>
<CAPTION>
APPRAISAL REDUCTION INFORMATION:
- --------------------------------------------------------------------------------------------------
Loan # SPB of Apr Red Loan All Unpd Int & Fees Appraised Val P&I Advance on Loan
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
<CAPTION>
AGGREGATE DELINQUENCY INFORMATION FOR RELATED PAYMENT DATE:
----------------------------------------------------------------------
One Month Two Months 3 Months + Foreclosures
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
# of Loans
- -----------------------------------------------------------------------------------------------
Agg Prin Balance
- -----------------------------------------------------------------------------------------------
<CAPTION>
REO PROPERTY WITH FINAL RECOVERY DETERMINATION:
- -----------------------------------------------------------------------------------------------
Mortgage Basis for Final All Proceeds Portion Proceeds Amount of
Loan # Recovery Determination Received to Certificat Realized Loss
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
<CAPTION>
LIQUIDATED MORTGAGE LOANS: (OTHER THAN PREPAYMENTS IN FULL)
- -----------------------------------------------------------------------------------------------
Loan Nature of Liquidation Portion of Proceeds Amount of
# Liquidation Event Proceeds Payable to Certificate Realized Loss
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
P&I ADVANCE & FEE INFORMATION:
ADVANCES:
------------------------------
- Current P&I
- Outstanding P&I
- Servicing
- Nonrecoverable P&I
Interest on:
- P&I Advances
- Servicing Advances
Servicing Compensation:
- to Master Servicer
- to Special Servicer
------------------------------
LOAN PREPAYMENT INFORMATION:
------------------------------
Loan # Amount of Prepayment
------------------------------
Total 0.00
------------------------------
PAGE 3
C-3
<PAGE>
<TABLE>
<CAPTION>
STATE STREET CORPORATE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES WEB: CORPORATETRUST.STATESTREET.COM
SERIES 1997-C2 PAYMENT DATE:
UNDERWRITER: REPORT
DISTRIBUTION OF CURRENT SCHEDULED PRINCIPAL BALANCES
- ------------------------------------------------------------------------------------------------------------------------------------
Current Weighted Averages
Scheduled # of Aggregate % Tot -----------------------------------------------
Principal Mtg Sched Prin Sched Mnths Mort
Balance Loans Balance Bal DSCR to Mat Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
less than $1,000,000.00
$1,000,000.00+
$2,000,000.00+
$3,000,000.00+
$4,000,000.00+
$5,000,000.00+
$6,000,000.00+
$7,000,000.00+
$8,000,000.00+
$10,000,000.00+
$15,000,000.00+
$20,000,000.00+
- ------------------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
DISTRIBUTION OF CURRENT MORTGAGE INTEREST RATES
- ------------------------------------------------------------------------------------------------------------------------------------
Current Weighted Averages
Mortgage # of Aggregate % Tot -----------------------------------------------
Interest Mtg Sched Prin Sched Mnths Mort
Rate Loans Balance Bal DSCR to Mat Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
less than 8.000%
8.000% +
8.250% +
8.500% +
8.750% +
9.000% +
9.250% +
9.500% +
10.000% +
- ------------------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
DISTRIBUTION OF REMAINING STATED TERM (BALLOON LOANS ONLY)
- ------------------------------------------------------------------------------------------------------------------------------------
Remaining Weighted Averages
Stated # of Aggregate % Tot ---------------------------------------------
Term Mtg Sched Prin Sched Mnths Mort
(Months) Loans Balance Bal DSCR to Mat Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
less than 13
13-24
25-36
37-48
49-60
61-72
73+
- ------------------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
DISTRIBUTION OF REMAINING STATED TERM (FULLY AMORTIZING LOANS ONLY)
- ------------------------------------------------------------------------------------------------------------------------------------
Remaining Weighted Averages
Stated # of Aggregate % Tot ------------------------------------------------
Term Mtg Sched Prin Sched Mnths Mort
(Months) Loans Balance Bal DSCR to Mat Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
less than 13
13-24
25-36
37-60
61-120
121-180
181-240
241+
- ------------------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
STATE STREET CORPORATE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES WEB: CORPORATETRUST.STATESTREET.COM
SERIES 1997-C2 PAYMENT DATE:
UNDERWRITER: REPORT
DISTRIBUTION BY STATE
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Averages
# of Aggregate % Tot -------------------------------------------------
Mtg Sched Prin Sched Mnths Mort
States Loans Balance Bal DSCR to Mat Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Texas
Florida
California
Pennsylvania
Maryland
Arizona
Georgia
New Jersey
Illinois
Massachusetts
Other
- ------------------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTION OF PROPERTY TYPE
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Averages
# of Aggregate % Tot ----------------------------------------------------
Property Mtg Sched Prin Sched Mnths Mort
Types Loans Balance Bal DSCR to Mat Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Multifamily
Retail
Hotel
Office
Industrial
Self-Storage
Health Care
Mobile Home Park
- ------------------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTION OF SEASONING
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Averages
# of Aggregate % Tot -----------------------------------------------------
Seasoning Mtg Sched Prin Sched Mnths Mort
(months) Loans Balance Bal DSCR to Mat Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
less than 13
13-24
25-36
37-48
49-60
61-72
73+
- ------------------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTION OF MOST RECENT DEBT SERVICE COVERAGE RATIO
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Averages
# of Aggregate % Tot -----------------------------------------------------
Mtg Sched Prin Sched Mnths Mort
DSCR Loans Balance Bal DSCR to Mat Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0
less than 1.01
1.01 - 1.109
1.11-1.209
1.21-1.309
1.31-1.409
1.41-1.509
1.51-2.009
2.01+
- ------------------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
STATE STREET CORPORATE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES WEB: CORPORATETRUST.STATESTREET.COM
SERIES 1997-C2 PAYMENT DATE:
UNDERWRITER: REPORT
DISTRIBUTION OF LOAN TO VALUE RATIO
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Averages
Most # of Aggregate % Tot ------------------------------------------
Recent Mtg Sched Prin Sched Mnths Mort
LTV Loans Balance Bal DSCR to Mat Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0
less than 50.00
50.00+
60.00+
70.00+
80.00+
90.00+
100.00+
- ------------------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
DISTRIBUTION OF AMORTIZATION TYPE
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Averages
# of Aggregate % Tot ------------------------------------------
Amortization Mtg Sched Prin Sched Mnths Mort
Type Loans Balance Bal DSCR to Mat Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Amortizing Balloon
Fully Amortizing
Other
- ------------------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
DISTRIBUTION OF REMAINING AMORTIZATION TERM
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Averages
Original # of Aggregate % Tot ------------------------------------------
Amortization Mtg Sched Prin Sched Mnths Mort
Term Loans Balance Bal DSCR to Mat Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0+
120+
240+
270+
300+
330+
370+
- ------------------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
DISTRIBUTION OF ORIGINAL TERM TO STATED MATURITY
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Averages
Original # of Aggregate % Tot ------------------------------------------
Term to Mtg Sched Prin Sched Mnths Mort
Maturity Loans Balance Bal DSCR to Mat Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0+
72+
89+
109+
121+
241+
275+
- ------------------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
STATE STREET CORPORATE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES WEB: CORPORATETRUST.STATESTREET.COM
SERIES 1997-C2 PAYMENT DATE:
UNDERWRITER: REPORT ID
LOAN LEVEL DETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Offer Property Transfer Maturity Neg Am Beg Note Sched Prepay/ Prepay Paid Thru Prepmt Loan
Control# Type Date State Date (Y/N) Sched Bal Rate P&I Liquid Date Date Premium Status
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Totals
- ------------------------------------------------------------------------------------------------------------------------------------
If state field is blank loan has properties in multiple states.
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Status:
A= Payment not rec'd. but still in grace period, B= Late payment, but less than 1mo., 0= Current, 1= 1 mo. delinquent,
2= 2mo. delinquent, 3= Three or more mo. delinquent 4= Assumed scheduled payment (performing matured balloon), 7= Foreclosure, 9=REO
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-7
<PAGE>
CSSA
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
DELINQUENT LOAN STATUS REPORT
AS OF ___________________
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 S62 or S63 P8 P7 P37
(a) (b)
- ------------------------------------------------------------------------------------------------------------------------------------
Short Name Scheduled Total P&I
(When Property Sq. Ft or Paid Thru Loan Advances to
Prospectus ID Appropriate) Type City State Units Date Balance Date
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
90 + DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
P39 P38 P25 P10 P11 P58 P54
(c) (d) (e)=a+b+c+d
- ------------------------------------------------------------------------------------------------------------------------------------
Total Other Advances
Expenses To (Taxes & Total Current Current Monthly LTM NOI
Date Escrow) Exposure Monthly P&I Interest Date Date LTM NOI
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
90 + DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FCL - Foreclosure
LTM - Latest 12 Months either Last Annual or Trailing 12 months
*Workout Strategy should match the CSSA Loan file using abreviated words in
place of a code number such as (FCL - In Foreclosure, MOD - Modification, DPO -
Discount Payoff, NS - Note Sale, BK - Bankrupcy, PP - Payment Plan, TBD - To Be
Determined. It is possible to combine the status codes if the loan is going in
more than one direction. (i.e. FCL/Mod, BK/Mod, BK/FCL/DPO)
**App - Appraisal, BPO - Broker opinion, Int. - Internal Value
*** How to determine the cap rate is agreed upon by Underwriter and servicers -
to be provided by a third party.
C-8
<PAGE>
CSSA
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
DELINQUENT LOAN STATUS REPORT
AS OF ___________________
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 P55 P81 P74
(f)=P38/P81
- ------------------------------------------------------------------------------------------------------------------------------------
Short Name Value using
(When Property LTM ***Cap Rate NOI & Cap Valuation
Prospectus ID Appropriate) Type City State DSCR Assigned Rate Date
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
90 + DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
P75 P35 P77 P79 P42 P82
(g)=(.92*f)-e (h)=(g/e)
- ------------------------------------------------------------------------------------------------------------------------------------
Appraisal Total
BPO or Loss using Appraisal Expected
Internal 90% Appr. or Estimated Reduction Transfer Resolution FCL Start FCL Sale
Value** BPO (f) Recover % Realized Date Date Date Date
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
90 + DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FCL - Foreclosure
LTM - Latest 12 Months either Last Annual or Trailing 12 months
*Workout Strategy should match the CSSA Loan file using abreviated words in
place of a code number such as (FCL - In Foreclosure, MOD - Modification, DPO -
Discount Payoff, NS - Note Sale, BK - Bankrupcy, PP - Payment Plan, TBD - To Be
Determined. It is possible to combine the status codes if the loan is going in
more than one direction. (i.e. FCL/Mod, BK/Mod, BK/FCL/DPO)
**App - Appraisal, BPO - Broker opinion, Int. - Internal Value
*** How to determine the cap rate is agreed upon by Underwriter and servicers -
to be provided by a third party.
C-9
<PAGE>
CSSA
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
DELINQUENT LOAN STATUS REPORT
AS OF ___________________
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 P76
- ------------------------------------------------------------------------------------------------------------------------------------
Short Name
(When Property Workout
Prospectus ID Appropriate) Type City State Strategy Comments
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
90 + DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FCL - Foreclosure
LTM - Latest 12 Months either Last Annual or Trailing 12 months
*Workout Strategy should match the CSSA Loan file using abreviated words in
place of a code number such as (FCL - In Foreclosure, MOD - Modification, DPO -
Discount Payoff, NS - Note Sale, BK - Bankrupcy, PP - Payment Plan, TBD - To Be
Determined. It is possible to combine the status codes if the loan is going in
more than one direction. (i.e. FCL/Mod, BK/Mod, BK/FCL/DPO)
**App - Appraisal, BPO - Broker opinion, Int. - Internal Value
*** How to determine the cap rate is agreed upon by Underwriter and servicers -
to be provided by a third party.
C-10
<PAGE>
CSSA
COMMERICIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
REO STATUS REPORT
AS OF _______________
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 S62 or S63 P8 P7 P37 P39 P38
(a) (b) (c) (d) (e)=a+b+c+d
Other
Pro- Short Name Proper- Paid Scheduled Total P&I Total Advances
spectus (When ty City State Sq. Ft. or Thru Loan Advances Expenses (Taxes & Total
ID Appropriate) Type Unit Date Balance To Date To Date Escrow) Exposure
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
P25 P11 P58 P54 P81 P74 P75 P35
(k) (j) (f)=(k (g) (h)=(.92*g) (i)=(g/e)
- -----------------------------------------------------------------------------------------------------------------------------------
Value Appraisal Total
Current LTM LTM Cap Rate using NOI BPO or Loss using Appraisal
Monthly Maturity NOI NOI/ Assign Valuation As Cap Internal 92% Appr. or Estimated Reduction
P&I Date Date DSC *** Date Rate Value** BFO (f) Recovery % Realized
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
- --------------------------------------------------------------------------------
(1) Use the following codes; App. - Appraisal, BPO - Brokers Opinion, Int -
Internal Value
- --------------------------------------------------------------------------------
*** How to determine the cap rate is agreed upon by Underwriter and servicers -
to be provided by a third party.
- --------------------------------------------------------------------------------
C-11
<PAGE>
CSSA
COMMERICIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
REO STATUS REPORT
AS OF _______________
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 S77 P82 P79
Pro- Short Name Proper- REO Pending
spectus (When ty City State Tranfer Acquisition Resolu-
ID Appropriate) Type Date Date tion Date Comments
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
- --------------------------------------------------------------------------------
(1) Use the following codes; App. - Appraisal, BPO - Brokers Opinion, Int -
Internal Value
- --------------------------------------------------------------------------------
*** How to determine the cap rate is agreed upon by Underwriter and servicers -
to be provided by a third party.
- --------------------------------------------------------------------------------
C-12
<PAGE>
CSSA
Commercial Mortgage Pass-Through Certificates, Series 1997-C2
Servicer Watch List
as of _________________________
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S58 P7 P8 P10 P11 P54
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prospectus Short Name Property Type State Scheduled Paid Thru Current Maturity LTM* DSCR
ID (When Appropriate) Loan Balance Date Interest Rate Date
- ------------------------------------------------------------------------------------------------------------------------------------
List all loans on watch list and reason sorted in decending balance order.
- ------------------------------------------------------------------------------------------------------------------------------------
Total: $
*LTM - Last 12 months either trailing or last annual
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-13
<PAGE>
CSSA
Commercial Mortgage Pass-Through Certificates, Series 1997-C2
Servicer Watch List
as of _________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Comment / Reason on Watch List
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
C-14
<PAGE>
CSSA
Commercial Mortgage Pass-Through Certificates, Series 1997-C2
Loan Payment Notification Report
as of _________________________
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S58 P7 P8 P10 P11 P54
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prospectus Short Name Property Type State Scheduled Paid Thru Current Maturity LTM* DSCR
ID (When Appropriate) Loan Balance Date Interest Rate Date
- ------------------------------------------------------------------------------------------------------------------------------------
Scheduled Payments
Unscheduled Payments
Total: $
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
Servicer Estimated Information
- --------------------------------------------------------------------------------
Yield Expected Expected
Maintenance Payment Distribution
Date Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Scheduled Payments
Unscheduled Payments
Total:
- --------------------------------------------------------------------------------
</TABLE>
THE BORROWER HAS ONLY REQUESTED THE INFORMATION TO PAY-OFF. THIS DOES NOT
INDICATE A DEFINITE PAYMENT.
C-15
<PAGE>
CSSA
Commercial Mortgage Pass-Through Certificates, Series 1997-C2
Historical Loan Modification Report
as of _________________________
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
S4 S57 S58 P49 P48 P7* P7* P50* P50* P25* P25*
- ------------------------------------------------------------------------------------------------------------------------------------
Balance
Balance at the
Mod/ When Sent Effective # Mths
Prospectus Extension Effect to Special Date of for Rate
ID City State Flag Date Servicer Rehabilitation Old Rate Change New Rate Old P&I New P&I
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
THIS REPORT IS HISTORICAL
Information is as of modification. Each line it should not change in the future. Only new modifications should be added.
- ------------------------------------------------------------------------------------------------------------------------------------
Total For All Loans:
Total For Loans in Current Month:
# of Loans $ Balance
Modifications:
Maturity Date Extentions: _____________________________
Total:
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
P11* P11* P47
- --------------------------------------------------------------------------------
Total #
Mths for (1) Realized
Change of Loss to
Old Maturity New Maturity Mod Trust $
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THIS REPORT IS HISTORICAL
Information is as of modification. Each line it should not change in the future.
Only new modifications should be added.
- -------------------------------------------------------------------------------
Total For All Loans:
Total For Loans in Current Month:
# of Loans $ Balance
Modifications:
Maturity Date Extentions:
Total:
* The information in these columns is from a particular point in time and should
not change on this report once assigned.
(1) Actual principal loss taken by bonds
(2) Expected future loss due to a rate reduction. This is just an estimate
calculated at the time of the modification.
- --------------------------------------------------------------------------------
</TABLE>
C-16
<PAGE>
CSSA
Commercial Mortgage Pass-Through Certificates, Series 1997-C2
Loan Payment Modification Report
as of _________________________
- ------------------------------------------------------------------------
S4 S57
- ------------------------------------------------------------------------
(2) Est.
Future
Interest Loss
Prospectus to Trust $
ID City (Rate Reduction) COMMENT
- ------------------------------------------------------------------------
THIS REPORT IS HISTORICAL
Information is as of modification. Each line it should not change in the
future. Only new modifications should be added.
- ------------------------------------------------------------------------
Total For All Loans:
Total For Loans in Current Month:
# of Loans $ Balance
Modifications:
Maturity Date Extentions:
Total:
* The information in these columns is from a particular point in time and should
not change on this report once assigned.
(1) Actual principal loss taken by bonds
(2) Expected future loss due to a rate reduction. This is just an estimate
calculated at the time of the modification.
C-17
<PAGE>
<TABLE>
CSSA
Commercial Mortgage Pass-Through Certificates
Series 1997-C2
Historical Loss Estimate Report (REO-Sold or
Discounted Payoff)
as of _________________________
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 P45/P7 P75 P45
- -----------------------------------------------------------------------------------------------------------------------------------
(c)=b/a (a) (b) (d)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Latest
Prospectus Short Name Property City State % Appraisal or Effect Net Amt
ID (When Type Received Brokers Date of Sales Received
Appropriate From Sale Opinion Sale Price from Sale
- -----------------------------------------------------------------------------------------------------------------------------------
THIS REPORT IS HISTORICAL
- -----------------------------------------------------------------------------------------------------------------------------------
All information is from the liquidation date and does not need to be updated.
- -----------------------------------------------------------------------------------------------------------------------------------
Total all Loans:
- -----------------------------------------------------------------------------------------------------------------------------------
Current Month Only:
- -----------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
P7 P37 P39+P38
- -------------------------------------------------------------------------------------------------------------
(e) (f) (g) (h) (i)=d-(f+g+h) (k)=i-e (m)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Date
Loss
Scheduled Total P&I Total Servicing Fees Actual Losses Passed Minor Adj to
Balance Advanced Expenses Expense Net Proceeds Passed thru thru Trust
- -------------------------------------------------------------------------------------------------------------
- ---------------------------------------
- ---------------------------------------
(n)=k+m (o)=n/e
- ---------------------------------------
Minor
Adj Total Loss % of
Passed Loss with Scheduled
thru Adjustment Balance
- ---------------------------------------
</TABLE>
C-18
<PAGE>
<TABLE>
<CAPTION>
CSSA
Commercial Mortgage Pass-Through Certificates, Series 1997-C2
Comparative Financial Status Report
as of _________________
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
S4 S57 S58 P7 P8 S72 S69 S70 S65 S66
- ------------------------------------------------------------------------------------------------------------------------------------
ORIGINAL UNDERWRITING
INFORMATION
BASIS YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
Last
Property Paid Annual Financial
Prospectus Inspect Scheduled Thru Debt Info as of % Total $ (1)
ID City State Date Loan Balance Date Service Date Occ Revenue NOI DSCR
- ------------------------------------------------------------------------------------------------------------------------------------
yy/mm yy/mm
- ------------------------------------------------------------------------------------------------------------------------------------
List all properties currently in deal with or without information largest to smallest loan
- ------------------------------------------------------------------------------------------------------------------------------------
Total: $ $ WA $ $ WA
====================================================================================================================================
RECEIVED
FINANCIAL INFORMATION: LOANS BALANCE
# % $ %
CURRENT FULL YEAR:
CURRENT FULL YR. RECEIVED WITH DSC <1:
PRIOR FULL YEAR:
PRIOR FULL YR. RECEIVED WITH DSC <1:
====================================================================================================================================
(1) DSCR should match to Operating Statement and is normally calculated using NOI/Debt Service.
(2) Net change should compare the latest year to the underwriting year
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
P65 P64 P59 P61 P63 P58 P57 P52 P54 P56
- ------------------------------------------------------------------------------------------------------------------------------------
2ND PRECEDING ANNUAL OPERATING PRECEDING ANNUAL OPERATING
INFORMATION INFORMATION
AS OF _______ NORMALIZED AS OF _______ NORMALIZED
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Financial
Info as of % Total $ (1) Info as of % Total $ (1)
Date Occ Revenue NOI DSCR Date Occ Revenue NOI DSCR
- ------------------------------------------------------------------------------------------------------------------------------------
yy/mm yy/mm
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
WA $ $ WA WA $ $ WA
====================================================================================================================================
REQUIRED
LOANS BALANCE
# % $ %
========================================================
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
P72 P73 P66 P68 P70 (2)
- ------------------------------------------------------------------------------------------------------------------------------------
TRAILING FINANCIAL OR YTD NET CHANGE
INFORMATION
MONTH REPORTED ACTUAL PRECEDING & BASIS
- ------------------------------------------------------------------------------------------------------------------------------------
%
FS Start FS End Total $ % % Total (1)
Date Date Revenue NOI DSC Occ Revenue DSCR
- ------------------------------------------------------------------------------------------------------------------------------------
yy/mm yy/mm
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
WA $ $ WA WA $ WA
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-19
<PAGE>
CSSA
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
FORM OF OPERATING STATEMENT ANALYSIS REPORT
AS OF ___________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW
Prospectus Number
Scheduled Balance/Paid to Date
Property Name
Property Type
Property Address, City, State
Net Rentable Square Feet
Year Built/Year Renovated --------------------------------------------------------------------------------------
Year of Operations Underwriting 1994 1995 1996 Trailing
Occupancy Rate * --------------------------------------------------------------------------------------
Average Rental Rate
* Occupancy rates are year end or the ending date of the financial statement for the period.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
INCOME: No. of Mos.
Number of Mos. Prior Year Current Yr. -------------
Period Ended Underwriting 1994 1995 1996 97 Trailing**
Statement Classification Base Line Normalized Normalized Normalized as of / /97
Rental Income (Category 1) ---------------------------------------------------------------------------------------------
Rental Income (Category 2)
Rental Income (Category 3)
Pass Through/Escalations
Other Income
---------------------------------------------------------------------------------------------
Gross Income $0.00 $0.00 $0.00 $0.00 $0.00
<CAPTION>
<S> <C> <C>
INCOME:
Number of Mos.
Period Ended 1996-Base 1996-1995
Statement Classification Variance Variance
Rental Income (Category 1) -----------------------------------
Rental Income (Category 2)
Rental Income (Category 3)
Pass Through/Escalations
Other Income
-----------------------------------
Gross Income % %
Normalized - Full year Financial
statements that have been reviewed by the
underwriter or Servicer
** Servicer will not be expected to
"Normalize" these YTD numbers.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING EXPENSES:
Real Estate Taxes
Property Insurance
Utilities
General & Administration
Repairs and Maintenance
Management Fees
Payroll & Benefits Expense
Advertising & Marketing
Professional Fees
Other Expenses
Ground Rent --------------------------------------------------------------------------------------------
Total Operating Expenses $0.00 $0.00 $0.00 $0.00 $0.00 % %
--------------------------------------------------------------------------------------------
Operating Expense Ratio
--------------------------------------------------------------------------------------------
Net Operating Income $0.00 $0.00 $0.00 $0.00 $0.00 % %
--------------------------------------------------------------------------------------------
Leasing Commissions
Tenant Improvements
Replacement Reserve --------------------------------------------------------------------------------------------
Total Capital Items $0.00 $0.00 $0.00 $0.00 $0.00 % %
--------------------------------------------------------------------------------------------
N.O.I. After Capital Items $0.00 $0.00 $0.00 $0.00 $0.00 % %
--------------------------------------------------------------------------------------------
Debt Service (per Servicer) $0.00 $0.00 $0.00 $0.00 $0.00 % %
Cash Flow after debt service $0.00 $0.00 $0.00 $0.00 $0.00 % %
(1) DSCR: (NOI/Debt Service)
DSCR: (after reserves\Cap exp.)
Source of Financial Data:
(ie. operating statements, financial statements, tax return, other)
Notes and Assumptions:
====================================================================================================================================
</TABLE>
The years shown above will roll always showing a three year history. 1996 is the
current year financials; 1995 is the prior year financials.
This report may vary depending on the property type and because of the way
information may vary in each borrowers statement.
Rental Income needs to be broken down, differently whenever possible for each
property type as follows: Retail: 1)Base Rent 2)Percentage rents on cashflow
Hotel: 1)Room Revenue 2)Food/Beverage Nursing Home: 1)Private 2)Medicaid
3)Medicare
Income: Comment
Expense: Comment
Capital Items: Comment
(1) Used in the Comparative Financial Status Report
C-20
<PAGE>
CSSA
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
FORM OF NOI ADJUSTMENT WORKSHEET FOR "YEAR"
AS OF ______________________
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PROPERTY OVERVIEW
Prospectus Number
Scheduled Balance/Paid to Date
Property Name
Property Type
Property Address, City, State
Net Rentable Square Feet
Year Built/Year Renovated --------------------------------------------------------
Year of Operations Borrower Adjustment Normalized
Occupancy Rate * --------------------------------------------------------
Average Rental Rate
* Occupancy rates are year end or the ending date of the financial statement
for the period.
<CAPTION>
<C> <C> <C>
INCOME: "Year"
Number of Mos. Annualized --------------------------------------------------------
Period Ended Borrower Adjustment Normalized
Statement Classification Actual
Rental Income (Category 1) --------------------------------------------------------
Rental Income (Category 2)
Rental Income (Category 3)
Pass Through/Escalations
Other Income
--------------------------------------------------------
Gross Income $0.00 $0.00 $0.00
--------------------------------------------------------
Normalized - Full year Financial statements that have been reviewed by the
underwriter or Servicer
OPERATING EXPENSES:
Real Estate Taxes
Property Insurance
Utilities
General & Administration
Repairs and Maintenance
Management Fees
Payroll & Benefits Expense
Advertising & Marketing
Professional Fees
Other Expenses
Ground Rent --------------------------------------------------------
Total Operating Expenses $0.00 $0.00 $0.00
--------------------------------------------------------
Operating Expense Ratio
--------------------------------------------------------
Net Operating Income $0.00 $0.00 $0.00
--------------------------------------------------------
Leasing Commissions
Tenant Improvements
Replacement Reserve
--------------------------------------------------------
Total Capital Items $0.00 $0.00 $0.00
--------------------------------------------------------
N.O.I. After Capital Items $0.00 $0.00 $0.00
--------------------------------------------------------
Debt Service (per Servicer) $0.00 $0.00 $0.00
--------------------------------------------------------
Cash Flow after debt service $0.00 $0.00 $0.00
--------------------------------------------------------
(1) DSCR: (NOI/Debt Service)
DSCR: (after reserves\Cap exp.)
Source of Financial Data:
(ie. operating statements, financial statements, tax return, other)
Notes and Assumptions:
====================================================================================================================================
</TABLE>
This report should be completed by the Servicer for any "Normalization" of the
Borrower's numbers.
The "Normalized" column is used in the Operating Statement Analysis Report.
This report may vary depending on the property type and because of the way
information may vary in each borrowers statement.
Income: Comment
Expense: Comment
Capital Items: Comment
(1) Used in the Comparative Financial Status Report
C-21
<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.
DECEMBER 9, 1997
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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.
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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
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TABLE OF CONTENTS
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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
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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 ................................................................................ 35
Termination .................................................................................. 35
Book-Entry Registration and Definitive Certificates .......................................... 36
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
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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
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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 ................................................................ 69
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 ...................................... 72
Foreign Investors in REMIC Certificates .................................................... 73
Grantor Trust Funds .......................................................................... 73
Classification of Grantor Trust Funds ...................................................... 73
Characterization of Investments in Grantor Trust Certificates ................................ 73
Grantor Trust Fractional Interest Certificates ............................................. 73
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 ............................................................................ 77
Premium .................................................................................... 78
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 .................................................................... 80
Backup Withholding ......................................................................... 81
Foreign Investors .......................................................................... 81
STATE AND OTHER TAX CONSEQUENCES ............................................................. 81
ERISA CONSIDERATIONS ......................................................................... 81
General .................................................................................... 81
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
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SUMMARY OF PROSPECTUS
The following summary of certain pertinent information is qualified in
its entirety by reference to the more detailed information appearing elsewhere
in this Prospectus and by reference to the information with respect to each
series of Certificates contained in the Prospectus Supplement to be prepared and
delivered in connection with the offering of Offered Certificates of such
series. An Index of Principal Definitions is included at the end of this
Prospectus.
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
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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
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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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<PAGE>
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 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. On December 24, 1996, the IRS released final
regulations (the "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 Mark-to-Market Regulations provide that for purposes of this
mark-to-market requirement, a REMIC Residual Certificate issued after January 4,
1995 is not treated as a security and thus may not be marked to market.
Prospective purchasers of REMIC Residual Certificates should consult their tax
advisors regarding the possible application of the mark-to-market requirement to
REMIC Residual Certificates.
Possible Pass-Through of Miscellaneous Itemized Deductions. Fees and
expenses of a REMIC generally will be allocated to the holders of the related
REMIC Residual Certificates. The applicable Treasury regulations indicate,
however, that in the case of a REMIC that is similar to a single class grantor
trust, all or a portion of such fees and expenses should be allocated to the
holders of the related REMIC Regular Certificates. Unless otherwise stated in
the related Prospectus Supplement, such fees and expenses will be allocated to
holders of the related REMIC Residual Certificates in their entirety and not to
the holders of the related REMIC Regular Certificates.
With respect to REMIC Residual Certificates or REMIC Regular Certificates
the holders of which receive an allocation of fees and expenses in accordance
with the preceding discussion, if any holder thereof is an individual, estate or
trust, or a "pass-through entity" beneficially owned by one or more individuals,
estates or trusts, (i) an amount equal to such individual's, estate's or trust's
share of such fees and expenses will be added to the gross income of such holder
and (ii) such individual's, estate's or trust's share of such fees and expenses
will be treated as a miscellaneous itemized deduction allowable subject to the
limitation of Section 67 of the Code, which permits such deductions only to the
extent they exceed in the aggregate two percent of a taxpayer's adjusted gross
income. In addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be reduced by the lesser of (i) 3% of the excess
of the individual's adjusted gross income over such amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for the taxable year. The
amount of additional taxable income reportable by REMIC Certificateholders that
are subject to the limitations of either Section 67 or Section 68 of the Code
may be substantial. Furthermore, in determining the alternative minimum taxable
income of such a holder of a REMIC Certificate that is an individual, estate or
trust, or a "pass-through entity" beneficially owned by one or more individuals,
estates or trusts, no deduction will be allowed for such holder's allocable
portion of servicing fees and other miscellaneous itemized deductions of the
REMIC, even though an amount equal to the amount of such fees and other
deductions will be included in such holder's gross income. Accordingly, such
REMIC Certificates may not be appropriate investments for individuals, estates,
or trusts, or pass-through entities beneficially owned by one or more
individuals, estates or trusts. Such prospective investors should carefully
consult with their own tax advisors prior to making an investment in such
Certificates.
Sales of REMIC Certificates. If a REMIC Certificate is sold, the selling
Certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its adjusted basis in the REMIC Certificate.
The adjusted basis of a REMIC Regular Certificate generally will equal the cost
of such REMIC Regular Certificate to such Certificateholder, increased by income
reported by such Certificateholder with respect to such REMIC Regular
Certificate (including original issue discount and market discount income) and
reduced (but not below zero) by distributions on such REMIC Regular Certificate
received by such Certificateholder and by any amortized premium. The adjusted
basis of a REMIC Residual Certificate will be determined as described under
"--Taxation of Owners of REMIC Residual Certificates--Basis Rules, Net Losses
and Distributions." Except as provided in the following two paragraphs, any such
gain or loss will be capital gain or loss, provided such REMIC Certificate is
held as a capital asset (generally, property held for investment) within the
meaning of Section 1221 of the Code. The Code as of the date of this Prospectus
provides for a top marginal tax rate of 39.6% for individuals and a maximum
marginal rate for long-term capital gains of individuals of 20%. 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 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.
Prohibited Transactions Tax and Other Taxes. The Code imposes a tax on
REMICs equal to 100% of the net income derived from "prohibited transactions" (a
"Prohibited Transactions Tax"). In general, subject to certain specified
exceptions a prohibited transaction means the disposition of a Mortgage Loan,
the receipt of income from a source other than a Mortgage Loan or certain other
permitted investments, the receipt of compensation for services, or gain from
the disposition of an asset purchased with the payments on the Mortgage Loans
for temporary investment pending distribution on the REMIC Certificates. It is
not anticipated that the REMIC will engage in any prohibited transactions in
which it would recognize a material amount of net income.
In addition, certain contributions to a REMIC made after the day on which
the REMIC issues all of its interests could result in the imposition of a tax on
the REMIC equal to 100% of the value of the contributed property (a
"Contributions Tax"). Each Pooling Agreement will include provisions designed to
prevent the acceptance of any contributions that would be subject to such tax.
REMICs also are subject to federal income tax at the highest corporate rate
on "net income from foreclosure property," determined by reference to the rules
applicable to real estate investment trusts. "Net income from foreclosure
property" generally means gain from the sale of a foreclosure property that is
inventory property and gross income from foreclosure property other than
qualifying rents and other qualifying income for a real estate investment trust.
Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any REMIC will recognize "net income from foreclosure property"
subject to federal income tax.
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Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any material state or local income or franchise tax will be
imposed on any REMIC.
Unless otherwise stated in the related Prospectus Supplement, and to the
extent permitted by then applicable laws, any Prohibited Transactions Tax,
Contributions Tax, tax on "net income from foreclosure property" or state or
local income or franchise tax that may be imposed on the REMIC will be borne by
the related Master Servicer, Special Servicer or Trustee in any case out of its
own funds, provided that such person has sufficient assets to do so, and
provided further that such tax arises out of a breach of such person's
obligations under the related Pooling Agreement and in respect of compliance
with applicable laws and regulations. Any such tax not borne by a Master
Servicer, Special Servicer or Trustee will be charged against the related Trust
Fund resulting in a reduction in amounts payable to holders of the related REMIC
Certificates.
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain
Organizations. If a REMIC Residual Certificate is transferred to a "disqualified
organization" (as defined below), a tax would be imposed in an amount
(determined under the REMIC Regulations) equal to the product of (i) the present
value (discounted using the "applicable Federal rate" for obligations whose term
ends on the close of the last quarter in which excess inclusions are expected to
accrue with respect to the REMIC Residual Certificate, which rate is computed
and published monthly by the IRS) of the total anticipated excess inclusions
with respect to such REMIC Residual Certificate for periods after the transfer
and (ii) the highest marginal federal income tax rate applicable to
corporations. The anticipated excess inclusions must be determined as of the
date that the REMIC Residual Certificate is transferred and must be based on
events that have occurred up to the time of such transfer, the Prepayment
Assumption and any required or permitted clean up calls or required liquidation
provided for in the REMIC's organizational documents. Such a tax generally would
be imposed on the transferor of the REMIC Residual Certificate, except that
where such transfer is through an agent for a disqualified organization, the tax
would instead be imposed on such agent. However, a transferor of a REMIC
Residual Certificate would in no event be liable for such tax with respect to a
transfer if the transferee furnishes to the transferor an affidavit that the
transferee is not a disqualified organization and, as of the time of the
transfer, the transferor does not have actual knowledge that such affidavit is
false. Moreover, an entity will not qualify as a REMIC unless there are
reasonable arrangements designed to ensure that (i) residual interests in such
entity are not held by disqualified organizations and (ii) information necessary
for the application of the tax described herein will be made available.
Restrictions on the transfer of REMIC Residual Certificates and certain other
provisions that are intended to meet this requirement will be included in the
Pooling Agreement, and will be discussed more fully in any Prospectus Supplement
relating to the offering of any REMIC Residual Certificate.
In addition, if a "pass-through entity" (as defined below) includes in
income excess inclusions with respect to a REMIC Residual Certificate, and a
disqualified organization is the record holder of an interest in such entity,
then a tax will be imposed on such entity equal to the product of (i) the amount
of excess inclusions on the REMIC Residual Certificate that are allocable to the
interest in the pass-through entity held by such disqualified organization and
(ii) the highest marginal federal income tax rate imposed on corporations. A
pass-through entity will not be subject to this tax for any period, however, if
each record holder of an interest in such pass-through entity furnishes to such
pass-through entity (i) such holder's social security number and a statement
under penalty of perjury that such social security number is that of the record
holder or (ii) a statement under penalty of perjury that such record holder is
not a disqualified organization.
For these purposes, a "disqualified organization" means (i) the United
States, any State or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of the foregoing
(but would not include instrumentalities described in Section 168(h)(2)(D) of
the Code or the Federal Home Loan Mortgage Corporation), (ii) any organization
(other than a cooperative described in Section 521 of the Code) that is exempt
from federal income tax, unless it is subject to the tax imposed by Section 511
of the Code or (iii) any organization described in Section 1381(a)(2)(C) of the
Code. For these purposes, a "pass-through entity" means any regulated investment
company, real estate investment trust, trust, partnership or certain other
entities described in 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
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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. Such loss may be treated as a
capital loss and may be subject to the "wash sale" rules of Section 1091 of the
Code.
Reporting and Other Administrative Matters. Solely for purposes of the
administrative provisions of the Code, the REMIC will be treated as a
partnership and REMIC Residual Certificateholders will be treated as partners.
Unless otherwise stated in the related Prospectus Supplement, either the Trustee
or the Master Servicer, generally will hold at least a nominal amount of REMIC
Residual Certificates, will file REMIC federal income tax returns on behalf of
the related REMIC, and will be designated as and will act as the "tax matters
person" with respect to the REMIC in all respects.
As the tax matters person, the Trustee or the Master Servicer, as the case
may be, will, subject to certain notice requirements and various restrictions
and limitations, generally have the authority to act on behalf of the REMIC and
the REMIC Residual Certificateholders in connection with the administrative and
judicial review of items of income, deduction, gain or loss of the REMIC, as
well as the REMIC's classification. REMIC Residual Certificateholders will
generally be required to report such REMIC items consistently with their
treatment on the related REMIC's tax return and may in some circumstances be
bound by a settlement agreement between the Trustee or the Master Servicer, as
the case may be, as tax matters person, and the IRS concerning any such REMIC
item. Adjustments made to the REMIC tax return may require a REMIC Residual
Certificateholder to make corresponding adjustments on its return, and an audit
of the REMIC's tax return, or the adjustments resulting from such an audit,
could result in an audit of a REMIC Residual Certificateholder's return. No
REMIC will be registered as a tax shelter pursuant to Section 6111 of the Code
because it is not anticipated that any REMIC will have a net loss for any of the
first five taxable years of its existence. Any person that holds a REMIC
Residual Certificate as a nominee for another person may be required to furnish
to the related REMIC, in a manner to be provided in Treasury regulations, the
name and address of such person and other information.
Reporting of interest income, including any original issue discount, with
respect to REMIC Regular Certificates is required annually, and may be required
more frequently under Treasury regulations. These information reports generally
are required to be sent to individual holders of REMIC Regular Interests and the
IRS; holders of REMIC Regular Certificates that are corporations, trusts,
securities dealers and certain other non-individuals will be provided interest
and original issue discount income information and the information set forth in
the following paragraph upon request in accordance with the requirements of the
applicable regulations. The information must be provided by the later of 30 days
after the end of the quarter for which the information was requested, or two
weeks after the receipt of the request. The REMIC must also comply with rules
requiring a REMIC Regular Certificate issued with original issue discount to
disclose on its face the amount of original issue discount and the issue date,
and requiring such information to be reported to the IRS. Reporting with respect
to the REMIC Residual Certificates, including income, excess inclusions,
investment expenses and relevant information regarding qualification of the
REMIC's assets will be made as required under the Treasury regulations,
generally on a quarterly basis.
As applicable, the REMIC Regular Certificate information reports will
include a statement of the adjusted issue price of the REMIC Regular Certificate
at the beginning of each accrual period. In addition, the reports will include
information required by regulations with respect to computing the accrual of any
market discount. Because exact computation of the accrual of market discount on
a constant yield method would require information relating to the holder's
purchase price that the REMIC may not have, such regulations only require that
information pertaining to the appropriate 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.
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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
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
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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
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
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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 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
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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.
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
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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 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
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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 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
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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
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.
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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 20%. No such rate differential exists for
corporations. In addition, the distinction between a capital gain or loss and
ordinary income or loss remains relevant for other purposes.
Gain or loss from the sale of a Grantor Trust Certificate may be partially
or wholly ordinary and not capital in certain circumstances. Gain attributable
to accrued and unrecognized market discount will be treated as ordinary income,
as will gain or loss recognized by banks and other financial institutions
subject to Section 582(c) of the Code. Furthermore, a portion of any gain that
might otherwise be capital gain may be treated as ordinary income to the extent
that the Grantor Trust Certificate is held as part of a "conversion transaction"
within the meaning of Section 1258 of the Code. A conversion transaction
generally is one in which the taxpayer has taken two or more positions in the
same or similar property that reduce or eliminate market risk, if substantially
all of the taxpayer's return is attributable to the time value of the taxpayer's
net investment in such transaction. The amount of gain realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate "applicable Federal rate" (which rate is computed and
published monthly by the IRS) at the time the taxpayer enters into the
conversion transaction, subject to appropriate reduction for prior inclusion of
interest and other ordinary income items from the transaction. Finally, a
taxpayer may elect to have net capital gain taxed at ordinary income rates
rather than capital gains rates in order to include such net capital gain in
total net investment income for that taxable year, for purposes of the rule that
limits the deduction of interest on indebtedness incurred to purchase or carry
property held for investment to a taxpayer's net investment income.
Grantor Trust Reporting. Unless otherwise provided in the related
Prospectus Supplement, the Trustee or Master Servicer, as applicable, will
furnish to each holder of a Grantor Trust Certificate with each distribution a
statement setting forth the amount of such distribution allocable to principal
on the underlying Mortgage Loans and to
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interest thereon at the related Pass-Through Rate. In addition, within a
reasonable time after the end of each calendar year, the Trustee or Master
Servicer, as applicable, will furnish to each Certificateholder during such year
such customary factual information as the Depositor or the reporting party deems
necessary or desirable to enable holders of Grantor Trust Certificates to
prepare their tax returns and will furnish comparable information to the IRS as
and when required by law to do so. Because the rules for accruing discount and
amortizing premium with respect to the Grantor Trust Certificates are uncertain
in various respects, there is no assurance the IRS will agree with the Trustee's
or Master Servicer's, as the case may be, information reports of such items of
income and expense. Moreover, such information reports, even if otherwise
accepted as accurate by the IRS, will in any event be accurate only as to the
initial Certificateholders that bought their Certificates at the representative
initial offering price used in preparing such reports.
Backup Withholding. In general, the rules described in "--REMICs--Backup
Withholding with Respect to REMIC Certificates" will also apply to Grantor Trust
Certificates.
Foreign Investors. In general, the discussion with respect to REMIC Regular
Certificates in "--REMICs--Foreign Investors in REMIC Certificates" applies to
Grantor Trust Certificates except that Grantor Trust Certificates will, unless
otherwise disclosed in the related Prospectus Supplement, be eligible for
exemption from United States withholding tax, subject to the conditions
described in such discussion, only to the extent the related Mortgage Loans were
originated after July 18, 1984.
To the extent that interest on a Grantor Trust Certificate would be exempt
under Sections 871(h)(1) and 881(c) of the Code from United States withholding
tax, and the Grantor Trust Certificate is not held in connection with a
Certificateholder's trade or business in the United States, such Grantor Trust
Certificate will not be subject to United States estate taxes in the estate of a
non-resident alien individual.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences," potential investors should consider the state
and local tax consequences of the acquisition, ownership, and disposition of the
Offered Certificates. State tax law may differ substantially from the
corresponding federal tax law, and the discussion above does not purport to
describe any aspect of the tax laws of any state or other jurisdiction.
Therefore, prospective investors should consult their own tax advisors with
respect to the various tax consequences of investments in the Offered
Certificates.
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on employee benefit plans, and on
certain other retirement plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and collective investment funds and separate
accounts in which such plans, accounts or arrangements are invested that are
subject to the fiduciary responsibility provisions of ERISA and Section 4975 of
the Code (all of which are hereinafter referred to as "Plans"), and on persons
who are fiduciaries with respect to Plans, in connection with the investment of
Plan assets. Certain employee benefit plans, such as governmental plans (as
defined in ERISA Section 3(32)), and, if no election has been made under Section
410(d) of the Code, church plans (as defined in Section 3(33) of ERISA) are not
subject to ERISA requirements. Accordingly, assets of such plans may be invested
in Offered Certificates without regard to the ERISA considerations described
below, subject to the provisions of other applicable federal and state law. Any
such plan which is qualified and exempt from taxation under Sections 401(a) and
501(a) of the Code, however, is subject to the prohibited transaction rules set
forth in Section 503 of the Code.
ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and the
requirement that a Plan's investments be made 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
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administrative exemption is available. These prohibited transactions generally
are set forth in Section 406 of ERISA and Section 4975 of the Code.
PLAN ASSET REGULATIONS
A Plan's investment in Certificates may cause the Trust Assets to be deemed
Plan assets. Section 2510.3-101 of the regulations of the United States
Department of Labor ("DOL") provides that when a Plan acquires an equity
interest in an entity, the Plan's assets include both such equity interest and
an undivided interest in each of the underlying assets of the entity, unless
certain exceptions not applicable to this discussion apply, or unless the equity
participation in the entity by "benefit plan investors" (that is, Plans and
certain employee benefit plans not subject to ERISA) is not "significant." For
this purpose, in general, equity participation in a Trust Fund will be
"significant" on any date if, immediately after the most recent acquisition of
any Certificate, 25% or more of any class of Certificates is held by benefit
plan investors.
Any person who has discretionary authority or control respecting the
management or disposition of Plan assets, and any person who provides investment
advice with respect to such assets for a fee, is a fiduciary of the investing
Plan. If the Trust Assets constitute Plan assets, then any party exercising
management or discretionary control regarding those assets, such as a Master
Servicer, a Special Servicer or any Sub-Servicer, may be deemed to be a Plan
"fiduciary" with respect to the investing Plan, and thus subject to the
fiduciary responsibility provisions and prohibited transaction provisions of
ERISA and the Code. In addition, if the Trust Assets constitute Plan assets, the
purchase of Certificates by a Plan, as well as the operation of the Trust Fund,
may constitute or involve a prohibited transaction under ERISA and the Code.
PROHIBITED TRANSACTION EXEMPTIONS
The DOL issued an individual administrative exemption, Prohibited
Transaction Exemption 90-29 (the "Exemption"), to Merrill Lynch, Pierce, Fenner
& Smith Incorporated, which generally exempts from the application of the
prohibited transaction provisions of Section 406 of ERISA, and the excise taxes
imposed on such prohibited transactions pursuant to Section 4975(a) and (b) of
the Code and Section 502(i) of ERISA, certain transactions, among others,
relating to the servicing and operation of mortgage pools and the purchase, sale
and holding of mortgage pass-through certificates underwritten by an Underwriter
(as hereinafter defined), provided that certain conditions set forth in the
Exemption are satisfied. For purposes of this Section "ERISA Considerations,"
the term "Underwriter" includes (i) Merrill Lynch, Pierce, Fenner & Smith
Incorporated, (ii) any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with Merrill
Lynch, Pierce, Fenner & Smith Incorporated and (iii) any member of the
underwriting syndicate or selling group of which Merrill Lynch, Pierce, Fenner &
Smith Incorporated or a person described in (ii) is a manager or co-manager with
respect to a class of Certificates.
The Exemption sets forth six general conditions which must be satisfied for
a transaction involving the purchase, sale and holding of Certificates to be
eligible for exemptive relief thereunder. First, the acquisition of Certificates
by a Plan must be on terms that are at least as favorable to the Plan as they
would be in an arm's-length transaction with an unrelated party. Second, the
Exemption only applies to Certificates evidencing rights and interests not
subordinated to the rights and interests evidenced by the other Certificates of
the same series. Third, the Certificates at the time of acquisition by the Plan
must be rated in one of the three highest generic rating categories by Standard
& Poor's Corporation ("Standard & Poor's"), Moody's Investors Service, Inc.
("Moody's"), Duff & Phelps, Inc. ("Duff & Phelps") or Fitch Investors Service,
Inc. ("Fitch"). Fourth, the Trustee cannot be an affiliate of any member of the
"Restricted Group," which consists of any Underwriter, the Depositor, the
Trustee, the Master Servicer, any Sub-Servicer, the provider of any Credit
Support and any obligor with respect to 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
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therewith. Sixth, the investing Plan must be an accredited investor as defined
in Rule 501(a)(1) of Regulation D of the Securities and Exchange Commission
under the Securities Act of 1933, as amended.
The Exemption also requires that each Trust Fund meet the following
requirements: (i) the Trust Fund must consist solely of assets of the type that
have been included in other investment pools; (ii) certificates in such other
investment pools must have been rated in one of the three highest categories of
Standard & Poor's, Moody's, Duff & Phelps or Fitch for at least one year prior
to the Plan's acquisition of Certificates; and (iii) certificates in such other
investment pools must have been purchased by investors other than Plans for at
least one year prior to any Plan's acquisition of Certificates.
If the general conditions of the Exemption are satisfied, the Exemption may
provide an exemption from the restrictions imposed by Sections 406(a) and 407(a)
of ERISA (as well as the excise taxes imposed by Sections 4975(a) and (b) of the
Code by reason of Sections 4975(c)(1) (A) through (D) of the Code) in connection
with (i) the direct or indirect sale, exchange or transfer of Offered
Certificates acquired by a Plan upon issuance from the Depositor or Underwriter
when the Depositor, Master Servicer, Special Servicer, Sub-Servicer, Trustee,
provider of Credit Support, Underwriter or obligor with respect to Mortgage
Assets is a Party in Interest with respect to the investing Plan, (ii) the
direct or indirect acquisition or disposition in the secondary market of fuel
Certificates by a Plan and (iii) the holding of Offered Certificates by a Plan.
However, no exemption is provided from the restrictions of Sections
406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of a
Certificate on behalf of an "Excluded Plan" by any person who has discretionary
authority or renders investment advice with respect to the assets of such
Excluded Plan. For purposes hereof, an Excluded Plan is a Plan sponsored by any
member of the Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide an exemption from the restrictions imposed by Sections
406(b)(1) and (b)(2) of ERISA and the taxes imposed by Section 4975(c)(1)(E) of
the Code in connection with (i) the direct or indirect sale, exchange or
transfer of Offered Certificates in the initial issuance of Offered Certificates
between the Depositor or an Underwriter and a Plan when the person who has
discretionary authority or renders investment advice with respect to the
investment of Plan assets in such Certificates is (a) an obligor with respect to
5% or less of the fair market value of the Mortgage Assets (including mortgage
loans underlying an MBS not issued by FNMA, FHLMC or GNMA) in the related Trust
Fund or (b) an affiliate of such a person, (ii) the direct or indirect
acquisition or disposition in the secondary market of Offered Certificates by a
Plan and (iii) the holding of Offered Certificates by a Plan.
Further, if certain specific conditions of the Exemption are satisfied, the
Exemption may provide an exemption from the restrictions imposed by Sections
406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by Sections 4975(a)
and (b) of the Code by reason of Section 4975(c) of the Code for transactions in
connection with the servicing, management and operation of the Trust Assets.
The Exemption also may provide an exemption from the restrictions imposed
by Sections 406(a) and 407(a) of ERISA, and the taxes imposed by Section 4975(a)
and (b) of the Code by reason of Sections 4975(c)(1) (a) through (D) of the Code
if such restrictions are deemed to otherwise apply merely because a person is
deemed to be a Party in Interest with respect to an investing Plan by virtue of
providing services to the Plan (or by virtue of having certain specified
relationships to such a person) solely as a result of the Plan's ownership of
Offered Certificates.
Before purchasing a Certificate, a fiduciary of a Plan should itself
confirm (i) that the Offered Certificates constitute "certificates" for purposes
of the Exemption and (ii) that the specific and general 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.
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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. In this connection, effective
December 31, 1996, the Office of the Comptroller of the Currency (the "OCC")
amended 12 C.F.R. Part 1 to authorize national banks to purchase and sell for
their own account, without limitation as to a percentage of the bank's capital
and surplus (but subject to compliance with certain general standards concerning
"safety and soundness" and retention of credit information in 12 C.F.R. Section
1.5), certain "Type IV securities", defined in 12 C.F.R. Section 1.2(1) to
include certain "commercial mortgage-related securities" and "residential
mortgage-related securities". As so defined, "commercial mortgage-related
security" and "residential mortgage-related security" mean, in relevant part,
"mortgage related security" within the meaning of SMMEA, provided that, in the
case of a "commercial mortgage-related security," it "represents ownership of a
promissory note or certificate of interest or participation that is directly
secured by a first lien on one or more parcels of real estate upon which one or
more commercial structures are located and that is fully secured by interests
in a pool of loans to numerous obligors." In the absence of any rule or
administrative interpretation by the OCC defining the term "numerous obligors,"
no representation is made as to whether any class of Offered Certificates will
qualify as "commercial mortgage-related securities", and thus as "Type IV
securities", for investment by national banks. Federal credit unions should
review NCUA Letter to Credit Unions No. 96, as modified by Letter to Credit
Unions No. 108, which includes guidelines to assist federal credit unions in
making investment decisions for mortgage related securities. The NCUA has
adopted rules, codified as 12 C.F.R. Section 703.5(f)-(k), which prohibit
federal credit unions from investing in certain mortgage related securities
(including securities such as certain classes of Offered Certificates), except
under limited circumstances.
Upon the issuance of final implementing regulations under the Riegle
Community Development and Regulatory Improvement Act of 1994 and subject to any
limitations those regulations may impose, a modification of the definition of
"mortgage related securities" will become effective to include among the types
of loans to which such securities may relate loans secured by "one or more
parcels of real estate upon which is located one or more commercial structures."
In addition, the related legislative history states that this expanded
definition includes multifamily loans secured by more than one parcel of real
estate upon which is located more than one structure. Until September 23, 2001
any state may enact legislation limiting the extent to which "mortgage related
securities" under this expanded definition would constitute legal investments
under that state's laws.
All depository institutions considering an investment in the Offered
Certificates of any series should review the Federal Financial Institutions
Examination Council's Supervisory Policy Statement on the Selection of
Securities
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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 Willkie Farr &
Gallagher, New York, New York.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each series of
Certificates, and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
RATING
It is a condition to the issuance of any class of Offered Certificates that
they shall have been rated not lower than investment grade, that is, in one of
the four highest rating categories, by at least one Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by the holders thereof of all collections on the underlying mortgage
assets to which such holders are entitled. These ratings address the structural,
legal and issuer-related aspects associated with such certificates, the nature
of the underlying mortgage assets and the credit quality of the guarantor, if
any. Ratings on mortgage pass-through certificates do not represent any
assessment of the likelihood of principal prepayments by borrowers or of the
degree by which such prepayments might differ from those originally anticipated.
As a result, certificateholders might suffer a lower than anticipated yield,
and, in addition, holders of stripped interest certificates in extreme cases
might fail to recoup their initial investments.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated independently of any
other security rating.
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INDEX OF PRINCIPAL DEFINITIONS
PAGE
----
Accrual Certificates .......................................... 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 ............................................. 36
Certificateholder ............................................. 1
Closing Date .................................................. 61
Code .......................................................... 13
Commercial Properties ......................................... 8
Commission .................................................... 2
Committee Report .............................................. 61
Companion Class ............................................... 12
Contributions Tax ............................................. 70
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 ................................................. 82
Equity Participation .......................................... 23
ERISA ......................................................... 15
Event of Default .............................................. 46
Excess Funds .................................................. 29
Exchange Act .................................................. 2
Exemption ..................................................... 82
FAMC .......................................................... 9
FHLMC ......................................................... 9
Fitch ......................................................... 82
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 ............................... 73
87
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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
Mark-to-Market Regulations..................................... 69
Master Servicer ............................................... 2
MBS ........................................................... 1
MBS Agreement ................................................. 24
MBS Issuer .................................................... 24
MBS Servicer .................................................. 24
MBS Trustee ................................................... 24
Merrill Lynch ................................................. 85
Moody's ....................................................... 82
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
OCC............................................................ 84
Offered Certificates .......................................... 1
OID Regulations ............................................... 59
Originator .................................................... 21
PAC ........................................................... 28
Participants .................................................. 20
Parties in Interest ........................................... 81
Pass-Through Rate ............................................. 2
Permitted Investments ......................................... 39
Plans ......................................................... 81
Pooling Agreement ............................................. 10
Prepayment Assumption ......................................... 61
Prepayment Interest Shortfall ................................. 26
Prepayment Premium ............................................ 23
Prohibited Transactions Tax ................................... 70
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
88
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PAGE
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REMIC Residual Certificates ................................... 13
REO Property .................................................. 34
Senior Certificates ........................................... 10
Servicing Standard ............................................ 41
SMMEA ......................................................... 84
SPA ........................................................... 27
Special Servicer .............................................. 2
Standard & Poor's ............................................. 82
Stripped Interest Certificates ................................ 10
Stripped Principal Certificates ............................... 10
Sub-Servicer .................................................. 41
Sub-Servicing Agreement ....................................... 42
Subordinate Certificates ...................................... 10
TAC ........................................................... 28
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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This diskette contains a file: The file "97C2red.xls." The file is a
Microsoft Excel, 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.
Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE>
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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-45
Description of the Certificates ........................................ S-53
Yield and Maturity Considerations ...................................... S-66
Use of Proceeds ........................................................ S-73
Certain Federal Income Tax
Consequences .......................................................... S-74
ERISA Considerations ................................................... S-76
Legal Investment ....................................................... S-77
Method of Distribution ................................................. S-77
Legal Matters .......................................................... S-77
Ratings ................................................................ S-79
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 ................................................... 81
Legal Investment ....................................................... 84
Method of Distribution ................................................. 84
Legal Matters .......................................................... 85
Financial Information .................................................. 85
Rating ................................................................. 85
Index of Principal Definitions ......................................... 87
================================================================================
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MERRILL LYNCH MORTGAGE
INVESTORS, INC.
(DEPOSITOR)
$ 618,448,000
(APPROXIMATE)
MORTGAGE PASS-THROUGH
CERTIFICATES
SERIES 1997-C2
---------------------
PROSPECTUS SUPPLEMENT
---------------------
MERRILL LYNCH & CO.
December __, 1997
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