SUBJECT TO COMPLETION
DATED MARCH 11, 1998
PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED FEBRUARY 25, 1998)
$968,618,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
The Mortgage Pass-Through Certificates, Series 1998-C2 (the "Certificates") will
consist of twelve classes (each, a "Class") of regular 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 401
conventional, fixed rate mortgage loans (the "Mortgage Loans") secured by first
liens on 405 commercial and multifamily properties (each, a "Mortgaged
Property"). The Depositor will acquire approximately 42% by Initial Pool Balance
(as defined below) of the Mortgage Loans from Daiwa Finance Corp. or Daiwa Real
Estate Finance Corp. and approximately 58% by Initial Pool Balance of the
Mortgage Loans from Merrill Lynch Mortgage Capital Inc. As of the Cut-Off Date
(as defined herein), the Mortgage Loans had an aggregate principal balance (the
"Initial Pool Balance") of approximately $1,088,335,035, after application of
all payments of principal due on or before such date, whether or not received.
The Offered Certificates bear the class designations and have the
characteristics set forth in the table below. Simultaneously with the issuance
of the Offered Certificates, the Private Certificates (as defined herein) will
be issued. Only the Offered Certificates are offered hereby.
----------
(Continued on next page)
PROSPECTIVE INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH UNDER "RISK
FACTORS" BEGINNING ON PAGE S-27 OF THIS PROSPECTUS SUPPLEMENT
AND ON PAGE 16 OF THE PROSPECTUS.
----------
PROCEEDS OF THE ASSETS IN THE TRUST FUND WILL BE THE SOLE SOURCE OF PAYMENTS ON
THE OFFERED CERTIFICATES. THE OFFERED CERTIFICATES WILL NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, THE UNDERWRITERS, THE MASTER
SERVICER, THE SPECIAL SERVICER, THE TRUSTEE, 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 INITIAL RATED FINAL
INITIAL CERTIFICATE OF INITIAL POOL PASS-THROUGH DISTRIBUTION EXPECTED
CLASS BALANCE (1) BALANCE (1) RATE DATE (2) RATING (3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A-1 ............... $229,904,000 21.1% % February 15, 2030 Aaa/AAA
Class A-2 ............... $559,138,000 51.4% % February 15, 2030 Aaa/AAA
Class B ................. $ 32,650,000 3.0% (4) February 15, 2030 Aa2/AA
Class C ................. $ 59,859,000 5.5% (4) February 15, 2030 A2/A
Class D ................. $ 70,742,000 6.5% (4) February 15, 2030 Baa2/BBB
Class E ................. $ 16,325,000 1.5% (4) February 15, 2030 Baa3/BBB-
Class IO ................ (5) N/A (5) February 15, 2030 Aaa/AAAr
====================================================================================================================================
</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 remaining amortization term. See "RATINGS" herein.
(3) By each of Moody's Investors Service, Inc. and Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc.
(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 principal balance nor will they
entitle the holders thereof to receive distributions of principal, but will
entitle such holders to receive payments of interest equal to the aggregate
of the interest accrued on the notional amount of each of its Components
(as defined herein). See "DESCRIPTION OF THE CERTIFICATES--Certificate
Balances and Notional Amounts" and "--Pass-Through Rates" herein.
----------
The Offered Certificates will be offered by Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Daiwa Securities America Inc. (together, the
"Underwriters") from time to time in negotiated transactions or otherwise at
varying prices to be determined at the time of sale. Proceeds to the Depositor
from the sale of the Offered Certificates, before deducting expenses payable by
the Depositor, will be approximately $ , which includes accrued interest.
See "METHOD OF DISTRIBUTION" herein.
The Offered Certificates are offered by the Underwriters when, as and if
issued and delivered to and accepted by the Underwriters, subject to prior sale
and subject to the Underwriters' right to reject orders in whole or in part. It
is expected that the Offered Certificates will be delivered in book-entry form
through the Same-Day Funds Settlement System of The Depository Trust Company on
or about March 26, 1998.
----------
MERRILL LYNCH & CO. DAIWA SECURITIES AMERICA INC.
----------
The date of this Prospectus Supplement is March , 1998.
<PAGE>
(cover continued)
On or before the date the Certificates are issued, the Depositor will
transfer the Mortgage Loans, without recourse, to Norwest Bank Minnesota,
National Association, 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 15th day of each month or, if any such 15th day is not a business day, then
on the next succeeding business day, commencing April 16, 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
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, one or more separate "real estate mortgage investment
conduit" ("REMIC") elections will be made with respect to the Trust Fund for
federal income tax purposes. The Offered Certificates will constitute "regular
interests" in one of such REMICs. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES"
herein and in the Prospectus.
There is currently no secondary market for the Offered Certificates and
there can be no assurance that any such market will develop or, if it does
develop, that it will continue. The Underwriters intend to make a secondary
market in the Offered Certificates, but have 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.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE OFFERED
CERTIFICATES. SEE "METHOD OF DISTRIBUTION."
S-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF PROSPECTUS SUPPLEMENT ....................................................... S-5
RISK FACTORS ........................................................................... S-27
The Certificates .................................................................. S-27
Limited Liquidity ............................................................ S-27
Certain Yield and Maturity Considerations .................................... S-27
Potential Conflicts of Interest .............................................. S-28
The Mortgage Loans ................................................................ S-29
Risks of Lending on Income-Producing Properties .............................. S-29
Nonrecourse Mortgage Loans ................................................... S-30
Environmental Law Considerations ............................................. S-30
Balloon Payments ............................................................. S-30
Risk of Subordinated Debt and Other Financing ................................ S-31
Related Borrowers ............................................................ S-31
Geographic Concentration of Properties Increasing Isolated Geographic Risk.... 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-32
Mortgage Loan Sellers ........................................................ S-32
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-33
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
Largest Mortgage Loans ............................................................ S-36
Canyon Crest Shopping Center ................................................. S-36
Ebbets Field Apartments ...................................................... S-36
Chelsea Mini Storage ......................................................... S-36
Firestone Mortgage Loans ..................................................... S-36
Harvey's Racquet Club ........................................................ S-37
Park Apartments .............................................................. S-37
Hub Apartments ............................................................... S-37
Orlando Hampton Inn and Suites ............................................... S-37
Additional Mortgage Pool Information .............................................. S-37
The Mortgage Pool ............................................................ S-37
The Mortgage Loan Sellers ......................................................... S-47
Assignment of The Mortgage Loans; Repurchases ..................................... S-47
Representations And Warranties; Repurchases ....................................... S-48
Changes in Mortgage Pool Characteristics .......................................... S-49
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SERVICING OF THE MORTGAGE LOANS ........................................................ S-49
General ........................................................................... S-49
The Master Servicer ............................................................... S-50
The Special Servicer .............................................................. S-50
Servicing And Other Compensation And Payment Of Expenses .......................... S-51
Modifications, Waivers And Amendments ............................................. S-53
REO Properties .................................................................... S-54
Inspections; Collection Of Operating Information .................................. S-54
DESCRIPTION OF THE CERTIFICATES ........................................................ S-55
General ........................................................................... S-55
Registration and Denominations .................................................... S-55
Certificate Balances And Notional Amounts ......................................... S-56
Pass-Through Rates ................................................................ S-56
Distributions ..................................................................... S-57
General ...................................................................... S-57
The Available Distribution Amount ............................................ S-57
Application of Available Distribution Amount ................................. S-58
Distributable Certificate Interest ........................................... S-60
Principal Distribution Amount ................................................ S-61
Treatment of REO Properties .................................................. S-62
Allocation of Prepayment Premiums ............................................ S-62
Subordination; Allocation of Losses and Certain Expenses .......................... S-62
P&I Advances ...................................................................... S-64
Appraisal Reductions .............................................................. S-65
Reports to Certificateholders; Available Information .............................. S-66
Voting Rights ..................................................................... S-67
Termination ....................................................................... S-67
The Trustee ....................................................................... S-68
YIELD AND MATURITY CONSIDERATIONS ...................................................... S-68
Yield Considerations .............................................................. S-68
General ...................................................................... S-68
Rate and Timing of Principal Payment ......................................... S-69
Losses and Shortfalls ........................................................ S-69
Strip Rates .................................................................. S-70
Certain Relevant Factors ..................................................... S-70
Delay in Payment of Distributions ............................................ S-70
Unpaid Distributable Certificate Interest .................................... S-70
Yield Sensitivity of the Class IO Certificates ............................... S-70
Pre-Tax Yield to Maturity (CBE) of the Class IO Certificates ...................... S-71
Weighted Average Life ............................................................. S-72
USE OF PROCEEDS ........................................................................ S-76
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ............................................... S-76
ERISA CONSIDERATIONS ................................................................... S-77
LEGAL INVESTMENT ....................................................................... S-79
METHOD OF DISTRIBUTION ................................................................. S-79
LEGAL MATTERS .......................................................................... S-80
RATINGS ................................................................................ S-80
INDEX OF PRINCIPAL DEFINITIONS ......................................................... S-81
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS .......................................... A-1
TERM SHEET ............................................................................. B-1
FORM OF DISTRIBUTION DATE STATEMENT .................................................... C-1
</TABLE>
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>
PERCENTAGE OF WEIGHTED CASH FLOW
INITIAL INITIAL PASS- AVERAGE OR
EXPECTED CERTIFICATE POOL CREDIT THROUGH LIFE PRINCIPAL
CLASS RATING (1) BALANCE (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 $229,904,000 21.1% 27.5% Fixed Coupon % 5.0 04/98-02/06
Class A-2 ......... Aaa/AAA $559,138,000 51.4% 27.5% Fixed Coupon % 9.4 02/06-01/08
Class B ........... Aa2/AA $ 32,650,000 3.0% 24.5% Net WAC (4) 9.8 01/08-01/08
Class C ........... A2/A $ 59,859,000 5.5% 19.0% Net WAC (4) 9.8 01/08-01/08
Class D ........... Baa2/BBB $ 70,742,000 6.5% 12.5% Net WAC (4) 9.8 01/08-02/08
Class E ........... Baa3/BBB- $ 16,325,000 1.5% 11.0% Net WAC (4) 10.0 02/08-09/08
Class IO .......... Aaa/AAAr (5) N/A N/A Variable I/O Strip (6) N/A 04/98-02/23
Private Certificates
- --------------------
Class F ........... (7) $ 59,858,000 5.5% 5.5% Fixed Coupon % 13.4 09/08-12/12
Class G ........... (7) $ 5,442,000 0.5% 5.0% Fixed Coupon % 14.7 12/12-01/13
Class H ........... (7) $ 21,766,000 2.0% 3.0% Fixed Coupon % 15.0 01/13-12/13
Class J ........... (7) $ 5,442,000 0.5% 2.5% Fixed Coupon % 16.1 12/13-10/14
Class K ........... (7) $ 27,209,034 2.5% N/A Fixed Coupon % 18.9 10/14-02/23
</TABLE>
(1) By each of Moody's Investors Service, Inc. and Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc.
(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 (as
defined herein) minus %, %, % and %, respectively.
(5) The Class IO Certificates will not have a principal balance nor will they
entitle the holders thereof to receive distributions of principal. See
"--Certificate Balances and Notional Amounts" in this Summary.
(6) Holders of the Class IO Certificates will be entitled to receive
distributions of interest in an amount equal to the aggregate of the
interest accrued on the notional amount of each of its Components, as
described herein. See "--Pass-Through Rates" in this Summary.
(7) 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.
- --------------------------------------------------------------------------------
S-5
<PAGE>
- --------------------------------------------------------------------------------
Title of Certificates ...................... Merrill Lynch Mortgage Investors,
Inc., Mortgage Pass-Through
Certificates, Series 1998-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"); and (iii) one or
more classes of residual
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 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 (as defined
herein), and an affiliate of
Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill
Lynch"), one of the Underwriters.
Neither the Depositor nor any of
its affiliates has insured or
guaranteed the Offered
Certificates. See "THE DEPOSITOR"
in the Prospectus.
Issuer ..................................... The Trust Fund established under
the Pooling and Servicing
Agreement (as defined herein), as
described herein under
"DESCRIPTION OF THE
CERTIFICATES."
Mortgage Loan Sellers ...................... Merrill Lynch Mortgage Capital Inc.
("MLMCI"), the Depositor's
corporate parent and an affiliate
of Merrill Lynch; Daiwa Real
Estate Finance Corp. and Daiwa
Finance Corp. (individually and
collectively, "Daiwa"), each an
affiliate of Daiwa Securities
America Inc. ("Daiwa
Securities"), one of the
Underwriters. See "DESCRIPTION OF
THE MORTGAGE POOL--The Mortgage
Loan Sellers" herein.
On or prior to the Closing Date,
the Depositor will cause the
Mortgage Loan Sellers to assign
the Mortgage Loans, without
recourse (except as set forth in
the next sentence), to the
Trustee for the benefit of the
holders of the Certificates (the
"Certificateholders"). In
connection with such assignment,
each Mortgage Loan Seller will
make certain representations and
warranties regarding the
characteristics of the Mortgage
Loans 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.
Master Servicer ............................ First Union National Bank ("FUNB"),
a national banking association
which has its principal office
located in Charlotte, North
Carolina and which is a
subsidiary of First Union
Corporation, a North Carolina
corporation registered as a bank
holding company under the Bank
Holding Company Act of 1956, as
amended. See "SERVICING OF THE
MORTGAGE
- --------------------------------------------------------------------------------
S-6
<PAGE>
- --------------------------------------------------------------------------------
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, will act as the
initial Special Servicer. 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 Controlling Class of
Sequential Pay Certificates (as
defined herein) will have the
right, subject to certain
conditions described herein, to
replace the Special Servicer and
to select a representative (the
"Controlling Class Representative
") from whom the Special Servicer
will seek advice and approval and
take directions under certain
circumstances, as described
herein. One or moreaffiliates of
the Special Servicer may purchase
the Class F,Class G, Class H,
Class J and Class K Certificates
shortly after the Closing Date.
See "SERVICING OF THE MORTGAGE
LOANS--The Special Servicer,"
"--Replacement of the Special
Servicer" and "--Servicing and
Other Compensation and Payment of
Expenses" herein.
Trustee .................................... Norwest Bank Minnesota, National
Association, a nationally
chartered bank.
Cut-Off Date ............................... March 1, 1998.
Closing Date ............................... On or about March 26, 1998.
Registration of the Offered Certificates ... The Offered Certificates of each
Class will initially be
represented by one or more global
Certificates registered in the
name of Cede & Co., as nominee of
The Depository Trust Company (
"DTC "). No person acquiring an
interest in any Offered
Certificate (any such person, a
"Certificate Owner ") will be
entitled to receive such
Certificate in fully registered,
certificated form (a "Definitive
Offered Certificate "), except
under the limited circumstances
described under "DESCRIPTION OF
THE CERTIFICATES--Registration
and Denominations" herein.
Instead, DTC will effect payments
and transfers in respect of the
Offered Certificates by means of
its electronic recordkeeping
services, acting through certain
participating organizations (
"Participants "). This may result
in certain delays in receipt of
payments by an investor and may
restrict an investor's ability to
pledge its Certificates. Unless
and until Definitive Offered
Certificates of any Class are
issued to the related Certificate
Owners, all references herein to
the rights of holders of such
Class of Offered Certificates are
to the rights of those
Certificate Owners as such rights
may be exercised through DTC and
its Participants, except as
otherwise specified herein.
Denominations .............................. The Offered Certificates of each
Class will be issued, maintained
and transferred on the book-entry
records of DTC and its
Participants in denominations of
$100,000 actual or notional
principal amount and in integral
multiples of $1 in excess
thereof.
- --------------------------------------------------------------------------------
S-7
<PAGE>
- --------------------------------------------------------------------------------
The Mortgage Pool .......................... The Mortgage Pool is expected to
consist of 401 conventional,
fixed rate Mortgage Loans secured
by 405 Mortgaged Properties with
an aggregate Cut-Off Date Balance
of $1,088,335,035 (the "Initial
Pool Balance"). The Cut-Off Date
Balances of the Mortgage Loans
will range from $179,680 to
$18,964,067 and the Mortgage
Loans will have an average
Cut-Off Date Balance of
$2,714,052. All loan balances and
percentages are subject to a
variance of plus or minus 5%. The
"Cut-Off Date Balance" of any
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 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.
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 "). Four of the Mortgage
Loans (1%) are secured by a first
mortgage lien on the respective
borrower's leasehold estate in
the related Mortgaged Property.
See "DESCRIPTION OF THE MORTGAGE
POOL--General" herein.
- --------------------------------------------------------------------------------
S-8
<PAGE>
- --------------------------------------------------------------------------------
Property Types ............................. Set forth below are the number of
Mortgaged Properties and the
approximate percentage of the
Initial Pool Balance represented
by the portion of the Mortgage
Loans that are secured by
Mortgaged Properties operated for
each of the indicated purposes:
<TABLE>
<CAPTION>
NUMBER OF % OF
MORTGAGED INITIAL POOL
PROPERTY TYPE PROPERTIES BALANCE
------------- ---------- -------
<S> <C> <C>
Multifamily ............. 265 42%
Retail
Anchored ............... 23 16%
Unanchored ............. 25 8%
--------------------------
48 24%
Hospitality ............. 49 14%
Office .................. 27 11%
Industrial .............. 10 6%
Nursing Home ............ 2 3%
Manufactured Housing
Community .............. 2 *%
Self Storage ............ 1 *%
Mixed Use ............... 1 *%
--------------------------
Total ................... 405 100%
==========================
</TABLE>
---------
* Less than 0.5%
Geographical Concentration ................. The Mortgaged Properties for the
Mortgage Loans are located
throughout 39 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%:
<TABLE>
<CAPTION>
NUMBER OF % OF
MORTGAGED INITIAL POOL
STATE PROPERTIES BALANCE
----- ---------- -------
<S> <C> <C>
Texas ................... 92 18%
California .............. 49 17%
New York ................ 34 9%
Florida ................. 25 7%
</TABLE>
Borrower Concentration .................... No Mortgage Loan or group of
Mortgage Loans to one borrower or
group of related borrowers
exceeds 3% of the Initial Pool
Balance. See "DESCRIPTION OF THE
MORTGAGE POOL" herein.
- --------------------------------------------------------------------------------
S-9
<PAGE>
- --------------------------------------------------------------------------------
Loan Size .................................. Set forth below are the number of
Mortgage Loans and the
approximate percentage of the
Initial Pool Balance represented
by the Mortgage Loans which have
Cut-Off Date Balances within the
indicated range:
<TABLE>
<CAPTION>
RANGE OF NUMBER OF % OF
CUT-OFF DATE MORTGAGE INITIAL POOL
BALANCE LOANS BALANCE
------- ----- -------
<S> <C> <C>
$ 179,680-$ 999,999 ......... 149 8%
1,000,000- 1,999,999 ......... 91 12%
2,000,000- 2,999,999 ......... 57 13%
3,000,000- 3,999,999 ......... 31 10%
4,000,000- 4,999,999 ......... 15 6%
5,000,000- 5,999,999 ......... 10 5%
6,000,000- 6,999,999 ......... 12 7%
7,000,000- 7,999,999 ......... 6 4%
8,000,000- 8,999,999 ......... 6 5%
9,000,000- 9,999,999 ......... 3 3%
10,000,000- 14,999,999 ......... 14 16%
$15,000,000-$18,964,067 ......... 7 11%
----------------------
Total ........................ 401 100%
======================
</TABLE>
Mortgage Loan 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 (the "Periodic Payments
") on all of the Mortgage Loans
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 Characteristics ............... Certain of the Mortgage Loans
provide for Periodic 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. 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 Periodic 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
payment (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
- --------------------------------------------------------------------------------
S-10
<PAGE>
- --------------------------------------------------------------------------------
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.
Set forth below are the number of
Mortgage Loans and the
approximate percentages of the
Initial Pool Balance,
respectively, represented by
Balloon Loans, Fully Amortizing
Loans and ARD Loans:
<TABLE>
<CAPTION>
NUMBER OF % OF
MORTGAGE INITIAL POOL
AMORTIZATION TYPE LOANS BALANCE
----------------- ----- -------
<S> <C> <C>
Balloon ...................... 325 83%
Fully Amortizing ............. 61 10%
ARD .......................... 15 7%
-------------------------
Total ..................... 401 100%
=========================
</TABLE>
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 (269
Mortgage Loans (67%)); (ii)
prohibit voluntary prepayments of
principal for most of their
remaining term to maturity (two
Mortgage Loans (2%)); (iii) permit
voluntary principal prepayments
provided that the prepayment is
accompanied by a Yield Maintenance
Charge and then a Percentage
Premium in excess of the amount
prepaid for most of their
respective remaining terms to
maturity (81 Mortgage Loans (7%));
(iv) permit voluntary principal
prepayments provided that the
prepayment is accompanied by a
Yield Maintenance Charge or
Percentage Premium in excess of
the amount prepaid for most of
their respective remaining terms
to maturity (three Mortgage Loans
(1%)); or (v) prohibit prepayment
for a period, then require that a
prepayment is accompanied with a
Yield Maintenance Charge for a
period, and then a Percentage
Premium in excess of the amount
prepaid for most of their
respective remaining terms to
maturity (one Mortgage Loan
(0.4%)). See "DESCRIPTION OF THE
MORTGAGE POOL--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 (as defined
herein) 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
pay-
- --------------------------------------------------------------------------------
S-11
<PAGE>
- --------------------------------------------------------------------------------
ment of a Prepayment Premium, or
of the collectability of any
Prepayment Premium.
Forty-five (45) of the Mortgage
Loans (23%), during their
respective Lockout Periods, but
beginning not earlier than two
years after the Closing Date,
provide that, in general, 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 (or, in the
case of the ARD Loans, 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 Periodic
Payments and the Balloon Payment
with respect to such defeased
Mortgaged Loan (or, in the case
of an ARD Loan, the payment
anticipated on the related
Anticipated Repayment Date).
Dates of Origination ...................... Set forth below is the approximate
percentage of the Initial Pool
Balance represented by the
Mortgage Loans originated in the
indicated year:
<TABLE>
<CAPTION>
% OF
INITIAL POOL
YEAR BALANCE
---------------------------
<S> <C>
1995 2%
1996 3%
1997 88%
1998 8%
</TABLE>
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- --------------------------------------------------------------------------------
S-12
<PAGE>
- --------------------------------------------------------------------------------
Additional Mortgage Loan
Characteristics .......................... Set forth below is certain
information regarding the Mortgage
Loans and the related Mortgaged
Properties as of the Cut-Off Date
(weighted averages set forth below
are based on the Initial Pool
Balance). Such information is more
fully described, and additional
information regarding the Mortgage
Loans and the related 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.
<TABLE>
<S> <C>
Minimum Cut-Off Date Balance ........................... $ 179,680
Maximum Cut-Off Date Balance ........................... $18,964,067
Average Cut-Off Date Balance ........................... $ 2,714,052
Minimum Mortgage Rate .................................. 6.91%
Maximum Mortgage Rate .................................. 11.50%
Weighted Average Mortgage Rate ......................... 7.97%
Minimum Remaining Term (months)(1) ..................... 40
Maximum Remaining Term (months)(1) ..................... 299
Weighted Average Remaining Term (months)(1) ............ 126
Minimum Remaining Amortization Term (months) ........... 118
Maximum Remaining Amortization Term (months) ........... 359
Weighted Average Remaining Amortization Term (months) .. 313
Minimum Cut-Off Date DSCR .............................. 1.12x
Maximum Cut-Off Date DSCR .............................. 2.99x
Weighted Average Cut-Off Date DSCR ..................... 1.41x
Minimum Cut-Off Date LTV ............................... 31.42%
Maximum Cut-Off Date LTV ............................... 83.50%
Weighted Average Cut-Off Date LTV ...................... 70.66%
Minimum Repayment LTV(2) ............................... 9.29%
Maximum Repayment LTV(2) ............................... 73.49%
Weighted Average Repayment LTV(2) ...................... 54.42%
</TABLE>
----------------
(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) At maturity with respect to Balloon Loans only or at
Anticipated Repayment Date with respect to ARD Loans. Does
not include Fully Amortizing Loans.
Description of the Certificates ............ The Certificates will be issued
pursuant to a Pooling and
Servicing Agreement, to be dated
as of March 1, 1998, among the
Depositor, the Master Servicer,
the Special Servicer and the
Trustee (the "Pooling and
Servicing Agreement "), and will
represent in the aggregate the
entire beneficial ownership
interest in a trust fund (the
"Trust Fund ") consisting of the
Mortgage Pool and certain related
assets.
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
- --------------------------------------------------------------------------------
S-13
<PAGE>
- --------------------------------------------------------------------------------
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. As
described herein, the Certificate
Balance of each Class of
Sequential Pay Certificates will
be reduced on each Distribution
Date by any distributions of
principal actually made on such
Class of Certificates on such
Distribution Date, and further by
any Realized Losses and Additional
Trust Fund Expenses (each, as
defined herein) that are allocated
to such Class of Certificates on
such Distribution Date.
The Class IO Certificates will not
have a principal balance, but will
represent the right to receive the
sum of the interest accrued on the
notional amount of each of its
Components, as described herein.
Each such Component will relate to
each separate Class of Sequential
Pay Certificates with the same
Class designation. 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. The Components
do not represent separate Classes
of Certificates, but rather
separate components, each of which
is a part of the Class IO
Certificates.
None of the REMIC Residual
Certificates will have a
Certificate Balance.
See "DESCRIPTION OF THE
CERTIFICATES--Certificate Balances
and Notional Amounts" herein.
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 the Summary.
The Class IO Certificates will
receive payments of interest equal
to the aggregate of the interest
accrued on the notional amount of
each of its Components. Each
Component will accrue interest at
its applicable Strip Rate (as set
forth below) on its related
notional amount. 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).
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 "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
- --------------------------------------------------------------------------------
S-14
<PAGE>
- --------------------------------------------------------------------------------
their respective Stated Principal
Balances outstanding immediately
prior to such Distribution Date.
The "Net Mortgage Rate" for each
Mortgage Loan will equal (x) the
Mortgage Rate in effect for such
Mortgage Loan as of the Cut-Off
Date, minus (y) the Administrative
Cost Rate (as defined herein) for
such Mortgage Loan; 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, solely for
the purpose of calculating the
Weighted Average Net Mortgage
Rate, the Mortgage Rate referred
to in clause (x) 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 on such
Mortgage Loan that are due or
received, as the case may be,
during the related Collection
Period and 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. 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 15th day of each month or, if
any such 15th day is not a
business day, then on the next
succeeding business day,
commencing April 16, 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).
On each Distribution Date, for so
long as the aggregate Certificate
Balance of the Classes of the
Sequential Pay Certificates is
greater than zero, the Trustee
will (except as otherwise
described under "DESCRIPTION OF
THE CERTIFICATES -- Termination"
herein) apply the Available
Distribution Amount (as defined
herein) 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
- --------------------------------------------------------------------------------
S-15
<PAGE>
- --------------------------------------------------------------------------------
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 Additional Trust Fund
Expenses, if any, previously
allocated to such Classes of
Certificates for which no
reimbursement has previously
been received, to reimburse
such holders for all
Realized Losses and
Additional Trust Fund
Expenses, if any;
(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
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
- --------------------------------------------------------------------------------
S-16
<PAGE>
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;
(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
- --------------------------------------------------------------------------------
S-17
<PAGE>
- --------------------------------------------------------------------------------
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 Available
Distribution Amount" herein.
The "Distributable Certificate
Interest" in respect of any Class
of REMIC Regular Certificates for
each Distribution Date represents
that portion of the Accrued
Certificate Interest in respect of
such Class of Certificates and
such Distribution Date reduced (to
not less than zero) by 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"). See "SERVICING OF THE
MORTGAGE LOANS--Servicing and
Other Compensation and Payment of
Expenses" and "DESCRIPTION OF THE
CERTIFICATES -- Distributions --
Distributable Certificate
Interest" herein.
The "Accrued Certificate Interest"
in respect of each Class of
Sequential Pay Certificates for
each Distribution Date is equal to
one month's interest at the
Pass-Through Rate applicable to
such Class of Certificates and
such Distribution Date accrued
during the immediately preceding
calendar month on the related
Certificate Balance outstanding
immediately prior to such
Distribution Date. The "Accrued
Certificate Interest" in respect
of the Class IO Certificates for
each Distribution Date is equal to
the sum of one month's interest at
the Strip Rate applicable to each
such Component and such
Distribution Date accrued during
the immediately preceding calendar
month on the related notional
amount outstanding on each such
Component immediately prior to
such Distribution Date. Accrued
Certificate Interest will be
calculated on a 30/360 day basis.
The portion of the Net Aggregate
Prepayment Interest Shortfall for
any Distribution Date that is
allocable to each Class of REMIC
Regular Certificates will equal
the product of (a) such Net
Aggregate Prepayment Interest
Shortfall, multiplied by (b) a
fraction, the numerator of which
is equal to the Accrued
Certificate Interest in respect of
such Class of Certificates for
such Distribution Date, and the
denominator of which is equal to
the aggregate Accrued Certificate
Interest for all the REMIC Regular
Certificates for such Distribution
Date.
The "Principal Distribution Amount"
for each Distribution Date will
generally equal the aggregate of
the following: (a) the aggregate
of the principal portions of all
Scheduled Payments (as defined
herein) (other than Balloon
Payments) due, and the prin-
- --------------------------------------------------------------------------------
S-18
<PAGE>
- --------------------------------------------------------------------------------
cipal portions of any Assumed
Scheduled Payments (as defined
herein) 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.
Reimbursements of Realized Losses
and Additional Trust Fund Expenses
previously allocated to principal
will not constitute distributions
of principal for any purpose and
will not result in an additional
reduction in the Certificate
Balance of the Class of
Certificates in respect of which
any such reimbursement is made.
The holders of the Certificates
may also receive portions of any
Prepayment Premiums, to the extent
described under "DESCRIPTION OF
THE CERTIFICATES -- Distributions
-- Allocation of Prepayment
Premiums" herein. Such
distributions will be in addition
to the distributions of interest,
if any, made to such holders from
the Available Distribution Amount
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 Periodic Payment
has been reduced as part of a
modification or otherwise, the
MasterServicer will be required to
make advances (each, a "P&I
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S-19
<PAGE>
- --------------------------------------------------------------------------------
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
related Determination Date.
Pursuant to the terms of the
Pooling and Servicing Agreement,
if the Master Servicer fails
tomake a required P&I Advance, the
Trustee shall then beobligated to
make such P&I Advance, in each
case subject to a recoverability
determination, as described herein
and further subject to the reduced
advancing obligations in respect
of certain Required Appraisal
Loans and certain Mortgage Loans
as to which the Periodic Payment
has been reduced as part of a
modification or otherwise. See
"DESCRIPTION OF THE
CERTIFICATES -- P&I Advances"
herein.
As described herein, the Master
Servicer (or the Trustee) 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 incurred at a rate per
annum equal to the "prime rate"
published in the "Money Rates"
section of The Wall Street
Journal, as such "prime rate" may
change from time to time (the
"Reimbursement Rate "), compounded
annually, and will be paid
contemporaneously with the
reimbursement of such P&I Advance
or servicing expense out of
general collections on the
Mortgage Loans then ondeposit in
the Certificate Account. See
"DESCRIPTION OF THE
CERTIFICATES--P&I Advances" herein
and "DESCRIPTION OF THE
CERTIFICATES--Advances in Respect
of Delinquencies" and "DESCRIPTION
OF THE POOLING AGREEMENTS --
Certificate Account" in the
Prospectus.
Compensating Interest Payments ............. With respect to any Distribution
Date, to the extent of an amount
equal to the Master Servicing Fee
plus 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
Servicing Fees) 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
- --------------------------------------------------------------------------------
S-20
<PAGE>
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 -- Distribution --
Distributable Certificate
Interest" herein.
Subordination; Allocation of Losses
and Certain Expenses ..................... The rights of holders of the Class
B, Class C, Class D, Class E and
the Private Certificates
(collectively, the "Subordinate
Certificates") to receive
distributions of amounts collected
or advanced on the Mortgage Loans
will, in each case, be
subordinated, to the extent
described herein, to the rights of
holders of the Class A-1, Class
A-2 and Class IO Certificates
(collectively, the "Senior
Certificates") and each other such
Class of Subordinate Certificates,
if any, with an earlier
alphabetical class designation.
This subordination is intended to
enhance the likelihood of timely
receipt by the holders of the
Senior Certificates of the full
amount of Distributable
Certificate Interest payable in
respect of such Classes of
Certificates on each Distribution
Date, and the ultimate receipt by
the holders of the Senior
Certificates (other than the Class
IO Certificates) of principal
equal to the entire respective
Certificate Balances of the Class
A-1 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 theretoby 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
describedabove 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 (to the
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S-21
<PAGE>
- --------------------------------------------------------------------------------
extent such Additional Trust Fund
Expenses are not covered by
interest received on the Mortgage
Loans) that have been incurred
since the Cut-off Date through the
end of the related Collection
Period and that have not
previously been allocated will be
allocated, subject to the
limitations described herein,
first to the Private Certificates
in the order described in the
Pooling and Servicing Agreement,
and then to the Class E, Class D,
Class C and Class B Certificates,
in that order, until the
Certificate Balance of each such
Class has been reduced to zero.
Thereafter any additional Realized
Losses and Additional Trust Fund
Expenses will be allocated to the
Class A-1 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 result in a
corresponding reduction in the
notional amount of the related
Component.
Treatment of REO Properties ................ Notwithstanding that any 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 and the
Master Servicer will have an
option to purchase all of the
Mortgage Loans and all REO
Properties, if any, and thereby
effect an early termination of the
Trust Fund and an early retirement
of the then outstanding
Certificates, on any Distribution
Date on which the aggregate Stated
Principal
- --------------------------------------------------------------------------------
S-22
<PAGE>
- --------------------------------------------------------------------------------
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. Risk
Factors There are material risks
associated with an investment in
the Offered Certificates. See
"RISK FACTORS" herein and in the
Prospectus.
Certain Investment Considerations .......... The yield to maturity of the Class
A-1, Class A-2, Class B, Class C,
Class D and Class E Certificates
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 Certificate
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 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. 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
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
prepayments 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 others 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).
Material Federal Income Tax
Consequences .............................. One or more separate "real estate
mortgage investment conduit" (
"REMIC ") elections will be made
with respect to the Trust
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S-23
<PAGE>
- --------------------------------------------------------------------------------
Fund for federal income tax
purposes. The assets of the lowest
tier REMIC 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 the REMIC
Regular Certificates (or, in the
case of the Class IO Certificates,
each Component thereof) will
represent "regular interests" in a
REMIC and generally will be
treated as debt instruments of
such REMIC.
The Class A-1, Class A-2, Class B,
Class C and Class D Certificates
will not, and the Class E and
Class 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%. No representation
is made that the Mortgage Loans
will prepay at that rate or at any
other rate.
The Offered Certificates will be
treated as "real estate assets"
within the meaning of Section
856(c)(5)(A) of the Internal
Revenue Code of 1986, as amended
(the "Code "). In addition,
interest (including original issue
discount) on the Offered
Certificates will be interest
described in Section 856(c)(3)(B)
of the Code. However, the Offered
Certificates will generally only
be considered assets described in
Section 7701(a)(19)(C) of the Code
to the extent that the Mortgage
Loans are secured by residential
property and, accordingly, an
investment in the Offered
Certificates may not be suitable
for certain thrift institutions.
For further information regarding
the federal income tax
consequences of investing in the
Offered Certificates, see
"MATERIAL 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 (each, 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
- --------------------------------------------------------------------------------
S-24
<PAGE>
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 ") and
Standard & Poor's Ratings
Services, a division of The
McGraw-Hill Companies, Inc. (
"Standard & Poor's" and together
with Moody'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 remaining
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" pursuant to 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
- --------------------------------------------------------------------------------
S-25
<PAGE>
- --------------------------------------------------------------------------------
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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S-26
<PAGE>
RISK FACTORS
Prospective purchasers of the Offered Certificates of any Class should
consider, among other things, the following risk factors (as well as the risk
factors set forth under "RISK FACTORS" in the Prospectus) in connection with an
investment therein. Additional risk factors are set forth elsewhere in this
Prospectus Supplement under separate headings in connection with discussions
regarding particular aspects of assets of the Trust Fund or the Offered
Certificates.
THE CERTIFICATES
Limited Liquidity. There is currently no secondary market for the Offered
Certificates. While each of the Underwriters currently intends to make a
secondary market in the Offered Certificates, none is under any obligation to do
so. Accordingly, there can be no assurance that a secondary market for the
Offered Certificates will develop. Moreover, if a secondary market does develop,
there can be no assurance that it will provide holders of the Offered
Certificates with liquidity of investment or that it will continue for the life
of the Offered Certificates. Any such secondary market may provide less
liquidity to investors than any comparable market for securities that evidence,
for example, interests solely in single-family mortgage loans. The Certificates
will not be listed on any securities exchange.
Certain Yield and Maturity Considerations. The yield on any Offered
Certificate that is purchased at a discount or premium will be affected by (i)
the rate and timing of principal payments and collections on the Mortgage Loans,
particularly unscheduled payments or collections in the form of voluntary
prepayments of principal or unscheduled recoveries of principal due to defaults,
casualties or condemnations whether before or after the scheduled maturity date
of the related Mortgage Loans, and (ii) the order of priority of distributions
of principal in respect of the Certificates. The rate and timing of unscheduled
payments and collections of principal on the Mortgage Loans is impossible to
accurately predict and will be affected by a variety of factors, including,
without limitation, the level of prevailing interest rates, restrictions on
voluntary prepayments contained in the 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 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 of the Class IO Certificates, to the extent such effect is
not offset by distributions of a portion of any applicable Prepayment Premiums
to the holders thereof, as described under "DESCRIPTION OF THE
CERTIFICATES--Distributions--Allocation of Prepayment Premiums" herein. In
addition, the Mortgage Loans may not require the payment of Prepayment Premiums
in the event of involuntary prepayments resulting from casualty or condemnation.
Accordingly, prospective investors in the Class IO Certificates should consider
the associated risks, including the risk that a rapid rate of prepayments on the
Mortgage Loans could result in the failure of such investors to recoup their
initial investments.
The yield on any Offered Certificate also will be affected by the rate and
timing of losses attributable to defaults on the Mortgage Loans, the severity of
such losses and the extent to which such losses and related expenses are applied
in reduction of the actual or notional principal amount of such Certificate or
otherwise reduce the amount of funds available for distribution to the holder of
such Certificate. To the extent described herein, the Private Certificates are
subordinate in right and time of payment to the Offered Certificates and will
bear shortfalls in collections and losses incurred in respect of the Mortgage
Loans prior to the Offered Certificates; and the Class B, Class C, Class D and
Class E Certificates are subordinate in right and time of payment to the Class
A-1, Class A-2 and Class IO Certificates
S-27
<PAGE>
and will bear such shortfalls in collections and losses prior to the Class A-1,
Class A-2 and Class IO Certificates, in reverse alphabetical order of Class
designation. Even though 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, 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 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 result in a corresponding reduction in the notional amount of the related
Component. See "DESCRIPTION OF THE CERTIFICATES--Distributions" and
"--Subordination; Allocation of Losses and Certain Expenses" herein and "YIELD
AND MATURITY CONSIDERATIONS" herein and in the Prospectus.
The Pass-Through Rate applicable to the Class 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.
Potential Conflicts of Interest. It is anticipated that one or more
affiliates of the initial Special Servicer may purchase all of the Class F,
Class G, Class H, Class J and Class K Certificates shortly after the Closing
Date. Subject to certain conditions described herein, the Pooling and Servicing
Agreement will permit the holder (or holders) of the majority of the Voting
Rights allocated to holders of the Class of Sequential Pay Certificates that has
the latest alphabetical Class designation and that has a Certificate Balance
that is greater than 20% of its original Certificate Balance (or if no Class of
Sequential Pay Certificates has a Certificate Balance that is greater than 20%
of its original Certificate Balance, the Class of Sequential Pay Certificates
with the latest alphabetical Class designation) to replace the Special Servicer
or any successor thereafter appointed and to select the Controlling Class
Representative from whom the Special Servicer will seek advice and approval and
take direction under certain circumstances, as described herein. The replacement
Special Servicer may be a Certificateholder of such Class or an affiliate of any
such Certificateholder. As described herein, the Special Servicer will have
considerable latitude in determining whether to liquidate or modify defaulted
Mortgage Loans. See "SERVICING OF THE MORTGAGE LOANS--Modifications, Waivers and
Amendments" herein. Although the initial Special Servicer will be obligated to
observe the terms of the Pooling and Servicing Agreement and will be governed by
the servicing standard described herein, it may, especially if it or an
affiliate is a Certificateholder, have interests when dealing with defaulted
Mortgage Loans that are in conflict with those of holders of other Classes of
Offered Certificates. For instance, a Special Servicer that is a
Certificateholder could seek to mitigate the potential for loss to its Class
from a troubled Mortgage Loan by deferring enforcement in the hope of maximizing
future proceeds. However, such action could result in less proceeds to the Trust
Fund than would have been realized if earlier action had been taken. To the
extent a Controlling Class Representative has been elected with respect to any
Specially Serviced Mortgage Loan, the Special Servicer may, at the direction of
the Controlling Class Representative, take actions with respect to such
Specially Serviced Mortgage
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Loan that could adversely affect the holders of some or all of the Classes of
Offered Certificates. See "SERVICING OF THE MORTGAGE LOANS--The Special
Servicer" herein.
THE MORTGAGE LOANS
Risks of Lending on Income-Producing Properties. The Mortgaged Properties
consist entirely of income-producing real estate. Lending on the security of
income-producing real estate is generally viewed as exposing a lender to a
greater risk of loss than lending on the security of single-family residences.
Income property lending typically involves larger loans than single-family
lending. In addition, and unlike loans made on the security of single-family
residences, repayment of loans made on the security of income-producing real
property depends upon the ability of the related real estate project (i) to
generate rental income sufficient to pay operating expenses and leasing
commissions, to make necessary repairs, tenant improvements and capital
improvements and to pay debt service and (ii) in the case of loans that do not
fully amortize over their terms, to retain sufficient value to permit the
borrower to repay the loan at maturity by sale or refinancing. A number of
factors, many beyond the control of the property owner, can affect the ability
of an income-producing real estate project to generate sufficient net operating
income to pay debt service and/or to maintain its value. Among these factors are
economic conditions generally and in the area of the project, the age, quality
and design of the project and the degree to which it competes with other
projects in the area, changes or continued weakness in specific industry
segments, increases in operating costs, the willingness and ability of the owner
to provide capable property management and maintenance and, in the case of
Mortgaged Properties that are retail, industrial/warehouse or office properties,
the degree to which the project's revenue is dependent upon a single tenant or
user, a small group of tenants, tenants concentrated in a particular business or
industry and the competition to any such tenants. If leases are not renewed or
replaced, if tenants default and/or if rental rates fall and/or if operating
expenses increase, the borrower's ability to repay the loan may be impaired and
the resale value of the property, which is substantially dependent upon the
property's ability to generate income, may decline. In addition, there are other
factors, including changes in zoning or tax laws, the availability of credit for
refinancing, and changes in interest rate levels that may adversely affect the
value of a project (and thus the borrower's ability to repay the loan at
maturity by sale or refinancing) without necessarily affecting the ability to
generatecurrent 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). 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
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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 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 specific property and such other assets,
if any, as were pledged to secure a Mortgage Loan.
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. Payment for the cost of
clean-up may reduce funds available to pay debt service. 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. Three hundred twenty-five (325) Mortgage Loans (83%) (the
"Balloon Loans"), do not fully amortize over their terms to maturity and have a
Balloon Payment due at maturity. Mortgage 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, tothe 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.
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Risk of Subordinated Debt and Other Financing. As of the Cut-Off Date, the
Mortgaged Properties securing seven Mortgage Loans (2%) (control numbers 202,
204, 208, 210, 233, 240 and 435), are encumbered by secured subordinated debt.
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. Notwithstanding, with respect to many of the Mortgage Loans, the
Mortgage Loan documents do not prohibit the borrower from incurring additional
indebtedness which is not secured by a lien on the related Mortgaged Properties.
A default by the borrower on such additional indebtedness could impair the
borrower's financial condition and result in the bankruptcy or receivership of
the borrower in which event foreclosure by the Trust Fund on the Mortgaged
Property would be delayed. With respect to one Mortgage Loan, (1%) (control
number 324), Daiwa has made a "subordinate" loan to a borrower secured by a
pledge of the limited partnership interest in the borrower. See "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 borrower concentrations in
excess of 3% 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.
Geographic Concentration of Properties Increasing Isolated Geographic Risk.
Ninety-two (92) Mortgaged Properties (18%) and forty-nine (49) Mortgaged
Properties (17%) are located in Texas and California, respectively. In general,
such concentrations increase the exposure of the Mortgage Loans to any adverse
economic or other developments that may occur in Texas and California.
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. Concentration of borrower representation in a
mortgage pool also poses increased risks. For instance, if a borrower that owns
several Mortgaged Properties experiences financial difficulty at one Mortgaged
Property, or at another income-producing property that it owns, it could attempt
to avert foreclosure by filing a bankruptcy petition that might have the effect
of interrupting Periodic Payments for an indefinite period on all of the related
Mortgage Loans.
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 each 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 to the extent described herein under "DESCRIPTION OF
CERTIFICATES--Distributions", Classes that have a lower priority of
distributions 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.
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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 (or
Daiwa Finance Corp. with respect to Mortgage Loans to be sold by Daiwa Real
Estate Finance Corp.), 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.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool is expected to consist of 401 conventional, fixed rate
Mortgage Loans with an aggregate Cut-Off Date Balance of $1,088,335,035 (the
"Initial Pool Balance") which are secured by first liens on 405 commercial and
multifamily properties. The Cut-Off Date Balances of the Mortgage Loans will
range from $179,680 to $18,964,067 and the Mortgage Loans will have an average
Cut-Off Date Balance of $2,714,052. All loan balances and percentages are
subject to a variance of plus or minus 5%. The "Cut-Off Date Balance" of any
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 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.
All but four of the Mortgage Loans are 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"). Four of the
Mortgage Loans (1%) (control numbers 118, 119, 233 and 329) are secured by a
first mortgage lien on the borrower's leasehold estate in the related Mortgaged
Property.
Two hundred forty-one (241) Mortgage Loans (42%) were acquired by the
Depositor from Daiwa, which originated such Mortgage Loans or 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 79 Mortgage Loans (6%), acquired such Mortgage Loans in secondary
market purchases. One hundred sixty (160) Mortgage Loans (58%), 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 twelve (12)
Mortgage Loans (4%), acquired such Mortgage Loans in a secondary market
purchase.
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Set forth below is the approximate percentage of the Initial Pool Balance
represented by the Mortgage Loans originated in the indicated year:
% OF
INITIAL POOL
YEAR BALANCE
---- -------
1995 ............................. 2%
1996 ............................. 3%
1997 ............................. 88%
1998 ............................. 8%
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 3% of the Initial Pool Balance. Mortgage Loans to one
borrower or a group of related borrowers are identified on Annex A hereto. See
"--Additional Mortgage Loan Information" and "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 Dates. One hundred fifty-six (156) Mortgage Loans (40%) accrue
interest on the basis (a "30/360 basis") of a 360-day year consisting of twelve
30-day months and 245 Mortgage Loans (60%) 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 Periodic Payments become due) that occur on the first day
of each month that a payment is due. Periodic Payments are due monthly with
respect to all of the Mortgage Loans, except that one Mortgage Loan's (control
number 300) Balloon Payment is due on the fifth day of the month.
Amortization. Three hundred twenty-five (325) Mortgage Loans (83%) provide
for Periodic 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.
Fifteeen (15) Mortgage Loans (7%) (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 Periodic 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. Sixty-one (61) Mortgage Loans (10%) (the "Fully Amortizing Loans"),
other than the ARD Loans, fully or substantially amortize through their
respective remaining terms to maturity.
Prepayment Provisions. As of the Cut-Off Date, all of the Mortgage Loans
restrict or prohibit voluntary principal prepayments. In general, the Mortgage
Loans (other than the Mortgage Loans described in the next succeeding
paragraph): (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 (269
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Mortgage Loans (67%)); (ii) prohibit voluntary prepayments of principal for most
of their remaining term, to maturity (two Mortgage Loans (2%)); (iii) permit
voluntary prepayments provided that the prepayment is accompanied by a Yield
Maintenance Charge and a Percentage Premium in excess of the amount prepaid for
most of their respective terms to maturity (81 Mortgage Loans (7%)); (iv) permit
voluntary principal prepayments provided that the prepayment is accompanied by a
Yield Maintenance Charge or a Percentage Premium in excess of the amount prepaid
for most of their respective remaining terms to maturity (three Mortgage Loans
(1%)); or (v) prohibit prepayment for a period, then require that a prepayment
is accompanied with a Yield Maintenance Charge for a period, and then a
Percentage Premium in excess of the amount prepaid for most of their respective
remaining terms to maturity (one Mortgage Loan (0.4%)). See "--Additional
Mortgage Loan Information" herein. With respect to the ARD Loans, voluntary
principal prepayments after the Anticipated Repayment Date are permitted without
material restrictions. The ability of the Master Servicer or a 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. Forty-five (45) Mortgage Loans (23%), during their respective
Lockout Periods (which prohibit prepayment for most of the term), but beginning
not earlier than two years after the Closing Date, provide that, in general,
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 (or, in the case of
the ARD Loans, 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 Periodic Payments and the Balloon
Payment with respect to such defeased Mortgage Loan (or, in the case of an ARD
Loan, the payment anticipated on the related Anticipated Repayment 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, (i) 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 (ii) 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 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
Mortgage Loans (2%) (control numbers 191, 179 and 216); two Mortgage Loans
(0.1%) (control numbers 395 and 396); three Mortgage Loans (0.1%) (control
numbers 418, 419 and 420); and three Mortgage Loans (1%) (control numbers 466,
467 and 468) 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 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.
S-34
<PAGE>
ASSESSMENT 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 or testing was being undertaken in a satisfactory manner
or that such remediation or testing 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 or its designee 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. The related borrowers generally deposited
with the Lender or its designee 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 any material recommended repairs, corrections or replacements
not completed by closing, to assure their completion.
Earthquake Analyses. Except for seven Mortgage Loans (0.53%) (control
numbers 405, 410, 411, 412, 423, 429 and 433), 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 Daiwa, that in the event of an
earthquake, none of the related Mortgaged Properties for which an analysis was
performed would suffer a maximum probable loss over a 50-year period in excess
of 36.6%.
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 for 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>
LARGEST MORTGAGE LOANS
Set forth below is a description of the five largest Mortgage Loans or
cross-collateralized Mortgage Loans by Cut-Off Date Balance. Additional data
with respect to such Mortgage Loans, to the extent applicable, is set forth in
Annex A hereto.
Canyon Crest Shopping Center. One of the Mortgage Loans is secured by a fee
mortgage encumbering Canyon Crest Shopping Center, a 249,187 net rentable square
foot anchored shopping center located in Riverside, California (the "Canyon
Crest Mortgage Loan"). The Canyon Crest Mortgage Loan was originated by L. J.
Melody & Company on or about December 22, 1997 and was acquired by MLMCI
concurrently therewith. As of the Cut-Off Date, the outstanding principal
balance of the Canyon Crest Mortgage Loan is $18,964,067 (2%).
The Canyon Crest Mortgage Loan was made to Canyon Crest Towne Centre, LLC,
a California limited liability company. The managing member of the borrowing
entity is Thompson Properties, Inc.
Canyon Crest Shopping Center, totaling 249,187 gross square feet, was
completed in 1978. The property is located on approximately 22.1 acres along
Central Avenue, Canyon Crest Drive and El Cerrito Drive approximately one mile
west of State Route 60 (Moreno Valley Freeway). Major tenants include Ralph's
Alpha Beta, Thrifty Drug, and Canyon Crest Athletic Center. The tenants listed
in the immediately preceding sentence occupy 14.1%, 7.1%, and 10.0%,
respectively, of Canyon Crest Towne Center's net rentable area. As of January
23, 1998, the property was 90% occupied. As of November 2, 1997, the appraised
value of the property was $25,400,000.
Ebbets Field Apartments. One of the Mortgage Loans is secured by a fee
mortgage encumbering Ebbets Field Apartments, an 1,318 unit multifamily
apartment building located in Brooklyn, New York (the "Ebbets Field Mortgage
Loan"). The Ebbets Field Mortgage Loan was originated by Univest Mortgage
Capital, LLC on or about July 22, 1997 and was acquired by Daiwa Finance Corp.
concurrently therewith. As of the Cut-Off Date, the outstanding principal
balance of the Ebbets Field Mortgage Loan is $17,638,089 (2%).
The Ebbets Field Mortgage Loan was made to Fieldbridge Associates, LLC, a
New York limited liability corporation. The managing member of the borrowing
entity is Fieldbridge SPC Corp.
Ebbets Field Apartments, totaling approximately 1,100,000 gross square
feet, was completed in 1962. Ebbets Field Apartments is located on approximately
6.50 acres along Bedford Avenue in the Crown Heights section of Brooklyn and is
within one-half mile of Prospect Park, the Brooklyn Botanical Gardens, the
Brooklyn Museum and Grand Army Plaza. As of year end, 1997, the property was
approximately 98% occupied. As of April 1, 1997, the appraised value of the
property was $25,300,000.
Chelsea Mini Storage. One of the mortgage loans is secured by a fee
mortgage encumbering Chelsea Mini Storage, a 725,061 net rentable square foot
industrial building located in the New York City borough of Manhattan (the
"Chelsea Mini Storage Mortgage Loan"). The Chelsea Mini Storage Mortgage Loan
was originated by Merrill Lynch Credit Corporation on or about November 26, 1997
and was acquired by MLMCI concurrently therewith.As of the Cut-Off Date, the
outstanding principal balance of the Chelsea Mini Storage Mortgage Loan
is$16,047,888 (1%).
The Chelsea Mini Storage Mortgage Loan was made to Waterfront N.Y. L.P., a
New York limited partnership. The managing general partner of the borrowing
entity is Bedrock Bender Corp.
Chelsea Mini Storage, totaling 1,001,500 gross square feet, was built about
the turn of the century and has been renovated/modified/upgraded on numerous
occasions. The property is located on an entire city block between 11th/12th
Avenues and West 27th/West 28th Streets. Major tenants include Chelsea Mini
Storage and Central Moving and Storage. The tenants listed in the immediately
preceding sentence occupy 44.3% and 22.1%, respectively, of Chelsea Mini
Storage's net rentable area. As of November 1, 1997, the property was 79%
occupied. As of Septem-ber 1, 1997, the appraised value of the property was
$38,400,000.
Firestone Mortgage Loans. Three mortgage loans are secured by fee mortgages
encumbering three separate garden apartment properties (the "Firestone Mortgage
Loans"). All three loans are cross-collateralized and cross-defaulted. The
Firestone Mortgage Loans were originated by Boston Capital Mortgage Company
Limited Partnership on or about May 28, 1997 and were acquired by MLMCI on or
about June 19, 1997. As of the Cut-Off Date, the aggregate outstanding principal
balance of the Firestone Mortgage Loans is $16,957,629 (2%).
The three Mortgage Properties, all of which are located in the same
neighborhood in Dallas, Texas, contain a total of 965 units and are further
detailed as follows:
S-36
<PAGE>
Harvey's Racquet Club Apartments was built in 1975 and renovated in
1994. Improvements include 35 two- and three-story buildings containing 352
rental units. Amenities include an on-site leasing office, clubroom, three
swimming pools, two tennis courts, playground and laundry facilities. As of
April 10, 1997, the appraised value of the property was $8,000,000. As of
the Cut-Off Date, the outstanding principal balance is $6,262,958.
Park Apartments was built in 1968 and renovated in 1994. Improvements
include 25 two-story buildings containing 239 rental units. Amenities
include an on-site leasing office, clubroom, four swimming pools and four
laundries. As of April 10, 1997, the appraised value of the property was
$5,100,000. As of the Cut-Off Date, the outstanding principal balance is
$3,761,745.
Hub Apartments was built in 1968 and renovated between 1992 and 1994.
Improvements include 35 two- and three-story buildings containing 374
rental units. Amenities include an on-site leasing office, clubroom, four
swimming pools and four laundries. As of April 10, 1997, the appraised
value of the property was $9,200,000. As of the Cut-Off Date, the
outstanding principal balance is $6,932,926.
Orlando Hampton Inn and Suites. One of the Mortgage Loans is secured by a
fee mortgage encumbering Hampton Inn and Suites Hotel, a 316 room limited
service hotel located in Orlando, Florida (the "Orlando Hampton Inn and Suites
Mortgage Loan"). The Orlando Hampton Inn and Suites Mortgage Loan was originated
by Daiwa Real Estate Finance Corp. on or about November 26, 1997. As of the
Cut-Off Date, the outstanding principal balance of the Hampton Inn and Suites
Mortgage Loan is $15,946,751 (1%).
The Orlando Hampton Inn and Suites Mortgage Loan was made to Laxmi Sand
Lake Hotel, Ltd., a Florida limited partnership. The general partner of the
borrowing entity is Auro Sand Lake Hotel, LLC.
The Orlando Hampton Inn and Suites Hotel, containing 316 rooms,
approximately 1,740 square feet of meeting space, a dining room and two swimming
pools, was completed in 1984 and substantially renovated in November, 1995. The
Orlando Hampton Inn and Suites Hotel is located on approximately 4.80 acres
along Sand Lake Road which is approximately one quarter mile from Interstate 4,
providing convenient access to the tourist attractions in the area. As of
November 1, 1997, the appraised value of the property was $24,000,000.
ADDITIONAL MORTGAGE LOAN INFORMATION
The Mortgage Pool. For a detailed presentation of certain of the
characteristics of the Mortgage Loans and the Mortgaged Properties, on an
individual basis, see Annex A hereto. Certain additional information regarding
the Mortgage Loans is contained herein under "--Assignment of the Mortgage
Loans; Repurchases" and "--Representations and Warranties; Repurchases," and in
the Prospectus under "DESCRIPTION OF THE TRUST FUNDS" and "CERTAIN LEGAL ASPECTS
OF THE MORTGAGE LOANS."
For purposes of the following tables, tables set forth in the Summary 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." With respect to the Mortgage Loans, 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,
nursing homes, industrial, self storage, hospitality and office properties
(each, a "Rental Property").
S-37
<PAGE>
In general, the applicable Mortgage Loan Seller relied on full-year
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 or acquisition 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. Occupancy rates were within the then current
market ranges and vacancy levels were a minimum of 5%. In general, any
non-recurring items and non-property related revenue were eliminated from
the calculation except in the case of residential health care facilities.
In determining the "expense" component of Net Cash Flow for each
Mortgaged Property, the Mortgage Loan Seller generally relied on full-year
or year-to-date financial statements, rolling 12-month operating statements
and/or year-to-date financial statements supplied by the related borrower,
except that (a) if tax or 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, (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. See Annex A hereto. 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, Room or Bed" are, for
each Mortgage Loan secured by a lien on (1) a retail, industrial, self
storage, medical office or office property, (2) a multifamily property, (3)
a
S-38
<PAGE>
manufactured housing community, (4) a hospitality property or (5) a
healthcare facility, respectively, references to the Cut-Off Date Balance
of such Mortgage Loan divided by the number of square feet, dwelling units,
pads, guest suites or rooms, or health care facility beds, 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 or in the event of substantial renovation or rehabilitation of a
Mortgaged Property, the year in which such renovation or rehabilitation was
completed.
(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.
(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, (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) and (e) in the case of healthcare facilities, the
percentage of beds rented.
(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.
S-39
<PAGE>
PROPERTY TYPES
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-------------------------------
AGGREGATE AVERAGE HIGHEST STATED REMAINING
NUMBER OF CUT-OFF % OF INITIAL CUT-OFF CUT-OFF REMAINING AMORT.
MORTGAGED DATE 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 265 $ 459,012,933 42.18% $ 1,732,124 $17,638,089 8.002% 121 322
RETAIL
Anchored Retail 23 174,404,613 16.02% 7,582,809 18,964,067 7.753 115 343
Unanchored Retail 25 89,383,339 8.21% 3,575,334 9,985,952 7.763 117 323
- ------------------------------------------------------------------------------------------------------------------------------
48 263,787,951 24.24% 5,495,582 18,964,067 7.756 116 336
HOSPITALITY 49 150,315,478 13.81% 3,067,663 15,946,751 8.475 156 258
OFFICE
Office 26 114,156,376 10.49% 4,390,630 15,838,528 7.800 119 318
Office/Industrial/R&D 1 2,840,589 0.26% 2,840,589 2,840,589 7.480 116 356
- ------------------------------------------------------------------------------------------------------------------------------
27 116,996,966 10.75% 4,333,221 15,838,528 7.792 119 319
INDUSTRIAL 10 60,953,837 5.60% 6,095,384 16,047,888 7.727 142 270
NURSING HOME 2 28,933,739 2.66% 14,466,869 15,933,739 7.903 145 298
MOBILE HOME PARK 2 4,444,167 0.41% 2,222,083 2,844,507 7.861 116 334
SELF STORAGE 1 3,393,201 0.31% 3,393,201 3,393,201 8.330 298 298
MIXED USE 1 496,764 0.05% 496,764 496,764 9.750 52 292
- ------------------------------------------------------------------------------------------------------------------------------
TOTALS/WTG. AVGS. 405 $1,088,335,035 100.00% $ 2,687,247 $18,964,067 7.968% 126 313
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
WEIGHTED AVERAGES
----------------------------------------------------- LOAN PER
CUT-OFF CUT-OFF OCCUPANCY SQ FT. UNIT, AVERAGE
DATE DATE REPAYMENT PERCENT- PAD, ROOM PROPERTY
PROPERTY TYPES DSCR LTV LTV AGE(A) OR BED SIZE(B)
- -------------- ---- --- --- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
MULTIFAMILY 1.40x 72.56% 58.63% 95.25% 26,248 212
RETAIL
Anchored Retail 1.36x 72.69 63.21 94.54 68 174,979
Unanchored Retail 1.48x 68.97 57.90 93.68 83 83,967
- ---------------------------------------------------------------------------------------------------------
1.40x 71.43 61.41 94.25 73 144,140
HOSPITALITY 1.53x 65.58 33.97 NAP 37,455 132
OFFICE
Office 1.36x 71.13 56.81 97.01 96 84,501
Office/Industrial/R&D 1.36x 74.75 65.32 100.00 77 36,941
- ---------------------------------------------------------------------------------------------------------
1.36x 71.22 57.02 97.09 96 83,346
INDUSTRIAL 1.45x 62.81 39.65 92.55 37 316,736
NURSING HOME 1.38x 74.86 55.82 96.70 107,292 136
MOBILE HOME PARK 1.33x 71.57 61.77 100.00 15,431 161
SELF STORAGE 1.53x 65.89 0.00 65.00 32 107,576
MIXED USE 1.21x 66.24 62.63 89.00 28 17,890
- ---------------------------------------------------------------------------------------------------------
TOTALS/WTG. AVGS. 1.41x 70.66% 54.42% 81.86% NAP NAP
</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 manufactured housing
communities, number of guest rooms with respect to each hospitality
property, number of square feet with respect to self-storage facilities and
number of beds with respect to health care facilities.
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
AGGREGATE % OF --------------------------------------------
NUMBER OF CUT-OFF INITIAL CUT-OFF CUT-OFF
MORTGAGED DATE POOL DATE DATE REPAYMENT
STATE PROPERTIES BALANCE BALANCE DSCR LTV LTV
----- ---------- ------- ------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
Texas 92 $ 197,464,990 18.14% 1.39x 73.16% 57.09%
California 49 181,157,102 16.65 1.39x 69.75 54.95
New York 34 97,572,082 8.97 1.55x 62.01 40.70
Florida 25 78,454,490 7.21 1.45x 72.52 59.55
Colorado 16 52,161,291 4.79 1.38x 74.12 65.17
Arizona 26 50,219,412 4.61 1.40x 70.66 60.15
New Jersey 10 45,445,503 4.18 1.37x 68.80 56.03
Georgia 19 39,032,805 3.59 1.44x 72.13 49.69
Illinois 5 28,219,070 2.59 1.42x 73.22 61.39
Ohio 4 28,201,787 2.59 1.37x 68.94 59.12
Washington 7 27,942,674 2.57 1.35x 76.74 66.93
Connecticut 9 27,269,327 2.51 1.33x 76.34 57.93
Virginia 9 26,475,278 2.43 1.57x 62.36 52.19
Massachusetts 11 21,397,768 1.97 1.40x 72.20 51.32
Tennessee 5 18,413,057 1.69 1.33x 75.41 58.72
Pennsylvania 15 16,372,870 1.50 1.35x 71.60 57.75
Michigan 3 15,578,101 1.43 1.32x 69.63 60.62
Missouri 2 14,679,289 1.35 1.27x 78.70 68.26
South Carolina 8 14,334,478 1.32 1.43x 67.42 32.08
North Carolina 7 11,099,936 1.02 1.83x 61.43 39.94
Maryland 2 9,243,210 0.85 1.28x 71.18 63.93
Nevada 3 8,687,788 0.80 1.37x 72.74 60.32
New Mexico 5 8,542,298 0.78 1.31x 73.48 64.28
Indiana 3 8,472,166 0.78 1.37x 69.14 31.31
Oklahoma 3 7,723,732 0.71 1.28x 73.58 64.61
Mississippi 4 7,353,658 0.68 1.58x 69.77 7.57
Rhode Island 2 7,176,268 0.66 1.42x 69.76 57.76
Minnesota 2 6,469,544 0.59 1.45x 69.35 31.01
Alabama 2 5,744,507 0.53 1.38x 77.69 23.91
Louisiana 5 4,519,498 0.42 1.54x 63.48 11.33
Kentucky 3 3,983,720 0.37 1.45x 69.14 33.04
New Hampshire 3 3,676,969 0.34 1.38x 63.98 47.11
Maine 1 3,089,851 0.28 1.39x 67.17 0.00
Arkansas 5 2,930,574 0.27 1.57x 69.99 59.17
Kansas 2 2,733,512 0.25 1.36x 73.05 63.25
West Virginia 1 1,970,007 0.18 1.33x 67.93 47.61
Utah 1 1,844,325 0.17 1.41x 70.94 59.57
Wisconsin 1 1,796,568 0.17 1.40x 74.86 56.44
District Of Columbia 1 885,530 0.08 1.22x 64.87 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/WTG. AVGS. 405 $1,088,335,035 100.00% 1.41x 70.66% 54.42%
</TABLE>
Total number of states is 39.
S-40
<PAGE>
<TABLE>
<CAPTION>
YEARS BUILT
WEIGHTED AVERAGES
AGGREGATE % OF CUMULATIVE --------------------------------------------------------------------
NUMBER OF CUT-OFF INITIAL % OF INITIAL STATED REMAINING CUT-OFF
RANGE OF MORTGAGED DATE POOL POOL MORTGAGE REMAINING AMORT. SEASONING DATE REPAYMENT
YEARS BUILT PROPERTIES BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) (MO.)(A) DSCR LTV LTV
- ----------- ---------- ------- ------- ------- ---- ---------- ---------- -------- ---- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1858-1959 66 $ 108,284,004 9.95% 9.95% 8.022% 131 290 5 1.51x 66.30% 46.83%
1960-1969 95 219,093,800 20.13 30.08 8.175 122 314 6 1.42x 71.09 57.32
1970-1979 94 249,787,648 22.95 53.03 7.897 131 320 5 1.39x 72.34 55.41
1980-1989 100 356,002,538 32.71 85.74 7.836 120 318 4 1.39x 70.36 56.18
1990-1997 50 155,167,045 14.26 100.00 8.056 136 304 4 1.44x 71.13 49.98
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/WTG.
AVGS. 405 $1,088,335,035 100.00% 100.00% 7.968% 126 313 5 1.41x 70.66% 54.42%
- ----------------
(A) Number of months elapsed since the first Due Date following origination.
</TABLE>
<TABLE>
<CAPTION>
DEBT SERVICE COVERAGE RATIOS
WEIGHTED AVERAGES
RANGE OF AGGREGATE % OF CUMULATIVE --------------------------------------------------------------
DEBT SERVICE NUMBER OF CUT-OFF INITIAL % OF INITIAL STATED REMAINING CUT-OFF
COVERAGE MORTGAGE DATE POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
RATIO LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ------------ --------- ------- ------- ------- ---- ---------- ---------- ---- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.12-1.19x 10 $ 13,257,901 1.22% 1.22% 8.649% 109 302 1.17x 68.80% 54.61%
1.20-1.29x 81 261,223,082 24.00 25.22 7.850 117 327 1.26x 73.63 60.33
1.30-1.39x 119 356,428,504 32.75 57.97 7.886 127 323 1.35x 73.00 57.95
1.40-1.49x 80 241,102,161 22.15 80.12 7.995 120 313 1.44x 71.13 57.39
1.50-1.59x 50 106,693,997 9.80 89.93 8.189 145 282 1.54x 67.22 42.09
1.60-1.69x 18 28,915,494 2.66 92.58 8.139 144 307 1.64x 64.14 42.03
1.70-1.79x 16 36,756,211 3.38 95.96 8.143 156 230 1.74x 54.03 22.41
1.80-1.89x 9 22,202,713 2.04 98.00 7.730 137 313 1.84x 62.17 43.86
1.90-1.99x 6 5,269,506 0.48 98.49 8.687 149 272 1.95x 66.09 39.13
2.00-2.49x 10 12,501,640 1.15 99.63 8.857 141 265 2.12x 58.16 34.27
2.50-2.99x 2 3,983,824 0.37 100.00 7.988 99 329 2.78x 31.88 28.22
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS/WTG.
AVGS. 401 $1,088,335,035 100.00% 100.00% 7.968% 126 313 1.41x 70.66% 54.42%
</TABLE>
<TABLE>
<CAPTION>
CUT-OFF DATE LTV RATIOS
WEIGHTED AVERAGES
RANGE AGGREGATE % OF CUMULATIVE -------------------------------------------------------------
OF CUT-OFF NUMBER OF CUT-OFF INITIAL % OF INITIAL STATED REMAINING CUT-OFF
DATE LTV MORTGAGE DATE POOL POOL MORTGAGE REMAINING AMORT. DATE REPAYMENT
RATIOS LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ------------ --------- ------- ------- ------- ---- ---------- ---------- ---- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31.42-50.00% 12 $ 34,325,731 3.15% 3.15% 7.859% 154 231 1.78x 42.57% 14.76%
50.01-60.00 34 62,365,103 5.73 8.88 8.398 140 283 1.55x 56.04 34.99
60.01-70.00 140 322,100,122 29.60 38.48 8.240 136 287 1.46x 66.60 44.66
70.01-80.00 211 648,370,998 59.57 98.05 7.808 119 331 1.36x 75.20 62.64
80.01-83.50 4 21,173,080 1.95 100.00 7.635 115 349 1.41x 82.24 72.66
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG.
AVGS. 401 $1,088,335,035 100.00% 100.00% 7.968% 126 313 1.41x 70.66% 54.42%
</TABLE>
S-41
<PAGE>
<TABLE>
<CAPTION>
REPAYMENT LTV RATIOS
WEIGHTED AVERAGES
RANGE OF AGGREGATE % OF CUMULATIVE --------------------------------------------------------------
REPAYMENT NUMBER OF CUT-OFF INITIAL % OF INITIAL STATED REMAINING CUT-OFF CUT-OFF
LTV RATIOS MORTGAGE DATE POOL POOL MORTGAGE REMAINING AMORT. DATE DATE REPAYMENT
(MO.) LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
---------- --------- --------- ------- ------------ -------- ---------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fully Amortizing 61 $ 105,265,862 9.67% 9.67% 8.408% 230 230 1.55x 61.69% NAP(A)
0.01%-50.00% 44 97,073,710 8.92 18.59 8.089 130 272 1.53x 60.22 42.02%
50.01 -60.00 110 304,784,744 28.00 46.60 8.060 122 303 1.45x 68.32 55.33
60.01 -70.00 175 515,761,807 47.39 93.99 7.838 112 339 1.36x 74.67 65.04
70.01 -73.49 11 65,448,912 6.01 100.00 7.684 91 347 1.32x 79.91 72.41
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/
WTG. AVGS. 401 $1,088,335,035 100.00% 100.00% 7.968% 126 313 1.41x 70.66% 54.42%
- ----------------
(A) Fully Amortizing Loans which compute interest on an Actual/360 basis generally have de minimis amounts (in addition to the
Scheduled Payment) due on its maturity date. Such amounts are not considered Balloon Payments.
</TABLE>
<TABLE>
<CAPTION>
MORTGAGE RATES
WEIGHTED AVERAGES
AGGREGATE % OF CUMULATIVE ----------------------------------------------------------------
RANGE OF NUMBER OF CUT-OFF INITIAL % OF INITIAL STATED REMAINING CUT-OFF CUT-OFF
MORTGAGE MORTGAGE DATE POOL POOL MORTGAGE REMAINING AMORT. DATE DATE REPAYMENT
RATES LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
-------- -------- ------- ------- ------- -------- ---------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6.910%- 6.999% 2 $ 20,369,911 1.87% 1.87% 6.910% 119 359 1.64x 67.97% 58.47%
7.000 - 7.124 5 35,311,147 3.24 5.12 7.056 111 331 1.40x 70.83 59.93
7.125 - 7.249 9 27,346,325 2.51 7.63 7.202 132 343 1.35x 76.06 61.71
7.250 - 7.374 20 93,380,798 8.58 16.21 7.299 127 350 1.33x 75.84 64.01
7.375 - 7.499 21 95,354,295 8.76 24.97 7.427 133 313 1.41x 69.66 52.18
7.500 - 7.624 26 100,835,237 9.27 34.24 7.549 123 338 1.33x 77.33 62.89
7.625 - 7.749 24 125,948,774 11.57 45.81 7.674 120 327 1.45x 70.18 58.56
7.750 - 7.874 32 107,946,409 9.92 55.73 7.796 128 321 1.41x 70.96 55.19
7.875 - 7.999 9 34,441,446 3.16 58.89 7.931 115 337 1.40x 68.53 59.52
8.000 - 8.124 16 52,237,243 4.80 63.69 8.025 118 319 1.41x 72.72 59.21
8.125 - 8.249 11 61,701,020 5.67 69.36 8.180 112 306 1.42x 67.30 56.45
8.250 - 8.374 23 72,364,142 6.65 76.01 8.300 147 278 1.42x 69.11 39.97
8.375 - 8.499 12 28,593,217 2.63 78.64 8.436 112 295 1.35x 72.41 54.04
8.500 - 8.624 25 57,993,057 5.33 83.97 8.566 130 277 1.47x 67.93 47.11
8.625 - 8.749 15 12,286,004 1.13 85.09 8.669 126 278 1.41x 69.23 48.51
8.750 - 8.874 19 31,279,279 2.87 87.97 8.791 135 275 1.45x 66.13 46.30
8.875 - 8.999 14 17,930,869 1.65 89.62 8.886 143 283 1.44x 66.29 41.55
9.000 - 9.124 22 27,518,557 2.53 92.14 9.014 129 260 1.55x 63.05 42.47
9.125 - 9.249 25 18,212,321 1.67 93.82 9.125 121 300 1.45x 66.80 52.52
9.250 - 9.374 24 30,650,600 2.82 96.63 9.288 134 270 1.43x 67.50 44.59
9.375 - 9.499 15 13,916,305 1.28 97.91 9.385 137 272 1.55x 69.50 44.06
9.500 - 9.624 13 7,375,331 0.68 98.59 9.504 143 276 1.33x 68.86 44.12
9.625 - 9.749 8 7,304,253 0.67 99.26 9.667 132 253 1.68x 63.71 40.49
9.750 - 9.874 5 4,457,226 0.41 99.67 9.750 148 248 1.70x 64.55 32.65
9.875 - 9.999 3 1,589,423 0.15 99.82 9.875 125 266 1.27x 65.24 43.82
10.000 -10.124 2 1,672,319 0.15 99.97 10.000 157 285 1.30x 70.02 36.00
11.000 -11.500 1 319,525 0.03 100.00 11.500 118 298 1.79x 63.90 57.57
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS/
WTG. AVGS. 401 $1,088,335,035 100.00% 100.00% 7.968% 126 313 1.41x 70.66% 54.42%
</TABLE>
S-42
<PAGE>
<TABLE>
<CAPTION>
ORIGINAL TERMS
WEIGHTED AVERAGES
% OF ----------------------------------------------------------------------
NUMBER OF AGGREGATE AGGREGATE STATED REMAINING CUT-OFF CUT-OFF
ORIGINAL MORTGAGE CUT-OFF DATE CUT-OF DATE MORTGAGE REMAINING AMORT. SEASONING DATE DATE REPAYMENT
TERMS LOANS BALANCE BALANCE RATE TERM (MO.) TERM (MO.) (MO.)(A) DSCR LTV LTV
-------- --------- ------------ ----------- -------- ---------- ---------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 Year Balloon 7 $ 17,297,592 1.59% 8.170% 52 320 8 1.28x 73.48% 69.40$
6 to 9 Year Balloon (B) 19 85,912,789 7.89 8.123 83 313 6 1.36x 72.76 63.05
10 Year Balloon (C) 279 738,954,469 67.90 7.932 115 323 5 1.41x 71.38 60.63
11 to 14 Year Balloon 1 3,241,581 0.30 7.640 142 298 2 1.59x 64.32 47.96
16 to 20 Year Balloon 1 399,141 0.04 9.125 236 356 4 1.26x 68.82 48.84
6 to 9 Year ARD 1 2,096,002 0.19 7,260 82 358 2 1.41x 70.34 64.67
10 Year ARD 14 73,138,360 6.72 7.864 116 324 4 1.38x 70.06 58.88
15 Year Balloon 18 62,029,238 5.70 7.536 178 320 2 1.33x 74.80 51.37
Fully Amortizing 61 105,265,862 9.67 8.408 230 230 6 1.55x 61.69 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/WTG.
AVGS. 401 $1,088,335,035 100.00% 7.968% 126 313 5 1.41x 70.66% 54.42%
- ----------------
(A) Number of months elapsed since the first Due Date following origination.
(B) Includes one loan with an original term to maturity of 109.
(C) Inclues one loan with an original term to maturity of 121.
</TABLE>
<TABLE>
<CAPTION>
REMAINING TERMS
WEIGHTED AVERAGES
% OF CUMULATIVE ------------------------------------------------------------------
RANGE OF NUMBER OF AGGREGATE INITIAL % OF INITIAL STATED REMAINING CUT-OFF CUT-OFF
REMAINING MORTGAGE CUT-OFF DATE POOL POOL MORTGAGE REMAINING AMORT. DATE DATE REPAYMENT
TERMS (MO.) LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ----------- --------- ------------ ------- ------------ -------- ---------- ----------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40- 48 3 $ 5,354,128 0.49% 0.49% 8.922% 47 287 1.41x 70.97% 66.95%
49- 72 11 17,642,224 1.62 2.11 8.304 58 326 1.28x 72.43 68.14
73- 84 11 63,629,809 5.85 7.96 7.965 78 326 1.37x 75.02 68.42
85- 96 11 11,228,694 1.03 8.99 9.076 90 299 1.40x 66.69 58.85
97-108 30 40,823,149 3.75 12.74 8.748 105 282 1.40x 67.59 52.21
109-120 254 778,721,207 71.55 84.29 7.873 116 324 1.41x 71.40 60.56
121-228 40 97,162,557 8.93 93.22 7.765 181 277 1.46x 66.27 34.40
229-240 33 59,196,052 5.44 98.66 8.564 237 238 1.51x 65.37 0.33
241-299 8 14,577,214 1.34 100.00 8.203 287 287 1.38x 72.77 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/WTG.
AVGS. 401 $1,088,335,035 100.00% 100.00% 7.968% 126 313 1.41x 70.66% 54.42%
</TABLE>
<TABLE>
<CAPTION>
YEARS OF SCHEDULED MATURITY OR ANTICIPATED REPAYMENT DATE
WEIGHTED AVERAGES
% OF CUMULATIVE ------------------------------------------------------------------
SCHEDULED NUMBER OF AGGREGATE INITIAL % OF INITIAL STATED REMAINING CUT-OFF CUT-OFF
MATURITY MORTGAGE CUT-OFF DATE POOL POOL MORTGAGE REMAINING AMORT. DATE DATE REPAYMENT
YEAR LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- --------- --------- ------------ ------- ------------ -------- ---------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2001 1 $ 609,244 0.06% 0.06% 9.625% 40 280 1.22x 72.53% 69.26%
2002 7 17,276,239 1.59 1.64 8.147 53 320 1.30x 73.06 68.93
2003 5 3,903,398 0.36 2.00 9.386 65 299 1.34x 69.68 64.69
2004 9 50,569,156 4.65 6.65 8.099 77 327 1.36x 74.60 68.32
2005 13 25,106,919 2.31 8.96 8.239 86 314 1.41x 71.99 64.37
2006 16 16,197,106 1.49 10.44 9.001 103 227 1.37x 66.32 41.45
2007 199 539,678,420 49.59 60.03 8.115 114 317 1.42x 70.64 59.85
2008 70 264,058,729 24.26 84.29 7.447 118 338 1.39x 72.65 61.87
2010 2 4,526,886 0.42 84.71 7.884 145 257 1.57x 61.39 34.35
2012 10 51,041,207 4.69 89.40 7.487 177 283 1.47x 63.47 35.66
2013 12 29,833,972 2.74 92.14 7.604 179 293 1.33x 74.87 45.81
2015 6 4,730,164 0.43 92.58 9.626 210 210 1.75x 56.35 0.00
2016 9 6,529,734 0.60 93.18 9.141 218 218 1.62x 61.50 0.00
2017 26 41,347,129 3.80 96.97 8.698 236 237 1.53x 65.93 0.47
2018 8 18,349,517 1.69 98.66 8.277 238 238 1.49x 63.38 0.00
2019 1 3,497,970 0.32 98.98 7.560 260 260 1.36x 79.50 0.00
2022 5 6,113,553 0.56 99.54 8.607 293 293 1.31x 72.20 0.00
2023 2 4,965,690 0.46 100.00 8.159 298 298 1.48x 68.74 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/WTG.
AVGS. 401 $1,088,335,035 100.00% 100.00% 7.968% 126 313 1.41x 70.66% 54.42%
</TABLE>
S-43
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF DATE BALANCES
WEIGHTED AVERAGES
RANGE OF AGGREGATE % OF CUMULATIVE -------------------------------------------------------------
CUT-OFF NUMBER OF CUT-OFF INITIAL % OF INITIAL STATED REMAINING CUT-OFF CUT-OFF
DATE MORTGAGE DATE POOL POOL MORTGAGE REMAINING AMORT. DATE DATE REPAYMENT
BALANCES LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
-------- --------- --------- ------- ------------ -------- ---------- ---------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 179,680-$ 999,999 149 $ 90,508,210 8.32% 8.32 8.899% 127 292 1.47x 67.81% 50.29%
1,000,000- 1,999,999 91 132,377,028 12.16 20.48 8.332 148 288 1.46x 68.95 42.79
2,000,000- 2,999,999 57 140,606,300 12.92 33.40 7.974 136 304 1.43x 70.38 49.67
3,000,000- 3,999,999 31 108,803,993 10.00 43.40 7.953 135 305 1.43x 70.19 50.04
4,000,000- 4,999,999 15 66,078,475 6.07 49.47 7.840 116 329 1.43x 68.90 58.88
5,000,000- 5,999,999 10 54,579,101 5.01 54.48 7.856 117 304 1.39x 72.22 56.64
6,000,000- 6,999,999 12 80,103,873 7.36 61.84 7.720 117 319 1.38x 73.38 60.70
7,000,000- 7,999,999 6 45,563,185 4.19 66.03 7.874 116 333 1.35x 74.88 64.04
8,000,000- 8,999,999 6 50,730,938 4.66 70.69 7.908 106 339 1.36x 71.75 62.59
9,000,000- 9,999,999 3 29,453,133 2.71 73.40 7.402 118 358 1.54x 70.46 61.53
10,000,000- 14,999,999 14 173,921,066 15.98 89.38 7.648 119 332 1.33x 72.97 61.11
15,000,000- 18,964,067 7 115,609,731 10.62 100.00 7.819 125 306 1.46x 68.49 53.66
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/WTG.
AVGS. 401 $1,088,335,035 100.00% 100.00% 7.968% 126 313 1.41x 70.66% 54.42%
- ----------------
Average Cut-Off Date Balance is $2,714,052.
</TABLE>
S-44
<PAGE>
<TABLE>
<CAPTION>
PREPAYMENT RESTRICTIONS BY CATEGORIES
WEIGHTED LOCKOUT/DEFEASANCE
AGGREGATE % OF AVERAGE TERM (MO.)/ WEIGHTED AVERAGE # OF
NUMBER OF CUT-OFF INITIAL STATED % OF WEIGHTED AVERAGE MONTHS OPEN TO
MORTGAGE DATE POOL REMAINING STATED REMAINING TERM PREPAYMENT PRIOR
PREPAYMENT RESTRICTIONS (A) LOANS BALANCE BALANCE TERM (MOS.) OF LOCKOUT TO MATURITY/ARD
- --------------------------- --------- --------- ------- ----------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Locked Only 2 $ 18,203,183 1.67% 184 181 98.37% 3
Locked, then D 45 254,751,460 23.41 122 116 95.41 6
Locked, then PP 8 46,998,752 4.32 148 53 35.46 10
Locked, then YM 261 684,841,259 62.93 125 58 46.59 4
Locked, then YM, then PP 1 4,776,013 0.44 113 41 36.28 6
PP Only 2 5,029,952 0.46 102 0 0.00 4
YM only 1 2,927,347 0.27 114 0 0.00 6
YM, then PP 81 70,807,068 6.51 134 0 0.00 18
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. AVGS. 401 $1,088,335,035 100.00% 126 69 54.74% 6
- ----------------
(A) D=Defeasance Collateral, YM=Yield Maintenance, PP=Percentage Premium.
</TABLE>
<TABLE>
<CAPTION>
PREPAYMENT RESTRICTIONS BY ORIGINAL TERM
WEIGHTED AVERAGES
----------------------------------------------------
AGGREGATE % OF STATED MONTHS
NUMBER OF CUT-OFF INITIAL REMAINING MONTHS OPEN
PREPAYMENT MORTGAGE DATE 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 3 $ 13,887,252 1.28% 7.863% 53 29 21 0 3
5 Year Balloon YM, then PP 4 3,410,341 0.31 9.421 48 0 24 18 6
- ------------------------------------------------------------------------------------------------------------------------------------
7 17,297,592 1.59 8.170 52 24 22 4 4
6 to 9 Year Balloon Locked, then D 3 13,635,534 1.25 8.353 91 85 0 0 6
6 to 9 Year Balloon Locked, then YM 9 65,350,439 6.00 7.979 83 43 35 0 5
6 to 9 Year Balloon PP only 1 1,790,669 0.16 8.170 79 0 0 73 6
6 to 9 Year Balloon YM, then PP 6 5,136,148 0.47 9.336 64 0 40 18 6
- ------------------------------------------------------------------------------------------------------------------------------------
19 85,912,789 7.89 8.123 83 46 29 3 5
6 to 9 Year
Balloon ARD Locked, then YM 1 2,096,002 0.19 7.260 82 34 42 0 6
10 Year Balloon Locked, then D 38 219,834,572 20.20 8.001 116 110 0 0 6
10 Year Balloon Locked, then PP 6 29,342,124 2.70 7.757 117 25 0 86 6
10 Year Balloon Locked, then YM 186 440,070,427 40.44 7.805 116 52 59 0 4
10 Year Balloon Locked, then YM, then PP 1 4,776,013 0.44 7.790 113 41 36 30 6
10 Year Balloon YM only 1 2,927,347 0.27 7.750 114 0 108 0 6
10 Year Balloon YM, then PP 47 42,003,986 3.86 9.054 103 0 68 29 6
- ------------------------------------------------------------------------------------------------------------------------------------
279 738,954,469 67.90 7.932 115 65 40 5 5
10 Year Balloon ARD Locked, then YM 13 69,899,077 6.42 7.866 116 46 66 0 4
10 Year Balloon ARD PP only 1 3,239,283 0.30 7,820 115 0 0 112 3
- ------------------------------------------------------------------------------------------------------------------------------------
14 73,138,360 6.72 7.864 116 44 63 5 4
11 to 14 Year
Balloon Locked, then YM 1 3,241,581 0.30 7.640 142 70 69 0 3
15 Year Balloon Locked, then D 1 13,000,000 1.19 7.600 180 174 0 0 6
15 Year Balloon Locked, then PP 1 14,263,427 1.31 7.270 177 93 0 78 6
15 Year Balloon Locked, then YM 16 34,765,811 3.19 7.622 177 97 76 0 4
- ------------------------------------------------------------------------------------------------------------------------------------
18 62,029,238 5.70 7.536 178 112 42 18 5
16 to 20 Year
Balloon Locked, then YM 1 399,141 0.04 9.125 236 176 54 0 6
Fully Amortizing Locked Only 2 18,203,183 1.67 7.483 184 181 0 0 3
Fully Amortizing Locked, then D 3 8,281,355 0.76 7.687 236 231 0 0 5
Fully Amortizing Locked, then PP 1 3,393,201 0.31 8.330 298 118 0 120 60
Fully Amortizing Locked, then YM 31 55,131,528 5.07 8.577 239 119 117 0 3
Fully Amortizing YM, then PP 24 20,256,594 1.86 9.089 232 0 117 68 47
- ------------------------------------------------------------------------------------------------------------------------------------
61 105,265,862 9.67 8.408 230 116 83 17 14
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS/WTG. AVGS. 401 $1,088,335,035 100.00% 7.968% 126 69 45 7 6
- ----------------
(A) D=Defeasance Collateral, YM=Yield Maintenance, PP=Percentage Premium.
</TABLE>
S-45
<PAGE>
<TABLE>
<CAPTION>
PREPAYMENT LOCK-OUT/PREMIUM ANALYSIS
CURRENT 12 MO. 24 MO. 36 MO. 48 MO. 60 MO. 72 MO. 84 MO.
PREPAYMENT MARCH MARCH MARCH MARCH MARCH MARCH MARCH MARCH
RESTRICTIONS 1998 1999 2000 2001 2002 2003 2004 2005
------------ ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 92.8% 92.8% 89.3% 80.7% 72.2% 37.7% 35.0% 36.3%
Yield Maintenance 6.8% 6.8% 7.7% 16.1% 24.3% 57.6% 57.1% 55.9%
Percentage Premium
5.00% and greater 0.0% 0.0% 2.3% 0.1% 0.0% 0.3% 0.0% 0.0%
4.00 to 4.99% 0.0% 0.0% 0.0% 2.3% 0.1% 0.0% 0.3% 0.0%
3.00 to 3.99% 0.3% 0.3% 0.3% 0.0% 2.3% 1.1% 1.7% 1.4%
2.00 to 2.99% 0.0% 0.0% 0.2% 0.2% 0.4% 2.4% 3.5% 1.9%
1.00 to 1.99% 0.2% 0.2% 0.2% 0.6% 0.5% 0.6% 0.5% 3.8%
Open 0.0% 0.0% 0.0% 0.1% 0.2% 0.3% 1.8% 0.7%
- ------------------------------------------------------------------------------------------------------------------
TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mortgage Pool
Balance
($millions) $1,088.3 $1,074.6 $1,059.9 $1,043.8 $1,021.3 $990.7 $965.9 $886.6
% of Initial Pool
Balance 100.0% 98.7% 97.4% 95.9% 93.8% 91.0% 88.7% 81.5%
<CAPTION>
96 MO. 108 MO. 120 MO. 132 MO. 144 MO. 156 MO. 168 MO. 180 MO.
MARCH MARCH MARCH MARCH MARCH MARCH MARCH MARCH
2006 2007 2008 2009 2010 2011 2012 2013
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 32.1% 25.9% 22.4% 21.8% 21.6% 19.6% 18.4% 12.1%
Yield Maintenance 59.0% 53.9% 58.0% 58.4% 58.1% 59.9% 59.8% 61.8%
Percentage Premium
5.00% and greater 2.1% 2.0% 11.0% 0.0% 0.0% 0.0% 0.9% 2.2%
4.00 to 4.99% 0.0% 0.6% 4.7% 13.6% 0.0% 0.0% 0.0% 2.1%
3.00 to 3.99% 0.0% 0.0% 3.4% 2.4% 14.4% 2.5% 2.6% 5.9%
2.00 to 2.99% 1.5% 0.1% 0.6% 3.2% 2.4% 12.5% 0.0% 0.0%
1.00 to 1.99% 4.7% 3.4% 0.0% 0.6% 3.5% 2.8% 13.2% 5.1%
Open 0.5% 14.1% 0.0% 0.0% 0.0% 2.7% 5.0% 10.9%
- ------------------------------------------------------------------------------------------------------------------
TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mortgage Pool
Balance
($millions) $854.4 $799.7 $123.2 $115.9 $105.6 $97.2 $88.2 $36.8
% of Initial Pool
Balance 78.5% 73.5% 11.3% 10.7% 9.7% 8.9% 8.1% 3.4%
</TABLE>
S-46
<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." It is
anticipated that Daiwa Finance Corp. will provide a guaranty of certain
repurchase obligations of Daiwa Real Estate Finance Corp. as a Mortgage Loan
Seller.
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
or the value of the affected Mortgage Loan, 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,
the Special Servicer or the Trustee 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;
provided, further, that for a period of two years from the Closing Date, such
Mortgage Loan Seller will have additional 90-day periods to complete such cure
as long as such Mortgage Loan Seller continues to provide officer's certificates
as described above. 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
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<PAGE>
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.
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 have 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 to the applicable Mortgage Loan Seller's knowledge, 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 or the value of the affected Mortgage Loan, 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 proposesto take to effect such cure and which states that it
anticipates such cure will be effected within the additional90-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
S-48
<PAGE>
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 (or Daiwa Finance Corp. with respect to Mortgage Loans sold by Daiwa
Real Estate Finance Corp.) defaults on its obligation to do so. See "DESCRIPTION
OF THE POOLING AGREEMENTS--Representations and Warranties; Repurchases" in the
Prospectus.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the time the Offered Certificates are issued. Prior to the
issuance of the Offered Certificates, a Mortgage Loan may be removed from the
Mortgage Pool if the Depositor deems such removal necessary or appropriate or if
it is prepaid. A limited number of other mortgage loans may be included in the
Mortgage Pool prior to the issuance of the Offered Certificates, unless
including such mortgage loans would materially alter the characteristics of the
Mortgage Pool as described herein. The Depositor believes that the information
set forth herein will be representative of the characteristics of the Mortgage
Pool as it will be constituted at the time the Offered Certificates are issued,
although the range of Mortgage Rates, maturities and certain other
characteristics of such Mortgage Loans 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 Trust Fund 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); and (v) the
ownership, servicing or management for others of any other mortgage loans or
mortgaged properties.
Set forth below, following the subsections captioned "--The Master
Servicer" and "--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 the 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 described in the
Prospectus with respect to Specially Serviced Mortgage Loans and REO Properties
(each, as defined herein).
The information set forth herein concerning the Master Servicer and the
Special Servicer has been provided by the Master Servicer and the Special
Servicer, respectively, and neither of the Depositor nor any Underwriter makes
any representation or warranty as to the accuracy or completeness of such
information.
S-49
<PAGE>
THE MASTER SERVICER
First Union National Bank ("FUNB") 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 (other than Specially
Serviced Mortgage Loans and REO Properties). Although the Master Servicer is
authorized to employ agents, including sub-servicers, to directly service the
Mortgage Loans that are not Specially Serviced Mortgage Loans, the Master
Servicer will remain liable for its servicing obligations under the Pooling and
Servicing Agreement. The Master Servicer is a wholly-owned subsidiary of First
Union Corporation, a North Carolina corporation registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended. The Master
Servicer's principal servicing offices are located at One First Union Center,
TW9, 301 South College Street, Charlotte, North Carolina 28288-1075.
As of December 31, 1997, the Master Servicer serviced approximately 3,056
commercial and multifamily loans, totaling approximately $16.5 billion in
aggregate outstanding principal amounts, including loans securitized in
mortgage-backed securitization transactions.
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 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. In addition, the Special Servicer will be responsible
for performing certain servicing functions with respect to Mortgage Loans that,
in general, are in default or as to which default is imminent, for administering
any REO Property and for performing certain other servicing functions with
respect to the Mortgage Pool under the Pooling and Servicing Agreement. As of
December 31, 1997, the Special Servicer was responsible for the servicing of
approximately $16.3 billion of commercial and multifamily loans and REO
properties. One or more affiliates of the Special Servicer may purchase the
Class F, Class G, Class H, Class J and Class K Certificates shortly after the
Closing Date. The Special Servicer's principal offices are located at 11200
Rockville Pike, Rockville, Maryland 20052.
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 or any successor and
to select a representative (the "Controlling Class Representative") from whom
the Special Servicer will seek advice and approval and take direction under
certain circumstances. See "--The Controlling Class Representative." The
"Controlling Class of Sequential Pay Certificates" is the Class of Sequential
Pay Certificates that has the latest alphabetical Class designation and that has
a Certificate Balance that is greater than 20% of its original Certificate
Balance (or if no Classes of Sequential Pay Certificates has a Certificate
Balance that is greater then 20% of its original Certificate Balance, the Class
of Sequential Pay Certificates with the latest alphabetical Class designation).
The Class A-1 and Class A-2 Certificates will be treated as one Class for
determining the Controlling Class of Sequential Pay Certificates. Any
replacement of the 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 Periodic Payment shall be delinquent 45 or
more days (or, in the case of a Balloon Payment, if the Master Servicer
determines that the related borrower has obtained a commitment to refinance,
such longer period of delinquency (not to exceed 120 days) within which such
refinancing is expected to occur); (b) the Master Servicer shall have determined
that a default in making a Periodic Payment is likely to occur within 30 days
and is likely to remain unremedied for at least 60 days (or, in the case of a
Balloon Payment, if the Master Servicer determines that the related borrower has
obtained commitment to refinance, such longer period of delinquency (not to
exceed 120 days) within which such refinancing is expected to occur); (c) there
shall have occurred a default (other than as described in clause (a) above) that
materially impairs the value of the Mortgaged Property as security for the
Mortgage Loan or otherwise materially adversely affects the interests of
Certificateholders and that continues unremedied for the applicable grace period
under the terms of the Mortgage Loan (or, if no grace period is specified, for
30 days); (d) a decree or order
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<PAGE>
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 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 the 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 Periodic 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, 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
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 0.090% in the case of six (6) Mortgage Loans (2%), 0.095% in
the case of 337 Mortgage Loans (78%), 0.125% in the case of 21 Mortgage Loans
(6%), 0.135% in the case of one Mortgage Loan (0.49%), 0.160% in
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<PAGE>
the case of 23 Mortgage Loans (12%), and ranging from 0.235% to 0.255% in the
case of three Mortgage Loans (0.72%). The weighted average Master Servicing Fee
Rate as of the Cut-Off Date will be 0.107 %. 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 such Specially
Serviced Mortgage Loans, will be entitled to retain all assumption and
modification fees, assumption application fees, late charges, exit fees or
repayment fees collected from borrowers on the related Mortgage Loans. The
Master Servicer and the Special Servicer will each be entitled to 50% of any
assumption fees paid with respect to those Mortgage Loans that the Special
Servicer has approved the related assumption. 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 a 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) that accrues on the Mortgage Loan during such
Collection Period will be less (such shortfall, a "Prepayment Interest
Shortfall") than the amount of interest (net of related Servicing Fees and
without regard to any Prepayment Premium or Yield Maintenance Charge actually
collected) that would have accrued on the Mortgage Loan through its Due Date. If
such a principal prepayment occurs during any Collection Period after the Due
Date for such Mortgage Loan in such Collection Period, the amount of interest
(net of related Servicing Fees 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 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 contemporaneously with the
reimbursement of the related P&I Advance or servicing expense, from general
collections on the Mortgage Loans then on deposit in the Certificate Account.
The principal compensation to be paid to the Special Servicer in respect of
its special servicing activities will be the Special Servicing Fee and, under
the circumstances described herein, Principal Recovery Fees. The "Special
Servicing Fee" will accrue at a rate (the "Special Servicing Fee Rate") equal to
0.25% per annum and will be computed on the basis of the same principal amount
and for the same period respecting which any related interest payment on the
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 Mortgage 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 serviced by
the Special Servicer, which Principal Recovery Fee generally will be in an
amount equal to 0.25% of all amounts received in respect thereof and allocable
as a recovery of principal. However, no Principal Recovery Fee will be payable
in connection with, or out of Liquidation Proceeds (as defined in the
Prospectus) resulting from, the purchase of any Specially Serviced Trust Fund
Asset or Corrected Mortgage Loan (i) by a Mortgage Loan Seller (as described
herein under "DESCRIPTION OF THE MORTGAGE POOL--Assignment of the Mortgage
Loans; Repurchases" and "--Representations and Warranties; Repurchases," (ii) by
the Master Servicer or the Depositor as described
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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 each of the Master
Servicer and 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 the
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 the
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 Periodic 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 such 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.
The Special Servicer and the 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 (with a copy to the Master Servicer), for deposit in the related
Mortgage File, an original counterpart of the agreement related to such
modification, waiver or amendment, promptly (and in any event within 10 business
days) following the execution thereof. Copies of each agreement whereby any such
modification, waiver or amendment of any term of any
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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 Infor-mation" herein.
REO PROPERTIES
If title to any Mortgaged Property is acquired by the Trust Fund 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 "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES" herein and "MATERIAL 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 Special Servicer will be required to inspect or cause the inspection of each
Mortgaged Property at least once per calendar year (or in the case of Mortgage
Loans with a principal balance of less than $3 million at origination, every
other calendar year) if, in a given calendar year, such Mortgaged Property has
not already been inspected by the Special Servicer. The Special Servicer will be
required to prepare a written report of each such inspection performed by it
that describes the condition of the Mortgaged Property and that specifies the
existence with respect thereto of any sale, transfer or abandonment or any
material change in its condition or value that is apparent from such inspection.
The Special Servicer 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
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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 statement required to be delivered will in fact be delivered, or that
the Special Servicer will 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 1998-C2 (the
"Certificates") will be issued pursuant to a Pooling and Servicing Agreement, to
be dated as of March 1, 1998, 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, 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"); and
(iii) one or more classes of REMIC residual 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 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. Accordingly, information herein regarding the terms of the Private
Certificates is provided solely because of its potential relevance to a
prospective purchaser of an Offered Certificate
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be issued in book-entry format through the
facilities of The Depository Trust Company ("DTC"). Each Offered Certificate
will be issued in denominations of not less than $100,000 actual or notional
principal amount and in integral multiples of $1 in excess thereof.
Each Class of Offered Certificates will initially be represented by one or
more global Certificates registered in the name of the nominee of DTC. The
Depositor has been informed by DTC that DTC's nominee will be Cede & Co. No
beneficial owner of an Offered Certificate (each, a "Certificate Owner") will be
entitled to receive a fully registered, certificated form of such Certificate (a
"Definitive Offered Certificate"), except under the limited circumstances
described in the Prospectus under "DESCRIPTION OF THE CERTIFICATES--Book-Entry
Registration and Definitive Certificates." Unless and until Definitive Offered
Certificates are issued in respect of a Class of Offered Certificates,
beneficial ownership interests in such Class will be recorded and transferred on
the book-entry records of DTC and its participating organizations (the
"Participants"), and all references to actions by holders of a Class of Offered
Certificates will refer to actions taken by DTC upon instructions received from
the related Certificate Owners through the Participants in accordance with DTC
procedures, and all references herein to payments, notices, reports and
statements to the holders of a Class of Offered Certificates will refer to
payments, notices, reports and statements to DTC or Cede & Co., as the
registered holder thereof, for distribution to the related Certificate Owners
through the Participants in accordance with DTC procedures. The form of such
payments and transfers may result in certain delays in receipt of payments by an
investor and may restrict an investor's ability to
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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:
PERCENT OF INITIAL
INITIAL POOL
CLASS OF CERTIFICATE CERTIFICATE BALANCE BALANCE
-------------------- ------------------- --------
Class A-1 ................ $229,904,000 21.1%
Class A-2 ................ $559,138,000 51.4%
Class B .................. $ 32,650,000 3.0%
Class C .................. $ 59,859,000 5.5%
Class D .................. $ 70,742,000 6.5%
Class E .................. $ 16,325,000 1.5%
Class F .................. $ 59,858,000 5.5%
Class G .................. $ 5,442,000 0.5%
Class H .................. $ 21,766,000 2.0%
Class J .................. $ 5,442,000 0.5%
Class K .................. $ 27,209,034 2.5%
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 the other assets in the Trust Fund. The
Certificate Balance of each Class of Sequential Pay Certificates will be reduced
on each Distribution Date by any distributions of principal actually made on
such Class of Certificates on such Distribution Date, and further by any
Realized Losses and Additional Trust Fund Expenses that are 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 principal balance, but will
represent the right to receive distributions of interest accrued on the
respective notional amount of each of its Components (each a "Component"), as
described herein. Each such Component will relate to each separate Class of
Sequential Pay Certificates with the same Class designation. 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. The Components do not represent separate Classes of
Certificates, but rather separate components, each of which is a part of the
Class IO Certificates.
None of the REMIC Residual Certificates will have a Certificate Balance.
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 the Summary.
The Class IO Certificates will receive payments of interest equal to the
aggregate of the interest accrued on the notional amount of each of its
Components. Each Component will accrue interest at its applicable Strip Rate on
its related notional amount. 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
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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 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 "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 (x) the Mortgage Rate in effect for such Mortgage Loan as of the
Cut-Off Date, minus (y) the Administrative Cost Rate (as defined herein) for
such Mortgage Loan; 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, solely for the purpose of calculating the Weighted Average Net Mortgage
Rate, the Mortgage Rate referred to in clause (x) 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
on such Mortgage Loan that are due or received, as the case may be, during the
related Collection Period and 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.
See "DESCRIPTION OF THE CERTIFICATES--Pass-Through Rates" herein.
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 10th 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 15th day of each month or, if any such
15th 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
April 16, 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 written wiring instructions to the Trustee
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 Periodic Payments collected but due on a Due Date after
the related Collection Period,
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(ii) any Prepayment Premiums,
(iii) Additional Interest and default interest, and
(iv) all amounts in the Certificate Account that are payable or
reimbursable to any person other than the Certificateholders,
including any Servicing Fees and Trustee Fees and any Additional Trust
Fund Expenses;
(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 Available Distribution Amount. On each Distribution Date,
for so long as the aggregate Certificate Balance 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 the Available Distribution Amount:
(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) in
respect of such Classes of Certificates on such Distribution Date in an
amount equal to all Distributable Certificate Interest in respect of each
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(2) to distributions of principal to the holders of the Class A-1
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of such Class of Certificates) equal to the Principal Distribution
Amount (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 Additional Trust Fund Expenses, if any, previously allocated to such
Classes of Certificates for which no reimbursement has previously been
received, to reimburse such holders for all Realized Losses and Additional
Trust Fund Expenses, if any;
(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 on such Distribution Date;
(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
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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;
(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 on such Distribution Date;
(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;
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(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;
(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 for each
Distribution Date represents that portion of the Accrued Certificate Interest in
respect of such Class of Certificates and such Distribution Date reduced (to not
less than zero) by such Class's allocable share (calculated as described below)
of the aggregate of any Prepayment Interest Shortfalls resulting from voluntary
principal prepayments made on the Mortgage Loans during the related Collection
Period that are not covered by the Master Servicer's Compensating Interest
Payment for such Distribution Date (the aggregate of such Prepayment Interest
Shortfalls that are not so covered, as to such Distribution Date, the "Net
Aggregate Prepayment Interest Shortfall").
The "Accrued Certificate Interest" in respect of each Class of Sequential
Pay Certificates for each Distribution Date is equal to one month's interest at
the Pass-Through Rate applicable to such Class of Certificates and such
Distribution Date accrued during the immediately preceding calendar month on the
related Certificate Balance outstanding immediately prior to such Distribution
Date. The "Accrued Certificate Interest" in respect of the Class IO Certificates
for each Distribution Date is equal to the sum of one month's interest at the
Strip Rate applicable to each
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such Component and such Distribution Date accrued during the immediately
preceding calendar month on the related notional amount outstanding on each such
Component immediately prior to such Distribution Date. Accrued Certificate
Interest will be calculated on a 30/360 day basis.
The portion of the Net Aggregate Prepayment Interest Shortfall for any
Distribution Date that is allocable to each Class of REMIC Regular Certificates
will equal the product of (a) such Net Aggregate Prepayment Interest Shortfall,
multiplied by (b) a fraction, the numerator of which is equal to the Accrued
Certificate Interest in respect of such Class of Certificates for such
Distribution Date, and the denominator of which is equal to the aggregate
Accrued Certificate Interest for all the REMIC Regular Certificates for such
Distribution Date.
Principal Distribution Amount. The "Principal Distribution Amount" for each
Distribution Date will generally equal the aggregate of the following:
(a) the aggregate of the principal portions of all Scheduled Payments
(other than Balloon Payments) due, and 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 Periodic 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 Master Servicer or
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 Periodic
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 Realized
Losses and Additional Trust Fund Expenses previously allocated to principal 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.
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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 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 REMIC Regular 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 has been calculated (based on
Scheduled Payments on such Mortgage Loan) to compensate the holder of the
Mortgage Loan 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
U.S. Treasury rate in effect on the date of prepayment (the "Rate
Differential").
On each Distribution Date, any Prepayment Premium collected on a Mortgage
Loan during the related Collection Period will be distributed as follows: the
holders of each Class of the Certificates then entitled to distributions of
principal with respect to such Mortgage Loan on such Distribution Date will be
entitled to an amount equal to the amount of such Prepayment Premium, 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
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 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 Certificates entitled to distributions of such principal on
any particular Distribution Date on which a Prepayment Premium is distributable,
the aggregate amount of such Prepayment Premium 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 remaining after any such payments to the holders
of such 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 non-callable 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 earlier 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
of the collectability of any Prepayment Premium. 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 (collectively, the
"Subordinate Certificates") to receive distributions of amounts collected or
advanced on the Mortgage Loans will be subordinated, to the extent described
herein, to the rights of holders of the Class A-1, Class A-2 and Class IO
Certificates (collectively, the "Senior Certificates") and each other such Class
of Subordinate
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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 Balance of such Classes of Certificates. Similarly, but to
decreasing degrees, this subordination is also intended to enhance the
likelihood of timely receipt by the holders of the Class B, the Class C, the
Class D and the Class E Certificates of the full amount of Distributable
Certificate Interest payable in respect of each such Class of Certificates on
each Distribution Date, and the ultimate receipt by the holders of each such
Class of Certificates of principal equal to the entire related Certificate
Balance. The protection afforded to the holders of the Class E Certificates by
means of the subordination of the Private Certificates, to the holders of the
Class D Certificates by means of the subordination of the Class E and the
Private Certificates, to the holders of the Class C Certificates by means of the
subordination of the Class D, the Class E and the Private Certificates, to the
holders of the Class B Certificates by means of the subordination of the Class
C, the Class D, the Class E and the Private Certificates, and to the holders of
the Senior Certificates by means of the subordination of the Subordinate
Certificates, will be accomplished by (i) the application of the Available
Distribution Amount on each Distribution Date in accordance with the order of
priority described under "--Distributions--Application of the Available
Distribution Amount" above and (ii) 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 (to the extent such Additional Trust Fund Expenses are not
covered by interest received on the Mortgage Loans) 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 Sequential Pay Certificates will
result in a corresponding reduction in the notional amount for 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
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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,
but not limited to, certain reimbursements and indemnifications to the Trustee
of the type described under "DESCRIPTION OF THE POOLING AGREEMENTS--Certain
Matters Regarding the Trustee" in the Prospectus, certain reimbursements to the
Master Servicer, 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 "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Prohibited
Transactions Tax and Other Taxes" in the Prospectus and the costs of certain
opinions of counsel required to be obtained in connection with the servicing of
the Mortgage Loans and administration of the Trust Fund. 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
Periodic 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 the Special Servicer, the Master Servicer will be required to
advance only the amount of the reduced Periodic 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) 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) 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
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"DESCRIPTION OF THE POOLING AGREEMENTS--Certificate Account" in the Prospectus.
For so long as the Trustee has not succeeded to the duties of the Master
Servicer pursuant to the terms of the Pooling and Servicing Agreement, the
Trustee may conclusively rely upon the Master Servicer's determination of a
Nonrecoverable P&I Advance. See "DESCRIPTION OF THE POOLING AGREEMENT--Events of
Default" 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, the Special
Servicer or the Trustee 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, out
of any amounts then on deposit in the Certificate Account, interest compounded
annually at a per annum rate (the "Reimbursement Rate") equal to the "prime
rate" published in the "Money Rates" section of 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
Periodic 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 Periodic 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 any 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.
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.
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REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
On each Distribution Date, based solely on information provided in monthly
reports prepared by the Master Servicer and the Special Servicer and delivered
to the Trustee, the Trustee will be required to 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 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 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.
The Trustee will make available each month, to any interested party, the
Distribution Date Statement via the Trustee's Internet Website, electronic
bulletin board and fax-on-demand service. In addition, the Trustee will also
make certain Mortgage Loan information as presented in the CSSA loan setup file
and CSSA loan periodic update file formats available to any Certificateholder,
any Certificate Owner, the Rating Agencies, the parties to the Pooling and
Servicing Agreement or any other interested party via the Trustee's Website. The
Trustee's Website will be located at "www.securitieslink.net/cmbs". The
Trustee's electronic bulletin board may be accessed by calling (301) 815-6620,
and its fax-on-demand service may be accessed by calling (301) 815-6610. For
assistance with regard to the above-mentioned services, investors may call (301)
815-6600. Certain additional information regarding the Mortgage Loans will be
available on the Master Servicer's Website at "www.firstunion.com" under
"Capital Markets". Such information should be available on the first
Distribution Date and will be updated periodically thereafter.
In addition, pursuant to the Pooling and Servicing Agreement, the Trustee
will make available, as a convenience for interested parties (and not in
furtherance of the distribution of the Prospectus or the Prospectus Supplement
under the securities laws), the Pooling and Servicing Agreement, the Prospectus
and this Prospectus Supplement via the Trustee's Website. The Trustee will make
no representations or warranties as to the accuracy or completeness of such
documents and will assume no responsibility therefor.
In connection with providing access to the Trustee's or the Master
Servicer's Website or electronic bulletin board, the Trustee or the Master
Servicer, as the case may be, may require registration and the acceptance of a
disclaimer. Neither the Trustee nor the Master Servicer shall be liable for the
dissemination of information in accordance with the Pooling and Servicing
Agreement.
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 Pooling and Servicing Agreement requires that the Trustee make
available at its offices, 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
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- --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.
The Trustee will make available, upon reasonable advance written notice and
at the expense of the requesting party, copies of the items referred to in the
prior paragraph that are maintained thereby, to Certificateholders, Certificate
Owners and prospective purchasers of Certificates and interests therein;
provided that the Trustee may require (a) in the case of a Certificate Owner, a
written confirmation executed by the requesting person or entity, in a form
reasonably acceptable to the Trustee, generally to the effect that such person
or entity is a beneficial owner of any Class of Certificates, is requesting the
information solely for use in evaluating such person's or entity's investment in
such Certificates and will otherwise keep such information confidential and (b)
in the case of a prospective purchaser, confirmation executed by the requesting
person or entity, in a form reasonably acceptable to the Trustee, generally to
the effect that such person or entity is a prospective purchaser of any Class of
Certificates or an interest therein, is requesting the information solely for
use in evaluating a possible investment in such Certificates and will otherwise
keep such information confidential. Certificateholders, by the acceptance of
their Certificates, will be deemed to have agreed to keep such information
confidential. Notwithstanding the foregoing, however, no Certificateholder,
Certificate Owner or prospective purchaser will be required to keep confidential
any information received from the Trustee as described above that has previously
been made available via the Trustee's Internet Website or has previously been
filed with the Securities and Exchange Commission (the "SEC"), and the Trustee
will not be required to obtain either of the confirmations referred to in the
second preceding sentence in connection with providing any information that has
previously been made available via the Trustee's Internet Website or has
previously been filed with the SEC.
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.
See "DESCRIPTION OF THE CERTIFICATES--Voting Rights" in the Prospectus.
TERMINATION
The obligations created by the Pooling and Servicing Agreement will
terminate upon the final distribution to the Certificateholders, which shall
follow the earlier of (i) the final payment (or advance in respect thereof) or
other liquidation of the last Mortgage Loan or REO Property subject thereto and
(ii) the purchase of all of the Mortgage Loans and all of the REO Properties
remaining in the Trust Fund, if any, by the Depositor or the Master Servicer.
Written notice of termination of the Pooling and Servicing Agreement will be
given to each Certificateholder, and the final distribution will be made only
upon surrender and cancellation of the Certificates at the office of the Trustee
or other registrar for the Certificates or at such other location as may be
specified in such notice of termination.
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Any such purchase by the Master Servicer or the Depositor of all the
Mortgage Loans and all of the REO Properties, if any, remaining in the Trust
Fund is required to be made at a price equal to (i) the aggregate Purchase Price
of all the Mortgage Loans (other than REO Loans) then included in the Trust
Fund, plus (ii) the fair market value of all REO Properties then included in the
Trust Fund, as determined by an appraiser mutually agreed upon by the Master
Servicer and the Trustee, minus (iii) if the purchaser is the Master Servicer
the aggregate of amounts payable or reimbursable to the Master Servicer, under
the Pooling and Servicing Agreement. Such purchase will effect early retirement
of the then outstanding Offered Certificates, but the right of the Master
Servicer or the Depositor to effect such termination is subject to the
requirement that the then aggregate Stated Principal Balance of the Mortgage
Pool be less than 1% of the Initial Pool Balance.
The purchase price paid in connection with the purchase of all Mortgage
Loans and REO Properties remaining in the Trust Fund, exclusive of any portion
thereof payable or reimbursable (as if such purchase price constituted
Liquidation Proceeds) to any person other than the Certificateholders, will
constitute part of the Available Distribution Amount for the final Distribution
Date. The Available Distribution Amount for the final Distribution Date will be
distributed by the Trustee generally as described herein under
"--Distributions--Application of the Available Distribution Amount," except that
the distributions of principal on any Class of Sequential Pay Certificates
described thereunder will be made, subject to available funds and the
distribution priorities described thereunder, in an amount equal to the entire
Certificate Balance of such Class remaining outstanding.
THE TRUSTEE
Norwest Bank Minnesota, National Association ("Norwest Bank") will act as
Trustee pursuant to the Pooling and Servicing Agreement. Norwest Bank, a direct,
wholly owned subsidiary of Norwest Corporation, is a national banking
association originally chartered in 1872 and is engaged in a wide range of
activities typical of a national bank. Norwest Bank's principal office is
located at Norwest Center, Sixth and Marquette, Minneapolis, Minnesota
55479-0113. Certificate transfer services are conducted at Norwest Bank's
offices in Minneapolis. Norwest Bank otherwise conducts its trustee and
securities administration services at its offices in Columbia, Maryland. Its
address there is 11000 Broken Land Parkway, Columbia, Maryland 21044-3562. In
addition, Norwest Bank maintains a trust office in New York located at 3 New
York Plaza, New York, New York 10004. Certificateholders and other interested
parties should direct their inquiries to the New York office. The telephone
number is (212) 509-7900. 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
0.004%.
The Trustee will also have certain duties with respect to REMIC
administration (in such capacity, the "REMIC Administrator"). See "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES--REMICs--Reporting and Other 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.
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Rate and Timing of Principal Payment. The yield to holders of the Class IO
Certificates will be extremely sensitive to, and the yield to holders of any
other Offered Certificates purchased at a discount or premium will be affected
by, the rate and timing of principal payments made in reduction of the
Certificate Balance of such Certificates (or, in the case of the Class IO
Certificates, in reduction of the notional amount of one or more of the
Components thereof). 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. Any reduction of the
Certificate Balance of any Class of Sequential Pay 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 Certificate Balance or notional amount 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 degree, payments of principal on the Mortgage Loans in turn are distributed
or otherwise result in reduction of the Certificate Balance or notional amount
of such Certificates. An investor should consider, in the case of any Offered
Certificate purchased at a discount, the risk that a slower than anticipated
rate of principal payments on the Mortgage Loans could result in an actual yield
to such investor that is lower than the anticipated yield and, in the case of a
Class IO Certificate or any other Offered Certificate purchased at a premium,
the risk that a faster than anticipated rate of principal payments could result
in an actual yield to such investor that is lower than the anticipated yield. In
general, the earlier a payment of principal on the Mortgage Loans is distributed
or otherwise results in reduction of the Certificate Balance (or the 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
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in reduction of the Certificate Balance of any Class of Sequential Pay
Certificates will result in a corresponding reduction in the notional amount for
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.
Strip 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, residential health care facility beds or
comparable commercial space, as applicable, in such areas, the quality of
management of the Mortgaged Properties, the servicing of the Mortgage Loans,
possible changes in tax laws and other opportunities for investment. See "RISK
FACTORS--The Mortgage Loans" and "DESCRIPTION OF THE MORTGAGE POOL" herein and
"YIELD AND MATURITY CONSIDERATIONS--Principal Prepayments" in the Prospectus.
The rate of prepayment on the Mortgage Pool is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
interest rate, the related borrower has an incentive to refinance its mortgage
loan. As of the Cut-off Date, all of the Mortgage Loans may either be
voluntarily prepaid or defeased 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. A requirement that a prepayment be
accompanied by a Prepayment Premium may not provide a sufficient economic
disincentive to deter a borrower from refinancing at a more favorable interest
rate.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell or
refinance Mortgaged Properties in order to realize their equity therein, to meet
cash flow needs or to make other investments. In addition, some borrowers may be
motivated by federal and state tax laws (which are subject to change) to sell
Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
The Depositor makes no representation as to the particular factors that
will affect the rate and timing of prepayments and defaults on the Mortgage
Loans, as to the relative importance of such factors, as to the percentage of
the principal balance of the Mortgage Loans that will be prepaid or as to
whether a default will have occurred as of any date or as to the overall rate of
prepayment or default on the Mortgage Loans.
Delay in Payment of Distributions. Because monthly distributions will not
be made to Certificateholders until a date that is scheduled to be at least 14
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
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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 Class 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 outstanding, (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) neither the Master Servicer nor the Depositor exercises its right of
optional termination of the Trust Fund described herein, (viii) no Mortgage Loan
is required to be purchased from the Trust Fund, (ix) there are no Prepayment
Interest Shortfalls or Appraisal Reductions, (x) distributions on the
Certificates are made on the 15th day (each assumed to be a business day) of
each month, commencing in April 1998, (xi) the assumed settlement date is March
30, 1998, and (xii) for the purpose of the following tables for Mortgage Loan
control number 325, 326 and 327, it was assumedthat only the Percentage Premium
was applicable to such Mortgage Loans and the Yield Maintenance provisionswere
ignored.
PRE-TAX YIELD TO MATURITY (CBE) OF THE CLASS IO CERTIFICATES
BREAK-EVEN PRE-TAX YIELD TO MATURITY AT
ASSUMED PURCHASE PRICE CPR% AT ----------------------------
(INCLUDING ACCRUED INTEREST) 0% YIELD (A) 0% CPR 5% CPR 10% CPR
---------------------------- ------------ ------ ------ -------
$
$
$
- ----------
(A) The Break-Even CPR% is the approximate CPR% for each assumed purchase price
where the pre-tax yield to maturity (CBE) is approximately 0%.
The pre-tax yields set forth in the preceding table were calculated by
determining the monthly discount rates that, when applied to the assumed streams
of cash flow to be paid on the Class IO Certificates, would cause the discounted
present value of such assumed stream of cash flows to equal the assumed
aggregate purchase price of the Class IO Certificates, which includes accrued
interest, and by converting such monthly rates to corporate bond equivalent
rates. Such calculation does not take into account shortfalls in collection of
interest due to prepayments (or other liquidations) on the Mortgage Loans or the
interest rates at which investors may be able to reinvest funds received by them
as distributions on the Class IO Certificates (and consequently does not purport
to reflect the return on any investment in the Class IO Certificates when such
reinvestment rates are considered).
The characteristics of the Mortgage Loans differ in substantial respects
from those assumed in preparing the table above, and the table is presented for
illustrative purposes only. In particular, none of the Mortgage Loans permit
voluntary partial prepayments, and many of the Mortgage Loans are subject to
Lockout Periods and/or Required
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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
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:
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 (including Mortgage
Loans allowing defeasance but not
voluntary prepayment during the
Lockout Period) 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).
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 is determined by (i) multiplying the amount of each principal
distribution thereon by the number of years from the date of issuance of such
Certificate to the related Distribution Date, (ii) summing the results and (iii)
dividing the sum by the aggregate amount of the reductions in the principal
balance of such Certificate.
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<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-1 CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT,
OR YLD. MAINT.-OTHERWISE
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
March 15, 1999 .......................... 94 94 94 94 93
March 15, 2000 .......................... 88 87 87 87 86
March 15, 2001 .......................... 81 80 79 78 76
March 15, 2002 .......................... 71 69 68 66 64
March 15, 2003 .......................... 58 55 53 51 48
March 15, 2004 .......................... 47 44 41 39 35
March 15, 2005 .......................... 12 8 5 2 0
March 15, 2006 (and thereafter) ......... 0 0 0 0 0
Weighted Average Life
(in years) ............................. 5.0 4.9 4.8 4.7 4.5
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-2 CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT,
OR YLD. MAINT.-OTHERWISE
----------------------------------------------------
(0% CPR) (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
March 15, 1999 .......................... 100 100 100 100 100
March 15, 2000 .......................... 100 100 100 100 100
March 15, 2001 .......................... 100 100 100 100 100
March 15, 2002 .......................... 100 100 100 100 100
March 15, 2003 .......................... 100 100 100 100 100
March 15, 2004 .......................... 100 100 100 100 100
March 15, 2005 .......................... 100 100 100 100 99
March 15, 2006 .......................... 99 97 96 95 93
March 15, 2007 .......................... 89 87 86 84 82
March 15, 2008 (and thereafter) ......... 0 0 0 0 0
Weighted Average Life
(in years) ............................. 9.4 9.4 9.4 9.3 9.3
</TABLE>
S-73
<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS B CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT,
OR YLD. MAINT.-OTHERWISE
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
March 15, 1999 .......................... 100 100 100 100 100
March 15, 2000 .......................... 100 100 100 100 100
March 15, 2001 .......................... 100 100 100 100 100
March 15, 2002 .......................... 100 100 100 100 100
March 15, 2003 .......................... 100 100 100 100 100
March 15, 2004 .......................... 100 100 100 100 100
March 15, 2005 .......................... 100 100 100 100 100
March 15, 2006 .......................... 100 100 100 100 100
March 15, 2007 .......................... 100 100 100 100 100
March 15, 2008 (and thereafter) ......... 0 0 0 0 0
Weighted Average Life
(in years) ............................. 9.8 9.8 9.8 9.8 9.8
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS C CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT,
OR YLD. MAINT.-OTHERWISE
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
March 15, 1999 .......................... 100 100 100 100 100
March 15, 2000 .......................... 100 100 100 100 100
March 15, 2001 .......................... 100 100 100 100 100
March 15, 2002 .......................... 100 100 100 100 100
March 15, 2003 .......................... 100 100 100 100 100
March 15, 2004 .......................... 100 100 100 100 100
March 15, 2005 .......................... 100 100 100 100 100
March 15, 2006 .......................... 100 100 100 100 100
March 15, 2007 .......................... 100 100 100 100 100
March 15, 2008 (and thereafter) ......... 0 0 0 0 0
Weighted Average
Life (in years) ........................ 9.8 9.8 9.8 9.8 9.8
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS D CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT,
OR YLD. MAINT.-OTHERWISE
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
March 15, 1999 .......................... 100 100 100 100 100
March 15, 2000 .......................... 100 100 100 100 100
March 15, 2001 .......................... 100 100 100 100 100
March 15, 2002 .......................... 100 100 100 100 100
March 15, 2003 .......................... 100 100 100 100 100
March 15, 2004 .......................... 100 100 100 100 100
March 15, 2005 .......................... 100 100 100 100 100
March 15, 2006 .......................... 100 100 100 100 100
March 15, 2007 .......................... 100 100 100 100 100
March 15, 2008 (and thereafter) ......... 0 0 0 0 0
Weighted Average Life
(in years) ............................. 9.8 9.8 9.8 9.8 9.8
</TABLE>
S-74
<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS E CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT,
OR YLD. MAINT.-OTHERWISE
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
March 15, 1999 .......................... 100 100 100 100 100
March 15, 2000 .......................... 100 100 100 100 100
March 15, 2001 .......................... 100 100 100 100 100
March 15, 2002 .......................... 100 100 100 100 100
March 15, 2003 .......................... 100 100 100 100 100
March 15, 2004 .......................... 100 100 100 100 100
March 15, 2005 .......................... 100 100 100 100 100
March 15, 2006 .......................... 100 100 100 100 100
March 15, 2007 .......................... 100 100 100 100 100
March 15, 2008 .......................... 21 8 0 0 0
March 15, 2009 (and thereafter) ......... 0 0 0 0 0
Weighted Average Life
(in years) ............................. 10.0 9.9 9.9 9.9 9.9
</TABLE>
S-75
<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.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the Offered Certificates, Willkie Farr & Gallagher,
counsel to the Depositor, will deliver and file with the Commission its opinion
generally to the effect that, assuming compliance with all provisions of the
Pooling and Servicing Agreement, for federal income tax purposes each portion of
the Trust Fund designated in the Pooling and Servicing Agreement as a REMIC will
qualify as a REMIC under the Code. The assets of one of such REMICs will
generally consist of the Mortgage Loans, any REO Properties acquired by the
Trust Fund on behalf of the Certificateholders and the Certificate Account. For
federal income tax purposes, the REMIC Regular Certificates (or, in the case of
the Class IO Certificates, each Component thereof) will represent the "regular
interests" in one of such REMICs and generally will be treated as debt
instruments of such REMIC. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--REMICs" in the Prospectus.
The Class A-1, Class A-2, Class B, Class C, Class D Certificates will not,
and the Class E and Class 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 "MATERIAL 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 through 1275 of the Code generally addressing
the treatment of debt instruments issued with original issue discount. The OID
Regulations in some circumstances permit the holder of a debt instrument to
recognize original issue discount under a method that differs from that used by
the issuer. Accordingly, it is possible that the holder of an Offered
Certificate may be able to select a method for recognizing original issue
discount that differs from that used by the Trustee in preparing reports to the
Certificateholders and the IRS. Prospective purchasers of Offered Certificates
are advised to consult their tax advisors concerning the tax treatment of such
Certificates.
The Offered Certificates will be treated as "real estate assets" within the
meaning of Section 856(c)(5)(A) of the Code. In addition, interest (including
original issue discount) on the Offered Certificates will be interest described
in Section 856(c)(3)(B) of the Code. However, the Offered Certificates will
generally only be considered assets described in Section 7701(a)(19)(C) of the
Code to the extent that the Mortgage Loans are secured by residential property
and, accordingly, investment in the Offered Certificates may not be suitable for
certain thrift institutions.
Prepayment Premiums actually collected will be distributed to the holders
of the Offered Certificates as described herein. It is not entirely clear under
the Code when the amount of a Prepayment Premium should be taxed to the holder
of an Offered Certificate, but it is not expected, for federal income tax
reporting purposes, that Prepayment Premiums will be treated as giving rise to
any income to the holders of the Offered Certificates prior to the Master
Servicer's actual receipt of a Prepayment Premium. It appears that Prepayment
Premiums, if any, will be treated as ordinary income rather than capital gain.
However, that is not entirely clear and Certificateholders should consult their
own tax advisors concerning the treatment of Prepayment Premiums. For further
information regarding the federal income tax consequences of investing in the
Offered Certificates, see "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--REMICs" in
the Prospectus.
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<PAGE>
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 IBCA, Inc. ("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, the 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, the 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 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 and Class A-2 Certificates that they
be rated not lower than "Aaa" by Moody's and "AAA" by Standard & Poor's and that
the Class IO Certificates be rated not lower than "Aaa" by Moody's and "AAAr" 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 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
S-77
<PAGE>
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).
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
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<PAGE>
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 and 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
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 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 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 Underwriters, the
Depositor has agreed to sell to Merrill Lynch and Daiwa Securities and Merrill
Lynch and Daiwa Securities have agreed to purchase __% and __%, respectively, of
the respective Certificate Balances of each Class of Offered Certificates.
In the Underwriting Agreement, the Underwriters have generally agreed to
purchase all of the Offered Certificates if any are purchased. In the event of a
default by either Underwriter, the Underwriting Agreement provides that the
purchase commitment of the non-defaulting Underwriter may be increased. Proceeds
to the Depositor from the sale of the Offered Certificates, before deducting
expenses payable by the Depositor, will be approximately $______, which includes
accrued interest.
Distribution of the Offered Certificates will be made by each Underwriter
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. Each Underwriter may effect such transactions
by selling the Offered Certificates to or through dealers, and such dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from such Underwriter. In connection with the purchase and sale of
the Offered Certificates, the Underwriters may be deemed to have received
compensation from the Depositor in the form of underwriting discounts. Each
Underwriter and any dealers that participate with such Underwriter in the
distribution of the Offered Certificates may be deemed to be underwriters and
any profit on the resale of the Offered Certificates positioned by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Purchasers of the Offered Certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be "underwriters"
within the meaning of the Securities Act in connection with reoffers and sales
by them of Offered Certificates. Certificateholders should consult with their
legal advisors in this regard prior to any such reoffer or sale.
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<PAGE>
The Depositor also has been advised by the Underwriters that each of them,
through one or more of its affiliates, currently intends to make a market in the
Offered Certificates; however, neither Underwriter has any obligation to do so,
any market making may be discontinued at any time and there can be no assurance
that an active public market for the Offered Certificates will develop. See
"RISK FACTORS--Limited Liquidity" herein and in the Prospectus.
The Depositor has agreed to indemnify the Underwriters and each person, if
any, who controls such Underwriter within the meaning of Section 15 of the
Securities Act against, or make contributions to each Underwriter and each such
controlling person with respect to, certain liabilities, including liabilities
under the Securities Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Willkie Farr
& Gallagher, New York, New York and for the Underwriters by Schulte Roth & Zabel
LLP, 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 Standard & Poor's and "Aaa" by
Moody's, that the Class IO Certificates be rated not lower than "AAAr" by
Standard & Poor's and "Aaa" by Moody's, that the Class B Certificates be rated
not lower than "AA" by Standard & Poor's and "Aa2" by Moody's, that the Class C
Certificates be rated not lower than "A" by 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 the
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 longest remaining 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 Pool were to entirely 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. Accordingly, the ratings of the Class IO Certificates should be
evaluated independently from similar ratings on other types of securities.
Standard & Poor's assigns the additional symbol of "r" to highlight classes
of securities that Standard & Poor's believes may experience high volatility or
high variability in expected returns due to non-credit risks; however, the
absence of an "r" symbol should not be taken as an indication that a class will
exhibit no volatility or variability in total return.
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" inthe Prospectus.
S-80
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
PAGE
30/360 basis .......................................... S-33
Accrued Certificate Interest .......................... S-18, S-60, S-61
Actual/360 basis ...................................... S-33
Additional Interest ................................... S-33
Additional Servicing Fee .............................. S-50
Additional Servicing Fee Rate ......................... S-50
Additional Trust Fund Expenses ........................ S-64
Adjusted Mortgage Rate ................................ S-10, S-33
Administrative Cost Rate .............................. S-39
Advance ............................................... S-20, S-64
Anticipated Repayment Date ............................ S10, S-33
Appraisal Reduction Amount ............................ S-65
ARD Loans ............................................. S-10, S-33
Assumed Scheduled Payment ............................. S-61
Available Distribution Amount ......................... S-15, S-57
Balloon Loans ......................................... S-10, S-30, S-33
Balloon Payment ....................................... S-10, S-33
Canyon Crest Mortgage Loan ............................ S-36
CBE ................................................... S-70
Certificateholders .................................... S-6, S-57
Certificates .......................................... Cover, S-6, S-55
Certificate Balance ................................... S-13, S-56
Certificate Owner ..................................... S-7, S-55
Certificate Registrar ................................. S-66
Chelsea Mini Storage Mortgage Loan .................... S-36
Class ................................................. Cover, S-6, S-55
Code .................................................. S-24
Collection Period ..................................... S-57
Compensating Interest Payment ......................... S-20, S-52
Component ............................................. S-56
Constant Prepayment Rate .............................. S-70
Controlling Class Representative ...................... S-7, S-50
Controlling Class of Sequential Pay Certificates ...... S-50
Corrected Mortgage Loan ............................... S-51
CPR ................................................... S-70
Custodian ............................................. S-47
Cut-Off Date Balance .................................. S-8, S-32
Cut-Off Date DSCR ..................................... S-38
Cut-Off Date LTV ...................................... S-38
Daiwa ................................................. S-6
Daiwa Securities ...................................... S-6
DCR ................................................... S-77
Debt Service Coverage Ratio ........................... S-37
Defeasance Collateral ................................. S-12, S-34
Definitive Offered Certificate ........................ S-7, S-55
Depositor ............................................. Cover
Determination Date .................................... S-57
Discount Rate ......................................... S-62
Distributable Certificate Interest .................... S-18, S-60
Distribution Date ..................................... S-15, S-57
S-81
<PAGE>
Distribution Date Statement ........................... S-66
DSCR .................................................. S-37
DTC ................................................... S-7, S-55
Ebbets Field Mortgage Loan ............................ S-36
ERISA ................................................. S-24, S-77
Exemption ............................................. S-77
Fitch ................................................. S-77
Firestone Mortgage Loans .............................. S-36
Form 8-K .............................................. S-49
Fully Amortizing Loans ................................ S-11, S-33
FUNB .................................................. S-6, S-50
Initial Pool Balance .................................. Cover, S-8, S-32
Initial Reserves at Closing ........................... S-39
IRS ................................................... S-76
Lockout Period ........................................ S-11, S-33
Loan per sq ft, Unit, Pad, Room or Bed ................ S-39
Master Servicer ....................................... S-50
Master Servicing Fee .................................. S-51
Master Servicing Fee Rate ............................. S-52
Merrill Lynch ......................................... S-6
MLMCI ................................................. S-6
Moody's ............................................... S-25
Mortgage File ......................................... S-47
Mortgage Loan Purchase Agreements ..................... S-47
Mortgage Loans ........................................ Cover
Mortgage Notes ........................................ S-27
Mortgage Pool ......................................... Cover
Mortgage Rate(s) ...................................... S-10, S-39
Mortgaged Property .................................... Cover, S-8, S-32
Net Aggregate Prepayment Interest Shortfall ........... S-18, S-21, S-60
Net Cash Flow ......................................... S-37, S-38
Net Mortgage Rate ..................................... S-15, S-57
Nonrecoverable P&I Advance ............................ S-64
Norwest Bank .......................................... S-68
Offered Certificates .................................. Cover, S-6, S-55
OID Regulations ....................................... S-76
Orlando Hamptons Inn and Suite Mortgage Loan .......... S-37
Occupancy Percentage .................................. S-39
P&I Advance ........................................... S-20, S-64
Participants .......................................... S-7, S-55
Party in Interest ..................................... S-78
Percentage Premium .................................... S-62
Periodic Payments ..................................... S-10
Plan .................................................. S-24, S-77
Pooling and Servicing Agreement ....................... S-13, S-55
Prepayment Premium .................................... S-62
Prepayment Interest Excess ............................ S-20, S-52
Prepayment Interest Shortfall ......................... S-20, S-52
Principal Distribution Amount ......................... S-18, S-61
Principal Recovery Fee ................................ S-52
Private Certificates .................................. S-6, S-55
PTE 95-60 ............................................. S-78
Purchase Price ........................................ S-47
Qualified Appraiser ................................... S-65
S-82
<PAGE>
Rate Differential ..................................... S-62
Rating Agencies ....................................... S-25
Realized Losses ....................................... S-63
Reimbursement Rate .................................... S-20, S-65
Related Proceeds ...................................... S-64
Remain Amort. Term .................................... S-37
Remaining Cash Flow ................................... S-10, S-33
REMIC ................................................. S-2, S-23
REMIC Administrator ................................... S-68
REMIC Regular Certificates ............................ S-6, S-55
REMIC Residual Certificates ........................... S-6, S-55
Rental Property ....................................... S-37
REO Extension ......................................... S-54
REO Loan .............................................. S-62
REO Property .......................................... S-22, S-51
REO Tax ............................................... S-54
Repayment LTV ......................................... S-39
Required Appraisal Date ............................... S-65
Required Appraisal Loan ............................... S-65
Restricted Group ...................................... S-77
Scenario .............................................. S-72
Scheduled Payment ..................................... S-61
SEC ................................................... S-67
Securities Act ........................................ S-6, S-55
Senior Certificates ................................... S-21, S-63
Sequential Pay Certificates ........................... S-6, S-55
Servicing Fees ........................................ S-51
SMMEA ................................................. S-26, S-77
Special Servicer ...................................... S-7, S-50
Specially Serviced Mortgage Loans ..................... S-51
Specially Serviced Trust Fund Assets .................. S-51
Special Servicing Fee ................................. S-52
Special Servicing Fee Rate ............................ S-52
Standard & Poor's ..................................... S-25
Stated Principal Balance .............................. S-15, S-57
Stated Remaining Term ................................. S-39
Subordinate Certificates .............................. S-21, S-62
Table Assumptions ..................................... S-70
Trust Fund ............................................ Cover, S-13, S-55
Trustee ............................................... S-2
Trustee Fee ........................................... S-68
Trustee Fee Rate ...................................... S-68
Underwriters .......................................... Cover
Underwriting Agreement ................................ S-79
Underwriting Reserves ................................. S-39
Voting Rights ......................................... S-67
Weighted Averages ..................................... S-39
Weighted Average Net Mortgage Rate .................... S-14, S-57
Year Built ............................................ S-39
Yield Maintenance Charges ............................. S-62
Zoning Laws ........................................... S-35
S-83
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
<TABLE>
<CAPTION>
LOAN CONTROL
SOURCE NO. PROPERTY NAME ADDRESS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MLMC 126 Canyon Crest Shopping Center Canyon Crest & Central Ave
DAIWA 305 Ebbets Field Apartments 1672-1726 Bedford Avenue
MLMC 137 Chelsea Mini Storage 224 12th Street
DAIWA 325 Hampton Inn and Suites 6101 Sand Lake Road
DAIWA 324 The Wealshire 150 Jamestown Lane
DAIWA 340 First Hill Medical Building 515 & 525 Minor Avenue
DAIWA 309 Promenade Shopping Center - Palm Beach Gardens 9810 - 9930 North Alternate A-1A
MLMC 166 Evergreen Ridge Apartments 3815 Susan Drive
MLMC 198 Lawrence Shopping Center 2495 U.S. Route 1
MLMC 147 Commons at Briargate 2845 Freewood Point
MLMC 113 Atrium at Chesterfield 16305 Swingley Ridge Drive
MLMC 120 Brea Plaza 1555-1643 Imperial Hwy / 409-477 Associated Road
DAIWA 544 Laurelwood Rehab and Skilled Nursing Center 642 Danbury Road
DAIWA 332 Shops at Fairlane Meadows 15901 - 16301 Ford Road
DAIWA 339 South Plaza Shopping Center 5500 Nolansville Road
MLMC 231 Serrano Highlands Apartments 25421 Alta Loma
MLMC 189 Horizon Court Office Building 7450 Horizon Drive
MLMC 139 Clarkstown Executive Park 704 & 706 Executive Blvd./612 & 614 Corporate Way
MLMC 237 Southgate Shopping Center Highway 79 and 21st Street
MLMC 194 Lackawanna Station Shopping Plaza One Lackawanna Plaza
MLMC 246 Valley View Apartments (Chud) Vermont View Drive
DAIWA 335 University Park Plaza 3350 South University Drive
MLMC 253 Virginia Village Apatments 4904 Fran Place
DAIWA 333 Palm Glen Shopping Center 3501-3627 West Glendale Avenue
MLMC 160 DFW Corporate Park 2100 Highway 360
MLMC 223 Regency Park Apartments 4770 North 7th Street
DAIWA 306 The Grand Hotel 1045 Beach Drive
MLMC 208 Mission Bell Plaza 453-593 W. Los Angeles Avenue
MLMC 196 Lake Shore Park Apartments Lake Shore Drive
MLMC 248 Villa Verde Apartments 4200 - 4260 West First Street
MLMC 249 Village at Collin Creek 601 - 641 Plano Parkway
MLMC 215 Oliver Corners Shopping Center Hesperian Blvd & West
DAIWA 341 Promenade Shopping Center - Highlands Ranch, Colorado 2660 - 2690 East County Line Road
MLMC 247 Valley View Apartments 7700-7736 Greenview Terrace
DAIWA 308 Woodbury Place Apartments 802 Barry Street
DAIWA 313 Comfort Inn - Maingate 7571 W. Irlo Bronson Memorial Highway
DAIWA 314 Lido Plaza Shopping Center 4343 North Rancho Drive
DAIWA 337 Corporate Center at Beaumeade 44633 & 44645 Guilford Drive, 21641 Beaumede Circle
MLMC 191 Hub Apartments 3136 Hudnall
MLMC 252 Villas of Josey Ranch 2050 Keller Springs Rd.
MLMC 207 Michael's Aurora Plaza 15151 East Mississippi Avenue
DAIWA 326 Hampton Inn 1975 N. Druid Hills Road
MLMC 261 Woodridge Apartments 2699 Ridge Road East
MLMC 107 650 Selig Drive Facility 650 Selig Drive
MLMC 169 Fossil Hill Apartments 5700 N. Beach Street
DAIWA 318 Napa Town Center 1290 Napa Town Center
MLMC 195 Lake Forest Business Park 22512 Aspen St, / 23901 Remme Ridge
MLMC 179 Harvey's Racquet Club Apts 3301 Hudnall Street
DAIWA 329 Fortunoff 70 Charles Lindbergh Boulevard
DAIWA 316 Rockledge Apartments 2505 Verde Drive
DAIWA 328 The Majestic Hotel 1500 Sutter Street
DAIWA 468 Seligson Portfolio - 17 Butler Street 17 Butler Street
MLMC 165 Embassy Plaza 6050-6140 Lankershim Blvd
MLMC 138 Cimarron Pointe Apartments 8301 North Council Road
MLMC 256 Wickes Headquarters 706 N. Deerpath Road
MLMC 102 200 South La Brea Retail Center 200 South La Brea Avenue
MLMC 251 Village Shopping Center 2700 Anderson Lane
MLMC 258 Willowick & Willow Creek Apts 430-502 Southwest Parkway
MLMC 115 Bay Pointe South Apartments 4613 Bayshore Drive
MLMC 213 Office Court at St Michael's 460 St. Michael's Drive
MLMC 200 Little Saigon Plaza II 9842 Bolsa Ave.
DAIWA 304 Northgate Distribution Center 1000 - 1200 Williams Drive
DAIWA 311 Days Inn Coliseum 2420 West Thomas Road
DAIWA 303 Waters Edge Apartments 394 Ocean Avenue
MLMC 176 Hampton Inn - Greensboro 7803 National Service Road
MLMC 150 Costa Neuporte Senior Apartments 2283 Fairview Road
MLMC 148 Commons of Laporte 2400 Andrew
MLMC 259 Windfern Meadows Apartments 12919 Windfern
MLMC 204 Meadows Centre 8230-8350 West 80 Blvd.
DAIWA 466 Seligson Portfolio - 605 West Avenue 605 West Avenue
<CAPTION>
LOAN ZIP ORIGINAL CURRENT % OF INITIAL
SOURCE CITY STATE CODE PROPERTY TYPE BALANCE BALANCE POOL BALANCE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MLMC Riverside CA 92507 Retail $ 19,000,000 $ 18,964,067 1.74
DAIWA Brooklyn NY 11225 Multifamily 17,750,000 17,638,089 1.62
MLMC New York NY 10001 Industrial 16,200,000 16,047,888 1.47
DAIWA Orlando FL 32819 Hospitality 16,000,000 15,946,751 1.47
DAIWA Lincolnshire IL 60069 Nursing Home 16,000,000 15,933,739 1.46
DAIWA Seattle WA 98104 Office 15,850,000 15,838,528 1.46
DAIWA Palm Beach Gardens FL 33408 Retail 15,300,000 15,240,669 1.40
MLMC San Bruno CA 94066 Multifamily 14,300,000 14,263,427 1.31
MLMC Lawrenceville NJ 08648 Retail 14,000,000 13,898,025 1.28
MLMC Colorado Springs CO 80920 Multifamily 13,650,000 13,589,233 1.25
MLMC St. Louis MO 63017 Office 13,520,000 13,485,480 1.24
MLMC Brea CA 92621 Retail 13,250,000 13,193,867 1.21
DAIWA Ridgefield CT 06877 Nursing Home 13,000,000 13,000,000 1.19
DAIWA Dearborn MI 48126 Retail 12,795,738 12,777,757 1.17
DAIWA Nashville TN 37211 Retail 12,500,000 12,478,702 1.15
MLMC Lake Forest CA 92630 Multifamily 12,500,000 12,465,158 1.15
MLMC Columbus OH 48235 Office 12,000,000 11,938,392 1.10
MLMC Valley Cottage NY 10989 Industrial 11,300,000 11,238,227 1.03
MLMC Heath OH 43056 Retail 11,000,000 10,958,660 1.01
MLMC Montclair NJ 07042 Retail 10,400,000 10,386,646 0.95
MLMC Colonie NY 12189 Multifamily 10,300,000 10,247,493 0.94
DAIWA Davie FL 33328 Retail 10,000,000 9,985,952 0.92
MLMC Alexandria VA 22312 Multifamily 10,000,000 9,983,265 0.92
DAIWA Phoenix AZ 85051 Retail 9,500,000 9,483,916 0.87
MLMC Grand Prairie TX 75050 Office 8,800,000 8,785,814 0.81
MLMC Phoenix AZ 85014 Multifamily 8,800,000 8,783,753 0.81
DAIWA Cape May NJ 08204 Hospitality 8,500,000 8,440,020 0.78
MLMC Moorpark CA 93021 Retail 8,456,250 8,423,864 0.77
MLMC Watervliet NY 12189 Multifamily 8,300,000 8,257,689 0.76
MLMC Santa Ana CA 92704 Multifamily 8,070,000 8,039,798 0.74
MLMC Plano TX 75075 Retail 7,900,000 7,890,269 0.72
MLMC Hayward CA 94545 Retail 7,750,000 7,727,996 0.71
DAIWA Highlands Ranch CO 80126 Retail 7,700,000 7,687,935 0.71
MLMC Baltimore MD 21204 Multifamily 7,700,000 7,660,004 0.70
DAIWA Corpus Christi TX 78411 Multifamily 7,470,000 7,438,115 0.68
DAIWA Kissimmee FL 34747 Hospitality 7,200,000 7,158,866 0.66
DAIWA Las Vegas NV 89130 Retail 7,000,000 6,983,195 0.64
DAIWA Ashburn VA 22011 Industrial 7,000,000 6,982,306 0.64
MLMC Dallas TX 75235 Multifamily 6,985,000 6,932,926 0.64
MLMC Carrollton TX 75006 Multifamily 6,880,000 6,845,755 0.63
MLMC Aurora CO 80012 Retail 6,800,000 6,777,510 0.62
DAIWA Atlanta GA 30329 Hospitality 6,750,000 6,727,536 0.62
MLMC Irondequoit NY 14622 Multifamily 6,700,000 6,674,630 0.61
MLMC Atlanta GA 30041 Industrial 6,600,000 6,585,217 0.61
MLMC Haltom City TX 76137 Multifamily 6,500,000 6,487,282 0.60
DAIWA Napa CA 95449 Retail 6,500,000 6,470,704 0.59
MLMC Lake Forest CA 92630 Industrial 6,400,000 6,373,854 0.59
MLMC Dallas TX 75235 Multifamily 6,310,000 6,262,958 0.58
DAIWA Uniondale NY 11553 Office 6,000,000 5,902,464 0.54
DAIWA Colorado Springs CO 80910 Multifamily 5,900,000 5,882,521 0.54
DAIWA San Francisco CA 94109 Hospitality 5,700,000 5,684,840 0.52
DAIWA Norwalk CT 06850 Retail 5,600,000 5,577,583 0.51
MLMC North Hollywood CA 91606 Retail 5,400,000 5,380,044 0.49
MLMC Oklahoma City OK 73132 Multifamily 5,395,000 5,378,367 0.49
MLMC Vernon Hills IL 60061 Office 5,350,000 5,307,965 0.49
MLMC Los Angeles CA 90036 Retail 5,250,000 5,238,722 0.48
MLMC Austin TX 78757 Retail 5,150,000 5,136,222 0.47
MLMC College Station TX 77840 Multifamily 5,100,000 5,090,373 0.47
MLMC Naples FL 34112 Multifamily 4,800,000 4,776,013 0.44
MLMC Santa Fe NM 87505 Office 4,760,000 4,753,340 0.44
MLMC Westminster CA 92683 Retail 4,700,000 4,689,499 0.43
DAIWA Marietta GA 30066 Industrial 4,710,000 4,678,099 0.43
DAIWA Phoenix AZ 85015 Hospitality 4,700,000 4,672,425 0.43
DAIWA Revere MA 02151 Multifamily 4,700,000 4,664,962 0.43
MLMC Greensboro NC 27409 Hospitality 4,450,000 4,430,540 0.41
MLMC Costa Mesa CA 92627 Multifamily 4,400,000 4,381,550 0.40
MLMC Laporte IN 46350 Multifamily 4,390,000 4,381,411 0.40
MLMC Houston TX 77064 Multifamily 4,250,000 4,240,239 0.39
MLMC Arvada CO 80005 Retail 4,200,000 4,187,008 0.38
DAIWA Norwalk CT 06850 Office 4,150,000 4,133,387 0.38
</TABLE>
<PAGE>
CERTAIN CHARACTERISTICS OF THE
MORTGAGE LOANS
ANNEX A
<TABLE>
<CAPTION>
CUMULATIVE % OF
INITIAL POOL BORROWER INTEREST ACCRUAL MORTGAGE ADMINISTRATIVE
BALANCE AFFILIATED CROSSED METHOD RATE COST RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1.74 Actual/360 7.31 0.099
3.36 Actual/360 8.61 0.164
4.84 Actual/360 7.38 0.129
6.30 Cntrl #'s 326, 327 Actual/360 7.70 0.099
7.77 Actual/360 8.15 0.099
9.22 30/360 7.63 0.099
10.62 Actual/360 7.98 0.164
11.93 Actual/360 7.27 0.099
13.21 30/360 8.19 0.099
14.46 30/360 7.58 0.099
15.70 Actual/360 7.28 0.099
16.91 30/360 8.01 0.099
18.10 Actual/360 7.60 0.099
19.28 30/360 8.18 0.164
20.43 Actual/360 7.47 0.099
21.57 Actual/360 7.03 0.099
22.67 30/360 8.23 0.099
23.70 30/360 7.84 0.099
24.71 Actual/360 7.73 0.099
25.66 Actual/360 6.91 0.099
26.60 Cntrl # 196 30/360 7.69 0.099
27.52 30/360 7.79 0.099
28.44 30/360 6.91 0.099
29.31 Actual/360 7.51 0.164
30.12 30/360 7.10 0.099
30.92 Actual/360 7.49 0.099
31.70 30/360 9.35 0.099
32.47 30/360 8.33 0.099
33.23 Cntrl # 246 30/360 7.69 0.099
33.97 30/360 7.52 0.099
34.70 Actual/360 7.50 0.099
35.41 30/360 7.77 0.099
36.11 Actual/360 7.42 0.164
36.82 30/360 8.28 0.099
37.50 Cntrl #'s 307, 316, 317 Actual/360 7.54 0.099
38.16 30/360 8.80 0.099
38.80 Actual/360 7.78 0.164
39.44 Cntrl #'s 304, 510 Actual/360 7.40 0.164
40.08 Cntrl #'s 179, 216 yes 30/360 8.47 0.164
40.71 30/360 7.81 0.099
41.33 Actual/360 7.47 0.099
41.95 Cntrl #'s 325, 327 Actual/360 7.70 0.099
42.56 Actual/360 7.24 0.129
43.17 30/360 7.63 0.099
43.76 Actual/360 7.06 0.099
44.36 Actual/360 7.63 0.099
44.94 30/360 8.01 0.099
45.52 Cntrl #'s 191, 216 yes 30/360 8.47 0.164
46.06 Actual/360 8.27 0.099
46.60 Cntrl #'s 307, 308, 317 Actual/360 7.55 0.099
47.12 Actual/360 8.31 0.164
47.64 Cntrl #'s 466, 467 yes Actual/360 8.01 0.099
48.13 Actual/360 8.00 0.099
48.62 Actual/360 7.35 0.139
49.11 30/360 8.57 0.099
49.59 30/360 7.71 0.099
50.06 Actual/360 7.37 0.099
50.53 Actual/360 7.33 0.099
50.97 30/360 7.79 0.099
51.41 30/360 7.81 0.099
51.84 Actual/360 7.63 0.099
52.27 Cntrl #'s 337, 510 Actual/360 8.82 0.164
52.70 Cntrl # 310 30/360 8.62 0.099
53.13 Actual/360 8.32 0.164
53.53 30/360 7.82 0.094
53.94 30/360 7.88 0.099
54.34 Actual/360 7.06 0.099
54.73 30/360 7.38 0.099
55.11 Actual/360 7.88 0.099
55.49 Cntrl #'s 467, 468 yes Actual/360 8.01 0.099
<CAPTION>
CUMULATIVE % OF ORIG REM AMORT AMORT
INITIAL POOL TERM TERM TERM TERM ORIGINATION REPAYMENT BALLOON/REPAYMENT
BALANCE (MOS.) (MOS.) (MOS.) (MOS.) DATE DATE BALANCE MATURITY TERM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.74 120 118 360 358 12/22/97 01/01/2008 16,486,783 HyperAm
3.36 120 113 300 293 07/22/97 08/01/2007 14,882,094 Balloon
4.84 180 177 180 177 11/26/97 12/01/2012 NAP Fully Amortizing
6.30 120 117 300 297 11/26/97 12/01/2007 13,070,810 Balloon
7.77 120 116 300 296 10/31/97 11/01/2007 13,239,862 Balloon
9.22 120 119 360 359 01/09/98 02/01/2008 13,794,625 Balloon
10.62 120 114 360 354 08/18/97 09/01/2007 13,672,728 Balloon
11.93 180 177 360 357 11/20/97 12/01/2012 10,770,829 Balloon
13.21 120 113 300 293 07/16/97 08/01/2007 11,393,148 Balloon
14.46 84 78 360 354 08/29/97 09/01/2004 12,566,602 Balloon
15.70 120 117 360 357 11/26/97 12/01/2007 11,726,148 HyperAm
16.91 84 79 330 325 09/22/97 10/01/2004 12,026,807 Balloon
18.10 180 180 300 300 01/30/98 03/01/2013 8,429,987 Balloon
19.28 109 107 350 348 12/09/97 02/01/2007 11,353,856 Balloon
20.43 120 118 360 358 12/23/97 01/01/2008 11,030,979 Balloon
21.57 120 118 300 298 12/10/97 01/01/2008 9,894,001 Balloon
22.67 120 115 300 295 09/12/97 10/01/2007 9,775,185 Balloon
23.70 120 115 300 295 09/30/97 10/01/2007 9,115,378 Balloon
24.71 120 115 360 355 09/18/97 10/01/2007 9,634,530 Balloon
25.66 120 119 360 359 01/07/98 02/01/2008 8,941,867 Balloon
26.60 120 113 360 353 07/28/97 08/01/2007 8,992,646 Balloon
27.52 120 118 360 358 12/19/97 01/01/2008 8,734,061 Balloon
28.44 120 118 360 358 12/18/97 01/01/2008 8,579,507 Balloon
29.31 120 118 360 358 12/15/97 01/01/2008 8,391,962 Balloon
30.12 120 118 360 358 12/30/97 01/01/2008 7,583,430 Balloon
30.92 120 118 360 358 12/09/97 01/01/2008 7,666,381 Balloon
31.70 120 114 264 258 08/14/97 09/01/2007 6,565,386 Balloon
32.47 120 114 360 354 08/29/97 09/01/2007 7,467,701 HyperAm
33.23 120 113 360 353 07/28/97 08/01/2007 7,246,501 Balloon
33.97 60 55 360 355 09/04/97 10/01/2002 7,637,139 Balloon
34.70 120 119 360 359 01/05/98 02/01/2008 6,883,808 Balloon
35.41 120 116 360 356 10/31/97 11/01/2007 6,777,767 Balloon
36.11 120 119 300 299 12/31/97 02/01/2008 6,235,721 Balloon
36.82 120 112 360 352 06/19/97 07/01/2007 6,804,203 Balloon
37.50 120 114 360 354 08/29/97 09/01/2007 6,604,219 Balloon
38.16 120 115 276 271 09/25/97 10/01/2007 5,648,785 Balloon
38.80 120 118 300 298 12/09/97 01/01/2008 5,730,746 Balloon
39.44 120 118 300 298 12/19/97 01/01/2008 5,666,502 Balloon
40.08 84 75 324 315 05/28/97 06/01/2004 6,343,155 Balloon
40.71 120 113 360 353 07/11/97 08/01/2007 6,021,959 Balloon
41.33 120 116 360 356 10/14/97 11/01/2007 5,921,446 Balloon
41.95 120 117 300 297 11/26/97 12/01/2007 5,514,247 Balloon
42.56 180 177 300 297 11/26/97 12/01/2012 4,166,591 Balloon
43.17 180 178 300 298 12/08/97 01/01/2013 4,155,287 Balloon
43.76 84 82 360 358 12/12/97 01/01/2005 5,947,512 Balloon
44.36 120 116 300 296 10/28/97 11/01/2007 5,297,465 Balloon
44.94 120 114 360 354 08/01/97 09/01/2007 5,624,995 Balloon
45.52 84 75 324 315 05/28/97 06/01/2004 5,730,180 Balloon
46.06 108 105 121 118 11/21/97 12/01/2006 910,444 Balloon
46.60 120 116 360 356 10/16/97 11/01/2007 5,217,274 Balloon
47.12 84 82 276 274 12/04/97 01/01/2005 4,978,148 Balloon
47.64 120 115 330 325 10/01/97 10/01/2007 4,836,979 Balloon
48.13 180 176 330 326 10/31/97 11/01/2012 3,866,464 Balloon
48.62 120 116 360 356 10/31/97 11/01/2007 4,753,804 Balloon
49.11 120 112 300 292 06/27/97 07/01/2007 4,394,057 Balloon
49.59 120 117 360 357 11/14/97 12/01/2007 4,585,577 Balloon
50.06 120 118 300 298 12/23/97 01/01/2008 4,114,384 Balloon
50.53 120 118 360 358 12/02/97 01/01/2008 4,426,660 Balloon
50.97 120 113 360 353 07/09/97 08/01/2007 4,199,607 Balloon
51.41 120 118 360 358 12/01/97 01/01/2008 4,166,356 Balloon
51.84 120 118 324 322 12/31/97 01/01/2008 3,930,816 Balloon
52.27 120 112 300 292 06/10/97 07/01/2007 3,972,656 Balloon
52.70 120 115 276 271 09/05/97 10/01/2007 3,670,286 Balloon
53.13 120 112 300 292 06/05/97 07/01/2007 3,909,933 Balloon
53.53 120 116 300 296 10/16/97 11/01/2007 3,577,410 HyperAm
53.94 120 114 360 354 08/15/97 09/01/2007 3,856,872 Balloon
54.34 120 118 360 358 12/19/97 01/01/2008 3,787,739 Balloon
54.73 120 117 360 357 11/07/97 12/01/2007 3,678,560 Balloon
55.11 120 116 360 356 10/09/97 11/01/2007 3,689,006 Balloon
55.49 120 115 330 325 10/01/97 10/01/2007 3,584,547 Balloon
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL UNDERWRITING UNDERWRITING
DEBT TOTAL TOTAL
PREPAYMENT RESTRICTIONS SERVICE REVENUE EXPENSES
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
L(60),> of YM or 1% (57),O(3) $ 1,580,937 $ 3,122,016 $ 1,007,456
L(31),DEF(83), O(6) 1,730,952 9,186,602 6,391,922
L(177), O(3) 1,800,641 8,054,967 4,858,055
L(24),< of YM or 5%(12), or 4%(12), or 3%(12), or 2%(24), or 1%(30),O(6) 1,443,934 5,620,023 3,346,847
L(28),DEF(86), O(6) 1,501,016 8,265,890 6,033,056
L(36),DEF(78), O(6) 1,346,224 2,664,784 757,058
L(30),DEF(84), O(6) 1,344,633 2,959,709 972,291
L(96), 7%(12),6%(12),5%(12),4%(12),3%(12),2%(12),1%(6),O(6) 1,185,250 2,233,975 724,647
L(60),> of YM or 1% (57),O(3) 1,317,867 2,765,100 893,408
L(36),> of YM or 1% (45),O(3) 1,154,300 2,120,523 679,848
L(36),> of YM or 1% (78),O(6) 1,121,722 2,318,535 890,689
L(36),> of YM or 1% (42),O(6) 1,194,259 2,209,015 470,003
L(24),DEF(150), O(6) 1,162,992 10,466,921 8,914,098
L(72),> of YM or 1% (31),O(6) 1,154,211 2,455,579 849,692
L(26),DEF(88), O(6) 1,045,742 1,987,215 480,415
L(60),> of YM or 1% (57),O(3) 1,072,707 2,351,845 871,990
L(60),> of YM or 1% (57),O(3) 1,133,444 2,732,131 998,074
L(60),> of YM or 1% (54),O(6) 1,032,251 2,082,795 690,110
L(24),DEF(93), O(3) 954,105 1,675,411 355,816
L(62),> of YM or 1% (53),O(5) 830,975 2,355,080 1,100,775
L(60),> of YM or 1% (57),O(3) 880,366 2,894,171 1,671,905
L(48),> of YM or 1% (66),O(6) 863,014 2,054,324 677,994
L(60),> of YM or 1% (54),O(6) 791,123 3,212,593 1,761,325
L(26),DEF(88), O(6) 797,885 1,714,502 534,881
L(60),> of YM or 1% (54),O(6) 709,666 1,799,028 698,592
L(60),> of YM or 1% (57),O(3) 745,428 2,200,903 1,190,415
L(30),DEF(84), O(6) 911,970 4,229,210 3,009,888
L(60),> of YM or 1% (54),O(6) 768,062 1,369,778 374,222
L(60),> of YM or 1% (57),O(3) 709,421 2,627,207 1,461,687
L(36),> of YM or 1% (21),O(3) 678,446 1,567,183 747,407
L(60),> of YM or 1% (54),O(6) 669,772 1,350,051 427,801
L(36),> of YM or 1% (78),O(6) 667,549 1,138,542 212,522
L(25),DEF(89), O(6) 678,027 1,573,436 531,815
L(60),> of YM or 1% (57),O(3) 696,120 1,564,500 687,441
L(30),DEF(84), O(6) 629,233 1,789,347 831,363
L(29),DEF(91) 730,885 4,131,571 3,116,346
L(38),DEF(76), O(6) 636,132 1,147,278 233,885
L(26),DEF(88), O(6) 615,299 1,221,817 293,415
L(60),> of YM or 1% (18),O(6) 659,124 2,014,990 1,169,423
L(60),> of YM or 1% (57),O(3) 594,897 1,505,767 732,534
L(60),> of YM or 1% (57),O(3) 574,891 1,296,894 382,717
L(24),< of YM or 5%(12), or 4%(12), or 3%(12), or 2%(24), or 1%(30),O(6) 609,160 2,287,847 1,359,164
L(96),> of YM or 1% (81),O(3) 586,064 1,734,463 888,965
L(96),> of YM or 1% (81),O(3) 591,995 831,968 56,239
L(24),> of YM or 1% (57),O(3) 527,413 1,482,742 763,580
L(28),DEF(86), O(6) 582,770 1,372,010 412,876
L(60),> of YM or 1% (57),O(3) 564,067 1,035,140 205,008
L(60),> of YM or 1% (18),O(6) 595,429 1,876,282 1,157,146
L(27),DEF(75), O(6) 883,865 1,729,000 528,973
L(28),DEF(86), O(6) 497,470 1,293,517 557,947
L(26),DEF(52), O(6) 556,516 2,356,667 1,532,884
L(29),DEF(85), O(6) 504,743 884,020 195,908
L(96),> of YM or 1% (78),O(6) 491,353 1,043,421 288,946
L(48),> of YM or 1% (66),O(6) 446,041 1,226,153 661,089
L(60),> of YM or 1% (57),O(3) 519,988 1,175,300 450,065
L(60),> of YM or 1% (57),O(3) 449,600 867,824 189,725
L(60),> of YM or 1% (57),O(3) 455,713 1,173,417 420,813
L(60),> of YM or 1% (57),O(3) 425,253 1,494,044 870,894
L(48),> of YM or 1% (36),1%(30),O(6) 414,247 1,033,006 472,804
L(60),> of YM or 1% (57),O(3) 411,585 672,876 110,984
L(60),> of YM or 1% (57),O(3) 415,506 805,197 203,538
L(32),DEF(82), O(6) 467,367 869,733 172,471
L(48),DEF(66), O(6) 470,377 2,066,979 1,351,817
L(32),DEF(82), O(6) 447,327 1,176,722 525,635
L(36),> of YM or 1% (81),O(3) 405,803 2,389,370 1,505,080
L(60),> of YM or 1% (57),O(3) 383,020 1,575,745 999,892
L(60),> of YM or 1% (54),O(6) 356,206 983,975 512,241
L(60),> of YM or 1% (57),O(3) 352,244 1,127,126 664,019
L(60),> of YM or 1% (57),O(3) 369,403 967,939 432,775
L(29),DEF(85), O(6) 374,051 813,756 211,664
<CAPTION>
UNDERWRITING UNDERWRITING APPRAISED
PREPAYMENT RESTRICTIONS NCF DSCR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
L(60),> of YM or 1% (57),O(3) $ 1,968,299 1.25 $ 25,400,000
L(31),DEF(83), O(6) 2,531,080 1.46 25,300,000
L(177), O(3) 3,150,755 1.75 38,200,000
L(24),< of YM or 5%(12), or 4%(12), or 3%(12), or 2%(24), or 1%(30),O(6) 2,273,176 1.57 24,000,000
L(28),DEF(86), O(6) 2,182,434 1.45 22,000,000
L(36),DEF(78), O(6) 1,825,066 1.36 20,500,000
L(30),DEF(84), O(6) 1,867,053 1.39 20,000,000
L(96), 7%(12),6%(12),5%(12),4%(12),3%(12),2%(12),1%(6),O(6) 1,509,329 1.27 18,250,000
L(60),> of YM or 1% (57),O(3) 1,710,891 1.30 21,000,000
L(36),> of YM or 1% (45),O(3) 1,440,675 1.25 17,100,000
L(36),> of YM or 1% (78),O(6) 1,411,079 1.26 16,900,000
L(36),> of YM or 1% (42),O(6) 1,705,911 1.43 17,900,000
L(24),DEF(150), O(6) 1,515,023 1.30 16,700,000
L(72),> of YM or 1% (31),O(6) 1,521,557 1.32 18,500,000
L(26),DEF(88), O(6) 1,329,457 1.27 16,300,000
L(60),> of YM or 1% (57),O(3) 1,479,855 1.38 18,500,000
L(60),> of YM or 1% (57),O(3) 1,633,115 1.44 18,600,000
L(60),> of YM or 1% (54),O(6) 1,335,266 1.29 16,600,000
L(24),DEF(93), O(3) 1,253,703 1.31 14,900,000
L(62),> of YM or 1% (53),O(5) 1,201,015 1.45 14,100,000
L(60),> of YM or 1% (57),O(3) 1,222,266 1.39 14,200,000
L(48),> of YM or 1% (66),O(6) 1,248,817 1.45 13,350,000
L(60),> of YM or 1% (54),O(6) 1,451,267 1.83 16,090,000
L(26),DEF(88), O(6) 1,060,331 1.33 12,700,000
L(60),> of YM or 1% (54),O(6) 934,417 1.32 12,000,000
L(60),> of YM or 1% (57),O(3) 1,010,488 1.36 11,000,000
L(30),DEF(84), O(6) 1,219,322 1.34 12,500,000
L(60),> of YM or 1% (54),O(6) 981,961 1.28 11,275,000
L(60),> of YM or 1% (57),O(3) 1,165,520 1.64 14,275,000
L(36),> of YM or 1% (21),O(3) 819,776 1.21 10,450,000
L(60),> of YM or 1% (54),O(6) 881,557 1.32 10,700,000
L(36),> of YM or 1% (78),O(6) 912,492 1.37 10,530,000
L(25),DEF(89), O(6) 938,310 1.38 10,300,000
L(60),> of YM or 1% (57),O(3) 877,058 1.26 10,750,000
L(30),DEF(84), O(6) 879,906 1.40 9,000,000
L(29),DEF(91) 1,015,225 1.39 9,700,000
L(38),DEF(76), O(6) 863,937 1.36 9,500,000
L(26),DEF(88), O(6) 843,137 1.37 10,400,000
L(60),> of YM or 1% (18),O(6) 845,567 1.28 9,200,000
L(60),> of YM or 1% (57),O(3) 773,234 1.30 8,600,000
L(60),> of YM or 1% (57),O(3) 849,422 1.48 9,000,000
L(24),< of YM or 5%(12), or 4%(12), or 3%(12), or 2%(24), or 1%(30),O(6) 928,683 1.52 9,200,000
L(96),> of YM or 1% (81),O(3) 845,498 1.44 9,300,000
L(96),> of YM or 1% (81),O(3) 775,729 1.31 8,700,000
L(24),> of YM or 1% (57),O(3) 719,162 1.36 8,200,000
L(28),DEF(86), O(6) 867,294 1.49 11,000,000
L(60),> of YM or 1% (57),O(3) 796,227 1.41 8,750,000
L(60),> of YM or 1% (18),O(6) 719,135 1.21 8,000,000
L(27),DEF(75), O(6) 1,127,175 1.28 9,800,000
L(28),DEF(86), O(6) 658,570 1.32 7,300,000
L(26),DEF(52), O(6) 823,783 1.48 7,700,000
L(29),DEF(85), O(6) 641,246 1.27 7,300,000
L(96),> of YM or 1% (78),O(6) 724,554 1.47 7,400,000
L(48),> of YM or 1% (66),O(6) 565,064 1.27 7,200,000
L(60),> of YM or 1% (57),O(3) 725,235 1.39 7,135,000
L(60),> of YM or 1% (57),O(3) 648,580 1.44 7,600,000
L(60),> of YM or 1% (57),O(3) 686,922 1.51 7,600,000
L(60),> of YM or 1% (57),O(3) 623,150 1.47 7,000,000
L(48),> of YM or 1% (36),1%(30),O(6) 560,202 1.35 6,000,000
L(60),> of YM or 1% (57),O(3) 520,148 1.26 6,365,000
L(60),> of YM or 1% (57),O(3) 587,784 1.41 6,400,000
L(32),DEF(82), O(6) 629,578 1.35 6,600,000
L(48),DEF(66), O(6) 715,162 1.52 7,275,000
L(32),DEF(82), O(6) 629,337 1.41 6,600,000
L(36),> of YM or 1% (81),O(3) 884,290 2.18 8,500,000
L(60),> of YM or 1% (57),O(3) 575,853 1.50 8,300,000
L(60),> of YM or 1% (54),O(6) 471,734 1.32 6,257,000
L(60),> of YM or 1% (57),O(3) 463,108 1.31 5,350,000
L(60),> of YM or 1% (57),O(3) 474,763 1.29 7,150,000
L(29),DEF(85), O(6) 556,744 1.49 4,950,000
<CAPTION>
APPRAISAL CURRENT
PREPAYMENT RESTRICTIONS YEAR LTV
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
L(60),> of YM or 1% (57),O(3) 1997 74.66
L(31),DEF(83), O(6) 1997 69.72
L(177), O(3) 1997 42.01
L(24),< of YM or 5%(12), or 4%(12), or 3%(12), or 2%(24), or 1%(30),O(6) 1997 66.44
L(28),DEF(86), O(6) 1997 72.43
L(36),DEF(78), O(6) 1997 77.26
L(30),DEF(84), O(6) 1997 76.20
L(96), 7%(12),6%(12),5%(12),4%(12),3%(12),2%(12),1%(6),O(6) 1997 78.16
L(60),> of YM or 1% (57),O(3) 1997 66.18
L(36),> of YM or 1% (45),O(3) 1997 79.47
L(36),> of YM or 1% (78),O(6) 1997 79.80
L(36),> of YM or 1% (42),O(6) 1996 73.71
L(24),DEF(150), O(6) 1997 77.84
L(72),> of YM or 1% (31),O(6) 1997 69.07
L(26),DEF(88), O(6) 1997 76.56
L(60),> of YM or 1% (57),O(3) 1997 67.38
L(60),> of YM or 1% (57),O(3) 1997 64.18
L(60),> of YM or 1% (54),O(6) 1997 67.70
L(24),DEF(93), O(3) 1997 73.55
L(62),> of YM or 1% (53),O(5) 1997 73.66
L(60),> of YM or 1% (57),O(3) 1997 72.17
L(48),> of YM or 1% (66),O(6) 1997 74.85
L(60),> of YM or 1% (54),O(6) 1997 62.05
L(26),DEF(88), O(6) 1997 74.68
L(60),> of YM or 1% (54),O(6) 1997 73.22
L(60),> of YM or 1% (57),O(3) 1997 79.85
L(30),DEF(84), O(6) 1997 67.52
L(60),> of YM or 1% (54),O(6) 1997 74.71
L(60),> of YM or 1% (57),O(3) 1997 57.85
L(36),> of YM or 1% (21),O(3) 1997 76.94
L(60),> of YM or 1% (54),O(6) 1997 73.74
L(36),> of YM or 1% (78),O(6) 1997 73.39
L(25),DEF(89), O(6) 1997 74.64
L(60),> of YM or 1% (57),O(3) 1997 71.26
L(30),DEF(84), O(6) 1997 82.65
L(29),DEF(91) 1997 73.80
L(38),DEF(76), O(6) 1997 73.51
L(26),DEF(88), O(6) 1997 67.14
L(60),> of YM or 1% (18),O(6) 1997 75.36
L(60),> of YM or 1% (57),O(3) 1997 79.60
L(60),> of YM or 1% (57),O(3) 1997 75.31
L(24),< of YM or 5%(12), or 4%(12), or 3%(12), or 2%(24), or 1%(30),O(6) 1997 73.13
L(96),> of YM or 1% (81),O(3) 1997 71.77
L(96),> of YM or 1% (81),O(3) 1997 75.69
L(24),> of YM or 1% (57),O(3) 1997 79.11
L(28),DEF(86), O(6) 1997 58.82
L(60),> of YM or 1% (57),O(3) 1997 72.84
L(60),> of YM or 1% (18),O(6) 1997 78.29
L(27),DEF(75), O(6) 1997 60.23
L(28),DEF(86), O(6) 1997 80.58
L(26),DEF(52), O(6) 1997 73.83
L(29),DEF(85), O(6) 1997 76.41
L(96),> of YM or 1% (78),O(6) 1997 72.70
L(48),> of YM or 1% (66),O(6) 1997 74.70
L(60),> of YM or 1% (57),O(3) 1997 74.39
L(60),> of YM or 1% (57),O(3) 1997 68.93
L(60),> of YM or 1% (57),O(3) 1997 67.58
L(60),> of YM or 1% (57),O(3) 1997 72.72
L(48),> of YM or 1% (36),1%(30),O(6) 1997 79.60
L(60),> of YM or 1% (57),O(3) 1997 74.68
L(60),> of YM or 1% (57),O(3) 1997 73.27
L(32),DEF(82), O(6) 1997 70.88
L(48),DEF(66), O(6) 1997 64.23
L(32),DEF(82), O(6) 1997 70.68
L(36),> of YM or 1% (81),O(3) 1997 52.12
L(60),> of YM or 1% (57),O(3) 1997 52.79
L(60),> of YM or 1% (54),O(6) 1997 70.02
L(60),> of YM or 1% (57),O(3) 1997 79.26
L(60),> of YM or 1% (57),O(3) 1997 58.56
L(29),DEF(85), O(6) 1997 83.50
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN PER
SQ FT, UNITS SQ FT, UNITS INITIAL
REPAYMENT YEAR BEDS, PADS BEDS, PADS OCCUPANCY RESERVES UNDERWRITING
LTV BUILT OR ROOM OR ROOM PERCENTAGE AT CLOSING RESERVES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
64.91 1978 249,187 sq.ft. 76 per sq. ft. 90 97,776 0.15
58.82 1962 1,318 units 13,382 per unit 98 716,541 200
NAP 1890 725,061 sq.ft. 22 per sq. ft. 79 -- 0.15
54.46 1984 316 rooms 50,464 per room NAP 18,442 4%
60.18 1994 144 beds 110,651 per bed 94 -- 350
67.29 1958 81,366 sq. ft. 195 per sq. ft. 100 1,051 0.16
68.36 1965 205,485 sq. ft. 74 per sq. ft. 93 20,156 0.15
59.02 1972 190 units 75,071 per unit 98 -- 250
54.25 1960 370,002 sq.ft. 38 per sq. ft. 88 101,131 0.15
73.49 1996 194 units 70,048 per unit 98 -- 200
69.39 1989 108,959 sq.ft. 124 per sq. ft. 100 -- 0.16
67.19 1977 139,550 sq.ft. 95 per sq. ft. 100 -- 0.15
50.48 1993 126 beds 103,175 per bed 100 3,150 300
61.37 1987 137,508 sq. ft. 93 per sq. ft. 98 1,772 0.15
67.67 1985 301,629 sq. ft. 41 per sq. ft. 95 70,460 0.16
53.48 1984 240 units 51,938 per unit 93 -- 250
52.55 1987 138,000 sq.ft. 87 per sq. ft. 100 -- 0.19
54.91 1986 211,257 sq.ft. 53 per sq. ft. 93 3,750 0.15
64.66 1960 203,291 sq.ft. 54 per sq. ft. 98 -- 0.15
63.42 1921 92 sq.ft. 92 per sq. ft. 100 -- 0.17
63.33 1966 654 units 15,749 per unit 80 61,625 250
65.42 1987 169,381 sq. ft. 59 per sq. ft. 92 1,625 0.15
53.32 1967 344 units 29,021 per unit 99 29,363 250
66.08 1963 175,407 sq. ft. 54 per sq. ft. 88 16,137 0.15
63.20 1982 210,720 sq.ft. 42 per sq. ft. 94 -- 0.23
69.69 1976 382 units 22,994 per unit 91 57,221 250
52.52 1967 165 rooms 51,152 per room NAP 261,129 4%
66.23 1996 109,246 sq.ft. 77 per sq. ft. 96 -- 0.15
50.76 1974 376 units 22,074 per unit 96 53,875 250
73.08 1987 210 units 38,285 per unit 99 106,665 250
64.33 1985 124,115 sq.ft. 64 per sq. ft. 92 35,625 0.15
64.37 1963 76,022 sq.ft. 102 per sq. ft. 100 25,000 0.15
60.54 1986 133,558 sq. ft. 58 per sq. ft. 96 7,920 0.15
63.29 1961 220 units 34,818 per unit 91 -- 265
73.38 1978 286 units 26,007 per unit 92 34,132 273
58.23 1973 282 rooms 25,386 per room NAP 71,239 4%
60.32 1996 62,580 sq. ft. 112 per sq. ft. 86 1,565 0.15
54.49 1987 177,563 sq. ft. 39 per sq. ft. 100 8,845 0.15
68.95 1966 374 units 18,537 per unit 96 118,438 250
70.02 1985 198 units 34,575 per unit 98 19,813 250
65.79 1982 118,281 sq.ft. 57 per sq. ft. 96 20,888 0.25
59.94 1990 111 rooms 60,608 per room NAP 9,635 4%
44.80 1969 264 units 25,283 per unit 98 -- 250
47.76 1972 264,000 sq.ft. 25 per sq. ft. 100 2,410,000 0.15
72.53 1985 216 units 30,034 per unit 97 -- 225
48.16 1986 118,473 sq. ft. 55 per sq. ft. 83 1,483 0.15
64.29 1979 112,143 sq.ft. 57 per sq. ft. 100 -- 0.15
71.63 1975 352 units 17,792 per unit 96 19,410 250
9.29 1987 85,920 sq. ft. 69 per sq. ft. 100 17,803 0.22
71.47 1973 280 units 21,009 per unit 93 159,698 275
64.65 1902 58 rooms 98,014 per room NAP 9,583 5%
66.26 1996 60,000 sq. ft. 93 per sq. ft. 100 3,250 0.15
52.25 1960 70,125 sq.ft. 77 per sq. ft. 96 2,000 0.17
66.03 1984 252 units 21,343 per unit 91 -- 200
61.58 1983 71,035 sq.ft. 75 per sq. ft. 100 -- 0.15
60.34 1988 37,846 sq.ft. 138 per sq. ft. 100 -- 0.15
54.14 1973 139,942 sq.ft. 37 per sq. ft. 99 -- 0.15
63.24 1976 320 units 15,907 per unit 95 13,094 275
69.99 1982 161 units 29,665 per unit 99 -- 250
65.46 1995 36,257 sq.ft. 131 per sq. ft. 100 -- 0.15
61.42 1990 36,297 sq.ft. 129 per sq. ft. 100 -- 0.21
60.19 1987 208,320 sq. ft. 22 per sq. ft. 100 57,815 0.19
50.45 1974 150 rooms 31,150 per room NAP 10,448 4%
59.24 1990 91 units 51,263 per unit 93 23,338 239
42.09 1996 127 rooms 35,001 per room NAP -- 4%
46.47 1989 148 units 29,605 per unit 77 -- 300
60.54 1977 192 units 22,820 per unit 96 11 225
68.76 1982 184 units 23,045 per unit 98 44,125 254
51.59 1984 120,142 sq.ft. 35 per sq. ft. 91 -- 0.15
72.42 1988 32,215 sq. ft. 128 per sq. ft. 69 5,403 0.15
<CAPTION>
LARGEST RETAIL TENANT
----------------------------------------------------------------------------
REPAYMENT RESERVES AREA LEASED LEASE CONTROL
LTV COLLECTED NAME (SQ. FT.) EXP DATE NO.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
64.91 per sq.ft. Ralph's 35,250 03/31/1999 126
58.82 161 per unit 305
NAP per sq.ft. Central Moving and Storage 160,000 12/31/2006 137
54.46 3% of revenue 325
60.18 350 per bed 324
67.29 0.16 per sq. ft. Minor & James 41,909 11/30/2007 340
68.36 0.15 per sq. ft. Publix Store #367 42,112 02/22/2009 309
59.02 250 per unit 166
54.25 per sq.ft. Burlington Coat 75,000 01/31/2005 198
73.49 200 per unit 147
69.39 per sq.ft. Mallinckrodt Chemical 95,759 12/31/2004 113
67.19 per sq.ft. Borders Books and Music 27,450 01/30/2007 120
50.48 300 per bed Care Matrix Of Ridgefield 61,109 12/31/2017 544
61.37 0.15 per sq. ft. Best Buy 36,586 01/31/2009 332
67.67 0.15 per sq. ft. Wal-Mart 131,180 08/29/2005 339
53.48 250 per unit 231
52.55 per sq.ft. Huntington Nat'l Bank 113,599 04/30/2005 189
54.91 per sq.ft. Geran Mailing 22,539 09/30/2003 139
64.66 per sq.ft. Big Bear Stores 66,501 12/31/2012 237
63.42 per sq.ft. Pathmark 48,778 05/10/2010 194
63.33 250 per unit 246
65.42 per sq. ft. Nova SE Univeristy 38,015 01/01/2002 335
53.32 per unit 253
66.08 0.15 per sq. ft. Mega Foods (Basha's) 49,990 12/31/2010 333
63.20 per sq.ft. Vektron International 10,043 01/31/1998 160
69.69 250 per unit 223
52.52 4% of revenue 306
66.23 per sq.ft. Albertson's 50,320 12/31/2020 208
50.76 250 per unit 196
73.08 250 per unit 248
64.33 per sq.ft. JoAnn Fabrics 25,027 03/31/2007 249
64.37 per sq.ft. Food Maxx 51,520 09/30/2015 215
60.54 0.15 per sq. ft. Gart Brothers 27,097 09/30/2001 341
63.29 265 per unit 247
73.38 273 per unit 308
58.23 3% of revenue 313
60.32 0.15 per sq. ft. Carpet Max 5,525 01/06/2002 314
54.49 0.15 per sq. ft. Old Dominion Brewing Company 42,308 03/31/2006 337
68.95 250 per unit 191
70.02 250 per unit 252
65.79 per sq.ft. Michael's 28,000 01/31/2003 207
59.94 3% of revenue 326
44.80 250 per unit 261
47.76 per sq.ft. Crain Industries, Inc 264,000 11/30/2012 107
72.53 225 per unit 169
48.16 0.15 per sq. ft. McCaulou's 51,396 03/31/2003 318
64.29 per sq.ft. Boukather & Assoc 15,971 08/31/2001 195
71.63 250 per unit 179
9.29 0.22 per sq. ft. Fortunoff & M. Fortunoff 85,920 11/30/2012 329
71.47 275 per unit 316
64.65 5% of revenue 328
66.26 0.15 per sq. ft. Huffman Koos 60,000 01/31/2011 468
52.25 per sq.ft. Vons 31,152 04/08/2004 165
66.03 per unit 138
61.58 per sq.ft. Wickes Lumber 71,035 04/28/2022 256
60.34 per sq.ft. Samy's Camera 19,199 09/01/2004 102
54.14 per sq.ft. Consign & Design 14,700 02/28/2002 251
63.24 211 per unit 258
69.99 250 per unit 115
65.46 per sq.ft. Technology Funding 14,405 09/30/2002 213
61.42 per sq.ft. Super Market 16,700 06/30/2012 200
60.19 0.19 per sq. ft. Riverwood International 70,164 04/30/2003 304
50.45 4% of revenue 311
59.24 239 per unit 303
42.09 4% of revenue 176
46.47 per unit 150
60.54 225 per unit 148
68.76 254 per unit 259
51.59 per sq.ft. United Artists 25,964 12/31/2004 204
72.42 0.15 per sq. ft. Fleet Bank 12,500 12/31/1998 466
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN CONTROL
SOURCE NO. PROPERTY NAME ADDRESS CITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MLMC 170 Gannon Place Apartments 3839 Gannon Lane Dallas
DAIWA 510 Corporate Point Office Building 14100 Park Meadow Drive Chantilly
MLMC 226 River Manor Apartments 200 Colorado Avenue Parachute
MLMC 128 Carlsbad Ramada Inn 751 Macadamia Drive Carlsbad
MLMC 127 Carlsbad Inn 3075 Carlsbad Boulevard Carlsbad
MLMC 135 Charles-Orms Building 10 Orms Street Providence
DAIWA 319 Days Inn Busch Gardens 2901 E. Busch Blvd Tampa
MLMC 228 Rowesix Office Building 4224 Sixth Avenue Lacey
MLMC 242 Summerfield Villas 8852 E. Bellevue Scottsdale
DAIWA 310 Ramada Inn Foothills 6944 East Tanque Verde Road Tucson
MLMC 216 Park Apartments 5414 Cedar Springs Road Dallas
MLMC 212 Northwood Hills Apartments 13980 Peyton Dr. Dallas
MLMC 177 Hampton Inn - Newnan 50 Hampton Way Newnan
DAIWA 307 Windrush Apartments 4322 Kostoryz Road Corpus Christi
DAIWA 312 Ramada Inn - Bordentown 1083 Route 206 Bordentown
MLMC 168 Forest Park Apartment 303 Des Plaines and 7456 Washington Forest Park
DAIWA 315 Southwood Square Shopping Center 2826-2850 South Main High Point
MLMC 181 Holiday Inn - Brainerd 2025 South 6th Street Brainerd
MLMC 125 Cambridge Park Apts 2259 Bonaparte Blvd. Montgomery
MLMC 210 Monroe Town Center 337 Applegarth Road Cranbury
MLMC 109 AAAAA Rent-A-Space - Hayward 24700 Mission Blvd Hayward
MLMC 199 Learwood Square Shopping Center Lear/Nagel and Walker Roads Avon Lake
MLMC 154 Crystal Cove Apartments 15615 Blue Ash Drive Houston
MLMC 238 Spring Lake Apartments 8800 Hammerly Blvd Houston
MLMC 219 PoPolo Village 4444 FM 1960 Houston
MLMC 243 Summit South 300 Centerville Road Warwick
MLMC 161 Dickson Kroger Shopping Center Highway 70-Bypass Dickson
MLMC 108 8000 Centre Park 8000 Centre Park Drive Austin
DAIWA 511 Great Western Bank Building 13701 - 13739 Riverside Drive Sherman Oaks
DAIWA 331 Timmons Place & Timmons Square 3637 & 3701 West Alabama Houston
MLMC 116 Belcourt Apartments 3117 North 7th Avenue Phoenix
MLMC 122 Briergreen Apartments 3 Saw Grass Road Charleston
DAIWA 534 Comfort Inn - St. Augustine 1111 N.Ponce De Leon Blvd. St. Augustine
MLMC 233 Sheraton Bangor International Airport 308 Godfrey Boulevard Bangor
MLMC 112 Arbor Oaks Apartments 3434 & 3500 West Little York Houston
MLMC 151 Courts at West University 3810 Law Houston
MLMC 131 Cedarvale Highlands 3908/3916/3924 Beau d'Rue Dr. Eagan
MLMC 217 Park Place Apartments 9303 Woodfair Houston
MLMC 193 La Costa Apartments 4303 Mariposa Drive Irving
MLMC 260 Windjammer Cove Apartments 79 Shaw Street Braintree
MLMC 123 Broadmoor Mobile Home Park 55 West Washington Street Yakima
MLMC 205 Mesa Tech Industrial/R&D Building 10540 Heater Court San Diego
MLMC 241 Sterling Pointe Apartments 6001 Oakland Hills Drive Fort Worth
DAIWA 519 Manayunk Apartments 3901 Manayunk Avenue Philadelphia
DAIWA 330 Days Inn - Fort Lauderdale 1595 West Oakland Park Blvd. Fort Lauderdale
MLMC 100 10000 Old Katy Road Office/Service Center 10000 Old Katy Road Houston
MLMC 152 Courtside/Harrigan's Plaza 5900, 5920 & 5930 West I-20 Arlington
MLMC 209 Modesto Ramada Inn 2001 West Orangeburg Avenue Modesto
DAIWA 320 Mill Village 365 Boston Post Road (Route 20) Sudbury
MLMC 202 Martin Plaza 2420 Martin Blvd Fairfield
MLMC 220 Portsmouth Industrial Park 124, 300 and 350 Heritage Ave. Portsmouth
DAIWA 301 Holiday Inn Cortland 2 River Street Cortland
MLMC 184 Holiday Inn Express - Brownsburg 31 Maplehurst Drive Brownsburg
DAIWA 539 The Sarvis Building and Conference Center 6104 and 6111 Gazebo Park Place North Jacksonville
MLMC 172 Gardens Apartments 1420 17th Street SE Auburn
DAIWA 322 South Water Street 5 South Water Street Nantucket
MLMC 182 Holiday Inn Express - Arlington 2451 Randoll Mill Road Arlington
MLMC 144 Comfort Inn Jackson 2800 Greenway Drive Jackson
DAIWA 327 Days Inn Hotel 121 Days Inn Drive Easley
MLMC 110 Antioch Ramada Inn 2436 Mahogany Way Antioch
MLMC 149 Copper Hill Apartments 3440 El Dorado Hills Blvd El Dorado Hills
MLMC 240 Spring Village Apartments 601 Poplar Street Sharon Hill
MLMC 211 Newport Landing Apartments 10850 Kingsley Road Dallas
MLMC 178 Hampton Inn Peachtree 300 Westpark Drive Peachtree City
DAIWA 502 Las Casitas Apartments 4100 East 29th Street Tucson
MLMC 171 Garden View 16200 West Nine Mile Road Southfield
MLMC 255 Westchester Manor 107 Westchester Circle Athens
DAIWA 432 Stoneridge Apartments 1500 South Lamar Boulevard Austin
MLMC 134 Chandler Village Phase I & II NE Corner Chandler Blvd @ 54th St. Chandler
MLMC 239 Spring Lake Lakehomes 2217 Hollister Houston
MLMC 188 Holmes Center Office Building 3251 W. 6th Street Los Angeles
MLMC 190 Howard Johnson San Mateo 2110 South El Camino Real San Mateo
MLMC 111 Applewood Grove Shopping Center 1975 Youngfield Street Golden
DAIWA 536 Fort Williams Square Shopping Center 1351-1389 Fort Williams Street Sylacuaga
MLMC 130 Cedars Apartments 403 Longmire Conroe
MLMC 254 Westbury Square Office/Retail Center 2301 West Park Row Arlington
MLMC 234 Sherwood 70 Associates 155 West 70th Street New York
MLMC 143 Comfort Inn - Vicksburg 3959 East Clay Street Vicksburg
DAIWA 448 Broadway Park Apartments 2505 Broadway Houston
MLMC 119 Best Western Anahiem Hills 5710 East La Palma Avenue Anaheim
<CAPTION>
LOAN ZIP ORIGINAL CURRENT % OF INITIAL
SOURCE STATE CODE PROPERTY TYPE BALANCE BALANCE POOL BALANCE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MLMC TX 75237 Multifamily 4,080,000 4,072,221 0.37
DAIWA VA 20151 Office 4,020,000 4,010,310 0.37
MLMC CO 81635 Multifamily 4,015,000 4,007,473 0.37
MLMC CA 92009 Hospitality 4,020,000 3,976,961 0.37
MLMC CA 92008 Hospitality 4,000,000 3,975,001 0.37
MLMC RI 02904 Office 3,950,000 3,934,687 0.36
DAIWA FL 33612 Hospitality 3,950,000 3,930,805 0.36
MLMC WA 98509 Office 3,825,000 3,815,922 0.35
MLMC AZ 85257 Multifamily 3,820,000 3,810,089 0.35
DAIWA AZ 85715 Hospitality 3,800,000 3,777,705 0.35
MLMC TX 75235 Multifamily 3,790,000 3,761,745 0.35
MLMC TX 75240 Multifamily 3,760,000 3,748,825 0.34
MLMC GA 30265 Hospitality 3,780,000 3,744,082 0.34
DAIWA TX 78415 Multifamily 3,735,000 3,719,057 0.34
DAIWA NJ 08505 Hospitality 3,615,000 3,594,409 0.33
MLMC IL 60130 Multifamily 3,600,000 3,593,127 0.33
DAIWA NC 27263 Retail 3,600,000 3,579,158 0.33
MLMC MN 56401 Hospitality 3,550,000 3,542,197 0.33
MLMC AL 36116 Multifamily 3,520,000 3,497,970 0.32
MLMC NJ 08520 Retail 3,450,000 3,443,821 0.32
MLMC CA 94544 Self Storage 3,400,000 3,393,201 0.31
MLMC OH 44012 Retail 3,400,000 3,390,166 0.31
MLMC TX 77090 Multifamily 3,400,000 3,386,750 0.31
MLMC TX 77080 Multifamily 3,380,000 3,371,456 0.31
MLMC TX 77068 Retail 3,275,000 3,267,851 0.30
MLMC RI 02866 Office 3,250,000 3,241,581 0.30
MLMC TN 37055 Retail 3,250,000 3,239,283 0.30
MLMC TX 78754 Office 3,215,000 3,202,341 0.29
DAIWA CA 91423 Office 3,200,000 3,191,482 0.29
DAIWA TX 77027 Office 3,200,000 3,188,784 0.29
MLMC AZ 85013 Multifamily 3,200,000 3,161,678 0.29
MLMC SC 29412 Multifamily 3,150,000 3,139,460 0.29
DAIWA FL 32084 Hospitality 3,100,000 3,094,546 0.28
MLMC ME 04401 Hospitality 3,100,000 3,089,851 0.28
MLMC TX 77091 Multifamily 3,000,000 2,992,591 0.27
MLMC TX 77005 Multifamily 3,000,000 2,990,545 0.27
MLMC MN 55122 Multifamily 2,940,000 2,927,347 0.27
MLMC TX 77036 Multifamily 2,915,000 2,909,404 0.27
MLMC TX 75038 Multifamily 2,900,000 2,890,408 0.27
MLMC MA 02184 Multifamily 2,900,000 2,887,413 0.27
MLMC WA 98903 Mobile Home Park 2,850,000 2,844,507 0.26
MLMC CA 92121 Office 2,850,000 2,840,589 0.26
MLMC TX 76112 Multifamily 2,800,000 2,794,690 0.26
DAIWA PA 19128 Multifamily 2,750,000 2,745,630 0.25
DAIWA FL 33311 Hospitality 2,750,000 2,736,636 0.25
MLMC TX 77055 Industrial 2,750,000 2,730,162 0.25
MLMC TX 76017 Retail 2,700,000 2,693,447 0.25
MLMC CA 95350 Hospitality 2,720,000 2,690,879 0.25
DAIWA MA 01776 Retail 2,700,000 2,688,338 0.25
MLMC CA 94533 Office 2,700,000 2,685,775 0.25
MLMC NH 03801 Industrial 2,660,000 2,649,594 0.24
DAIWA NY 13045 Hospitality 2,668,000 2,646,054 0.24
MLMC IN 46112 Hospitality 2,610,000 2,600,559 0.24
DAIWA FL 32257 Office 2,600,000 2,596,679 0.24
MLMC WA 98002 Multifamily 2,600,000 2,595,126 0.24
DAIWA MA 02554 Retail 2,600,000 2,588,588 0.24
MLMC TX 76011 Hospitality 2,600,000 2,586,576 0.24
MLMC MS 39204 Hospitality 2,590,000 2,576,613 0.24
DAIWA SC 29640 Hospitality 2,550,000 2,541,513 0.23
MLMC CA 94507 Hospitality 2,560,000 2,532,592 0.23
MLMC CA 95762 Multifamily 2,500,000 2,495,221 0.23
MLMC PA 19079 Multifamily 2,500,000 2,491,116 0.23
MLMC TX 75238 Multifamily 2,480,000 2,475,272 0.23
MLMC GA 30269 Hospitality 2,500,000 2,467,089 0.23
DAIWA AZ 85711 Multifamily 2,505,000 2,432,979 0.22
MLMC MI 48075 Multifamily 2,410,000 2,401,202 0.22
MLMC GA 30606 Multifamily 2,400,000 2,392,102 0.22
DAIWA TX 78704 Multifamily 2,400,000 2,370,291 0.22
MLMC AZ 85226 Retail 2,350,000 2,338,090 0.21
MLMC TX 77080 Multifamily 2,340,000 2,334,173 0.21
MLMC CA 90020 Office 2,330,000 2,327,143 0.21
MLMC CA 94403 Hospitality 2,300,000 2,285,715 0.21
MLMC CO 80401 Retail 2,260,000 2,252,035 0.21
DAIWA AL 35150 Retail 2,250,000 2,246,537 0.21
MLMC TX 77304 Multifamily 2,250,000 2,245,651 0.21
MLMC TX 76013 Retail 2,250,000 2,241,484 0.21
MLMC NY 10023 Retail 2,200,000 2,193,155 0.20
MLMC MS 39180 Hospitality 2,200,000 2,188,628 0.20
DAIWA TX 77012 Multifamily 2,190,000 2,173,625 0.20
MLMC CA 92807 Hospitality 2,160,000 2,155,296 0.20
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE % OF
INITIAL POOL BORROWER INTEREST ACCRUAL MORTGAGE ADMINISTRATIVE
BALANCE AFFILIATED CROSSED METHOD RATE COST RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55.87 Actual/360 7.25 0.099
56.24 Actual/360 7.75 0.289
56.60 Actual/360 7.38 0.099
56.97 Cntrl #'s 110, 209, 245 30/360 9.01 0.099
57.33 30/360 8.75 0.094
57.70 30/360 8.27 0.099
58.06 Cntrl # 330 30/360 8.36 0.099
58.41 Actual/360 7.72 0.099
58.76 Actual/360 7.18 0.129
59.11 Cntrl # 311 30/360 8.62 0.099
59.45 Cntrl #'s 179, 191 yes 30/360 8.47 0.164
59.80 30/360 7.34 0.099
60.14 30/360 8.70 0.094
60.48 Cntrl #'s 308, 316, 317 Actual/360 7.54 0.099
60.81 Actual/360 8.53 0.099
61.14 Cntrl # 236 Actual/360 7.24 0.099
61.47 Actual/360 8.38 0.164
61.80 Actual/360 8.10 0.099
62.12 Actual/360 7.56 0.099
62.43 Actual/360 7.72 0.099
62.75 30/360 8.33 0.129
63.06 Actual/360 7.67 0.094
63.37 Actual/360 7.53 0.099
63.68 Cntrl # 239 Actual/360 7.34 0.099
63.98 30/360 7.63 0.099
64.28 Actual/360 7.64 0.129
64.57 Actual/360 7.82 0.094
64.87 Actual/360 7.85 0.099
65.16 Actual/360 7.02 0.289
65.45 30/360 7.77 0.099
65.74 30/360 8.56 0.099
66.03 Actual/360 7.40 0.099
66.32 Actual/360 7.65 0.099
66.60 30/360 8.32 0.129
66.88 Cntrl # 151 Actual/360 7.48 0.099
67.15 Cntrl # 112 Actual/360 7.40 0.099
67.42 30/360 7.75 0.239
67.69 Cntrl # 130 Actual/360 7.20 0.099
67.95 Actual/360 7.47 0.099
68.22 Actual/360 7.86 0.259
68.48 Actual/360 7.17 0.099
68.74 Actual/360 7.48 0.099
69.00 Actual/360 7.29 0.099
69.25 Actual/360 7.25 0.099
69.50 Cntrl # 319 30/360 8.36 0.099
69.75 30/360 8.25 0.099
70.00 Actual/360 7.58 0.099
70.25 Cntrl #'s 110, 128, 245 30/360 9.01 0.099
70.49 Cntrl #'s 321, 322, 323 Actual/360 7.89 0.164
70.74 30/360 8.07 0.099
70.98 Actual/360 7.63 0.129
71.23 Actual/360 9.74 0.164
71.47 Actual/360 8.42 0.129
71.70 Actual/360 8.05 0.099
71.94 Actual/360 7.38 0.099
72.18 Cntrl #'s 320, 321, 323 Actual/360 7.79 0.164
72.42 Actual/360 8.30 0.099
72.66 Cntrl #'s 118, 143, 145 Actual/360 8.29 0.099
72.89 Cntrl #'s 326, 327 Actual/360 7.70 0.099
73.12 Cntrl #'s 128, 209, 245 30/360 9.01 0.099
73.35 Actual/360 7.23 0.099
73.58 30/360 7.78 0.099
73.81 Actual/360 7.25 0.099
74.03 30/360 9.43 0.094
74.26 30/360 9.25 0.099
74.48 Actual/360 7.50 0.129
74.70 Actual/360 7.50 0.099
74.92 30/360 8.88 0.099
75.13 30/360 8.31 0.099
75.34 Cntrl # 238 Actual/360 7.43 0.099
75.56 Actual/360 7.57 0.099
75.77 30/360 8.80 0.099
75.98 Actual/360 7.75 0.099
76.18 Actual/360 7.64 0.099
76.39 Cntrl # 217 Actual/360 7.15 0.099
76.59 Actual/360 8.12 0.099
76.80 Actual/360 7.84 0.099
77.00 Cntrl #'s 118, 144, 145 Actual/360 8.29 0.099
77.20 Cntrl # 447 30/360 8.88 0.099
77.39 Actual/360 8.25 0.129
<CAPTION>
REM
CUMULATIVE % OF ORIG REM AMORT AMORT
INITIAL POOL TERM TERM TERM TERM ORIGINATION REPAYMENT BALLOON/REPAYMENT
BALANCE (MOS.) (MOS.) (MOS.) (MOS.) DATE DATE BALANCE MATURITY TERM
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
55.87 120 118 360 358 12/12/97 01/01/2008 3,535,559 Balloon
56.24 120 118 300 298 12/31/97 01/01/2008 3,288,198 Balloon
56.60 120 118 360 358 12/31/97 01/01/2008 3,488,959 Balloon
56.97 120 113 240 233 07/08/97 08/01/2007 2,856,062 HyperAm
57.33 120 116 240 236 10/24/97 11/01/2007 2,820,501 HyperAm
57.70 120 114 360 354 08/27/97 09/01/2007 3,489,781 Balloon
58.06 120 116 276 272 10/09/97 11/01/2007 3,063,533 Balloon
58.41 120 117 360 357 11/24/97 12/01/2007 3,349,474 Balloon
58.76 120 117 360 357 11/03/97 12/01/2007 3,306,067 Balloon
59.11 120 115 276 271 09/05/97 10/01/2007 2,967,465 Balloon
59.45 84 75 324 315 05/28/97 06/01/2004 3,441,740 Balloon
59.80 120 117 324 321 11/21/97 12/01/2007 3,114,719 Balloon
60.14 120 114 240 234 08/14/97 09/01/2007 2,675,355 Balloon
60.48 120 114 360 354 08/29/97 09/01/2007 3,302,109 Balloon
60.81 120 115 276 271 09/24/97 10/01/2007 2,881,302 Balloon
61.14 120 118 360 358 12/05/97 01/01/2008 3,118,907 Balloon
61.47 120 114 300 294 08/06/97 09/01/2007 2,998,471 Balloon
61.80 240 239 240 239 01/09/98 02/01/2018 NAP Fully Amortizing
62.12 264 260 264 260 10/08/97 11/01/2019 NAP Fully Amortizing
62.43 120 118 360 358 12/22/97 01/01/2008 3,020,445 Balloon
62.75 300 298 300 298 12/05/97 01/01/2023 NAP Fully Amortizing
63.06 120 116 360 356 10/23/97 11/01/2007 3,015,518 HyperAm
63.37 120 115 360 355 09/19/97 10/01/2007 2,965,214 Balloon
63.68 120 117 360 357 11/07/97 12/01/2007 2,935,474 Balloon
63.98 120 117 360 357 11/06/97 12/01/2007 2,855,652 Balloon
64.28 144 142 300 298 12/30/97 01/01/2010 2,417,395 Balloon
64.57 120 115 360 355 09/12/97 10/01/2007 2,898,588 HyperAm
64.87 120 116 324 320 10/21/97 11/01/2007 2,703,018 Balloon
65.16 120 118 300 298 12/19/97 01/01/2008 2,560,471 Balloon
65.45 240 238 240 238 12/15/97 01/01/2018 NAP Fully Amortizing
65.74 60 48 300 288 02/10/97 03/01/2002 2,971,094 Balloon
66.03 120 116 360 356 10/20/97 11/01/2007 2,738,809 Balloon
66.32 120 119 276 275 01/12/98 02/01/2008 2,403,613 Balloon
66.60 240 238 240 238 12/31/97 01/01/2018 NAP Fully Amortizing
66.88 180 177 360 357 11/13/97 12/01/2012 2,277,236 Balloon
67.15 120 117 324 321 11/13/97 12/01/2007 2,495,441 Balloon
67.42 120 114 360 354 08/25/97 09/01/2007 2,570,096 Balloon
67.69 120 118 360 358 12/09/97 01/01/2008 2,523,165 Balloon
67.95 120 116 360 356 10/15/97 11/01/2007 2,525,323 Balloon
68.22 300 296 300 296 10/03/97 11/01/2022 NAP Fully Amortizing
68.48 120 118 360 358 12/19/97 01/01/2008 2,465,222 Balloon
68.74 120 116 360 356 10/31/97 11/01/2007 2,482,325 Balloon
69.00 120 118 360 358 12/09/97 01/01/2008 2,428,544 Balloon
69.25 120 119 300 299 01/12/98 02/01/2008 2,215,627 Balloon
69.50 120 116 276 272 10/09/97 11/01/2007 2,132,841 Balloon
69.75 120 113 300 293 07/15/97 08/01/2007 2,241,247 Balloon
70.00 120 117 360 357 11/06/97 12/01/2007 2,357,587 Balloon
70.25 120 113 240 233 07/08/97 08/01/2007 1,932,460 HyperAm
70.49 120 116 300 296 10/17/97 11/01/2007 2,217,630 Balloon
70.74 60 55 300 295 09/29/97 10/01/2002 2,497,549 Balloon
70.98 120 118 240 238 12/24/97 01/01/2008 1,828,408 Balloon
71.23 120 111 276 267 05/27/97 06/01/2007 2,201,900 Balloon
71.47 240 238 240 238 12/18/97 01/01/2018 NAP Fully Amortizing
71.70 120 119 330 329 01/23/98 02/01/2008 2,247,057 Balloon
71.94 120 118 360 358 12/16/97 01/01/2008 2,259,351 Balloon
72.18 120 116 300 296 10/22/97 11/01/2007 2,129,290 Balloon
72.42 240 237 240 237 11/20/97 12/01/2017 NAP Fully Amortizing
72.66 240 237 240 237 11/14/97 12/01/2017 NAP Fully Amortizing
72.89 120 117 300 297 11/26/97 12/01/2007 2,083,161 Balloon
73.12 120 113 240 233 07/08/97 08/01/2007 1,818,786 HyperAm
73.35 120 118 360 358 12/11/97 01/01/2008 2,165,418 Balloon
73.58 120 115 360 355 09/18/97 10/01/2007 2,186,837 Balloon
73.81 120 118 360 358 12/08/97 01/01/2008 2,149,064 Balloon
74.03 240 231 240 231 05/19/97 06/01/2017 NAP Fully Amortizing
74.26 120 90 300 270 08/31/95 09/01/2005 2,084,388 Balloon
74.48 120 117 300 297 11/05/97 12/01/2007 1,932,469 Balloon
74.70 120 116 360 356 10/09/97 11/01/2007 2,088,189 Balloon
74.92 120 107 300 287 01/08/97 02/01/2007 1,980,020 Balloon
75.13 120 115 300 295 09/04/97 10/01/2007 1,912,720 Balloon
75.34 120 117 360 357 11/07/97 12/01/2007 2,036,305 Balloon
75.56 120 119 360 359 01/14/98 02/01/2008 2,033,370 Balloon
75.77 240 236 240 236 10/03/97 11/01/2017 NAP Fully Amortizing
75.98 120 117 300 297 11/19/97 12/01/2007 1,824,106 Balloon
76.18 120 119 300 299 01/12/98 02/01/2008 1,834,095 Balloon
76.39 120 118 360 358 12/09/97 01/01/2008 1,945,341 Balloon
76.59 120 116 324 320 10/03/97 11/01/2007 1,903,184 Balloon
76.80 120 116 360 356 10/21/97 11/01/2007 1,930,935 Balloon
77.00 240 237 240 237 11/14/97 12/01/2017 NAP Fully Amortizing
77.20 120 112 300 292 06/27/97 07/01/2007 1,806,766 Balloon
77.39 240 239 240 239 01/07/98 02/01/2018 NAP Fully Amortizing
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL UNDERWRITING UNDERWRITING
DEBT TOTAL TOTAL
PREPAYMENT RESTRICTIONS SERVICE REVENUE EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
L(60),> of YM or 1% (57),O(3) 337,454 1,125,319 669,134
L(26),DEF(88), O(6) 364,371 901,833 344,268
L(60),> of YM or 1% (57),O(3) 336,248 930,265 493,589
L(36),> of YM or 1% (81),O(3) 434,338 2,056,359 1,381,199
L(60),> of YM or 1% (54),O(6) 424,181 1,827,915 1,108,025
L(60),> of YM or 1% (57),O(3) 356,767 1,053,673 551,783
L(36),> of YM or 1% (78),O(6) 387,207 2,194,567 1,593,118
L(60),> of YM or 1% (57),O(3) 331,436 844,785 306,940
L(60),> of YM or 1% (57),O(3) 313,745 746,164 355,765
L(48),DEF(66), O(6) 380,304 1,917,543 1,376,902
L(60),> of YM or 1% (18),O(6) 357,635 1,251,450 826,102
L(60),> of YM or 1% (57),O(3) 320,411 1,116,194 648,294
L(36),> of YM or 1% (81),O(3) 399,405 1,460,528 917,857
L(30),DEF(84), O(6) 314,616 993,924 486,255
L(29),DEF(85), O(6) 359,213 1,800,638 1,300,567
L(60),> of YM or 1% (55),O(5) 297,455 1,019,029 626,182
L(60),> of YM or 1% (54),O(6) 344,372 803,666 192,264
L(120),> of YM or 1% (117),O(3) 362,013 2,872,530 2,280,513
L(24),DEF(234), O(6) 331,631 895,998 446,301
L(60),> of YM or 1% (57),O(3) 298,906 613,834 162,105
L(120), 4%(24),3%(48),2%(24),1%(24),O(60) 323,872 1,066,059 569,599
L(60),> of YM or 1% (57),O(3) 290,044 583,365 170,267
L(60),> of YM or 1% (57),O(3) 289,187 954,035 569,584
L(60),> of YM or 1% (57),O(3) 282,116 917,264 551,332
L(60),> of YM or 1% (57),O(3) 278,298 673,666 226,811
L(72),> of YM or 1% (69),O(3) 294,562 814,562 298,374
3%(36),1%(81),O(3) 281,290 526,935 104,814
L(24),> of YM or 1% (93),O(3) 290,029 832,178 429,197
L(26),DEF(88), O(6) 271,893 850,751 278,885
L(26),DEF(208), O(6) 315,718 806,738 357,889
L(36),> of YM or 1% (21),O(3) 310,761 983,974 483,680
L(60),> of YM or 1% (57),O(3) 264,468 734,288 377,234
L(48),> of YM or 1% (66),O(6) 286,792 1,101,992 676,544
L(120),> of YM or 1% (117),O(3) 318,605 2,708,387 2,266,394
L(96),> of YM or 1% (81),O(3) 253,902 1,341,835 990,674
L(60),> of YM or 1% (57),O(3) 259,639 712,126 385,666
> of YM or 1% (114),O(6) 252,750 670,750 361,960
L(60),> of YM or 1% (57),O(3) 239,891 1,118,923 773,273
L(60),> of YM or 1% (57),O(3) 245,174 630,921 337,923
> of YM or 1% (180),1%(117),O(3) 265,373 666,387 327,214
L(60),> of YM or 1% (57),O(3) 233,835 519,531 232,465
L(60),> of YM or 1% (57),O(3) 241,185 443,632 109,921
L(60),> of YM or 1% (57),O(3) 232,515 906,303 586,936
L(48),> of YM or 1% (66),O(6) 238,526 719,676 341,514
L(37),> of YM or 1% (77),O(6) 269,575 1,799,753 1,420,697
L(60),> of YM or 1% (57),O(3) 260,189 528,544 175,354
L(60),> of YM or 1% (57),O(3) 230,753 544,943 139,552
L(36),> of YM or 1% (81),O(3) 293,881 1,603,532 1,158,933
L(36),DEF(78), O(6) 247,712 514,362 154,407
L(36),> of YM or 1% (21),O(3) 251,573 503,292 164,719
L(60),> of YM or 1% (57),O(3) 261,728 610,267 215,390
L(33),DEF(81), O(6) 291,132 2,889,961 2,281,086
L(120),> of YM or 1% (117),O(3) 272,597 1,127,780 755,152
L(60),> of YM or 1% (54),O(6) 235,195 646,265 293,472
L(60),> of YM or 1% (57),O(3) 217,744 499,789 230,269
L(36),DEF(78), O(6) 236,483 385,258 62,537
L(120),> of YM or 1% (117),O(3) 269,186 1,212,729 795,473
L(120),> of YM or 1% (117),O(3) 267,952 1,009,951 603,234
L(24), < of YM or 5%(12), or 4%(12), or 3%(12), or 2%(24), or 1%(30),O(6) 230,127 824,359 462,750
L(36),> of YM or 1% (81),O(3) 276,593 1,650,667 1,260,020
L(60),> of YM or 1% (54),O(6) 206,359 462,609 198,558
L(60),> of YM or 1% (57),O(3) 215,546 753,447 467,134
L(84),> of YM or 1% (24),O(12) 205,119 980,045 690,231
L(120),> of YM or 1% (117),O(3) 278,269 1,161,429 684,924
YM (84),3%(12),2%(12),1%(6),O(6) 257,428 701,433 341,950
L(60),> of YM or 1% (57),O(3) 215,765 628,710 345,779
L(60),> of YM or 1% (57),O(3) 203,505 663,172 390,333
YM (84),3%(12),2%(12),1%(6),O(6) 239,228 698,079 366,041
L(60),> of YM or 1% (57),O(3) 223,475 519,397 162,326
L(60),> of YM or 1% (57),O(3) 197,066 573,875 322,546
L(60),> of YM or 1% (57),O(3) 198,906 654,184 321,455
L(120),> of YM or 1% (117),O(3) 244,785 1,035,053 672,893
L(60),> of YM or 1% (57),O(3) 206,849 555,104 164,315
L(36),DEF(78), O(6) 201,993 469,617 112,037
L(60),> of YM or 1% (57),O(3) 184,235 692,214 430,659
L(60),> of YM or 1% (57),O(3) 208,024 617,397 312,373
L(60),> of YM or 1% (57),O(3) 192,844 755,873 238,739
L(120),> of YM or 1% (117),O(3) 227,604 1,025,138 636,174
YM (84),3%(12),2%(12),1%(6),O(6) 218,296 957,201 573,516
L(237), O(3) 222,774 1,662,608 1,251,507
<CAPTION>
UNDERWRITING UNDERWRITING APPRAISED
PREPAYMENT RESTRICTIONS NCF DSCR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
L(60),> of YM or 1% (57),O(3) 456,185 1.35 5,100,000
L(26),DEF(88), O(6) 492,658 1.35 8,500,000
L(60),> of YM or 1% (57),O(3) 436,677 1.30 5,300,000
L(36),> of YM or 1% (81),O(3) 675,160 1.55 5,800,000
L(60),> of YM or 1% (54),O(6) 719,890 1.70 8,950,000
L(60),> of YM or 1% (57),O(3) 455,954 1.28 5,300,000
L(36),> of YM or 1% (78),O(6) 601,449 1.55 5,300,000
L(60),> of YM or 1% (57),O(3) 482,615 1.46 5,100,000
L(60),> of YM or 1% (57),O(3) 390,399 1.24 4,800,000
L(48),DEF(66), O(6) 540,641 1.42 7,025,000
L(60),> of YM or 1% (18),O(6) 425,348 1.19 5,100,000
L(60),> of YM or 1% (57),O(3) 467,900 1.46 4,800,000
L(36),> of YM or 1% (81),O(3) 542,671 1.36 5,400,000
L(30),DEF(84), O(6) 463,509 1.47 4,500,000
L(29),DEF(85), O(6) 500,071 1.39 5,200,000
L(60),> of YM or 1% (55),O(5) 392,847 1.32 4,550,000
L(60),> of YM or 1% (54),O(6) 559,459 1.62 5,600,000
L(120),> of YM or 1% (117),O(3) 592,017 1.64 5,700,000
L(24),DEF(234), O(6) 449,698 1.36 4,400,000
L(60),> of YM or 1% (57),O(3) 430,049 1.44 5,000,000
L(120), 4%(24),3%(48),2%(24),1%(24),O(60) 496,460 1.53 5,150,000
L(60),> of YM or 1% (57),O(3) 380,054 1.31 5,100,000
L(60),> of YM or 1% (57),O(3) 384,451 1.33 4,320,000
L(60),> of YM or 1% (57),O(3) 365,933 1.30 4,400,000
L(60),> of YM or 1% (57),O(3) 419,771 1.51 4,700,000
L(72),> of YM or 1% (69),O(3) 469,350 1.59 5,040,000
3%(36),1%(81),O(3) 391,601 1.39 4,300,000
L(24),> of YM or 1% (93),O(3) 362,508 1.25 4,700,000
L(26),DEF(88), O(6) 506,997 1.86 5,150,000
L(26),DEF(208), O(6) 387,505 1.23 4,600,000
L(36),> of YM or 1% (21),O(3) 455,964 1.47 4,470,000
L(60),> of YM or 1% (57),O(3) 357,054 1.35 4,000,000
L(48),> of YM or 1% (66),O(6) 425,448 1.48 4,500,000
L(120),> of YM or 1% (117),O(3) 441,992 1.39 4,600,000
L(96),> of YM or 1% (81),O(3) 351,161 1.38 4,300,000
L(60),> of YM or 1% (57),O(3) 326,460 1.26 3,780,000
> of YM or 1% (114),O(6) 308,790 1.22 3,750,000
L(60),> of YM or 1% (57),O(3) 345,650 1.44 3,650,000
L(60),> of YM or 1% (57),O(3) 292,999 1.20 3,750,000
> of YM or 1% (180),1%(117),O(3) 339,173 1.28 3,650,000
L(60),> of YM or 1% (57),O(3) 287,066 1.23 3,700,000
L(60),> of YM or 1% (57),O(3) 329,087 1.36 3,800,000
L(60),> of YM or 1% (57),O(3) 319,367 1.37 3,600,000
L(48),> of YM or 1% (66),O(6) 338,526 1.42 3,900,000
L(37),> of YM or 1% (77),O(6) 379,056 1.41 3,700,000
L(60),> of YM or 1% (57),O(3) 333,187 1.28 3,750,000
L(60),> of YM or 1% (57),O(3) 382,737 1.66 3,600,000
L(36),> of YM or 1% (81),O(3) 444,599 1.51 4,500,000
L(36),DEF(78), O(6) 321,636 1.30 4,000,000
L(36),> of YM or 1% (21),O(3) 317,978 1.26 3,750,000
L(60),> of YM or 1% (57),O(3) 368,823 1.41 4,215,000
L(33),DEF(81), O(6) 608,875 2.09 4,100,000
L(120),> of YM or 1% (117),O(3) 372,628 1.37 3,850,000
L(60),> of YM or 1% (54),O(6) 310,108 1.32 3,600,000
L(60),> of YM or 1% (57),O(3) 269,520 1.24 3,300,000
L(36),DEF(78), O(6) 313,428 1.33 3,600,000
L(120),> of YM or 1% (117),O(3) 417,255 1.55 3,900,000
L(120),> of YM or 1% (117),O(3) 406,718 1.52 3,700,000
L(24), < of YM or 5%(12), or 4%(12), or 3%(12), or 2%(24), or 1%(30),O(6) 361,609 1.57 3,400,000
L(36),> of YM or 1% (81),O(3) 390,647 1.41 4,500,000
L(60),> of YM or 1% (54),O(6) 264,051 1.28 3,150,000
L(60),> of YM or 1% (57),O(3) 286,313 1.33 3,250,000
L(84),> of YM or 1% (24),O(12) 289,814 1.41 3,110,000
L(120),> of YM or 1% (117),O(3) 476,505 1.71 3,900,000
YM (84),3%(12),2%(12),1%(6),O(6) 334,112 1.30 3,500,000
L(60),> of YM or 1% (57),O(3) 282,932 1.31 3,300,000
L(60),> of YM or 1% (57),O(3) 272,838 1.34 3,000,000
YM (84),3%(12),2%(12),1%(6),O(6) 306,708 1.28 3,390,000
L(60),> of YM or 1% (57),O(3) 342,574 1.53 3,600,000
L(60),> of YM or 1% (57),O(3) 251,328 1.28 3,070,000
L(60),> of YM or 1% (57),O(3) 253,839 1.28 3,500,000
L(120),> of YM or 1% (117),O(3) 362,160 1.48 3,950,000
L(60),> of YM or 1% (57),O(3) 364,884 1.76 3,230,000
L(36),DEF(78), O(6) 284,483 1.41 3,000,000
L(60),> of YM or 1% (57),O(3) 261,555 1.42 3,300,000
L(60),> of YM or 1% (57),O(3) 267,891 1.29 3,625,000
L(60),> of YM or 1% (57),O(3) 503,792 2.61 6,800,000
L(120),> of YM or 1% (117),O(3) 388,963 1.71 3,250,000
YM (84),3%(12),2%(12),1%(6),O(6) 304,837 1.40 2,850,000
L(237), O(3) 411,101 1.85 4,500,000
<CAPTION>
APPRAISAL CURRENT
PREPAYMENT RESTRICTIONS YEAR LTV
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
L(60),> of YM or 1% (57),O(3) 1997 79.85
L(26),DEF(88), O(6) 1997 47.18
L(60),> of YM or 1% (57),O(3) 1997 75.61
L(36),> of YM or 1% (81),O(3) 1997 68.57
L(60),> of YM or 1% (54),O(6) 1997 44.41
L(60),> of YM or 1% (57),O(3) 1997 74.24
L(36),> of YM or 1% (78),O(6) 1997 74.17
L(60),> of YM or 1% (57),O(3) 1997 74.82
L(60),> of YM or 1% (57),O(3) 1997 79.38
L(48),DEF(66), O(6) 1997 53.78
L(60),> of YM or 1% (18),O(6) 1997 73.76
L(60),> of YM or 1% (57),O(3) 1997 78.10
L(36),> of YM or 1% (81),O(3) 1997 69.33
L(30),DEF(84), O(6) 1997 82.65
L(29),DEF(85), O(6) 1997 69.12
L(60),> of YM or 1% (55),O(5) 1997 78.97
L(60),> of YM or 1% (54),O(6) 1997 63.91
L(120),> of YM or 1% (117),O(3) 1997 62.14
L(24),DEF(234), O(6) 1997 79.50
L(60),> of YM or 1% (57),O(3) 1997 68.88
L(120), 4%(24),3%(48),2%(24),1%(24),O(60) 1997 65.89
L(60),> of YM or 1% (57),O(3) 1997 66.47
L(60),> of YM or 1% (57),O(3) 1997 78.40
L(60),> of YM or 1% (57),O(3) 1997 76.62
L(60),> of YM or 1% (57),O(3) 1997 69.53
L(72),> of YM or 1% (69),O(3) 1997 64.32
3%(36),1%(81),O(3) 1997 75.33
L(24),> of YM or 1% (93),O(3) 1997 68.13
L(26),DEF(88), O(6) 1997 61.97
L(26),DEF(208), O(6) 1997 69.32
L(36),> of YM or 1% (21),O(3) 1997 70.73
L(60),> of YM or 1% (57),O(3) 1997 78.49
L(48),> of YM or 1% (66),O(6) 1997 68.77
L(120),> of YM or 1% (117),O(3) 1997 67.17
L(96),> of YM or 1% (81),O(3) 1997 69.60
L(60),> of YM or 1% (57),O(3) 1997 79.11
> of YM or 1% (114),O(6) 1997 78.06
L(60),> of YM or 1% (57),O(3) 1997 79.71
L(60),> of YM or 1% (57),O(3) 1997 77.08
> of YM or 1% (180),1%(117),O(3) 1997 79.11
L(60),> of YM or 1% (57),O(3) 1997 76.88
L(60),> of YM or 1% (57),O(3) 1997 74.75
L(60),> of YM or 1% (57),O(3) 1997 77.63
L(48),> of YM or 1% (66),O(6) 1997 70.40
L(37),> of YM or 1% (77),O(6) 1997 73.96
L(60),> of YM or 1% (57),O(3) 1997 72.80
L(60),> of YM or 1% (57),O(3) 1997 74.82
L(36),> of YM or 1% (81),O(3) 1997 59.80
L(36),DEF(78), O(6) 1997 67.21
L(36),> of YM or 1% (21),O(3) 1997 71.62
L(60),> of YM or 1% (57),O(3) 1997 62.86
L(33),DEF(81), O(6) 1997 64.54
L(120),> of YM or 1% (117),O(3) 1997 67.55
L(60),> of YM or 1% (54),O(6) 1997 72.13
L(60),> of YM or 1% (57),O(3) 1997 78.64
L(36),DEF(78), O(6) 1997 71.91
L(120),> of YM or 1% (117),O(3) 1997 66.32
L(120),> of YM or 1% (117),O(3) 1997 69.64
L(24), < of YM or 5%(12), or 4%(12), or 3%(12), or 2%(24), or 1%(30),O(6) 1997 74.75
L(36),> of YM or 1% (81),O(3) 1997 56.28
L(60),> of YM or 1% (54),O(6) 1997 79.21
L(60),> of YM or 1% (57),O(3) 1997 76.65
L(84),> of YM or 1% (24),O(12) 1997 79.59
L(120),> of YM or 1% (117),O(3) 1997 63.26
YM (84),3%(12),2%(12),1%(6),O(6) 1995 69.51
L(60),> of YM or 1% (57),O(3) 1997 72.76
L(60),> of YM or 1% (57),O(3) 1997 79.74
YM (84),3%(12),2%(12),1%(6),O(6) 1996 69.92
L(60),> of YM or 1% (57),O(3) 1997 64.95
L(60),> of YM or 1% (57),O(3) 1997 76.03
L(60),> of YM or 1% (57),O(3) 1997 66.49
L(120),> of YM or 1% (117),O(3) 1997 57.87
L(60),> of YM or 1% (57),O(3) 1997 69.72
L(36),DEF(78), O(6) 1997 74.88
L(60),> of YM or 1% (57),O(3) 1997 68.05
L(60),> of YM or 1% (57),O(3) 1997 61.83
L(60),> of YM or 1% (57),O(3) 1997 32.25
L(120),> of YM or 1% (117),O(3) 1997 67.34
YM (84),3%(12),2%(12),1%(6),O(6) 1997 76.27
L(237), O(3) 1997 47.90
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN PER
SQ FT, UNITS SQ FT, UNITS INITIAL
REPAYMENT YEAR BEDS, PADS BEDS, PADS OCCUPANCY RESERVES UNDERWRITING
LTV BUILT OR ROOM OR ROOM PERCENTAGE AT CLOSING RESERVES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
69.32 1985 228 units 17,861 per unit 95 31,563 218
38.68 1989 65,918 sq. ft. 61 per sq. ft. 100 938 0.17
65.83 1982 192 units 20,872 per unit 86 -- 200
49.24 1985 121 rooms 32,867 per room NAP 48,744 4%
31.51 1984 61 rooms 65,164 per room NAP 3,000 6%
65.84 1979 48,128 sq.ft. 82 per sq. ft. 100 24,813 0.15
57.80 1972 176 rooms 22,334 per room NAP -- 4%
65.68 1980 93,397 sq.ft. 41 per sq. ft. 96 41,413 0.25
68.88 1984 96 units 39,688 per unit 95 55,680 308
42.24 1984 113 rooms 33,431 per room NAP 6,701 4%
67.49 1963 239 units 15,740 per unit 97 81,395 250
64.89 1963 192 units 19,525 per unit 96 183,735 268
49.54 1996 91 rooms 41,343 per room NAP -- 4%
73.38 1977 160 units 23,244 per unit 96 30,055 276
55.41 1978 95 rooms 37,836 per room NAP 292,171 4%
68.55 1967 146 units 24,610 per unit 91 17,175 250
53.54 1978 153,563 sq. ft. 23 per sq. ft. 98 38,696 0.24
NAP 1970 150 rooms 23,615 per room NAP 101,250 4%
NAP 1972 172 units 20,337 per unit 98 66,813 311
60.41 1990 32,205 sq.ft. 107 per sq. ft. 100 -- 0.26
NAP 1980 107,576 sq. ft. 32 per sq. ft. 65 -- 0.15
59.13 1989 56,675 sq. ft. 60 per sq. ft. 90 -- 0.15
68.64 1983 167 units 20,280 per unit 95 43,875 250
66.72 1982 208 units 16,209 per unit 88 15,631 225
60.76 1976 58,899 sq.ft. 55 per sq. ft. 86 -- 0.15
47.96 1997 45,890 sq.ft. 71 per sq. ft. 100 -- 0.17
67.41 1986 83,028 sq. ft. 39 per sq. ft. 97 6,750 0.14
57.51 1984 63,079 sq.ft. 51 per sq. ft. 95 -- 0.18
49.72 1955 44,483 sq. ft. 72 per sq. ft. 98 100,756 0.15
NAP 1973 79,684 sq. ft. 40 per sq. ft. 91 6,375 0.15
66.47 1957 198 units 15,968 per unit 94 -- 250
68.47 1979 112 units 28,031 per unit 96 -- 250
53.41 1985 85 rooms 36,406 per room NAP 263 4%
NAP 1974 101 rooms 30,593 per room NAP -- 4%
52.96 1983 298 units 10,042 per unit 95 44,500 267
66.02 1972 124 units 24,117 per unit 96 224,762 267
68.54 1974 108 units 27,105 per unit 98 265,000 200
69.13 1978 248 units 11,731 per unit 96 -- 250
67.34 1985 88 units 32,846 per unit 95 -- 250
NAP 1975 72 units 40,103 per unit 100 70,464 200
66.63 1975 200 pads 14,223 per pad 100 3,125 50
65.32 1996 36,941 sq.ft. 77 per sq. ft. 100 -- 0.15
67.46 1985 216 units 12,938 per unit 94 42,250 225
56.81 1965 108 units 25,423 per unit 96 32,303 367
57.64 1980 144 rooms 19,004 per room NAP 203,874 4%
59.77 1978 71,452 sq.ft. 38 per sq. ft. 86 -- 0.15
65.49 1986 39,987 sq.ft. 67 per sq. ft. 96 25,625 0.19
42.94 1987 113 rooms 23,813 per room NAP -- 4%
55.44 1890 47,908 sq. ft. 56 per sq. ft. 92 56,602 0.20
66.60 1994 22,932 sq.ft. 117 per sq. ft. 86 -- 0.15
43.38 1977 113,600 sq.ft. 23 per sq. ft. 100 -- 0.15
53.70 1967 148 rooms 17,879 per room NAP 26,344 4%
NAP 1994 75 rooms 34,674 per room NAP -- 4%
62.42 1989 33,890 sq. ft. 77 per sq. ft. 91 14,557 0.55
68.47 1987 79 units 32,850 per unit 100 15,000 250
59.15 1930 5,746 sq. ft. 451 per sq. ft. 100 2,595 0.20
NAP 1996 70 rooms 36,951 per room NAP -- 4%
NAP 1995 77 rooms 33,463 per room NAP -- 4%
61.27 1987 73 rooms 34,815 per room NAP 14,503 5%
40.42 1985 115 rooms 22,023 per room NAP -- 4%
68.74 1990 56 units 44,558 per unit 89 15,531 250
67.29 1967 124 units 20,090 per unit 95 38,180 200
69.10 1971 185 units 13,380 per unit 95 112,000 326
NAP 1994 61 rooms 40,628 per room NAP -- 5%
59.55 1964 125 units 19,464 per unit 94 17,250 203
58.56 1968 96 units 25,013 per unit 99 13,500 250
69.61 1971 135 units 17,719 per unit 91 39,813 324
58.41 1973 138 units 17,176 per unit 98 58,152 204
53.13 1989 36,341 sq.ft. 64 per sq. ft. 95 -- 0.22
66.33 1985 86 units 27,142 per unit 84 -- 250
58.10 1990 53,680 sq.ft. 43 per sq. ft. 100 15,875 0.15
NAP 1962 57 rooms 40,100 per room NAP -- 4%
56.47 1960 68,620 sq.ft. 33 per sq. ft. 99 16,875 0.48
61.14 1980 104,819 sq. ft. 21 per sq. ft. 76 33,749 0.27
58.95 1978 128 units 17,544 per unit 93 -- 250
52.50 1971 76,954 sq.ft. 29 per sq. ft. 91 -- 0.18
28.40 1990 17,573 sq.ft. 125 per sq. ft. 100 -- 0.15
NAP 1987 80 rooms 27,358 per room NAP 25,000 4%
63.40 1961 224 units 9,704 per unit 96 275,825 352
NAP 1975 118 rooms 18,265 per room NAP -- 4%
<CAPTION>
LARGEST RETAIL TENANT
----------------------------------------------------------------------------
REPAYMENT RESERVES AREA LEASED LEASE CONTROL
LTV COLLECTED NAME (SQ. FT.) EXP DATE NO.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
69.32 218 per unit 170
38.68 0.17 per sq. ft. The Analytic Sciences Corp. 24,352 12/31/1998 510
65.83 250 per unit 226
49.24 4% of revenue 128
31.51 6% of revenue 127
65.84 per sq.ft. ABC-6 15,626 12/31/2001 135
57.80 4% of revenue 319
65.68 per sq.ft. WLN 20,921 04/30/2004 228
68.88 308 per unit 242
42.24 4% of revenue 310
67.49 250 per unit 216
64.89 268 per unit 212
49.54 4% of revenue 177
73.38 276 per unit 307
55.41 4% of revenue 312
68.55 250 per unit 168
53.54 0.24 per sq. ft. K-Mart Corporation 87,543 11/30/2004 315
NAP 4% of revenue 181
NAP 311 per unit 125
60.41 per sq.ft. Robert Wood Hospital 3,430 03/31/2002 210
NAP per sq.ft. 109
59.13 per sq. ft. Revco 10,000 10/31/2003 199
68.64 250 per unit 154
66.72 225 per unit 238
60.76 per sq.ft. The Oakwood School 6,769 07/31/2000 219
47.96 per sq.ft. Kent Country Health 12,813 04/30/2007 243
67.41 per sq. ft. Kroger 45,528 03/09/2011 161
57.51 per sq.ft. Engineering Science 21,384 01/14/2001 108
49.72 0.15 per sq. ft. Great Western Bank 6,458 12/31/1998 511
NAP 0.15 per sq. ft. HISD 5,691 03/14/2000 331
66.47 250 per unit 116
68.47 250 per unit 122
53.41 4% of revenue 534
NAP 4% of revenue 233
52.96 267 per unit 112
66.02 267 per unit 151
68.54 200 per unit 131
69.13 250 per unit 217
67.34 250 per unit 193
NAP 200 per unit 260
66.63 50 per pad 123
65.32 per sq.ft. Sparta 30,441 01/31/2004 205
67.46 225 per unit 241
56.81 367 per unit 519
57.64 4% of revenue 330
59.77 per sq.ft. Comtec Computer 12,500 04/30/2000 100
65.49 per sq.ft. Get Fit 9,303 10/31/1998 152
42.94 4% of revenue 209
55.44 0.24 per sq. ft. Heritage Hardware 4,100 09/30/1999 320
66.60 per sq.ft. Fidelity National Title 9,540 10/22/1999 202
43.38 per sq.ft. Advanced Design & Manufact 15,000 06/30/2001 220
53.70 4% of revenue 301
NAP 4% of revenue 184
62.42 0.15 per sq. ft. Sarvis Company 16,356 11/30/2012 539
68.47 250 per unit 172
59.15 0.20 per sq. ft. Belle Maison 1,336 03/31/2000 322
NAP 4% of revenue 182
NAP 4% of revenue 144
61.27 3% of revenue 327
40.42 4% of revenue 110
68.74 250 per unit 149
67.29 200 per unit 240
69.10 326 per unit 211
NAP 5% of revenue 178
59.55 per unit 502
58.56 250 per unit 171
69.61 324 per unit 255
58.41 204 per unit 432
53.13 per sq.ft. Triple R Day Care 7,000 05/31/2012 134
66.33 250 per unit 239
58.10 per sq.ft. UCRS 17,982 01/31/2000 188
NAP 4% of revenue 190
56.47 per sq.ft. Applewood Market 19,300 05/31/2006 111
61.14 0.24 per sq. ft. Bruno's Food World 34,019 09/30/2007 536
58.95 250 per unit 130
52.50 per sq.ft. All Seasons 12,000 12/31/2000 254
28.40 per sq.ft. Astro Parking 11,110 03/01/2010 234
NAP 4% of revenue 143
63.40 352 per unit 448
NAP 4% of revenue 119
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN CONTROL
SOURCE NO. PROPERTY NAME ADDRESS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MLMC 245 Vallejo Ramada Inn 1000 Admiral Callaghan Lane
DAIWA 521 Claridge Manor Apartments 72 - 92 Colonel Bell Drive
DAIWA 338 The Village Mall Shopping Center 4907 West 10th Street
MLMC 133 Chambers Cove Apartments 201- 272 Chambers Cove Drive
MLMC 124 Butler Pike Office Building 4070 Butler Pike
MLMC 104 380/400 Woodview Avenue 380/400 Woodview Avenue
DAIWA 500 1011 Sheridan Avenue 1011 Sheridan Avenue
MLMC 145 Comfort Inn Ruston 1801 N Service Road
MLMC 163 Econo Lodge 962 Riverview Road
DAIWA 300 Spring Branch Estates Apartments 7901 Ameilia Road
DAIWA 475 Rampart Gardens Apartments 6300 Rampart
DAIWA 516 Wellington Apartments 818 Forest Drive & 812 Woods Drive
MLMC 229 Salem Manor 124 York Street
MLMC 146 Comfort Suites - Stafford 4820 Techniplex Drive
MLMC 103 3000/3100 Carlisle Buildings 3000/3100 Carlisle
MLMC 175 Goff Building 321 West Main Street
MLMC 206 Metric Place 1921 Cedar Bend Drive
MLMC 174 Garfield Villas & Hillcrest Apts. 5150-5220 East 88th Street
MLMC 236 South Oak & Taylor Oak Apts. 165 S. Oak Park & 415 South Taylor
MLMC 164 Edgemont Plaza 3071-3167 Provo Canyon Rd/3060 North St.
MLMC 230 Savannah Heights Apartments 2600 Arroyo Avenue
MLMC 214 Office Max 7610 S Kentucky
MLMC 250 Village Green Apartments III/IV W180 N8526 Town Hall Rd
DAIWA 323 Wellesley Marketplace 239-251 Washington Street
MLMC 218 Parkway Plaza Shopping Center 3115 Parker Road & Independence Parkway
MLMC 158 Days Inn - Southeast 1850 Embassy Square Blvd.
DAIWA 447 Mansard Place Apartments 6156 S. Loop East
MLMC 136 Chateau De Vie Apartments 1521 Reagan Hill
MLMC 186 Holiday Inn Express - Edinburg 1806 S. Closner Blvd
MLMC 183 Holiday Inn Express - Brentwood 8820 Brentwood Blvd.
MLMC 155 Days Inn 914 Riverview Road
MLMC 157 Days Inn - Alice 555 N. Johnson
MLMC 141 Comfort Inn - Greenwood 1215 E. Highway 72 Bypass
MLMC 185 Holiday Inn Express - Columbia 1554 Bear Creek Pike
MLMC 118 Best Western - Pearl 257 S. Pearson Road
DAIWA 397 Foresight Village Apartments - Phase I 610 & 616 25 1/2 Road
DAIWA 520 Folcroft Apartments 1503-1505, 1511, 1513, 1528 Elmwood & 1528 Baltimore
MLMC 224 Ridge Landing Apartments 919 Corder Road
DAIWA 302 Stoney Fields Estates 1059 Ocean Heights Avenue
MLMC 197 Lancaster East Shopping Center East Lancaster & Edgewood
DAIWA 537 Ramada Inn - Katy 22025 IH-10 West
DAIWA 431 Pine Hill Apartments 367 Fletchwood Road
MLMC 192 KAR Printing Building 13930 NW 60th Avenue
MLMC 225 Ridglea West Shopping Center 6550 Camp Bowie Blvd.
MLMC 187 Holiday Inn Express - Goose Creek 103 Redbank Road
DAIWA 522 Oakwood Apartments 1104 140th Street East
DAIWA 499 Tahiti Village Apartments 883 Buena Vista Avenue
DAIWA 533 Comfort Inn - Ormond Beach 507 South Atlantic Avenue
DAIWA 317 Carmel Apartments 2010 Carmel Drive
MLMC 153 Creekwood Apartments 710 North 46th Street
DAIWA 414 1479 Macombs Road 1479 Macombs Road
MLMC 142 Comfort Inn - Indiana 3801 N. Frontage Road
DAIWA 442 Lake Forest Apartments 2320 N. Vermilion St.
MLMC 156 Days Inn-Fresno 4061 N. Blackstone Avenue
DAIWA 359 Hampstead Oaks Apartments 200 Hampstead Avenue
DAIWA 321 Cedar Professional Building 204 Worcester Road
DAIWA 467 Seligson Portfolio - 698 West Avenue 698 West Avenue
MLMC 257 Williamstown Apartments 3242 Norwalk Avenue
DAIWA 366 1020 & 1030 Boynton Avenue 1020 & 1030 Boynton Avenue
MLMC 232 Shamrock East Apartments 736 East Foster Avenue
MLMC 167 Farnham Park Office Building 7887 San Felipe
DAIWA 348 Albany Avenue 601 Albany Avenue
MLMC 201 Madison Parke Apartments 10501 Steppington Drive
MLMC 244 Tanglewod Apartments 11185 Magnolia Avenue
MLMC 140 Comfort Inn - Dallas 8901 East R L Thornton Freeway
MLMC 129 Cedar Apartments 424-534 37th Street SE
MLMC 117 Best Western-LaPorte 705 Hwy I-45 South
DAIWA 345 Golden Arms Apartments 1400 Utah Street
DAIWA 401 Pinon Terrace Apartments 8409 Comanche Road
MLMC 121 Briarbend Apartments 349 Briarbend
DAIWA 368 Pine Valley Estates Apartments 415 West Redd Road
DAIWA 384 Darling Street Apartments 3, 5 & 11 Darling Street
DAIWA 540A New Haven Apartments 4021 Hessmer Avenue
DAIWA 540B Westchester Apartments 4217 Hessmer Avenue
DAIWA 540C Willowdale Apartments 3212 Roberta Street
<CAPTION>
LOAN ZIP ORIGINAL CURRENT % OF INITIAL
SOURCE CITY STATE CODE PROPERTY TYPE BALANCE BALANCE POOL BALANCE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MLMC Vallejo CA 94591 Hospitality 2,170,000 2,146,767 0.20
DAIWA Brockton MA 02401 Multifamily 2,150,000 2,146,653 0.20
DAIWA Great Bend KS 67530 Retail 2,150,000 2,145,621 0.20
MLMC Macon GA 31206 Multifamily 2,160,000 2,145,274 0.20
MLMC Plymouth PA 19444 Office 2,100,000 2,096,076 0.19
MLMC Morgan Hill CA 95037 Industrial 2,100,000 2,096,002 0.19
DAIWA Bronx NY 10456 Multifamily 2,100,000 2,095,478 0.19
MLMC Ruston LA 71270 Hospitality 2,100,000 2,089,145 0.19
MLMC Rock Hill SC 29730 Hospitality 2,100,000 2,087,047 0.19
DAIWA Houston TX 77055 Multifamily 2,062,500 2,048,229 0.19
DAIWA Houston TX 77081 Multifamily 2,050,000 2,040,944 0.19
DAIWA Newport News VA 23605 Multifamily 1,996,000 1,991,651 0.18
MLMC Salem NJ 08079 Multifamily 2,000,000 1,990,346 0.18
MLMC Stafford TX 77477 Hospitality 2,000,000 1,990,058 0.18
MLMC Dallas TX 75204 Office 2,000,000 1,989,223 0.18
MLMC Clarksburg WV 26301 Office 1,980,000 1,970,007 0.18
MLMC Austin TX 78758 Retail 1,940,000 1,930,968 0.18
MLMC Garfield Heights OH 44125 Multifamily 1,920,000 1,914,568 0.18
MLMC Oak Park IL 60302 Multifamily 1,900,000 1,896,397 0.17
MLMC Provo UT 84604 Retail 1,850,000 1,844,325 0.17
MLMC Dallas TX 75219 Multifamily 1,840,000 1,832,842 0.17
MLMC Oklahoma City OK 73159 Retail 1,800,000 1,796,625 0.17
MLMC Menomonee WI 53051 Multifamily 1,800,000 1,796,568 0.17
DAIWA Wellesley MA 02181 Retail 1,800,000 1,792,099 0.16
MLMC Plano TX 75023 Retail 1,800,000 1,790,669 0.16
MLMC Forest Hills KY 40299 Hospitality 1,800,000 1,789,084 0.16
DAIWA Houston TX 77087 Multifamily 1,800,000 1,786,541 0.16
MLMC Austin TX 78752 Multifamily 1,790,000 1,782,058 0.16
MLMC Edinburg TX 78539 Hospitality 1,770,000 1,760,938 0.16
MLMC Brentwood CA 94513 Hospitality 1,750,000 1,741,165 0.16
MLMC Rock Hill SC 29730 Hospitality 1,750,000 1,739,206 0.16
MLMC Alice TX 78332 Hospitality 1,700,000 1,694,592 0.16
MLMC Greenwood SC 29649 Hospitality 1,700,000 1,692,326 0.16
MLMC Columbia TN 38401 Hospitality 1,700,000 1,691,818 0.16
MLMC Pearl MS 39208 Hospitality 1,700,000 1,691,213 0.16
DAIWA Grand Junction CO 81505 Multifamily 1,700,000 1,680,867 0.15
DAIWA Folcroft PA 19032 Multifamily 1,650,000 1,647,555 0.15
MLMC Warner Robbins GA 31088 Multifamily 1,628,000 1,616,894 0.15
DAIWA Egg Harbor Township NJ 08234 Mobile Home Park 1,610,000 1,599,660 0.15
MLMC Fort Worth TX 76112 Retail 1,600,000 1,594,668 0.15
DAIWA Katy TX 77450 Hospitality 1,600,000 1,594,600 0.15
DAIWA Elkton MD 21921 Multifamily 1,600,000 1,583,206 0.15
MLMC Miami Lakes FL 33014 Industrial 1,575,000 1,572,489 0.14
MLMC Fort Worth TX 76116 Retail 1,560,000 1,555,030 0.14
MLMC Goose Creek SC 29445 Hospitality 1,550,000 1,542,498 0.14
DAIWA Tampa FL 33613 Multifamily 1,500,000 1,497,712 0.14
DAIWA Pomona CA 91766 Multifamily 1,500,000 1,496,770 0.14
DAIWA Ormond Beach FL 32176 Hospitality 1,500,000 1,496,713 0.14
DAIWA Colorado Springs CO 80910 Multifamily 1,500,000 1,495,556 0.14
MLMC Killeen TX 76543 Multifamily 1,500,000 1,491,462 0.14
DAIWA Bronx NY 10452 Multifamily 1,500,000 1,490,902 0.14
MLMC Michigan City IN 46360 Hospitality 1,500,000 1,490,197 0.14
DAIWA Danville IL 61832 Multifamily 1,500,000 1,487,842 0.14
MLMC Fresno CA 93726 Hospitality 1,480,000 1,472,579 0.14
DAIWA Savannah GA 31405 Multifamily 1,495,000 1,470,407 0.14
DAIWA Wellesley MA 02181 Office 1,465,000 1,458,570 0.13
DAIWA Norwalk CT 06850 Office 1,450,000 1,444,195 0.13
MLMC Dallas TX 75220-4877 Multifamily 1,450,000 1,442,996 0.13
DAIWA Bronx NY 10472 Multifamily 1,500,000 1,433,583 0.13
MLMC State College PA 16801 Multifamily 1,430,000 1,425,417 0.13
MLMC Houston TX 77063 Office 1,420,000 1,413,680 0.13
DAIWA Brooklyn NY 11203 Multifamily 1,470,000 1,398,810 0.13
MLMC Dallas TX 75230 Multifamily 1,400,000 1,397,502 0.13
MLMC Riverside CA 92505 Multifamily 1,400,000 1,397,285 0.13
MLMC Dallas TX 75228 Hospitality 1,400,000 1,391,531 0.13
MLMC Auburn WA 98002 Multifamily 1,380,000 1,376,411 0.13
MLMC La Porte TX 77571 Hospitality 1,350,000 1,341,075 0.12
DAIWA Golden CO 80401 Multifamily 1,360,000 1,332,587 0.12
DAIWA Alberquerque NM 87111 Multifamily 1,308,000 1,298,380 0.12
MLMC New Braunfels TX 78130 Multifamily 1,300,000 1,296,969 0.12
DAIWA El Paso TX 79932 Multifamily 1,400,000 1,285,305 0.12
DAIWA Roxbury MA 02120 Multifamily 1,280,000 1,268,746 0.12
DAIWA Metairie LA 70002 Multifamily 540,643 525,388
DAIWA Metairie LA 70002 Multifamily 513,611 499,118
DAIWA Metairie LA 70002 Multifamily 245,747 238,813
---------------------------------------------------
1,300,000 1,263,319 0.12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE % OF
INITIAL POOL BORROWER INTEREST ACCRUAL MORTGAGE ADMINISTRATIVE
BALANCE AFFILIATED CROSSED METHOD RATE COST RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
77.59 Cntrl #'s 110, 128, 209 30/360 9.01 0.099
77.79 Actual/360 7.50 0.099
77.99 Actual/360 7.80 0.099
78.18 Cntrl # 224 Actual/360 7.83 0.099
78.38 Actual/360 7.40 0.099
78.57 Actual/360 7.26 0.099
78.76 30/360 7.88 0.099
78.95 Cntrl #'s 118, 143, 144 Actual/360 8.29 0.099
79.14 Cntrl # 155 Actual/360 9.31 0.099
79.33 Actual/360 8.71 0.164
79.52 Actual/360 7.75 0.099
79.70 Actual/360 8.50 0.099
79.89 Actual/360 7.58 0.099
80.07 30/360 8.25 0.129
80.25 30/360 7.93 0.099
80.43 30/360 8.87 0.099
80.61 30/360 8.83 0.099
80.79 Actual/360 7.78 0.249
80.96 Cntrl # 168 Actual/360 7.29 0.099
81.13 Actual/360 7.32 0.099
81.30 Actual/360 7.54 0.099
81.46 Actual/360 7.38 0.099
81.63 Actual/360 7.25 0.099
81.79 Cntrl #'s 320,321, 322 Actual/360 7.79 0.164
81.96 30/360 8.17 0.099
82.12 30/360 8.99 0.099
82.29 Cntrl # 448 30/360 8.88 0.099
82.45 30/360 7.73 0.099
82.61 Actual/360 8.38 0.099
82.77 Actual/360 8.50 0.099
82.93 Cntrl # 163 Actual/360 9.31 0.099
83.09 30/360 8.55 0.129
83.24 30/360 9.02 0.099
83.40 30/360 8.51 0.099
83.55 Cntrl #'s 143, 144, 145 Actual/360 8.29 0.099
83.71 Actual/360 9.05 0.099
83.86 Actual/360 8.13 0.099
84.01 Cntrl # 133 Actual/360 7.83 0.099
84.16 Actual/360 9.09 0.164
84.30 30/360 7.70 0.099
84.45 Actual/360 7.80 0.099
84.59 30/360 9.38 0.099
84.74 Actual/360 7.79 0.099
84.88 30/360 7.98 0.099
85.02 Actual/360 8.88 0.099
85.16 Actual/360 7.75 0.099
85.30 Cntrl #'s 518,526, 527, 528, 529, 530, 531 30/360 7.88 0.099
85.44 Actual/360 7.69 0.099
85.57 Cntrl #'s 307, 308, 316 Actual/360 7.55 0.099
85.71 Actual/360 7.43 0.099
85.85 Actual/360 9.38 0.099
85.98 Actual/360 8.80 0.099
86.12 30/360 9.13 0.099
86.26 Actual/360 8.56 0.129
86.39 30/360 9.25 0.099
86.52 Cntrl #'s 320, 322, 323 Actual/360 7.79 0.164
86.66 Cntrl #'s 466, 468 yes Actual/360 8.01 0.099
86.79 Actual/360 7.58 0.099
86.92 Cntrl # 365 30/360 9.75 0.099
87.05 Actual/360 7.66 0.129
87.18 Actual/360 8.16 0.099
87.31 30/360 9.63 0.099
87.44 Cntrl # 203 Actual/360 7.75 0.129
87.57 Actual/360 7.13 0.099
87.70 30/360 9.01 0.099
87.82 Actual/360 7.17 0.129
87.95 Actual/360 8.69 0.099
88.07 30/360 8.88 0.099
88.19 Actual/360 9.52 0.099
88.31 30/360 7.30 0.099
88.42 30/360 8.50 0.039
88.54 Cntrl #'s 438, 440 30/360 9.25 0.099
Cntrl #'s 540B,540C
Cntrl #'s 540A,540C
Cntrl #'s 540A,540B
- ------------------------------------------------------------------------------------------------------------------------------------
88.66 30/360 8.88 0.099
<CAPTION>
REM
CUMULATIVE % OF ORIG REM AMORT AMORT
INITIAL POOL TERM TERM TERM TERM ORIGINATION REPAYMENT BALLOON/REPAYMENT
BALANCE (MOS.) (MOS.) (MOS.) (MOS.) DATE DATE BALANCE MATURITY TERM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
77.59 120 113 240 233 07/08/97 08/01/2007 1,541,705 HyperAm
77.79 120 119 300 299 01/09/98 02/01/2008 1,745,316 Balloon
77.99 120 118 324 322 12/30/97 01/01/2008 1,830,971 Balloon
78.18 120 114 300 294 08/29/97 09/01/2007 1,746,619 Balloon
78.38 120 118 360 358 12/03/97 01/01/2008 1,825,869 HyperAm
78.57 84 82 360 358 12/30/97 01/01/2005 1,927,269 HyperAm
78.76 120 118 300 298 12/18/97 01/01/2008 1,690,615 Balloon
78.95 240 237 240 237 11/14/97 12/01/2017 NAP Fully Amortizing
79.14 240 236 240 236 10/03/97 11/01/2017 NAP Fully Amortizing
79.33 83 75 300 292 06/05/97 06/05/2004 1,864,749 Balloon
79.52 120 116 300 296 10/31/97 11/01/2007 1,676,901 Balloon
79.70 120 118 300 298 12/31/97 01/01/2008 1,667,835 Balloon
79.89 120 116 300 296 10/10/97 11/01/2007 1,606,769 Balloon
80.07 120 117 240 237 11/19/97 12/01/2007 1,389,397 HyperAm
80.25 120 115 300 295 09/17/97 10/01/2007 1,617,041 Balloon
80.43 180 174 312 306 07/07/97 08/01/2012 1,380,691 Balloon
80.61 120 115 300 295 09/12/97 10/01/2007 1,603,094 Balloon
80.79 120 116 360 356 10/02/97 11/01/2007 1,709,813 Balloon
80.96 120 118 360 358 12/05/97 01/01/2008 1,647,941 Balloon
81.13 120 117 330 327 11/25/97 12/01/2007 1,548,916 Balloon
81.30 120 115 360 355 09/30/97 10/01/2007 1,605,052 Balloon
81.46 120 118 360 358 12/24/97 01/01/2008 1,564,166 HyperAm
81.63 180 178 360 358 12/02/97 01/01/2013 1,354,481 Balloon
81.79 120 116 300 296 10/22/97 11/01/2007 1,474,125 Balloon
81.96 84 79 300 295 09/30/97 10/01/2004 1,595,508 Balloon
82.12 240 236 240 236 10/20/97 11/01/2017 NAP Fully Amortizing
82.29 120 112 300 292 06/27/97 07/01/2007 1,485,012 Balloon
82.45 84 80 300 296 10/10/97 11/01/2004 1,575,123 Balloon
82.61 240 237 240 237 11/26/97 12/01/2017 NAP Fully Amortizing
82.77 240 237 240 237 11/26/97 12/01/2017 NAP Fully Amortizing
82.93 240 236 240 236 10/03/97 11/01/2017 NAP Fully Amortizing
83.09 240 238 240 238 12/31/97 01/01/2018 NAP Fully Amortizing
83.24 240 237 240 237 11/06/97 12/01/2017 NAP Fully Amortizing
83.40 240 237 240 237 11/07/97 12/01/2017 NAP Fully Amortizing
83.55 240 237 240 237 11/14/97 12/01/2017 NAP Fully Amortizing
83.71 120 107 300 287 01/17/97 02/01/2007 1,441,202 Balloon
83.86 120 119 300 299 01/12/98 02/01/2008 1,364,009 Balloon
84.01 120 114 300 294 08/29/97 09/01/2007 1,316,221 Balloon
84.16 120 112 300 292 06/06/97 07/01/2007 1,367,804 Balloon
84.30 120 117 300 297 11/26/97 12/01/2007 1,286,027 Balloon
84.45 180 179 183 179 01/15/98 02/01/2013 NAP Fully Amortizing
84.59 60 48 300 288 02/12/97 03/01/2002 1,497,902 Balloon
84.74 300 299 300 299 01/08/98 02/01/2023 NAP Fully Amortizing
84.88 120 117 300 297 11/04/97 12/01/2007 1,262,888 Balloon
85.02 240 237 240 237 11/25/97 12/01/2017 NAP Fully Amortizing
85.16 120 119 300 299 01/09/98 02/01/2008 1,226,687 Balloon
85.30 120 118 300 298 12/16/97 01/01/2008 1,207,582 Balloon
85.44 120 119 240 239 01/15/98 02/01/2008 1,045,754 Balloon
85.57 120 116 360 356 10/16/97 11/01/2007 1,326,426 Balloon
85.71 240 237 240 237 11/26/97 12/01/2017 NAP Fully Amortizing
85.85 120 112 300 292 06/09/97 07/01/2007 1,283,901 Balloon
85.98 240 236 240 236 10/01/97 11/01/2017 NAP Fully Amortizing
86.12 120 111 300 291 05/23/97 06/01/2007 1,244,631 Balloon
86.26 240 237 240 237 11/21/97 12/01/2017 NAP Fully Amortizing
86.39 84 66 300 282 08/15/96 09/01/2003 1,344,675 Balloon
86.52 120 116 300 296 10/22/97 11/01/2007 1,199,773 Balloon
86.66 120 115 330 325 10/01/97 10/01/2007 1,252,432 Balloon
86.79 120 116 300 296 10/01/97 11/01/2007 1,164,677 Balloon
86.92 240 211 240 211 09/29/95 10/01/2015 NAP Fully Amortizing
87.05 120 116 360 356 10/27/97 11/01/2007 1,250,363 Balloon
87.18 120 116 300 296 10/01/97 11/01/2007 1,157,832 Balloon
87.31 240 209 240 209 07/07/95 08/01/2015 NAP Fully Amortizing
87.44 120 118 360 358 12/12/97 01/01/2008 1,226,464 Balloon
87.57 120 118 360 358 12/29/97 01/01/2008 1,209,742 Balloon
87.70 240 236 240 236 10/07/97 11/01/2017 NAP Fully Amortizing
87.82 120 117 360 357 11/26/97 12/01/2007 1,193,925 Balloon
87.95 240 236 240 236 10/21/97 11/01/2017 NAP Fully Amortizing
88.07 120 88 360 328 06/24/95 07/01/2005 1,213,496 Balloon
88.19 120 110 300 291 04/09/97 05/01/2007 1,123,828 Balloon
88.31 120 117 360 357 11/12/97 12/01/2007 1,125,375 Balloon
88.42 180 153 180 153 11/22/95 12/01/2010 NAP Fully Amortizing
88.54 120 104 360 344 09/30/96 11/01/2006 1,149,756 Balloon
- ------------------------------------------------------------------------------------------------------------------------------------
88.66 120 92 300 272 10/11/95 11/01/2005 1,072,509 Balloon
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL UNDERWRITING UNDERWRITING
DEBT TOTAL TOTAL
PREPAYMENT RESTRICTIONS SERVICE REVENUE EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
L(36),> of YM or 1% (81),O(3) 234,456 1,621,179 1,324,119
L(48),> of YM or 1% (66),O(6) 190,660 455,088 157,664
L(26),DEF(94), 191,123 436,818 147,464
L(60),> of YM or 1% (57),O(3) 199,072 410,369 164,160
L(60),> of YM or 1% (54),O(6) 176,308 347,146 93,183
L(36),> of YM or 1% (42),O(6) 173,864 309,260 51,848
L(48),> of YM or 1% (66),O(6) 192,416 667,968 340,926
L(120),> of YM or 1% (117),O(3) 217,258 829,578 489,810
L(120),> of YM or 1% (117),O(3) 233,962 937,078 615,411
L(32),DEF(45), O(6) 202,808 688,111 400,612
L(48),> of YM or 1% (66),O(6) 185,811 738,520 441,309
L(48),> of YM or 1% (66),O(6) 192,868 619,486 281,937
L(60),> of YM or 1% (57),O(3) 180,316 504,988 275,955
L(60),> of YM or 1% (57),O(3) 204,496 1,001,971 720,370
L(60), 5%(12),4%(12),3%(12),2%(12),1%(9),O(3) 184,124 512,811 233,080
L(96),> of YM or 1% (81),O(3) 195,246 497,603 211,129
L(60),> of YM or 1% (57),O(3) 192,662 614,699 277,732
> of YM or 1% (114),1%(3),O(3) 165,539 521,953 300,258
L(60),> of YM or 1% (56),O(4) 157,778 540,752 303,331
L(60),> of YM or 1% (57),O(3) 158,015 306,234 72,701
L(60),> of YM or 1% (57),O(3) 156,655 682,638 460,885
L(60),> of YM or 1% (57),O(3) 150,746 251,639 56,833
L(96),> of YM or 1% (81),O(3) 148,877 454,791 246,352
L(36),DEF(78), O(6) 163,719 331,590 94,602
1%(78),O(6) 169,152 833,378 275,313
L(120),> of YM or 1% (117),O(3) 194,202 860,616 571,163
YM (84),3%(12),2%(12),1%(6),O(6) 179,421 842,678 454,957
L(48),> of YM or 1% (33),O(3) 161,963 529,304 322,260
L(120),> of YM or 1% (117),O(3) 184,275 710,571 418,259
L(120),> of YM or 1% (117),O(3) 183,882 824,770 542,742
L(120),> of YM or 1% (117),O(3) 194,969 1,029,267 759,775
L(120),> of YM or 1% (117),O(3) 177,682 1,171,883 881,181
L(120),> of YM or 1% (117),O(3) 183,807 1,066,858 784,315
L(120),> of YM or 1% (117),O(3) 177,165 775,003 498,552
L(120),> of YM or 1% (117),O(3) 175,876 704,017 434,085
L(48),> of YM or 1% (66),O(6) 171,895 477,708 145,918
L(48),> of YM or 1% (66),O(6) 154,463 435,852 213,741
L(60),> of YM or 1% (57),O(3) 150,056 336,894 151,270
L(32),DEF(82), O(6) 163,325 375,817 120,893
L(60),> of YM or 1% (57),O(3) 144,393 457,002 152,488
L(25),DEF(155), 181,275 828,864 567,833
YM (36),2%(12),1%(6),O(6) 166,084 530,568 277,245
L(156),> of YM or 1% (141),O(3) 144,642 272,059 75,435
L(60),> of YM or 1% (57),O(3) 144,236 314,925 98,140
L(120),> of YM or 1% (117),O(3) 167,390 744,732 506,857
L(48),> of YM or 1% (66),O(6) 135,959 538,135 238,259
L(48),> of YM or 1% (66),O(6) 137,440 358,173 153,228
L(60),> of YM or 1% (54),O(6) 147,105 625,995 403,670
L(28),DEF(86), O(6) 126,475 384,420 160,107
L(120),> of YM or 1% (117),O(3) 145,421 536,711 266,439
L(48),> of YM or 1% (66),O(6) 155,704 491,521 185,371
L(120),> of YM or 1% (117),O(3) 161,116 700,602 454,823
YM (84),3%(12),2%(12),1%(6),O(6) 152,599 559,828 317,627
L(120),> of YM or 1% (117),O(3) 156,199 761,716 546,515
YM (60),2%(12),1%(6),O(6) 153,635 445,092 193,488
L(36),DEF(78), O(6) 133,249 247,575 56,182
L(29),DEF(85), O(6) 130,692 214,830 29,082
L(60),> of YM or 1% (54),O(6) 130,745 416,879 248,652
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 170,733 947,104 567,581
L(60),> of YM or 1% (57),O(3) 123,175 308,160 144,367
L(60), 5%(12),4%(12),3%(12),2%(12),1%(9),O(3) 134,661 436,217 252,009
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 165,870 807,962 584,989
L(24),DEF(93), O(3) 121,650 381,461 232,315
L(60),> of YM or 1% (57),O(3) 114,346 333,613 165,790
L(120),> of YM or 1% (117),O(3) 151,262 632,284 404,651
L(60),> of YM or 1% (57),O(3) 113,238 268,698 132,981
L(120),> of YM or 1% (117),O(3) 143,827 521,424 315,848
YM (84),3%(12),2%(12),1%(6),O(6) 129,849 391,191 185,327
L(48),> of YM or 1% (66),O(6) 137,354 300,219 88,884
L(60),> of YM or 1% (57),O(3) 106,949 316,103 168,403
YM (120),5%(12),4%(12),3%(12),2%(12),1%(6),O(6) 165,436 522,364 249,007
YM (84),3%(12),2%(12),1%(6),O(6) 126,363 292,238 60,047
221,087 142,612
208,587 125,741
111,213 97,975
- --------------------------------------------------------------------------------------------------------------------------------
YM (84),3%(12),2%(12),1%(6),O(6) 129,582 540,887 366,328
<CAPTION>
UNDERWRITING UNDERWRITING APPRAISED
PREPAYMENT RESTRICTIONS NCF DSCR VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
L(36),> of YM or 1% (81),O(3) 297,060 1.27 4,000,000
L(48),> of YM or 1% (66),O(6) 279,604 1.47 2,870,000
L(26),DEF(94), 250,726 1.31 2,800,000
L(60),> of YM or 1% (57),O(3) 246,209 1.24 2,700,000
L(60),> of YM or 1% (54),O(6) 237,805 1.35 2,800,000
L(36),> of YM or 1% (42),O(6) 245,184 1.41 2,980,000
L(48),> of YM or 1% (66),O(6) 304,642 1.58 3,200,000
L(120),> of YM or 1% (117),O(3) 339,767 1.56 3,000,000
L(120),> of YM or 1% (117),O(3) 321,667 1.37 3,385,000
L(32),DEF(45), O(6) 260,099 1.28 2,750,000
L(48),> of YM or 1% (66),O(6) 259,063 1.39 2,850,000
L(48),> of YM or 1% (66),O(6) 294,250 1.53 2,975,000
L(60),> of YM or 1% (57),O(3) 229,033 1.27 2,600,000
L(60),> of YM or 1% (57),O(3) 281,601 1.38 2,880,000
L(60), 5%(12),4%(12),3%(12),2%(12),1%(9),O(3) 250,253 1.36 3,200,000
L(96),> of YM or 1% (81),O(3) 258,878 1.33 2,900,000
L(60),> of YM or 1% (57),O(3) 307,249 1.59 2,700,000
> of YM or 1% (114),1%(3),O(3) 221,695 1.34 2,500,000
L(60),> of YM or 1% (56),O(4) 237,420 1.50 2,450,000
L(60),> of YM or 1% (57),O(3) 222,197 1.41 2,600,000
L(60),> of YM or 1% (57),O(3) 221,753 1.42 2,300,000
L(60),> of YM or 1% (57),O(3) 194,806 1.29 2,300,000
L(96),> of YM or 1% (81),O(3) 208,439 1.40 2,400,000
L(36),DEF(78), O(6) 222,959 1.36 2,400,000
1%(78),O(6) 505,095 2.99 5,700,000
L(120),> of YM or 1% (117),O(3) 289,453 1.49 2,820,000
YM (84),3%(12),2%(12),1%(6),O(6) 316,252 1.76 2,550,000
L(48),> of YM or 1% (33),O(3) 207,044 1.28 2,245,000
L(120),> of YM or 1% (117),O(3) 284,104 1.54 2,530,000
L(120),> of YM or 1% (117),O(3) 282,028 1.53 2,650,000
L(120),> of YM or 1% (117),O(3) 269,493 1.38 2,750,000
L(120),> of YM or 1% (117),O(3) 290,702 1.64 2,750,000
L(120),> of YM or 1% (117),O(3) 282,543 1.54 3,350,000
L(120),> of YM or 1% (117),O(3) 276,451 1.56 2,450,000
L(120),> of YM or 1% (117),O(3) 269,932 1.53 2,400,000
L(48),> of YM or 1% (66),O(6) 321,790 1.87 2,600,000
L(48),> of YM or 1% (66),O(6) 201,375 1.30 2,300,000
L(60),> of YM or 1% (57),O(3) 185,625 1.24 2,035,000
L(32),DEF(82), O(6) 244,732 1.50 2,575,000
L(60),> of YM or 1% (57),O(3) 255,769 1.77 2,500,000
L(25),DEF(155), 261,031 1.44 2,925,000
YM (36),2%(12),1%(6),O(6) 229,241 1.38 2,235,000
L(156),> of YM or 1% (141),O(3) 196,624 1.36 2,100,000
L(60),> of YM or 1% (57),O(3) 196,355 1.36 2,225,000
L(120),> of YM or 1% (117),O(3) 237,875 1.42 2,250,000
L(48),> of YM or 1% (66),O(6) 267,284 1.97 2,100,000
L(48),> of YM or 1% (66),O(6) 188,817 1.37 2,000,000
L(60),> of YM or 1% (54),O(6) 222,325 1.51 2,100,000
L(28),DEF(86), O(6) 203,138 1.61 2,100,000
L(120),> of YM or 1% (117),O(3) 222,012 1.53 2,080,000
L(48),> of YM or 1% (66),O(6) 288,638 1.85 2,300,000
L(120),> of YM or 1% (117),O(3) 245,779 1.53 2,150,000
YM (84),3%(12),2%(12),1%(6),O(6) 204,816 1.34 2,550,000
L(120),> of YM or 1% (117),O(3) 215,201 1.38 2,130,000
YM (60),2%(12),1%(6),O(6) 224,074 1.46 2,050,000
L(36),DEF(78), O(6) 177,588 1.33 2,100,000
L(29),DEF(85), O(6) 164,225 1.26 1,950,000
L(60),> of YM or 1% (54),O(6) 168,227 1.29 1,900,000
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 350,202 2.05 2,800,000
L(60),> of YM or 1% (57),O(3) 163,793 1.33 1,800,000
L(60), 5%(12),4%(12),3%(12),2%(12),1%(9),O(3) 168,326 1.25 2,000,000
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 194,573 1.17 2,700,000
L(24),DEF(93), O(3) 149,146 1.23 1,850,000
L(60),> of YM or 1% (57),O(3) 167,823 1.47 1,850,000
L(120),> of YM or 1% (117),O(3) 227,633 1.50 2,050,000
L(60),> of YM or 1% (57),O(3) 135,717 1.20 1,750,000
L(120),> of YM or 1% (117),O(3) 205,576 1.43 2,000,000
YM (84),3%(12),2%(12),1%(6),O(6) 188,577 1.45 2,150,000
L(48),> of YM or 1% (66),O(6) 194,531 1.42 1,770,000
L(60),> of YM or 1% (57),O(3) 147,700 1.38 1,740,000
YM (120),5%(12),4%(12),3%(12),2%(12),1%(6),O(6) 249,215 1.51 2,380,000
YM (84),3%(12),2%(12),1%(6),O(6) 225,991 1.79 1,600,000
66,399 1,100,000
72,176 1,045,000
6,587 500,000
- --------------------------------------------------------------------------------------------------------------------------------
YM (84),3%(12),2%(12),1%(6),O(6) 145,162 1.12 2,645,000
<CAPTION>
APPRAISAL CURRENT
PREPAYMENT RESTRICTIONS YEAR LTV
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
L(36),> of YM or 1% (81),O(3) 1997 53.67
L(48),> of YM or 1% (66),O(6) 1997 74.80
L(26),DEF(94), 1997 76.63
L(60),> of YM or 1% (57),O(3) 1997 79.45
L(60),> of YM or 1% (54),O(6) 1997 74.86
L(36),> of YM or 1% (42),O(6) 1997 70.34
L(48),> of YM or 1% (66),O(6) 1997 65.48
L(120),> of YM or 1% (117),O(3) 1997 69.64
L(120),> of YM or 1% (117),O(3) 1997 61.66
L(32),DEF(45), O(6) 1997 74.48
L(48),> of YM or 1% (66),O(6) 1997 71.61
L(48),> of YM or 1% (66),O(6) 1997 66.95
L(60),> of YM or 1% (57),O(3) 1997 76.55
L(60),> of YM or 1% (57),O(3) 1997 69.10
L(60), 5%(12),4%(12),3%(12),2%(12),1%(9),O(3) 1997 62.16
L(96),> of YM or 1% (81),O(3) 1997 67.93
L(60),> of YM or 1% (57),O(3) 1997 71.52
> of YM or 1% (114),1%(3),O(3) 1997 76.58
L(60),> of YM or 1% (56),O(4) 1997 77.40
L(60),> of YM or 1% (57),O(3) 1997 70.94
L(60),> of YM or 1% (57),O(3) 1997 79.69
L(60),> of YM or 1% (57),O(3) 1997 78.11
L(96),> of YM or 1% (81),O(3) 1997 74.86
L(36),DEF(78), O(6) 1997 74.67
1%(78),O(6) 1997 31.42
L(120),> of YM or 1% (117),O(3) 1997 63.44
YM (84),3%(12),2%(12),1%(6),O(6) 1997 70.06
L(48),> of YM or 1% (33),O(3) 1997 79.38
L(120),> of YM or 1% (117),O(3) 1997 69.60
L(120),> of YM or 1% (117),O(3) 1997 65.70
L(120),> of YM or 1% (117),O(3) 1997 63.24
L(120),> of YM or 1% (117),O(3) 1997 61.62
L(120),> of YM or 1% (117),O(3) 1997 50.52
L(120),> of YM or 1% (117),O(3) 1997 69.05
L(120),> of YM or 1% (117),O(3) 1997 70.47
L(48),> of YM or 1% (66),O(6) 1996 64.65
L(48),> of YM or 1% (66),O(6) 1997 71.63
L(60),> of YM or 1% (57),O(3) 1997 79.45
L(32),DEF(82), O(6) 1996 62.12
L(60),> of YM or 1% (57),O(3) 1997 63.79
L(25),DEF(155), 1997 54.52
YM (36),2%(12),1%(6),O(6) 1996 70.84
L(156),> of YM or 1% (141),O(3) 1997 74.88
L(60),> of YM or 1% (57),O(3) 1997 69.89
L(120),> of YM or 1% (117),O(3) 1997 68.56
L(48),> of YM or 1% (66),O(6) 1997 71.32
L(48),> of YM or 1% (66),O(6) 1997 74.84
L(60),> of YM or 1% (54),O(6) 1997 71.27
L(28),DEF(86), O(6) 1997 71.22
L(120),> of YM or 1% (117),O(3) 1998 71.70
L(48),> of YM or 1% (66),O(6) 1997 64.82
L(120),> of YM or 1% (117),O(3) 1997 69.31
YM (84),3%(12),2%(12),1%(6),O(6) 1997 58.39
L(120),> of YM or 1% (117),O(3) 1997 69.14
YM (60),2%(12),1%(6),O(6) 1996 71.73
L(36),DEF(78), O(6) 1997 69.46
L(29),DEF(85), O(6) 1997 74.06
L(60),> of YM or 1% (54),O(6) 1997 75.95
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1995 51.20
L(60),> of YM or 1% (57),O(3) 1997 79.19
L(60), 5%(12),4%(12),3%(12),2%(12),1%(9),O(3) 1997 70.68
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1995 51.81
L(24),DEF(93), O(3) 1997 75.54
L(60),> of YM or 1% (57),O(3) 1997 75.53
L(120),> of YM or 1% (117),O(3) 1997 67.88
L(60),> of YM or 1% (57),O(3) 1997 78.65
L(120),> of YM or 1% (117),O(3) 1997 67.05
YM (84),3%(12),2%(12),1%(6),O(6) 1995 61.98
L(48),> of YM or 1% (66),O(6) 1997 73.35
L(60),> of YM or 1% (57),O(3) 1997 74.54
YM (120),5%(12),4%(12),3%(12),2%(12),1%(6),O(6) 1995 54.00
YM (84),3%(12),2%(12),1%(6),O(6) 1996 79.30
- ---------------------------------------------------------------------------------------------
YM (84),3%(12),2%(12),1%(6),O(6) 1995 47.76
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN PER
SQ FT, UNITS SQ FT, UNITS INITIAL
REPAYMENT YEAR BEDS, PADS BEDS, PADS OCCUPANCY RESERVES UNDERWRITING
LTV BUILT OR ROOM OR ROOM PERCENTAGE AT CLOSING RESERVES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
38.54 1987 131 rooms 16,388 per room NAP -- 4%
60.81 1971 60 units 35,778 per unit 100 1,485 297
65.39 1975 98,457 sq. ft. 22 per sq. ft. 92 24,883 0.21
64.69 1985 72 units 29,795 per unit 88 -- 250
65.21 1980 20,986 sq.ft. 100 per sq. ft. 100 -- 0.18
64.67 1997 27,580 sq.ft. 76 per sq. ft. 100 -- 0.15
52.83 1946 112 units 18,710 per unit 99 1,869 200
NAP 1985 60 rooms 34,819 per room NAP -- 4%
NAP 1984 106 rooms 19,689 per room NAP -- 4%
67.81 1969 137 units 14,951 per unit 97 72,475 200
58.84 1971 171 units 11,935 per unit 94 10,115 223
56.06 1972 152 units 13,103 per unit 86 256,089 285
61.80 1957 84 units 23,695 per unit 95 -- 250
48.24 1996 53 rooms 37,548 per room NAP -- 4%
50.53 1973 45,042 sq.ft. 44 per sq. ft. 97 -- 0.15
47.61 1911 49,821 sq.ft. 40 per sq. ft. 97 -- 0.17
59.37 1986 45,757 sq.ft. 42 per sq. ft. 98 155,938 0.21
68.39 1963 112 units 17,094 per unit 100 5,688 200
67.26 1923 67 units 28,304 per unit 96 38,313 250
59.57 1980 36,661 sq.ft. 50 per sq. ft. 98 1,400 0.22
69.78 1970 137 units 13,378 per unit 93 88,000 261
68.01 1997 23,500 sq.ft. 76 per sq. ft. 100 -- 0.15
56.44 1972 62 units 28,977 per unit 92 14,000 250
61.42 1937 14,345 sq. ft. 125 per sq. ft. 100 4,133 0.22
27.99 1982 62,373 sq.ft. 29 per sq. ft. 94 -- 0.15
NAP 1983 108 rooms 16,566 per room NAP -- 4%
58.24 1971 196 units 9,115 per unit 97 372,439 365
70.16 1971 102 units 17,471 per unit 96 56,224 300
NAP 1995 48 rooms 36,686 per room NAP -- 4%
NAP 1995 50 rooms 34,823 per room NAP -- 4%
NAP 1987 113 rooms 15,391 per room NAP -- 4%
NAP 1979 101 rooms 16,778 per room NAP -- 4%
NAP 1991 83 rooms 20,389 per room NAP 18,875 4%
NAP 1995 56 rooms 30,211 per room NAP -- 4%
NAP 1993 50 rooms 33,824 per room NAP -- 4%
55.43 1995 50 units 33,617 per unit 100 833 200
59.30 1928 72 units 22,883 per unit 100 2,166 288
64.68 1989 56 units 28,873 per unit 89 -- 250
53.12 1968 91 pads 17,579 per pad 100 6,375 112
51.44 1953 102,515 sq.ft. 16 per sq. ft. 88 30,313 0.13
NAP 1995 71 rooms 22,459 per room 52 6,213 4%
67.02 1976 97 units 16,322 per unit 91 20,938 248
NAP 1965 47,632 sq.ft. 33 per sq. ft. 100 26,875 0.25
56.76 1986 36,874 sq.ft. 42 per sq. ft. 96 13,375 0.15
NAP 1986 60 rooms 25,708 per room NAP -- 4%
58.41 1969 111 units 13,493 per unit 96 161,567 294
60.38 1948 63 units 23,758 per unit 87 10,219 256
49.80 1968 47 rooms 31,845 per room 67 6,943 4%
63.16 1968 77 units 19,423 per unit 92 84,015 275
NAP 1975 112 units 13,317 per unit 88 49,563 250
55.82 1929 72 units 20,707 per unit 97 3,000 243
NAP 1996 50 rooms 29,804 per room NAP -- 4%
48.81 1975 115 units 12,948 per unit 96 59,175 325
NAP 1962 111 rooms 13,266 per room NAP 25,450 5%
65.59 1987 87 units 16,901 per unit 93 122,119 316
57.13 1960 13,300 sq. ft. 110 per sq. ft. 100 8,023 0.25
64.23 1940 12,700 sq. ft. 114 per sq. ft. 100 10,858 0.20
61.30 1982 100 units 14,430 per unit 98 -- 250
NAP 1930 134 units 10,698 per unit 100 49,650 219
69.46 1965 40 units 35,635 per unit 100 -- 325
57.89 1985 40,868 sq.ft. 35 per sq. ft. 100 -- 0.15
NAP 1954 142 units 9,851 per unit 100 19,101 200
66.30 1979 90 units 15,528 per unit 93 -- 220
65.39 1987 50 units 27,946 per unit 99 6,440 250
NAP 1994 42 rooms 33,132 per room NAP -- 4%
68.22 1978 40 units 34,410 per unit 100 71,500 388
NAP 1996 49 rooms 27,369 per room NAP -- 4%
56.44 1971 70 units 19,037 per unit 97 -- 247
63.49 1966 50 units 25,968 per unit 98 -- 336
64.68 1986 48 units 27,020 per unit 100 -- 200
NAP 1980 80 units 16,066 per unit 100 6,000 302
71.86 1992 31 units 40,927 per unit 100 -- 200
1970 40 units 13,135 per unit 95 260
1972 40 units 12,478 per unit 95 316
1965 24 units 9,951 per unit 87 200
- ------------------------------------------------------------------------------------------------------------------------------------
40.55 104 units 12,147 per unit 6,050 296
<CAPTION>
LARGEST RETAIL TENANT
----------------------------------------------------------------------------
REPAYMENT RESERVES AREA LEASED LEASE CONTROL
LTV COLLECTED NAME (SQ. FT.) EXP DATE NO.
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
38.54 4% of revenue 245
60.81 297 per unit 521
65.39 0.39 per sq. ft. Falley's d/b/a Food 4 Less 46,816 07/01/2007 338
64.69 250 per unit 133
65.21 per sq.ft. Aerotek, Inc 15,300 08/31/2004 124
64.67 per sq.ft. Spectra International, LLC 16,630 06/30/2002 104
52.83 200 per unit 500
NAP 4% of revenue 145
NAP 4% of revenue 163
67.81 250 per unit 300
58.84 223 per unit 475
56.06 285 per unit 516
61.80 250 per unit 229
48.24 4% of revenue 146
50.53 per sq.ft. Voice Publishing 2,855 08/31/2001 103
47.61 per sq.ft. 175
59.37 0.21 per sq.ft. Texas Health Dept. 25,322 11/30/1998 206
68.39 200 per unit 174
67.26 250 per unit 236
59.57 per sq.ft. Day's Thriftway Market 18,000 11/04/2010 164
69.78 261 per unit 230
68.01 per sq.ft. Office Max 23,500 10/31/2012 214
56.44 250 per unit 250
61.42 0.22 per sq. ft. Boston Chicken, Inc. 4,310 07/31/1998 323
27.99 per sq.ft. ART etc. 4,620 01/31/2001 218
NAP 4% of revenue 158
58.24 533 per unit 447
70.16 300 per unit 136
NAP 4% of revenue 186
NAP 4% of revenue 183
NAP 4% of revenue 155
NAP 4% of revenue 157
NAP 4% of revenue 141
NAP 4% of revenue 185
NAP 4% of revenue 118
55.43 200 per unit 397
59.30 288 per unit 520
64.68 250 per unit 224
53.12 112 per pad 302
51.44 per sq.ft. Levines 22,725 02/28/2001 197
NAP 4% of revenue 537
67.02 per unit 431
NAP per sq.ft. KAR Printing 47,632 12/17/2022 192
56.76 per sq.ft. Clubhouse For Kids 11,833 07/31/2002 225
NAP 4% of revenue 187
58.41 291 per unit 522
60.38 256 per unit 499
49.80 4% of revenue 533
63.16 275 per unit 317
NAP 250 per unit 153
55.82 243 per unit 414
NAP 4% of revenue 142
48.81 per unit 442
NAP 5% of revenue 156
65.59 414 per unit 359
57.13 0.25 per sq. ft. Wellesley Women's Care 6,700 08/31/1998 321
64.23 0.22 per sq. ft. Norwalk Hospital 12,700 08/20/2010 467
61.30 250 per unit 257
NAP per unit 366
69.46 325 per unit 232
57.89 per sq.ft. Tarantino Properties 7,999 04/01/1999 167
NAP per unit 348
66.30 250 per unit 201
65.39 250 per unit 244
NAP 4% of revenue 140
68.22 388 per unit 129
NAP 4% of revenue 117
56.44 per unit 345
63.49 336 per unit 401
64.68 200 per unit 121
NAP per unit 368
71.86 214 per unit 384
260 540A
414 540B
196 540C
- ------------------------------------------------------------------------------------------------------------------------
40.55 per unit 540
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN CONTROL
SOURCE NO. PROPERTY NAME ADDRESS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DAIWA 367 Amberlake Apartments 4901 Bartow Road
DAIWA 375 Terwood Court Apartments 329 - 331 West Washington
DAIWA 503 Orangewood Place Apartments 7328 North 27th Avenue
DAIWA 392 Concord Green Apartments 7001 Northline Drive
DAIWA 406 Chestnut Mansion 114 West Chestnut Street
DAIWA 433 Highland Villas Apartments 210 North Avenue 55
DAIWA 530 Villa Fontana Apartments 3719 - 3725 Gilman Road
MLMC 173 Gardenwood Apartments 1400 Gardenia St.
MLMC 222 Regency Manor Apartments 2075 Regency Road
MLMC 235 Snider Plaza 6801 Hillcrest & 6730 Snider Pl
DAIWA 393 Bellerive Apartments 214 East Armour Boulevard
DAIWA 358 Cedar Point Apartments 4411 Cedar Springs Road
DAIWA 360 Cordova Apartments 900 West Gate Drive
DAIWA 342 Plaza Terrace Apartments 1307 thru 1701 Plaza, 35th, and Murdock Road
DAIWA 507 Burton Gardens Apartments 300 - 311 East Glendale Avenue
DAIWA 518 Parkwood Apartments 5917 Carmelita Avenue
DAIWA 538 Quail Run 1000 South Clack Street
DAIWA 372 Courtyard Apartments 2300 North "A" Street
DAIWA 411 Saticoy Street Apartments 20445 Saticoy Street
MLMC 227 Roadway Inn - Killeen 517 W. Veterans Memorial Blvd
MLMC 114 Avondale Apartments 1st Avenue and Route 41
DAIWA 416 Denton Court Apartments 4735 Denton Street
DAIWA 495 Glenoaks Apartments 8817 South 28th Street
DAIWA 531 Park Lane Apartments 2628 Maxson Road
DAIWA 344 Pines Apartments 2125 Stardust Court
MLMC 106 524 Raymond Avenue 524 Raymond Avenue
DAIWA 496 Gilmore Apartments 705-725 & 815 - 823 North Gilmore Avenue
MLMC 105 518 Raymond Avenue 518 Raymond Avenue
DAIWA 527 Leisure Isle Apartments 3615 - 3623 Gilman Road
MLMC 180 Hillview Apartments 200 Shalimar Drive
MLMC 159 Days Inn-Lawrenceville 731 West Pike Street
DAIWA 453 Canberra Apartments 2929 North 36th Street
DAIWA 405 Beverly Rossmore Apartments 304 North Rossmore Avenue
DAIWA 353 The Tropicaire Apartments 890 NW 45th Avenue
DAIWA 396 Beechnut Palms Apartments 8910 Beechnut Street
MLMC 101 1031 South Santa Fe Avenue 1031 South Santa Fe Avenue
DAIWA 351 Tierra Alegre Apartments 3355 East Fort Lowell Road
DAIWA 450 Atlantic City Apartments 1901 Haren Drive
DAIWA 334 Fairway Shopping Center 5859 West Indian School Road
MLMC 221 Radford Place Condominiums 3922 Evergreen
DAIWA 526 Tropic Isle Apartments 260 East Newburgh Street
DAIWA 491 D'iberville Apartments 265 Front Beach Drive
DAIWA 472 Savings Tower 45 Savings Street
DAIWA 430 Country Creek Village Apartments 3783 Legendary Lane
DAIWA 389 Newport Central Townhomes 5506 Grover Avenue
DAIWA 435 Lanier Place 1725 Lanier Place, NW
DAIWA 456 Dutch Haven Apartments 846 Piney Grove
DAIWA 354 Woodland View Apartments 1195 Woodland Avenue
DAIWA 458 Sunset Apartments 830 & 840 Sunset Drive
DAIWA 361 Deerwood Apartments 2220 NW 55th Boulevard
DAIWA 449 The Deely Place Apartments 8511 South Flores
DAIWA 505 Ramsey Apartments 201 - 207 East Glendale Avenue
DAIWA 506 Glendale Apartments 200-216 E. Glendale Avenue
DAIWA 409 96 Wadsworth Terrace 96 Wadsworth Terrace
DAIWA 413 Albion Manor Apartments 1500 - 10 South Albion Street
DAIWA 525 Brandywine Apartments 4710 Lake Avenue
DAIWA 400 Amberwood Apartments 800 Hamsted Street
DAIWA 494 The Tropic Estates Apartments 3044 Jamaica Drive
DAIWA 541 Cameron Court Apartments 1675 Smyrna Roswell Road
DAIWA 490 Townhouse Apartments 12621 Lomas Boulevard N.E.
DAIWA 470 Palms at Byron Place 8535 Byron Avenue
DAIWA 471 Olde North Village Apartments 3490 Triangle Drive
DAIWA 535 Atrium Apartments 3401 Northwest 3rd Avenue
DAIWA 440 Dorchester Apartments 1350 - 1358 Dorchester Avenue
DAIWA 370 West 24th Street 1300 - 1302 West 24th Street
DAIWA 402 Second Street Apartments 80 - 86 Second Street
DAIWA 504 Edison Terrace Apartments 401 N. Ash Street
DAIWA 387 Woodglen Apartments 818 Pinemont
DAIWA 513 Foresight Village Apartments - Phase II 620 25 1/2 Road
MLMC 203 Meadow Oaks Apartments 7770 Meadow Road
DAIWA 517 Golden Villas Apartments 4088 - 4136 Silver Dollar
DAIWA 461 Skyline Woods Apartments Skyline Drive
DAIWA 532 Lincoln Apartments 219 Lincoln Avenue
DAIWA 478 670 Garden Street 670 Garden Street
<CAPTION>
LOAN ZIP ORIGINAL CURRENT % OF INITIAL
SOURCE CITY STATE CODE PROPERTY TYPE BALANCE BALANCE POOL BALANCE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DAIWA Acworth GA 30101 Multifamily 1,295,000 1,259,160 0.12
DAIWA Westchester PA 19380 Multifamily 1,295,000 1,247,933 0.11
DAIWA Phoenix AZ 85051 Multifamily 1,250,000 1,241,303 0.11
DAIWA Houston TX 77076 Multifamily 1,250,000 1,233,274 0.11
DAIWA Kingston NY 12401 Multifamily 1,220,000 1,210,517 0.11
DAIWA Los Angeles CA 90042 Multifamily 1,217,000 1,207,471 0.11
DAIWA El Monte CA 91732 Multifamily 1,200,000 1,198,144 0.11
MLMC San Antonio TX 78201 Multifamily 1,200,000 1,197,731 0.11
MLMC Lexington KY 40503 Multifamily 1,200,000 1,197,046 0.11
MLMC University Park TX 75205 Retail 1,200,000 1,195,771 0.11
DAIWA Kansas City MO 64111 Multifamily 1,210,000 1,193,809 0.11
DAIWA Dallas TX 75219 Multifamily 1,200,000 1,180,697 0.11
DAIWA Bossier LA 71112 Multifamily 1,200,000 1,167,034 0.11
DAIWA Charlotte NC 28205 Multifamily 1,160,000 1,154,417 0.11
DAIWA Alexandria VA 22030 Multifamily 1,150,000 1,142,601 0.10
DAIWA Huntington Park CA 90255 Multifamily 1,125,000 1,123,692 0.10
DAIWA Abilene TX 79605 Multifamily 1,106,000 1,104,313 0.10
DAIWA Midland TX 79705 Multifamily 1,125,000 1,101,562 0.10
DAIWA Canoga Park CA 91306 Multifamily 1,105,000 1,097,312 0.10
MLMC Killeen TX 76541 Hospitality 1,085,000 1,081,106 0.10
MLMC Avondale PA 19311 Multifamily 1,080,000 1,074,277 0.10
DAIWA Dallas TX 75219 Multifamily 1,075,000 1,068,144 0.10
DAIWA Fort Smith AR 72908 Multifamily 1,067,000 1,064,675 0.10
DAIWA El Monte CA 91732 Multifamily 1,050,000 1,048,376 0.10
DAIWA Alamogordo NM 88310 Multifamily 1,060,000 1,039,650 0.10
MLMC Santa Monica CA 90405 Multifamily 1,040,000 1,033,841 0.09
DAIWA Lakeland FL 33801 Multifamily 1,031,000 1,028,597 0.09
MLMC Santa Monica CA 90405 Multifamily 1,030,000 1,023,901 0.09
DAIWA El Monte CA 91732 Multifamily 1,023,000 1,021,418 0.09
MLMC Glascow KY 42141 Multifamily 1,000,000 997,589 0.09
MLMC Lawrenceville GA 30245 Hospitality 1,000,000 997,132 0.09
DAIWA Phoenix AZ 85018 Multifamily 1,000,000 992,786 0.09
DAIWA Los Angeles CA 90004 Multifamily 1,000,000 991,827 0.09
DAIWA Miami FL 33126 Multifamily 1,005,000 988,590 0.09
DAIWA Houston TX 77072 Multifamily 1,000,000 986,885 0.09
MLMC Vista CA 92083 Retail 980,000 976,665 0.09
DAIWA Tucson AZ 85716 Multifamily 975,000 958,013 0.09
DAIWA Henderson NV 89015 Multifamily 960,000 956,341 0.09
DAIWA Phoenix AZ 85031 Retail 950,000 947,804 0.09
MLMC Irving TX 75061 Multifamily 940,000 938,208 0.09
DAIWA Azusa CA 91702 Multifamily 900,000 898,608 0.08
DAIWA Ocean Springs MS 39564 Multifamily 900,000 897,204 0.08
DAIWA Waterbury CT 06702 Multifamily 900,000 896,333 0.08
DAIWA Dallas TX 75224 Multifamily 900,000 889,515 0.08
DAIWA Austin TX 78756 Multifamily 900,000 887,713 0.08
DAIWA Washington DC 20009 Multifamily 900,000 885,530 0.08
DAIWA Columbia SC 29210 Multifamily 880,000 877,371 0.08
DAIWA Atlanta GA 30329 Multifamily 900,000 870,369 0.08
DAIWA Athens GA 30601 Multifamily 870,000 865,383 0.08
DAIWA Gainesville FL 32606 Multifamily 875,000 860,400 0.08
DAIWA San Antonio TX 78221 Multifamily 850,000 846,676 0.08
DAIWA Alexandria VA 22030 Multifamily 850,000 844,531 0.08
DAIWA Alexandria VA 22301 Multifamily 850,000 844,531 0.08
DAIWA New York NY 10005 Multifamily 850,000 843,939 0.08
DAIWA Denver CO 80220 Multifamily 850,000 843,939 0.08
DAIWA Dallas TX 75219 Multifamily 830,000 828,161 0.08
DAIWA Fort Worth TX 76115 Multifamily 815,000 809,135 0.07
DAIWA Corpus Christi TX 78418 Multifamily 810,000 807,379 0.07
DAIWA Smyrna GA 30136 Multifamily 815,000 803,412 0.07
DAIWA Albuquerque NM 87112 Multifamily 800,000 797,662 0.07
DAIWA Miami Beach FL 33141 Multifamily 800,000 796,934 0.07
DAIWA Winston-Salem NC 27106 Multifamily 795,000 792,195 0.07
DAIWA Pompano Beach FL 33064 Multifamily 789,500 788,570 0.07
DAIWA Dorchester MA 02122 Multifamily 780,000 775,220 0.07
DAIWA Austin TX 78705 Multifamily 800,000 764,747 0.07
DAIWA Elizabeth NJ 07206 Multifamily 766,500 760,839 0.07
DAIWA Centralia WA 98531 Multifamily 760,000 757,189 0.07
DAIWA Houston TX 77018 Multifamily 765,000 753,624 0.07
DAIWA Grand Junction CO 81501 Multifamily 750,000 748,825 0.07
MLMC Dallas TX 75231 Multifamily 750,000 748,662 0.07
DAIWA Las Vegas NV 89102 Multifamily 750,000 748,252 0.07
DAIWA Saugerties NY 12477 Multifamily 750,000 746,654 0.07
DAIWA Newark NJ 07104 Multifamily 750,000 745,620 0.07
DAIWA Bronx NY 10457 Multifamily 750,000 745,462 0.07
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE % OF
INITIAL POOL BORROWER INTEREST ACCRUAL MORTGAGE ADMINISTRATIVE
BALANCE AFFILIATED CROSSED METHOD RATE COST RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
88.77 30/360 9.00 0.099
88.89 30/360 9.25 0.099
89.00 Actual/360 9.38 0.099
89.12 30/360 8.88 0.099
89.23 Actual/360 9.25 0.099
89.34 30/360 9.13 0.099
89.45 Cntrl #'s 499, 518, 526, 527, 528, 529, 531 Actual/360 7.58 0.099
89.56 Actual/360 7.31 0.099
89.67 Actual/360 7.50 0.129
89.78 Actual/360 7.75 0.099
89.89 30/360 8.88 0.099
90.00 30/360 9.75 0.099
90.10 30/360 9.38 0.099
90.21 Actual/360 8.50 0.289
90.31 Cntrl #'s 505, 506 Actual/360 8.50 0.099
90.42 Cntrl #'s 499, 526, 527, 528, 529, 530, 531 30/360 7.38 0.099
90.52 Actual/360 7.75 0.099
90.62 Cntrl #'s 373, 374 30/360 9.13 0.099
90.72 Cntrl #'s 410, 412 Actual/360 9.38 0.099
90.82 Actual/360 8.50 0.099
90.92 30/360 8.78 0.099
91.02 Actual/360 9.13 0.099
91.11 Cntrl # 497 Actual/360 8.50 0.099
91.21 Cntrl #'s 499, 518, 526, 527, 528, 529, 530 Actual/360 7.58 0.099
91.31 30/360 9.13 0.099
91.40 Actual/360 7.49 0.099
91.50 Actual/360 8.00 0.099
91.59 Actual/360 7.49 0.099
91.68 Cntrl #'s 499, 518, 526, 528, 529, 530, 531 Actual/360 7.58 0.099
91.78 Actual/360 7.63 0.129
91.87 30/360 9.37 0.129
91.96 30/360 8.25 0.099
92.05 Actual/360 9.00 0.099
92.14 30/360 10.00 0.099
92.23 Cntrl # 395 yes 30/360 9.00 0.099
92.32 Actual/360 8.00 0.129
92.41 30/360 9.25 0.099
92.50 30/360 9.13 0.099
92.58 Actual/360 8.06 0.164
92.67 Actual/360 7.25 0.099
92.75 Cntrl #'s 499, 518, 527, 528, 529, 530, 531 Actual/360 7.58 0.099
92.83 Actual/360 8.13 0.099
92.92 Actual/360 8.25 0.099
93.00 30/360 9.25 0.099
93.08 30/360 8.75 0.099
93.16 30/360 9.50 0.099
93.24 Actual/360 9.13 0.099
93.32 Cntrl #'s 346, 371, 381 30/360 9.25 0.099
93.40 Actual/360 8.88 0.099
93.48 30/360 8.88 0.039
93.56 30/360 9.00 0.099
93.64 Cntrl #'s 506, 507 Actual/360 8.50 0.099
93.71 Cntrl #'s 505, 507 Actual/360 8.50 0.099
93.79 Actual/360 9.25 0.099
93.87 Actual/360 9.25 0.099
93.95 Actual/360 8.38 0.099
94.02 Actual/360 9.63 0.099
94.09 Actual/360 7.88 0.039
94.17 30/360 9.38 0.099
94.24 Actual/360 8.50 0.099
94.31 Actual/360 8.63 0.099
94.39 Actual/360 9.13 0.099
94.46 Actual/360 7.30 0.099
94.53 30/360 9.25 0.099
94.60 30/360 8.75 0.099
94.67 Actual/360 9.50 0.099
94.74 Actual/360 9.00 0.099
94.81 30/360 9.88 0.099
94.88 Actual/360 8.00 0.289
94.95 Cntrl # 201 Actual/360 7.75 0.129
95.02 Actual/360 8.00 0.164
95.08 Actual/360 8.75 0.099
95.15 Actual/360 8.38 0.099
95.22 Actual/360 9.00 0.099
<CAPTION>
REM
CUMULATIVE % OF ORIG REM AMORT AMORT
INITIAL POOL TERM TERM TERM TERM ORIGINATION REPAYMENT BALLOON/REPAYMENT
BALANCE (MOS.) (MOS.) (MOS.) (MOS.) DATE DATE BALANCE MATURITY TERM
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
88.77 120 92 300 272 10/03/95 11/01/2005 1,071,474 Balloon
88.89 240 217 240 217 03/19/96 04/01/2016 NAP Fully Amortizing
89.00 120 111 300 291 05/19/97 06/01/2007 1,069,674 Balloon
89.12 300 286 300 286 12/05/96 01/01/2022 NAP Fully Amortizing
89.23 120 110 300 290 04/30/97 05/01/2007 1,040,913 Balloon
89.34 84 70 360 346 12/23/96 01/01/2004 1,141,239 Balloon
89.45 180 179 300 299 01/14/98 02/01/2013 781,666 Balloon
89.56 120 118 360 358 12/22/97 01/01/2008 1,041,271 Balloon
89.67 180 177 360 357 11/07/97 12/01/2012 911,559 Balloon
89.78 120 117 300 297 11/10/97 12/01/2007 968,552 Balloon
89.89 120 106 300 286 12/04/96 01/01/2007 998,259 Balloon
90.00 120 101 300 281 07/16/96 08/01/2006 1,009,442 Balloon
90.10 240 222 240 222 08/14/96 09/01/2016 NAP Fully Amortizing
90.21 240 237 240 237 11/04/97 12/01/2017 NAP Fully Amortizing
90.31 120 113 300 293 07/28/97 08/01/2007 961,274 Balloon
90.42 180 179 300 299 01/12/98 02/01/2013 696,514 Balloon
90.52 120 119 300 299 01/15/98 02/01/2008 904,476 Balloon
90.62 120 98 300 278 04/04/96 05/01/2006 933,474 Balloon
90.72 120 111 300 291 05/06/97 06/01/2007 945,591 Balloon
90.82 240 238 240 238 12/23/97 01/01/2018 NAP Fully Amortizing
90.92 120 111 360 351 05/30/97 06/01/2007 963,446 Balloon
91.02 120 112 300 292 06/13/97 07/01/2007 914,131 Balloon
91.11 120 118 300 298 12/03/97 01/01/2008 891,573 Balloon
91.21 180 179 300 299 01/14/98 02/01/2013 683,956 Balloon
91.31 120 88 360 328 06/30/95 07/01/2005 950,065 Balloon
91.40 180 175 300 295 09/25/97 10/01/2012 653,989 Balloon
91.50 120 118 300 298 12/04/97 01/01/2008 849,452 Balloon
91.59 180 175 300 295 09/25/97 10/01/2012 647,699 Balloon
91.68 180 179 300 299 01/14/98 02/01/2013 666,370 Balloon
91.78 120 117 360 357 11/07/97 12/01/2007 873,909 Balloon
91.87 240 238 240 238 12/15/97 01/01/2018 NAP Fully Amortizing
91.96 120 113 300 293 07/30/97 08/01/2007 812,718 Balloon
92.05 120 110 300 290 04/25/97 05/01/2007 847,590 Balloon
92.14 84 64 300 280 06/20/96 07/01/2003 913,387 Balloon
92.23 120 106 300 286 12/11/96 01/01/2007 827,393 Balloon
92.32 120 117 300 297 11/12/97 12/01/2007 796,054 Balloon
92.41 120 90 360 330 08/16/95 09/01/2005 875,791 Balloon
92.50 120 113 360 353 07/03/97 08/01/2007 860,436 Balloon
92.58 120 118 300 298 12/15/97 01/01/2008 784,063 Balloon
92.67 120 118 360 358 12/12/97 01/01/2008 814,565 Balloon
92.75 180 179 300 299 01/14/98 02/01/2013 586,250 Balloon
92.83 120 117 300 297 11/10/97 12/01/2007 744,339 Balloon
92.92 120 116 300 296 10/10/97 11/01/2007 746,851 Balloon
93.00 120 107 300 287 01/08/97 02/01/2007 748,881 Balloon
93.08 120 106 300 286 12/06/96 01/01/2007 740,338 Balloon
93.16 240 229 240 229 03/17/97 04/01/2017 NAP Fully Amortizing
93.24 120 114 360 354 08/12/97 09/01/2007 806,889 Balloon
93.32 240 219 240 219 05/21/96 06/01/2016 NAP Fully Amortizing
93.40 120 114 300 294 08/20/97 09/01/2007 734,505 Balloon
93.48 120 93 360 333 11/06/95 12/01/2005 780,742 Balloon
93.56 120 113 360 353 07/23/97 08/01/2007 760,153 Balloon
93.64 120 113 300 293 07/28/97 08/01/2007 710,507 Balloon
93.71 120 113 300 293 07/28/97 08/01/2007 710,507 Balloon
93.79 120 111 300 291 05/22/97 06/01/2007 725,018 Balloon
93.87 120 111 300 291 05/09/97 06/01/2007 725,018 Balloon
93.95 120 118 300 298 12/19/97 01/01/2008 691,139 Balloon
94.02 120 110 300 290 04/15/97 05/01/2007 702,124 Balloon
94.09 120 117 300 297 11/25/97 12/01/2007 665,105 Balloon
94.17 120 104 300 284 10/04/96 11/01/2006 680,040 Balloon
94.24 120 117 300 297 11/12/97 12/01/2007 668,634 Balloon
94.31 120 116 300 296 10/06/97 11/01/2007 670,811 Balloon
94.39 300 296 300 296 10/03/97 11/01/2022 NAP Fully Amortizing
94.46 120 119 360 359 01/12/98 02/01/2008 693,608 Balloon
94.53 120 113 300 293 07/03/97 08/01/2007 649,031 Balloon
94.60 240 214 240 214 12/11/95 01/01/2016 NAP Fully Amortizing
94.67 120 110 300 290 04/18/97 05/01/2007 658,236 Balloon
94.74 120 112 360 352 06/13/97 07/01/2007 695,343 Balloon
94.81 120 102 300 282 08/28/96 09/01/2006 645,215 Balloon
94.88 120 118 360 358 12/22/97 01/01/2008 670,490 Balloon
94.95 120 118 360 358 12/12/97 01/01/2008 657,035 Balloon
95.02 120 118 300 298 12/31/97 01/01/2008 617,934 Balloon
95.08 120 115 300 295 09/22/97 10/01/2007 631,188 Balloon
95.15 180 178 180 178 12/10/97 01/01/2013 NAP Fully Amortizing
95.22 240 236 240 236 10/31/97 11/01/2017 NAP Fully Amortizing
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL UNDERWRITING UNDERWRITING
DEBT TOTAL TOTAL
PREPAYMENT RESTRICTIONS SERVICE REVENUE EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
YM (84),3%(12),2%(12),1%(6),O(6) 130,411 402,914 156,386
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 142,326 427,973 230,133
L(48),> of YM or 1% (66),O(6) 129,753 395,775 178,778
YM (180),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 124,598 743,602 536,722
L(48),> of YM or 1% (66),O(6) 125,374 407,123 230,444
YM (60),2%(12),1%(6),O(6) 118,823 313,101 129,413
L(120),> of YM or 1% (54),O(6) 107,165 294,631 143,759
L(36),> of YM or 1% (81),O(3) 99,849 336,365 211,874
L(96),> of YM or 1% (81),O(3) 101,762 458,302 320,597
L(60),> of YM or 1% (57),O(3) 109,831 267,213 107,792
YM (84),3%(12),2%(12),1%(6),O(6) 120,611 690,399 500,368
YM (84),3%(12),2%(12),1%(6),O(6) 128,324 351,792 152,477
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 133,054 771,864 480,344
L(48),> of YM or 1% (186),O(6) 120,801 555,650 304,742
L(48),> of YM or 1% (66),O(6) 111,121 351,097 166,433
L(120),> of YM or 1% (54),O(6) 98,669 299,696 155,456
L(48),> of YM or 1% (66),O(6) 100,247 485,545 320,240
YM (84),3%(12),2%(12),1%(6),O(6) 114,449 498,096 318,345
L(48),> of YM or 1% (66),O(6) 114,702 256,443 90,123
L(120),> of YM or 1% (117),O(3) 113,991 451,445 294,438
L(60),> of YM or 1% (57),O(3) 102,234 296,656 170,159
L(48),> of YM or 1% (66),O(6) 109,363 477,110 285,537
L(48),> of YM or 1% (66),O(6) 103,101 259,419 111,887
L(120),> of YM or 1% (54),O(6) 93,770 246,903 112,250
YM (84),3%(12),2%(12),1%(6),O(6) 103,494 212,971 70,607
L(96),> of YM or 1% (81),O(3) 93,030 185,373 68,620
L(48),> of YM or 1% (66),O(6) 95,489 351,290 198,227
L(96),> of YM or 1% (81),O(3) 92,136 184,121 67,816
L(120),> of YM or 1% (54),O(6) 91,358 259,300 128,297
L(60),> of YM or 1% (57),O(3) 85,850 265,581 136,739
L(120),> of YM or 1% (117),O(3) 110,839 584,166 421,146
YM (84),3%(12),2%(12),1%(6),O(6) 94,614 337,045 162,850
L(48),> of YM or 1% (66),O(6) 100,704 323,394 110,508
YM (60),2%(12),1%(6),O(6) 109,589 266,223 119,211
YM (84),3%(12),2%(12),1%(6),O(6) 100,704 441,048 237,228
L(60),> of YM or 1% (57),O(3) 91,671 200,650 64,338
YM (84),3%(12),2%(12),1%(6),O(6) 96,253 341,772 152,869
YM (84),3%(12),2%(12),1%(6),O(6) 93,731 202,014 68,079
L(26),DEF(88), O(6) 88,441 253,933 106,737
L(60),> of YM or 1% (57),O(3) 77,747 229,450 129,781
L(120),> of YM or 1% (54),O(6) 80,374 254,834 135,203
L(48),> of YM or 1% (66),O(6) 84,252 381,604 243,018
L(48),> of YM or 1% (66),O(6) 85,153 508,160 360,734
YM (84),3%(12),2%(12),1%(6),O(6) 92,489 548,766 344,387
YM (84),3%(12),2%(12),1%(6),O(6) 88,791 234,063 122,788
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 100,670 257,508 129,061
L(48),> of YM or 1% (66),O(6) 85,920 176,415 49,934
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 98,914 341,074 146,531
L(48),> of YM or 1% (66),O(6) 86,720 190,014 45,003
YM (84),3%(12),2%(12),1%(6),O(6) 83,543 201,900 81,079
YM (84),3%(12),2%(12),1%(6),O(6) 82,071 250,735 133,688
L(48),> of YM or 1% (66),O(6) 82,133 252,863 124,052
L(48),> of YM or 1% (66),O(6) 82,133 261,678 129,015
L(48),> of YM or 1% (66),O(6) 87,351 278,764 135,027
L(48),> of YM or 1% (66),O(6) 87,351 176,217 57,414
L(48),> of YM or 1% (66),O(6) 79,363 345,540 203,867
L(48),> of YM or 1% (66),O(6) 86,299 300,551 146,360
L(48),> of YM or 1% (66),O(6) 74,217 259,422 126,673
YM (84),3%(12),2%(12),1%(6),O(6) 84,599 344,078 205,679
L(48),> of YM or 1% (66),O(6) 77,302 200,690 81,118
L(48),> of YM or 1% (66),O(6) 78,112 174,660 44,846
L(240),> of YM or 1% (54),O(6) 80,877 242,158 109,237
L(60),> of YM or 1% (54),O(6) 64,951 208,760 118,040
YM (84),3%(12),2%(12),1%(6),O(6) 80,157 188,185 38,713
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 84,836 490,325 352,276
L(48),> of YM or 1% (66),O(6) 80,363 185,435 65,376
L(48),> of YM or 1% (66),O(6) 73,382 160,463 36,429
YM (84),3%(12),2%(12),1%(6),O(6) 82,611 253,888 145,308
L(48),> of YM or 1% (66),O(6) 66,039 133,740 43,292
L(24),DEF(93), O(3) 65,169 191,318 109,632
L(48),> of YM or 1% (66),O(6) 69,463 193,645 80,188
L(48),> of YM or 1% (66),O(6) 73,993 213,744 103,205
L(120),> of YM or 1% (54),O(6) 87,968 267,672 126,487
L(180),> of YM or 1% (54),O(6) 80,975 236,342 93,144
<CAPTION>
UNDERWRITING UNDERWRITING APPRAISED
PREPAYMENT RESTRICTIONS NCF DSCR VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
YM (84),3%(12),2%(12),1%(6),O(6) 232,528 1.78 1,800,000
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 178,057 1.25 2,185,000
L(48),> of YM or 1% (66),O(6) 190,758 1.47 1,700,000
YM (180),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 169,280 1.36 2,220,000
L(48),> of YM or 1% (66),O(6) 164,879 1.32 1,700,000
YM (60),2%(12),1%(6),O(6) 173,652 1.46 1,835,000
L(120),> of YM or 1% (54),O(6) 138,032 1.29 1,600,000
L(36),> of YM or 1% (81),O(3) 124,491 1.25 1,550,000
L(96),> of YM or 1% (81),O(3) 137,705 1.35 1,600,000
L(60),> of YM or 1% (57),O(3) 151,905 1.38 1,750,000
YM (84),3%(12),2%(12),1%(6),O(6) 162,031 1.34 1,800,000
YM (84),3%(12),2%(12),1%(6),O(6) 181,628 1.42 1,500,000
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 260,120 1.96 1,680,000
L(48),> of YM or 1% (186),O(6) 219,308 1.82 1,550,000
L(48),> of YM or 1% (66),O(6) 169,709 1.53 1,650,000
L(120),> of YM or 1% (54),O(6) 125,818 1.28 1,500,000
L(48),> of YM or 1% (66),O(6) 133,049 1.33 1,475,000
YM (84),3%(12),2%(12),1%(6),O(6) 153,151 1.34 1,500,000
L(48),> of YM or 1% (66),O(6) 156,468 1.36 1,500,000
L(120),> of YM or 1% (117),O(3) 157,007 1.38 1,550,000
L(60),> of YM or 1% (57),O(3) 126,497 1.24 1,500,000
L(48),> of YM or 1% (66),O(6) 166,973 1.53 1,470,000
L(48),> of YM or 1% (66),O(6) 130,396 1.26 1,457,000
L(120),> of YM or 1% (54),O(6) 122,377 1.31 1,400,000
YM (84),3%(12),2%(12),1%(6),O(6) 131,964 1.28 1,525,000
L(96),> of YM or 1% (81),O(3) 116,753 1.26 1,750,000
L(48),> of YM or 1% (66),O(6) 130,307 1.36 1,375,000
L(96),> of YM or 1% (81),O(3) 116,304 1.26 1,700,000
L(120),> of YM or 1% (54),O(6) 117,791 1.29 1,400,000
L(60),> of YM or 1% (57),O(3) 128,841 1.50 1,375,000
L(120),> of YM or 1% (117),O(3) 163,020 1.47 1,790,000
YM (84),3%(12),2%(12),1%(6),O(6) 158,195 1.67 1,600,000
L(48),> of YM or 1% (66),O(6) 203,286 2.02 1,900,000
YM (60),2%(12),1%(6),O(6) 136,262 1.24 1,500,000
YM (84),3%(12),2%(12),1%(6),O(6) 178,870 1.78 1,450,000
L(60),> of YM or 1% (57),O(3) 126,871 1.38 1,400,000
YM (84),3%(12),2%(12),1%(6),O(6) 173,627 1.80 1,300,000
YM (84),3%(12),2%(12),1%(6),O(6) 126,935 1.35 1,400,000
L(26),DEF(88), O(6) 127,131 1.44 1,450,000
L(60),> of YM or 1% (57),O(3) 99,669 1.28 1,300,000
L(120),> of YM or 1% (54),O(6) 110,929 1.38 1,200,000
L(48),> of YM or 1% (66),O(6) 125,122 1.49 1,200,000
L(48),> of YM or 1% (66),O(6) 124,226 1.46 1,900,000
YM (84),3%(12),2%(12),1%(6),O(6) 183,001 1.98 1,270,000
YM (84),3%(12),2%(12),1%(6),O(6) 101,675 1.15 1,170,000
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 123,047 1.22 1,365,000
L(48),> of YM or 1% (66),O(6) 113,675 1.32 1,300,000
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 183,743 1.86 1,550,000
L(48),> of YM or 1% (66),O(6) 133,160 1.54 1,160,000
YM (84),3%(12),2%(12),1%(6),O(6) 112,740 1.35 1,215,000
YM (84),3%(12),2%(12),1%(6),O(6) 105,847 1.29 1,120,000
L(48),> of YM or 1% (66),O(6) 118,040 1.44 1,250,000
L(48),> of YM or 1% (66),O(6) 121,892 1.48 1,250,000
L(48),> of YM or 1% (66),O(6) 135,337 1.55 1,200,000
L(48),> of YM or 1% (66),O(6) 108,569 1.24 1,220,000
L(48),> of YM or 1% (66),O(6) 109,573 1.38 1,200,000
L(48),> of YM or 1% (66),O(6) 142,191 1.65 1,100,000
L(48),> of YM or 1% (66),O(6) 120,693 1.63 1,080,000
YM (84),3%(12),2%(12),1%(6),O(6) 124,577 1.47 1,100,000
L(48),> of YM or 1% (66),O(6) 107,358 1.39 1,075,000
L(48),> of YM or 1% (66),O(6) 124,414 1.59 1,170,000
L(240),> of YM or 1% (54),O(6) 110,889 1.37 1,061,000
L(60),> of YM or 1% (54),O(6) 81,948 1.26 1,100,000
YM (84),3%(12),2%(12),1%(6),O(6) 143,583 1.79 1,225,000
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 118,433 1.40 1,600,000
L(48),> of YM or 1% (66),O(6) 115,559 1.44 1,150,000
L(48),> of YM or 1% (66),O(6) 118,034 1.61 1,080,000
YM (84),3%(12),2%(12),1%(6),O(6) 94,980 1.15 1,250,000
L(48),> of YM or 1% (66),O(6) 86,448 1.31 1,095,000
L(24),DEF(93), O(3) 81,685 1.25 1,050,000
L(48),> of YM or 1% (66),O(6) 105,369 1.52 1,050,000
L(48),> of YM or 1% (66),O(6) 95,166 1.29 1,050,000
L(120),> of YM or 1% (54),O(6) 129,145 1.47 1,200,000
L(180),> of YM or 1% (54),O(6) 134,798 1.66 1,040,000
<CAPTION>
APPRAISAL CURRENT
PREPAYMENT RESTRICTIONS YEAR LTV
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
YM (84),3%(12),2%(12),1%(6),O(6) 1995 69.95
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1996 57.11
L(48),> of YM or 1% (66),O(6) 1997 73.02
YM (180),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1996 55.55
L(48),> of YM or 1% (66),O(6) 1996 71.21
YM (60),2%(12),1%(6),O(6) 1996 65.80
L(120),> of YM or 1% (54),O(6) 1997 74.88
L(36),> of YM or 1% (81),O(3) 1997 77.27
L(96),> of YM or 1% (81),O(3) 1997 74.82
L(60),> of YM or 1% (57),O(3) 1997 68.33
YM (84),3%(12),2%(12),1%(6),O(6) 1996 66.32
YM (84),3%(12),2%(12),1%(6),O(6) 1996 78.71
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1996 69.47
L(48),> of YM or 1% (186),O(6) 1997 74.48
L(48),> of YM or 1% (66),O(6) 1997 69.25
L(120),> of YM or 1% (54),O(6) 1997 74.91
L(48),> of YM or 1% (66),O(6) 1997 74.87
YM (84),3%(12),2%(12),1%(6),O(6) 1996 73.44
L(48),> of YM or 1% (66),O(6) 1997 73.15
L(120),> of YM or 1% (117),O(3) 1997 69.75
L(60),> of YM or 1% (57),O(3) 1997 71.62
L(48),> of YM or 1% (66),O(6) 1997 72.66
L(48),> of YM or 1% (66),O(6) 1997 73.07
L(120),> of YM or 1% (54),O(6) 1997 74.88
YM (84),3%(12),2%(12),1%(6),O(6) 1995 68.17
L(96),> of YM or 1% (81),O(3) 1997 59.08
L(48),> of YM or 1% (66),O(6) 1997 74.81
L(96),> of YM or 1% (81),O(3) 1997 60.23
L(120),> of YM or 1% (54),O(6) 1997 72.96
L(60),> of YM or 1% (57),O(3) 1997 72.55
L(120),> of YM or 1% (117),O(3) 1997 55.71
YM (84),3%(12),2%(12),1%(6),O(6) 1997 62.05
L(48),> of YM or 1% (66),O(6) 1997 52.20
YM (60),2%(12),1%(6),O(6) 1996 65.91
YM (84),3%(12),2%(12),1%(6),O(6) 1996 68.06
L(60),> of YM or 1% (57),O(3) 1997 69.76
YM (84),3%(12),2%(12),1%(6),O(6) 1995 73.69
YM (84),3%(12),2%(12),1%(6),O(6) 1997 68.31
L(26),DEF(88), O(6) 1997 65.37
L(60),> of YM or 1% (57),O(3) 1997 72.17
L(120),> of YM or 1% (54),O(6) 1997 74.88
L(48),> of YM or 1% (66),O(6) 1997 74.77
L(48),> of YM or 1% (66),O(6) 1997 47.18
YM (84),3%(12),2%(12),1%(6),O(6) 1996 70.04
YM (84),3%(12),2%(12),1%(6),O(6) 1996 75.87
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1997 64.87
L(48),> of YM or 1% (66),O(6) 1997 67.49
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1996 56.15
L(48),> of YM or 1% (66),O(6) 1997 74.60
YM (84),3%(12),2%(12),1%(6),O(6) 1995 70.81
YM (84),3%(12),2%(12),1%(6),O(6) 1997 75.60
L(48),> of YM or 1% (66),O(6) 1997 67.56
L(48),> of YM or 1% (66),O(6) 1997 67.56
L(48),> of YM or 1% (66),O(6) 1997 70.33
L(48),> of YM or 1% (66),O(6) 1997 69.18
L(48),> of YM or 1% (66),O(6) 1997 69.01
L(48),> of YM or 1% (66),O(6) 1997 73.56
L(48),> of YM or 1% (66),O(6) 1997 74.76
YM (84),3%(12),2%(12),1%(6),O(6) 1996 73.04
L(48),> of YM or 1% (66),O(6) 1997 74.20
L(48),> of YM or 1% (66),O(6) 1997 68.11
L(240),> of YM or 1% (54),O(6) 1997 74.66
L(60),> of YM or 1% (54),O(6) 1997 71.77
YM (84),3%(12),2%(12),1%(6),O(6) 1997 63.28
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1995 47.80
L(48),> of YM or 1% (66),O(6) 1997 66.16
L(48),> of YM or 1% (66),O(6) 1997 70.11
YM (84),3%(12),2%(12),1%(6),O(6) 1996 60.29
L(48),> of YM or 1% (66),O(6) 1997 68.39
L(24),DEF(93), O(3) 1997 71.30
L(48),> of YM or 1% (66),O(6) 1997 71.26
L(48),> of YM or 1% (66),O(6) 1997 71.11
L(120),> of YM or 1% (54),O(6) 1997 62.14
L(180),> of YM or 1% (54),O(6) 1997 71.68
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN PER
SQ FT, UNITS SQ FT, UNITS INITIAL
REPAYMENT YEAR BEDS, PADS BEDS, PADS OCCUPANCY RESERVES UNDERWRITING
LTV BUILT OR ROOM OR ROOM PERCENTAGE AT CLOSING RESERVES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
59.53 1990 70 units 17,988 per unit 86 25,500 200
NAP 1973 73 units 17,095 per unit 95 16,050 271
62.92 1984 84 units 14,777 per unit 95 - 312
NAP 1977 188 units 6,560 per unit 99 10,125 200
61.23 1875 59 units 20,517 per unit 98 1,250 200
62.19 1991 42 units 28,749 per unit 95 - 239
48.85 1964 40 units 29,954 per unit 100 5,641 321
67.18 1984 80 units 14,972 per unit 94 42,438 200
56.97 1974 96 units 12,469 per unit 100 - 250
55.35 1951 11,176 sq.ft. 107 per sq. ft. 95 - 0.15
55.46 1922 140 units 8,527 per unit 99 132,826 200
67.30 1964 68 units 17,363 per unit 93 16,950 260
NAP 1964 157 units 7,433 per unit 88 21,686 200
NAP 1949 158 units 7,306 per unit 100 67,633 200
58.26 1943 50 units 22,852 per unit 94 913 299
46.43 1953 61 units 18,421 per unit 99 9,640 302
61.32 1979 128 units 8,627 per unit 98 5,976 252
62.23 1976 133 units 8,282 per unit 98 - 200
63.04 1965 48 units 22,861 per unit 100 3,226 205
NAP 1996 42 rooms 25,741 per room NAP - 4%
64.23 1968 47 units 22,857 per unit 100 - 250
62.19 1971 123 units 8,684 per unit 96 110,481 200
61.19 1984 56 units 19,012 per unit 95 15,741 306
48.85 1962 36 units 29,122 per unit 100 9,543 341
62.30 1986 52 units 19,993 per unit 94 10,000 200
37.37 1972 22 units 46,993 per unit 100 11,000 250
61.78 1964 92 units 11,180 per unit 98 15,516 247
38.10 1969 20 units 51,195 per unit 100 48,988 250
47.60 1961 36 units 28,373 per unit 97 21,212 367
63.56 1971 72 units 13,855 per unit 96 - 250
NAP 1987 57 rooms 17,494 per room NAP - 4%
50.79 1971 64 units 15,512 per unit 98 - 250
44.61 1953 48 units 20,663 per unit 100 25,988 200
60.89 1966 43 units 22,990 per unit 100 - 250
57.06 1970 100 units 9,869 per unit 94 10,000 250
56.86 1990 16,562 sq.ft. 59 per sq. ft. 87 1,500 0.20
67.37 1983 72 units 13,306 per unit 96 12,825 212
61.46 1991 28 units 34,155 per unit 100 - 250
54.07 1965 32,055 sq. ft. 30 per sq. ft. 72 74,105 0.15
62.66 1985 27 units 34,748 per unit 100 38,875 387
48.85 1963 38 units 23,648 per unit 95 10,600 229
62.03 1965 51 units 17,592 per unit 92 34,313 264
39.31 1972 116 units 7,727 per unit 100 - 200
58.97 1968 102 units 8,721 per unit 100 38,313 210
63.28 1966 48 units 18,494 per unit 98 13,500 200
NAP 1923 27 units 32,797 per unit 100 8,750 200
62.07 1989 30 units 29,246 per unit 97 1,068 427
NAP 1965 54 units 16,118 per unit 96 70,575 200
63.32 1968 42 units 20,604 per unit 100 7,368 364
64.26 1976 40 units 21,510 per unit 95 - 202
67.87 1986 56 units 15,119 per unit 98 - 200
56.84 1943 37 units 22,825 per unit 92 731 291
56.84 1943 37 units 22,825 per unit 95 731 291
60.42 1922 42 units 20,094 per unit 98 1,875 200
59.43 1958 34 units 24,822 per unit 100 2,015 301
57.59 1975 100 units 8,282 per unit 100 11,238 321
63.83 1968 60 units 13,486 per unit 95 - 200
61.58 1969 47 units 17,178 per unit 98 16,507 257
61.82 1966 52 units 15,450 per unit 100 27,260 266
62.20 1982 36 units 22,157 per unit 89 48,890 339
57.33 1953 27 units 29,516 per unit 100 450 200
NAP 1983 48 units 16,504 per unit 100 920 459
63.06 1972 34 units 23,193 per unit 91 6,250 258
52.98 1924 20 units 38,761 per unit 100 10,250 294
NAP 1966 80 units 9,559 per unit 100 8,317 245
57.24 1950 18 units 42,269 per unit 100 3,198 250
64.38 1995 30 units 25,240 per unit 87 1,438 200
51.62 1974 68 units 11,083 per unit 100 17,250 200
61.23 1997 20 units 37,441 per unit 85 345 200
62.57 1968 37 units 20,234 per unit 89 27,625 250
58.85 1963 32 units 23,383 per unit 97 675 253
60.11 1968 48 units 15,555 per unit 100 1,280 320
NAP 1965 43 units 17,340 per unit 95 8,662 280
NAP 1923 42 units 17,749 per unit 95 5,906 200
<CAPTION>
LARGEST RETAIL TENANT
----------------------------------------------------------------------------
REPAYMENT RESERVES AREA LEASED LEASE CONTROL
LTV COLLECTED NAME (SQ. FT.) EXP DATE NO.
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
59.53 per unit 367
NAP 110 per unit 375
62.92 312 per unit 503
NAP per unit 392
61.23 per unit 406
62.19 per unit 433
48.85 321 per unit 530
67.18 200 per unit 173
56.97 250 per unit 222
55.35 per sq.ft. Dallas Music 2,293 08/30/2002 235
55.46 per unit 393
67.30 260 per unit 358
NAP 196 per unit 360
NAP 200 per unit 342
58.26 219 per unit 507
46.43 302 per unit 518
61.32 347 per unit 538
62.23 per unit 372
63.04 205 per unit 411
NAP 4% of revenue 227
64.23 250 per unit 114
62.19 242 per unit 416
61.19 306 per unit 495
48.85 341 per unit 531
62.30 per unit 344
37.37 250 per unit 106
61.78 247 per unit 496
38.10 250 per unit 105
47.60 367 per unit 527
63.56 250 per unit 180
NAP 4% of revenue 159
50.79 200 per unit 453
44.61 200 per unit 405
60.89 0.15 per unit 353
57.06 per unit 396
56.86 per sq.ft. WIC Clinic 2,880 03/31/2000 101
67.37 per unit 351
61.46 per unit 450
54.07 0.23 per sq. ft. Goodwill Industries 9,147 10/31/1998 334
62.66 387 per unit 221
48.85 229 per unit 526
62.03 264 per unit 491
39.31 207 per unit Total Essance 860 07/01/1998 472
58.97 per unit 430
63.28 289 per unit 389
NAP per unit 435
62.07 427 per unit 456
NAP 165 per unit 354
63.32 364 per unit 458
64.26 per unit 361
67.87 per unit 449
56.84 237 per unit 505
56.84 237 per unit 506
60.42 200 per unit 409
59.43 270 per unit 413
57.59 321 per unit 525
63.83 200 per unit 400
61.58 257 per unit 494
61.82 per unit 541
62.20 339 per unit 490
57.33 200 per unit 470
NAP 230 per unit 471
63.06 91 per unit 535
52.98 per unit Pho Hoa Restuarant 16,904 12/31/2001 440
NAP per unit 370
57.24 208 per unit 402
64.38 200 per unit 504
51.62 174 per unit 387
61.23 200 per unit 513
62.57 250 per unit 203
58.85 253 per unit 517
60.11 320 per unit 461
NAP 280 per unit 532
NAP 200 per unit 478
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN CONTROL
SOURCE NO. PROPERTY NAME ADDRESS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DAIWA 423 Princess Apartments 1177 South Norton Ave.
DAIWA 485A 244 West 21st Street 244 West 21st Street
DAIWA 485B 248 West 21st Street 248 West 21st Street
DAIWA 434 Mount Vernon Manor Apartments 9225 Long Point
DAIWA 524 The Mase Building 6515 Main Street
DAIWA 452 The Samuel Building 7290 Samuel Drive
DAIWA 492 Ricciuti Court Apartments 445 Shenandoah Drive
DAIWA 421 470 Beacon Street 470 Beacon Street
DAIWA 424 Villa Martel Apartments 3602 E. Monte Vista Road
DAIWA 417 Mulberry Place Apartments 1661 Mulberry Street
DAIWA 407 Riverside Village 1608 8th Street NE
DAIWA 365 Crotona Avenue 2314 - 2318 Crotona Avenue
DAIWA 412 Bombay Apartments 11922 Burbank Boulevard
DAIWA 501 Kirlin Place Apartments 27 Old Lawrence Road
DAIWA 455 Hickory Apartments 320 South Jupiter Road
DAIWA 383 Malibu Apartments 3655 North First Avenue
DAIWA 443 Manor Apartments and Traymore Apartments 130 North McLean and 51 South McLean
DAIWA 457 Robinswood Apartments 800 North Hastings Street
DAIWA 419 Willow Pointe Apartments 3224 & 3212 Massard and 3207 & 3211 Enid
DAIWA 399 Altos Park Apartments 1119 - 1131 Mary Ellen, NE
DAIWA 469 McFarlin Condos 3412 McFarlin Blvd.
DAIWA 542 Pleasonton Valley Apartments 3735 Pleasanton Road
DAIWA 355 Coronado Heights 3066 North Balboa Avenue
DAIWA 476 Morris Hall Apartments 357 Morris Street
DAIWA 465 The Villages Apartment 1775 Leon Road
DAIWA 382 Papago Palms West 1835 North 51st Street
DAIWA 390 Village Phoenix Apartments 2620 North 40th Street
DAIWA 489 Trinity Court Condominiums 6526 - 6530 Ridgecrest
DAIWA 362A Shadyedge Apartments 810 - 812 South Negley Avenue
DAIWA 362B Tudor Court Apartments 131 Edgewood Avenue
DAIWA 356 Sheridan Apartments 78 Sheridan Drive
DAIWA 374 Western Crest Apartments 3901 Avenue O
DAIWA 463 Featherstone Apartments 7800 - 7820 Featherstone Drive
DAIWA 422 Meadow Lea Apartments 8217 Fulton Street
DAIWA 408 Woodlawn Apartments 3762 UpRiver Road
DAIWA 436 Tamarack Shadows Apartments 3101 North 36th Street
DAIWA 350 Shawnee Garden Apartments 6013 King Street
DAIWA 454 Rosewood Gardens 7 Charles Street
DAIWA 509 Lake Parker Apartments 730-810 East First Street
DAIWA 459 3301 Powelton Avenue 3301- 3315 Powelton Avenue
DAIWA 410 Vanowen Street Apartments 16215 - 16221 Vanowen Street
DAIWA 349 Broadway Inn Apartments 8477 East Broadway Boulevard
DAIWA 343 136 West 71st Street 136 West 71st Street
DAIWA 398 Canterbury Apartments 689 - 695 Farmington Avenue
DAIWA 336 Timbers North Apartments 2201 North 14th Street
DAIWA 441 Hillside Village Apartments 1401 East Dunlap
DAIWA 380 Bonnie Lynn Apartments 2020 West Hayward Avenue
DAIWA 371 Chestnut Hill Apartments 246 Chestnut Hill Road
DAIWA 529 La Mesa Apartments 752 La Mesa Avenue
DAIWA 508 Drexel Terrace Apartments 1356 & 1360 East Drexel Road
DAIWA 493 495 Washington Avenue 495 Washinton Avenue
DAIWA 451 Checker Auto Parts 2206 North Big Spring Street
DAIWA 347 Pacific Cove Apartments 3619 East Monterosa Street
DAIWA 429 Sunset Gardens 801 Las Lomas Avenue
DAIWA 446 Birch Row Apartments 1201 - 1211 Locust Street
DAIWA 395 Silver Club Apartments 5170 Silver Creek Drive
DAIWA 391 Woodside Court Apartments 103 - 105 South Narberth Avenue
DAIWA 357 Vista Verde Apartments 3620 Verde Drive
DAIWA 377 Morningside Bay Apartments 5995 Biscayne Boulevard
DAIWA 388 Abbey Arms Apartments 2010 Abbey Road
DAIWA 415 The Seville Apartments 1148 William Street
DAIWA 543 Castille Court Apartments 1811 Rogero Road
DAIWA 376 Winding Way Apartments 13266 Emily Road
DAIWA 373 Century Heights Apartments 1305 West Woodrow Road
DAIWA 385 2025-2027 Walnut Street 2025 - 2027 Walnut Street
DAIWA 346 Le Chateau Apartments 3144 Chateau Boulevard
DAIWA 479 Anna Hart Portfolio - 6 West 87th Street 6 West 87th Street
DAIWA 497 Village Meadows 9801 Meandering Way
DAIWA 437 Royal Poinciana 380 North Royal Poinciana Boulevard
DAIWA 512 Windsor Hall Apartments 179 Dwight Street
DAIWA 473 Hawthorne Apartments 1491 Hawthorne Avenue
DAIWA 462 Sunrise Apartments 190 Kirkwood Road, NE
DAIWA 418 Windsor Apartments 4421 Windsor Drive
DAIWA 438 37 Wales Street 37 Wales Street
<CAPTION>
LOAN ZIP ORIGINAL CURRENT % OF INITIAL
SOURCE CITY STATE CODE PROPERTY TYPE BALANCE BALANCE POOL BALANCE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DAIWA Los Angeles CA 90019 Multifamily 740,000 734,689 0.07
DAIWA New York NY 10011 Multifamily 250,386 249,941
DAIWA New York NY 10005 Multifamily 479,614 478,761
------------------------------------------------
730,000 728,702 0.07
DAIWA Houston TX 77055 Multifamily 735,000 726,800 0.07
DAIWA Trumbull CT 06611 Office 725,000 723,420 0.07
DAIWA Denver CO 80221 Office 725,000 721,127 0.07
DAIWA Penn Hills PA 15235 Multifamily 720,000 718,103 0.07
DAIWA Boston MA 02117 Multifamily 720,000 715,408 0.07
DAIWA Phoenix AZ 85008 Multifamily 720,000 715,408 0.07
DAIWA Charleston SC 29407 Multifamily 720,000 715,057 0.07
DAIWA Auburn WA 98022 Multifamily 720,000 714,990 0.07
DAIWA Bronx NY 10458 Multifamily 740,000 707,234 0.06
DAIWA North Hollywood CA 91607 Multifamily 710,000 705,060 0.06
DAIWA Pelham NH 03076 Multifamily 715,000 704,372 0.06
DAIWA Garland TX 75042 Multifamily 700,000 696,202 0.06
DAIWA Tucson AZ 85719 Multifamily 700,000 691,749 0.06
DAIWA Memphis TN 38104 Multifamily 688,000 683,729 0.06
DAIWA Orlando FL 32808 Multifamily 675,000 671,338 0.06
DAIWA Fort Smith AR 72903 Multifamily 665,000 661,194 0.06
DAIWA Alberquerque NM 87112 Multifamily 658,000 653,265 0.06
DAIWA University Park TX 75205 Multifamily 650,000 647,405 0.06
DAIWA San Antonio TX 78221 Multifamily 650,000 642,946 0.06
DAIWA Tucson AZ 85705 Multifamily 650,000 638,948 0.06
DAIWA Albany NY 12207 Multifamily 640,000 637,497 0.06
DAIWA Jacksonville FL 32211 Multifamily 635,000 632,167 0.06
DAIWA Phoenix AZ 85008 Multifamily 630,000 622,202 0.06
DAIWA Phoenix AZ 85008 Multifamily 630,000 620,636 0.06
DAIWA Dallas TX 75231 Multifamily 620,000 618,034 0.06
DAIWA Pittsburgh PA 15232 Multifamily 137,778 135,467
DAIWA Edgewood Borough PA 15218 Multifamily 482,222 474,133
------------------------------------------------
620,000 609,599 0.06
DAIWA Atlanta GA 30305 Multifamily 620,000 609,244 0.06
DAIWA Snyder TX 79549 Multifamily 625,000 603,035 0.06
DAIWA Raleigh NC 27612 Multifamily 600,000 597,323 0.05
DAIWA Houston TX 77022 Multifamily 600,000 596,268 0.05
DAIWA Corpus Christi TX 78408 Multifamily 600,000 595,825 0.05
DAIWA Phoenix AZ 85018 Multifamily 600,000 593,306 0.05
DAIWA Shawnee KS 66203 Multifamily 606,000 587,891 0.05
DAIWA Roselle NJ 07204 Multifamily 590,000 586,116 0.05
DAIWA Lakeland FL 33805 Multifamily 585,000 583,660 0.05
DAIWA Philadelphia PA 19104 Multifamily 580,000 577,527 0.05
DAIWA Van Nuys CA 94406 Multifamily 580,000 575,964 0.05
DAIWA Tucson AZ 85710 Multifamily 590,000 573,071 0.05
DAIWA New York NY 10023 Multifamily 568,000 562,613 0.05
DAIWA West Hartford CT 06107 Multifamily 566,000 560,954 0.05
DAIWA Ponca City OK 74602 Multifamily 550,000 548,740 0.05
DAIWA Phoenix AZ 85020 Multifamily 555,000 546,077 0.05
DAIWA Phoenix AZ 85021 Multifamily 550,000 537,974 0.05
DAIWA Marietta GA 30064 Multifamily 550,000 525,411 0.05
DAIWA Pomona CA 91766 Multifamily 523,000 522,191 0.05
DAIWA Tucson AZ 85706 Multifamily 525,000 520,097 0.05
DAIWA Brooklyn NY 11238 Multifamily 520,000 518,449 0.05
DAIWA Midland TX 79705 Retail 520,000 516,942 0.05
DAIWA Phoenix AZ 85018 Multifamily 520,000 510,017 0.05
DAIWA Pacific Palisades CA 90272 Multifamily 510,000 500,594 0.05
DAIWA Philadelphia PA 19107 Mixed Use 500,000 496,764 0.05
DAIWA Houston TX 77017 Multifamily 500,000 493,443 0.05
DAIWA Narberth PA 19072 Multifamily 500,000 493,309 0.05
DAIWA Colorado Springs CO 80910 Multifamily 500,000 492,118 0.05
DAIWA Miami FL 33137 Multifamily 500,000 489,067 0.04
DAIWA Norfolk VA 23518 Multifamily 495,000 488,428 0.04
DAIWA Bridgeport CT 06608 Multifamily 487,500 484,468 0.04
DAIWA Jacksonville FL 32211 Multifamily 485,000 482,836 0.04
DAIWA Dallas TX 75240 Multifamily 500,000 482,686 0.04
DAIWA Slaton TX 79364 Multifamily 500,000 482,166 0.04
DAIWA Philadelphia PA 19103 Multifamily 485,000 477,964 0.04
DAIWA East Point GA 30344 Multifamily 490,000 464,137 0.04
DAIWA New York NY 10024 Multifamily 464,000 463,175 0.04
DAIWA Fort Smith AR 72903 Multifamily 460,000 458,998 0.04
DAIWA Miami Springs FL 33166 Multifamily 470,000 457,831 0.04
DAIWA New Haven CT 06533 Multifamily 450,000 448,986 0.04
DAIWA Houston TX 77006 Multifamily 450,000 448,276 0.04
DAIWA Atlanta GA 30317 Multifamily 427,500 425,506 0.04
DAIWA Fort Smith AR 72904 Multifamily 425,000 422,567 0.04
DAIWA Dorchester MA 02124 Multifamily 415,000 411,771 0.04
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE % OF
INITIAL POOL BORROWER INTEREST ACCRUAL MORTGAGE ADMINISTRATIVE
BALANCE AFFILIATED CROSSED METHOD RATE COST RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
95.29 30/360 9.13 0.099
- ------------------------------------------------------------------------------------------------------------------------------------
95.36 Cntrl #'s 479, 480, 481, 482, 483, 484, 488 Actual/360 8.63 0.099
95.42 30/360 9.00 0.099
95.49 Actual/360 8.50 0.099
95.56 30/360 9.13 0.099
95.62 Actual/360 9.13 0.099
95.69 Actual/360 9.13 0.099
95.75 Actual/360 9.13 0.099
95.82 Actual/360 8.75 0.099
95.88 Actual/360 9.38 0.099
95.95 Cntrl # 366 30/360 9.75 0.039
96.01 Cntrl #'s 410, 411 Actual/360 9.38 0.099
96.08 30/360 9.50 0.099
96.14 Actual/360 8.75 0.099
96.21 Actual/360 9.13 0.099
96.27 30/360 10.00 0.099
96.33 Actual/360 8.75 0.099
96.39 Cntrl #'s 418, 420 yes Actual/360 9.13 0.099
96.45 Actual/360 9.63 0.099
96.51 Actual/360 8.38 0.099
96.57 Actual/360 9.25 0.099
96.63 30/360 9.75 0.099
96.69 Actual/360 8.50 0.099
96.75 Cntrl # 543 Actual/360 8.75 0.099
96.80 30/360 9.25 0.099
96.86 30/360 9.50 0.099
96.92 Actual/360 8.00 0.099
Cntrl # 362B
Cntrl # 362A
- ------------------------------------------------------------------------------------------------------------------------------------
96.97 30/360 9.25 0.039
97.03 30/360 9.63 0.099
97.08 Cntrl #'s 372, 373 30/360 9.13 0.099
97.14 Cntrl # 464 Actual/360 8.75 0.099
97.19 Actual/360 9.25 0.099
97.25 Actual/360 9.38 0.099
97.30 30/360 9.00 0.099
97.36 30/360 9.00 0.099
97.41 Actual/360 8.38 0.099
97.46 Actual/360 8.13 0.099
97.52 Actual/360 9.00 0.099
97.57 Cntrl #'s 411, 412 Actual/360 9.38 0.099
97.62 30/360 9.50 0.099
97.67 30/360 8.88 0.289
97.73 Actual/360 9.13 0.099
97.78 Actual/360 8.13 0.289
97.83 30/360 9.50 0.099
97.88 30/360 9.13 0.099
97.92 Cntrl #'s 346, 354, 381 30/360 8.63 0.099
97.97 Cntrl #'s 499,518, 526, 527, 528, 530, 531 Actual/360 7.58 0.099
98.02 Actual/360 8.63 0.289
98.07 Actual/360 8.38 0.039
98.12 30/360 9.50 0.099
98.16 30/360 9.13 0.099
98.21 30/360 9.13 0.099
98.25 30/360 9.75 0.099
98.30 Cntrl # 396 yes 30/360 9.00 0.099
98.34 30/360 8.88 0.099
98.39 30/360 9.88 0.099
98.43 30/360 9.13 0.099
98.48 Cntrl #'s 386, 428 30/360 9.38 0.099
98.52 Actual/360 9.25 0.099
98.57 Cntrl # 465 Actual/360 8.75 0.099
98.61 30/360 9.25 0.099
98.66 Cntrl #'s 372, 374 30/360 9.00 0.099
98.70 30/360 9.25 0.099
98.74 Cntrl #'s 354, 371, 381 30/360 8.88 0.099
98.79 Cntrl #'s 480, 481, 482, 483, 484, 485, 488 Actual/360 8.63 0.099
98.83 Cntrl # 495 Actual/360 8.50 0.099
98.87 30/360 9.63 0.099
98.91 Actual/360 8.25 0.289
98.95 Actual/360 8.63 0.099
98.99 Actual/360 8.50 0.099
99.03 Cntrl #'s 419, 420 yes Actual/360 9.13 0.099
99.07 Cntrl #'s 384, 440 30/360 9.38 0.099
<CAPTION>
REM
CUMULATIVE % OF ORIG REM AMORT AMORT
INITIAL POOL TERM TERM TERM TERM ORIGINATION REPAYMENT BALLOON/REPAYMENT
BALANCE (MOS.) (MOS.) (MOS.) (MOS.) DATE DATE BALANCE MATURITY TERM
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
95.29 120 112 300 292 06/20/97 07/01/2007 614,017 Balloon
- -----------------------------------------------------------------------------------------------------------------------------------
95.36 120 117 360 357 11/18/97 12/01/2007 662,203 Balloon
95.42 120 108 300 288 02/21/97 03/01/2007 608,134 Balloon
95.49 120 118 300 298 12/24/97 01/01/2008 605,801 Balloon
95.56 60 54 300 294 07/31/97 09/01/2002 677,075 Balloon
95.62 120 117 300 297 11/14/97 12/01/2007 612,003 Balloon
95.69 120 112 300 293 06/19/97 07/01/2007 612,256 Balloon
95.75 120 112 300 293 06/30/97 07/01/2007 612,256 Balloon
95.82 120 112 300 293 06/16/97 07/01/2007 606,134 Balloon
95.88 120 111 300 292 05/16/97 06/01/2007 616,131 Balloon
95.95 240 211 240 211 09/29/95 10/01/2015 NAP Fully Amortizing
96.01 120 111 300 292 05/06/97 06/01/2007 607,574 Balloon
96.08 120 103 300 283 09/20/96 10/01/2006 598,236 Balloon
96.14 120 114 300 294 08/05/97 09/01/2007 588,993 Balloon
96.21 121 107 300 287 12/24/96 02/01/2007 593,514 Balloon
96.27 300 292 300 292 06/05/97 07/01/2022 NAP Fully Amortizing
96.33 120 114 300 294 08/12/97 09/01/2007 567,958 Balloon
96.39 120 113 300 293 07/03/97 08/01/2007 565,329 Balloon
96.45 120 110 300 290 04/15/97 05/01/2007 566,869 Balloon
96.51 120 116 300 296 10/02/97 11/01/2007 541,284 Balloon
96.57 120 107 300 287 01/13/97 02/01/2007 553,935 Balloon
96.63 120 100 300 280 05/30/96 07/01/2006 546,782 Balloon
96.69 120 116 300 296 10/30/97 11/01/2007 534,809 Balloon
96.75 120 115 300 295 09/26/97 10/01/2007 534,407 Balloon
96.80 84 62 360 338 04/18/96 05/01/2003 591,611 Balloon
96.86 120 103 300 283 09/26/96 10/01/2006 527,119 Balloon
96.92 120 117 300 297 11/04/97 12/01/2007 510,936 Balloon
- -----------------------------------------------------------------------------------------------------------------------------------
96.97 120 91 360 331 09/15/95 10/01/2005 556,913 Balloon
97.03 60 40 300 280 06/06/96 07/01/2001 581,818 Balloon
97.08 240 218 240 218 04/04/96 05/01/2016 NAP Fully Amortizing
97.14 120 115 300 295 09/25/97 10/01/2007 504,951 Balloon
97.19 120 112 300 292 06/12/97 07/01/2007 511,892 Balloon
97.25 120 111 300 291 05/21/97 06/01/2007 513,443 Balloon
97.30 120 108 300 288 02/05/97 03/01/2007 496,435 Balloon
97.36 84 54 300 270 08/29/95 09/01/2002 543,068 Balloon
97.41 120 113 300 293 07/31/97 08/01/2007 491,465 Balloon
97.46 120 118 300 298 12/12/97 01/01/2008 483,713 Balloon
97.52 120 115 300 295 09/05/97 10/01/2007 491,407 Balloon
97.57 120 111 300 291 05/06/97 06/01/2007 496,328 Balloon
97.62 120 89 300 269 07/31/95 08/01/2005 493,650 Balloon
97.67 85 69 360 344 10/22/96 12/01/2003 530,511 Balloon
97.73 120 109 300 289 03/13/97 04/01/2007 481,227 Balloon
97.78 120 118 300 298 12/24/97 01/01/2008 454,773 Balloon
97.83 240 229 240 229 03/18/97 04/01/2017 NAP Fully Amortizing
97.88 120 97 300 277 03/28/96 04/01/2006 456,365 Balloon
97.92 240 214 240 214 12/04/95 01/01/2016 NAP Fully Amortizing
97.97 180 179 300 299 01/14/98 02/01/2013 340,676 Balloon
98.02 120 114 240 234 08/22/97 09/01/2007 378,052 Balloon
98.07 120 117 300 297 11/12/97 12/01/2007 433,105 Balloon
98.12 300 293 300 293 07/09/97 08/01/2022 NAP Fully Amortizing
98.16 120 88 360 328 06/30/95 07/01/2005 466,070 Balloon
98.21 240 228 240 228 02/26/97 03/01/2017 NAP Fully Amortizing
98.25 60 52 300 292 06/03/97 07/01/2002 469,753 Balloon
98.30 120 106 300 286 12/11/96 01/01/2007 413,697 Balloon
98.34 120 106 300 286 12/05/96 01/01/2007 412,503 Balloon
98.39 120 101 300 281 07/03/96 08/01/2006 421,710 Balloon
98.43 120 97 300 277 03/19/96 04/01/2006 414,878 Balloon
98.48 120 105 300 285 11/04/96 12/01/2006 413,029 Balloon
98.52 120 112 300 292 06/09/97 07/01/2007 415,913 Balloon
98.57 120 115 300 295 09/26/97 10/01/2007 408,168 Balloon
98.61 240 218 240 218 04/12/96 05/01/2016 NAP Fully Amortizing
98.66 240 218 240 218 04/04/96 05/01/2016 NAP Fully Amortizing
98.70 120 104 300 284 10/07/96 11/01/2006 403,565 Balloon
98.74 240 209 240 209 07/10/95 08/01/2015 NAP Fully Amortizing
98.79 120 117 360 357 11/18/97 12/01/2007 420,908 Balloon
98.83 120 118 300 298 12/03/97 01/01/2008 384,372 Balloon
98.87 180 170 180 170 04/11/97 05/01/2012 NAP Fully Amortizing
98.91 120 118 300 298 12/24/97 01/01/2008 373,404 Balloon
98.95 120 116 300 296 10/10/97 11/01/2007 377,330 Balloon
98.99 120 115 300 295 09/18/97 10/01/2007 357,322 Balloon
99.03 120 113 300 293 07/03/97 08/01/2007 361,301 Balloon
99.07 120 111 300 291 05/08/97 06/01/2007 346,277 Balloon
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL UNDERWRITING UNDERWRITING
DEBT TOTAL TOTAL
PREPAYMENT RESTRICTIONS SERVICE REVENUE EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
L(48),> of YM or 1% (66),O(6) 75,282 187,097 75,573
61,790 24,686
107,495 37,941
- ------------------------------------------------------------------------------------------------------------------------------------
L(48),> of YM or 1% (66),O(6) 68,134 169,285 62,627
YM (84),3%(12),2%(12),1%(6),O(6) 74,017 371,553 262,028
L(36), 5%(12),4%(12),3%(12),2%(36),1%(6),O(6) 70,055 197,256 84,125
YM (36),2%(12),1%(6),O(6) 73,756 283,206 150,981
L(48),> of YM or 1% (66),O(6) 73,248 201,646 58,633
L(48),> of YM or 1% (66),O(6) 73,248 145,260 41,213
L(48),> of YM or 1% (66),O(6) 73,248 218,468 98,329
L(48),> of YM or 1% (66),O(6) 71,033 203,752 86,341
L(48),> of YM or 1% (66),O(6) 74,738 171,732 66,129
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 84,228 372,665 179,505
L(48),> of YM or 1% (66),O(6) 73,700 172,847 64,505
L(48),> of YM or 1% (66),O(6) 74,963 150,432 48,056
L(48),> of YM or 1% (66),O(6) 69,060 338,672 181,724
L(48),> of YM or 1% (67),O(6) 71,213 252,257 136,206
YM (180),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 75,022 215,108 94,234
L(48),> of YM or 1% (66),O(6) 66,594 150,854 57,154
L(48),> of YM or 1% (66),O(6) 67,652 267,869 106,753
L(48),> of YM or 1% (66),O(6) 69,674 155,376 56,123
L(48),> of YM or 1% (66),O(6) 62,152 115,283 34,806
L(48),> of YM or 1% (66),O(6) 66,798 290,456 192,254
YM (84),3%(12),2%(12),1%(6),O(6) 69,509 234,148 118,956
L(48),> of YM or 1% (66),O(6) 61,841 176,845 82,247
L(48),> of YM or 1% (66),O(6) 62,647 138,879 36,329
YM (60),2%(12),1%(6),O(6) 62,194 128,182 50,103
YM (84),3%(12),2%(12),1%(6),O(6) 66,051 229,896 136,393
L(48),> of YM or 1% (66),O(6) 57,423 143,722 41,737
169,082 87,619
169,082 87,619
- ------------------------------------------------------------------------------------------------------------------------------------
YM (84),3%(12),2%(12),1%(6),O(6) 61,207 169,082 87,619
YM (36),2%(12),1%(6),O(6) 65,651 139,593 55,977
YM (120),2%(24),1%(36),O(60) 68,084 242,946 119,268
L(48),> of YM or 1% (66),O(6) 59,194 114,256 33,899
L(48),> of YM or 1% (66),O(6) 61,659 215,398 102,950
L(48),> of YM or 1% (66),O(6) 62,282 224,420 124,593
YM (84),3%(12),2%(12),1%(6),O(6) 60,422 193,470 83,582
YM (60),2%(12),1%(6),O(6) 61,026 238,502 132,206
L(48),> of YM or 1% (66),O(6) 56,415 180,933 93,275
L(48),> of YM or 1% (66),O(6) 54,764 175,035 85,710
L(48),> of YM or 1% (66),O(6) 58,408 206,812 119,698
L(48),> of YM or 1% (66),O(6) 60,206 133,403 48,866
YM (84),3%(12),2%(12),1%(6),O(6) 61,858 154,633 58,607
L(48),> of YM or 1% (31),O(6) 54,231 118,720 38,229
L(48),> of YM or 1% (66),O(6) 57,581 243,781 161,546
L(48),> of YM or 1% (66),O(6) 51,488 282,360 196,950
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 62,080 173,703 78,629
YM (84),3%(12),2%(12),1%(6),O(6) 55,953 169,343 82,042
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 57,800 226,073 95,752
L(120),> of YM or 1% (54),O(6) 46,706 120,600 49,643
L(48),> of YM or 1% (66),O(6) 55,172 130,518 47,676
L(48),> of YM or 1% (66),O(6) 49,722 208,333 101,548
YM (180),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 54,519 70,119 -
YM (84),3%(12),2%(12),1%(6),O(6) 50,771 148,510 64,184
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 55,556 152,874 42,543
YM (36),2%(12),1%(6),O(6) 53,468 148,261 77,738
YM (84),3%(12),2%(12),1%(6),O(6) 50,352 196,058 96,496
YM (84),3%(12),2%(12),1%(6),O(6) 49,839 148,489 58,942
YM (84),3%(12),2%(12),1%(6),O(6) 53,994 150,823 63,662
YM (84),3%(12),2%(12),1%(6),O(6) 50,866 166,359 93,398
YM (84),3%(12),2%(12),1%(6),O(6) 51,382 167,651 81,666
L(48),> of YM or 1% (66),O(6) 50,098 142,642 68,422
L(48),> of YM or 1% (66),O(6) 47,849 219,385 135,638
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 54,952 200,039 112,783
YM (120),2%(24),1%(36),O(60) 53,984 203,713 98,843
YM (84),3%(12),2%(12),1%(6),O(6) 49,841 125,871 59,353
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 52,432 268,477 153,426
L(48),> of YM or 1% (66),O(6) 43,307 109,072 49,624
L(48),> of YM or 1% (66),O(6) 44,448 144,295 78,083
YM (120),5%(12),4%(12),3%(12),2%(12),1%(6),O(6) 59,320 142,472 55,671
L(48),> of YM or 1% (66),O(6) 42,576 153,604 78,798
L(48),> of YM or 1% (66),O(6) 43,938 175,299 102,095
L(48),> of YM or 1% (66),O(6) 41,308 117,515 39,362
L(48),> of YM or 1% (66),O(6) 43,236 203,755 111,922
YM (84),3%(12),2%(12),1%(6),O(6) 43,078 89,452 18,633
<CAPTION>
UNDERWRITING UNDERWRITING APPRAISED
PREPAYMENT RESTRICTIONS NCF DSCR VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
L(48),> of YM or 1% (66),O(6) 103,565 1.38 1,000,000
33,192 355,000
64,934 680,000
- --------------------------------------------------------------------------------------------------------------------------------
L(48),> of YM or 1% (66),O(6) 98,126 1.44 1,035,000
YM (84),3%(12),2%(12),1%(6),O(6) 88,244 1.19 1,000,000
L(36), 5%(12),4%(12),3%(12),2%(36),1%(6),O(6) 100,719 1.44 1,200,000
YM (36),2%(12),1%(6),O(6) 94,961 1.29 1,100,000
L(48),> of YM or 1% (66),O(6) 133,413 1.82 1,050,000
L(48),> of YM or 1% (66),O(6) 101,683 1.39 1,200,000
L(48),> of YM or 1% (66),O(6) 110,817 1.51 1,020,000
L(48),> of YM or 1% (66),O(6) 109,411 1.54 1,250,000
L(48),> of YM or 1% (66),O(6) 96,227 1.29 1,000,000
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 170,601 2.03 1,050,000
L(48),> of YM or 1% (66),O(6) 103,161 1.40 1,000,000
L(48),> of YM or 1% (66),O(6) 97,976 1.31 1,090,000
L(48),> of YM or 1% (66),O(6) 134,250 1.94 1,200,000
L(48),> of YM or 1% (67),O(6) 94,470 1.33 1,100,000
YM (180),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 103,564 1.38 900,000
L(48),> of YM or 1% (66),O(6) 86,058 1.29 900,000
L(48),> of YM or 1% (66),O(6) 143,511 2.12 900,000
L(48),> of YM or 1% (66),O(6) 94,453 1.36 900,000
L(48),> of YM or 1% (66),O(6) 78,211 1.26 870,000
L(48),> of YM or 1% (66),O(6) 84,576 1.27 936,000
YM (84),3%(12),2%(12),1%(6),O(6) 102,026 1.47 1,000,000
L(48),> of YM or 1% (66),O(6) 88,398 1.43 870,000
L(48),> of YM or 1% (66),O(6) 96,550 1.54 850,000
YM (60),2%(12),1%(6),O(6) 71,830 1.15 855,000
YM (84),3%(12),2%(12),1%(6),O(6) 82,753 1.25 985,000
L(48),> of YM or 1% (66),O(6) 94,909 1.65 900,000
71,531 180,000
71,531 630,000
- --------------------------------------------------------------------------------------------------------------------------------
YM (84),3%(12),2%(12),1%(6),O(6) 71,531 1.17 810,000
YM (36),2%(12),1%(6),O(6) 80,216 1.22 840,000
YM (120),2%(24),1%(36),O(60) 110,125 1.62 930,000
L(48),> of YM or 1% (66),O(6) 77,157 1.30 835,000
L(48),> of YM or 1% (66),O(6) 103,248 1.67 815,000
L(48),> of YM or 1% (66),O(6) 85,784 1.38 810,000
YM (84),3%(12),2%(12),1%(6),O(6) 100,888 1.67 1,100,000
YM (60),2%(12),1%(6),O(6) 93,702 1.54 980,000
L(48),> of YM or 1% (66),O(6) 82,658 1.47 910,000
L(48),> of YM or 1% (66),O(6) 77,547 1.42 780,000
L(48),> of YM or 1% (66),O(6) 75,301 1.29 850,000
L(48),> of YM or 1% (66),O(6) 79,459 1.32 800,000
YM (84),3%(12),2%(12),1%(6),O(6) 84,055 1.36 775,000
L(48),> of YM or 1% (31),O(6) 77,296 1.43 870,000
L(48),> of YM or 1% (66),O(6) 72,209 1.25 760,000
L(48),> of YM or 1% (66),O(6) 65,210 1.27 1,150,000
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 88,038 1.42 800,000
YM (84),3%(12),2%(12),1%(6),O(6) 79,242 1.42 775,000
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 122,321 2.12 760,000
L(120),> of YM or 1% (54),O(6) 66,957 1.43 700,000
L(48),> of YM or 1% (66),O(6) 77,042 1.40 770,000
L(48),> of YM or 1% (66),O(6) 95,284 1.92 700,000
YM (180),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 65,378 1.20 800,000
YM (84),3%(12),2%(12),1%(6),O(6) 73,543 1.45 715,000
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 105,515 1.90 1,300,000
YM (36),2%(12),1%(6),O(6) 64,913 1.21 750,000
YM (84),3%(12),2%(12),1%(6),O(6) 86,050 1.71 740,000
YM (84),3%(12),2%(12),1%(6),O(6) 86,437 1.73 750,000
YM (84),3%(12),2%(12),1%(6),O(6) 82,361 1.53 675,000
YM (84),3%(12),2%(12),1%(6),O(6) 68,161 1.34 800,000
YM (84),3%(12),2%(12),1%(6),O(6) 78,345 1.52 705,000
L(48),> of YM or 1% (66),O(6) 66,483 1.33 650,000
L(48),> of YM or 1% (66),O(6) 66,317 1.39 685,000
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 77,456 1.41 730,000
YM (120),2%(24),1%(36),O(60) 89,663 1.66 780,000
YM (84),3%(12),2%(12),1%(6),O(6) 62,885 1.26 670,000
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 105,451 2.01 775,000
L(48),> of YM or 1% (66),O(6) 56,676 1.31 625,000
L(48),> of YM or 1% (66),O(6) 58,212 1.31 615,000
YM (120),5%(12),4%(12),3%(12),2%(12),1%(6),O(6) 80,401 1.36 800,000
L(48),> of YM or 1% (66),O(6) 68,206 1.60 715,000
L(48),> of YM or 1% (66),O(6) 58,649 1.33 670,000
L(48),> of YM or 1% (66),O(6) 70,966 1.72 570,000
L(48),> of YM or 1% (66),O(6) 74,591 1.73 700,000
YM (84),3%(12),2%(12),1%(6),O(6) 67,822 1.57 530,000
<CAPTION>
APPRAISAL CURRENT
PREPAYMENT RESTRICTIONS YEAR LTV
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
L(48),> of YM or 1% (66),O(6) 1997 73.47
- ---------------------------------------------------------------------------------------------
L(48),> of YM or 1% (66),O(6) 1996 70.41
YM (84),3%(12),2%(12),1%(6),O(6) 1996 72.68
L(36), 5%(12),4%(12),3%(12),2%(36),1%(6),O(6) 1997 60.29
YM (36),2%(12),1%(6),O(6) 1997 65.56
L(48),> of YM or 1% (66),O(6) 1997 68.39
L(48),> of YM or 1% (66),O(6) 1997 59.62
L(48),> of YM or 1% (66),O(6) 1997 70.14
L(48),> of YM or 1% (66),O(6) 1997 57.20
L(48),> of YM or 1% (66),O(6) 1997 71.50
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1995 67.36
L(48),> of YM or 1% (66),O(6) 1997 70.51
L(48),> of YM or 1% (66),O(6) 1996 64.62
L(48),> of YM or 1% (66),O(6) 1997 58.02
L(48),> of YM or 1% (67),O(6) 1996 62.89
YM (180),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1997 75.97
L(48),> of YM or 1% (66),O(6) 1997 74.59
L(48),> of YM or 1% (66),O(6) 1997 73.47
L(48),> of YM or 1% (66),O(6) 1997 72.58
L(48),> of YM or 1% (66),O(6) 1997 74.41
L(48),> of YM or 1% (66),O(6) 1996 68.69
YM (84),3%(12),2%(12),1%(6),O(6) 1996 63.89
L(48),> of YM or 1% (66),O(6) 1997 73.28
L(48),> of YM or 1% (66),O(6) 1997 74.37
YM (60),2%(12),1%(6),O(6) 1996 72.77
YM (84),3%(12),2%(12),1%(6),O(6) 1996 63.01
L(48),> of YM or 1% (66),O(6) 1997 68.67
1997
1995
- ---------------------------------------------------------------------------------------------
YM (84),3%(12),2%(12),1%(6),O(6) 1997 75.26
YM (36),2%(12),1%(6),O(6) 1996 72.53
YM (120),2%(24),1%(36),O(60) 1996 64.84
L(48),> of YM or 1% (66),O(6) 1997 71.54
L(48),> of YM or 1% (66),O(6) 1997 73.16
L(48),> of YM or 1% (66),O(6) 1997 73.56
YM (84),3%(12),2%(12),1%(6),O(6) 1997 53.94
YM (60),2%(12),1%(6),O(6) 1995 59.99
L(48),> of YM or 1% (66),O(6) 1997 64.41
L(48),> of YM or 1% (66),O(6) 1997 74.83
L(48),> of YM or 1% (66),O(6) 1997 67.94
L(48),> of YM or 1% (66),O(6) 1997 72.00
YM (84),3%(12),2%(12),1%(6),O(6) 1995 73.94
L(48),> of YM or 1% (31),O(6) 1996 64.75
L(48),> of YM or 1% (66),O(6) 1996 73.81
L(48),> of YM or 1% (66),O(6) 1997 47.72
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1997 68.26
YM (84),3%(12),2%(12),1%(6),O(6) 1996 69.42
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1995 69.13
L(120),> of YM or 1% (54),O(6) 1997 74.60
L(48),> of YM or 1% (66),O(6) 1997 67.55
L(48),> of YM or 1% (66),O(6) 1997 74.06
YM (180),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1997 64.62
YM (84),3%(12),2%(12),1%(6),O(6) 1995 71.33
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1996 38.51
YM (36),2%(12),1%(6),O(6) 1997 66.24
YM (84),3%(12),2%(12),1%(6),O(6) 1996 66.68
YM (84),3%(12),2%(12),1%(6),O(6) 1996 65.77
YM (84),3%(12),2%(12),1%(6),O(6) 1996 72.91
YM (84),3%(12),2%(12),1%(6),O(6) 1996 61.13
YM (84),3%(12),2%(12),1%(6),O(6) 1996 69.28
L(48),> of YM or 1% (66),O(6) 1997 74.53
L(48),> of YM or 1% (66),O(6) 1997 70.49
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1996 66.12
YM (120),2%(24),1%(36),O(60) 1996 61.82
YM (84),3%(12),2%(12),1%(6),O(6) 1996 71.34
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1995 59.89
L(48),> of YM or 1% (66),O(6) 1996 74.11
L(48),> of YM or 1% (66),O(6) 1997 74.63
YM (120),5%(12),4%(12),3%(12),2%(12),1%(6),O(6) 1997 57.23
L(48),> of YM or 1% (66),O(6) 1997 62.80
L(48),> of YM or 1% (66),O(6) 1997 66.91
L(48),> of YM or 1% (66),O(6) 1997 74.65
L(48),> of YM or 1% (66),O(6) 1997 60.37
YM (84),3%(12),2%(12),1%(6),O(6) 1997 77.69
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN PER
SQ FT, UNITS SQ FT, UNITS INITIAL
REPAYMENT YEAR BEDS, PADS BEDS, PADS OCCUPANCY RESERVES UNDERWRITING
LTV BUILT OR ROOM OR ROOM PERCENTAGE AT CLOSING RESERVES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
61.40 1964 33 units 22,263 per unit 91 2,313 241
1944 8 units 31,243 per unit 100 489
1920 15 units 31,917 per unit 100 308
- ------------------------------------------------------------------------------------------------------------------------------------
63.98 23 units 31,683 per unit 100 1,711 371
60.81 1964 81 units 8,973 per unit 94 - 263
50.48 1980 24,000 sq. ft. 30 per sq. ft. 75 3,587 0.23
61.55 1971 32,766 sq. ft. 22 per sq. ft. 96 6,250 0.15
58.29 1977 48 units 14,960 per unit 92 1,750 200
51.02 1910 10 units 71,541 per unit 100 - 236
60.03 1974 37 units 19,335 per unit 97 777 252
48.49 1988 40 units 17,876 per unit 100 667 200
61.61 1968 30 units 23,833 per unit 100 783 313
NAP 1927 49 units 14,433 per unit 98 116,625 460
60.76 1960 25 units 28,202 per unit 100 4,213 207
54.88 1995 22 units 32,017 per unit 95 - 200
49.08 1966 68 units 10,238 per unit 96 4,518 334
53.96 1964 64 units 10,809 per unit 98 6,297 337
NAP 1929 32 units 21,367 per unit 97 97,461 541
63.11 1966 33 units 20,344 per unit 100 675 200
62.81 1979 74 units 8,935 per unit 93 8,205 238
62.99 1973 24 units 27,219 per unit 100 400 200
62.22 1984 7 units 92,486 per unit 100 189 324
59.18 1972 64 units 10,046 per unit 97 5,011 213
54.68 1977 57 units 11,210 per unit 100 9,375 231
61.47 1934 31 units 20,564 per unit 100 5,725 200
62.87 1962 30 units 21,072 per unit 100 16,426 200
69.19 1994 25 units 24,888 per unit 87 - 250
53.51 1969 43 units 14,433 per unit 95 23,625 250
56.77 1982 26 units 23,771 per unit 88 1,075 272
1925 6 units 22,578 per unit 100 - 64
1932 24 units 19,756 per unit 98 - 202
- ------------------------------------------------------------------------------------------------------------------------------------
68.75 30 units 20,320 per unit - 331
69.26 1965 17 units 35,838 per unit 100 13,485 200
NAP 1985 53 units 11,378 per unit 91 1,350 256
60.47 1985 16 units 37,333 per unit 100 4,128 200
62.81 1962 46 units 12,962 per unit 98 767 200
63.39 1969 46 units 12,953 per unit 98 12,423 305
45.13 1979 45 units 13,185 per unit 98 13,438 200
55.42 1962 48 units 12,248 per unit 100 90,000 262
54.01 1965 25 units 23,445 per unit 92 - 200
62.01 1972 40 units 14,591 per unit 95 4,386 294
57.81 1900 42 units 13,751 per unit 97 984 281
62.04 1963 24 units 23,999 per unit 100 1,960 230
63.70 1981 49 units 11,695 per unit 85 - 244
61.82 1912 10 units 56,261 per unit 100 6,875 320
63.32 1925 30 units 18,698 per unit 100 7,258 334
39.55 1968 100 units 5,487 per unit 75 47,498 202
NAP 1961 32 units 17,065 per unit 97 6,250 220
58.89 1961 34 units 15,823 per unit 91 - 237
NAP 1969 40 units 13,135 per unit 100 8,700 200
48.67 1962 20 units 26,110 per unit 100 9,458 200
49.10 1983 29 units 17,934 per unit 93 483 200
61.87 1945 41 units 12,645 per unit 100 11,250 200
NAP 1996 8,000 sq. ft. 65 per sq. ft. 100 - 0.15
65.18 1979 28 units 18,215 per unit 93 - 385
NAP 1959 14 units 35,757 per unit 100 3,750 344
62.63 1858 17,890 sq. ft. 28 per sq. ft. 89 11,700 0.31
55.90 1960 46 units 10,727 per unit 100 10,372 294
55.00 1941 15 units 32,887 per unit 88 8,445 207
62.48 1972 24 units 20,505 per unit 96 1,125 200
51.86 1974 24 units 20,378 per unit 87 8,895 200
58.59 1964 35 units 13,955 per unit 94 29,100 218
63.99 1988 20 units 24,223 per unit 100 23,145 387
59.59 1969 55 units 8,779 per unit 96 66,729 317
NAP 1979 50 units 9,654 per unit 100 - 196
NAP 1984 48 units 10,045 per unit 92 1,206 317
60.23 1900 17 units 28,116 per unit 100 7,250 214
NAP 1970 48 units 9,670 per unit 96 41,790 200
67.35 1904 11 units 42,107 per unit 100 3,731 252
62.50 1980 40 units 11,475 per unit 95 667 200
NAP 1948 32 units 14,307 per unit 100 2,188 200
52.22 1928 33 units 13,606 per unit 97 550 200
56.32 1965 45 units 9,962 per unit 98 11,524 323
62.69 1967 32 units 13,297 per unit 97 913 225
51.61 1975 59 units 7,162 per unit 93 7,561 292
65.34 1990 10 units 41,177 per unit 100 5,938 300
<CAPTION>
LARGEST RETAIL TENANT
----------------------------------------------------------------------------
REPAYMENT RESERVES AREA LEASED LEASE CONTROL
LTV COLLECTED NAME (SQ. FT.) EXP DATE NO.
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
61.40 241 per unit 423
267 485A
374 485B
- ------------------------------------------------------------------------------------------------------------------------
63.98 371 per unit 485
60.81 per unit 434
50.48 0.23 per sq. ft. Technology Service Corp 8,300 08/31/2003 524
61.55 per sq. ft. Denver Court Reporters 12,443 06/30/1998 452
58.29 200 per unit 492
51.02 239 per unit 421
60.03 252 per unit 424
48.49 200 per unit 417
61.61 313 per unit 407
NAP per unit 365
60.76 207 per unit 412
54.88 per unit 501
49.08 334 per unit 455
53.96 337 per unit 383
NAP per unit 443
63.11 200 per unit 457
62.81 10 per unit 419
62.99 200 per unit 399
62.22 per unit 469
59.18 213 per unit 542
54.68 231 per unit 355
61.47 200 per unit 476
62.87 592 per unit 465
69.19 203 per unit 382
53.51 276 per unit 390
56.77 272 per unit 489
362A
362B
- ------------------------------------------------------------------------------------------------------------------------
68.75 per unit 362
69.26 225 per unit 356
NAP per unit 374
60.47 75 per unit 463
62.81 200 per unit 422
63.39 306 per unit 408
45.13 per unit 436
55.42 per unit 350
54.01 per unit 454
62.01 294 per unit 509
57.81 281 per unit 459
62.04 230 per unit 410
63.70 per unit 349
61.82 per unit 343
63.32 335 per unit 398
39.55 202 per unit 336
NAP per unit 441
58.89 per unit 380
NAP per unit 371
48.67 200 per unit 529
49.10 200 per unit 508
61.87 200 per unit 493
NAP per sq. ft. Checker Auto Parts 8,000 07/31/2017 451
65.18 per unit 347
NAP per unit 429
62.63 per sq. ft. ActionAids 2,841 09/30/1997 446
55.90 per unit 395
55.00 207 per unit 391
62.48 200 per unit 357
51.86 184 per unit 377
58.59 219 per unit 388
63.99 387 per unit 415
59.59 109 per unit 543
NAP per unit 376
NAP per unit 373
60.23 214 per unit Capital Consulting Company 800 07/31/1997 385
NAP per unit 346
67.35 252 per unit 479
62.50 200 per unit 497
NAP per unit 437
52.22 200 per unit 512
56.32 323 per unit 473
62.69 225 per unit 462
51.61 215 per unit 418
65.34 per unit 438
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN CONTROL
SOURCE NO. PROPERTY NAME ADDRESS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DAIWA 394 Prince Plaza Apartments 120 West Prince Road
DAIWA 474 Oak Forest Apartments 3614 Pine Oak Avenue Southwest
DAIWA 515 Windsong Apartments 2320 North Garrett Drive
DAIWA 379 Eucalyptus Apartments 3055 N. Tyndall
DAIWA 381 Regal Oaks Apartments 115 Woodland Avenue
DAIWA 488 Anna Hart Portfolio - 330 West 101st Street 330 West 101st Street
DAIWA 369 West 141st Street Apartments 111-115 West 141st Street
DAIWA 439 Joanne Marie Apartments 807 N. W. 24th Street
DAIWA 460 Bryan Place Apartments 3219 San Jacinto
DAIWA 426 1808 Beverly Road 1808 Beverly Road
DAIWA 425 Stardust Apartments 5727 Gaston Avenue
DAIWA 514 Cedarhaus Apartments 4503-4509 So. Salina Street
DAIWA 386 Burlington Townhomes 102 Denise Drive
DAIWA 352 2240 University Avenue 2240 University Avenue
DAIWA 484 Anna Hart Portfolio - 148 West 76th Street 148 West 76th Street
DAIWA 445 Kimberly Oaks Apartments 1530 Heights Boulevard
DAIWA 482 Anna Hart Portfolio - 117 West 69th Street 117 West 69th Street
DAIWA 420 Southtown Apartments 5039 South 31st
DAIWA 427 Lake Avenue Apartments 144 Lake Avenue
DAIWA 498 Blair House Apartments 321-323 Montgomery and 324 N. Bellevue
DAIWA 528 Laurel Apartments 1420 - 1446 Laurel Avenue
DAIWA 444 Shadow Oaks Apartments 1523 Heights Boulevard
DAIWA 523 Teesdale Apartments 1730-1736 Teesdale Street
DAIWA 378 Del Toro Apartments 909 South Priest Drive
DAIWA 477 English Hills II 2004 140th Avenue & 2005 142nd Avenue
DAIWA 404 Williams Street Apartments 1436 Williams Street
DAIWA 481 Anna Hart Portfolio - 49 West 68th Street 49 West 68th Street
DAIWA 403 Steele Street Apartments 1421 Steele Street
DAIWA 480 Anna Hart Portfolio - 45 West 69th Street 45 West 69th Street
DAIWA 464 Wayne Street Apartments 5339 Wayne Street
DAIWA 428 Shea Terrace Apartments 222-224 Sandpiper Drive
DAIWA 483 Anna Hart Portfolio - 130 Beach 133rd Street 130 Beach 133rd Street
<CAPTION>
LOAN ZIP ORIGINAL CURRENT % OF INITIAL
SOURCE CITY STATE CODE PROPERTY TYPE BALANCE BALANCE POOL BALANCE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DAIWA Tucson AZ 85705 Multifamily 405,000 399,899 0.04
DAIWA Wyoming MI 49509 Multifamily 400,000 399,141 0.04
DAIWA Dallas TX 75206 Multifamily 400,000 398,831 0.04
DAIWA Tucson AZ 85719 Multifamily 400,000 389,900 0.04
DAIWA Atlanta GA 30329 Multifamily 400,000 386,353 0.04
DAIWA New York NY 10025 Multifamily 387,000 386,312 0.04
DAIWA New York NY 10030 Multifamily 400,000 382,720 0.04
DAIWA Wilton Manors FL 33311 Multifamily 385,000 381,727 0.04
DAIWA Dallas TX 75044 Multifamily 382,500 380,869 0.03
DAIWA Brooklyn NY 11226 Multifamily 380,000 377,773 0.03
DAIWA Dallas TX 75214 Multifamily 380,000 377,576 0.03
DAIWA Syracuse NY 13205 Multifamily 370,000 369,180 0.03
DAIWA Burlington NC 27215 Multifamily 352,000 347,194 0.03
DAIWA Bronx NY 10453 Multifamily 360,000 343,680 0.03
DAIWA New York NY 10023 Multifamily 340,000 339,395 0.03
DAIWA Houston TX 77008 Multifamily 334,000 331,455 0.03
DAIWA New York NY 10023 Multifamily 329,000 328,415 0.03
DAIWA Fort Smith AR 72903 Multifamily 325,000 323,140 0.03
DAIWA Manchester NH 03104 Multifamily 325,000 323,003 0.03
DAIWA Memphis TN 38104 Multifamily 320,000 319,525 0.03
DAIWA Pomona CA 91768 Multifamily 300,000 299,536 0.03
DAIWA Houston TX 77008 Multifamily 296,000 293,744 0.03
DAIWA Philadelphia PA 19111 Multifamily 272,000 271,599 0.02
DAIWA Tempe AZ 85008 Multifamily 265,000 259,587 0.02
DAIWA Tampa FL 33613 Multifamily 260,000 258,941 0.02
DAIWA Denver CO 80206 Multifamily 250,500 248,650 0.02
DAIWA New York NY 10023 Multifamily 225,000 224,600 0.02
DAIWA Denver CO 80218 Multifamily 215,500 213,908 0.02
DAIWA New York NY 10023 Multifamily 212,000 211,623 0.02
DAIWA Raleigh NC 27606 Multifamily 200,000 199,108 0.02
DAIWA Portsmouth VA 23704 Multifamily 190,000 187,655 0.02
DAIWA Queens NY 11694 Multifamily 180,000 179,680 0.02
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE % OF
INITIAL POOL BORROWER INTEREST ACCRUAL MORTGAGE ADMINISTRATIVE
BALANCE AFFILIATED CROSSED METHOD RATE COST RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
99.11 30/360 9.25 0.099
99.14 Actual/360 9.13 0.099
99.18 Cntrl # 425 Actual/360 8.50 0.289
99.21 30/360 8.50 0.099
99.25 Cntrl #'s 346, 354, 371 30/360 9.38 0.099
99.29 Cntrl #'s 479, 480, 481, 482, 483, 484, 485 Actual/360 8.63 0.099
99.32 30/360 9.63 0.039
99.36 30/360 9.50 0.099
99.39 Actual/360 9.00 0.099
99.43 Actual/360 9.00 0.099
99.46 Cntrl # 515 Actual/360 9.13 0.099
99.49 Actual/360 8.38 0.289
99.53 Cntrl #'s 388, 428 30/360 9.63 0.099
99.56 30/360 9.88 0.099
99.59 Cntrl #'s 479, 480, 481, 482, 483, 485, 488 Actual/360 8.63 0.099
99.62 Cntrl # 444 30/360 9.50 0.099
99.65 Cntrl #'s 479, 480, 481, 483, 484, 485, 488 Actual/360 8.63 0.099
99.68 Cntrl #'s 418, 419 yes Actual/360 9.13 0.099
99.71 Actual/360 8.75 0.099
99.74 Actual/360 11.50 0.099
99.77 Cntrl #'s 499,518, 526, 527, 529, 530, 531 Actual/360 7.58 0.099
99.79 Cntrl # 445 30/360 9.50 0.099
99.82 Actual/360 8.20 0.099
99.84 30/360 9.25 0.099
99.87 Actual/360 8.25 0.099
99.89 Cntrl # 403 Actual/360 9.50 0.099
99.91 Cntrl #'s 479, 480, 482, 483, 484, 485, 488 Actual/360 8.63 0.099
99.93 Cntrl # 404 Actual/360 9.50 0.099
99.95 Cntrl #'s 479, 481, 482, 483, 484, 485, 488 Actual/360 8.63 0.099
99.97 Cntrl # 463 Actual/360 8.75 0.099
99.98 30/360 9.38 0.099
100.00 Cntrl #'s 479, 480, 481, 482, 484, 485, 488 Actual/360 8.63 0.099
<CAPTION>
REM
CUMULATIVE % OF ORIG REM AMORT AMORT
INITIAL POOL TERM TERM TERM TERM ORIGINATION REPAYMENT BALLOON/REPAYMENT
BALANCE (MOS.) (MOS.) (MOS.) (MOS.) DATE DATE BALANCE MATURITY TERM
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
99.11 120 106 300 286 12/10/96 01/01/2007 336,996 Balloon
99.14 240 236 360 356 10/20/97 11/01/2017 283,289 Balloon
99.18 120 117 300 297 11/21/97 12/01/2007 334,317 Balloon
99.21 120 96 300 276 02/15/96 03/01/2006 327,082 Balloon
99.25 240 218 240 218 04/23/96 05/01/2016 NAP Fully Amortizing
99.29 120 117 360 357 11/18/97 12/01/2007 351,058 Balloon
99.32 240 212 240 212 10/13/95 11/01/2015 NAP Fully Amortizing
99.36 120 110 300 290 04/25/97 05/01/2007 322,128 Balloon
99.39 120 115 300 295 09/12/97 10/01/2007 324,080 Balloon
99.43 120 113 300 293 07/22/97 08/01/2007 321,977 Balloon
99.46 120 112 300 292 06/30/97 07/01/2007 323,134 Balloon
99.49 120 118 300 298 12/31/97 01/01/2008 308,098 Balloon
99.53 120 104 300 284 10/16/96 11/01/2006 295,315 Balloon
99.56 240 210 240 210 08/11/95 09/01/2015 NAP Fully Amortizing
99.59 120 117 360 357 11/18/97 12/01/2007 308,423 Balloon
99.62 120 111 300 291 05/14/97 06/01/2007 279,455 Balloon
99.65 120 117 360 357 11/18/97 12/01/2007 298,445 Balloon
99.68 120 113 300 293 07/03/97 08/01/2007 276,289 Balloon
99.71 120 113 300 293 07/31/97 08/01/2007 273,531 Balloon
99.74 120 118 300 298 12/19/97 01/01/2008 287,869 Balloon
99.77 180 179 300 299 01/14/98 02/01/2013 195,416 Balloon
99.79 120 111 300 291 05/14/97 06/01/2007 247,662 Balloon
99.82 120 119 300 299 01/06/98 02/01/2008 225,333 Balloon
99.84 84 62 300 278 03/29/96 05/01/2003 238,354 Balloon
99.87 120 116 300 296 10/31/97 11/01/2007 215,757 Balloon
99.89 120 110 300 290 04/02/97 05/01/2007 215,118 Balloon
99.91 120 117 360 357 11/18/97 12/01/2007 204,103 Balloon
99.93 120 110 300 290 04/02/97 05/01/2007 185,061 Balloon
99.95 120 117 360 357 11/18/97 12/01/2007 192,312 Balloon
99.97 120 115 300 295 09/25/97 10/01/2007 168,316 Balloon
99.98 120 106 300 286 12/20/96 01/01/2007 158,538 Balloon
100.00 120 117 360 357 11/18/97 12/01/2007 163,283 Balloon
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL UNDERWRITING UNDERWRITING
DEBT TOTAL TOTAL
PREPAYMENT RESTRICTIONS SERVICE REVENUE EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
YM (84),3%(12),2%(12),1%(6),O(6) 41,620 158,263 89,954
L(180),> of YM or 1% (54),O(6) 39,054 78,867 27,071
L(48),> of YM or 1% (66),O(6) 38,651 168,348 102,746
YM (84),3%(12),2%(12),1%(6),O(6) 38,651 137,370 80,839
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 44,351 115,056 55,926
L(48),> of YM or 1% (66),O(6) 36,121 80,667 28,933
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 45,135 276,354 146,847
YM (84),3%(12),2%(12),1%(6),O(6) 40,365 104,283 48,683
L(48),> of YM or 1% (66),O(6) 38,519 105,999 47,910
L(48),> of YM or 1% (66),O(6) 38,267 138,726 77,963
L(48),> of YM or 1% (66),O(6) 38,658 161,258 100,097
L(48),> of YM or 1% (66),O(6) 35,379 154,879 91,621
YM (84),3%(12),2%(12),1%(6),O(6) 37,273 86,793 21,876
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 41,332 188,056 131,048
L(48),> of YM or 1% (66),O(6) 31,734 96,253 49,366
YM (84),3%(12),2%(12),1%(6),O(6) 35,018 120,113 68,872
L(48),> of YM or 1% (66),O(6) 30,707 88,322 44,225
L(48),> of YM or 1% (66),O(6) 33,063 140,438 77,846
L(48),> of YM or 1% (66),O(6) 32,064 108,642 61,498
L(48),> of YM or 1% (66),O(6) 39,032 138,444 58,418
L(120),> of YM or 1% (54),O(6) 26,791 74,344 32,381
YM (84),3%(12),2%(12),1%(6),O(6) 31,034 105,742 57,460
L(48),> of YM or 1% (66),O(6) 25,626 103,113 59,368
YM (60),2%(12),1%(6),O(6) 27,233 77,753 38,586
L(48),> of YM or 1% (66),O(6) 24,600 92,232 34,002
L(48),> of YM or 1% (66),O(6) 26,263 58,617 20,314
L(48),> of YM or 1% (66),O(6) 21,000 70,718 37,150
L(48),> of YM or 1% (66),O(6) 22,594 53,780 20,424
L(48),> of YM or 1% (66),O(6) 19,787 78,682 49,951
L(48),> of YM or 1% (66),O(6) 19,731 42,939 10,224
YM (84),3%(12),2%(12),1%(6),O(6) 19,722 62,610 33,736
L(48),> of YM or 1% (66),O(6) 16,800 56,581 27,707
<CAPTION>
UNDERWRITING UNDERWRITING APPRAISED
PREPAYMENT RESTRICTIONS NCF DSCR VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
YM (84),3%(12),2%(12),1%(6),O(6) 60,309 1.45 700,000
L(180),> of YM or 1% (54),O(6) 49,396 1.26 580,000
L(48),> of YM or 1% (66),O(6) 57,408 1.49 535,000
YM (84),3%(12),2%(12),1%(6),O(6) 47,731 1.23 700,000
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 55,930 1.26 560,000
L(48),> of YM or 1% (66),O(6) 49,324 1.37 530,000
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 110,435 2.45 640,000
YM (84),3%(12),2%(12),1%(6),O(6) 51,400 1.27 570,000
L(48),> of YM or 1% (66),O(6) 51,812 1.35 510,000
L(48),> of YM or 1% (66),O(6) 56,761 1.48 516,000
L(48),> of YM or 1% (66),O(6) 50,476 1.31 535,000
L(48),> of YM or 1% (66),O(6) 54,798 1.55 535,000
YM (84),3%(12),2%(12),1%(6),O(6) 58,989 1.58 550,000
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 48,467 1.17 528,000
L(48),> of YM or 1% (66),O(6) 43,147 1.36 550,000
YM (84),3%(12),2%(12),1%(6),O(6) 45,576 1.30 420,000
L(48),> of YM or 1% (66),O(6) 42,097 1.37 475,000
L(48),> of YM or 1% (66),O(6) 52,599 1.59 550,000
L(48),> of YM or 1% (66),O(6) 42,944 1.34 450,000
L(48),> of YM or 1% (66),O(6) 70,018 1.79 500,000
L(120),> of YM or 1% (54),O(6) 38,785 1.45 400,000
YM (84),3%(12),2%(12),1%(6),O(6) 42,937 1.38 375,000
L(48),> of YM or 1% (66),O(6) 36,113 1.41 400,000
YM (60),2%(12),1%(6),O(6) 36,167 1.33 343,000
L(48),> of YM or 1% (66),O(6) 52,216 2.12 395,000
L(48),> of YM or 1% (66),O(6) 34,776 1.32 350,000
L(48),> of YM or 1% (66),O(6) 31,568 1.50 300,000
L(48),> of YM or 1% (66),O(6) 30,766 1.36 310,000
L(48),> of YM or 1% (66),O(6) 26,731 1.35 370,000
L(48),> of YM or 1% (66),O(6) 31,515 1.60 320,000
YM (84),3%(12),2%(12),1%(6),O(6) 25,634 1.30 270,000
L(48),> of YM or 1% (66),O(6) 26,204 1.56 505,000
<CAPTION>
APPRAISAL CURRENT
PREPAYMENT RESTRICTIONS YEAR LTV
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
YM (84),3%(12),2%(12),1%(6),O(6) 1996 57.13
L(180),> of YM or 1% (54),O(6) 1997 68.82
L(48),> of YM or 1% (66),O(6) 1997 74.55
YM (84),3%(12),2%(12),1%(6),O(6) 1996 55.70
YM (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1996 68.99
L(48),> of YM or 1% (66),O(6) 1996 72.89
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1995 59.80
YM (84),3%(12),2%(12),1%(6),O(6) 1997 66.97
L(48),> of YM or 1% (66),O(6) 1997 74.68
L(48),> of YM or 1% (66),O(6) 1997 73.21
L(48),> of YM or 1% (66),O(6) 1997 70.58
L(48),> of YM or 1% (66),O(6) 1997 69.01
YM (84),3%(12),2%(12),1%(6),O(6) 1996 63.13
> of YM or 1% (120),5%(12),4%(12),3%(12),2%(12),1%(12),O(60) 1995 65.09
L(48),> of YM or 1% (66),O(6) 1996 61.71
YM (84),3%(12),2%(12),1%(6),O(6) 1997 78.92
L(48),> of YM or 1% (66),O(6) 1996 69.14
L(48),> of YM or 1% (66),O(6) 1997 58.75
L(48),> of YM or 1% (66),O(6) 1997 71.78
L(48),> of YM or 1% (66),O(6) 1997 63.90
L(120),> of YM or 1% (54),O(6) 1997 74.88
YM (84),3%(12),2%(12),1%(6),O(6) 1997 78.33
L(48),> of YM or 1% (66),O(6) 1997 67.90
YM (60),2%(12),1%(6),O(6) 1996 75.68
L(48),> of YM or 1% (66),O(6) 1997 65.55
L(48),> of YM or 1% (66),O(6) 1997 71.04
L(48),> of YM or 1% (66),O(6) 1996 74.87
L(48),> of YM or 1% (66),O(6) 1997 69.00
L(48),> of YM or 1% (66),O(6) 1996 57.20
L(48),> of YM or 1% (66),O(6) 1997 62.22
YM (84),3%(12),2%(12),1%(6),O(6) 1996 69.50
L(48),> of YM or 1% (66),O(6) 1996 35.58
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN PER
SQ FT, UNITS SQ FT, UNITS INITIAL
REPAYMENT YEAR BEDS, PADS BEDS, PADS OCCUPANCY RESERVES UNDERWRITING
LTV BUILT OR ROOM OR ROOM PERCENTAGE AT CLOSING RESERVES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
48.14 1981 40 units 9,997 per unit 100 12,011 200
48.84 1996 12 units 33,262 per unit 100 - 200
62.49 1972 34 units 11,730 per unit 100 1,402 241
46.73 1978 44 units 8,861 per unit 86 - 200
NAP 1964 16 units 24,147 per unit 94 2,400 200
66.24 1905 10 units 38,631 per unit 100 1,241 241
NAP 1923 59 units 6,487 per unit 92 42,000 323
56.51 1972 16 units 23,858 per unit 100 - 263
63.55 1963 22 units 17,312 per unit 95 2,273 285
62.40 1930 20 units 18,889 per unit 100 448 269
60.40 1959 36 units 10,488 per unit 100 4,641 297
57.59 1967 30 units 12,306 per unit 93 705 282
53.69 1985 16 units 21,700 per unit 100 33,190 371
NAP 1941 32 units 10,740 per unit 100 15,320 267
56.08 1900 10 units 33,940 per unit 100 312 374
66.54 1964 24 units 13,811 per unit 100 2,306 236
62.83 1900 10 units 32,841 per unit 100 1,167 200
50.23 1970 47 units 6,875 per unit 98 1,826 213
60.78 1991 21 units 15,381 per unit 100 2,100 200
57.57 1977 36 units 8,876 per unit 100 7,709 278
48.85 1956 14 units 21,395 per unit 100 6,140 227
66.04 1964 23 units 12,771 per unit 96 - 232
56.33 1966 24 units 11,317 per unit 100 2,199 318
69.49 1971 15 units 17,306 per unit 100 3,525 200
54.62 1965 22 units 11,770 per unit 100 12,385 273
61.46 1960 12 units 20,721 per unit 92 - 294
68.03 1910 10 units 22,460 per unit 100 1,168 200
59.70 1960 12 units 17,826 per unit 100 - 216
51.98 1910 10 units 21,162 per unit 100 1,167 200
52.60 1984 6 units 33,185 per unit 100 - 200
58.72 1973 13 units 14,435 per unit 92 - 249
32.33 1929 10 units 17,968 per unit 90 223 267
<CAPTION>
LARGEST RETAIL TENANT
----------------------------------------------------------------------------
REPAYMENT RESERVES AREA LEASED LEASE CONTROL
LTV COLLECTED NAME (SQ. FT.) EXP DATE NO.
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
48.14 200 per unit 394
48.84 200 per unit 474
62.49 241 per unit 515
46.73 per unit 379
NAP 282 per unit 381
66.24 241 per unit 488
NAP per unit 369
56.51 per unit 439
63.55 285 per unit 460
62.40 269 per unit 426
60.40 297 per unit 425
57.59 282 per unit 514
53.69 371 per unit 386
NAP per unit 352
56.08 374 per unit 484
66.54 per unit 445
62.83 200 per unit 482
50.23 16 per unit 420
60.78 200 per unit Various 427
57.57 278 per unit 498
48.85 227 per unit 528
66.04 per unit 444
56.33 318 per unit 523
69.49 per unit 378
54.62 273 per unit 477
61.46 216 per unit 404
68.03 200 per unit 481
59.70 294 per unit 403
51.98 200 per unit 480
52.60 533 per unit 464
58.72 per unit 428
32.33 267 per unit 483
</TABLE>
<PAGE>
ANNEX B
[LOGO] MERRILL LYNCH MORTGAGE SECURITY NEW ISSUE TERM SHEET MARCH 11, 1998
- --------------------------------------------------------------------------------
$968,618,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C2
TOTAL POOL SIZE = $ 1,088,335,035 (401 LOANS / 405 PROPERTIES)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
% OF WEIGHTED CASH FLOW
INITIAL INITIAL PASS- AVERAGE OR
EXPECTED CERTIFICATE POOL CREDIT THROUGH LIFE PRINCIPAL
CLASS RATING(1) BALANCE(2) BALANCE(2) SUPPORT DESCRIPTION RATE (YEARS)(3) WINDOW(3)
- ----- --------- ---------- ---------- ------- ----------- ---- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Publicly Offered Certificates
Class A-1 Aaa/AAA $229,904,000 21.1% 27.5% Fixed Coupon % 5.0 04/98-02/06
Class A-2 Aaa/AAA $559,138,000 51.4% 27.5% Fixed Coupon % 9.4 02/06-01/08
Class B Aa2/AA $ 32,650,000 3.0% 24.5% Net WAC (4) 9.8 01/08-01/08
Class C A2/A $ 59,859,000 5.5% 19.0% Net WAC (4) 9.8 01/08-01/08
Class D Baa2/BBB $ 70,742,000 6.5% 12.5% Net WAC (4) 9.8 01/08-02/08
Class E Baa3/BBB- $ 16,325,000 1.5% 11.0% Net WAC (4) 10.0 02/08-09/08
Class IO Aaa/AAAr (5) N/A N/A Variable I/O Strip (6) N/A 04/98-02/23
Private Certificates
Class F (7) $ 59,858,000 5.5% 5.5% Fixed Coupon % 13.4 09/08-12/12
Class G (7) $ 5,442,000 0.5% 5.0% Fixed Coupon % 14.7 12/12-01/13
Class H (7) $ 21,766,000 2.0% 3.0% Fixed Coupon % 15.0 01/13-12/13
Class J (7) $ 5,442,000 0.5% 2.5% Fixed Coupon % 16.1 12/13-10/14
Class K (7) $ 27,209,034 2.5% N/A Fixed Coupon % 18.9 10/14-02/23
- ------------------
(1) By each of Moody's Investors Service, Inc. and Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc.
(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 (as defined herein) minus %, %, % and %, respectively.
(5) The Class IO Certificates will not have a principal balance nor will they entitle the holders thereof to receive distributions
of principal. See "Certificate Balances and Notional Amounts" in this Summary.
(6) Holders of the Class IO Certificates will be entitled to receive distributions of interest in an amount equal to the aggregate
of the interest accrued on the notional amount of each of its Components.
(7) Not offered publicly. 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.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
KEY FEATURES:
o PASS-THROUGH STRUCTURE: Senior/subordinated, sequential pay pass-through
bonds.
o UNDERWRITER: Merrill Lynch & Co. and Daiwa Securities America, Inc.
o DEPOSITOR: Merrill Lynch Mortgage Investors, Inc.
o MASTER SERVICER: First Union National Bank.
o SPECIAL SERVICER: CRIIMI MAE Services Limited Partnership.
o TRUSTEE: Norwest Bank Minnesota.
o MORTGAGE LOAN SELLERS: Merrill Lynch Mortgage Capital, Inc. ("MLMCI")
(58%), and Daiwa Real Estate Corp. and Daiwa Finance Corp. (collectively
"Daiwa") (42%).
o INTEREST ACCRUAL PERIOD: 1st to the 1st.
o DISTRIBUTION: The 15th day of the month, or if such date is not a business
day, the following business day (but in no case, no earlier than the fourth
business day following the Determination Date).
o DETERMINATION DATE: The 10th 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 are SMMEA eligible.
o TAX TREATMENT: REMIC.
o OPTIONAL TERMINATION: 1% clean up call.
- --------------------------------------------------------------------------------
[LOGO] MERRILL LYNCH Prospective investors are advised to read
(212) 449-3860 carefully, and should rely solely on, the final
[LOGO] DAIWA prospectus and prospectus supplement (the "Final
(212) 612-6920 Prospectus") relating to the Offered Certificates
referred to herein (the "Offered Securities") in
making their investment decision. This Term Sheet
does not include all relevant information relating
to the Offered Securities described herein,
particularly with respect to the risks and special
considerations associated with an investment in
the Offered Securities. Any information contained
herein will be more fully described in, and will
be fully superseded by, the descriptions of the
collateral and structure in the preliminary
prospectus supplement and Final Prospectus.
Although the information contained in this Term
Sheet is based on sources which the Underwriters
believe to be reliable, the Underwriters make no
representation or warranty that such information
is accurate or complete. Such information should
not be viewed as projections, forecasts,
predictions or opinions with respect to value.
Prior to making any investment decision, a
prospective investor shall receive and fully
review the Final Prospectus. NOTHING HEREIN SHOULD
BE CONSIDERED AN OFFER TO SELL OR SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES.
- --------------------------------------------------------------------------------
B-1
<PAGE>
Annex B
[LOGO] MERRILL LYNCH MORTGAGE SECURITY NEW ISSUE TERM SHEET MARCH 11, 1998
- --------------------------------------------------------------------------------
$968,618,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C2
TOTAL POOL SIZE = $ 1,088,335,035 (401 LOANS / 405 PROPERTIES)
OVERVIEW: o The transaction is collateralized by 401
multifamily and commercial loans, with an
aggregate pool balance of approximately $1.088
billion, secured by 405 properties located
throughout 39 states.
o Merrill Lynch Commercial and Multifamily Conduit
Program originated or acquired 160 of the mortgage
loans, or 58.19% of the total pool balance. Daiwa
originated or acquired 241 loans, or 41.81% of the
pool balance. Approximately, 96% of the loans were
originated in 1997 and 1998.
o Except where otherwise indicated, percentages (%)
represent principal amount of loan or loans
compared to the Initial Pool Balance.
- --------------------------------------------------------------------------------
LOAN INFORMATION
Total Conduit Balance: $1.088 billion (401 loans/405 properties)
Avg./Max Balance: $2.71 million/$18.96 million
Loan Types: All fixed rate; 83.42% balloons,
9.67% fully amortizing, 6.91% ARD
Gross WAC: 7.97% (Range = 6.91% - 11.5%)
Net WAC: 7.86%
Avg. Seasoning: 5 months
Wtg. Avg. RTM: 10.5 years (126 mos.)
Wtg. Avg. Rem. Amort.: 26.08 years (313 mos.)
Wtg. Avg. DSCR: 1.41x
Wtg. Avg. Cut-Off LTV: 70.66
Call Protection: Over 99% of the all loans are currently locked out or
have yield maintenance.
Borrower Concentration: None greater than 3% of the pool.
Cross Collateralization: 4 loan groups representing 3% of the pool are cross-
collateralized.
WAC = Weighted Average Mortgage Rate
RTM = Remaining Term to Maturity
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY TYPE DISTRIBUTION
WTG.
# OF % OF AVG.
TYPE PROPS. POOL DSCR
-----------------------------------------------------
Multifamily: 265 42.18% 1.40x
Retail: 48 24.24 1.40
Hospitality: 49 13.81 1.53
Office: 27 10.75 1.36
Industrial: 10 5.60 1.45
Nursing Home: 2 2.66 1.38
MH Parks: 2 0.41 1.33
Self Storage: 1 0.31 1.53
Mixed Use: 1 0.05 1.21
TOT/WTG. AVG.: 405 100.00% 1.41X
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATE DISTRIBUTION
------------------
Total of 39 States
# OF % OF
STATE PROPERTIES POOL
-----------------------------------------------------
Texas: 92 18.14%
California: 49 16.65
New York: 34 8.97
Florida: 25 7.21
All others <5%: 205 49.03
TOTALS 405 100.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CUT-OFF DATE BALANCES
BALANCE # OF % OF CUMULATIVE WTG. AVG.
RANGE (MM) LOANS POOL % OF POOL CUT-OFF LTV
----------------------------------------------------------
$ .179 - .99 149 8.32% 8.32% 67.81%
1.00 - 1.99 91 12.16 20.48 68.95
2.00 - 2.99 57 12.92 33.40 70.38
3.00 - 3.99 31 10.00 43.40 70.19
4.00 - 4.99 15 6.07 49.47 68.90
5.00 - 5.99 10 5.01 54.48 72.22
6.00 - 6.99 12 7.36 61.84 73.38
7.00 - 7.99 6 4.19 66.03 74.88
8.00 - 8.99 6 4.66 70.69 71.75
9.00 - 9.99 3 2.71 73.40 70.46
10.00 - 14.99 14 15.98 89.38 72.97
15.00 - 18.96 7 10.62 100.00 68.49
----------------------------------------------------------
TOTALS 401 100.00% 100.00% 70.66
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEBT SERVICE COVERAGE RATIOS
DSCR # of % of Cumulative Wtg. Avg.
Range Loans Pool % of Pool Cut-Off LTV
-------------------------------------------------------------
1.12 - 1.19x 10 1.22% 1.22% 68.80%
1.20 - 1.29 81 24.00 25.22 73.63
1.30 - 1.39 119 32.75 57.97 73.00
1.40 - 1.49 80 22.15 80.12 71.13
1.50 - 1.59 50 9.80 89.93 67.22
1.60 - 1.69 18 2.66 92.58 64.14
1.70 - 1.79 16 3.38 95.96 54.03
1.80 - 1.89 9 2.04 98.00 62.17
1.90 - 1.99 6 0.48 98.49 66.09
2.00 - 2.49 10 1.15 99.63 58.16
2.50 - 2.99 2 0.37 100.00 31.88
-------------------------------------------------------------
TOTALS 401 100.00% 100.00% 70.66
Weighted Average DSCR = 1.41x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CUT-OFF DATE LTV RATIOS
# OF % OF CUMULATIVE
LTV RANGE LOANS POOL % OF POOL
-------------------------------------------------------------
31.42% -50.00% 12 3.15% 3.15%
50.01% -60.00% 34 5.73 8.88
60.01% -70.00% 140 29.60 38.48
70.01% -80.00% 211 59.57 98.05
80.01% -83.50% 4 1.95 100.00
-------------------------------------------------------------
TOTALS 401 100.00% 100.00%
Weighted Average Cut-Off LTV = 70.66%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ORIGINAL TERMS
# OF % OF
TERM LOANS POOL
-------------------------------------------------------------
5 Year Balloon 7 1.59%
6 to 9 Year Balloon 19 7.89
6 to 9 Year ARD 1 0.19
10 Year Balloon 279 67.90
10 Year ARD 14 6.72
11 to 14 Year Balloon 1 0.30
15 Year Balloon 18 5.70
16 to 20 Year Balloon 1 0.04
Fully Amortizing 61 9.67
-------------------------------------------------------------
TOTALS 401 100.00%
- --------------------------------------------------------------------------------
B-2
<PAGE>
ANNEX B
[LOGO] MERRILL LYNCH MORTGAGE SECURITY NEW ISSUE TERM SHEET MARCH 11, 1998
- --------------------------------------------------------------------------------
$968,618,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C2
TOTAL POOL SIZE = $ 1,088,335,035 (401 LOANS / 405 PROPERTIES)
DESCRIPTION OF PROPERTY TYPES:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LOAN CHARACTERISTICS BY PROPERTY TYPE
- ------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGES
--------------------------------------------------------------
AVERAGE LOAN PER
CUT-OFF SQ. FT.,
% OF DATE MAX. CUT-OFF REPAY- OCCU- UNIT, BED,
BALANCE # OF POOL BALANCE BALANCE DATE MENT PROPERTY PANCY KEY, PAD
(MM) PROPS. BALANCE (MM) (MM) DSCR LTV LTV SIZE % (A) OR ROOM (B)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MULTIFAMILY $459.01 265 42.18% $1.73 $17.64 1.40x 72.56% 58.63% 212 units 95.25% 26,248
RETAIL
Anchored $174.40 23 16.02% $7.58 $18.96 1.36x 72.69% 63.21% 174,979 sq.ft. 94.54% 68
Unanchored $89.38 25 8.21% $3.58 $9.99 1.48x 68.97% 57.90% 83,967 sq.ft. 93.68% 83
------- ---- ----- ----- ----- ----- ------ ------ -------------- ----- ----
Subtotals $263.79 48 24.24% $5.50 $18.96 1.40x 71.43% 61.41% 144,140 sq.ft. 94.25% 73
HOSPITALITY $150.32 49 13.81% $3.07 $15.95 1.53x 65.58% 33.97% 132 rooms NAP 37,455
OFFICE
Office $114.16 26 10.49% $4.39 $15.84 1.36x 71.13% 56.81% 84,501 sq.ft. 97.01% 96
Office/Indus./R&D $2.84 1 0.26% $2.84 $2.84 1.36x 74.75% 65.32% 36,941 sq.ft. 100.00% 77
------- ---- ----- ----- ----- ----- ------ ------ -------------- ----- ----
Subtotals $117.00 27 10.75% $4.33 $15.84 1.36x 71.22% 57.02% 83,346 sq.ft. 97.09% 96
INDUSTRIAL $60.95 10 5.60% $6.10 $16.05 1.45x 62.81% 39.65% 316,736 sq.ft. 92.55% 37
NURSING HOME $28.93 2 2.66% $14.47 $15.93 1.38x 74.86% 55.82% 136 beds 96.70% 107,292
MH PARKS $4.44 2 0.41% $2.22 $2.84 1.33x 71.57% 61.77% 161 units 100.00% 15,431
SELF STORAGE $3.39 1 0.31% $3.39 $3.39 1.53x 65.89% 0.00% 107,576 sq.ft. 65.00% 32
MIXED USE $0.50 1 0.05% $0.50 $0.50 1.21x 66.24% 62.63% 17,890 sq.ft. 89.00% 28
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. AVG. $1,088.34 405 100.0% $2.69 $18.96 1.41X 70.66% 54.42% NAP 81.86% NAP
- ------------------------------------------------------------------------------------------------------------------------------------
(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 manufactured housing communities, number of guest
rooms with respect to each hospitality property, number of square feet with respect to self-storage facilities, and number of
beds with respect to health care facilities.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-3
<PAGE>
ANNEX B
[LOGO] MERRILL LYNCH MORTGAGE SECURITY NEW ISSUE TERM SHEET MARCH 11, 1998
- --------------------------------------------------------------------------------
$968,618,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C2
TOTAL POOL SIZE = $ 1,088,335,035 (401 LOANS / 405 PROPERTIES)
PREPAYMENT PROTECTION: o Currently 93% of the loans are locked
out and 7% are subject to yield
maintenance charges.
o As described further, 62.93% 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.
o 45% of the loans provide for defeasance.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 1
PREPAYMENT RESTRICTION CATEGORIES
- -----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGES
AGGREGATE ---------------------------------------------------------
NUMBER CUT-OFF % OF # OF MONTHS OF OPEN
OF DATE INITIAL TERM TO REMAINING PREPAYMENT
MORTGAGE BALANCE POOL ARD/MATURITY LOCKOUT/DEFEASANCE PRIOR TO ARD/MATURITY
PREPAYMENT RESTRICTION (A) LOANS (MM) BALANCE (MOS.) TERM (MOS.) (MOS.)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Locked Only 2 $ 18.2 1.67% 184 181 3
Locked, then D 45 254.8 23.41 122 116 6
Locked, then PP(b) 8 47.0 4.32 148 53 10
Locked, then YM 261 684.8 62.93 125 58 4
Locked, then YM, then PP 1 4.8 0.44 113 41 6
PP Only 2 5.0 0.46 102 0 4
YM Only 1 2.9 0.27 114 0 6
YM, then PP 81 70.8 6.51 134 0 18
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. AVG. 401 $1,088.3 100.00% 126 69 6
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Average Term to End of Lockout/Defeasance Term (for Lockout Only loans): 181 months
Weighted Average Term to End of Lockout/Defeasance Term (for all loans): 69 months
Weighted Average Number of Months Loans are Open to Prepayment Prior to ARD/Maturity: 6 months
(a) D=Defeasance Collateral, YM=Yield Maintenance, PP=Percentage Premium.
(b) 3 of the loans are subject to YM provisions whose penalties are capped at fixed prepayment percentages.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ALLOCATION OF Prepayment premiums will be allocated among the
PREPAYMENT PREMIUMS: REMIC Regular Certificates as follows:
o Any yield maintenance charges and
percentage prepayment premiums will be
allocated among the REMIC Regular
Certificates based upon a formula which
is based, in part, on the relationship
between the Pass-Through Rate of the
Class(es) currently receiving principal,
the mortgage rate of the loan that has
prepaid, and current interest rates.
------------------------------------------------------------------------
% of Prepayment Premium (Pass-Through Rate - Discount Rate)
= ------------------------------------
Allocated to Non-IO Certificates (Mortgage Rate - Discount Rate)
------------------------------------------------------------------------
o Any penalties not allocated to non-IO
certificates will be allocated 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.
The "Discount Rate" applicable to any Class of
Certificates will be equal to the yield (when
compounded monthly) on the non-callable 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 MARCH 11, 1998
- --------------------------------------------------------------------------------
$968,618,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C2
TOTAL POOL SIZE = $ 1,088,335,035 (401 LOANS / 405 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 MARCH MARCH MARCH MARCH MARCH MARCH MARCH MARCH
RESTRICTION 1998 1999 2000 2001 2002 2003 2004 2005
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 92.8% 92.8% 89.3% 80.7% 72.2% 37.7% 35.0% 36.3%
Yield Maintenance 6.8% 6.8% 7.7% 16.1% 24.3% 57.6% 57.1% 55.9%
- -------------------------------------------------------------------------------------------------------------------
Percentage Premium
5.00% and greater 0.0 0.0 2.3 0.1 0.0 0.3 0.0 0.0
4.00 to 4.99% 0.0 0.0 0.0 2.3 0.1 0.0 0.3 0.0
3.00 to 3.99% 0.3 0.3 0.3 0.0 2.3 1.1 1.7 1.4
2.00 to 2.99% 0.0 0.0 0.2 0.2 0.4 2.4 3.5 1.9
1.00 to 1.99% 0.2 0.2 0.2 0.6 0.5 0.6 0.5 3.8
Open 0.0 0.0 0.0 0.1 0.2 0.3 1.8 0.7
- -------------------------------------------------------------------------------------------------------------------
TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mortgage Pool Balance($mm) $1,088.3 $1,074.6 $1,059.9 $ 1,043.8 $1,021.3 $990.7 $965.9 $886.6
% of Initial Pool Balance 100.0% 98.7% 97.4% 95.9% 93.8% 91.0% 88.7% 81.5%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PREPAYMENT LOCK-OUT/PREMIUM ANALYSIS
- --------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT RESTRICTION ASSUMING NO PREPAYMENT
--------------------------------------------------------------------------------------
96 MO. 108 MO. 120 MO. 132 MO. 144 MO. 156 MO. 168 MO. 180 MO.
PREPAYMENT MARCH MARCH MARCH MARCH MARCH MARCH MARCH MARCH
RESTRICTION 2006 2007 2008 2009 2010 2011 2012 2013
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 32.1% 25.9% 22.4% 21.8% 21.6% 19.6% 18.4% 12.1%
Yield Maintenance 59.0% 53.9% 58.0% 58.4% 58.1% 59.9% 59.8% 61.8%
- -------------------------------------------------------------------------------------------------------------------
Percentage Premium
5.00% and greater 2.1 2.0 11.0 0.0 0.0 0.0 0.9 2.2
4.00 to 4.99% 0.0 0.6 4.7 13.6 0.0 0.0 0.0 2.1
3.00 to 3.99% 0.0 0.0 3.4 2.4 14.4 2.5 2.6 5.9
2.00 to 2.99% 1.5 0.1 0.6 3.2 2.4 12.5 0.0 0.0
1.00 to 1.99% 4.7 3.4 0.0 0.6 3.5 2.8 13.2 5.1
Open 0.5 14.1 0.0 0.0 0.0 2.7 5.0 10.9
- -------------------------------------------------------------------------------------------------------------------
TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mortgage Pool Balance($mm) $854.4 $799.7 $123.2 $115.9 $105.6 $97.2 $88.2 $36.8
% of Initial Pool Balance 78.5% 73.5% 11.3% 10.7% 9.7% 8.9% 8.1% 3.4%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
B-5
<PAGE>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1998-C2
- --------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS A1
BOND TYPE - FIXED
Settlement Date: 3/30/98 Current Balance: $229,904,000
Next Payment: 4/15/98 Current Coupon: 6.330%
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
*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>
99-00 6.60 4.04 6.61 3.95 6.62 3.88 6.63 3.81 6.65 3.71 6.68 3.54
99-04 6.57 6.58 6.59 6.60 6.62 6.65
99-08 6.54 6.55 6.56 6.57 6.58 6.61
99-12 6.51 6.52 6.53 6.54 6.55 6.57
99-16 6.48 4.05 6.49 3.96 6.50 3.88 6.50 3.82 6.52 3.72 6.54 3.55
99-20 6.45 6.45 6.46 6.47 6.48 6.50
99-24 6.41 6.42 6.43 6.44 6.45 6.47
99-28 6.38 6.39 6.40 6.40 6.41 6.43
100-00 6.35 4.06 6.36 3.97 6.37 3.89 6.37 3.83 6.38 3.73 6.40 3.56
100-04 6.32 6.33 6.33 6.34 6.35 6.36
100-08 6.29 6.30 6.30 6.31 6.31 6.33
100-12 6.26 6.27 6.27 6.28 6.28 6.29
100-16 6.23 4.07 6.24 3.98 6.24 3.90 6.24 3.84 6.25 3.73 6.26 3.56
100-20 6.20 6.20 6.21 6.21 6.22 6.23
100-24 6.17 6.17 6.18 6.18 6.18 6.19
100-28 6.14 6.14 6.14 6.15 6.15 6.16
101-00 6.11 4.08 6.11 3.98 6.11 3.91 6.11 3.84 3.12 3.74 6.12 3.57
101-04 6.08 6.08 6.08 6.08 6.08 6.09
101-08 6.05 6.05 6.05 6.05 6.05 6.05
101-12 6.02 6.02 6.02 6.02 6.02 6.02
101-16 5.99 4.09 5.99 3.99 5.99 3.92 5.99 3.85 5.99 3.75 5.98 3.58
101-20 5.96 5.96 5.96 5.95 5.95 5.95
101-24 5.93 5.93 5.92 5.92 5.92 5.92
101-28 5.90 5.90 5.89 5.89 5.89 5.88
102-00 5.87 4.09 5.87 4.00 5.86 3.92 5.86 3.86 5.85 3.76 5.85 3.59
WAL 5.0 4.9 4.8 4.7 4.5 4.3
1st Prin 4/15/98 4/15/98 4/15/98 4/15/98 4/15/98 4/15/98
Mat. 2/15/06 10/15/05 8/15/05 5/15/05 1/15/05 12/15/04
</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-6
<PAGE>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1998-C2
- --------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS A2
BOND TYPE - FIXED
Settlement Date: 3/30/98 Current Balance: $559,138,000
Next Payment: 4/15/98 Current Coupon: 6.510%
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
*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>
99-00 6.71 6.82 6.71 6.79 6.71 6.77 6.71 6.75 6.71 6.72 6.72 6.66
99-04 6.69 6.69 6.69 6.69 6.70 6.70
99-08 6.67 6.67 6.67 6.68 6.68 6.68
99-12 6.65 6.65 6.66 6.66 6.66 6.66
99-16 6.63 6.83 6.64 6.80 6.64 6.78 6.64 6.76 6.64 6.73 6.64 6.67
99-20 6.62 6.62 6.62 6.62 6.62 6.63
99-24 6.60 6.60 6.60 6.60 6.60 6.61
99-28 6.58 6.58 6.58 6.58 6.58 6.59
100-00 6.56 6.84 6.56 6.81 6.56 6.79 6.56 6.77 6.57 6.74 6.57 6.68
100-04 6.54 6.54 6.55 6.55 6.55 6.55
100-08 6.53 6.53 6.53 6.53 6.53 6.53
100-12 6.51 6.51 6.51 6.51 6.51 6.51
100-16 6.49 6.85 6.49 6.82 6.49 6.80 6.49 6.78 6.49 6.75 6.49 6.69
100-20 6.47 6.47 6.47 6.47 6.47 6.48
100-24 6.45 6.45 6.45 6.45 6.46 6.46
100-28 6.44 6.44 6.44 6.44 6.44 6.44
101-00 6.42 6.85 6.42 6.83 6.42 6.81 6.42 6.79 6.42 6.76 6.42 6.70
101-04 6.40 6.40 6.40 6.40 6.40 6.40
101-08 6.38 6.38 6.38 6.38 6.38 6.38
101-12 6.36 6.36 6.36 6.36 6.36 6.37
101-16 6.35 6.86 6.35 6.84 6.35 6.82 6.35 6.80 6.35 6.77 6.35 6.71
101-20 6.33 6.33 6.33 6.33 6.33 6.33
101-24 6.31 6.31 6.31 6.31 6.31 6.31
101-28 6.29 6.29 6.29 6.29 6.29 6.29
102-00 6.27 6.87 6.27 6.85 6.27 6.83 6.27 6.81 6.27 6.77 6.28 6.72
WAL 9.4 9.4 9.4 9.3 9.3 9.2
1st Prin 2/15/06 10/15/05 8/15/05 5/15/05 1/15/05 12/15/04
Mat. 1/15/08 1/15/08 1/15/08 1/15/08 1/15/08 12/15/07
</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-7
<PAGE>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1998-C2
- --------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS B
BOND TYPE - NET WAC
Settlement Date: 3/30/98 Current Balance: $32,650,000
Next Payment: 4/15/98 Current Coupon: 6.744%
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
*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>
99-00 6.84 6.95 6.84 6.95 6.84 6.95 6.83 6.95 6.83 6.95 6.83 6.94
99-04 6.82 6.82 6.82 6.82 6.82 6.81
99-08 6.80 6.80 6.80 6.80 6.80 6.79
99-12 6.78 6.78 6.78 6.78 6.78 6.78
99-16 6.76 6.96 6.76 6.96 6.76 6.96 6.76 6.96 6.76 6.96 6.76 6.95
99-20 6.75 6.75 6.75 6.74 6.74 6.74
99-24 6.73 6.73 6.73 6.73 6.73 6.72
99-28 6.71 6.71 6.71 6.71 6.71 6.70
100-00 6.69 6.97 6.69 6.97 6.69 6.97 6.69 6.97 6.69 6.97 6.69 6.96
100-04 6.67 6.67 6.67 6.67 6.67 6.67
100-08 6.66 6.66 6.66 6.66 6.65 6.65
100-12 6.64 6.64 6.64 6.64 6.64 6.63
100-16 6.62 6.98 6.62 6.98 6.62 6.98 6.62 6.98 6.62 6.98 6.62 6.97
100-20 6.60 6.60 6.60 6.60 6.60 6.60
100-24 6.59 6.59 6.59 6.58 6.58 6.58
100-28 6.57 6.57 6.57 6.57 6.57 6.56
101-00 6.55 6.99 6.55 6.99 6.55 6.99 6.55 6.99 6.55 6.99 6.54 6.98
101-04 6.53 6.53 6.53 6.53 6.53 6.53
101-08 6.52 6.52 6.51 6.51 6.51 6.51
101-12 6.50 6.50 6.50 6.50 6.50 6.49
101-16 6.48 7.00 6.48 7.00 6.48 7.00 6.48 7.00 6.48 7.00 6.47 6.99
101-20 6.46 6.46 6.46 6.46 6.46 6.46
101-24 6.45 6.45 6.44 6.44 6.44 6.44
101-28 6.43 6.43 6.43 6.43 6.43 6.42
102-00 6.41 7.01 6.41 7.01 6.41 7.01 6.41 7.01 6.41 7.01 6.40 7.00
WAL 9.8 9.8 9.8 9.8 9.8 9.8
1st Prin 1/15/08 1/15/08 1/15/08 1/15/08 1/15/08 12/15/07
Mat. 1/15/08 1/15/08 1/15/08 1/15/08 1/15/08 1/15/08
</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-8
<PAGE>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1998-C2
- --------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS C
BOND TYPE - NET WAC
Settlement Date: 3/30/98 Current Balance: $59,859,000
Next Payment: 4/15/98 Current Coupon: 6.834%
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
*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>
99-00 6.93 6.92 6.93 6.92 6.93 6.92 6.93 6.92 6.93 6.92 6.92 6.92
99-04 6.91 6.91 6.91 6.91 6.91 6.90
99-08 6.89 6.89 6.89 6.89 6.89 6.89
99-12 6.87 6.87 6.87 6.87 6.87 6.87
99-16 6.86 6.93 6.86 6.93 6.86 6.93 6.85 6.93 6.85 6.93 6.85 6.93
99-20 6.84 6.84 6.84 6.84 6.84 6.83
99-24 6.82 6.82 6.82 6.82 6.82 6.81
99-28 6.80 6.80 6.80 6.80 6.80 6.80
100-00 6.78 6.94 6.78 6.94 6.78 6.94 6.78 6.94 6.78 6.94 6.78 6.94
100-04 6.77 6.77 6.77 6.77 6.76 6.76
100-08 6.75 6.75 6.75 6.75 6.75 6.74
100-12 6.73 6.73 6.73 6.73 6.73 6.72
100-16 6.71 6.95 6.71 6.95 6.71 6.95 6.71 6.95 6.71 6.95 6.71 6.95
100-20 6.70 6.69 6.69 6.69 6.69 6.69
100-24 6.68 6.68 6.68 6.68 6.67 6.67
100-28 6.66 6.66 6.66 6.66 6.66 6.65
101-00 6.64 6.96 6.64 6.96 6.64 6.96 6.64 6.96 6.64 6.96 6.64 6.96
101-04 6.62 6.62 6.62 6.62 6.62 6.62
101-08 6.61 6.61 6.61 6.61 6.60 6.60
101-12 6.59 6.59 6.59 6.59 6.59 6.58
101-16 6.57 6.97 6.57 6.97 6.57 6.97 6.57 6.97 6.57 6.97 6.57 6.97
101-20 6.55 6.55 6.55 6.55 6.55 6.55
101-24 6.54 6.54 6.54 6.53 6.53 6.53
101-28 6.52 6.52 6.52 6.52 6.52 6.51
102-00 6.50 6.98 6.50 6.98 6.50 6.98 6.50 6.98 6.50 6.98 6.50 6.98
WAL 9.8 9.8 9.8 9.8 9.8 9.8
1st Prin 1/15/08 1/15/08 1/15/08 1/15/08 1/15/08 1/15/08
Mat. 1/15/08 1/15/08 1/15/08 1/15/08 1/15/08 1/15/08
</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-9
<PAGE>
ANNEX B
[LOGO] MERRILL LYNCH MORTGAGE SECURITY NEW ISSUE TERM SHEET MARCH 11, 1998
- --------------------------------------------------------------------------------
$968,618,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(DEPOSITOR)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C2
TOTAL POOL SIZE = $ 1,088,335,035 (401 LOANS / 405 PROPERTIES)
SPECIAL SERVICER/LOAN The initial Special Servicer will be CRIIMI MAE
MODIFICATIONS: 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
Certificate holders 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 The Pooling and Servicing Agreement permits
SERVICER/CONTROLLING CLASS (subject to certain conditions) the Controlling
REPRESENTATIVE: Class of Sequential Pay Certificates to replace
the Special Servicer. The "Controlling Class of
Sequential Pay Certificates" is the majority
holder or 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 (or if no Class of Sequential
Pay Certificates has a Certificate Balance that is
greater than 20% of its initial Certificate
Balance and 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.
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 Periodic 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 Periodic
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, unless
such an appraisal had been previously obtained
within the last twelve months.
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
(as defined in the Prospectus Supplement) shall be
deemed to be zero.
B-10
<PAGE>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1998-C2
- --------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS D
BOND TYPE - NET WAC
Settlement Date: 3/30/98 Current Balance: $70,742,000
Next Payment: 4/15/98 Current Coupon: 7.234%
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
*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>
99-00 7.34 6.81 7.34 6.81 7.34 6.81 7.34 6.81 7.34 6.80 7.33 6.80
99-04 7.32 7.32 7.32 7.32 7.32 7.32
99-08 7.30 7.30 7.30 7.30 7.30 7.30
99-12 7.29 7.28 7.28 7.28 7.28 7.28
99-16 7.27 6.82 7.27 6.82 7.27 6.82 7.27 6.82 7.26 6.81 7.26 6.81
99-20 7.25 7.25 7.25 7.25 7.25 7.24
99-24 7.23 7.23 7.23 7.23 7.23 7.22
99-28 7.21 7.21 7.21 7.21 7.21 7.21
100-00 7.19 6.83 7.19 6.83 7.19 6.83 7.19 6.83 7.19 6.82 7.19 6.82
100-04 7.18 7.18 7.18 7.17 7.17 7.17
100-08 7.16 7.16 7.16 7.16 7.16 7.15
100-12 7.14 7.14 7.14 7.14 7.14 7.13
100-16 7.12 6.84 7.12 6.84 7.12 6.84 7.12 6.84 7.12 6.83 7.12 6.83
100-20 7.10 7.10 7.10 7.10 7.10 7.10
100-24 7.09 7.08 7.08 7.08 7.08 7.08
100-28 7.07 7.07 7.07 7.07 7.06 7.06
101-00 7.05 6.85 7.05 6.85 7.05 6.85 7.05 6.85 7.05 6.84 7.04 6.84
101-04 7.03 7.03 7.03 7.03 7.03 7.03
101-08 7.01 7.01 7.01 7.01 7.01 7.01
101-12 7.00 7.00 6.99 6.99 6.99 6.99
101-16 6.98 6.86 6.98 6.86 6.98 6.86 6.98 6.86 6.98 6.85 6.97 6.85
101-20 6.96 6.96 6.96 6.96 6.96 6.95
101-24 6.94 6.94 6.94 6.94 6.94 6.94
101-28 6.92 6.92 6.92 6.92 6.92 6.92
102-00 6.91 6.87 6.91 6.87 6.91 6.87 6.91 6.87 6.90 6.86 6.90 6.86
WAL 9.8 9.8 9.8 9.8 9.8 9.8
1st Prin 1/15/08 1/15/08 1/15/08 1/15/08 1/15/08 1/15/08
Mat. 2/15/08 2/15/08 2/15/08 2/15/08 2/15/08 2/15/08
</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-11
<PAGE>
COMPUTATIONAL MATERIALS
MERRILL LYNCH MORTGAGE INVESTORS, INC. MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1998-C2
- --------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS E
BOND TYPE - NET WAC
Settlement Date: 3/30/98 Current Balance: $16,325,000
Next Payment: 4/15/98 Current Coupon: 7.524%
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
*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>
99-00 7.64 6.77 7.64 6.74 7.64 6.73 7.64 6.73 7.64 6.73 7.64 6.73
99-04 7.62 7.62 7.62 7.62 7.62 7.62
99-08 7.60 7.61 7.60 7.60 7.60 7.60
99-12 7.58 7.59 7.58 7.58 7.58 7.58
99-16 7.57 6.78 7.57 6.75 7.56 6.74 7.56 6.74 7.56 6.74 7.56 6.74
99-20 7.55 7.55 7.55 7.55 7.55 7.54
99-24 7.53 7.53 7.53 7.53 7.53 7.52
99-28 7.51 7.51 7.51 7.51 7.51 7.51
100-00 7.49 6.79 7.49 6.76 7.49 6.75 7.49 6.75 7.49 6.75 7.49 6.75
100-04 7.47 7.48 7.47 7.47 7.47 7.47
100-08 7.46 7.46 7.45 7.45 7.45 7.45
100-12 7.44 7.44 7.44 7.44 7.43 7.43
100-16 7.42 6.80 7.42 6.77 7.42 6.76 7.42 6.76 7.42 6.76 7.41 6.77
100-20 7.40 7.40 7.40 7.40 7.40 7.40
100-24 7.38 7.39 7.38 7.38 7.38 7.38
100-28 7.36 7.37 7.36 7.36 7.36 7.36
101-00 7.35 6.81 7.35 6.78 7.34 6.77 7.34 6.77 7.34 6.77 7.34 6.78
101-04 7.33 7.33 7.33 7.33 7.33 7.32
101-08 7.31 7.31 7.31 7.31 7.31 7.30
101-12 7.29 7.29 7.29 7.29 7.29 7.29
101-16 7.27 6.82 7.28 6.79 7.27 6.78 7.27 6.79 7.27 6.79 7.27 6.79
101-20 7.26 7.26 7.25 7.25 7.25 7.25
101-24 7.24 7.24 7.24 7.24 7.24 7.23
101-28 7.22 7.22 7.22 7.22 7.22 7.21
102-00 7.20 6.83 7.20 6.80 7.20 6.80 7.20 6.80 7.20 6.80 7.20 6.80
WAL 10.0 9.9 9.9 9.9 9.9 9.9
1st Prin 2/15/08 2/15/08 2/15/08 2/15/08 2/15/08 2/15/08
Mat. 9/15/08 5/15/08 2/15/08 2/15/08 2/15/08 2/15/08
</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-12
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
DISTRIBUTION DATE STATEMENT
Table of Contents
================================================================================
STATEMENT SECTIONS PAGE(s)
- ------------------ -------
Certificate Distribution Detail 2
Certificate Factor Detail 3
Reconciliation Detail 4
Other Required Information 5
Ratings Detail 6
Current Mortgage Loan and Property Stratification Tables 7-9
Mortgage Loan Detail 10
Principal Prepayment Detail 11
Historical Detail 12
Delinquency Loan Detail 13
Specially Serviced Loan Detail 14-15
Modified Loan Detail 16
Liquidated Loan Detail 17
================================================================================
Underwriter
================================================================================
Merrill Lynch, Pierce, Fenner & Smith Inc.
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281
Contact:
Phone Number:
================================================================================
Servicer
================================================================================
First Union National Bank
First Union Capital Markets Group
One First Union Center
301 South College Street
Charlotte, North Carolina 28288- 1075
Contact: Timothy S. Ryan
Phone Number: (704) 374- 2217
================================================================================
Special Servicer
================================================================================
CRIIMI MAE Services Limited Partnership
11200 Rockville Pike
Rockville, MD 20852
Contact:
Phone Number:
================================================================================
This report has been compiled from information provided to Norwest by various
third parties, which may include the Servicer, Master Servicer, Special Servicer
and others. Norwest has not independently confirmed the accuracy of information
received from these third parties and assumes no duty to do so. Norwest
expressly disclaims any responsibility for the accuracy or completeness of
information furnished by third parties.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 1 of 17
C-1
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
CERTIFICATE DISTRIBUTION DETAIL
<TABLE>
<CAPTION>
===================================================================================================================================
Realized Loss/
Pass-Through Original Beginning Principal Interest Prepayment Additional Trust Total Ending
Class CUSIP Rate Balance Balance Distribution Distribution Premium Fund Expenses Distribution Balance
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-2 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
C 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
D 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
E 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
F 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
G 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
H 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
J 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
K 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-I 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-II 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-III 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
===================================================================================================================================
Totals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
===================================================================================================================================
<CAPTION>
======================
Current
Subordination
Class Level(1)
======================
<S> <C>
A-1 0.00%
A-2 0.00%
B 0.00%
C 0.00%
D 0.00%
E 0.00%
F 0.00%
G 0.00%
H 0.00%
J 0.00%
K 0.00%
R-I 0.00%
R-II 0.00%
R-III 0.00%
======================
Totals
======================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================
Original Beginning Ending
Pass-Through Notional Notional Interest Prepayment Total Notional
Class CUSIP Rate Amount Amount Distribution Premium Distribution Amount
====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IO 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
====================================================================================================
</TABLE>
(1) Calculated by taking (A) the sum of the ending certificate balance of all
classes less (B) the sum of (i) the ending certificate balance of the designated
class and (ii) the ending certificate balance of all classes which are not
subordinate to the designated class and dividing the result by (A).
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 2 of 17
C-2
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
CERTIFICATE FACTOR DETAIL
<TABLE>
<CAPTION>
===================================================================================================
Realized Loss/
Beginning Principal Interest Prepayment Additional Ending
Class CUSIP Balance Distribution Distribution Premium Fund Expenses Balance
====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-2 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
C 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
D 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
E 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
F 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
G 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
H 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
J 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
K 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-I 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-II 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-III 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
====================================================================================================
</TABLE>
=================================================================
Beginning Ending
Notional Interest Prepayment Notional
Class CUSIP Amount Distribution Premium Amount
=================================================================
IO 0.00000000 0.00000000 0.00000000 0.00000000
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 3 of 17
C-3
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
RECONCILIATION DETAIL
ADVANCE SUMMARY
P & I Advances Outstanding 0.00
Servicing Advances Outstanding 0.00
Reimbursement for Interest on P&I 0.00
Advances paid from general collections
Reimbursement for Interest on Servicing 0.00
Advances paid from general collections
SERVICING FEE BREAKDOWNS
Current Period Accrued Servicing Fees 0.00
Less Delinquent Servicing Fees 0.00
Less Reductions to Servicing Fees 0.00
Plus Servicing Fees for Delinquent Payments Received 0.00
Plus Adjustments for Prior Servicing Calculation 0.00
Total Servicing Fees Collected 0.00
CERTIFICATE INTEREST RECONCILIATION
<TABLE>
<CAPTION>
=============================================================================================================================
Accrued Net Aggregate Distributable Distributable Additional Remaining Unpaid
Certificate Prepayment Certificate Certificate Interest Trust Fund Interest Distributable
Class Interest Interest Shortfall Interest Adjustment Expenses Distribution Certificate Interest
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
A-1
A-2
IO
B
C
D
E
F
G
H
J
K
=============================================================================================================================
Total
=============================================================================================================================
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 4 of 17
C-4
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
OTHER REQUIRED INFORMATION
- --------------------------------------------------------------------------------
Available Distribution Amount 0.00
Aggregate Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance of Loans 0.00
Aggregate Stated Principal Balance of Loans 0.00
Aggregate Amount of Servicing Fee 0.00
Aggregate Amount of Special Servicing Fee 0.00
Aggregate Amount of Trustee Fee 0.00
Aggregate Trust Fund Expenses 0.00
Specially Serviced Loans not Delinquent
Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance 0.00
- --------------------------------------------------------------------------------
Appraisal Reduction Amount
=================================================
Appraisal Date Appraisal
Loan Reduction Reduction
Number Amount Effected
=================================================
=================================================
TOTAL
=================================================
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 5 of 17
C-5
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
RATINGS DETAIL
================================================================================
Original Ratings Current Ratings (1)
------------------------------------------------------------
Class CUSIP DCR Fitch Moody's S & P DCR Fitch Moody's S & P
================================================================================
A- 1
A- 2
IO
B
C
D
E
F
G
H
J
K
================================================================================
NR - Designates that the class was not rated by the above agency at the time
of original issuance.
X - Designates that the above rating agency did not rate any classes in this
transaction at the time of original issuance.
N/A - Data not available this period.
1) For any class not rated at the time of original issuance by any particular
rating agency, no request has been made subsequent to issuance to obtain rating
information, if any, from such rating agency. The current ratings were obtained
directly from the applicable rating agency within 30 days of the payment date
listed above. The ratings may have changed since they were obtained. Because the
ratings may have changed, you may want to obtain current ratings directly from
the rating agencies.
Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, Illinois 60603
(312) 368-3100
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
(212) 908-0500
Moody's Investors Service
99 Church Street
New York, New York 10007
(212) 553-0300
Standard & Poor's Rating Services
26 Broadway
New York, New York 10004
(212) 208-8000
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 6 of 17
C-6
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
SCHEDULED BALANCE
================================================================================
% of
Scheduled # of Scheduled Agg. WAM Weighted
Balance Loans Balance Bal. (2) WAC Avg DSCR (1)
================================================================================
================================================================================
Totals
================================================================================
STATE (3)
================================================================================
% of
# of Scheduled Agg. WAM Weighted
State Props. Balance Bal. (2) WAC Avg DSCR (1)
================================================================================
================================================================================
Totals
================================================================================
See footnotes on last page of this section.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 7 of 17
C-7
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
DEBT SERVICE COVERAGE RATIO
================================================================================
Debt Service # of Scheduled % of WAM Weighted
Coverage Ratio Loans Balance Agg (2) WAC Avg DSCR (1)
Bal.
================================================================================
================================================================================
Totals
================================================================================
NOTE RATE
================================================================================
Note # of Scheduled % of WAM Weighted
Rate Loans Balance Agg (2) WAC Avg DSCR (1)
Bal.
================================================================================
================================================================================
Totals
================================================================================
PROPERTY TYPE (3)
================================================================================
Property # of Scheduled % of WAM Weighted
Type Props. Balance Agg (2) WAC Avg DSCR (1)
Bal.
================================================================================
================================================================================
Totals
================================================================================
SEASONING
================================================================================
# of Scheduled % of WAM Weighted
Seasoning Loans Balance Agg (2) WAC Avg DSCR (1)
Bal.
================================================================================
================================================================================
Totals
================================================================================
See footnotes on last page of this section.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 8 of 17
C-8
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
ANTICIPATED REMAINING TERM (ARD AND BALLOON LOANS)
================================================================================
Anticipated # of Scheduled % of WAM Weighted
Remaining Loans Balance Agg. (2) WAC Avg DSCR (1)
Term(2) Bal.
================================================================================
================================================================================
Totals
================================================================================
REMAINING AMORTIZATION TERM (ARD AND BALLOON LOANS)
================================================================================
Remaining # of Scheduled % of WAM Weighted
Amortization Loans Balance Agg. (2) WAC Avg DSCR (1)
Term Bal.
================================================================================
================================================================================
Totals
================================================================================
REMAINING STATED TERM (FULLY AMORTIZING LOANS)
================================================================================
Remaining # of Scheduled % of WAM Weighted
Stated Loans Balance Agg. (2) WAC Avg DSCR (1)
Term Bal.
================================================================================
================================================================================
Totals
================================================================================
AGE OF MOST RECENT NOI
================================================================================
Age of Most # of Scheduled % of WAM Weighted
Recent NOI Loans Balance Agg. (2) WAC Avg DSCR (1)
Bal.
================================================================================
================================================================================
Totals
================================================================================
(1) Debt Service Coverage Ratios are calculated as described in the prospectus,
values are updated periodically as new NOI figures become available from
borrowers on an asset level. The Trustee makes no representations as to the
accuracy of the data provided by the borrower for this calculation.
(2) Anticipated Remaining Term and WAM are each calculated based upon the term
from the current month to the earlier of the Anticipated Repayment Date, if
applicable, and the maturity date.
(3) Data in this table was calculated by allocating pro-rata the current loan
information to the properties based upon the Cut-off Date balance of each
property as disclosed in the offering document.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 9 of 17
C-9
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
Mortgage Loan Detail
<TABLE>
<CAPTION>
====================================================================================================================================
Anticipated Neg. Beginning Ending Paid Appraisal
Loan ODCR Property City State Interest Principal Gross Repayment Maturity Amort Scheduled Scheduled Thru Reduction
Number Type (1) Payment Payment Coupon Date Date (Y/N) Balance Balance Date Date
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Totals
====================================================================================================================================
</TABLE>
===============================
Appraisal Res. Mod.
Loan Reduction Strat. Code
Number Amount (2) (3)
===============================
===============================
Totals
===============================
(1) Property Type Code (2) Resolution Strategy Code (3) Modification Code
MF - Multi- Family 1 - Modification 1 - Maturity Date Extension
RT - Retail 2 - Foreclosure 2 - Amortization Change
HC - Health Care 3 - Bankruptcy 3 - Principal Write-Off
IN - Industrial 4 - Extension 4 - Combination
WH - Warehouse 5 - Note Sale
MH - Mobile Home Park 6 - DPO
OF - Office 7 - REO
MU - Mixed Use 8 - Resolved
LO - Lodging 9 - Pending Return
SS - Self Storage to Master Servicer
OT - Other 10 - Deed In Lieu Of
Foreclosure
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 10 of 17
C-10
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
Principal Prepayment Detail
<TABLE>
<CAPTION>
===============================================================================================================
Principal Prepayment Amount Prepayment Premium
Offering Document --------------------------------- --------------------------------------------
Loan Number Cross-Reference Payoff Amount Curtailment Amount Precentage Premium Yield Maintenance Charge
===============================================================================================================
<S> <C> <C> <C> <C> <C>
===============================================================================================================
Totals
===============================================================================================================
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 11 of 17
C-11
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
Historical Detail
<TABLE>
<CAPTION>
====================================================================================================================================
Delinquencies Prepayments Rate and Maturities
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution 30-59 Days 60-89 Days 90 Days or More Foreclosure REO Modifications Curtailments Payoff Next Weighted Avg.
Date # Balance # Balance # Balance # Balance # Balance # Balance # Amount # Amount Coupon Remit WAM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
Note: Foreclosure and REO Totals are excluded from the delinquencies aging
categories.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 12 of 17
C-12
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
Delinquency Loan Detail
<TABLE>
<CAPTION>
=============================================================================================================================
Offering # of Current Outstanding Status of Resolution
Document Months Paid Through P & I P & I Mortgage Strategy Servicing Foreclosure
Loan Number Cross-Reference Delinq. Date Advances Advances ** Loan (1) Code (2) Transfer Date Date
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
=============================================================================================================================
Totals
=============================================================================================================================
</TABLE>
Delinquency Loan Detail
==========================================================
Current Outstanding
Servicing Servicing REO
Loan Number Advances Advances Bankruptcy Date Date
==========================================================
==========================================================
Totals
==========================================================
(1) Status of Mortgage Loan (2) Resolution Strategy Code
--------------------------- ----------------------------
A - Payment Not Received 1 - Modification
But Still in Grace Period 2 - Foreclosure
B - Late Payment But Less 3 - Bankruptcy
Than 1 Month Delinquent 4 - Extension
0 - Current 5 - Note Sale
1 - One Month Delinquent 6 - DPO
2 - Two Months Delinquent 7 - REO
3 - Three Or More Months Delinquent 8 - Resolved
4 - Assumed Scheduled Payment 9 - Pending Return
(Performing Matured Balloon) to Master Servicer
7 - Foreclosure 10- Deed In Lieu Of
9 - REO Foreclosure
** Outstanding P & I Advances include the current period advance
===============================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 13 of 17
C-13
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
SPECIALLY SERVICED LOAN DETAIL - PART 1
<TABLE>
<CAPTION>
====================================================================================================================================
Offering Servicing Resolution Net
Distribution Loan Document Transfer Strategy Scheduled Property State Interest Actual Operating NOI
Date Number Cross-Reference Date Code (1) Balance Type (2) Rate Balance Income Date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
=================================
Note Maturity Remaining
DSCR Date Date Amortization
Term
=================================
(1) Resolution Strategy Code (2) Property Type Code
1 - Modification MF - Multi-Family
2 - Foreclosure RT - Retail
3 - Bankruptcy HC - Health Care
4 - Extension IN - Industrial
5 - Note Sale WH - Warehouse
6 - DPO MH - Mobile Home Park
7 - REO OF - Office
8 - Resolved MU - Mixed Use
9 - Pending Return LO - Lodging
to Master Servicer SS - Self Storage
10 - Deed In Lieu Of OT - Other
Foreclosure
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 14 of 17
C-14
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
Specially Serviced Loan Detail - Part 2
<TABLE>
<CAPTION>
===================================================================================================================================
Offering Resolution Site
Distribution Loan Document Strategy Inspection Appraisal Appraisal Other REO
Date Number Cross-Reference Code (1) Date Phase 1 Date Date Value Property Revenue Comment
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
</TABLE>
(1) Resolution Strategy Code
1 - Modification
2 - Foreclosure
3 - Bankruptcy
4 - Extension
5 - Note Sale
6 - DPO
7 - REO
8 - Resolved
9 - Pending Return
to Master Servicer
10 - Deed In Lieu Of
Foreclosure
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 15 of 17
C-15
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
Modified Loan Detail
================================================================================
Offering
Loan Document Pre-Modification Modification
Number Cross-Reference Balance Modification Date Description
================================================================================
================================================================================
Total
================================================================================
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 16 of 17
C-16
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 509-1630
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.securitieslink.net/cmbs
PAYMENT DATE: 4/15/98
RECORD DATE: 3/31/98
================================================================================
Liquidated Loan Detail
<TABLE>
<CAPTION>
===========================================================================================================
Final Recovery Offering Gross Proceeds
Loan Determination Document Appraisal Appraisal Actual Gross as a % of
Number Date Cross-Reference Date Value Balance Proceeds Actual Balance
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
===========================================================================================================
Current Total
===========================================================================================================
Cumulative Total
===========================================================================================================
<CAPTION>
=======================================================
Aggregate Net Proceeds Repurchased
Liquidation as a % of Realized by Seller
Number Actual Balance Loss (Y/N)
=======================================================
<S> <C> <C> <C>
=======================================================
Current Total
=======================================================
Cumulative Total
=======================================================
</TABLE>
* Aggregate liquidation expenses also include outstanding P & I advances and
unpaid fees (servicing, trustee, etc.).
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 17 of 17
C-17
<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")
secured by interests in the following property types residential properties
consisting of five or more rental or cooperatively-owned dwelling units, retail
stores, hotels or motels, office buildings, industrial plants, nursing homes,
mobile home parks, self-storage facilities, or mixed use or other types of
income producing properties, 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"). See "Description of the Trust Funds."
Mortgage Loans (or mortgage loans underlying an MBS) may be delinquent 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 Certificate may include amounts on deposit in a
separate account (the "Pre-Funding Account") which may be used by the Trust Fund
to acquire additional assets as more fully described herein and 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 "Risk Factors--Effects of Pre-Funding and
Acquisition of Additional Mortgage Assets," "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. Such distributions will be made only from the
assets of the related Trust Fund.
This Prospectus and related Prospectus Supplements may be used by the
Depositor, Merrill Lynch, an affiliate of the Depositor, and any other affiliate
of the Depositor when required under the federal securities law in connection
with offers and sales of Offered Certificates in furtherance of market-making
activities in Offered Certificates. Merrill Lynch or any such other affiliate
may act as principal or agent in such transactions. Such sales will be made at
prices related to prevailing marketing prices at the time of sale or otherwise.
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 "Material Federal Income Tax Consequences" herein.
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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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
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.
FEBRUARY 25, 1998
<PAGE>
PROSPECTUS SUPPLEMENT
As more particularly described herein, each Prospectus Supplement will,
among other things, set forth, as and to the extent appropriate: (i) a
description of the class or classes of Offered Certificates of the related
series, including the payment provisions with respect to each such class, the
aggregate principal amount of each such class (the "Certificate Balance"), the
rate at which interest will accrue from time to time, if at all, with respect to
each such class (the "Pass-Through Rate") or the method of determining such
rate; (ii) information with respect to any other classes of Certificates of the
same series; (iii) the respective dates on which distributions are to be made to
Certificateholders; (iv) information as to the assets constituting the related
Trust Fund, including the general characteristics of the assets included
therein, including the Mortgage Assets and any Credit Support and Cash Flow
Agreements (with respect to the Certificates of any series, the "Trust Assets");
(v) the circumstances, if any, under which the related Trust Fund may be subject
to early termination; (vi) additional information with respect to the method of
distribution of such Offered Certificates; (vii) whether one or more REMIC
elections will be made and the designation of the "regular interests" and
"residual interests" in each REMIC to be created; (viii) the initial percentage
ownership interest in the related Trust Fund to be evidenced by each class of
Certificates of such series; (ix) information concerning the trustee (as to any
series, the "Trustee") of the related Trust Fund; (x) information concerning the
master servicer (as to any series, the "Master Servicer") and any special
servicer (as to any series, the "Special Servicer") engaged to administer the
related Mortgage Assets; (xi) information as to the nature and extent of any
subordination in entitlement to distributions of any class of Certificates of
such series; and (xii) whether such Offered Certificates will be initially
issued in definitive or book-entry form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a part)
under the Securities Act of 1933, as amended, with respect to the Offered
Certificates. This Prospectus and the Prospectus Supplement relating to the
Offered Certificates of each series contain summaries of the material terms of
the documents referred to herein and therein, but do not contain all of the
information set forth in the Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its Regional
Offices located as follows: Chicago Regional Office, 500 West Madison, 14th
Floor, Chicago, Illinois 60661; and New York Regional Office, Seven World Trade
Center, New York, New York 10048. Publicly filed information, including
information regarding the Registrant, is available at the Commission's web site
at www.sec.gov.
No person has been authorized to give any information or to make any
representation not contained in this Prospectus and any related Prospectus
Supplement and, if given or made, such information or representation must not be
relied upon. This Prospectus and any related Prospectus Supplement do not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the Offered Certificates, or an offer of the Offered Certificates to
any person in any state or other jurisdiction in which such offer would be
unlawful. The delivery of this Prospectus at any time does not imply that
information herein is correct as of any time subsequent to its date; however, if
any material change occurs while this Prospectus is required by law to be
delivered, this Prospectus will be amended or supplemented accordingly.
The related Master Servicer or Trustee will be required to mail to holders
of the Offered Certificates of each series periodic unaudited reports concerning
the related Trust Fund. If beneficial interests in a class of Offered
Certificates are being held and transferred in book-entry format through the
facilities of The Depository Trust Company ("DTC") as described herein, then
unless otherwise provided in the related Prospectus Supplement, such reports
will be sent on behalf of the related Trust Fund to a nominee of DTC as the
registered holder of the Offered Certificates. The means by which notices and
other communications are conveyed by DTC to its participating organizations, and
directly or indirectly through such participating organizations to the
beneficial owners of the applicable Offered Certificates, will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. See "Description of the
Certificates--Reports to Certificateholders" and "--Book-Entry Registration and
Definitive Certificates," and "Description of the Pooling Agreements--Evidence
as to Compliance." The Depositor will file or cause to be filed with the
Commission such periodic reports with respect to each Trust Fund as are required
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations of the Commission thereunder.
2
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of an offering of Offered Certificates evidencing interests therein. The
Depositor, upon request, will provide or cause to be provided without charge to
each person to whom this Prospectus is delivered in connection with the offering
of one or more classes of Offered Certificates, a copy of any or all documents
or reports incorporated herein by reference, in each case to the extent such
documents or reports relate to one or more of such classes of such Offered
Certificates, other than the exhibits to such documents (unless such exhibits
are specifically incorporated by reference in such documents). Requests to the
Depositor should be directed in writing to its principal executive office at
250Vesey 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
<TABLE>
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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 for Offered Certificates ..................................................... 16
Limited Assets to Support Payment on Certificates .............................................. 16
Prepayments on Mortgage Loans; Effects on Average Life of Certificates; Effects on Yields
on Certificates ............................................................................... 16
Optional Early Termination ..................................................................... 18
Limited Nature of Ratings on Certificates ...................................................... 18
Effects of Pre-Funding and Acquisition of Additional Mortgage Assets ........................... 18
Risks to Lenders Associated With Certain Income Producing Loans and Mortgaged Properties ....... 19
Risks Associated with Mortgage Loans Secured by Multifamily Properites ....................... 19
Risks Associated with Mortgage Loans Secured by Retail Properties ............................ 20
Risks Associated with Mortgage Loans Secured by Hospitality Properties ....................... 20
Risks Associated with Mortgage Loans Secured by Office Buildings ............................. 20
Risks Associated with Mortgage Loans Secured by Industrial & Mixed-Use Facilities ............ 21
Risks Associated with Mortgage Loans Secured by Residential Healthcare Facilities ............ 21
Risks Associated with Mortgage Loans Secured by Healthcare-Related Properties ................ 21
Risks Associated with Mortgage Loans Secured by Warehouse and Storage Facilities ............. 23
Management Risks ............................................................................... 23
Balloon Payments on Mortgage Loans; Heightened Risk of Borrower Default ........................ 23
Leases and Rents Serving as Security for Mortgage Loans Pose Special Risks ..................... 24
Delinquent Mortgage Loans ...................................................................... 24
Environmental Liability May Affect Lien on Mortgaged Property and Expose Lender to Costs ....... 24
Credit Support Limitations--May Not Cover All Risks or Full Payment on Certificates ............ 25
Certain Federal Tax Considerations Regarding REMIC Residual Certificates ....................... 25
ERISA Considerations--Covered Investors May Experience Liability ............................... 26
Book-Entry Registration of Certificates Affects Ownership of Certificates and Receipt of Payment 26
DESCRIPTION OF THE TRUST FUNDS ................................................................... 26
General ........................................................................................ 26
Mortgage Loans ................................................................................. 26
General ...................................................................................... 26
Default and Loss Considerations with Respect to the Mortgage Loans ........................... 27
Payment Provisions of the Mortgage Loans ..................................................... 28
Mortgage Loan Information in Prospectus Supplements .......................................... 28
MBS ............................................................................................ 29
Certificate Accounts ........................................................................... 29
Credit Support ................................................................................. 30
Cash Flow Agreements ........................................................................... 30
Pre-Funding .................................................................................... 30
YIELD AND MATURITY CONSIDERATIONS ................................................................ 31
General ........................................................................................ 31
Pass-Through Rate .............................................................................. 31
Payment Delays ................................................................................. 31
Certain Shortfalls in Collections of Interest .................................................. 31
Yield and Prepayment Considerations ............................................................ 31
Weighted Average Life and Maturity ............................................................. 33
Controlled Amortization Classes and Companion Classes .......................................... 33
Other Factors Affecting Yield, Weighted Average Life and Maturity .............................. 34
Balloon Payments; Extensions of Maturity ..................................................... 34
Negative Amortization ........................................................................ 34
Foreclosures and Payment Plans ............................................................... 35
Losses and Shortfalls on the Mortgage Assets ................................................. 35
Additional Certificate Amortization .......................................................... 35
</TABLE>
4
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<TABLE>
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THE DEPOSITOR .................................................................................... 36
USE OF PROCEEDS .................................................................................. 36
DESCRIPTION OF THE CERTIFICATES .................................................................. 36
General ........................................................................................ 36
Distributions .................................................................................. 36
Distributions of Interest on the Certificates .................................................. 37
Distributions of Certificate Principal ......................................................... 38
Distributions on the Certificates in Respect of Prepayment Premiums or in Respect of
Equity Participations ......................................................................... 38
Allocation of Losses and Shortfalls ............................................................ 38
Advances in Respect of Delinquencies ........................................................... 39
Reports to Certificateholders .................................................................. 39
Voting Rights .................................................................................. 41
Termination .................................................................................... 41
Book-entry Registration and Definitive Certificates ............................................ 42
DESCRIPTION OF THE POOLING AGREEMENTS ............................................................ 43
General ........................................................................................ 43
Assignment of Mortgage Loans; Repurchases ...................................................... 43
Representations and Warranties; Repurchases .................................................... 44
Certificate Account ............................................................................ 45
General ...................................................................................... 45
Deposits ..................................................................................... 45
Withdrawals .................................................................................. 46
Collection and Other Servicing Procedures ...................................................... 47
Modifications, Waivers and Amendments of Mortgage Loans ........................................ 47
Sub-Servicers .................................................................................. 47
Special Servicers .............................................................................. 48
Realization Upon Defaulted Mortgage Loans ...................................................... 48
Hazard Insurance Policies ...................................................................... 49
Due-on-Sale and Due-on-Encumbrance Provisions .................................................. 50
Servicing Compensation and Payment of Expenses ................................................. 50
Evidence as to Compliance ...................................................................... 51
Certain Matters Regarding the Master Servicer and the Depositor ................................ 51
Events of Default .............................................................................. 52
Rights Upon Event of Default ................................................................... 52
Amendment ...................................................................................... 53
List of Certificateholders ..................................................................... 53
The Trustee .................................................................................... 53
Duties of the Trustee .......................................................................... 53
Certain Matters Regarding the Trustee .......................................................... 54
Resignation and Removal of the Trustee ......................................................... 54
DESCRIPTION OF CREDIT SUPPORT .................................................................... 54
General ........................................................................................ 54
Subordinate Certificates ....................................................................... 55
Cross-support Provisions ....................................................................... 55
</TABLE>
5
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Insurance or Guarantees with Respect to Mortgage Loans ....................................... 55
Letter of Credit ............................................................................. 55
Certificate Insurance and Surety Bonds ....................................................... 55
Reserve Funds ................................................................................ 56
Credit Support with Respect to MBS ........................................................... 56
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS ........................................................ 56
General ...................................................................................... 57
Types of Mortgage Instruments ................................................................ 57
Leases and Rents ............................................................................. 57
Personalty ................................................................................... 57
Junior Mortgages; Rights of Senior Lenders ................................................... 58
Foreclosure .................................................................................. 58
General .................................................................................... 58
Foreclosure Procedures Vary From State to State ............................................ 58
Judicial Foreclosure ....................................................................... 58
Non-Judicial Foreclosure/Power of Sale ..................................................... 59
Limitations on the Rights of Mortgage Lenders .............................................. 59
Rights of Redemption ....................................................................... 60
Anti-Deficiency Legislation ................................................................ 60
Leasehold Considerations ................................................................... 60
Bankruptcy Laws .............................................................................. 61
Environmental Considerations ................................................................. 62
General .................................................................................... 62
Superlien Laws ............................................................................. 62
CERCLA ..................................................................................... 62
Certain State and Other Federal Laws ....................................................... 62
Additional Considerations .................................................................. 63
Due-on-Sale and Due-on-Encumbrance ........................................................... 63
Subordinate Financing ........................................................................ 63
Default Interest and Limitations on Prepayments .............................................. 64
Applicability of Usury Laws .................................................................. 64
Soldiers' and Sailors' Civil Relief Act of 1940 .............................................. 64
Americans with Disabilities Act .............................................................. 64
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ....................................................... 65
General ...................................................................................... 65
REMICs ....................................................................................... 65
Classification of REMICs ................................................................... 65
Characterization of Investments in REMIC Certificates ...................................... 66
Tiered REMIC Structures .................................................................... 66
Taxation of Owners of REMIC Regular Certificates ............................................. 67
General .................................................................................... 67
Original Issue Discount .................................................................... 67
Market Discount ............................................................................ 68
Premium .................................................................................... 70
Realized Losses ............................................................................ 70
</TABLE>
6
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Taxation of Owners of REMIC Residual Certificates ................................................ 70
General ........................................................................................ 70
Taxable Income of the REMIC .................................................................... 71
Basis Rules, Net Losses and Distributions ...................................................... 72
Excess Inclusions .............................................................................. 73
Noneconomic REMIC Residual Certificates ........................................................ 74
Mark-to-Market Rules ........................................................................... 74
Possible Pass-Through of Miscellaneous Itemized Deductions ..................................... 75
Sales of REMIC Certificates .................................................................... 75
Prohibited Transactions Tax and Other Taxes .................................................... 76
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain Organizations ...... 77
Termination .................................................................................... 77
Reporting and Other Administrative Matters ..................................................... 78
Backup Withholding with Respect to REMIC Certificates .......................................... 78
Foreign Investors in REMIC Certificates ........................................................ 78
Grantor Trust Funds .............................................................................. 79
Classification of Grantor Trust Funds .......................................................... 79
Characterization of Investments in Grantor Trust Certificates .................................... 79
Grantor Trust Fractional Interest Certificates ................................................. 79
Grantor Trust Strip Certificates ............................................................... 80
Taxation of Owners of Grantor Trust Fractional Interest Certificates ............................. 80
General ........................................................................................ 80
If Stripped Bond Rules Apply ................................................................... 81
If Stripped Bond Rules Do Not Apply ............................................................ 82
Market Discount ................................................................................ 83
Premium ........................................................................................ 84
Taxation of Owners of Grantor Trust Strip Certificates ......................................... 85
Possible Application of Proposed Contingent Payment Rules ...................................... 86
Sales of Grantor Trust Certificates ............................................................ 86
Grantor Trust Reporting ........................................................................ 86
Backup Withholding ............................................................................. 87
Foreign Investors .............................................................................. 87
STATE AND OTHER TAX CONSEQUENCES ................................................................. 87
ERISA CONSIDERATIONS ............................................................................. 87
General ........................................................................................ 87
Plan Asset Regulations ......................................................................... 87
Prohibited Transaction Exemptions .............................................................. 88
LEGAL INVESTMENT ................................................................................. 89
METHOD OF DISTRIBUTION ........................................................................... 91
LEGAL MATTERS .................................................................................... 92
FINANCIAL INFORMATION ............................................................................ 92
RATING ........................................................................................... 92
INDEX OF DEFINITIONS ............................................................................. 93
</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 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."
Issuer ............................. The Trust Fund established under a
Pooling and Servicing Agreement, as
described below in this Summary of
Prospectus under "Description of
Certificates."
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 willconsist 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) retail stores,
hotels or motels, office buildings,
industrial plants, nursing homes,
mobile home parks, self-storage
facilities, or mixed use or other
types of income-producing properties
(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 as
of the date of their deposit into the
related Trust Fund. A Mortgage Loan
will be considered "delinquent" if it
is thirty (30) days or more past its
most recently contractual scheduled
payment date in payment of all
amounts due according to its terms.
In any event, at the time of its
creation the Trust Fund will not
include delinquent loans which by
principal amount are more than 20% of
the aggregate principal amount of all
Mortgage Loans in the 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.
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8
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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 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,
such as mortgage-backed securities
that are similar to a series of
Certificates 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
- --------------------------------------------------------------------------------
9
<PAGE>
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 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 or reserve fund, 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 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."
E. Pre-Funding If so provided in the related Prospectus
Supplement, a Trust Fund may include
amounts on deposit in a separate
account (the "Pre-Funding Account")
which amounts will not exceed 25% of
the pool balance of the Trust Fund as
of the Cut-off Date. Amounts on
deposit in the Pre-Funding Account
may be used by the Trust Fund to
acquire additional Mortgage Assets,
which additional Mortgage Assets will
be selected using criteria that is
substantially similar to the criteria
used to select the Mortgage Assets
included in the Trust Fund on the
Closing Date. The Trust Fund may
acquire such additional Mortgage
Assets for a period of time of not
more than 120 days after the Closing
Date (the "Pre-Funding Period") as
specified in the related Prospectus
Supplement. Amounts on deposit in the
Pre-Funding Account after the end of
the Pre-Funding Period, will be
distributed to Certificateholders or
such other person as set forth in the
related Prospectus Supplement. If so
provided in the related Prospectus
Supplement, the Trust Fund may
include amounts on deposit in a
separate account (the "Capitalized
Interest Account"). Amounts on
deposit in the Capitalized Interest
Account may be used to supplement
investment earnings, if any, of
amounts on deposit in the Pre-Funding
Account, supplement interest
collections of the Trust Fund, or
such other purpose as specified in
the related Prospectus Supplement. As
set forth in a related Prospectus
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10
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Supplement, amounts on deposit in the
Capitalized Interest Account and
Pre-Funding Account will be held in
cash or invested in short-term
investment grade obligations. Any
amounts on deposit in the Capitalized
Interest Account will be released
after the end of the Pre-Funding
Period as specified in the related
Prospectus Supplement. See "Risk
Factors--Effects of Pre-Funding and
Acquisition of Additional Mortgage
Assets."
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) provide for
distributions of principal to be
made, subject to available funds,
based on a specified principal
payment schedule or other
methodology.
Each class of Certificates, other than
certain classes of Stripped Interest
Certificates and certain REMIC
Residual Certificates (as defined
below), will have a stated principal
amount (a "Certificate Balance"); and
each class of Certificates, other
than certain classes of Stripped
Principal Certificates and certain
REMIC Residual Certificates, will
accrue interest on its Certificate
Balance or, in the case of certain
classes of Stripped Interest
Certificates, on a notional amount
("Notional Amount"), based on a
fixed, variable or adjustable
interest rate (a "Pass-Through
Rate"). The related Prospectus
Supplement will specify the
Certificate Balance, Notional Amount
and Pass-Through Rate for each class
of Offered Certificates, as
applicable, or, in the case of a
variable or adjustable Pass-Through
Rate, the method for determining the
Pass-Through Rate.
The Certificates will not be guaranteed
or insured by the Depositor or any of
its affiliates, by any governmental
agency or instrumentality or by any
other person, unless otherwise
provided in the related Prospectus
Supplement. See "Risk
Factors--Limited Assets" and
"Description of the Certificates."
Distributions of Interest on the
Certificates ..................... Interest on each class of Offered
Certificates (other than certain
classes of Stripped Principal
Certificates and Stripped Interest
Certificates and
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11
<PAGE>
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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
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, dis-
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12
<PAGE>
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tributions 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
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."
Risk Factors ....................... There are material risks associated with
an investment in Certificates. See
"Risk Factors" herein. Additional
risks pertaining to a particular
series of Certificates may be
disclosed in the applicable
Prospectus Supplement.
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
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13
<PAGE>
- --------------------------------------------------------------------------------
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. If
so indicated in the related
Prospectus Supplement, an election
alternatively may be made to treat
the Trust Fund as a financial asset
securitization investment trust
("FASIT").
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. See "Material 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
"Material Federal Income Tax
Consequences--REMICs--Taxation of
Owners of REMIC Residual
Certificates."
B. Grantor Trust ............... If so 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.
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14
<PAGE>
- --------------------------------------------------------------------------------
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 "Material Federal
Income Tax Consequences--Grantor
TrustFunds."
Investors are advised to consult their
tax advisors and to review "Material
Federal Income Tax Consequences"
herein and in the related Prospectus
Supplement.
ERISA Considerations ............... Fiduciaries of employee benefit plans
and certain other retirement plans
and arrangements, including
individual retirement accounts,
annuities, Keogh plans, and
collective investment funds and
separate accounts in which such
plans, accounts, annuities or
arrangements are invested, that are
subject to the Employee Retirement
Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of
the Code, should carefully review
with their legal advisors whether the
purchase or holding of Offered
Certificates could give rise to a
transaction that is prohibited or is
not otherwise permissible either
under ERISA or Section 4975 of the
Code. See "ERISA Considerations"
herein and in the related Prospectus
Supplement.
Legal Investment ................... The Offered Certificates of any series
will constitute "mortgage related
securities" for purposes of the
Secondary Mortgage Market Enhancement
Act of 1984 only if so specified in
the related Prospectus Supplement.
Investors whose investment authority
is subject to legal restrictions
should consult their own legal
advisors to determine whether and to
what extent the Offered Certificates
constitute legal investments for
them. See "Legal Investment" herein
and in the related Prospectus
Supplement.
Rating ............................. At their respective dates of issuance,
each class of Offered Certificates
will be rated not lower than
investment grade by one or more
nationally recognized statistical
rating agencies (each, a "Rating
Agency"). See "Rating" herein and in
the related Prospectus Supplement.
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15
<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. Additional risk factors are set forth elsewhere in the
Prospectus under separate headings, and will be set forth in the related
Prospectus Supplement under separate headings, in connection with discussions
regarding particular aspects of Trust Fund Assets or the Certificates. 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 FOR OFFERED CERTIFICATES
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 TO SUPPORT PAYMENT ON CERTIFICATES
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.
See "Description of the Trust Funds." 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 ON MORTGAGE LOANS; EFFECTS ON AVERAGE LIFE OF CERTIFICATES; EFFECTS
ON YIELDS ON CERTIFICATES
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
16
<PAGE>
of the related series may be highly unpredictable. Prepayments on the Mortgage
Loans in any Trust Fund will result in a faster rate of principal payments on
one or more classes of the related Certificates than if payments on such
Mortgage Loans were made as scheduled. Thus, the prepayment experience on the
Mortgage Loans may affect the average life of each class of such Certificates,
including a class of Offered Certificates. The rate of principal payments on
pools of mortgage loans varies among pools and from time to time is influenced
by a variety of economic, demographic, geographic, social, tax, legal and other
factors. For example, if prevailing interest rates fall significantly below the
Mortgage Rates borne by the Mortgage Loans included in a Trust Fund, principal
prepayments are likely to be higher than if prevailing rates remain at or above
the rates borne by those Mortgage Loans. Conversely, if prevailing interest
rates rise significantly above the Mortgage Rates borne by the Mortgage Loans
included in a Trust Fund, principal prepayments thereon are likely to be lower
than if prevailing interest rates remain at or below the rates borne by those
Mortgage Loans. There can be no assurance as to the rate of prepayments on the
Mortgage Loans in any Trust Fund or that such rate will conform to any model
described herein or in any Prospectus Supplement. As a result, depending on the
anticipated rate of prepayment for the Mortgage Loans in any Trust Fund, the
retirement of any class of Certificates of the related series could occur
significantly earlier or later thanexpected.
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 (i) 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, (ii) a
disproportionately large share (which, in some cases, may be all) of such
prepayments, or (iii) 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. 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. A Companion Class 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. Where the amount of
interest payable with respect to a class is disproportionately large, as
compared to the amount of principal, as with certain classes of Stripped
Interest Certificates, a holder might fail to recoup its original investment
under some prepayment scenarios. An investor should consider, in the case of any
Offered Certificate purchased at a discount, the risk that a slower than
anticipated rate of principal payments on the Mortgage Loans could result in an
actual yield to such investor that is lower than the anticipated yield and, in
the case of any Offered Certificate purchased at a premium, the risk that a
faster than anticipated rate of principal payments could result in an actual
yield to such investor that is lower
17
<PAGE>
than the anticipated yield. See "Yield and Maturity Considerations" herein and,
if applicable, in the related Prospectus Supplement.
OPTIONAL EARLY TERMINATION
If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination by means of the
repurchase of the Mortgage Assets in the related Trust Fund by the party or
parties specified therein, under the circumstances and in the manner set forth
therein. If so provided in the related Prospectus Supplement, upon the reduction
of the Certificate Balance of a specified class or classes of Certificates by a
specified percentage or amount, a party specified therein may be authorized or
required to solicit bids for the purchase of all of the Mortgage Assets of the
Trust Fund, or of a sufficient portion of such Mortgage Assets to retire such
class or classes, under the circumstances and in the manner set forth therein.
In the event of a partial or complete termination of a Trust Fund, there can be
no assurance that the proceeds from a sale of the Mortgage Assets will be
sufficient to distribute the outstanding Certificate Balance plus accrued
interest and any undistributed shortfalls in interest accrued on the
Certificates subject to the termination. Accordingly the holders of such
Certificates may incur a loss. See "Description of the Certificates
- --Termination." In the event that partial or complete early termination of a
series of Certificates is authorized and does occur in this manner, the holders
of the series of Certificates or one or more classes of a series of Certificates
that are terminated early may experience repayment of their investment outside
their control at an unpredictable and inopportune time. Moreover, such early
termination could have an adverse impact on the overall yield received by such
holder, depending upon the amount of the series of Certificates or class or
classes of such series that is outstanding at the time of early termination,
among other factors.
LIMITED NATURE OF RATINGS ON CERTIFICATES
Any rating assigned by a Rating Agency to a class of Offered Certificates
will reflect only its assessment of the likelihood that holders of Certificates
of such class will receive payments to which such Certificateholders are
entitled under the related Pooling Agreement. Such rating will not constitute an
assessment of the likelihood that principal prepayments on the related Mortgage
Loans will be made, the degree to which the rate of such prepayments might
differ from that originally anticipated or the likelihood of early optional
termination of the related Trust Fund. Neither will such rating address the
possibility that prepayments on the related Mortgage Loans at a higher or lower
rate than anticipated by an investor may cause such investor to experience a
lower than anticipated yield or that an investor that purchases an Offered
Certificate at a significant premium might fail to recoup its initial investment
under certain prepayment scenarios.
The amount, type and nature of Credit Support, if any, provided with
respect to a series of Certificates will be determined on the basis of criteria
established by each Rating Agency rating classes of the Certificates of such
series. Those criteria are sometimes based upon an actuarial analysis of the
behavior of mortgage loans in a larger group. However, there can be no assurance
that the historical data supporting any such actuarial analysis will accurately
reflect future experience, or that the data derived from a large pool of
mortgage loans will accurately predict the delinquency, foreclosure or loss
experience of any particular pool of Mortgage Loans. In other cases, such
criteria may be based upon determinations of the values of the Mortgaged
Properties that provide security for the Mortgage Loans. However, no assurance
can be given that those values will not decline in the future. See "Description
of Credit Support" and "Rating."
EFFECTS OF PRE-FUNDING AND ACQUISITION OF ADDITIONAL MORTGAGE ASSETS
Any amounts on deposit in a Pre-Funding Account as described in the
Prospectus Supplement for a series of Certificates that is not used to acquire
additional Mortgage Assets by the end of the Pre-Funding Period, may be
distributed to holders of Certificates as a prepayment of principal as set forth
in the related Prospectus Supplement. Such a prepayment of principal to the
holders of Certificates may materially and adversely effect the yield on the
Certificates. See "Yield and Maturity Considerations" herein and, if applicable,
in the related Prospectus Supplement.
Any additional Mortgage Assets acquired by a Trust Fund during the
Pre-Funding Period, as described in the related Prospectus Supplement, may
possess substantially different characteristics than the Mortgage Assets in the
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Trust Fund on the Closing Date. Therefore the aggregate characteristics of a
Trust Fund following the Pre-Funding Period may be substantially different than
the characteristics of a Trust Fund on the Closing Date.
RISKS TO LENDERS ASSOCIATED WITH CERTAIN MORTGAGE LOANS AND INCOME PRODUCING
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.
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.
Risks Associated with Mortgage Loans Secured by Multifamily Properties. It
is expected that Mortgage Loans secured by multi-family properties will
constitute a material consentration of the Mortgage Loans in a Trust Fund.
Adverse economic conditions, either local, regional or national, may limit the
amount of rent that can be charged for rental units, and may result in a
reduction in timely rent payments or a reduction in occupancy levels. Occupancy
and rent levels may also be affected by construction of additional housing
units, local military base closings, developments at local colleges and
universities and national, regional and local politics, including, in the case
of multifamily rental properties, current or future rent stabilization and rent
control laws and agreements. In addition, the level of mortgage interest rates
may encourage tenants in multifamily rental properties to purchase housing.
Furthermore, tax credit and city, state and federal housing subsidy or similar
programs may impose rent limitations and may adversely affect the ability of the
applicable borrowers to increase rents to maintain such Mortgaged Properties in
proper condition during periods of rapid inflation or declining market value of
such Mortgaged Properties. In addition, such programs may impose income
restrictions on tenants, which may reduce the number of eligible tenants in such
Mortgaged Properties and result in a reduction in occupancy rates applicable
thereto. Furthermore, some eligible tenants may not find any differences in
rents between such subsidized or supported properties and other multifamily
rental properties in the same area to be a sufficient economic incentive to
reside at a subsidized or supported property, which may have fewer amenities or
otherwise be less attractive as a residence. All of these conditions and events
may increase the possibility that a borrower may be unable to meet its
obligations under its Mortgage Loan.
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
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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.
Risks Associated with Mortgage Loans Secured by Retail Properties. Mortgage
Loans secured by retail properties may constitute a material consentration of
the Mortgage Loans in a Trust Fund. Significant factors determining the value of
retail properties are the quality of the tenants as well as fundamental aspects
of real estate such as location and market demographics. The correlation between
the success of tenant businesses and property value is more direct with respect
to retail properties than other types of commercial property because a
significant component of the total rent paid by retail tenants is often tied to
a percentage of gross sales. Significant tenants at a retail property play an
important part in generating customer traffic and making a retail property a
desirable location for other tenants at such property. Accordingly, retail
properties may be adversely affected if a significant tenant ceases operations
at such locations (which may occur on account of a voluntary decision not to
renew a lease, bankruptcy or insolvency of such tenant, such tenant's general
cessation of business activities or for other reasons). In addition, certain
tenants at retail properties may be entitled to terminate their leases or pay
reduced rent if an anchor tenant ceases operations at such property. In such
cases, there can be no assurance that any such anchor tenants will continue to
occupy space in the related shopping centers.
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).
Unlike other income producing properties, retail properties also face
competition from sources outside a given real estate market. Catalogue
retailers, home shopping networks, the Internet, telemarketing and outlet
centers all compete with more traditional retail properties for consumer
dollars. Continued growth of these alternative retail outlets (which are often
characterized by lower operating costs) could adversely affect the rents
collectible at the retail properties which secure Mortgage Loans in a Trust
Fund.
Risks Associated with Mortgage Loans Secured by Hospitality Properties.
Mortgage Loans secured by hospitality properties may constitute a material
consentration of the Mortgage Loans in a Trust Fund. 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. Furthermore, the financial strength and capabilities of
the owner and operator of a hotel may have a substantial impact on such hotel's
quality of service and economic performance. Additionally, the hotel and lodging
industry is generally seasonal in nature and this seasonality can be expected to
cause periodic fluctuations in room and other revenues, occupancy levels, room
rates and operating expenses.
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.
Risks Associated with Mortgage Loans Secured by Office Buildings. Mortgage
Loans secured by office buildings may constitute a material consentration of the
Mortgage Loans in a Trust Fund. Significant factors determining the value of
office properties are the quality of the tenants in the building, the physical
attributes of the building in relation to competing buildings and the strength
and stability of the market area as a desirable business location. Office
properties may be adversely affected by an economic decline in the business
operated by the tenants.
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The risk of such an adverse effect is increased if revenue is dependent on a
single tenant or if there is a significant concentration of tenants in a
particular business or industry.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a property's age,
condition, design (e.g., floor sizes and layout), access to transportation and
ability or inability to offer certain amenities to its tenants, including
sophisticated building systems (such as fiberoptic cables, satellite
communications or other base building technological features).
The success of an office property also depends on the local economy. A
company's decision to locate office headquarters in a given area, for example,
may be affected by such factors as labor cost and quality, tax environment and
quality of life issues such as schools and cultural amenities. A central
business district may have an economy which is markedly different from that of a
suburb. The local economy and the financial condition of the owner will impact
on an office property's ability to attract stable tenants on a consistent basis.
In addition, the cost of refitting office space for a new tenant is often more
costly than for other property types.
Risks Associated with Mortgage Loans Secured by Industrial & Mixed-Use
Facilities. Mortgage Loans secured by industrial and mixed-use facilities may
constitute a material consentration of the Mortgage Loans in a Trust Fund.
Significant factors determining the value of industrial properties are the
quality of tenants, building design and adaptability and the location of the
property. Concerns about the quality of tenants, particularly major tenants, are
similar in both office properties and industrial properties, although industrial
properties are more frequently dependent on a single tenant. In addition,
properties used for many industrial purposes are more prone to environmental
concerns than other property types.
Aspects of building site design and adaptability affect the value of an
industrial property. Site characteristics which are valuable to an industrial
property include clear heights, column spacing, zoning restrictions, number of
bays and bay depths, divisibility, truck turning radius and overall
functionality and accessibility. Location is also important because an
industrial property requires the availability of labor sources, proximity to
supply sources and customers and accessibility to rail lines, major roadways and
other distribution channels.
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.]
Risks Associated with Mortgage Loans Secured by Residential Healthcare
Facilities. Mortgage Loans secured by residential healthcare facilities may
constitute a material consentration of the Mortgage Loans in a Trust Fund.
Mortgage Loans secured by liens on residential health care facilities pose
additional risks not associated with loans secured by liens on other types of
income-producing properties. Providers of long-term nursing care, assisted
living and other medical services are subject to federal and state laws that
relate to the adequacy of medical care, distribution of pharmaceuticals, rate
setting, equipment, personnel, operating policies and additions to facilities
and services and, to the extent dependent on patients whose fees are reimbursed
by private insurers, to the reimbursement policies of such insurers. The failure
of any of such borrowers to maintain or renew any required license or regulatory
approval could prevent it from continuing operations at a Mortgaged Property (in
which case no revenues would be received from such property or portion thereof
requiring licensing) or, if applicable, bar it from participation in government
reimbursement programs. Furthermore, in the event of foreclosure, there can be
no assurance that the Trustee or any other purchaser at a foreclosure sale would
be entitled to the rights under such licenses and such party may have to apply
in its own right for such a license. There can be no assurance that a new
license could be obtained or that the related Mortgaged Property would be
adaptable to other uses. To the extent any nursing home receives a significant
portion of its revenues from government reimbursement programs, primarily
Medicaid and Medicare, such revenue may be subject to statutory and regulatory
changes, retroactive rate adjustments, administrative rulings, policy
interpretations, delays by fiscal intermediaries and government funding
restrictions. Moreover, governmental payors have employed cost-containment
measures that limit payments to health care providers, and there are currently
under consideration various proposals in the United States Congress that could
materially change or curtail those payments. Accordingly, there can be no
assurance that payments under government reimbursement programs will, in the
future, be sufficient to fully reimburse the cost of caring for program
beneficiaries. If not, net operating income of the Mortgaged Properties that
receive substantial revenues from those sources, and consequently the
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ability of the related borrowers to meet their Mortgage Loan obligations, could
be adversely affected. Under applicable federal and state laws and regulations,
including those that govern Medicare and Medicaid programs, only the provider
who actually furnished the related medical goods and services may sue for or
enforce its rights to reimbursement. Accordingly, in the event of foreclosure,
none of the Trustee, the Master Servicer, the Special Servicer or a subsequent
lessee or operator of the property would generally be entitled to obtain from
federal or state governments any outstanding reimbursement payments relating to
services furnished at the respective properties prior to such foreclosure.
Risk Associated with Mortgage Loans Secured by Health Care-Related
Properties. The Mortgaged Properties may include Senior Housing, Assisted Living
Facilities, Skilled Nursing Facilities and Acute Care Facilities (any of the
foregoing, "Health Care-Related Facilities"). "Senior Housing" generally consist
of facilities with respect to which the residents are ambulatory, handle their
own affairs and typically are couples whose children have left the home and at
which the accommodations are usually apartment style. "Assisted Living
Facilities" are typically single or double room occupancy, dormitory-style
housing facilities which provide food service, cleaning and some personal care
and with respect to which the tenants are able to medicate themselves but may
require assistance with certain daily routines. "Skilled Nursing Facilities"
provide services to post trauma and frail residents with limited mobility who
require extensive medical treatment. "Acute Care Facilities" generally consist
of hospital and other facilities providing short-term, acute medical care
services.
Certain types of Health Care-Related Properties, particularly Acute Care
Facilities, Skilled Nursing Facilities and some Assisted Living Facilities,
typically receive a substantial portion of their revenues from government
reimbursement programs, primarily Medicaid and Medicare. Medicaid and Medicare
are subject to statutory and regulatory changes, retroactive rate adjustments,
administrative rulings, policy interpretations, delays by fiscal intermediaries
and government funding restrictions. Moreover, governmental payors have employed
cost-containment measures that limit payments to health care providers, and
there exist various proposals for national health care reform that could further
limit those payments. Accordingly, there can be no assurance that payments under
government reimbursement programs will, in the future, be sufficient to fully
reimburse the cost of caring for program beneficiaries. If such payments are
insufficient, net operating income of those Health Care-Related Facilities that
receive revenues from those sources, and consequently the ability of the related
borrowers to meet their obligations under any Mortgage Loans secured thereby,
could be adversely affected.
Moreover, Health Care-Related Facilities are generally subject to federal
and state laws that relate to the adequacy of medical care, distribution of
pharmaceuticals, rate setting, equipment, personnel, operating policies and
additions to facilities and services. In addition, facilities where such care or
other medical services are provided are subject to periodic inspection by
governmental authorities to determine compliance with various standards
necessary to continued licensing under state law and continued participation in
the Medicaid and Medicare reimbursement programs. Providers of assisted living
services are also subject to state licensing requirements in certain states. The
failure of an operator to maintain or renew any required license or regulatory
approval could prevent it from continuing operations at a Health Care-Related
Facility or, if applicable, bar it from participation in government
reimbursement programs. Furthermore, under applicable federal and state laws and
regulations, Medicare and Medicaid reimbursements are generally not permitted to
be made to any person other than the provider who actually furnished the related
medical goods and services. Accordingly, in the event of foreclosure, none of
the Trustee, the Master Servicer, the Special Servicer or a subsequent lessee or
operator of any Health Care-Related Facility securing a defaulted Mortgage Loan
(a "Health Care-Related Mortgaged Property") would generally be entitled to
obtain from federal or state governments any outstanding reimbursement payments
relating to services furnished at such property prior to such foreclosure. Any
of the aforementioned events may adversely affect the ability of the related
borrowers to meet their Mortgage Loan obligations.
Government regulation applying specifically to Acute Care Facilities,
Skilled Nursing Facilities and certain types of Assisted Living Facilities
includes health planning legislation, enacted by most states, intended, at least
in part, to regulate the supply of nursing beds. The most common method of
control is the requirement that a state authority first make a determination of
need, evidenced by its issuance of a Certificate of Need ("CON"), before a
long-term care provider can establish a new facility, add beds to an existing
facility or, in some states, take certain other actions (for example, acquire
major medical equipment, make major capital expenditures, add services,
refinance long-term debt, or transfer ownership of a facility). States also
regulate nursing bed supply in other ways. For example, some states have imposed
moratoria on the licensing of new beds, or on the certification of new
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Medicaid beds, or have discouraged the construction of new nursing facilities by
limiting Medicaid reimbursements allocable to the cost of new construction and
equipment. In general, a CON is site specific and operator specific; it cannot
be transferred from one site to another, or to another operator, without the
approval of the appropriate state agency. Accordingly, if a Mortgage Loan
secured by a lien on such a Health Care-Related Mortgaged Property were
foreclosed upon, the purchaser at foreclosure might be required to obtain a new
CON or an appropriate exemption. In addition, compliance by a purchaser with
applicable regulations may in any case require the engagement of a new operator
and the issuance of a new operating license. Upon a foreclosure, a state
regulatory agency may be willing to expedite any necessary review and approval
process to avoid interruption of care to a facility's residents, but there can
be no assurance that any will do so or that any necessary licenses or approvals
will be issued.
Further government regulation applicable to Health Care-Related Facilities
is found in the form of federal and state "fraud and abuse" laws that generally
prohibit payment or fee-splitting arrangements between health care providers
that are designed to induce or encourage the referral of patients to, or the
recommendation of, a particular provider for medical products or services.
Violation of these restrictions can result in license revocation, civil and
criminal penalties, and exclusion from participation in Medicare or Medicaid
programs. The state law restrictions in this area vary considerably from state
to state. Moreover, the federal anti-kickback law includes broad language that
potentially could be applied to a wide range of referral arrangements, and
regulations designed to create "safe harbors" under the law provide only limited
guidance. Accordingly, there can be no assurance that such laws will be
interpreted in a manner consistent with the practices of the owners or operators
of the Health Care-Related Mortgaged Properties that are subject to such laws.
The operators of Health Care-Related Facilities are likely to compete on a
loca1 and regional basis with others that operate similar facilities, some of
which competitors may be better capitalized, may offer services not offered by
such operators, or may be owned by non-profit organizations or government
agencies supported by endowments, charitable contributions, tax revenues and
other sources not available to such operators. The successful operation of a
Health Care-Related Facility will generally depend upon the number of competing
facilities in the local market, as well as upon other factors such as its age,
appearance, reputation and management, the types of services it provides and,
where applicable, the quality of care and the cost of that care. The inability
of a Health Care-Related Mortgaged Property to flourish in a competitive market
may increase the likelihood of foreclosure on the related Mortgage Loan,
possibly affecting the yield on one or more classes of the related series of
Offered Certificates.
Risks Associated with Mortgage Loans Secured by Warehouse and Storage
Facilities. Mortgage Loans secured by warehouse and self storage facilities may
constitute a material consentration of the Mortgage Loans in a Trust Fund. Self
storage facilities are part of a market that contains low barriers to entry.
Increased competition among self storage facilities may reduce income available
to repay Mortgage Loans secured by self storage facility. Furthermore, due to
the privacy considerations applicable to self storage facilities, may increase
environmental risks. See "Risk Factors--Environmental Law Considerations"
herein.
MANAGEMENT RISKS
Each Mortgaged Property is managed by a property manager (which generally
is an affiliate of the borrower) or by the borrower itself. The successful
operation of a real estate project is largely dependent on the performance and
viability of the management of such project. The property manager is responsible
for responding to changes in the local market, planning and implementing the
rental structure, including establishing levels of rent payments and advising
the borrowers so that maintenance and capital improvements can be carried out in
a timely fashion. There is no assurance regarding the performance of any
operators, leasing agents and/or managers or persons who may become operators
and/or managers upon the expiration or termination of management agreements or
following any default or foreclosure under a Mortgage Loan. In addition,
generally the property managers are operating companies and unlike limited
purpose entities, may not be restricted from incurring debt and other
liabilities in the ordinary course of business or otherwise. There can be no
assurance that the property managers will at all times be in a financial
condition to continue to fulfill their management responsibilities under the
related management agreements throughout the terms thereof.
BALLOON PAYMENTS ON MORTGAGE LOANS; HEIGHTENED RISK OF 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
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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), Medicaidand 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. See "Yield and
Maturity Considerations--Other Factors Affecting Yield, Weighted Average Life
and Maturity --Balloon Payments; Extensions of Maturity."
LEASES AND RENTS SERVING AS SECURITY FOR MORTGAGE LOANS POSE SPECIAL RISKS
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."
DELINQUENT 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 delinquent
as of the date they are deposited in the Trust Fund. A Mortgage Loan will be
considered "delinquent" if it is thirty (30) days or more past its most recently
contractual scheduled payment date in payment of all amounts due according to
its terms. In any event, at the time of its creation, the Trust Fund will not
include delinquent loans which by principal amount are more than 20% of the
aggregate principal amount of all Mortgage Loans 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 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 theTrust Fund and the
yield on the Offered Certificates of such series. See "Description of the Trust
Funds--Mortgage Loans-General."
ENVIRONMENTAL LIABILITY MAY AFFECT LIEN ON MORTGAGED PROPERTY AND EXPOSE LENDER
TO COSTS
Under certain laws, 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
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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 of hazardous substances, but there can be no assurance in a given
case that those risks can be eliminated entirely.
CREDIT SUPPORT LIMITATIONS--MAY NOT COVER ALL RISKS OR FULL PAYMENT ON
CERTIFICATES
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 be, however, 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."
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 "Material 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.
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ERISA CONSIDERATIONS--COVERED INVESTORS MAY EXPERIENCE LIABILITY
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."
BOOK-ENTRY REGISTRATION OF CERTIFICATES AFFECTS OWNERSHIP OF CERTIFICATES AND
RECEIPT OF PAYMENT
If so provided in the related Prospectus Supplement, one or more classes of
the Offered Certificates of any series will be issued as Book-Entry
Certificates. Each class of Book-Entry Certificates will be initially
represented by one or more Certificates registered in the name of a nominee for
DTC. As a result, unless and until corresponding Definitive Certificates are
issued, the Certificate Owners with respect to any class of Book-Entry
Certificates will be able to exercise the rights of Certificateholders only
indirectly through DTC and its participating organizations ("Participants"). In
addition, the access of Certificate Owners to information regarding the
Book-Entry Certificates in which they hold interests may be limited. The means
by which notices and other communications are conveyed by DTC to its
Participants, and directly and indirectly through such Participants to
Certificate Owners, will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Furthermore, as described herein, Certificate Owners may experience delays in
the receipt of payments on the Book-Entry Certificates, and the ability of any
Certificate Owner to pledge or otherwise take actions with respect to its
interest in the Book-Entry Certificates may be limited due to the lack of a
physical certificate evidencing such interest. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates."
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
such as mortgage-backed securities that are similar to a series of Certificates
("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) retail stores, hotels or motels, office buildings, industrial plants,
nursing homes, mobile home parks, self-storage facilities, or mixed use or other
types of income-producing properties ("Commercial Properties"). The Multifamily
Properties may include mixed commercial and residential structures and may
include apartment buildings owned by private cooperative housing corporations
("Cooperatives"). If so 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, if so 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.
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If so specified in the related Prospectus Supplement, Mortgage Assets for a
series of Certificates may include Mortgage Loans made on the security of real
estate projects under construction. In that case, the related Prospectus
Supplement will describe the procedures and timing for making disbursements from
construction reserve funds as portions of the related real estate project are
completed. In addition, the Mortgage Assets for a particular series of
Certificates may include Mortgage Loans that are delinquent or non-performing as
of the date such Certificates are issued. In that case, the related Prospectus
Supplement will set forth, as to each such Mortgage Loan, available information
as to the period of such delinquency or non-performance, any forbearance
arrangement then in effect, the condition of the related Mortgaged Property and
the ability of the Mortgaged Property to generate income to service the mortgage
debt.
Default and Loss Considerations with Respect to the Mortgage Loans.
Mortgage loans secured by liens on income-producing properties are substantially
different from loans made on the security of owner-occupied single-family homes.
The repayment of a loan secured by a lien on an income-producing property is
typically dependent upon the successful operation of such property (that is, its
ability to generate income). Moreover, some or all of the Mortgage Loans
included in a particular Trust Fund may be non-recourse loans, which means that,
absent special facts, recourse in the case of 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. As more fully set forth 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. As more fully set forth 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. As
more fully set forth 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
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borrower's equity in a Mortgaged Property, and thus the greater the cushion
provided to the lender against loss on liquidation following a default.
Loan-to-Value Ratios will not necessarily constitute an accurate measure of
the risk of liquidation loss in a pool of Mortgage Loans. For example, the value
of a Mortgaged Property as of the date of initial issuance of the related series
of Certificates may be less than the Value determined at loan origination, and
will likely continue to fluctuate from time to time based upon changes in
economic conditions and the real estate market. Moreover, even when current, an
appraisal is not necessarily a reliable estimate of value. Appraised values of
income-producing properties are generally based on the market comparison method
(recent resale value of comparable properties at the date of the appraisal), the
cost replacement method (the cost of replacing the property at such date), the
income capitalization 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 Income Producing Properties" and "--Balloon Payments;
Borrower Default."
Payment Provisions of the Mortgage Loans. If so 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
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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 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 such as
mortgage-backed securities that are similar to a series of Certificates 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.
To the extent required under the securities laws, MBS included among the
assets of a Trust Fund will (i) either have been registered under the Securities
Act of 1933, as amended, or be eligible for resale under Rule 144(k) thereunder
and (ii) have been acquired in a bona fide secondary market transaction and not
from the issuer or an affiliate.
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
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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 types of credit support,
such as a letter of credit, insurance policy, guarantee or reserve fund, 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 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.
PRE-FUNDING
If so provided in the related Prospectus Supplement, a Trust Fund may
include amounts on deposit in a separate account (the "Pre-Funding Account")
which amounts will not exceed 25% of the pool balance of the Trust Fund as of
the Cut-off Date. Amounts on deposit in the Pre-Funding Account may be used by
the Trust Fund to acquire additional Mortgage Assets, which additional Mortgage
Assets will be selected using criteria that is substantially similar to the
criteria used to select the Mortgage Assets included in the Trust Fund on the
Closing Date. The Trust Fund may acquire such additional Mortgage Assets for a
period of time of not more than 120 days after the Closing Date (the
"Pre-Funding Period") as specified in the related Prospectus Supplement. Amounts
on deposit in the Pre-Funding Account after the end of the Pre-Funding Period,
will be distributed to Certificateholders or such other person as set forth in
the related Prospectus Supplement. If so provided in the related Prospectus
Supplement, the Trust Fund may include amounts on deposit in a separate account
(the "Capitalized Interest Account"). Amounts on deposit in the Capitalized
Interest Account may be used to supplement investment earnings, if any, of
amounts on deposit in the Pre-Funding Account, supplement interest collections
of the Trust Fund, or such other purpose as specified in the related Prospectus
Supplement. As set forth in a related Prospectus Supplement, amounts on deposit
in the Capitalized Interest Account and Pre-Funding Account will be held in cash
or invested in short-term investment grade obligations. Any amounts on deposit
in the Capitalized Interest Account will be released after the end of the
Pre-Funding Period as specified in the related Prospectus Supplement. See "Risk
Factors--Effects of Pre-Funding and Acquisition of Additional Mortgage Assets."
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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 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
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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.
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
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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 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. If so specified
in the related Prospectus Supplement, each Controlled Amortization Class will
either be a Planned
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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
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
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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. As specifically set forth 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's principal business is to
acquire, hold and/or sell or otherwise dispose of cash flow assets, usually in
connection with the securitization of that asset. 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. If so 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
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payments or other collections (or advances in lieu thereof) on, under or in
respect of the Mortgage Assets and any other assets included in the related
Trust Fund that are available for distribution to the Certificateholders of such
series on such date. The particular components of the Available Distribution
Amount for any series on each Distribution Date will be more specifically
described in the related Prospectus Supplement.
Except as otherwise specified in the related Prospectus Supplement,
distributions on the Certificates of each series (other than the final
distribution in retirement of any such Certificate) will be made to the persons
in whose names such Certificates are registered at the close of business on the
last business day of the month preceding the month in which the applicable
Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date (the
"Determination Date") specified in the related Prospectus Supplement. All
distributions with respect to each class of Certificates on each Distribution
Date will be allocated pro rata among the outstanding Certificates in such
class. Payments will be made either by wire transfer in immediately available
funds to the account of a Certificateholder at a bank or other entity having
appropriate facilities therefor, if such Certificateholder has provided the
Trustee or other person required to make such payments with wiring instructions
(which may be provided in the form of a standing order applicable to all
subsequent distributions) no later than the date specified in the related
Prospectus Supplement (and, if so provided in the related Prospectus Supplement,
such Certificateholder holds Certificates in the requisite amount or
denomination specified therein), or by check mailed to the address of such
Certificateholder as it appears on the Certificate Register; provided, however,
that the final distribution in retirement of any class of Certificates (whether
Definitive Certificates or Book-Entry Certificates) will be made only upon
presentation and surrender of such Certificates at the location specified in the
notice to Certificateholders of such final distribution.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of Certificates of each series (other than certain classes of
Stripped Principal Certificates and certain REMIC Residual Certificates that
have no Pass-Through Rate) may have a different Pass-Through Rate, which may be
fixed, variable or adjustable. The related Prospectus Supplement will specify
the Pass-Through Rate or, in the case of a variable or adjustable Pass-Through
Rate, the method for determining the Pass-Through Rate, for each class. Unless
otherwise specified in the related Prospectus Supplement, interest on the
Certificates of each series will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
Distributions of interest in respect of the Certificates of any class
(other than any class of Certificates that will be entitled to distributions of
accrued interest commencing only on the Distribution Date, or under the
circumstances, specified in the related Prospectus Supplement ("Accrual
Certificates"), and other than any class of Stripped Principal Certificates or
REMIC Residual Certificates that is not entitled to any distributions of
interest) will be made on each Distribution Date based on the Accrued
Certificate Interest for such class and such Distribution Date, subject to the
sufficiency of the portion of the Available Distribution Amount allocable to
such class on such Distribution Date. Prior to the time interest is
distributable on any class of Accrual Certificates, the amount of Accrued
Certificate Interest otherwise distributable on such class will be added to the
Certificate Balance thereof on each Distribution Date. With respect to each
class of Certificates (other than certain classes of Stripped Interest
Certificates and REMIC Residual Certificates), "Accrued Certificate Interest"
for each Distribution Date will be equal to interest at the applicable
Pass-Through Rate accrued for a specified period (generally the period between
Distribution Dates) on the outstanding Certificate Balance thereof immediately
prior to such Distribution Date. Unless otherwise provided in the related
Prospectus Supplement, Accrued Certificate Interest for each Distribution Date
on Stripped Interest Certificates will be similarly calculated except that it
will accrue on a notional amount (a "Notional Amount") that is either (i) based
on the principal balances of some or all of the Mortgage Assets in the related
Trust Fund or (ii) equal to the Certificate Balances of one or more other
classes of Certificates of the same series. Reference to a Notional Amount with
respect to a class of 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
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Prospectus Supplement will also describe the extent to which the amount of
Accrued Certificate Interest that is otherwise distributable on (or, in the case
of Accrual Certificates, that may otherwise be added to the Certificate Balance
of) a class of Offered Certificates may be reduced as a result of any other
contingencies, including delinquencies, losses and deferred interest on or in
respect of the Mortgage Assets in the related Trust Fund. Unless otherwise
provided in the related Prospectus Supplement, any reduction in the amount of
Accrued Certificate Interest otherwise distributable on a class of Certificates
by reason of the allocation to such class of a portion of any deferred interest
on or in respect of the Mortgage Assets in the related Trust Fund will result in
a corresponding increase in the Certificate Balance of such class. See "Risk
Factors--Prepayments; Average Life of Certificates; Yields" and "Yield and
Maturity Considerations."
DISTRIBUTIONS OF CERTIFICATE PRINCIPAL
Each class of Certificates of each series (other than certain classes of
Stripped Interest Certificates of REMIC Residual Certificates) will have a
"Certificate Balance" which, at any time, will equal the then maximum amount
that the holders of Certificates of such class will be entitled to receive in
respect of principal out of the future cash flow on the Mortgage Assets and
other assets included in the related Trust Fund. The outstanding Certificate
Balance of a class of Certificates will be reduced by distributions of principal
made thereon from time to time and, if so provided in the related Prospectus
Supplement, further by any losses incurred in respect of the related Mortgage
Assets allocated thereto from time to time. In turn, the outstanding Certificate
Balance of a class of Certificates may be increased as a result of any deferred
interest on or in respect of the related Mortgage Assets that is allocated
thereto from time to time, and will be increased, in the case of a class of
Accrual Certificates prior to the Distribution Date on which distributions of
interest thereon are required to commence, by the amount of any Accrued
Certificate Interest in respect thereof (reduced as described above). Unless
otherwise provided in the related Prospectus Supplement, the initial aggregate
Certificate Balance of all classes of a series of Certificates will not be
greater than the aggregate outstanding principal balance of the related Mortgage
Assets as of the applicable Cut-off Date, after application of scheduled
payments due on or before such date, whether or not received. As and to the
extent described in the related Prospectus Supplement, distributions of
principal with respect to a series of Certificates will be made on each
Distribution Date to the holders of the class or classes of Certificates of such
series entitled thereto until the Certificate Balances of such Certificates have
been reduced to zero. Distributions of principal with respect to one or more
classes of Certificates may be made at a rate that is faster (and, in some
cases, substantially faster) than the rate at which payments or other
collections of principal are received on the Mortgage Assets in the related
Trust Fund, may not commence until the occurrence of certain events, such as the
retirement of one or more other classes of Certificates of the same series, or
may be made at a rate that is slower (and, in some cases, substantially slower)
than the rate at which payments or other collections of principal are received
on such Mortgage Assets. In addition, distributions of principal with respect to
one or more classes of Certificates (each such class, a "Controlled Amortization
Class") may be made, subject to available funds, based on a specified principal
payment schedule and, with respect to one or more classes of Certificates (each
such class, a "Companion Class"), may be contingent on the specified principal
payment schedule for a Controlled Amortization Class of the same series and the
rate at which payments and other collections of principal on the Mortgage Assets
in the related Trust Fund are received. Unless otherwise specified in the
related 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
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may result in reductions in the entitlements to interest and/or in the
Certificate Balances of one or more such classes of Certificates, or may be
effected simply by a prioritization of payments among such classes of
Certificates.
ADVANCES IN RESPECT OF DELINQUENCIES
If and to the extent provided in the related Prospectus Supplement, the
related Master Servicer and/or other specified person (including a provider of
Credit Support) may be obligated to advance, or have the option of advancing, on
or before each Distribution Date, from its or their own funds or from excess
funds held in the related Certificate Account that are not part of the Available
Distribution Amount for the related series of Certificates for such Distribution
Date, an amount up to the aggregate of any payments of principal (other than any
balloon payments) and interest that were due on or in respect of such Mortgage
Loans during the related Due Period and were delinquent on the related
Determination Date. Unless otherwise provided in the related Prospectus
Supplement, a "Due Period" is the period between Distribution Dates, and
scheduled payments on the Mortgage Loans in any Trust Fund that became due
during a given Due Period will, to the extent received by the related
Determination Date or advanced by the related Master Servicer or other specified
person, be distributed on the Distribution Date next succeeding such
Determination Date.
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. Accordingly, all
advances made from the advancing person's own funds will be reimbursable out of
related recoveries on the Mortgage Loans (including amounts received under any
instrument of Credit Support) respecting which such advances were made (as to
any Mortgage Loan, "Related Proceeds") and such other specific sources as may be
identified in the related Prospectus Supplement, including in the case of a
series that includes one or more classes of Subordinate Certificates,
collections on other Mortgage Loans in the related Trust Fund that would
otherwise be distributable to the holders of one or more classes of such
Subordinate Certificates. No advance will be required to be made by the Master
Servicer or by any other person if, in the good faith judgment of the Master
Servicer or such other person, such advance would not be recoverable from
Related Proceeds or another specifically identified source (any such advance, a
"Nonrecoverable Advance"); and, if previously made by a Master Servicer or
another person, a Nonrecoverable Advance will be reimbursable from any amounts
in the related Certificate Account prior to any distributions being made to the
related series of Certificateholders.
If advances have been made from excess funds in a Certificate Account, the
Master Servicer or other person that advanced such funds will be required to
replace such funds in the Certificate Account on any future Distribution Date to
the extent that funds then in the Certificate Account are insufficient to permit
full distributions to Certificateholders on such date. If so specified in the
related Prospectus Supplement, the obligation of a Master Servicer or other
specified person to make advances may be 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;
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(ii) the amount of such distribution to holders of Certificates of
such class that is allocable to Accrued Certificate Interest;
(iii) the amount, if any, of such distribution to holders of
Certificates of such class that is allocable to (A) Prepayment Premiums and
(B) payments on account of Equity Participations;
(iv) the amount of servicing compensation received by the related
Master Servicer (and, if payable directly out of the related Trust Fund, by
any Special Servicer and any Sub-Servicer) and such other customary
information as such Master Servicer or the related Trustee, as the case may
be, deems necessary or desirable, or that a Certificateholder reasonably
requests, to enable Certificateholders to prepare their tax returns;
(v) the aggregate amount of advances included in such distribution,
and the aggregate amount of unreimbursed advances at the close of business
on such Distribution Date;
(vi) the aggregate principal balance of the related Mortgage Loans on,
or as of a specified date shortly prior to, such Distribution Date;
(vii) the number and aggregate principal balance of any Mortgage Loans
in respect of which (A) one scheduled payment is delinquent, (B) two
scheduled payments are delinquent, (C) three or more scheduled payments are
delinquent and (D) foreclosure proceedings have been commenced;
(viii) with respect to each Mortgage Loan that is delinquent in
respect of three or more scheduled payments, (A) the loan number thereof,
(B) the unpaid balance thereof, (C) whether the delinquency is in respect
of any balloon payment, (D) the aggregate amount of unreimbursed servicing
expenses and unreimbursed advances in respect thereof, (E) if applicable,
the aggregate amount of any interest accrued and payable to the related
Master Servicer, a Special Servicer and/or any other entity on related
servicing expenses and related advances, (F) whether a notice of
acceleration has been sent to the borrower and, if so, the date of such
notice and (G) a brief description of the status of any foreclosure
proceedings or negotiations with the borrower;
(ix) with respect to any Mortgage Loan liquidated during the related
Prepayment Period (that is, the specified period, generally equal in length
to the time period between Distribution Dates, during which prepayments and
other unscheduled collections on the Mortgage Loans in the related Trust
Fund must be received in order to be distributed on a particular
Distribution Date) in connection with a default thereon or by reason of
being purchased out of the related Trust Fund, (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;
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(xiv) the amount deposited in or withdrawn from any reserve fund on
such Distribution Date, and the amount remaining on deposit in such reserve
fund as of the close of business on such Distribution Date;
(xv) the amount of any Accrued Certificate Interest due but not paid
on such class of Offered Certificates at the close of business on such
Distribution Date;
(xvi) if such class of Offered Certificates has a variable
Pass-Through Rate or an adjustable Pass-Through Rate, the Pass-Through Rate
applicable thereto for such Distribution Date and, if determinable, for the
next succeeding Distribution Date; and
(xvii) if the related Trust Fund includes one or more instruments of
Credit Support, such as a letter of credit, an insurance policy and/or a
surety bond, the amount of coverage under each such instrument as of the
close of business on such Distribution Date.
In the case of information furnished pursuant to subclauses (i)-(iv) above,
the amounts will be expressed as a dollar amount per minimum denomination of the
relevant class of Offered Certificates or per a specified portion of such
minimum denomination. The Prospectus Supplement for each series of Offered
Certificates will describe any additional information to be included in reports
to the holders of such Certificates.
Within a reasonable period of time after the end of each calendar year, the
related Master Servicer or Trustee, as the case may be, will be required to
furnish to each person who at any time during the calendar year was a holder of
an Offered Certificate a statement containing the information set forth in
subclauses (i)-(iv) above, aggregated for such calendar year or the applicable
portion thereof during which such person was a Certificateholder. Such
obligation will be deemed to have been satisfied to the extent that
substantially comparable information is provided pursuant to any requirements of
the Code as are from time to time in force. See, however, "Description of the
Certificates--Book-Entry Registration and Definitive Certificates."
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,
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under the circumstances and in the manner set forth therein. If so provided in
the related Prospectus Supplement, upon the reduction of the Certificate Balance
of a specified class or classes of Certificates by a specified percentage or
amount, a party identified therein will be authorized or required to solicit
bids for the purchase of all the assets of the related Trust Fund, or of a
sufficient portion of such assets to retire such class or classes, under the
circumstances and in the manner set forth therein. In any event, unless
otherwise disclosed in the applicable Prospectus Supplement, any such repurchase
or purchase shall be at a price or prices that are generally based upon the
unpaid principal balance of, plus accrued interest on, all Mortgage Loans (other
than Mortgage Loans secured by REO Properties) then included in a Trust Fund and
the fair market value of all REO Properties then included in the Trust Fund,
which may or may not result in full payment of the aggregate Certificate Balance
plus accrued interest and any undistributed shortfall in interest for the then
outstanding Certificates. Any sale of Trust Fund assets will be without recourse
to the Trust and/or Certificateholders, provided, however, that there can be no
assurance that in all events a court would accept such a contractual
stipulation.
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),
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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.
As may be provided in the related Prospectus Supplement, the only
"Certificateholder" (as such term is used in the related Pooling Agreement) of a
Book-Entry Certificate will be the nominee of DTC, and the Certificate Owners
will not be recognized as Certificateholders under the Pooling Agreement.
Certificate Owners will be permitted to exercise the rights of
Certificateholders under the related Pooling Agreement only indirectly through
the Participants who in turn will exercise their rights through DTC. The
Depositor is informed that DTC will take action permitted to be taken by a
Certificateholder under a Pooling Agreement only at the direction of one or more
Participants to whose account with DTC interests in the Book-Entry Certificates
are credited.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain Certificate Owners, the ability of a
Certificate Owner to pledge its interest in Book-Entry Certificates to persons
or entities that do not participate in the DTC system, or otherwise take actions
in respect of its interest in Book-Entry Certificates, may be limited due to the
lack of a physical certificate evidencing such interest.
As may be 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
As set forth in the related Prospectus Supplement, generally 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
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related Trust Fund, together with, all principal and interest to be received on
or with respect to such Mortgage Loans after the Cut-off Date, other than
principal and interest due on or before the Cut-off Date. The Trustee will,
concurrently with such assignment, deliver the Certificates to or at the
direction of the Depositor in exchange for the Mortgage Loans and the other
assets to be included in the Trust Fund for such series. Each Mortgage Loan will
be identified in a schedule appearing as an exhibit to the related Pooling
Agreement. Such schedule generally will include detailed information that
pertains to each Mortgage Loan included in the related Trust Fund, which
information will typically include the address of the related Mortgaged Property
and type of such property; the Mortgage Rate and, if applicable, the applicable
index, gross margin, adjustment date and any rate cap information; the original
and remaining term to maturity; the original amortization term; 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, 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. 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
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.
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.
This repurchase or substitution obligation may 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
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date prior to the date upon which the related series of Certificates is issued,
and thus may not address events that may occur following the date as of which
they were made. However, the Depositor will not include any Mortgage Loan in the
Trust Fund for any series of Certificates if anything has come to the
Depositor's attention that would cause it to believe that the representations
and warranties made in respect of such Mortgage Loan will not be accurate in all
material respects as of such date of issuance.
CERTIFICATE ACCOUNT
General. The Master Servicer and/or the Trustee will, as to each Trust
Fund, establish and maintain or cause to be established and maintained one or
more separate accounts for the collection of payments on the related Mortgage
Loans (collectively, the "Certificate Account"), which will be established so as
to comply with the standards of each Rating Agency that has rated any one or
more classes of Certificates of the related series. As described in the related
Prospectus Supplement, a Certificate Account may be maintained either as an
interest-bearing or a non-interest-bearing account, and the funds held therein
may be held as cash or invested in United States government securities and other
investment grade obligations specified in the related Pooling Agreement
("Permitted Investments"). 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 "Material 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. Generally, 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, 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. 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.
Generally, 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. Generally, 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
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time institute foreclosure proceedings, exercise any power of sale contained in
the related Mortgage, obtain a deed in lieu of foreclosure, or otherwise acquire
title to the related Mortgaged Property, by operation of law or otherwise, if
such action is consistent with the Servicing Standard. 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."
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
Each Pooling Agreement may 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. Such coverage generally will be
in an amount equal to the lesser of the principal balance owing on such Mortgage
Loan and the replacement cost of the Mortgaged Property, but in either case not
less than the amount necessary to avoid the application of any co-insurance
clause contained in the hazard insurance policy. The ability of the Master
Servicer to
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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.
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
Generally, a Master Servicer's primary servicing compensation with respect
to a series of Certificates will come from the periodic payment to it of a
portion of the interest payments on each Mortgage Loan in the related Trust
Fund. Since that compensation is generally based on a percentage of the
principal balance of each such Mortgage Loan outstanding from time to time, it
will decrease in accordance with the amortization of the Mortgage Loans. The
Prospectus Supplement with respect to a series of Certificates may provide that,
as additional compensation, the Master Servicer may retain all or a portion of
late payment charges, Prepayment Premiums, modification fees and other fees
collected from borrowers and any interest or other income that may be earned on
funds held in the Certificate Account. Any Sub-Servicer will receive a portion
of the Master Servicer's compensation as its sub-servicing compensation.
In addition to amounts payable to any Sub-Servicer, a Master Servicer may
be required, to the extent provided in the related Prospectus Supplement, to pay
from amounts that represent its servicing compensation certain expenses incurred
in connection with the administration of the related Trust Fund, including,
without limitation, payment of the
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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
Each Pooling Agreement may 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.
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. The related Pooling Agreement may 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. 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.
Each Pooling Agreement may further provide that none of the Master
Servicer, the Depositor and any director, officer, employee or agent of either
of them will be under any liability to the related Trust Fund or
Certificateholders for any action taken, or not taken, in good faith pursuant to
the Pooling Agreement or for errors in judgment; provided, however, that none of
the Master Servicer, the Depositor and any such person will be protected against
any breach of a representation, warranty or covenant made in such Pooling
Agreement, or against any expense or liability that such person is specifically
required to bear pursuant to the terms of such Pooling Agreement, or against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of obligations or duties thereunder
or by reason of reckless disregard of such obligations and duties. Unless
otherwise specified in the related Prospectus Supplement, each Pooling Agreement
will further provide that the Master Servicer, the Depositor and any director,
officer, employee or agent of either of them will be entitled to indemnification
by the related Trust Fund against any loss, liability or expense incurred in
connection with any legal action that relates to the Pooling Agreement or the
related series of Certificates; provided, however, that such indemnification
will not extend to any loss, liability or expense (i) that such person is
specifically required to bear pursuant to the terms of such agreement, or is
incidental to the performance of obligations and duties thereunder and is not
reimbursable pursuant to the Pooling Agreement; (ii) incurred in connection with
any breach of a representation,
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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.
Subject, in certain cases, to the satisfaction of certain conditions that
may be required in the Pooling Agreement, 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
The "Events of Default for a series of Certificates" under the related
Pooling Agreement generally 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. If the Trustee is unwilling or
unable so to act, it may (or, at the written request of Certificateholders
entitled to at least 51% (or such other percentage specified in the related
Prospectus Supplement) of the Voting Rights for such series, it will be required
to) appoint, or petition a court of competent jurisdiction to appoint, a loan
servicing institution that (unless otherwise provided in the related Prospectus
Supplement) is acceptable to each Rating Agency that assigned ratings to the
Offered Certificates of such series to act as successor to the Master Servicer
under the Pooling Agreement. Pending such appointment, the Trustee will be
obligated to act in such capacity.
No Certificateholder will have the right under any Pooling Agreement to
institute any proceeding with respect thereto unless such holder previously has
given to the Trustee written notice of default and unless Certificateholders
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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. 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, 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 Pooling Agreement,
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 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
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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
The Trustee for a series of Certificates may 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 Master Servicer (or such other person as may be specified in
the related Prospectus Supplement) will be required to use reasonable 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.
Unless otherwise provided in the related Prospectus Supplement, 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. Unless otherwise provided in the
related Prospectus Supplement, 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.
The Credit Support generally will not provide protection against all risks
of loss and will not guarantee payment to Certificateholders of all amounts to
which they are entitled under the related Pooling Agreement. If losses or
shortfalls occur that exceed the amount covered by the Credit Support or that
are not covered by the Credit Support, Certificateholders will bear their
allocable share of deficiencies. Moreover, if a form of Credit Support covers
more than one series of Certificates, holders of Certificates of one series will
be subject to the risk that such Credit Support will be exhausted by the claims
of the holders of Certificates of one or more other series before the former
receive their intended share of such coverage.
If Credit Support is provided with respect to one or more classes of
Certificates of a series, or with respect to the related Mortgage Assets, the
related Prospectus Supplement will include a description of (i) the nature and
amount of
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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. ss.ss. 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
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lien on the fee estate of the borrower. The most significant of these risks is
that if the borrower's leasehold were to be terminated (for example, as a result
of a lease default or the bankruptcy of the ground lessor or the borrower/ground
lessee), the leasehold mortgagee would be left without its security. This risk
may be substantially lessened if the ground lease contains provisions protective
of the leasehold mortgagee, such as a provision that requires the ground lessor
to give the leasehold mortgagee notices of lessee defaults and an opportunity to
cure them, a provision that permits the leasehold estate to be assigned to and
by the leasehold mortgagee or the purchaser at a foreclosure sale, a provision
that gives the leasehold mortgagee the right to enter into a new ground lease
with the 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
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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 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 certain laws, 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 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.
Certain State and Other Federal 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. 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 in order to sell or otherwise transfer
the property.
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Beyond statute-based environmental liability, there exist common law causes
of action (for example, actions based on nuisance or on toxic tort resulting in
death, personal injury, or damage to property) related to hazardous
environmental conditions on a property. While it may be more difficult to hold a
lender liable in such cases, unanticipated or uninsured liabilities of the
borrower may jeopardize the borrower's ability to meet its loan obligations.
Additional Considerations. The cost of remediating hazardous substance
contamination at a property can be substantial. If a lender becomes liable, it
can bring an action for contribution against 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 result in the imposition of certain investigation or remediation
requirements or 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.
MATERIAL 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. If no REMIC election is
made and the Trust Fund does not elect to be treated as a Grantor Trust Fund,
the Trust Fund may elect to be treated as a financial assets securitization
investment trust ("FASIT"). The Prospectus Supplement relating to such an
election will describe the requirements for the classification of the Trust Fund
as a FASIT and the consequences to a holder of owning certificates in a FASIT.
The Prospectus Supplement for each series of Certificates also 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
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Agreement, the related Trust Fund (or each applicable portion thereof) will
qualify as a REMIC and the REMIC Certificates offered with respect thereto will
be considered to evidence ownership of "regular interests" ("REMIC Regular
Certificates") or "residual interests" ("REMIC Residual Certificates") in that
REMIC within the meaning of the REMIC Provisions.
If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for such status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In that event, such entity may be taxable as a corporation
under Treasury regulations, and the related REMIC Certificates may not be
accorded the status or given the tax treatment described below. Although the
Code authorizes the Treasury Department to issue regulations providing relief in
the event of an inadvertent termination of REMIC status, no such regulations
have been issued. Any such relief, moreover, may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the Trust
Fund's income for the period in which the requirements for such status are not
satisfied. The Pooling Agreement with respect to each REMIC will include
provisions designed to maintain the Trust Fund's status as a REMIC under the
REMIC Provisions. It is not anticipated that the status of any Trust Fund as a
REMIC will be terminated.
Characterization of Investments in REMIC Certificates. In general, 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").
In addition, if the accrued interest to be paid on the first Distribution
Date is computed with respect to a period that begins prior to the Closing Date,
a portion of the purchase price paid for a REMIC Regular Certificate will
reflect such accrued interest. In such cases, information returns provided to
the Certificateholders and the IRS will be based on the position that the
portion of the purchase price paid for the interest accrued with respect to
periods prior to the Closing Date is treated as part of the overall cost of such
REMIC Regular Certificate (and not as a separate asset the cost of which is
recovered entirely out of interest received on the next Distribution Date) and
that portion of the interest paid on the first Distribution Date in excess of
interest accrued for a number of days corresponding to the number of days from
the Closing Date to the first Distribution Date should be included in the stated
redemption price of such REMIC Regular Certificate. However, the OID Regulations
state that all or some portion of such accrued interest may be treated as a
separate asset the cost of which is recovered entirely out of interest paid on
the first Distribution Date. It is unclear how an election to do so would be
made under the OID Regulations and whether such an election could be made
unilaterally by a Certificateholder.
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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, each period that ends on a date that
corresponds to a Distribution Date and begins on the first day following the
immediately preceding accrual period (or in the case of the first such period,
begins on the Closing Date), a calculation will be made of the portion of the
original issue discount that accrued during such accrual period. The portion of
original issue discount that accrues in any accrual period will equal the
excess, if any, of (i) the sum of (a) the present value, as of the end of the
accrual period, of all of the distributions remaining to be made on the REMIC
Regular Certificate, if any, in future periods and (b) the distributions made on
such REMIC Regular Certificate during the accrual period of amounts included in
the stated redemption price, over (ii) the adjusted issue price of such REMIC
Regular Certificate at the beginning of the accrual period. The present value of
the remaining distributions referred to in the preceding sentence will be
calculated (i) assuming that distributions on the REMIC Regular Certificate will
be received in future periods based on the Mortgage Loans being prepaid at a
rate equal to the Prepayment Assumption and (ii) using a discount rate equal to
the original yield to maturity of the Certificate. For these purposes, the
original yield to maturity of the Certificate will be calculated based on its
issue price and assuming that distributions on the Certificate will be made in
all accrual periods based on the Mortgage Loans being prepaid at a rate equal to
the Prepayment Assumption. The adjusted issue price of a REMIC Regular
Certificate at the beginning of any accrual period will equal the issue price of
such Certificate, increased by the aggregate amount of original issue discount
that accrued with respect to such Certificate in prior accrual periods, and
reduced by the amount of any distributions made on such REMIC Regular
Certificate in prior accrual periods of amounts included in the stated
redemption price. The original issue discount accruing during any accrual
period, computed as described above, will be allocated ratably to each day
during the accrual period to determine the daily portion of original issue
discount for such day.
A subsequent purchaser of a REMIC Regular Certificate that purchases such
Certificate at a cost (excluding any portion of such cost attributable to
accrued qualified stated interest) less than its remaining stated redemption
price will also be required to include in gross income the daily portions of any
original issue discount with respect to such Certificate. However, each such
daily portion will be reduced, if such cost is in excess of its "adjusted issue
price," in proportion to the ratio such excess bears to the aggregate original
issue discount remaining to be accrued on such REMIC Regular Certificate. The
adjusted issue price of a REMIC Regular Certificate on any given day equals the
sum of (i) the adjusted issue price (or, in the case of the first accrual
period, the issue price) of such Certificate at the beginning of the accrual
period which includes such day and (ii) the daily portions of original issue
discount for all days during such accrual period prior to such day.
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
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remaining stated principal amount, or in the case of a REMIC Regular Certificate
issued with original issue discount, at a purchase price less than its adjusted
issue price will recognize gain upon receipt of each distribution representing
stated redemption price. In particular, under Section 1276 of the Code such a
Certificateholder generally will be required to allocate the portion of each
such distribution representing stated redemption price first to accrued market
discount not previously included in income, and to recognize ordinary income to
that extent. A Certificateholder may elect to include market discount in income
currently as it accrues rather than including it on a deferred basis in
accordance with the foregoing. If made, such election will apply to all market
discount bonds acquired by such Certificateholder on or after the first day of
the first taxable year to which such election applies. In addition, the OID
Regulations permit a Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were made
with respect to a REMIC Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to include currently
market discount in income with respect to all other debt instruments having
market discount that such Certificateholder acquires during the taxable year of
the election or thereafter, and possibly previously acquired instruments.
Similarly, a Certificateholder that made this election for a Certificate that is
acquired at a premium would be deemed to have made an election to amortize bond
premium with respect to all debt instruments having amortizable bond premium
that such Certificateholder owns or acquires. See "--Taxation of Owners of REMIC
Regular Certificates--Premium." Each of these elections to accrue interest,
discount and premium with respect to a Certificate on a constant yield method or
as interest would be irrevocable.
However, market discount with respect to a REMIC Regular Certificate will
be considered to be de minimis for purposes of Section 1276 of the Code if such
market discount is less than 0.25% of the remaining stated redemption price of
such REMIC Regular Certificate multiplied by the number of complete years to
maturity remaining after the date of its purchase. In interpreting a similar
rule with respect to original issue discount on obligations payable in
installments, the OID Regulations refer to the weighted average maturity of
obligations, and it is likely that the same rule will be applied with respect to
market discount, presumably taking into account the Prepayment Assumption. If
market discount is treated as de minimis under this rule, it appears that the
actual discount would be treated in a manner similar to original issue discount
of a de minimis amount. See "--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount." Such treatment would result in discount
being included in income at a slower rate than discount would be required to be
included in income using the method described above.
Section 1276(b)(3) of the Code specifically authorizes the Treasury
Department to issue regulations providing for the method for accruing market
discount on debt instruments, the principal of which is payable in more than one
installment. Until regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. The Committee Report indicates
that in each accrual period market discount on REMIC Regular Certificates should
accrue, at the Certificateholder's option: (i) on the basis of a constant yield
method, (ii) in the case of a REMIC Regular Certificate issued without original
issue discount, in an amount that bears the same ratio to the total remaining
market discount as the stated interest paid in the accrual period bears to the
total amount of stated interest remaining to be paid on the REMIC Regular
Certificate as of the beginning of the accrual period, or (iii) in the case of a
REMIC Regular Certificate issued with original issue discount, in an amount that
bears the same ratio to the total remaining market discount as the original
issue discount accrued in the accrual period bears to the total original issue
discount remaining on the REMIC Regular Certificate at the beginning of the
accrual period. Moreover, the Prepayment Assumption used in calculating the
accrual of original issue discount is also used in calculating the accrual of
market discount. Because the regulations referred to in this paragraph have not
been issued, it is not possible to predict what effect such regulations might
have on the tax treatment of a REMIC Regular Certificate purchased at a discount
in the secondary market.
To the extent that REMIC Regular Certificates provide for monthly or other
periodic distributions throughout their term, the effect of these rules may be
to require market discount to be includible in 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
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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.
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
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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 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
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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.
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.
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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.
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
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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, 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.
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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 Certificate 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.
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
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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.
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
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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 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.
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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.
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
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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. persons 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.
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 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
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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 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.
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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 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
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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 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
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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.
The Trustee or Master Servicer, as applicable, will provide to any holder
of a Grantor Trust Fractional Interest Certificate such information as such
holder may reasonably request from time to time with respect to original issue
discount accruing on Grantor Trust Fractional Interest Certificates. See
"--Grantor Trust Reporting" below.
Market Discount. If the stripped bond rules do not apply to the Grantor
Trust Fractional Interest Certificate, a Certificateholder may be subject to the
market discount rules of Sections 1276 through 1278 of the Code to the extent an
interest in a Mortgage Loan is considered to have been purchased at a "market
discount," that is, in the case of a Mortgage Loan issued without original issue
discount, at a purchase price less than its remaining stated redemption price
(as defined above), or in the case of a Mortgage Loan issued with original issue
discount, at a purchase price less than its adjusted issue price (as defined
above). If market discount is in excess of a de minimis amount (as described
below), the holder generally will be required to include in income in each month
the amount of such discount that has accrued (under the rules described in the
next paragraph) through such month that has not previously been included in
income, but limited, in the case of the portion of such discount that is
allocable to any Mortgage Loan, to the payment of stated redemption price on
such Mortgage Loan that is received by (or, in the case of accrual basis
Certificateholders, due to) the Trust Fund in that month. A Certificateholder
may elect to include market discount in income currently as it accrues (under a
constant yield method based on the yield of the Certificate to such holder)
rather than including it on a deferred basis in accordance with the foregoing.
If made, such election will apply to all market discount bonds acquired by such
Certificateholder during or after the first taxable year to which such election
applies. In addition, the OID Regulations would permit a Certificateholder to
elect to accrue all interest, discount
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(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 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
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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.
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
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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. As may be provided in the related Prospectus
Supplement, the Trustee or Master Servicer, as applicable, will furnish to each
holder of a Grantor Trust Certificate with each distribution a statement setting
forth the amount of such distribution allocable to principal on the underlying
Mortgage Loans and to interest thereon at the related Pass-Through Rate. In
addition, within a reasonable time after the end of each calendar year, the
Trustee or Master Servicer, as applicable, will furnish to each
Certificateholder during such year such customary factual information as the
Depositor or the reporting party deems necessary or desirable to enable holders
of Grantor Trust Certificates to prepare their tax returns and will furnish
comparable information to the IRS as and when required by law to do so. Because
the rules for accruing discount and amortizing premium with respect to the
Grantor
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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 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 "Material
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 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
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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 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
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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.
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.
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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 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
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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.
This Prospectus and related Prospectus Supplements may be used by the
Depositor, Merrill Lynch, an affiliate of the Depositor, and any other affiliate
of the Depositor when required under the federal securities laws in connection
with offers and sales of Offered Certificates in furtherance of market-making
activities in Offered Certificates. Merrill Lynch or any such other affiliate
may act as principal or agent in such transactions. Such sales will be made at
prices related to prevailing market prices at the time of sale or otherwise.
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 DEFINITIONS
PAGE
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Accrual Certificates ................................... 12, 37
Accrued Certificate Interest ........................... 37
Acute Care Facilities .................................. 22
Act .................................................... 62
ADA .................................................... 64
ARM Loans .............................................. 28
Assisted Living Facilities ............................. 22
Available Distribution Amount .......................... 36
Bankruptcy Code ........................................ 59
Book-Entry Certificates ................................ 13, 36
call risk .............................................. 17
Capitalized Interest Account ........................... 10, 30
Cash Flow Agreement .................................... 1, 10, 30
CERCLA ................................................. 24, 62
Certificate Account .................................... 9, 29, 45
Certificate Balance .................................... 2, 11, 38
Certificate Owner ...................................... 13, 42
Certificateholders ..................................... 1, 65
Certificates ........................................... 1, 8
Closing Date ........................................... 67
Code ................................................... 14, 65
Commercial Properties .................................. 8, 26
Commission ............................................. 2
Committee Report ....................................... 67
Companion Class ........................................ 12, 38
Con .................................................... 22
Contributions Tax ...................................... 76
Controlled Amortization Class .......................... 12, 38
Cooperatives ........................................... 26
CPR .................................................... 33
Credit Support ......................................... 1, 10, 30
Cut-off Date ........................................... 12
Debt Service Coverage Ratio ............................ 27
Definitive Certificates ................................ 13, 36, 46
Depositor .............................................. 8, 26
Determination Date ..................................... 37
Direct Participants .................................... 42
Distribution Date ...................................... 12
Distribution Date Statement ............................ 39
DOL .................................................... 87
DTC .................................................... 2, 13, 36, 42
Due Dates .............................................. 28
Due Period ............................................. 39
Duff & Phelps .......................................... 88
Equity Participation ................................... 28
ERISA .................................................. 15, 87
Event of Default ....................................... 50
Excess Funds ........................................... 33
Exchange Act ........................................... 2
Exemption .............................................. 88
extension risks ........................................ 17
FAMC ................................................... 9
FASIT .................................................. 14, 65
FHLMC .................................................. 9
Fitch .................................................. 88
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PAGE
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FNMA ................................................... 9
Fraud and Abuse Laws ................................... 23
Garn Act ............................................... 63
GNMA ................................................... 9
Grantor Trust Certificates ............................. 14, 65
Grantor Trust Fractional Interest Certificates ......... 14, 79
Grantor Trust Fund ..................................... 65
Grantor Trust Strip Certificate ........................ 79
Health Care-Related Facilities ......................... 22
holder ................................................. 62
Indirect Participants .................................. 42
Insurance Proceeds ..................................... 45
IRS .................................................... 67
Issue Premium .......................................... 72
L/C Bank ............................................... 55
Liquidation Proceeds ................................... 45
Loan-to-Value Ratio .................................... 27
Lock-out Expiration Date ............................... 28
Lock-out Period ........................................ 28
Mark-to-Market Regulations ............................. 74
Master Servicer ........................................ 2, 8
MBS .................................................... 1, 9, 26
MBS Agreement .......................................... 29
MBS Issuer ............................................. 29
MBS Servicer ........................................... 29
MBS Trustee ............................................ 29
Merrill Lynch .......................................... 91
Moody's ................................................ 88
Mortgage Asset Seller .................................. 9, 26
Mortgage Assets ........................................ 1, 26
mortgage instruments ................................... 56
Mortgage Loans ......................................... 1, 8, 26
Mortgage Notes ......................................... 26
Mortgage Rate .......................................... 9, 28
Mortgaged Properties ................................... 26
Mortgages .............................................. 26
Multifamily Properties ................................. 8, 26
Net Leases ............................................. 27
Net Operating Income ................................... 27
Nonrecoverable Advance ................................. 39
Notional Amount ........................................ 11, 37
OCC .................................................... 90
Offered Certificates ................................... 1
OID Regulations ........................................ 65
Originator ............................................. 26
PAC .................................................... 34
Participants ........................................... 26, 42
Parties in Interest .................................... 87
pass-through entity .................................... 76
Pass-Through Rate ...................................... 2, 11
Permitted Investments .................................. 45
Plans .................................................. 87
Pooling Agreement ...................................... 11, 43
Pre-Funding Account .................................... 1, 10, 28
Pre-Funding Period ..................................... 10
prepayment ............................................. 33
94
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Prepayment Assumption .................................. 67, 82
Prepayment Interest Shortfall .......................... 31
Prepayment Premium ..................................... 28
Prohibited Transactions Tax ............................ 76
Prospectus Supplement .................................. 1
Rating Agency .......................................... 15
RCRA ................................................... 62
Record Date ............................................ 37
Related Proceeds ....................................... 39
Relief Act ............................................. 64
REMIC .................................................. 1, 65
REMIC Certificates ..................................... 65
REMIC Provisions ....................................... 65
REMIC Regular Certificates ............................. 13, 66
REMIC Regulations ...................................... 65
REMIC Residual Certificates ............................ 13, 66
REO Property ........................................... 47
Restricted Group ....................................... 88
Senior Certificates .................................... 11, 36
Senior Honorary ........................................ 22
Servicing Standard ..................................... 47
Skilled Nursing Facilities ............................. 22
SMMEA .................................................. 89
SPA .................................................... 33
Special Servicer ....................................... 2, 8, 48
Standard & Poor's ...................................... 88
Stripped Interest Certificates ......................... 11, 36
Stripped Principal Certificates ........................ 11, 36
Sub-Servicer ........................................... 47
Sub-Servicing Agreement ................................ 48
Subordinate Certificates ............................... 11, 36
TAC .................................................... 34
Tiered REMICs .......................................... 66
Title V ................................................ 64
Trust Assets ........................................... 2
Trust Fund ............................................. 1
Trustee ................................................ 2, 8
UCC .................................................... 57
Underwriter ............................................ 88
United States person ................................... 79
Value .................................................. 27
Voting Rights .......................................... 41
Warranting Party ....................................... 44
95
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[POUCH & DISKETTE HERE]
This diskette contains a file: The file "98C2red.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>
================================================================================
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-6
Risk Factors ............................................................ S-27
Description of the Mortgage Pool ........................................ S-32
Servicing of the Mortgage Loans ......................................... S-49
Description of the Certificates ......................................... S-55
Yield and Maturity Considerations ....................................... S-68
Use of Proceeds ......................................................... S-76
Material Federal Income Tax Consequences ................................ S-76
ERISA Considerations .................................................... S-77
Legal Investment ........................................................ S-79
Method of Distribution .................................................. S-79
Legal Matters ........................................................... S-80
Ratings ................................................................. S-80
Index of Principal Definitions .......................................... S-81
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 .......................................... 26
Yield and Maturity Considerations ....................................... 31
The Depositor ........................................................... 36
Use of Proceeds ......................................................... 36
Description of the Certificates ......................................... 36
Description of the Pooling Agreements ................................... 43
Description of Credit Support ........................................... 54
Certain Legal Aspects of Mortgage Loans ................................. 56
Material Federal Income Tax Consequences ................................ 65
State and Other Tax Considerations ...................................... 87
ERISA Considerations .................................................... 87
Legal Investment ........................................................ 89
Method of Distribution .................................................. 91
Legal Matters ........................................................... 92
Financial Information ................................................... 92
Rating .................................................................. 92
Index of Principal Definitions .......................................... 93
================================================================================
================================================================================
MERRILL LYNCH MORTGAGE
INVESTORS, INC.
(DEPOSITOR)
$968,618,000
(APPROXIMATE)
MORTGAGE PASS-THROUGH
CERTIFICATES
SERIES 1998-C2
---------------------
PROSPECTUS SUPPLEMENT
---------------------
MERRILL LYNCH & CO.
DAIWA SECURITIES AMERICA INC.
MARCH ___, 1998
================================================================================
