<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-38073
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 25, 1998
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES SERIES 1998-C3
----------------
- -------------------------------------------------------------------------------
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE S-21 OF THIS
PROSPECTUS SUPPLEMENT AND ON PAGE 18 OF THE PROSPECTUS.
Neither these securities nor the underlying Mortgage Loans are insured or
guaranteed by any government agency or instrumentality.
These securities will represent interests in the Trust Fund only and will not
represent interests in or obligations of any other party.
This Prospectus Supplement may be used to offer and sell the certificates only
if it is accompanied by the Depositor's Prospectus dated February 25, 1998.
- -------------------------------------------------------------------------------
THE TRUST FUND:
o The Trust Fund will consist of a pool of 139 conventional, fixed rate
Mortgage Loans.
o The Mortgage Loans are generally secured by first liens on commercial and
multifamily properties.
o As of December 1, 1998, the Mortgage Loans had an aggregate principal
balance of $638,408,606.
THE CERTIFICATES:
o The Trust Fund will issue 17 classes of Certificates.
o Only the Certificates described on the following table are being offered
by this Prospectus Supplement and the Prospectus.
<TABLE>
<CAPTION>
==================================================================================================================
INITIAL % OF INITIAL
CERTIFICATE POOL PASS- RATED FINAL EXPECTED
BALANCE BALANCE THROUGH DISTRIBUTION RATING
CLASS (+/-5%) (+/-5%) RATE DATE (1) CUSIP NO. (MOODY'S/S&P)
- ------------------- ------------------ ------------- ------------ ----------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 ......... $129,870,000 20.34% 5.65% December 15, 2030 589929 SW9 Aaa/AAA
Class A-2 ......... $ 75,490,000 11.82% 5.87% December 15, 2030 589929 SX7 Aaa/AAA
Class A-3 ......... $243,122,000 38.08% 5.88% December 15, 2030 589929 SY5 Aaa/AAA
Class B ........... $ 33,516,000 5.25% (2) December 15, 2030 589929 SZ2 Aa2/AA
Class C ........... $ 35,112,000 5.50% (2) December 15, 2030 589929 TA6 A2/A
Class D ........... $ 38,305,000 6.00% (2) December 15, 2030 589929 TB4 Baa2/BBB
Class E ........... $ 7,980,000 1.25% (2) December 15, 2030 589929 TC2 Baa3/BBB-
Class IO .......... (3) N/A (3) December 15, 2030 589929 TD0 Aaa/AAAr
==================================================================================================================
</TABLE>
(Footnotes explaining the table are on S-3)
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE SECURITIES OR HAS DETERMINED THAT THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
On or about December 22, 1998, Merrill Lynch Mortgage Investors, Inc. will
sell these securities to Merrill Lynch, Pierce, Fenner & Smith Incorporated,
which will offer the Offered Certificates from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale.
----------------
MERRILL LYNCH & CO.
----------------
December 17, 1998
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES SERIES 1998-C3
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR
THE PURPOSE OF EDGAR FILING.]
[PICTURE OF U.S. MAP]
WASHINGTON DELAWARE NEW MEXICO
5 properties 1 property 1 property
$24,286,318 $1,165,188 $1,348,157
3.80% of total 0.18% of total 0.21% of total
MISSOURI MARYLAND ARIZONA
4 properties 2 properties 1 property
$11,734,932 $5,432,590 $3,991,293
1.84% of total 0.85% of total 0.63% of total
ILLINOIS VIRGINIA UTAH
1 property 3 properties 2 properties
$2,786,199 $13,189,084 $19,978,440
0.44% of total 2.07% of total 3.13% of total
WISCONSIN NORTH CAROLINA NEVADA
1 property 2 properties 4 properties
$3,737,476 $4,387,696 $6,334,434
0.59% of total 0.69% of total 0.99% of total
MICHIGAN KENTUCKY CALIFORNIA
4 properties 1 property 36 properties
$42,550,697 $1,409,963 $87,726,790
6.67% of total 0.22% of total 13.74% of total
INDIANA SOUTH CAROLINA OREGON
1 property 2 properties 3 properties
$3,204,462 $5,670,075 $8,376,956
0.50% of total 0.89% of total 1.31% of total
OHIO GEORGIA
1 property 3 properties
$1,428,498 $8,987,389
0.22% of total 1.41% of total
PENNSYLVANIA TENNESSEE
9 properties 1 property
$51,200,394 $4,830,724
8.02% of total 0.76% of total
NEW YORK ALABAMA
10 properties 1 property
$116,431,602 $806,453
18.24% of total 0.13% of total
RHODE ISLAND MISSISSIPPI
1 property 2 properties
1,420,966 $1,640,704
0.22% of total 0.26% of total
CONNECTICUT TEXAS
2 properties 25 properties
$12,258,283 $114,996,255
1.92% of total 18.01% of total
NEW JERSEY OKLAHOMA
5 properties 6 properties
$46,746,077 $30,350,510
7.32% of total 4.75% of total
<PAGE>
Primary Property Type by Cut-Off Date Balance
[3-D PIE CHART]
Credit Lease 1.6%
Other 1.7%
Multifamily 38.2%
Retail 23.6%
Office 14.1%
Hospitality 9.6%
Industrial 9.1%
Healthcare 2.2%
[LEGEND]
[ ] (less than or equal to) 1.0% of Initial Pool Balance
[ ] 1.1% -5.0% of Initial Pool Balance
[ ] 5.1% -10.0% of Initial Pool Balance
[ ] (greater than) 10.0% of Initial Pool Balance
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the Offered Certificates in two
separate documents that progressively provide more detail: (1) the accompanying
Prospectus, which provides general information about the issuer, the
Certificates and the types of collateral securing the Certificates, and (2)
this Prospectus Supplement, which describes the specific terms of the Offered
Certificates. You should read both this Prospectus Supplement and the
Prospectus before investing in any of the Offered Certificates.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. IF THE DESCRIPTIONS OF THE
CERTIFICATES VARY BETWEEN THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT, YOU
SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT.
THIS PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IS
NOT A SOLICITATION OF AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE SUCH
OFFER OR SALE IS NOT PERMITTED.
This Prospectus Supplement begins with several introductory sections
describing the Series 1998-C3 Certificates and the Trust Fund in abbreviated
form:
Summary of Prospectus Supplement, commencing on Page S-7 of this
Prospectus Supplement, which gives a brief introduction of the key
features of the Series 1998-C3 Certificates and a description of the
Mortgage Loans; and
Risk Factors, commencing on page S-21 of this Prospectus Supplement,
which describe risks that apply to the Series 1998-C3 Certificates which
are in addition to those described in the Prospectus with respect to the
securities issued by the Trust Fund generally.
This Prospectus Supplement and the accompanying Prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this Prospectus Supplement and the
Prospectus identify the pages where these sections are located.
Certain capitalized terms are defined and used in this Prospectus
Supplement and the Prospectus to assist you in understanding the terms of the
Offered Certificates and this offering. The capitalized terms used in this
Prospectus Supplement are defined on the pages indicated under the caption
"Index of Principal Definitions" beginning on page S-94 in this Prospectus
Supplement. The capitalized terms used in the Prospectus are defined on the
pages indicated under the caption "Index of Principal Definitions" beginning on
page 106 in the Prospectus.
In this Prospectus Supplement, the terms "Depositor," "we," "us" and "our"
refer to Merrill Lynch Mortgage Investors, Inc.
(Footnotes to Table on the Front Cover)
- ----------
(1) The "Rated Final Distribution Date" 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. See "RATINGS" in this Prospectus Supplement.
(2) The Pass-Through Rates applicable to the Class B, Class C, Class D and
Class E Certificates will be the Weighted Average Net Mortgage Rate (as
defined in this Prospectus Supplement) minus 0.92%, 0.54%, 0.00% and
0.00%, respectively.
(3) The Class IO Certificates will not have a Certificate Balance and their
holders will not receive distributions of principal, but are entitled to
receive payments of the aggregate interest accrued on the notional amount
of each of its components, as described in this Prospectus Supplement. See
"Description of the Certificates--Certificate Balances and Notional
Amount" and "--Pass-Through Rates" in this Prospectus Supplement.
S-3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF PROSPECTUS SUPPLEMENT ....................................................... S-7
RISK FACTORS ........................................................................... S-21
Certain Risks Associated with the Certificates ........................................ S-21
Limited Assets ....................................................................... S-21
Certain Yield and Maturity Considerations ............................................ S-21
Potential Conflicts of Interest ...................................................... S-22
Risk of Year 2000 .................................................................... S-23
Limited Liquidity for Offered Certificates ........................................... S-23
Lack of Control Over Trust Fund ...................................................... S-23
Certain Risk Factors Associated with the Mortgage Loans ............................... S-23
Risks of Lending on Income-Producing Properties ...................................... S-23
Certain Risks Associated with Credit Lease Loans ..................................... S-27
Limited Alternative Uses of Mortgaged Properties ..................................... S-27
Nonrecourse Mortgage Loans ........................................................... S-28
Environmental Law Considerations ..................................................... S-28
Risks Associated with Balloon Loans .................................................. S-29
Risks Associated with Related Borrowers .............................................. S-29
Geographic Concentration of Properties Increasing Isolated Geographic Risk ........... S-30
Risks Associated with Concentration of Mortgage Loans ................................ S-30
No Reunderwriting of Mortgage Loans .................................................. S-30
Tax Considerations Related to Foreclosure ............................................ S-31
Special Hazards Losses ............................................................... S-31
Other Financing ...................................................................... S-31
Risks Related to the Borrower's Form of Entity ....................................... S-32
Limitations of Appraisals and Engineering Reports .................................... S-32
Zoning Compliance .................................................................... S-32
Costs of Compliance with Applicable Laws and Regulations ............................. S-33
Limitations on Enforceability of Due-on-Sale Clauses and Assignments of Leases and
Rents ............................................................................... S-33
Limitations on Enforceability of Cross-Collateralization ............................. S-33
Litigation ........................................................................... S-34
Condemnations ........................................................................ S-34
Risks of Different Timing of Mortgage Loan Amortization .............................. S-34
Risks Associated with Ground Leases and Other Leasehold Interests .................... S-34
Risks Associated with the Mortgage Loan Seller ....................................... S-34
DESCRIPTION OF THE MORTGAGE POOL ....................................................... S-36
General ............................................................................... S-36
Certain Terms and Conditions of the Mortgage Loans .................................... S-36
Mortgage Rates; Calculations of Interest ............................................. S-36
Due Dates ............................................................................ S-37
Amortization ......................................................................... S-37
Prepayment Provisions ................................................................ S-37
Defeasance ........................................................................... S-37
Nonrecourse Obligations .............................................................. S-38
"Due-on-Sale" and "Due-on-Encumbrance" Provisions .................................... S-38
Cross-Default and Cross-Collateralization of Certain Mortgage Loans .................. S-38
Assessment of Property Condition ...................................................... S-38
Property Inspection .................................................................. S-38
Appraisals ........................................................................... S-38
Environmental Assessments ............................................................ S-38
Engineering Assessments .............................................................. S-39
Earthquake Analyses .................................................................. S-39
Zoning Compliance .................................................................... S-39
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Largest Mortgage Loans .................................................. S-39
Credit Lease Loans ...................................................... S-39
Additional Mortgage Loan Information .................................... S-40
The Mortgage Pool ...................................................... S-40
The Mortgage Loan Seller ................................................ S-50
Assignment of the Mortgage Loans; Repurchases and Substitutions ......... S-50
Representations and Warranties; Repurchases and Substitutions ........... S-51
Changes in Mortgage Pool Characteristics ................................ S-52
SERVICING OF THE MORTGAGE LOANS .......................................... S-54
General ................................................................. S-54
The Master Servicer ..................................................... S-54
The Special Servicer .................................................... S-55
Servicing and Other Compensation and Payment of Expenses ................ S-56
Modifications, Waivers and Amendments ................................... S-58
Purchase of Specially Serviced Mortgage Loans ........................... S-59
The Controlling Class Representative .................................... S-60
Limitation on Liability of Controlling Class Representative ............. S-60
REO Properties .......................................................... S-61
Inspections; Collection of Operating Information ........................ S-61
DESCRIPTION OF THE CERTIFICATES .......................................... S-63
General ................................................................. S-63
Registration and Denominations .......................................... S-63
Certificate Balances and Notional Amounts ............................... S-64
Pass-Through Rates ...................................................... S-65
Distributions ........................................................... S-66
General ................................................................ S-66
The Available Distribution Amount ...................................... S-66
Application of Available Distribution Amount ........................... S-66
Distributable Certificate Interest ..................................... S-70
Principal Distribution Amount .......................................... S-70
Treatment of REO Properties ............................................ S-71
Allocation of Prepayment Premiums ...................................... S-72
Subordination; Allocation of Losses and Certain Expenses ................ S-72
Advances ................................................................ S-74
Appraisal Reductions .................................................... S-75
Reports to Certificateholders; Available Information .................... S-76
Voting Rights ........................................................... S-78
Termination ............................................................. S-78
The Trustee ............................................................. S-79
YIELD AND MATURITY CONSIDERATIONS ........................................ S-80
Yield Considerations .................................................... S-80
General ................................................................ S-80
Rate and Timing of Principal Payment ................................... S-80
Losses and Shortfalls .................................................. S-81
Strip Rates ............................................................ S-81
Pass-Through Rates ..................................................... S-81
Certain Relevant Factors ............................................... S-82
Delay in Payment of Distributions ...................................... S-82
Unpaid Distributable Certificate Interest .............................. S-82
Yield Sensitivity of the Class IO Certificates ......................... S-82
Weighted Average Life ................................................... S-83
USE OF PROCEEDS .......................................................... S-88
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ................................. S-88
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ERISA CONSIDERATIONS ............................................. S-89
LEGAL INVESTMENT ................................................. S-91
METHOD OF DISTRIBUTION ........................................... S-92
LEGAL MATTERS .................................................... S-92
RATINGS .......................................................... S-92
INDEX OF PRINCIPAL DEFINITIONS ................................... S-94
ANNEX A -- CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS ......... A-1
ANNEX B -- TERM SHEET ............................................ B-1
ANNEX C -- FORM OF STATEMENTS TO CERTIFICATEHOLDERS .............. C-1
ANNEX D -- FORM OF SUPPLEMENTAL STATEMENTS ....................... D-1
ANNEX E -- DESCRIPTION OF THE LARGEST MORTGAGE LOANS ............. E-1
ANNEX F -- CERTAIN CHARACTERISTICS OF MULTIFAMILY MORTGAGED
PROPERTIES ......................................... F-1
</TABLE>
S-6
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
o THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS
SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED
TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND THE
TERMS OF THE OFFERED CERTIFICATES YOU MUST CAREFULLY READ THIS ENTIRE
DOCUMENT AND THE ACCOMPANYING PROSPECTUS.
o THIS SUMMARY PROVIDES AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOWS
AND OTHER INFORMATION TO AID YOUR UNDERSTANDING AND IS QUALIFIED BY
THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOWS AND OTHER
INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS.
o WE PROVIDE INFORMATION ON THE PRIVATE CERTIFICATES IN THIS PROSPECTUS
SUPPLEMENT ONLY TO ENHANCE YOUR UNDERSTANDING OF THE OFFERED
CERTIFICATES.
o UNLESS OTHERWISE STATED, ALL PERCENTAGES OF THE MORTGAGE LOANS, OR OF
ANY SPECIFIED GROUP OF MORTGAGE LOANS, REFERRED TO IN THIS PROSPECTUS
SUPPLEMENT ARE CALCULATED USING THE AGGREGATE CUT-OFF DATE BALANCE OF
ALL THE MORTGAGE LOANS. PERCENTAGES OF MORTGAGED PROPERTIES ARE
REFERENCES TO THE PERCENTAGES OF THE INITIAL POOL BALANCE REPRESENTED
BY THE AGGREGATE CUT-OFF DATE BALANCE OF THE RELATED MORTGAGE LOANS.
o ALL NUMERICAL INFORMATION CONCERNING THE MORTGAGE LOANS IS PROVIDED
ON AN APPROXIMATE BASIS.
OVERVIEW OF THE CERTIFICATES
The table below lists certain summary information concerning the Merrill
Lynch Mortgage Investors, Inc. Mortgage Pass-Through Certificates, Series
1998-C3. Each Certificate represents an interest in the Mortgage Loans and the
other assets of the Trust Fund. The table also lists the privately offered
certificates, which have not been registered under the Securities Act of 1933
and are not offered in this public offering.
<TABLE>
<CAPTION>
INITIAL PERCENT OF
CERTIFICATE INITIAL POOL CREDIT
CLASS BALANCE(1) BALANCE(1) SUPPORT
- -------------------- ------------------- -------------- -----------
<S> <C> <C> <C>
Class A-1 ......... $129,870,000 20.34% 29.75%
Class A-2 ......... $ 75,490,000 11.82% 29.75%
Class A-3 ......... $243,122,000 38.08% 29.75%
Class B ........... $ 33,516,000 5.25% 24.50%
Class C ........... $ 35,112,000 5.50% 19.00%
Class D ........... $ 38,305,000 6.00% 13.00%
Class E ........... $ 7,980,000 1.25% 11.75%
Class IO .......... (5) N/A N/A
Class F ........... $ 35,113,000 5.50% 6.25%
Class G ........... $ 4,788,000 0.75% 5.50%
Class H ........... $ 14,364,000 2.25% 3.25%
Class J ........... $ 3,192,000 0.50% 2.75%
Class K ........... $ 17,556,605 2.75% 0.00%
Class L ........... (6) N/A N/A
<CAPTION>
PASS- WEIGHTED CASH FLOW
THROUGH AVERAGE LIFE OR PRINCIPAL EXPECTED
CLASS DESCRIPTION RATE (YEARS)(2) WINDOW(2) RATING(3)
- -------------------- -------------------- ------------ -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Class A-1 ......... Fixed Coupon 5.65% 5.0 01/99-12/06 Aaa/AAA
Class A-2 ......... Fixed Coupon 5.87% 9.0 12/06-04/08 Aaa/AAA
Class A-3 ......... Fixed Coupon 5.88% 9.7 04/08-11/08 Aaa/AAA
Class B ........... Net WAC (4) 10.1 11/08-10/09 Aa2/AA
Class C ........... Net WAC (4) 11.5 10/09-09/11 A2/A
Class D ........... Net WAC (4) 14.3 09/11-09/13 Baa2/BBB
Class E ........... Net WAC (4) 14.7 09/13-09/13 Baa3/BBB-
Class IO .......... Variable I/O Strip (5) 9.9 01/99-09/23 Aaa/AAAr
Class F ........... Fixed Coupon 6.00% 14.7 09/13-10/13 N/A
Class G ........... Fixed Coupon 6.00% 14.8 10/13-11/13 N/A
Class H ........... Fixed Coupon 6.00% 15.1 11/13-12/14 N/A
Class J ........... Fixed Coupon 6.00% 16.5 12/14-01/16 N/A
Class K ........... Fixed Coupon 6.00% 19.5 01/16-09/23 N/A
Class L ........... Add'l Int. Only N/A N/A N/A N/A
</TABLE>
- ---------
(1) Subject to a permitted variance of plus or minus 5.0%.
(2) Based on no prepayments and the other assumptions set forth under "YIELD
AND MATURITY CONSIDERATIONS-- Weighted Average Life" in this Prospectus
Supplement.
(3) By each of Moody's Investors Service, Inc. and Standard and Poor's Rating
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
minus 0.92%, 0.54%, 0.00% and 0.00%, respectively.
(5) The Class IO Certificates will not have a Certificate Balance and their
holders will not receive distributions of principal, but are entitled to
receive payments of the total interest accrued on the notional amount of
each of its components.
(6) The Class L Certificates will not have a Certificate Balance and will not
entitle the holders thereof to receive distributions of principal or
interest, other than certain amounts described herein. See "DESCRIPTION OF
THE MORTGAGE POOL--Certain Terms and Conditions of the Mortgage
Loans--Amortization" herein.
[ ] Offered Certificates
[ ] Private Certificates
S-7
<PAGE>
THE PARTIES
THE 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., which is the
Mortgage Loan Seller, and an affiliate of Merrill
Lynch, Pierce, Fenner & Smith Incorporated, the
Underwriter. The Depositor's principal executive
office is located at World Financial Center,
North Tower, New York, New York 10281, phone
(212) 449-3860. Neither the Depositor nor any of
its affiliates has insured or guaranteed the
Offered Certificates. For more detailed
information, see "THE DEPOSITOR" in the
Prospectus.
On the Closing Date, the Depositor will deposit
the Mortgage Loans and related assets into the
Trust Fund.
THE ISSUER.................. The Trust Fund established under the Pooling
and Servicing Agreement. For more detailed
information, see "DESCRIPTION OF THE
CERTIFICATES" in the Prospectus.
THE MORTGAGE LOAN SELLER.... Merrill Lynch Mortgage Capital Inc., the
Depositor's corporate parent. For more
information, see "DESCRIPTION OF THE MORTGAGE
POOL--The Mortgage Loan Seller" in this
Prospectus Supplement. On the Closing Date, the
Mortgage Loan Seller will assign the Mortgage
Loans to the Depositor, which, in turn, will
assign the Mortgage Loans to the Trustee for the
benefit of the Certificateholders. See
"DESCRIPTION OF THE MORTGAGE
POOL--Representations and Warranties;
Repurchases" herein.
THE MASTER SERVICER......... GE Capital Loan Services, Inc., an affiliate of
the Special Servicer is expected to be the Master
Servicer. The Master Servicer will be primarily
responsible for collecting payments and gathering
information with respect to the Mortgage Loans.
THE SPECIAL SERVICER........ GE Capital Realty Group, Inc., an affiliate of
the Master Servicer is expected to be the 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. Certain Certificateholders
will have the right, subject to certain
conditions described herein, to replace the
Special Servicer and to select a representative
from whom the Special Servicer will seek advice
and approval and take directions under certain
circumstances, as described herein.
THE TRUSTEE................. The Chase Manhattan Bank, a New York banking
corporation. The Trustee will be responsible for
distributing payments to Certificateholders and
delivering to Certificateholders certain reports
on the Mortgage Loans and the Certificates.
THE UNDERWRITER............. Merrill Lynch, Pierce, Fenner & Smith
Incorporated, an affiliate of the Depositor. The
Underwriter will purchase the Offered
Certificates from the Depositor and you may
purchase Offered Certificates from the
Underwriter on and after the Closing Date.
S-8
<PAGE>
IMPORTANT DATES AND PERIODS
CLOSING DATE................ On or about December 22, 1998.
CUT-OFF DATE................ December 1, 1998.
DISTRIBUTION DATE........... The 15th day of each month (or if such day is
not a business day, the next succeeding business
day) beginning on January 15, 1999, provided,
however, that the Distribution Date will be no
earlier than the fourth business day following
the Determination Date in the month in which such
Distribution Date occurs.
DETERMINATION DATE.......... The 10th day of each month (or, if not a
business day, the immediately preceding business
day).
COLLECTION PERIOD........... For each Distribution Date the related
Collection Period 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 CERTIFICATES
OFFERED CERTIFICATES........ The Depositor is offering the Class A-1, Class
A-2, Class A-3, Class B, Class C, Class D, Class
E and Class IO Certificates of its Mortgage
Pass-Through Certificates, Series 1998-C3 to you
pursuant to this Prospectus Supplement.
PRIVATE CERTIFICATES........ The Class F, Class G, Class H, Class J, Class K
and Class L Certificates of the Depositor's
Mortgage Pass-Through Certificates, Series
1998-C3 are being offered by the Depositor in a
private transaction.
PRINCIPAL DISTRIBUTIONS..... Each class of Certificates, other than the
Class IO and Class L Certificates, will be issued
with an initial aggregate principal balance equal
to the Certificate Balance shown on the table at
the beginning of this Summary. On each
Distribution Date, the Certificate Balance of any
such class may be reduced by:
o distributions of principal and
o allocations of realized losses and other
trust fund expenses.
However, the Certificate Balance for any such
class cannot be reduced below zero.
The Class IO and Class L Certificates do not
have Certificate Balances and their holders are
not entitled to receive distributions of
principal.
The total amount of principal to be distributed
on any Distribution Date on the Certificates
will equal the Principal Distribution Amount.
S-9
<PAGE>
The "Principal Distribution Amount" for each
Distribution Date generally will be an amount
equal to:
o the scheduled principal payments (other
than balloon payments) due (to the extent
received or advanced) on the Mortgage Loans
during the related Collection Period;
o balloon payments actually received on the
Mortgage Loans during the related
Collection Period;
o prepayments received on the Mortgage Loans
during the related Collection Period; and
o all liquidation proceeds, insurance
proceeds, condemnation awards and
repurchase amounts received during the
related Collection Period that are
allocated to principal.
INTEREST.................... On each Distribution Date, the holders of each
class of Offered Certificates will be entitled to
receive:
o the class' Distributable Certificate
Interest; and
o any unpaid Distributable Certificate
Interest for such class of Certificates
from all prior Distribution Dates.
On any Distribution Date, the "Distributable
Certificate Interest" for each class of
Certificates (other than the Class IO and Class
L Certificates) generally will equal the greater
of zero and:
o one month's interest at its Pass-Through
Rate accrued on its Certificate Balance
(without subtracting any payments of
principal to be distributed, or losses
allocated, on such Distribution Date)
minus
o such class' share of any shortfalls in
interest collections due to prepayments on
Mortgage Loans that are not paid by the
Servicer or the Trustee, in its capacity as
successor servicer.
The Class IO Certificates will have 12
components (each a "Component"), with a
Component corresponding to each class of
Certificates which has a Certificate Balance. On
each Distribution Date, each Component will have
a notional amount equal to the Certificate
Balance (before any reductions because of
principal distributions or losses allocated on
such Distribution Date) of the class of the
Sequential Pay Certificates that corresponds to
such Component.
Each Component will have a Pass-Through Rate as
described under "Pass-Through Rates" below.
As of the Closing Date, the aggregate of the
notional amounts of each of the Components will
be $638,408,605.
S-10
<PAGE>
On any Distribution Date, the "Distributable
Certificate Interest" for the Class IO
Certificates on any Distribution Date generally
will equal the greater of zero and:
o the sum of one month's interest accrued at
the applicable Pass-Through Rate on the
notional amount of each of its Components
minus
o such class' share of any shortfalls in
interest collections due to prepayments on
Mortgage Loans that are not paid by the
Servicer or the Trustee, in its capacity as
successor servicer.
Interest on the Certificates will be calculated
on a 30/360 basis.
The Class L Certificates will not bear interest.
PASS-THROUGH RATES.......... The per annum interest rate for each class of
Certificates (other than the Class IO and Class L
Certificates) on each Distribution Date will
equal the Pass-Through Rate set forth with
respect to such class in the table at the
beginning of this Summary.
The Pass-Through Rate applicable to each
Component for any Distribution Date will equal
the excess, if any, of (a) the Weighted Average
Net Mortgage Rate for such Distribution Date,
over (b) the Pass-Through Rate then applicable
to the corresponding class of 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 Determination Date occurring in the
previous month, weighted on the basis of their
respective Stated Principal Balances outstanding
immediately prior to such Distribution Date.
The "Net Mortgage Rate" for each Mortgage Loan
will generally equal (x) the Mortgage Rate in
effect for such Mortgage Loan on the Cut-Off
Date, minus (y) the sum of certain servicing and
trustee fee rates for such Mortgage Loan.
However, if any Mortgage Loan does not accrue
interest on the basis of a 360-day year
consisting of twelve 30-day months, then, solely
for the purpose of calculating the Weighted
Average Net Mortgage Rate, the Mortgage Rate
referred to in clause (x) and the servicing fee
rate will be adjusted, if necessary, to
compensate for months which have more or less
than 30 days.
The "Stated Principal Balance" of a Mortgage
Loan at any time represents the outstanding
principal balance ultimately due and payable on
such Mortgage Loan, and generally will equal its
Cut-Off Date Balance, 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 during the related Collection
Period and distributed on the
Certificates on such date; and
S-11
<PAGE>
(ii) the principal portion of any realized
loss incurred for such Mortgage Loan
during the related Collection Period.
However, if any Mortgage Loan is paid in full,
liquidated or otherwise removed from the Trust
Fund in any Collection Period, on and after the
next Distribution Date, the Stated Principal
Balance of such Mortgage Loan will be zero.
PRIORITY OF DISTRIBUTIONS... On each Distribution Date, Certificateholders
will be entitled to distributions of all payments
or other collections (or advances in lieu
thereof) on the Mortgage Loans that the Master
Servicer collected or advanced during the related
Collection Period after deducting certain fees
and expenses.
The Trustee will, to the extent funds are
available therefor, distribute interest to the
holders of a class of the Certificates (other
than the holders of Class L Certificates):
o only to the extent funds remain after the
Trustee makes all required distributions of
principal and interest on each class of
Certificates with a higher priority of
distribution; and
o only if the Certificate Balance of such
class of Certificates (or the aggregate
notional amount of the Components in the
case of the Class IO Certificates) has not
been reduced to zero prior to such
Distribution Date.
The Trustee will, to the extent funds are
available, distribute the Principal Distribution
Amount to holders of a class of Certificates
(other than the Class IO and Class L
Certificates):
o only to the extent funds remain after the
Trustee makes all distributions of
principal and interest on each class of
Certificates with a higher priority of
distribution; and
o in an amount not greater than the
outstanding Certificate Balance of such
class.
The Trustee will distribute such amounts, to the
extent that money is available, in the following
order of priority to pay:
(1) Interest, pro rata, on the Class IO, Class
A-1, Class A-2 and Class A-3 Certificates.
(2) Principal on the Class A-1 Certificates.
(3) Principal on the Class A-2 Certificates.
(4) Principal on the Class A-3 Certificates.
(5) Reimbursement to the Class A-1, Class A-2
and Class A-3 Certificates, pro rata, for
any realized losses and unanticipated trust
fund expenses previously applied to such
classes, plus interest on such losses or
expenses.
(6) Interest on the Class B Certificates.
(7) Principal on the Class B Certificates.
S-12
<PAGE>
(8) Reimbursement to the Class B Certificates
for any realized losses and unanticipated
trust fund expenses previously applied to
such class, plus interest on such losses or
expenses.
(9) Interest on the Class C Certificates.
(10) Principal on the Class C Certificates.
(11) Reimbursement to the Class C Certificates
for any realized losses and unanticipated
trust fund expenses previously applied to
such class, plus interest on such losses or
expenses.
(12) Interest on the Class D Certificates.
(13) Principal on the Class D Certificates.
(14) Reimbursement to the Class D Certificates
for any realized losses and unanticipated
trust fund expenses previously applied to
such class, plus interest on such losses or
expenses.
(15) Interest on the Class E Certificates.
(16) Principal on the Class E Certificates.
(17) Reimbursement to the Class E Certificates
for any realized losses and unanticipated
trust fund expenses previously applied to
such class, plus interest on such losses or
expenses.
(18) Distributions on the Private Certificates.
However, if, on any Distribution Date, the
Certificate Balances of the Class B through
Class K Certificates have been reduced to zero,
but if any two of the Class A-1, Class A-2 and
Class A-3 Certificates remain outstanding,
distributions of principal will be made, pro
rata, to the outstanding Class A-1, Class A-2
and Class A-3 Certificates.
You may, in certain circumstances, also receive
distributions of prepayment premiums and yield
maintenance charges collected on the Mortgage
Loans. Such distributions are in addition to the
distributions of principal and interest
described above.
SUBORDINATION; ALLOCATION OF LOSSES
AND CERTAIN EXPENSES....... A class of Certificates with an earlier
alphabetical or numerical class designation, as
applicable, is more likely to receive
distributions of principal than classes with
later alphabetical or numerical class
designations, as applicable, because:
o distributions of payments on the Mortgage
Loans generally are made in alphabetical or
numerical order, as applicable, and
S-13
<PAGE>
o losses on the Mortgage Loans are allocated
to classes in reverse alphabetical order,
as indicated on the following table:
ORDER OF APPLICATION OF LOSSES
AND EXPENSES
<TABLE>
<CAPTION>
% OF
INITIAL INITIAL
CLASS CERTIFICATE POOL
DESIGNATION BALANCE BALANCE
- --------------------------- --------------- -----------
<S> <C> <C>
Private Certificates $ 75,013,605 11.75%
Class E $ 7,980,000 1.25%
Class D $ 38,305,000 6.00%
Class C $ 35,112,000 5.50%
Class B $ 33,516,000 5.25%
Class A-1, Class A-2 and
Class A-3 $448,482,000 70.25%
</TABLE>
The Certificate Balance of a class of
Certificates (other than the Class L
Certificates) will be reduced on each
Distribution Date by any losses on the Mortgage
Loans and certain Trust Fund expenses actually
allocated to such class of Certificates on such
Distribution Date. Any loss or expense allocated
to a class of Certificates will also result in a
similar reduction of the notional amount of the
corresponding Component.
ADVANCING................... You are less likely to incur shortfalls in
distributions on your Certificates due to late
payments on the Mortgage Loans because the Master
Servicer has agreed to advance certain payments
to the Trust Fund. The Master Servicer will
advance a monthly payment not made by a borrower
if the Master Servicer determines that such
payments will be ultimately recoverable. The
Trust Fund will pay interest to the Master
Servicer on the amount of any such advance at the
prime rate and will reimburse the Master Servicer
for any such advances that are not recoverable.
OPTIONAL TERMINATION OF THE
TRUST FUND................. The Trust Fund may be terminated when 1% or
less of the Initial Pool Balance is outstanding.
See "DESCRIPTION OF THE
CERTIFICATES--Termination" herein and in the
Prospectus.
S-14
<PAGE>
REGISTRATION AND
DENOMINATION................ The Offered Certificates will be registered in
the name of Cede & Co., as nominee for The
Depository Trust Company. You will not receive a
definitive certificate representing your interest
in the Trust Fund, except in limited
circumstances. See "DESCRIPTION OF THE
CERTIFICATES--Book-Entry Registration and
Definitive Certificates" in the Prospectus.
Beneficial interests in the Offered Certificates
will be offered in minimum denominations of
$1,000 actual or notional principal amount and
in integral multiples of $1 in excess of those
amounts.
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES............... The Trustee will be required to make one or
more separate "real estate mortgage investment
conduit" ("REMIC") elections for most of the
assets of the Trust Fund. The Certificates (other
than the Class L Certificates) will evidence
"regular interests" in a REMIC and generally will
be treated as debt instruments of such REMIC.
The Class A-1, Class A-2, Class A-3, Class B and
Class C Certificates will not, and the Class D,
Class E and Class IO Certificates will be
treated as having been issued with original
issue discount for federal income tax reporting
purposes.
For further information regarding the federal
income tax consequences of investing in the
Offered Certificates, see "MATERIAL FEDERAL
INCOME TAX CONSEQUENCES" in this Prospectus
Supplement and in the Prospectus.
ERISA CONSIDERATIONS........ If you are a plan subject to ERISA or Section
4975 of the Internal Revenue Code, you should
consult with your legal advisors before
purchasing any Certificate. The Depositor expects
that only prospective purchasers of the Class
A-1, Class A-2, Class A-3 and Class IO
Certificates may rely upon Merrill Lynch's
Prohibited Transaction Exemption.
See "ERISA CONSIDERATIONS" in this Prospectus
Supplement and in the Prospectus.
SMMEA ELIGIBILITY........... The Certificates will not constitute "mortgage
related securities" pursuant to the Secondary
Mortgage Market Enhancement Act of 1984.
See "LEGAL INVESTMENT" in this Prospectus
Supplement and in the Prospectus.
S-15
<PAGE>
RATINGS..................... The Offered Certificates will not be offered
unless they receive the following ratings from
Moody's and Standard & Poor's (the "Rating
Agencies"):
<TABLE>
<CAPTION>
RATING FROM MOODY'S/
CLASS STANDARD AND POOR'S
- --------------------- ---------------------
<S> <C>
Class A-1 ......... Aaa/AAA
Class A-2 ......... Aaa/AAA
Class A-3 ......... Aaa/AAA
Class B ........... Aa2/AA
Class C ........... A2/A
Class D ........... Baa2/BBB
Class E ........... Baa3/BBB-
Class IO .......... Aaa/AAAr
</TABLE>
The ratings on the Offered Certificates address
the likelihood of the timely receipt of all
distributions of interest to which they are
entitled and, except in the case of the Class IO
Certificates, distributions of principal equal
to the entire Certificate Balance by the Rated
Final Distribution Date, which is December 15,
2030. 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.
See "RATINGS" in this prospectus supplement and
"RISK FACTORS--Limited Nature of Ratings on
Certificates" in the Prospectus for further
explanation of the limitations and explanation
of the ratings.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
S-16
<PAGE>
THE MORTGAGE LOANS
GENERAL..................... The following table lists 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).
<TABLE>
<S> <C>
Number of Mortgage Loans ...................................... 139
Initial Pool Balance .......................................... $638,408,606
Minimum Cut-Off Date Balance .................................. $ 238,421
Maximum Cut-Off Date Balance .................................. $ 59,845,380
Average Cut-Off Date Balance .................................. $ 4,592,868
Minimum Mortgage Rate ......................................... 6.170%
Maximum Mortgage Rate ......................................... 9.625%
Weighted Average Mortgage Rate ................................ 7.088%
Minimum Remaining Term to Maturity (months)(1) ................ 52
Maximum Remaining Term to Maturity (months)(1) ................ 297
Weighted Average Remaining Term to Maturity (months)(1) ....... 135
Minimum Remaining Amortization Term (months) .................. 129
Maximum Remaining Amortization Term (months) .................. 360
Weighted Average Remaining Amortization Term (months) ......... 326
Minimum Cut-Off Date DSCR(2) .................................. 1.14x
Maximum Cut-Off Date DSCR(2) .................................. 2.53x
Weighted Average Cut-Off Date DSCR(2) ......................... 1.43x
Minimum Cut-Off Date LTV(2) ................................... 25.64%
Maximum Cut-Off Date LTV(2) ................................... 80.58%
Weighted Average Cut-Off Date LTV(2) .......................... 70.41%
Minimum Repayment LTV(2)(3) ................................... 30.74%
Maximum Repayment LTV(2)(3) ................................... 71.99%
Weighted Average Repayment LTV(3) ............................. 58.78%
</TABLE>
- ------------
(1) Term to maturity of Balloon Loans and Fully Amortizing Loans and term to
Anticipated Repayment Date of ARD Loans.
(2) Does not include Credit Lease Loans.
(3) At maturity for Balloon Loans only or at Anticipated Repayment Date for ARD
Loans. Does not include Fully Amortizing Loans.
o One hundred and twenty-nine (129) of the
Mortgage Loans (93.9%) were originated in
1998. Ten of the Mortgage Loans (6.1%) were
originated in 1997.
o Four of the Mortgage Loans (1.6%) are
Credit Lease Loans. Credit Lease Loans are
underwritten based upon the
creditworthiness of the tenant leasing the
related Mortgaged Property or of a
guarantor.
o All Mortgage Loans are non-recourse
obligations of the related borrowers.
o No Mortgage Loan is insured by any
government agency or private insurer (other
than certain Credit Lease Loans).
S-17
<PAGE>
For more information about the Mortgage Loans
and the related Mortgaged Properties, you should
review the tables under "DESCRIPTION OF THE
MORTGAGE POOL--Additional Mortgage Loan
Information" in this Prospectus Supplement and
in attached Annex A.
SECURITY FOR THE MORTGAGE
LOANS ...................... All Mortgage Loans are first liens on the
following types of real estate interests:
<TABLE>
<CAPTION>
REAL ESTATE NUMBER OF PERCENTAGE OF INITIAL
INTEREST MORTGAGE LOANS POOL BALANCE
- ----------------------------- ---------------- ----------------------
<S> <C> <C>
Fee Simple Estate ......... 132 83.0%
Leasehold Estate .......... 6 13.3%
Fee Simple Estate and
Leasehold Estate ........ 1 3.8%
</TABLE>
PROPERTY TYPES.............. The following table lists the uses for the
Mortgaged Properties:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF INITIAL POOL
PROPERTY TYPE MORTGAGED PROPERTIES BALANCE
- -------------------------- ---------------------- --------------
<S> <C> <C>
Multifamily ............ 65 38.2%
Retail ................. 34 23.6%
Office ................. 6 14.1%
Hospitality ............ 9 9.6%
Industrial/Warehouse 12 9.1%
Health Care ............ 3 2.2%
Credit Lease Loans ..... 4 1.6%
Self-Storage ........... 2 0.8%
Mobile Home Park ....... 2 0.5%
Mixed Use .............. 3 0.3%
</TABLE>
GEOGRAPHIC CONCENTRATIONS... The Mortgaged Properties are located throughout
30 states. The following table lists the number
and percentage of Mortgaged Properties in states
which have concentrations of Mortgage Properties
above 5%:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF INITIAL POOL
STATES MORTGAGED PROPERTIES BALANCE
- ------------------------ ---------------------- --------------
<S> <C> <C>
New York ............. 10 18.2%
Texas ................ 25 18.0%
California ........... 36 13.7%
Pennsylvania ......... 9 8.0%
New Jersey ........... 5 7.3%
Michigan ............. 4 6.7%
</TABLE>
S-18
<PAGE>
PRINCIPAL AND INTEREST PAYMENT
TERMS...................... All of the Mortgage Loans accrue interest at a
fixed rate, although the rates for those loans
which have anticipated repayment dates may
increase if such loans are not repaid on such
anticipated repayment dates.
Payments are due on the first day of each month.
Thirty-seven (37) Mortgage Loans (13.5%) bear
interest on a 30/360 basis; 102 Mortgage Loans
(86.5%) bear interest on an actual/360 basis.
TYPE OF AMORTIZATION........ The following table lists the amortization
characteristics of the Mortgage Loans:
<TABLE>
<CAPTION>
PERCENTAGE OF
TYPE OF NUMBER OF INITIAL POOL
AMORTIZATION MORTGAGE LOANS BALANCE
- ------------------------- ---------------- --------------
<S> <C> <C>
Balloon Loans ......... 122 75.5%
ARD Loans ............. 5 17.1%
Fully Amortizing
Loans ............... 12 7.3%
</TABLE>
Balloon Loans have amortization schedules
significantly longer than their terms to
maturity and have substantial principal payments
due on their maturity dates, unless prepaid
earlier.
ARD Loans fully or substantially amortize
through their terms to maturity. However, if an
ARD Loan is not prepaid by a date set forth in
its Mortgage Loan documents, interest will
accrue at a higher rate and the borrower will be
required to pay all cash flow generated by the
Mortgaged Property over its regular debt service
payments and certain other permitted expenses
and reserves to repay principal on the Mortgage
Loan.
Fully Amortizing Loans fully or substantially
amortize through their terms to maturity, but do
not include ARD Loans.
See, "DESCRIPTION OF THE MORTGAGE POOL --
Certain Terms and Conditions of the Mortgage
Loans", herein.
PREPAYMENT PROVISIONS....... As of the Cut-Off Date, all of the Mortgage
Loans restrict or prohibit voluntary prepayments
of principal as listed on the following table:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
TYPE OF PREPAYMENT MORTGAGE INITIAL POOL
RESTRICTION LOANS BALANCE
- -------------------------------------- ----------- --------------
<S> <C> <C>
Prohibit Prepayments for most of
term ............................. 76 67.9%
Prohibit Prepayment until date
specified in related Note and
then impose a Yield Maintenance
Charge or Percentage Premium
for most of remaining term ....... 57 30.5%
Permit Prepayment if accompanied
by a Yield Maintenance Charge
for remaining term ............... 6 1.6%
</TABLE>
S-19
<PAGE>
See "DESCRIPTION OF THE MORTGAGE
POOL--Additional Mortgage Loan Information"
herein.
If a loan has an anticipated repayment date, the
borrower may prepay the loan after the
anticipated repayment date without material
restrictions. The ability of the Master Servicer
or the Special Servicer to waive or modify the
terms of any Mortgage Loan relating to the
payment of a Prepayment Premium is limited as
described herein. See "SERVICING OF THE MORTGAGE
LOANS--Modifications, Waivers and Amendments"
herein. Although the Mortgage Loan documents may
require the borrower to pay Prepayment Premiums,
those provisions may not be enforceable. In
addition, the Master Servicer may be unable to
collect Prepayment Premiums that are due.
DEFEASANCE.................. In seventy-four (74) Mortgage Loans (67.5%),
the borrower may, under certain conditions,
substitute non-callable United States Treasury
obligations (the "Defeasance Collateral") as
collateral for the related Mortgage Loan during
their respective lock-out periods. Upon such
substitution, the related Mortgaged Property will
no longer secure such Mortgage Loan. The payments
on the Defeasance Collateral are expected to
approximate the amount and timing of payments on
the related Mortgage Loan. The Master Servicer
may not permit borrowers to defease a Mortgage
Loan in this manner under certain circumstances.
See "RISK FACTORS--Certain Risk Factors
Associated with the Mortgage Loans" and
"DESCRIPTION OF THE MORTGAGE POOL" in this
Prospectus Supplement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
S-20
<PAGE>
RISK FACTORS
o YOU SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE FOLLOWING RISK
FACTORS (AS WELL AS THE RISK FACTORS SET FORTH UNDER "RISK FACTORS"
IN THE PROSPECTUS) BEFORE MAKING YOUR INVESTMENT DECISION. ADDITIONAL
RISK FACTORS ARE DESCRIBED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT
UNDER SEPARATE HEADINGS IN CONNECTION WITH DISCUSSIONS REGARDING
PARTICULAR ASPECTS OF THE MORTGAGE LOANS OR THE CERTIFICATES.
o THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES
RELATING TO YOUR CERTIFICATES. ADDITIONAL RISKS AND UNCERTAINTIES NOT
PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO
IMPAIR YOUR INVESTMENT.
o IF ANY OF THE FOLLOWING RISKS ARE REALIZED, YOUR INVESTMENT COULD BE
MATERIALLY AND ADVERSELY AFFECTED.
CERTAIN RISKS ASSOCIATED WITH THE CERTIFICATES
Limited Assets. Distributions on your Certificates will depend on payments
received on the Mortgage Loans. Therefore you should carefully consider the
risks associated with the Mortgage Loans described in this Prospectus
Supplement and in the Prospectus.
Certain Yield and Maturity Considerations. Your yield on the Offered
Certificates may be adversely affected by the:
o The rate, amount and timing of principal payments and collections
on the Mortgage Loans, particularly voluntary prepayments. These
can be affected by:
o The prevailing interest rates (if interest rates fall, borrowers
will have an increased incentive to refinance their Mortgage
Loan, which may result in more prepayments).
o Restrictions on voluntary prepayments contained in the Mortgage
Notes. See "DESCRIPTION OF THE MORTGAGE POOL--Certain Terms and
Conditions of the Mortgage Loans--Prepayment Provisions" in this
Prospectus Supplement.
o The availability of mortgage credit from other sources.
o Other economic, demographic, geographic, tax and legal factors.
o Principal losses or payment delays with respect to Mortgage Loans due
to defaults, casualties or condemnations, and
o The order of priority of distributions of principal in respect of the
Sequential Pay Certificates.
As described in this Prospectus Supplement under "DESCRIPTION OF THE
CERTIFICATES--Application of Available Distribution Amount", the Principal
Distribution Amount for each Distribution Date will be distributable to
each class of Sequential Pay Certificates in alphabetical and/or numerical
order and no class of Sequential Pay Certificates will be entitled to
distributions of principal until the Certificate Balance of each class of
Certificates with an earlier alphabetical and/or numerical designation has
been reduced to zero. Therefore, the principal payments on the Mortgage
Loans may have different effects on the yields of the respective classes of
Offered Certificates.
The yield on the Class IO Certificates is particularly sensitive to the
timing of payments on the Mortgage Loans and the Sequential Pay Certificates. A
buyer of 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 to fully recoup your initial investment.
The Pass-Through Rates 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 0.92%, 0.54%, 0.00% and 0.00%, respectively (but not
less than zero); the Strip Rates applicable to the Class A-1, Class A-2 and
Class A-3 Components for each Distribution Date will equal the Weighted Average
Net Mortgage Rate minus 5.65%, 5.87% and 5.88%, respectively (but not less than
zero); and the Strip
S-21
<PAGE>
Rates 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 minus 6.00% (but not less than zero). Accordingly, the
Pass-Through Rates on such Classes of Certificates and the Strip Rates 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.
You should also consider that (1) the Mortgage Loans may not require the
payment of Prepayment Premiums or Yield Maintenance Charges in the event of
involuntary prepayments resulting from casualty or condemnation; (2) in the
event of a liquidation of a Mortgage Loan following a default, the liquidation
proceeds may be insufficient to cover any Prepayment Premium or Yield
Maintenance Charge, and (3) the obligation of a borrower to pay such Prepayment
Premium or Yield Maintenance Charge may be unenforceable.
Generally, the Private Certificates (other than the Class L Certificates)
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 will bear such shortfalls and losses prior to
the Class A-1, Class A-2 and Class A-3 Certificates, in reverse alphabetical
order of class designation. The Class A-1, Class A-2 and Class A-3 Certificates
will bear shortfalls in collections and losses pro rata, in proportion to their
respective outstanding Certificate Balances. However, until the first
Distribution Date after the aggregate of the Certificate Balances of the Class
B, Class C, Class D, Class E Certificates and the Private Certificates (other
than the Class L Certificates) (the "Subordinate Certificates") has been
reduced to zero, the Class A-3 Certificates will receive principal payments
only after the Certificate Balance of the Class A-2 Certificates has been
reduced to zero, and the Class A-2 Certificates will receive principal payments
only after the Certificate Balance of the Class A-1 Certificates has been
reduced to zero. As a result, the shortfalls and losses allocated to the Class
A Certificates will have a greater effect on the Class A-3 Certificates than on
the Class A-2 Certificates and a greater effect on the Class A-2 Certificates
than on the Class A-1 Certificates. 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 corresponding Component. See "DESCRIPTION OF THE
CERTIFICATES--Distributions" and "--Subordination; Allocation of Losses and
Certain Expenses" in this Prospectus Supplement and "YIELD AND MATURITY
CONSIDERATIONS" in this Prospectus Supplement and in the Prospectus.
Investors in the Class IO Certificates should consider that the
Pass-Through Rate applicable to each Component and, correspondingly, the yield
on the Class IO Certificates, will be sensitive to changes in the relative
composition of the Mortgage Pool as a result of scheduled amortization,
voluntary prepayments, defaults and liquidations. The Pass-Through Rate
applicable to some of the Components is variable and will be equal to the
excess, if any, of the Weighted Average Net Mortgage Rate from time to time,
over the Pass-Through Rate on the class of Sequential Pay Certificates related
to such Component. Therefore a reduction in the Weighted Average Net Mortgage
Rate results in a lower Pass-Through Rate on the Components and a corresponding
reduction in interest distributions on the Class IO Certificates. See
"DESCRIPTION OF THE CERTIFICATES--Pass-Through Rates" in this Prospectus
Supplement.
Potential Conflicts of Interest. Certain holders of the Subordinate
Certificates have the right to appoint the Controlling Class Representative and
to replace the Special Servicer. The Special Servicer may be such a Subordinate
Certificateholder or be affiliated with such Certificateholders. Although the
actions of the Special Servicer will be governed by the terms of the Pooling
and Servicing Agreement, the Special Servicer will have considerable latitude
in liquidating or modifying defaulted Mortgage Loans. The Special Servicer may
have interests when dealing with defaulted Mortgage Loans that are in conflict
with those of holders of Offered Certificates. For example, a Special Servicer
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that is a Certificateholder or an affiliate of a Certificateholder could seek
to mitigate the potential for loss to its class from a troubled Mortgage Loan
by deferring enforcement in the hope of maximizing future proceeds. However,
such action could result in less proceeds to the Trust Fund than would have
been realized if earlier action had been taken.
The initial Special Servicer or its affiliate may purchase some or all of
the Certificates of one or more classes of Private Certificates, including the
initial Controlling Class of Sequential Pay Certificates, and the Special
Servicer or an affiliate is not prohibited from purchasing the Certificates of
any other class.
Risk of Year 2000. To the best knowledge of the Master Servicer and the
Special Servicer, any custom-made software or hardware designed, purchased or
licensed by either the Master Servicer or the Special Servicer, identified as
being critical to its operations and for compiling, reporting or generating
data required by the Pooling and Servicing Agreement, will be capable by August
31, 1999, of accurately performing calculations or other processing with
respect to dates after August 31, 1999, including leap year calculations, when
used for the purpose for which it was intended. The knowledge of the Master
Servicer or the Special Servicer regarding the capabilities of such hardware
and software may be based upon information obtained from vendors or information
obtained from sources that the Master Servicer or Special Servicer, as
applicable, reasonably believes are reliable. This assertion further assumes
that all other products, when used in combination with the software or hardware
of the Master Servicer or the Special Servicer, properly exchange date data.
Limited Liquidity for Offered Certificates. There is currently no
secondary market for the Offered Certificates. While the Underwriter currently
intends to make a secondary market in the Offered Certificates, it is under no
obligation to do so. Accordingly, no secondary market for your Certificates
will develop. Moreover, if a secondary market does develop, it may not provide
you with liquidity of investment or continue for the life of your Certificates.
A secondary market may provide less liquidity to you than any comparable market
for securities that evidence interests solely in single-family mortgage loans.
Your Certificates will not be listed on any securities exchange.
Lack of Control Over Trust Fund. You and other Certificateholders
generally do not have a right to vote and do not have the right to make
decisions with respect to the administration of the trust. See "SERVICING OF
THE MORTGAGE LOANS--General" in this Prospectus Supplement. Such decisions are
generally made, subject to the express terms of the Pooling and Servicing
Agreement, by the Master Servicer, the Special Servicer, or the Trustee, as
applicable. Any decision made by one of those parties in respect of the trust
may be contrary to the decision that you or other Certificateholders would have
made and may negatively affect your interests.
CERTAIN RISK FACTORS ASSOCIATED WITH 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 riskier than lending on the
security of single-family residences. Income-producing property lending
typically involves larger loans than single-family lending. In addition,
repayment of loans made on the security of income-producing real property
depends upon the ability of the related real estate project:
o to generate income sufficient to pay operating expenses and leasing
commissions, to make necessary repairs, tenant improvements and
capital improvements and to pay debt service, and
o in the case of loans that do not fully amortize over their terms, to
retain sufficient value to permit the borrower to pay off the loan at
maturity by sale or refinancing.
A number of factors, many beyond the control of the property owner, can
affect the ability of an income-producing real estate project to generate
sufficient net operating income to pay debt service and/or to maintain its
value. Among these factors are:
o the age, quality and design of the project;
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o competition with other projects in the area;
o changes or weaknesses in specific industry segments;
o increases in operating costs;
o capable property management and maintenance;
o in the case of retail, industrial/warehouse or office properties, the
dependence 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;
o increases in capital expenditures needed to maintain the properties
or make improvements;
o a decline in the financial condition of a major tenant; and
o increases in vacancy rates.
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 sell or refinance) without necessarily affecting the
ability to generate current income.
Other factors are more general in nature, such as:
o national, regional or local economic conditions (including plant
closings, industry slowdowns and unemployment rates);
o local real estate conditions (such as an oversupply of retail space,
office space or multifamily housing);
o demographic factors;
o consumer confidence;
o consumer tastes and preferences; and
o retroactive changes in building codes.
The volatility of net operating income will be influenced by many of the
foregoing factors, as well as by:
o the length of tenant leases;
o the creditworthiness of tenants;
o in the case of rental properties, the rate at which new rentals
occur; and
o the property's "operating leverage" (i.e., the percentage of total
property expenses in relation to revenue, the ratio of fixed
operating expenses to those that vary with revenues, and the level of
capital expenditures required to maintain the property and to retain
or replace tenants).
A decline in the real estate market or in the financial condition of a
major tenant will tend to have a more immediate effect on the net operating
income of properties with short-term revenue sources, such as short-term or
month-to-month leases, and may lead to higher rates of delinquency or defaults.
In addition, particular types of income properties are exposed to
particular risks. For instance:
o Office Properties. Owners of office properties may have to spend
significant amounts of cash to pay for general capital improvements,
tenant improvements and costs of re-leasing space. Office properties
that are not equipped to accommodate the needs of modern businesses
may become functionally obsolete and thus non-competitive;
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o Multifamily Projects. Multifamily projects are part of a market that,
in general, is characterized by low barriers to entry. Thus, a
particular apartment market with historically low vacancies could
experience substantial new construction, and a resultant oversupply
of units, in a relatively short period of time. Since multifamily
apartment units are typically leased on a short-term basis, the
tenants who reside in a particular project within such a market may
easily move to alternative projects with more desirable amenities or
locations. Multifamily properties secure 65 of the Mortgage Loans
(38.2%). A large number of factors may adversely affect the value and
successful operation of a multifamily property, including:
o its age, appearance and construction quality;
o the location of the property (e.g., a change in the neighborhood
over time);
o the ability of management to provide adequate maintenance;
o the types of services (amenities) that the property provides;
o the property's reputation;
o the level of mortgage interest rates (which may encourage
tenants to purchase rather than lease housing);
o the presence of competing properties;
o adverse local or national economic conditions; and
o state and local regulations.
Certain information with respect to the Mortgage Loans secured by
multifamily properties is set forth in Annex F hereto.
o Retail Properties. In the case of retail properties, the failure of
an anchor tenant to renew its lease, the termination of an anchor
tenant's lease, the bankruptcy or economic decline of an anchor
tenant, a shift in consumer demand due to demographic changes (for
example, population decreases or changes in average age or income)
and/or changes in consumer preference (for example, to discount
retailers), or the closing of the business of an anchor at its store,
notwithstanding its continued payment of rent after "going dark," can
have a particularly negative effect on the economic performance of a
shopping center property given the importance of anchor tenants in
attracting traffic to other stores within the same shopping center.
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. In addition, the failure of one or more major tenants,
such as an anchor tenant, to operate from its premises may entitle
other tenants to rent reductions or the right to terminate their
leases. For several Mortgage Loans, the land and improvements
utilized by an anchor or other tenant are not subject to the related
Mortgage;
o Industrial Properties. 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 re-let to
another tenant or may become functionally obsolete relative to newer
properties;
o Self Storage Facilities. Self storage facilities are also part of a
market that contains low barriers to entry. In addition, it is
difficult to assess the environmental risks posed by such facilities
due to tenant privacy, anonymity and unsupervised access to such
facilities. Therefore, such facilities may pose additional
environmental risks to investors. The environmental site assessments
discussed herein did not include an inspection of the contents of the
self-storage units included in the self storage properties and there
is no assurance that all of the units included in the self storage
properties are free from hazardous substances or other pollutants or
contaminants or will remain so in the future. See "--Environmental
Law Considerations"
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below. Due to the short-term nature of self storage leases, self
storage properties also may be subject to more volatility in terms of
supply and demand than loans secured by other types of properties. In
addition, because of the construction utilized in connection with
certain self storage facilities, it might be difficult or costly to
convert such a facility to an alternative use. Thus, the liquidation
value of self storage properties may be substantially less than would
be the case if the same were readily adaptable to other uses.
o Mobile Home Parks. Mortgage lenders whose loans are secured by
mortgages encumbering mobile home parks may be subject to additional
risks not faced by lenders whose loans are secured by other types of
income producing properties. Since the borrower often does not own
the mobile homes located upon the related Mortgaged Property, the
borrower (and the lender subsequent to any foreclosure) may face
additional costs and delays in obtaining evictions of tenants and the
removal of mobile homes upon a default or abandonment by a tenant.
o Hotels. Hotels are affected by various factors, including location,
quality and franchise affiliation (or lack thereof). Adverse economic
conditions, either local, regional or national, may limit the amount
that may be charged for a room and/or 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 respond more quickly
to adverse economic conditions and competition than do other
commercial properties. The successful operation of a hotel with a
franchise affiliation may depend in part upon the strength of the
franchisor, franchisor management, 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 any franchise
license agreement. Furthermore, the ability of a hotel to attract
customers, and some of such hotel's revenues, may depend in large
part on its having a liquor license. Such a license may not be
transferable (for example, in connection with a foreclosure).
Various factors may adversely affect the economic performance of a hotel,
including:
o adverse economic and social conditions, either local, regional or
national (which may limit the amount that can be charged for a room
and reduce occupancy levels);
o the construction of competing hotels or resorts;
o continuing expenditures for modernizing, refurbishing and maintaining
existing facilities prior to the expiration of their anticipated
useful lives;
o a deterioration in the financial strength or managerial capabilities
of the owner and operator of a hotel;
o changes in travel patterns caused by changes in energy prices,
strikes, relocation of highways, the construction of additional
highways or other factors; and
o seasonality, which can cause periodic fluctuations in a hotel
property's revenues.
o Residential Health Care Facilities. Residential health care
facilities pose risks not associated with other types of
income-producing real estate. Providers of long-term nursing care,
assisted living and other medical services are subject to federal and
state laws that relate to the adequacy of medical care, distribution
of pharmaceuticals, rate setting, equipment, personnel, operating
policies and additions to facilities and services and, to the extent
dependent on patients whose fees are reimbursed by private insurers,
to the reimbursement policies of such insurers.
o The failure of any of such borrower to maintain or renew any
required license or regulatory approval could prevent it from
continuing operations at a Mortgaged Property (in which case no
revenues would be received from such property or portion thereof
requiring licensing) or, if applicable, bar it from
participation in government reimbursement programs.
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o In the event of foreclosure, we cannot ensure 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.
o We cannot ensure that a new license could be obtained or that
the related Mortgaged Property would be adaptable to other uses.
To the extent any residential health care facility 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.
o 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, the Depositor can give no assurance that payments
under government reimbursement programs will, in the future, be
sufficient to fully reimburse the cost of caring for program
beneficiaries. If not, net operating income of the Mortgaged
Properties that receive substantial revenues from those sources,
and consequently the ability of the related borrowers to meet
their Mortgage Loan obligations, could be adversely affected.
o 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.
See "RISK FACTORS--Risks to Lenders Associated with Certain Income Producing
Mortgaged-- Properties--Risks Associated with Mortgage Loans Secured by
Residential Healthcare Facilities" in the prospectus.
Certain Risks Associated with Credit Lease Loans. Four of the Mortgage
Loans (the "Credit Lease Loans") (1.6%) are secured by Mortgages on Mortgaged
Properties that are, in each case, subject to a lease (a "Credit Lease") to a
tenant (each a "Credit Lease Tenant") which possesses (or which parent or other
affiliate which guarantees the Credit Lease obligation possesses) a credit
rating meeting the originator's underwriting criteria. The payment of interest
and principal on Credit Lease Loans is dependent primarily on the payment by
each Credit Lease Tenant or guarantor of the Credit Lease (the "Guarantor"), if
any, of monthly rental payments and other payments due under the terms of its
Credit Lease. A downgrade in the credit rating of the Credit Lease Tenant
and/or the Guarantor may adversely affect the rating of your Certificates. In
addition, because the ability of the owner of a Credit Lease Mortgaged Property
to service the related Credit Lease Loan is dependent on revenue from a single
Credit Lease Tenant, in the event of a default under a Credit Lease or the
associated guarantee, as the case may be, the related borrower may not have the
ability to make required payments on such Credit Lease Loan until the premises
are re--let. If a payment default on a Credit Lease Loan occurs, the Special
Servicer may be entitled to foreclose upon or otherwise realize upon the
related Mortgaged Property to recover amounts due under the Credit Lease Loan,
and will also be entitled to pursue any available remedies against the
defaulting Credit Lease Tenant and any Guarantor.
Any failure by the provider of any lease enhancement policy or residual
value policy to pay under the terms of any such policy, or any downgrade of the
credit rating of such provider, may have an adverse affect on the ratings of
your Certificates. See "DESCRIPTION OF THE MORTGAGE POOL--Credit Lease Loans"
herein.
Limited Alternative Uses of Mortgaged Properties. Some of the Mortgaged
Properties may not be readily convertible to alternative uses if those
properties were to become unprofitable for any reason.
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Converting commercial properties to alternate uses generally requires
substantial capital expenditures. The liquidation value of any such Mortgaged
Property consequently may be substantially less than would be the case if the
property were readily adaptable to other uses.
Nonrecourse Mortgage Loans. The Mortgage Loans are not insured or
guaranteed by any governmental entity or private mortgage insurer (other than
certain Credit Lease Loans with respect to which a lease enhancement policy or
residual value insurance policy is in effect). The Depositor has not evaluated
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, you should assume all of the Mortgage Loans are
nonrecourse loans; recourse in the case of default will be limited to the
related Mortgaged Property. However, in certain circumstances the Mortgage Loan
Seller will be obligated to repurchase or substitute a Mortgage Loan if (i)
there is a defect with respect to certain of the documents relating to such
Mortgage Loan or (ii) certain of their respective representations or warranties
concerning such Mortgage Loan are breached, and such defect or breach
materially and adversely affects the interests of the Certificateholders and
such defect or breach is not cured as required. There can be no assurance that
the Mortgage Loan Seller will be in a financial position to effect such
repurchase or substitution.
Environmental Law Considerations. If an adverse environmental condition
exists with respect to a Mortgaged Property, the Trust Fund will be subject to
certain risks including the following:
o a diminution in the value of such Mortgaged Property or the inability
to foreclose against such Mortgaged Property;
o the potential that the related borrower may default on the related
Mortgage Loan due to such borrower's inability to pay high
remediation costs or difficulty in bringing its operations into
compliance with environmental laws;
o liability for clean-up costs or other remedial actions, which could
exceed the value of such Mortgaged Property or the unpaid balance of
the related Mortgage Loan;
o the inability to sell the related Mortgage Loan in the secondary
market or to lease such Mortgaged Property to potential tenants.
Under certain federal and state laws, federal and state agencies may
impose a statutory lien over the subject property to secure the reimbursement
of remedial costs incurred by these agencies to correct environmental
conditions. This lien may be prior to the lien of an existing mortgage. Any
such lien arising with respect to a Mortgaged Property would adversely affect
the value of such Mortgaged Property and could make impracticable the
foreclosure by the Special Servicer on such Mortgaged Property in the event of
a default by the related borrower.
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real property, as well as certain
other categories of parties, may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under, adjacent to or in such
property. The cost of any required remediation and the owner's liability
therefor is generally not limited under applicable laws. Such liability could
exceed the value of the property and/or the aggregate assets of the owner.
Under some environmental laws, a secured lender (such as the Trust Fund) may be
found to be an "owner" or "operator" of the related Mortgaged Property if it is
determined that the lender participated in the management of the borrower,
regardless of whether the borrower actually caused the environmental damage. In
such cases, a secured lender may be liable for the costs of any required
removal or remediation of hazardous substances. The Trust Fund's potential
exposure to liability for cleanup costs will increase if the Trust Fund, or an
agent of the Trust Fund, actually takes possession of a Mortgaged Property or
control of its day--to--day operations. See "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS--Environmental Considerations" in the Prospectus, and
"DESCRIPTION OF THE MORTGAGE POOL--Assessment of Property Condition--
Environmental 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
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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, the Depositor can give 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 Liability May Affect Lien on Mortgaged Property and
Expose Lender to Costs" and "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Environmental Considerations" in the prospectus.
Risks Associated with Balloon Loans. One hundred twenty-two (122) of the
Mortgage Loans (75.5%) are Balloon Loans.
o Balloon Loans involve a greater risk to the Trust Fund 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.
o Whether or not losses are ultimately sustained, any delay in the
collection of a Balloon Payment that would otherwise be distributable
on your Certificates will likely extend the weighted average life of
your Certificates.
o 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 and
regional economic conditions and the availability of credit for loans
secured by multifamily or commercial properties, as the case may be.
See "RISK FACTORS--Balloon Payments on Mortgage Loans; Heightened Risk of
Borrower Default" in the prospectus.
In order to maximize recoveries on defaulted Mortgage Loans, the Pooling
and Servicing Agreement permits the Master Servicer or the Special Servicer to
extend and modify Mortgage Loans that are in material default or as to which a
payment default (including the failure to make a Balloon Payment) is imminent,
subject, however, to the limitations described under "SERVICING OF THE MORTGAGE
LOANS--Modifications, Waivers and Amendments" in this prospectus supplement. We
cannot ensure, 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 on your 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 your
Certificates. See "YIELD AND MATURITY CONSIDERATIONS" in this prospectus
supplement and in the prospectus.
Risks Associated with Related Borrowers. While there are no related
borrower concentrations in excess of 3.3% 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
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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. Ten Mortgaged Properties (18.2%) are located in New York and 25 of the
Mortgaged Properties (18.0%) are located in Texas. Concentrations of Mortgaged
Properties in geographic areas may increase the risk that adverse economic or
other developments or natural disasters affecting a particular region of the
country could increase the frequency and severity of losses on Mortgage Loans
secured by those properties. From time to time, several regions of the United
States have experienced significant real estate downturns. Regional economic
declines or conditions in regional real estate markets could adversely affect
the income from, and market value of, the Mortgaged Properties. In general,
such concentrations increase the exposure of the Mortgage Loans to any adverse
economic or other developments that may occur in New York and Texas.
Risks Associated with 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.
o The largest Mortgage Loan represents approximately 9.4% of the
aggregate principal balance of the Mortgage Loans as of the Cut-Off
Date.
o The three largest Mortgage Loans represent, in the aggregate,
approximately 19.3% of the aggregate principal balance of the
Mortgage Loans as of the Cut-Off Date.
o The ten largest Mortgage Loans represent, in the aggregate,
approximately 37.2% of the aggregate principal balance of the
Mortgage Loans as of the Cut-Off Date.
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.
A concentration of mortgaged property types also can pose increased risks.
In that regard:
o multifamily properties represent approximately 38.2% of the aggregate
principal balance of the mortgage pool as of its Cut-Off Date;
o retail properties represent approximately 23.6% of the aggregate
principal balance of the mortgage pool as of the Cut-Off Date (based
on the primary property type for combined office/retail properties);
o office properties represent approximately 14.1% of the aggregate
principal balance of the mortgage pool as of its Cut-Off Date (based
on the primary property type for combined office/retail properties);
A concentration of mortgaged property types can increase the risk that a
decline in a particular industry or business would have a disproportionately
large impact on the pool of Mortgage Loans. For example, if there is a decline
in tourism, the hotel industry might be adversely affected, leading to
increased losses on loans secured by hotel properties as compared to the
Mortgage Loans secured by other property types.
No Reunderwriting of Mortgage Loans. The Depositor has not reunderwritten
the Mortgage Loans. Instead, the Depositor has relied on the representations
and warranties made by the Mortgage
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Loan Seller, and the Mortgage Loan Seller's obligation to repurchase a Mortgage
Loan in the event that a representation or warranty was not true when made.
These representations and warranties do not cover all of the matters that the
Depositor would review in underwriting a Mortgage Loan and you should not view
them as a substitute for reunderwriting the Mortgage Loans. If the Depositor
had reunderwritten the Mortgage Loans, it is possible that the reunderwriting
process may have revealed problems with a Mortgage Loan not covered by a
representation or warranty. In addition, the Depositor can give no assurance
that the Mortgage Loan Seller will be able to repurchase a Mortgage Loan if a
representation or warranty has been breached. See "DESCRIPTION OF THE MORTGAGE
POOL--Representations and Warranties; Repurchases" herein.
Tax Considerations Related to Foreclosure. One or more of the REMICs
established under the Pooling and Servicing Agreement might become subject to
federal (and possibly state or local) tax on certain of its net income from the
operation and management of a Mortgaged Property subsequent to the Trust Fund's
acquisition of a Mortgaged Property pursuant to a foreclosure or deed-in-lieu
of foreclosure, including in some circumstances a 100% prohibited transaction
tax. Any such tax would substantially reduce net proceeds available for
distribution to Certificateholders. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--REMICs--Taxation of Owners of REMIC Regular Certificates,"
"--Taxation of Owners of REMIC Residual Certificates" in the Prospectus.
Special Hazards Losses. The Master Servicer and/or Special Servicer will
generally be required to cause the borrower on each Mortgage Loan serviced by
it to maintain such insurance coverage in respect of the related Mortgaged
Property as is required under the related Mortgage, including hazard insurance;
provided, that each of the Master Servicer and the Special Servicer may satisfy
its obligation to cause hazard insurance to be maintained with respect to any
Mortgaged Property through its acquisition of a blanket or master forced place
insurance policy. In general, the standard form of fire and extended coverage
policy covers physical damage to or destruction of the improvements on the
related Mortgaged 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 are underwritten by different insurers under different
state laws in accordance with different applicable state forms, and therefore
do 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 mud flows), wet or dry rot, vermin, domestic
animals and other kinds of risks not specified in the preceding sentence. Any
losses incurred with respect to Mortgage Loans due to uninsured risks or
insufficient hazard insurance proceeds could adversely affect distributions to
the Certificateholders.
Other Financing. In general, the borrowers: (1) are required to satisfy
all existing indebtedness encumbering the related Mortgaged Property as of the
closing of the related Mortgage Loan and (2) are prohibited from encumbering
the related Mortgaged Property with additional secured debt without the
lender's prior approval. However, with respect to any such future subordinate
debt, a violation of such prohibition may not become evident until the related
Mortgage Loan otherwise defaults. With respect to five of the Mortgage Loans
(5.8%) (control numbers MLMI-005, MLMI-019, MLMI-027, MLMI-033, and MLMI-128),
the related Mortgage Loan documents allow the borrower, under certain specified
circumstances, to maintain existing unsecured debt, and with respect to three
of the Mortgage Loans (4.6%) (control numbers MLMI-064, MLMI-112 and MLMI-115)
the related Mortgage Loan documents allow the borrower to incur subordinate
debt in the future. As of the Cut-Off Date, none of the Mortgaged Properties is
encumbered by secured subordinated debt. In cases in which one or more
subordinate liens are imposed on a Mortgaged Property or the borrower incurs
other indebtedness, the Trust Fund is subject to additional risks, including,
without limitation, the following:
o the risk that the necessary maintenance of the Mortgaged Property could
be deferred to allow the borrower to pay the required debt service on the
subordinate financing and that the value of the Mortgaged Property may
fall as a result;
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o the risk that the borrower may have a greater incentive to repay the
subordinate or unsecured indebtedness first;
o the risk that it may be more difficult for the borrower to refinance
the Mortgage Loan or to sell the Mortgaged Property for purposes of
making any Balloon Payment upon the maturity of the Mortgage Loan;
and
o the risk that foreclosure may be delayed.
See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS--Due-on-Sale and
Due-on-Encumbrance" in the Prospectus and "DESCRIPTION OF THE MORTGAGE
POOL--Certain Terms and Conditions of the Mortgage Pool--Due-on-Sale and
Due-on-Encumbrance" herein.
Risks Related to the Borrower's Form of Entity. The borrowers may be
either individuals or legal entities. Mortgage loans made to legal entities may
entail risks of loss greater than those of mortgage loans made to individuals.
For example, a legal entity, as opposed to an individual, may be more inclined
to seek legal protection from its creditors under the bankruptcy laws. Unlike
individuals involved in bankruptcies, various types of entities generally do
not have personal assets and creditworthiness at stake. The bankruptcy of a
borrower, or a general partner or managing member of a borrower, may impair the
ability of the lender to enforce its rights and remedies under the related
Mortgage. The borrowers are generally not bankruptcy--remote entities, and
therefore may be more likely to become insolvent or the subject of a voluntary
or involuntary bankruptcy proceeding because such borrowers may be (1)
operating entities with businesses distinct from the operation of the property
with the associated liabilities and risks of operating an ongoing business and
(2) individuals who have personal liabilities unrelated to the property.
However, any borrower, even a bankruptcy-remote entity, as owner of real estate
will be subject to certain potential liabilities and risks. Even if a borrower
is a bankruptcy-remote entity, such a borrower may still file for bankruptcy
protection or the creditors of a borrower or a corporate or individual general
partner or managing member of a borrower may initiate a bankruptcy or similar
proceeding against such borrower or corporate or individual general partner or
managing member. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS--Bankruptcy
Laws" in the Prospectus.
Limitations of Appraisals and Engineering Reports. In general, appraisals
and market value studies represent only the analysis and opinion of qualified
experts and are not guaranties of present or future value, and may determine a
value of a property that is significantly higher than the amount that can be
obtained from the sale of a Mortgaged Property under a distress or liquidation
sale. Information regarding the values of the Mortgaged Properties as of the
Cut-off Date is presented under "DESCRIPTION OF THE MORTGAGE POOL--Additional
Mortgage Loan Information" herein for illustrative purposes only. Any
engineering reports obtained in connection with this offering represent only
the analysis of the individual engineers or site inspectors preparing such
reports, and may not reveal all necessary or desirable repairs, maintenance or
capital improvement items.
Zoning Compliance. The Mortgaged Properties are typically subject to
applicable building and zoning ordinances and codes ("Zoning Laws") affecting
the construction and use of real property. Since the Zoning Laws applicable to
a Mortgaged Property (including, without limitation, density, use, parking and
set--back requirements) are generally subject to change by the applicable
regulatory authority at any time, certain of the improvements located upon the
Mortgaged Properties may not comply fully with all applicable current and
future Zoning Laws. Such changes may limit the ability of the related borrower
to rehabilitate, renovate and update the premises, and to rebuild or utilize
the premises "as is" in the event of a substantial casualty loss with respect
thereto.
If a Mortgaged Property does not comply with zoning laws or is not a
"permitted non-conforming" use, the market value of the Mortgaged Property may
decrease, or the borrower may be unable to use it in the manner in which it is
currently being used.
In addition, certain of the Mortgaged Properties are subject to certain
use restrictions imposed pursuant to reciprocal easement agreements or
operating agreements. Such use restrictions include, for
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example, limitations on the character of the improvements or the properties,
limitations affecting noise and parking requirements, among other things, and
limitations on the borrowers' right to operate certain types of facilities
within a prescribed radius. These limitations could adversely affect the
ability of the related borrower to lease the Mortgaged Property on favorable
terms, thus adversely affecting the borrower's ability to fulfill its
obligations under the related Mortgage Loan.
Costs of Compliance with Applicable Laws and Regulations. A borrower may
be required to incur costs to comply with various existing and future federal,
state or local laws and regulations applicable to the related Mortgaged
Property, e.g., Zoning Laws and the Americans with Disabilities Act of 1990.
See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS--Americans With Disabilities
Act" in the Prospectus. The expenditure of such costs or the imposition of
injunctive relief, penalties or fines in connection with the borrower's
noncompliance could negatively impact the borrower's cash flow and,
consequently, its ability to pay its Mortgage Loan.
Limitations on Enforceability of Due-on-Sale Clauses and Assignments of
Leases and Rents. The Mortgages generally contain due-on-sale clauses, which
permit the acceleration of the maturity of the related Mortgage Loan if the
borrower sells, transfers or conveys the related Mortgaged Property or its
interest in the Mortgaged Property. There may be limitations on the
enforceability of such clauses. The Mortgages also generally include a
debt--acceleration clause, which permits the acceleration of the related
Mortgage Loan upon a monetary or non--monetary default by the borrower. The
courts of all states will generally enforce clauses providing for acceleration
in the event of a material payment default, but may refuse the foreclosure of a
Mortgage when acceleration of the indebtedness would be inequitable or unjust
or the circumstances would render acceleration unconscionable. See "CERTAIN
LEGAL ASPECTS OF THE MORTGAGE LOANS--Due-on-Sale and Due-on-Encumbrance" in the
Prospectus.
The Mortgage Loans may also be secured by an assignment of leases and
rents pursuant to which the borrower typically assigns its right, title and
interest as landlord under the leases on the related Mortgaged Property and the
income derived therefrom to the lender 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 the rents. Such assignments are typically not perfected
as security interests prior to the lender's taking possession of the related
Mortgaged Property and/or appointment of a receiver. 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 THE MORTGAGE LOANS--Leases
and Rents" in the Prospectus.
Limitations on Enforceability of Cross--Collateralization. Certain of the
Mortgage Loans (the "Cross-Collateralized Loans") are cross--collateralized and
cross--defaulted with one or more related Cross-Collateralized Loans. Such
arrangements could be challenged as fraudulent conveyances by creditors of any
of the related borrowers or by the representative of the bankruptcy estate of
any related borrower if one or more of such borrowers becomes a debtor in a
bankruptcy case. Generally, under federal and most state fraudulent conveyance
statutes, a lien granted by any such borrower could be avoided if a court
determines that:
o such borrower was insolvent at the time of granting the lien, was
rendered insolvent by the granting of the lien, was left with
inadequate capital or was not able to pay its debts as they matured,
and
o the borrower did not, when it allowed its Mortgaged Property to be
encumbered by the liens securing the indebtedness represented by the
other Cross-Collateralized Loans, receive "fair consideration" or
"reasonably equivalent value" for pledging such Mortgaged Property
for the equal benefit of the other related borrowers.
The Depositor can give no assurance that a lien granted by a borrower on a
Cross--Collateralized Loan to secure the Mortgage Loan of another borrower, or
any payment thereon, would not be
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avoided as a fraudulent conveyance. See "DESCRIPTION OF THE MORTGAGE
POOL--Certain Terms and Conditions of the Mortgage Loans--Cross-Default and
Cross-Collateralization of Certain Mortgage Loans" and Annex A herein for more
information regarding the Cross-Collateralized Loans.
Litigation. From time to time, there may be legal proceedings pending or
threatened against the borrowers and their affiliates relating to the business
of, or arising out of the ordinary course of business of, the borrowers and
their affiliates. Any such litigation may have a material adverse effect on a
borrower's ability to meet its obligations under the related Mortgage Loan and,
thus, on the distributions to Certificateholders.
Condemnations. From time to time, there may be Condemnations pending or
threatened against one or more of the Mortgaged Properties. The Depositor can
give no assurance that the proceeds payable in connection with a total
Condemnation will be sufficient to restore the related Mortgaged Property or to
satisfy the remaining indebtedness of the related Mortgage Loan. The occurrence
of a partial Condemnation may have a material adverse effect on the continued
use of, or income generation from, the affected Mortgaged Property. Therefore,
a Condemnation may have a negative impact upon the distributions to
Certificateholders.
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 "Remaining Terms" under "DESCRIPTION OF THE MORTGAGE POOL--Additional
Mortgage Loan Information--The Mortgage Pool" for a description of the
respective maturity dates of the Mortgage Loans. Because principal on your
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.
Risks Associated with 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.
Risks Associated with the Mortgage Loan Seller. The Mortgage Loan Seller
will be the sole warranting party in respect of the Mortgage Loans sold by the
Mortgage Loan Seller to the Depositor. Neither the Depositor nor any of its
affiliates will be obligated to repurchase any Mortgage Loan in connection with
either a breach of the Mortgage Loan Seller's representations and warranties or
any document defects, if the Mortgage Loan Seller defaults on its obligation to
do so. The Depositor can give no assurance that the Mortgage Loan Seller will
have the financial ability to effect such repurchases. In addition, the
Mortgage Loan Seller has acquired a portion of the Mortgage Loans in one or
more secondary market purchases. Such purchases may be challenged as fraudulent
conveyances, regardless of the parties' intent, if a court determines generally
that (a) the sale was for
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less than fair consideration, and (b) (i) such sale occurred while the seller
was insolvent (or the seller was rendered insolvent as a result of such sale),
(ii) such seller was left with inadequate capital as a result of such sale or
(iii) such Seller became unable to pay its debts. Such a challenge, if
successful, may have a negative impact on the distributions to
Certificateholders. See "DESCRIPTION OF THE MORTGAGE POOL--Assignment of the
Mortgage Loans; Repurchases" and "--Representations and Warranties; Repurchases
and Substitutions" herein and "DESCRIPTION OF THE POOLING
AGREEMENTS--Representations and Warranties; Repurchases" in the Prospectus.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool is expected to consist of 139 conventional, fixed rate
mortgage loans (each, a "Mortgage Loan," and collectively, the "Mortgage
Loans") with an aggregate Cut-Off Date Balance of $638,408,606 (the "Initial
Pool Balance") which are secured by first liens on 140 commercial and
multifamily properties (the "Mortgaged Properties"). The Cut-Off Date Balances
of the Mortgage Loans will range from $238,421 to $59,845,380 and the Mortgage
Loans will have an average Cut-Off Date Balance of $4,592,868. 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 (other than certain Credit Lease Loans).
All but seven of the Mortgage Loans are secured by a first mortgage lien
on the borrower's fee simple estate. Six of the Mortgage Loans (13.3%) (control
numbers MLMI-003, MLMI-004, MLMI-036, MLMI-125, MLMI-126 and MLMI-127) are
secured by a first mortgage lien on the borrower's leasehold estate in the
related Mortgaged Property. The remaining Mortgage Loan (3.8%) (control number
MLMI-064) is secured by a first mortgage lien on the borrower's fee simple and
leasehold estate in the related Mortgaged Property.
All of the Mortgage Loans will be acquired by the Depositor from the
Mortgage Loan Seller, 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 40 of such Mortgage Loans (33.3%) acquired such Mortgage
Loans from WMF Capital Corp.
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>
1997 ......... 6.1
1998 ......... 93.9
</TABLE>
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 related borrowers exceeds
9.4% 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 and Annex E
hereto.
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. Thirty-seven (37) of the Mortgage Loans (13.5%)
accrue interest on the basis (a "30/360 basis") of a 360-day year consisting of
twelve 30-day months and 102 Mortgage Loans (86.5%) accrue interest on the
basis (an "actual/360 basis") of the actual number of days elapsed over a
360-day year.
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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.
Amortization. One hundred twenty-two (122) of the Mortgage Loans (75.5%)
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--Balloon Payments" herein and
"RISK FACTORS--Balloon Payments on Mortgage Loans; Heightened Risk of Borrower
Default" in the Prospectus. Five Mortgage Loans (17.1%) (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 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 (such excess interest and
any interest accrued thereon, collectively "Additional Interest"). 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. Twelve (12) of the Mortgage Loans (7.3%) (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 (57 Mortgage Loans (30.5%)); (ii) prohibit
voluntary prepayments of principal for most of their remaining term to maturity
(76 Mortgage Loans (67.9%)); or (iii) permit voluntary principal prepayments
provided that the prepayment is accompanied by a Yield Maintenance Charge in
excess of the amount prepaid for most of their respective remaining terms to
maturity (six Mortgage Loans (1.6%)). 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
and the Trustee make 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. Seventy-four (74) of the Mortgage Loans (67.5%), 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
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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 (other than certain Credit Lease Loans).
"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, and subject to, the Pooling and Servicing Agreement, the Master
Servicer or the Special Servicer, on behalf of the Trust Fund, will determine,
in a manner consistent with the servicing standard described herein under
"SERVICING OF THE MORTGAGE LOANS--General," whether to exercise any right the
holder of any Mortgage may have under any such clause to accelerate payment of
the related Mortgage Loan upon, or to withhold its consent to, any transfer or
further encumbrance of the related Mortgaged Property.
Cross-Default and Cross-Collateralization of Certain Mortgage Loans. Five
of the Mortgage Loans (3.1%) are cross-collateralized and cross-defaulted with
one or more Mortgage Loans in the Trust Fund. Of such Mortgage Loans (i) two
Mortgage Loans (1.2%) (control numbers MLMI-105 and MLMI-106) are
cross-collateralized and cross-defaulted with each other, and (ii) three
Mortgage Loans (1.9%) (control numbers MLMI-125, MLMI-126 and MLMI-127) are
cross-collateralized and cross-defaulted with each other. No Mortgage Loan is
cross-collateralized or cross-defaulted with any loan which is 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.
ASSESSMENT OF PROPERTY CONDITION
Property Inspection. All but two 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 Mortgage Loan Seller to
assess their general condition. The remaining two Mortgaged Properties (control
numbers MLMI-161 and MLMI-162) secure Credit Lease Loans. 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
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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 114 of the Mortgage Loans (95.1%) 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. 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. If the resulting reports concluded that in the event of an earthquake
and with respect to a Mortgaged Property, the probable maximum loss would
exceed 25% and either (i) the bounded maximum loss over a 50-year period would
exceed 20% of the amount of the estimated replacement cost of its improvements
or (ii) no bounded maximum loss analysis was performed, earthquake insurance on
such Mortgaged Properties was obtained.
Zoning Compliance. Due to changes in applicable 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, 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.
LARGEST MORTGAGE LOANS
Certain information with respect to the four largest Mortgage Loans
(23.1%) is set forth in Annex E hereto.
CREDIT LEASE LOANS
Each Credit Lease has a primary lease term (the "Primary Term") that
expires on or after the scheduled final maturity date of the related Credit
Lease Loan. The amount of the Monthly Rental Payments payable by each Credit
Lease Tenant is equal to or greater than the scheduled payment of all
principal, interest and other amounts due each month on the related Credit
Lease Loan, with any Balloon Payments to be paid from the proceeds of any
residual value insurance policies or offers to purchase the Mortgaged Property
by the Credit Lease Tenant, as may be required in the related Credit Lease. In
the case of Credit Lease Loans with debt service reserve accounts, withdrawals
of funds on deposit in the debt service reserve account will be used to
supplement Monthly Rental Payments in an amount necessary to fully amortize
such Mortgage Loans.
Each Credit Lease generally provides that the related Credit Lease Tenant
must pay all real property taxes and assessments levied or assessed against the
related Mortgaged Property, and except in the case of certain of the double net
leases, all charges for utility services, insurance and other operating
expenses incurred in connection with the operation of the related Mortgaged
Property.
S-39
<PAGE>
Pursuant to the terms of each assignment of a Credit Lease (each, a
"Credit Lease Assignment"), the related borrower has assigned to the mortgagee
of the related Credit Lease Loan, as security for such borrower's obligations
thereunder, such borrower's rights under the related Credit Lease and its
rights to all income and profits to be derived from the operation and leasing
of the related Mortgaged Property including, but not limited to, an assignment
of any guarantee of the Credit Lease Tenant's obligations under the Credit
Lease and an assignment of the right to receive all Monthly Rental Payments due
under the Credit Lease. Pursuant to the terms of the Credit Lease Assignments,
each Credit Lease Tenant is obligated under its Credit Lease to make all
Monthly Rental Payments directly to the owner of the related Credit Lease Loan.
Each Credit Lease Loan that provides the Credit Lease Tenant with
termination and abatement rights directly arising from certain casualty
occurrences or condemnations ("Casualty or Condemnation Rights") has the
benefit of a noncancelable lease enhancement insurance policy or requires the
Credit Lease Tenant to make a rejectable offer to purchase the related
Mortgaged Property pursuant to a set termination value schedule. Each lease
enhancement insurance policy provides, subject to customary exclusions, that in
the event of a permitted termination by a Credit Lease Tenant of its Credit
Lease as a result of a casualty or condemnation, the related insurer will pay
to the Master Servicer on behalf of the Trustee the "Loss of Rents" (that is, a
lump sum payment of all outstanding principal plus, subject to certain
limitations, accrued interest on the Credit Lease Loan).
The Mortgage Loans which are Credit Lease Loans are indicated on Annex A
hereto.
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 Substitutions" and "--Representations and Warranties;
Repurchases and Substitutions," 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 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").
In general, the 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. The Cut-Off Date DSCR ratio information shown in the
following tables does not reflect the four Credit Lease Loans representing 1.6%
of the Initial Pool Balance, which typically have debt service coverage ratios
equal to or less than 1.00x. In general, "net cash flow" is the revenue derived
S-40
<PAGE>
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 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
Mortgage Loan Seller's underwriting standards. In determining rental revenue
for multifamily properties, the Mortgage Loan Seller either reviewed rental
revenue shown on the certified rolling 12-month operating statements or
annualized the rental revenue shown on certified rent rolls or operating
statements with respect to the prior one- to 12-month periods. For the other
Rental Properties, the 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 Mortgage Loan Seller
recharacterized as capital expenditures those items reported by borrowers as
operating expenses (thus increasing "net cash flow") where the 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 Seller nor the Depositor
verified their accuracy.
(i) 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 Mortgage Loan Seller. The Cut-Off Date
LTV ratio information shown in the following tables does not
reflect the four Credit Lease Loans representing 1.6% of the
Initial Pool Balance, which typically have a loan to value ratios
in excess of 80%.
(ii) 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
Mortgage Loan Seller prior to the Cut-Off Date.
(iii) 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
S-41
<PAGE>
multifamily property, (3) a 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.
(iv) 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.
(v) 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.
(vi) 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.
(vii) 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.
(viii) References to "Underwriting Reserves" represent amounts
underwritten on an annual basis to cover capital costs, as used
by the Mortgage Loan Seller in determining net cash flow.
(ix) References to "Administrative Cost Rate" represent the sum of
the Master Servicing Fee and the Trustee Fee.
(x) 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.
(xi) 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).
(xii) References to "NAP" mean not applicable.
The sum in any column of any of the following tables may not equal the
indicated total due to rounding.
S-42
<PAGE>
PROPERTY TYPES
<TABLE>
<CAPTION>
AGGREGATE % OF AVERAGE HIGHEST
NUMBER OF CUT-OFF INITIAL CUT-OFF CUT-OFF
MORTGAGED DATE POOL DATE DATE
PROPERTY TYPES PROPERTIES BALANCE BALANCE BALANCE BALANCE
- -------------------------- ------------ --------------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
MULTIFAMILY
Multifamily 64 $241,373,163 37.81% $3,771,456 $34,890,416
Multifamily/Retail 1 2,347,999 0.37 2,347,999 2,347,999
- -------------------------- -- ------------ ------ ---------- -----------
SubTotal 65 243,721,163 38.18 3,749,556 34,890,416
RETAIL
Anchored Retail 18 121,296,040 19.00 6,738,669 28,781,905
Unanchored Retail 16 29,147,622 4.57 1,821,726 8,157,432
- -------------------------- -- ------------ ------ ---------- -----------
SubTotal 34 150,443,662 23.57 4,424,814 28,781,905
OFFICE 6 89,856,507 14.08 14,976,085 59,845,380
HOSPITALITY
Full Service 3 41,632,795 6.52 13,877,598 17,214,166
Limited Service 6 19,863,813 3.11 3,310,635 4,894,635
- -------------------------- -- ------------ ------ ---------- -----------
SubTotal 9 61,496,608 9.63 6,832,956 17,214,166
INDUSTRIAL 12 58,006,689 9.09 4,833,891 15,514,008
HEALTHCARE
Assisted/Skilled 2 7,956,940 1.25 3,978,470 4,102,798
Congregate Care 1 6,295,086 0.99 6,295,086 6,295,086
- -------------------------- -- ------------ ------ ---------- -----------
SubTotal 3 14,252,026 2.23 4,750,675 6,295,086
CREDIT LEASE 4 10,090,179 1.58 2,522,545 3,737,476
MINI STORAGE 2 5,156,535 0.81 2,578,268 3,587,622
MOBILE HOME PARK 2 3,157,748 0.49 1,578,874 1,992,560
MIXED USE
Office/Retail 2 1,666,919 0.26 833,460 1,428,498
Retail/Office/Warehouse 1 560,569 0.09 560,569 560,569
- -------------------------- -- ------------ ------ ---------- -----------
SubTotal 3 2,227,489 0.35 742,496 1,428,498
- -------------------------- -- ------------ ------ ---------- -----------
TOTAL/WTG. AVG. 140 $638,408,606 100.00% $4,560,061 $59,845,380
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------------------------------------------------------
LOAN PER
STATED REMAINING CUT-OFF CUT-OFF SQ FT, UNIT,
MORTGAGE REMAINING AMORT. DATE DATE REPAYMENT OCCUPANCY PAD, ROOM
PROPERTY TYPES RATE TERM (MO.) TERM (MO.) DSCR LTV LTV PERCENTAGE (A) OR BED
- -------------------------- ---------- ------------ ------------ --------- ----------- ------------ ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MULTIFAMILY
Multifamily 7.063% 128 333 1.35x 73.97% 60.42% 95% 37,534
Multifamily/Retail 7.250 119 359 1.22 71.15 61.72 95 57,268
- -------------------------- ----- --- --- ---- ----- ----- -- ------
SubTotal 7.065 128 333 1.35 73.95 60.43 95 37,724
RETAIL
Anchored Retail 7.018 120 344 1.42 71.65 59.04 99 150
Unanchored Retail 7.457 152 301 1.38 72.26 47.87 97 96
- -------------------------- ----- --- --- ---- ----- ----- -- ------
SubTotal 7.103 126 335 1.41 71.76 56.87 98 139
OFFICE 6.797 161 352 1.56 61.69 47.20 97 101
HOSPITALITY
Full Service 7.143 119 299 1.49 70.56 56.82 NAP 54,100
Limited Service 7.565 126 292 1.48 70.53 54.26 NAP 48,217
- -------------------------- ----- --- --- ---- ----- ----- ---- ------
SubTotal 7.279 121 296 1.48 70.55 55.99 NAP 52,200
INDUSTRIAL 7.161 150 279 1.51 65.67 39.20 97 34
HEALTHCARE
Assisted/Skilled 7.300 237 237 1.47 71.22 0.0 85 37,908
Congregate Care 7.250 119 359 1.28 74.50 65.55 94 58,833
- -------------------------- ----- --- --- ---- ----- ----- ---- ------
SubTotal 7.278 185 291 1.38 72.67 28.95 89 47,150
CREDIT LEASE 7.756 153 328 NAP NAP NAP 100 123
MINI STORAGE 7.256 117 297 1.34 73.40 59.55 89 3,034
MOBILE HOME PARK 7.448 180 259 1.85 48.93 23.89 93 7,837
MIXED USE
Office/Retail 7.839 109 349 1.28 73.23 64.63 98 73
Retail/Office/Warehouse 7.875 117 237 1.43 70.07 48.81 100 48
- -------------------------- ----- --- --- ---- --------- ----- ---- ------
SubTotal 7.848 111 321 1.31 72.44 60.65 99 67
- -------------------------- ----- --- --- ---- --------- ----- ---- ------
TOTAL/WTG. AVG. 7.088% 135 326 1.43x 70.41% 54.39% 96% NAP
<CAPTION>
WEIGHTED
AVERAGES
---------
PROPERTY
PROPERTY TYPES SIZE (B)
- -------------------------- ---------
<S> <C>
MULTIFAMILY
Multifamily 329
Multifamily/Retail 41
- -------------------------- ---
SubTotal 326
RETAIL
Anchored Retail 145,007
Unanchored Retail 47,754
- -------------------------- -------
SubTotal 126,165
OFFICE 415,410
HOSPITALITY
Full Service 275
Limited Service 81
- -------------------------- -------
SubTotal 212
INDUSTRIAL 335,006
HEALTHCARE
Assisted/Skilled 105
Congregate Care 107
- -------------------------- -------
SubTotal 106
CREDIT LEASE 24,362
MINI STORAGE 1,051
MOBILE HOME PARK 216
MIXED USE
Office/Retail 16,488
Retail/Office/Warehouse 11,600
- -------------------------- -------
SubTotal 15,258
- -------------------------- -------
TOTAL/WTG. AVG. 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
--------------------------------------
NUMBER OF AGGREGATE % OF CUT-OFF CUT-OFF
STATE OR MORTGAGED CUT-OFF DATE INITIAL POOL DATE DATE REPAYMENT
DISTRICT PROPERTIES BALANCE BALANCE DSCR LTV LTV
- ------------------ ------------ -------------- -------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
New York 10 $116,431,602 18.24% 1.45x 63.85% 50.06%
Texas 25 114,996,255 18.01 1.37 73.65 55.39
California 36 87,726,790 13.74 1.53 68.39 53.30
Pennsylvania 9 51,200,394 8.02 1.47 70.88 54.87
New Jersey 5 46,746,077 7.32 1.55 65.50 53.61
Michigan 4 42,550,697 6.67 1.27 78.57 65.43
Oklahoma 6 30,350,510 4.75 1.49 70.27 53.24
Washington 5 24,286,318 3.80 1.23 72.73 66.79
Utah 2 19,978,440 3.13 1.38 73.86 61.24
Virginia 3 13,189,084 2.07 1.30 77.26 66.76
Connecticut 2 12,258,283 1.92 1.47 73.53 61.37
Missouri 4 11,734,932 1.84 1.46 68.93 8.09
Georgia 3 8,987,389 1.41 1.46 74.61 32.79
Oregon 3 8,376,956 1.31 1.54 65.33 37.04
Nevada 4 6,334,434 .99 1.40 69.69 55.51
South Carolina 2 5,670,075 .89 1.31 79.01 68.28
Maryland 2 5,432,590 .85 1.38 74.44 62.94
Tennessee 1 4,830,724 .76 1.22 77.91 67.30
North Carolina 2 4,387,696 .69 1.32 77.92 56.67
Arizona 1 3,991,293 .63 1.23 79.83 70.25
Wisconsin 1 3,737,476 .59 NAP NAP NAP
Indiana 1 3,204,462 .50 NAP NAP NAP
Illinois 1 2,786,199 .44 1.26 76.65 67.50
Mississippi 2 1,640,704 .26 1.40 74.58 65.74
Ohio 1 1,428,498 .22 1.27 74.40 65.59
Rhode Island 1 1,420,966 .22 1.36 64.88 0.00
Kentucky 1 1,409,963 .22 NAP NAP NAP
New Mexico 1 1,348,157 .21 1.46 74.90 58.74
Delaware 1 1,165,188 .18 1.28 72.82 64.76
Alabama 1 806,453 .13 1.37 79.85 50.72
- ------------------ -- ------------ ------ ---- --------- -----
TOTAL/WTG. AVG. 140 $638,408,606 100.00% 1.43x 70.41% 54.39%
</TABLE>
Mortgaged Properties are located in 30 states.
S-43
<PAGE>
YEARS BUILT
<TABLE>
<CAPTION>
CUMULATIVE
NUMBER OF AGGREGATE % OF INITIAL % OF INITIAL
RANGE OF MORTGAGED CUT-OFF DATE POOL POOL
YEARS BUILT PROPERTIES BALANCE BALANCE BALANCE
- --------------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
1890 -- 1899 1 $ 1,680,709 0.26% 0.26%
1900 -- 1929 9 72,554,219 11.36 11.63
1930 -- 1959 11 22,716,752 3.56 15.19
1960 -- 1969 26 166,428,916 26.07 41.26
1970 -- 1979 28 147,003,266 23.03 64.28
1980 -- 1989 34 139,845,954 21.91 86.19
1990 -- 1998 31 88,178,789 13.81 100.00
- --------------- -- ------------ ------ ------
TOTAL/WTG.
AVG. 140 $638,408,606 100.00% 100.00%
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------------------------------------
STATED REMAINING CUT-OFF CUT-OFF
RANGE OF MORTGAGE REMAINING AMORT SEASONING DATE DATE REPAYMENT
YEARS BUILT RATE TERM (MO.) TERM (MO.) (MO.)(A) DSCR LTV LTV
- --------------- ---------- ------------ ------------ ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1890 -- 1899 8.000% 104 344 16 1.25x 73.07% 64.95%
1900 -- 1929 6.913 109 321 5 1.59 63.99 53.11
1930 -- 1959 7.115 173 305 3 1.37 68.99 36.71
1960 -- 1969 6.989 138 342 4 1.37 70.68 57.37
1970 -- 1979 7.099 131 335 4 1.51 68.78 55.36
1980 -- 1989 7.125 131 325 5 1.36 74.55 60.12
1990 -- 1998 7.316 157 293 3 1.38 71.81 42.03
- --------------- ----- --- --- -- ---- ----- -----
TOTAL/WTG.
AVG. 7.088% 135 326 4 1.43x 70.41% 54.39%
</TABLE>
- --------------
(A) Number of months elapsed since the first Due Date following
origination.
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
CUMULATIVE
RANGE OF NUMBER OF AGGREGATE % OF INITIAL % OF INITIAL
DEBT SERVICE MORTGAGE CUT-OFF DATE POOL POOL
COVERAGE RATIOS LOANS BALANCE BALANCE BALANCE
- ------------------------------ ----------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
CTL Loans 4 $ 10,090,179 1.58% 1.58%
1.10x -- 1.19x 3 13,965,146 2.19 3.77
1.20 -- 1.29 45 204,717,050 32.07 35.83
1.30 -- 1.39 30 168,167,913 26.34 62.18
1.40 -- 1.49 24 104,958,245 16.44 78.62
1.50 -- 1.59 19 53,053,781 8.31 86.93
1.60 -- 1.69 3 13,125,433 2.06 88.98
1.70 -- 1.79 4 33,768,166 5.29 94.27
1.80 -- 1.89 1 2,997,102 .47 94.74
1.90 -- 1.99 1 622,567 .10 94.84
2.00 -- 2.49 4 24,994,985 3.92 98.76
2.50 -- 2.53 1 7,948,040 1.24 100.00
- ------------------- -- ------------ ------ ------
TOTAL/WTG.
AVG. 139 $638,408,606 100.00% 100.00%
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------------------------
RANGE OF STATED REMAINING CUT-OFF CUT-OFF
DEBT SERVICE MORTGAGE REMAINING AMORT DATE DATE REPAYMENT
COVERAGE RATIOS RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ------------------------------ ---------- ------------ ------------ --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
CTL Loans 7.756% 153 328 NAP NAP NAP
1.10x -- 1.19x 7.089 123 353 1.17x 77.39% 65.21%
1.20 -- 1.29 7.100 132 331 1.26 75.98 59.62
1.30 -- 1.39 6.999 136 339 1.36 69.02 54.69
1.40 -- 1.49 7.230 130 308 1.43 73.55 57.12
1.50 -- 1.59 7.176 146 310 1.55 71.02 49.16
1.60 -- 1.69 6.761 129 299 1.66 61.11 44.16
1.70 -- 1.79 7.245 136 329 1.73 59.29 44.38
1.80 -- 1.89 6.500 179 359 1.88 53.05 38.80
1.90 -- 1.99 8.250 114 354 1.94 62.82 55.70
2.00 -- 2.49 6.621 137 348 2.12 52.16 41.12
2.50 -- 2.53 6.780 178 178 2.53 25.64 0.00
- ------------------- ----- --- --- ---- --------- -----
TOTAL/WTG.
AVG. 7.088% 135 326 1.43x 70.41% 54.39%
</TABLE>
CUT-OFF DATE LTV RATIOS
<TABLE>
<CAPTION>
% OF CUMULATIVE
RANGE OF NUMBER OF AGGREGATE INITIAL % OF
CUT-OFF DATE MORTGAGE CUT-OFF DATE POOL INITIAL POOL
LTV RATIOS LOANS BALANCE BALANCE BALANCE
- ------------------ ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
CTL Loans 4 $ 10,090,179 1.58% 1.58%
0.01% -- 50.00% 4 17,589,092 2.76 4.34
50.01 -- 60.00 10 56,996,373 8.93 13.26
60.01 -- 70.00 34 138,550,175 21.70 34.97
70.01 -- 80.00 84 401,681,558 62.92 97.89
80.01 -- 80.58 3 13,501,230 2.11 100.00
- ------------------ -- ------------ ------ ------
TOTAL/WTG.
AVG. 139 $638,408,606 100.00% 100.00%
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------------------------
RANGE OF STATED REMAINING CUT-OFF CUT-OFF
CUT-OFF DATE MORTGAGE REMAINING AMORT DATE DATE REPAYMENT
LTV RATIOS RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ------------------ ---------- ------------ ------------ --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
CTL Loans 7.756% 153 328 NAP NAP NAP
0.01% -- 50.00% 7.016 196 224 2.21x 35.52% 4.63%
50.01 -- 60.00 6.924 142 349 1.84 57.10 43.01
60.01 -- 70.00 7.032 157 311 1.40 64.40 44.27
70.01 -- 80.00 7.118 124 332 1.35 75.56 61.28
80.01 -- 80.58 7.041 137 349 1.27 80.44 66.15
- ------------------ ----- --- --- ---- --------- -----
TOTAL/WTG.
AVG. 7.088% 135 326 1.43x 70.41% 54.39%
</TABLE>
S-44
<PAGE>
REPAYMENT LTV RATIOS
<TABLE>
<CAPTION>
AGGREGATE % OF CUMULATIVE
RANGE OF NUMBER CUT-OFF INITIAL % OF INITIAL
REPAYMENT MORTGAGE DATE POOL POOL
LTVRATIOS OF LOANS BALANCE BALANCE BALANCE
- ---------------------- ---------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
CTL Loans 4 $ 10,090,179 1.58% 1.58%
Fully Amortizing 12 46,911,765 7.35 8.93
0.01% -- 50.00% 19 128,906,948 20.19 29.12
50.01 -- 60.00 39 174,180,152 27.28 56.40
60.01 -- 70.00 60 249,971,496 39.16 95.56
70.01 -- 71.99 5 28,348,067 4.44 100.00
- ----------------- -- ------------ ------ ------
TOTAL/WTG.
AVG. 139 $638,408,606 100.00% 100.00%
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------------------------
RANGE OF STATED REMAINING CUT-OFF CUT-OFF
REPAYMENT MORTGAGE REMAINING AMORT DATE DATE REPAYMENT
LTVRATIOS RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ---------------------- ---------- ------------ ------------ --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
CTL Loans 7.756% 153 328 NAP NAP NAP
Fully Amortizing 6.966 233 233 1.63x 57.29% 0.00(A)
0.01% -- 50.00% 6.885 165 337 1.57 62.23 44.46
50.01 -- 60.00 7.246 128 317 1.44 70.68 56.79
60.01 -- 70.00 7.063 111 341 1.32 75.99 66.17
70.01 -- 71.99 7.215 95 353 1.23 78.46 70.86
- ----------------- ----- --- --- ---- --------- ------
TOTAL/WTG.
AVG. 7.088% 135 326 1.43x 70.41% 54.39%
</TABLE>
- --------
(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.
MORTGAGE RATES
<TABLE>
<CAPTION>
% OF CUMULATIVE
NUMBER OF AGGREGATE INITIAL % OF INITIAL
RANGE OF MORTGAGE CUT-OFF DATE POOL POOL
MORTGAGE RATES LOANS BALANCE BALANCE BALANCE
- ------------------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
6.170% -- 6.999% 34 $279,672,199 43.81% 43.81%
7.000 -- 7.124 21 85,605,718 13.41 57.22
7.125 -- 7.249 17 56,544,061 8.86 66.07
7.250 -- 7.374 14 88,987,379 13.94 80.01
7.375 -- 7.499 9 21,312,875 3.34 83.35
7.500 -- 7.624 9 62,796,950 9.84 93.19
7.625 -- 7.749 3 3,860,849 0.60 93.79
7.750 -- 7.874 7 13,242,770 2.07 95.87
7.875 -- 7.999 2 2,201,274 0.34 96.21
8.000 -- 8.124 4 4,890,810 0.77 96.98
8.125 -- 8.249 4 2,852,616 0.45 97.42
8.250 -- 8.374 7 5,574,873 0.87 98.30
8.375 -- 8.499 5 5,762,734 0.90 99.20
8.500 -- 8.624 2 4,567,897 0.72 99.92
9.625 -- 9.625 1 535,602 0.08 100.00
- ------------------- -- ------------ ------ ------
TOTAL/WTG.
AVG. 139 $638,408,606 100.00% 100.00%
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------------------------
STATED REMAINING CUT-OFF CUT-OFF
RANGE OF MORTGAGE REMAINING AMORT DATE DATE REPAYMENT
MORTGAGE RATES RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ------------------- ---------- ------------ ------------ --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
6.170% -- 6.999% 6.763% 137 334 1.44x 68.76% 53.98%
7.000 -- 7.124 7.029 136 324 1.39 74.04 58.10
7.125 -- 7.249 7.164 152 309 1.45 68.98 45.71
7.250 -- 7.374 7.265 142 326 1.47 70.62 51.14
7.375 -- 7.499 7.387 144 313 1.56 69.18 52.27
7.500 -- 7.624 7.517 114 316 1.34 74.60 61.81
7.625 -- 7.749 7.671 162 273 1.42 66.80 36.76
7.750 -- 7.874 7.752 115 319 1.41 70.25 59.28
7.875 -- 7.999 7.875 113 323 1.41 73.43 61.42
8.000 -- 8.124 8.000 84 336 1.27 71.08 64.55
8.125 -- 8.249 8.125 94 353 1.29 69.74 63.33
8.250 -- 8.374 8.250 113 335 1.36 68.21 59.14
8.375 -- 8.499 8.375 111 313 1.39 67.97 56.94
8.500 -- 8.624 8.580 112 352 1.15 79.09 71.10
9.625 -- 9.625 9.625 104 344 1.39 63.01 57.51
- ------------------- ----- --- --- ---- ----- -----
TOTAL/WTG.
AVG. 7.088% 135 326 1.43x 70.41% 54.39%
</TABLE>
S-45
<PAGE>
ORIGINAL TERMS
<TABLE>
<CAPTION>
% OF
NUMBER OF AGGREGATE INITIAL
ORIGINAL MORTGAGE CUT-OFF DATE POOL
TERMS LOANS BALANCE BALANCE
- ----------------------- ----------- -------------- ----------
<S> <C> <C> <C>
5 Year Balloon 2 $ 2,378,859 0.37%
6 to 9 Year Balloon 6 22,949,384 3.59
10 Year Balloon 92 365,957,359 57.32
11 to 14 Year Balloon 6 35,726,491 5.60
15 Year Balloon 13 43,466,600 6.81
16 to 20 Year Balloon 3 11,544,244 1.81
6 to 9 Year ARD 1 28,781,905 4.51
10 Year ARD 2 8,846,618 1.39
15 Year ARD 2 71,845,380 11.25
Fully Amortizing 12 46,911,765 7.35
- ----------------------- -- ------------ ------
TOTAL/WTG. AVG. 139 $638,408,606 100.00%
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------------------------------------
STATED REMAINING CUT-OFF CUT-OFF
ORIGINAL MORTGAGE REMAINING AMORT SEASONING DATE DATE REPAYMENT
TERMS RATE TERM (MO.) TERM (MO.) (MO.)(A) DSCR LTV LTV
- ----------------------- ---------- ------------ ------------ ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
5 Year Balloon 8.048% 52 352 8 1.30x 69.56% 66.57%
6 to 9 Year Balloon 7.281 75 337 9 1.28 74.65 68.53
10 Year Balloon 7.179 116 328 4 1.40 73.07 61.91
11 to 14 Year Balloon 6.776 136 345 2 1.86 61.17 49.47
15 Year Balloon 7.141 176 327 4 1.38 73.59 51.18
16 to 20 Year Balloon 7.207 238 306 2 1.45 75.45 33.23
6 to 9 Year ARD 6.790 75 351 9 1.33 73.80 67.79
10 Year ARD 7.182 113 336 7 1.35 73.73 62.82
15 Year ARD 6.817 178 358 2 1.37 63.87 47.63
Fully Amortizing 6.966 233 233 2 1.63 57.29 0.00
- ----------------------- ----- --- --- ----------- ---- ----- -----
TOTAL/WTG. AVG. 7.088% 135 326 4 1.43x 70.41% 54.39%
</TABLE>
- --------
(A) Number of months elapsed since the first Due Date following
origination.
REMAINING TERMS
<TABLE>
<CAPTION>
% OF CUMULATIVE
RANGE OF NUMBER OF AGGREGATE INITIAL % OF INITIAL
REMAINING MORTGAGE CUT-OFF DATE POOL POOL
TERMS (MO.) LOANS BALANCE BALANCE BALANCE
- -------------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
52 -- 72 3 $ 9,953,029 1.56% 1.56%
73 -- 84 6 44,157,120 6.92 8.48
97 -- 108 5 22,785,879 3.57 12.04
109 -- 120 89 352,018,098 55.14 67.18
121 -- 228 24 160,830,987 25.19 92.38
229 -- 240 10 40,942,488 6.41 98.79
241 -- 297 2 7,721,005 1.21 100.00
- -------------- -- ------------ ------ ------
TOTAL/WTG.
AVG. 139 $638,408,606 100.00% 100.00%
<CAPTION>
WEIGHTED AVERAGES
----------------------------------------------------------------------
RANGE OF STATED REMAINING CUT-OFF CUT-OFF
REMAINING MORTGAGE REMAINING AMORT DATE DATE REPAYMENT
TERMS (MO.) RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- -------------- ---------- ------------ ------------ --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
52 -- 72 7.664% 66 348 1.29x 75.44% 70.70%
73 -- 84 6.916 76 345 1.31 73.64 67.46
97 -- 108 7.668 107 342 1.26 74.12 65.08
109 -- 120 7.148 116 327 1.40 73.02 61.72
121 -- 228 6.894 168 335 1.53 64.09 46.00
229 -- 240 7.046 238 257 1.47 65.19 8.31
241 -- 297 7.110 289 289 1.36 71.26 0.00
- -------------- ----- --- --- ---- ----- -----
TOTAL/WTG.
AVG. 7.088% 135 326 1.43x 70.41% 54.39%
</TABLE>
YEARS OF SCHEDULED MATURITY OR ANTICIPATED REPAYMENT DATE
<TABLE>
<CAPTION>
% OF CUMULATIVE
SCHEDULED NUMBER OF AGGREGATE INITIAL % OF INITIAL
MATURITY OR MORTGAGE CUT-OFF DATE POOL POOL
ARD YEAR LOANS BALANCE BALANCE BALANCE
- ------------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
2003 2 $ 2,378,859 0.37% 0.37%
2004 1 7,574,170 1.19 1.56
2005 6 44,157,120 6.92 8.48
2007 5 22,785,879 3.57 12.04
2008 89 352,018,098 55.14 67.18
2009 3 21,385,438 3.35 70.53
2010 2 10,150,138 1.59 72.12
2011 2 4,614,425 0.72 72.85
2013 17 124,680,986 19.53 92.38
2018 10 40,942,488 6.41 98.79
2022 1 4,831,809 0.76 99.55
2023 1 2,889,197 0.45 100.00
------ -- ------------ ------ ------
TOTAL/WTG.
AVG 139 $638,408,606 100.00% 100.00%
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------------------------
SCHEDULED STATED REMAINING CUT-OFF CUT-OFF
MATURITY OR MORTGAGE REMAINING AMORT DATE DATE REPAYMENT
ARD YEAR RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ------------- ---------- ------------ ------------ --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
2003 8.048% 52 352 1.30x 69.56% 66.57%
2004 7.544 70 346 1.29 77.29 71.99
2005 6.916 76 345 1.31 73.64 67.46
2007 7.668 107 342 1.26 74.12 65.08
2008 7.148 116 327 1.40 73.02 61.72
2009 6.509 130 353 2.08 54.53 44.25
2010 7.053 142 329 1.36 75.12 58.38
2011 7.420 152 318 NAP NAP NAP
2013 6.928 177 333 1.45 64.83 45.29
2018 7.046 238 257 1.47 65.19 8.31
2022 7.175 285 285 1.26 78.25 0.00
2023 7.000 297 297 1.52 59.57 0.00
------ ----- --- --- ---- --------- -----
TOTAL/WTG.
AVG 7.088% 135 326 1.43x 70.41% 54.39%
</TABLE>
S-46
<PAGE>
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
% OF CUMULATIVE
CUT-OFF NUMBER AGGREGATE INITIAL % OF INITIAL
DATE MORTGAGE CUT-OFF DATE POOL POOL
BALANCES OF LOANS BALANCE BALANCE BALANCE
- ----------------------------- ---------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
$ 238,421 -- $ 999,999 21 $ 13,344,544 2.09% 2.09%
1,000,000 -- 1,999,999 32 49,018,847 7.68 9.77
2,000,000 -- 2,999,999 30 73,820,452 11.56 21.33
3,000,000 -- 3,999,999 12 42,150,293 6.60 27.93
4,000,000 -- 4,999,999 11 51,989,313 8.14 36.08
5,000,000 -- 5,999,999 6 32,580,824 5.10 41.18
6,000,000 -- 6,999,999 6 38,355,271 6.01 47.19
7,000,000 -- 7,999,999 4 30,700,049 4.81 52.00
8,000,000 -- 8,999,999 1 8,157,432 1.28 53.28
9,000,000 -- 9,999,999 2 18,639,537 2.92 56.20
10,000,000 -- 14,999,999 7 81,548,195 12.77 68.97
15,000,000 -- 19,999,999 3 50,606,581 7.93 76.90
20,000,000 -- 24,999,999 1 23,979,568 3.76 80.65
25,000,000 -- 29,999,999 1 28,781,905 4.51 85.16
30,000,000 -- 34,999,999 1 34,890,416 5.47 90.63
40,000,000 -- 59,845,380 1 59,845,380 9.37 100.00
- ----------------------------- -- ------------ ------ ------
TOTAL/WTG.
AVG 139 $638,408,606 100.00% 100.00%
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------------------------
CUT-OFF STATED REMAINING CUT-OFF CUT-OFF
DATE MORTGAGE REMAINING AMORT DATE DATE REPAYMENT
BALANCES RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
- ----------------------------- ---------- ------------ ------------ --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 238,421 -- $ 999,999 8.135% 113 322 1.37x 69.02% 56.84%
1,000,000 -- 1,999,999 7.352 137 307 1.43 69.22 50.76
2,000,000 -- 2,999,999 7.152 132 331 1.45 71.41 56.72
3,000,000 -- 3,999,999 7.318 141 327 1.37 73.03 53.43
4,000,000 -- 4,999,999 7.293 150 301 1.39 74.80 48.56
5,000,000 -- 5,999,999 6.997 141 270 1.41 69.10 52.87
6,000,000 -- 6,999,999 7.089 119 336 1.30 73.59 61.78
7,000,000 -- 7,999,999 7.064 136 308 1.62 63.25 48.65
8,000,000 -- 8,999,999 7.320 238 298 1.46 74.84 30.74
9,000,000 -- 9,999,999 6.863 115 355 1.34 80.00 69.41
10,000,000 -- 14,999,999 6.731 145 324 1.56 67.75 47.75
15,000,000 -- 19,999,999 7.437 114 315 1.35 74.10 61.80
20,000,000 -- 24,999,999 7.250 119 359 1.73 59.95 52.00
25,000,000 -- 29,999,999 6.790 75 351 1.33 73.80 67.79
30,000,000 -- 34,999,999 6.700 116 356 1.25 79.30 68.94
40,000,000 -- 59,845,380 6.810 177 357 1.39 61.70 45.76
- ----------------------------- ----- --- --- ---- ----- -----
TOTAL/WTG.
AVG 7.088% 135 326 1.43x 70.41% 54.39%
</TABLE>
- --------
Average Cut-Off Date Balance is $4,592,868.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
S-47
<PAGE>
PREPAYMENT PENALTY CATEGORIES
<TABLE>
<CAPTION>
LOCKOUT/DEFEASANCE
TERM (MO.)/
WEIGHTED % OF WEIGHTED
AGGREGATE % OF AVERAGE AVERAGE WEIGHTED AVERAGE
NUMBER CUT-OFF INITIAL STATED STATED REMAINING # OF MONTHS
PREPAYMENT MORTGAGE DATE POOL REMAINING TERM OPEN TO PREPAYMENT
RESTRICTIONS (A) OF LOANS BALANCE BALANCE TERM (MO.) OF LOCKOUT PRIOR TO MATURITY
- ---------------------- ---------- --------------- ----------- ------------ ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
LO or LO, then D (B) 76 $433,360,592 67.88% 146 140 95.81% 6
LO, then PP 17 40,237,671 6.30 86 51 59.76 11
LO, then YM 40 154,287,568 24.17 120 52 43.76 5
YM Only 6 10,522,775 1.65 111 0 -- 7
- ---------------------- -- ------------ ------ --- --- ------ --
TOTAL/WTG. AVG 139 $638,408,606 100.00% 135 111 81.95% 6
</TABLE>
- --------
(A) LO=Locked Out, D=Defeasance Collateral, YM=Yield Maintenance,
PP=Percentage Premium.
(B) Includes two Mortgage Loans (0.37%) which are not defeasance loans.
PREPAYMENT RESTRICTIONS BY ORIGINAL TERM
<TABLE>
<CAPTION>
AGGREGATE % OF
NUMBER OF CUT-OFF INITIAL
MORTGAGE DATE POOL
ORIGINAL TERM PREPAYMENT RESTRICTIONS (A) LOANS BALANCE BALANCE
- ----------------------- ----------------------------- ----------- --------------- ----------
<S> <C> <C> <C> <C>
5 Year Balloon LO 2 $ 2,378,859 0.37%
6 to 9 Year Balloon LO, then YM 6 22,949,384 3.59
6 to 9 Year ARD LO, then PP 1 28,781,905 4.51
10 Year Balloon LO, then D 48 253,697,089 39.74
LO, then PP 16 11,455,766 1.79
LO, then YM 22 90,281,729 14.14
YM Only 6 10,522,775 1.65
----------------------------- -- ------------ ------
SubTotal 92 365,957,359 57.32
10 Year ARD LO, then YM 2 8,846,618 1.39
11 to 14 Year Balloon LO, then D 5 30,415,357 4.76
LO, then YM 1 5,311,134 0.83
----------------------------- -- ------------ ------
SubTotal 6 35,726,491 5.60
15 Year Balloon LO, then D 6 19,981,423 3.13
LO, then YM 7 23,485,177 3.68
----------------------------- -- ------------ ------
SubTotal 13 43,466,600 6.81
15 Year ARD LO, then D 2 71,845,380 11.25
16 to 20 Year Balloon LO, then D 3 11,544,244 1.81
Fully Amortizing LO, then D 10 43,498,238 6.81
LO, then YM 2 3,413,526 0.53
----------------------------- -- ------------ ------
SubTotal 12 46,911,765 7.35
----------------------------- -- ------------ ------
TOTAL/WTG. AVG 139 $638,408,606 100.00%
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------------------------------
REMAINING REMAINING
STATED MONTHS REMAINING REMAINING MONTHS OPEN
MORTGAGE REMAINING LOCKED MONTHS MONTHS PRIOR TO
ORIGINAL TERM RATE TERM (MO.) OUT YM PP MATURITY/ARD
- ----------------------- ---------- ------------ ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
5 Year Balloon 8.048% 52 45 0 0 7
6 to 9 Year Balloon 7.281 75 33 37 0 4
6 to 9 Year ARD 6.790 75 51 0 11 13
10 Year Balloon 7.097 117 113 0 0 4
8.285 113 52 0 54 7
7.187 112 44 64 0 5
7.900 111 0 105 0 7
----- --- --- --- -- --
7.179 116 91 19 2 5
10 Year ARD 7.182 113 53 56 0 4
11 to 14 Year Balloon 6.779 135 132 0 0 4
6.760 142 70 68 0 4
----- --- --- --- -- --
6.776 136 122 10 0 4
15 Year Balloon 7.219 177 173 0 0 4
7.074 175 91 80 0 4
----- --- --- --- -- --
7.141 176 129 43 0 4
15 Year ARD 6.817 178 166 0 0 11
16 to 20 Year Balloon 7.207 238 235 0 0 3
Fully Amortizing 6.962 235 225 0 0 10
7.021 213 108 101 0 4
----- --- --- --- -- --
6.966 233 216 7 0 10
----- --- --- --- -- --
7.088% 135 111 17 1 6
</TABLE>
- --------
(A) LO=Locked Out, D=Defeasance Collateral, YM=Yield Maintenance,
PP=Percentage Premium.
S-48
<PAGE>
PREPAYMENT LOCK-OUT/PREMIUM ANALYSIS
<TABLE>
<CAPTION>
CURRENT 12 MO. 24 MO. 36 MO. 48 MO. 60 MO. 72 MO.
PREPAYMENT DEC. DEC. DEC. DEC. DEC. DEC. DEC.
RESTRICTIONS 1998 1999 2000 2001 2002 2003 2004
- -------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Locked Out 98.4% 96.2% 96.0% 93.2% 87.9% 72.6% 72.6%
Yield Maintenance 1.6 3.8 4.0 6.8 11.6 21.0 20.1
Percentage Premium
5.00% and greater 0.0 0.0 0.0 0.0 0.1 1.7 0.0
4.00 to 4.99% 0.0 0.0 0.0 0.0 0.0 0.1 1.7
3.00 to 3.99% 0.0 0.0 0.0 0.0 0.0 0.0 0.1
2.00 to 2.99% 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1.00 to 1.99% 0.0 0.0 0.0 0.0 0.0 4.6 0.0
Open 0.0 0.0 0.0 0.0 0.4 0.0 5.4
- -------------------- ------- ------- ------- ------- ------- ------- -------
TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mortgage Pool
Balance
($millions) $ 638.4 $ 630.4 $ 622.0 $ 612.8 $ 602.9 $ 590.0 $ 571.7
% of Initial Pool
Balance 100.0% 98.7% 97.4% 96.0% 94.4% 92.4% 89.6%
<CAPTION>
84 MO. 96 MO. 108 MO. 120 MO. 132 MO. 144 MO. 156 MO. 168 MO.
PREPAYMENT DEC. DEC. DEC. DEC. DEC. DEC. DEC. DEC.
RESTRICTIONS 2005 2006 2007 2008 2009 2010 2011 2012
- -------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 78.1% 73.9% 74.0% 84.5% 82.6% 84.8% 84.4% 44.1%
Yield Maintenance 19.9 24.2 12.0 15.5 17.4 15.2 15.6 13.3
Percentage Premium
5.00% and greater 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
4.00 to 4.99% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
3.00 to 3.99% 1.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.00 to 2.99% 0.1 1.9 0.0 0.0 0.0 0.0 0.0 0.0
1.00 to 1.99% 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0
Open 0.0 0.0 14.0 0.0 0.0 0.0 0.0 42.6
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mortgage Pool
Balance
($millions) $ 519.8 $ 507.6 $ 474.6 $ 166.5 $ 143.0 $ 129.1 $ 119.4 $ 112.9
% of Initial Pool
Balance 81.4% 79.5% 74.3% 26.1% 22.4% 20.2% 18.7% 17.7%
<CAPTION>
180 MO.
PREPAYMENT DEC.
RESTRICTIONS 2013
- -------------------- -----------
<S> <C>
Locked Out 96.7%
Yield Maintenance 3.3
Percentage Premium
5.00% and greater 0.0
4.00 to 4.99% 0.0
3.00 to 3.99% 0.0
2.00 to 2.99% 0.0
1.00 to 1.99% 0.0
Open 0.0
- --------------------- ------
TOTALS 100.0%
Mortgage Pool
Balance
($millions) $ 23.5
% of Initial Pool
Balance 3.7%
</TABLE>
S-49
<PAGE>
THE MORTGAGE LOAN SELLER
On or prior to the Closing Date, the Depositor will acquire the Mortgage
Loans from the Mortgage Loan Seller pursuant to an agreement (the "Mortgage
Loan Purchase Agreement"). The Mortgage Loan Seller acquired or originated the
Mortgage Loans as described above under "--General."
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 the 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 Mortgage Loan Seller; and
(ix) an original assignment in favor of the Trustee of any financing statement
executed and filed in favor of the Mortgage Loan Seller in the relevant
jurisdiction.
ASSIGNMENT OF THE MORTGAGE LOANS; REPURCHASES AND SUBSTITUTIONS
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 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 Mortgage Loan Purchase Agreement
(the relevant rights under which will be assigned by the Depositor to the
Trustee) to (1) 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 or (2) substitute a Qualified Substitute
Mortgage Loan for such Mortgage Loan and pay the Trustee a shortfall amount
equal to the difference between the Purchase Price of the deleted Mortgage Loan
calculated as of the date of substitution and the Stated Principal Balance of
such Qualified Substitute Mortgage Loan as of the date of substitution (the
"Substitution Shortfall Amount"); provided, that such Mortgage Loan Seller will
have an additional 90-day period to deliver the document or cure the defect, as
the case may be, if it is diligently proceeding to effect such delivery or
cure, has delivered to the Trustee an officer's certificate that describes the
reasons that such delivery or cure was not effected within the first 90-day
cure period and the actions it proposes to take to effect such delivery or
cure, and which states that it anticipates such delivery or cure will be
effected within the additional 90-day period, and such defect does not relate
to any Mortgage Loan not being treated as a "qualified mortgage" within the
meaning of the REMIC Provisions. The foregoing repurchase or substitution
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
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Mortgage Loan Seller will be solely responsible for such repurchase or
substitution 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 45 days after the later of the
delivery of a complete Mortgage File or the Closing Date) submitted for
recording or filing in the appropriate public office for real property records
or UCC financing statement records.
A "Qualified Substitute Mortgage Loan" is a mortgage loan which must, on
the date of substitution: (i) have an outstanding Stated Principal Balance,
after application of all scheduled payments of principal and interest due
during or prior to the month of substitution, not in excess of the Stated
Principal Balance of the deleted Mortgage Loan as of the Due Date in the
calendar month during which the substitution occurs; (ii) have a Mortgage Rate
not less than the Mortgage Rate of the deleted Mortgage Loan; (iii) have the
same Due Date as the deleted Mortgage Loan; (iv) accrue interest on the same
basis as the deleted Mortgage Loan (for example, on the basis of a 360-day year
consisting of twelve 30-day months); (v) have a remaining term to stated
maturity not greater than, and not more than two years less than, the remaining
term to stated maturity of the deleted Mortgage Loan; (vi) have an original
loan-to-value ratio not higher than that of the deleted Mortgage Loan and a
current loan-to-value ratio not higher than the then-current loan-to-value
ratio of the deleted Mortgage Loan; (vii) comply as of the date of substitution
with all of the representations and warranties set forth in the Mortgage Loan
Purchase Agreement; (viii) have an environmental report with respect to the
related Mortgaged Property which will be delivered as a part of the related
Mortgage File; (ix) have an original debt service coverage ratio not less than
the original debt service coverage ratio of the deleted Mortgage Loan; (x) be
determined by an Opinion of Counsel to be a "qualified replacement mortgage"
within the meaning of Section 860G(a)(4) of the Internal Revenue Code (the
"Code"); (xi) not have a maturity date after the date three years prior to the
Rated Final Distribution Date; (xii) not be substituted for a deleted Mortgage
Loan unless the Trustee has received prior confirmation in writing by each
Rating Agency that such substitution will not result in the withdrawal,
downgrade, or qualification of the rating assigned by the Rating Agency to any
Class of Certificates then rated by the Rating Agency (the cost, if any, of
obtaining such confirmation to be paid by the Mortgage Loan Seller); (xiii) not
be substituted for a deleted Mortgage Loan if it would result in the
termination of the REMIC status of any of the REMICs or the imposition of tax
on any of the REMICs other than a tax on income expressly permitted or
contemplated to be received by the terms of the Pooling and Servicing
Agreement; (xiv) has a date of origination which is the same as or later than
the Cut-Off Date; (xv) has been approved by the Controlling Class
Representative; provided, that the Controlling Class Representative shall cease
to have the right to approve the substitution of a Qualified Substitute
Mortgage Loan for a deleted Mortgage Loan after the aggregate of the Stated
Principal Balances of all Qualified Substitute Mortgage Loans which were
previously substituted for deleted Mortgage Loans exceeds 10% of the Initial
Pool Balance (provided, however, that such approval of the Controlling Class
Representative may not be unreasonably withheld, as determined by the Special
Servicer); and (xvi) has not been previously rejected by the Controlling Class
Representative pursuant to clause (xv) above. In the event that one or more
mortgage loans are substituted for one or more deleted Mortgage Loans, then the
amounts described in clause (i) will be determined on the basis of aggregate
principal balances and the rates described in clause (ii) above and the
remaining term to stated maturity referred to in clause (v) above will be
determined on a weighted average basis.
REPRESENTATIONS AND WARRANTIES; REPURCHASES AND SUBSTITUTIONS
In each Mortgage Loan Purchase Agreement, the 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
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 Mortgage Loan Seller owns the Mortgage Loan, has full
right and authority to sell, transfer and assign such 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
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foregoing agreements and any applicable state anti-deficiency or market value
deficiency legislation), enforceable in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
liquidation, receivership, moratorium or other laws affecting the enforcement
of creditors' rights, 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, binding and enforceable
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 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 and enforceable first priority lien on the related
Mortgaged Property 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 delinquent or accruing
interest or penalties, (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
(including taxes payable in future installments) that would be a lien on the
related Mortgaged Property and that prior to the Cut-Off Date have become
delinquent were paid, or an escrow of funds sufficient to cover such payment
had been established; (viii) as of the Cut-Off Date, no scheduled payment of
principal or interest was more than 30 days past due; (ix) there is no
proceeding pending for the total or partial condemnation of any material
portion of the related Mortgaged Property and to the 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 (or a pro forma or specimen policy, escrow letter or a marked
up title insurance commitment on which the required premium has been paid which
evidence that such title insurance policy will be issued) 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 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.
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 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 Mortgage Loan
Purchase Agreement (the relevant rights under which will be assigned by the
Depositor to the Trustee) to either substitute a Qualified Substitute Mortgage
Loan and pay any Substitution Shortfall Amount or to repurchase the affected
Mortgage Loan within such 90-day period at the applicable Purchase Price;
provided, that such Seller will generally have an additional 90-day period to
cure such breach if it is diligently proceeding with such cure, and has
delivered to the Trustee an officer's certificate that describes the reasons
that a cure was not effected within the first 90-day cure period and the
actions it proposes to take to effect such cure and which states that it
anticipates such cure will be effected within the additional 90-day period.
The foregoing substitution or repurchase obligation will constitute the
sole remedy available to the Certificateholders and the Trustee for any uncured
breach of the Mortgage Loan Seller's representations and warranties regarding
the Mortgage Loans. The Mortgage Loan Seller will be the sole warranting party
in respect of the Mortgage Loans sold by such Seller to the Depositor, and
neither the Depositor nor any of its other affiliates will be obligated to
substitute or repurchase any such affected Mortgage Loan in connection with a
breach of the Mortgage Loan Seller's representations and warranties if the
Mortgage Loan Seller defaults on its obligation to do so.
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
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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.
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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 of a similar nature (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.
THE MASTER SERVICER
GE Capital Loan Services, Inc. or an affiliate thereof is expected to act
as the master servicer (the "Master Servicer") pursuant to the Pooling and
Servicing Agreement. The Master Servicer is a Delaware corporation and an
affiliate of the Special Servicer. The Master Servicer is a wholly owned
subsidiary of GECIA Holdings, Inc., which is itself a wholly owned subsidiary
of GE Capital Services Corporation, which is itself a wholly owned subsidiary
of The General Electric Company. The principal servicing offices of the Master
Servicer are located at 363 North Sam Houston Parkway E., Suite 200, Houston,
Texas 77060. As of June 30, 1998, the Master Servicer was the servicer of a
portfolio of multifamily and commercial mortgage loans, secured by properties
located throughout the United States and totalling approximately $14.5 billion
in aggregate outstanding principal amounts, including loans securitized in
mortgage backed securitization transactions. The Master Servicer intends to
engage one or more sub-servicers to service a portion of the Mortgage Loans.
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
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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 SPECIAL SERVICER
GE Capital Realty Group, Inc. or an affiliate thereof is expected to act
as the special servicer (the "Special Servicer") pursuant to the Pooling and
Servicing Agreement. The Special Servicer is a Texas corporation and an
affiliate of the Master Servicer, and a wholly owned subsidiary of GE Capital
Access, Inc., which is a wholly owned subsidiary of GE Capital Services
Corporation. The Special Servicer will conduct property inspections, collect
financial statements, rent-rolls and other financial data on the Mortgaged
Properties and prepare reports, with respect to the Specially Serviced Mortgage
Loans and upon written notice to the Master Servicer with respect to any other
Mortgaged Properties, 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. One or more affiliates
of the Special Servicer may purchase the Class F, Class G, Class H, Class J,
Class K and Class L Certificates shortly after the Closing Date. The Special
Servicer's principal offices are located at 2 Bent Tree Tower, 16479 Dallas
Parkway, Suite 400, Addison, Texas 75001.
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 (the "Majority Subordinate Certificateholder") 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,
provided, that if the Majority Subordinate Certificate Holder is or includes
the Special Servicer, as applicable, the Majority Subordinate Certificateholder
shall not re-appoint such Special Servicer which has resigned or otherwise
ceased to serve as Special Servicer. See "--The Controlling Class
Representative." The "Controlling Class of Sequential Pay Certificates" is the
Class of Sequential Pay Certificates that has the latest alphabetical Class
designation and that has a Certificate Balance that is greater than 20% of its
original Certificate Balance (or if no Classes of Sequential Pay Certificates
has a Certificate Balance that is greater then 20% of its original Certificate
Balance, the Class of Sequential Pay Certificates with the latest alphabetical
Class designation). The Class A-1, Class A-2 and Class A-3 Certificates will be
treated as one Class for determining the Controlling Class of Sequential Pay
Certificates. Any replacement of 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 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
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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;
or (g) the Master Servicer shall have received notice of the commencement of
foreclosure or similar proceedings with respect to the related Mortgaged
Property.
Promptly after a Mortgage Loan becomes a Specially Serviced Mortgaged
Loan, the Special Servicer will give written notice to the Trustee, and the
Trustee will provide a copy of such notice to the Controlling Class
Representative, which notice will include an explanation as to the reasons such
Mortgage Loan became a Specially Serviced Mortgage Loan and the Special
Servicer's contemplated course of action with respect to such Mortgage Loan.
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):
(w) with respect to the circumstances described in clause (a) of the
second preceding paragraph, when the related borrower has made three
consecutive full and timely 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);
(x) with respect to any of the circumstances described in clauses
(b), (d), (e) and (f) of the second preceding paragraph, when such
circumstances cease to exist in the good faith, reasonable judgment of the
Special Servicer, but, with respect to any bankruptcy or insolvency
proceedings described in clauses (d), (e) and (f), no later than the entry
of an order or decree dismissing such proceeding;
(y) with respect to the circumstances described in clause (c) of the
second preceding paragraph, when such default is cured; and
(z) with respect to the circumstances described in clause (g) of the
second preceding paragraph, when such proceedings are terminated;
so long as at that time no circumstance identified in such clauses (a) through
(g) exists that would cause the Mortgage Loan to continue to be characterized
as a Specially Serviced Mortgage Loan.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The primary compensation to be paid to the Master Servicer in respect of
its servicing activities (including fees to be paid to any sub-servicer) will
be the 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
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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 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 interest in escrow to the extent not payable to the
borrower, modification fees, assumption fees, assumption application fees,
default interest, late charges (except to the extent such default interest is
applied to offset interest accrued on Advances with respect to the related
Mortgage Loan), exit fees or repayment fees collected from borrowers on the
related Mortgage Loans. The Master Servicer is authorized to invest or direct
the investment of funds held in the Certificate Account in certain short-term
United States government securities and other investment grade obligations, and
the Master Servicer will be entitled to retain any interest or other income
earned on such funds, but shall be required to cover any losses from its own
fund without any right to reimbursement.
If 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 Servicing Fees) that accrues on the Mortgage Loan (other than a
Specially Serviced 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 aggregate of any Prepayment Interest
Shortfalls experienced during the related Collection Period (but only up to the
sum of (i) a portion of its Master Servicing Fee for the related Collection
Period equal to .01% per annum on a Mortgage Loan on an aggregate basis and
(ii) any Prepayment Interest Excesses received during such 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--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 monthly 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"
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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 the 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, the Special Servicer, the Depositor
or the Majority Subordinate Class Certificateholder as described herein under
"DESCRIPTION OF THE CERTIFICATES--Termination" or (iii) in certain other
limited circumstances set forth in the Pooling and Servicing Agreement. As
additional servicing compensation, the Special Servicer will be entitled to
retain all assumption fees, modification fees and late payment charges received
on or with respect to the Specially Serviced Mortgage Loans.
The Pooling and Servicing Agreement will provide that 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 contemplated 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.
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, 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
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REMICs created pursuant to the Pooling and Servicing Agreement to fail to
qualify as a REMIC at any time the Certificates are outstanding. In no event,
however, will the Special Servicer be permitted to (i) extend the maturity date
of a Mortgage Loan beyond a date that is two years prior to the Rated Final
Distribution Date, (ii) extend the maturity date of any Mortgage Loan which has
a Mortgage Rate below the then prevailing interest rate for comparable loans at
the time of such modification, as determined by the Special Servicer, unless
such Mortgage Loan is a Balloon Loan that has failed to make the Balloon
Payment at its scheduled maturity and such Balloon Loan is not a Specially
Serviced Mortgage Loan (other than by reason of the failure to make the Balloon
Payment) and has not been delinquent in the preceding 12 months (other than
with respect to the Balloon Payment), in which case the Special Servicer may
make up to three one-year extensions at the existing Mortgage Rate for such
Mortgage Loan (such limitation of extensions made at a below market rate shall
not limit the ability of the Special Servicer to extend the maturity date of
any Mortgage Loan at an interest rate at or in excess of the prevailing rate
for comparable loans at the time of such modification), (iii) if the Mortgage
Loan is secured by a ground lease, extend the maturity date of such Mortgage
Loan beyond a date which is 10 years prior to the expiration of the term of
such ground lease, including renewal options, or (iv) defer interest due on any
Mortgage Loan in excess of 10% of the Stated Principal Balance of such Mortgage
Loan or defer the collection of interest on any Mortgage Loan without accruing
interest on such deferred interest at a rate at least equal to the Mortgage
Rate of such Mortgage Loan.
The Master Servicer and Special Servicer, as applicable, will not be
required to seek the consent of any Certificateholder or obtain an opinion of
counsel in order to approve certain routine modifications, waivers or
amendments of the Mortgage Loan documents, including: (i) waivers of minor
covenant defaults (other than financial covenants), including late financial
statements; (ii) releases of non-material parcels of a Mortgaged Property
(provided that releases as to which the Mortgage Loan documents expressly
require the mortgagee thereunder to make such releases upon the satisfaction of
certain conditions shall be made as required by the Mortgage Loan documents);
(iii) grants of easements that do not materially affect the use, value or
operation of a Mortgaged Property or the Mortgagor's ability to make any
payments with respect to the related Mortgage Loan; and (iv) any other
modifications, waivers or amendments which the Master Servicer or Special
Servicer, as applicable, determines, in accordance with the servicing standard
described under "General" above; provided, that the Master Servicer or Special
Servicer, as applicable, has determined that any such modification, waiver or
amendment (w) would not in any way affect a payment term of the Certificates,
(x) would 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, (y) agreeing
to such modification, waiver or amendment would be consistent with the
servicing standard described under "General" above, and (z) agreeing to such
modification waiver or amendment will not violate the terms, provisions or
limitations of the Pooling and Servicing Agreement or any other Mortgage Loan
document.
The Special Servicer or 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 Mortgage
Loan is effected are required to be available for review during normal business
hours at the offices of the Trustee. See "DESCRIPTION OF THE
CERTIFICATES--Reports to Certificateholders; Available Information" herein.
PURCHASE OF SPECIALLY SERVICED MORTGAGE LOANS
The Pooling and Servicing Agreement grants to the Majority Subordinate
Certificateholder a right to purchase from the Trust Fund certain defaulted
Specially Serviced Mortgage Loans. If the Special Servicer has determined in
good faith, in accordance with the servicing standards described under
"General" above, that any such defaulted Specially Serviced Mortgage Loan will
become subject to foreclosure proceedings, the Special Servicer will be
required to promptly so notify in writing the Trustee and the Master Servicer,
and the Trustee will be required, within ten days after receipt of such notice,
to notify the Majority Subordinate Certificateholder. Such Certificateholder
may at its option purchase from
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the Trust Fund, at a cash price equal to the applicable Purchase Price, any
such defaulted Specially Serviced Mortgage Loan at any time prior to
liquidation thereof.
THE CONTROLLING CLASS REPRESENTATIVE
The Controlling Class Representative will be entitled to advise the
Special Servicer with respect to the following actions of the Special Servicer,
and the Special Servicer will not be permitted to take any of the following
actions as to which the Controlling Class Representative has objected in
writing within ten business days of being notified thereof (provided that if
such written objection has not been received by the Special Servicer within
such ten business days, then the Controlling Class Representative's approval
will be deemed to have been given):
(i) any foreclosure upon or comparable conversion (which may include
acquisitions of an REO Property) of the ownership of properties securing
such of the Specially Serviced Mortgage Loans as come into and continue in
default;
(ii) any modification of a monetary term of a Specially Serviced
Mortgage Loan other than a modification consisting of the extension of the
maturity date of a Specially Serviced Mortgage Loan for one year or less;
(iii) any proposed sale of a Specially Serviced Mortgage Loan or REO
Property (other than in connection with the termination of the Trust Fund
as described under "DESCRIPTION OF THE CERTIFICATES--Termination" herein);
(iv) any determination to bring an REO Property into compliance with
applicable environmental laws;
(v) any acceptance of substitute or additional collateral for a
Specially Serviced Mortgage Loan;
(vi) any waiver of a "due-on-sale" or "due-on-encumbrance" clause;
and
(vii) any acceptance of an assumption agreement releasing a borrower
from liability under a Specially Serviced Mortgage Loan.
In addition, the Controlling Class Representative may direct the Special
Servicer to take or to refrain from taking, such other actions as the
Controlling Class Representative may deem advisable or as to which provision is
otherwise made in the Pooling and Servicing Agreement; provided that no such
direction and no objection contemplated by the prior paragraph may require or
cause the Special Servicer to violate any provision of the Pooling and
Servicing Agreement or the provision in the Code relating to REMICs, including
the Special Servicer's obligation to act in accordance with the servicing
standard described under "General" above, expose the Master Servicer, the
Special Servicer, the Trust Fund or the Trustee to liability, or materially
expand the scope of the Special Servicer's responsibilities under the Pooling
and Servicing Agreement. Any out-of-pocket expenses incurred by the Special
Servicer in connection with its obtaining the approval of the Controlling Class
Representative shall be treated as an Advance and the Special Servicer shall be
entitled to reimbursement in respect thereof.
LIMITATION ON LIABILITY OF CONTROLLING CLASS REPRESENTATIVE
The Controlling Class Representative will have no liability to the
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Pooling and Servicing Agreement, or
for errors in judgment; provided, however, that the Controlling Class
Representative will not be protected against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the exercise of its rights or by reason of reckless disregard in
the exercise of its rights. By its acceptance of a Certificate, each
Certificateholder confirms its understanding that the Controlling Class
Representative may take actions that favor the interests of one or more Classes
of the Certificates over other Classes of the Certificates, and that the
Controlling Class Representative may have special relationships and interests
that conflict with those of holders of some Classes of the Certificates and,
absent willful misfeasance, bad faith or gross negligence on the part of the
Controlling Class Representative, each Certificateholder agrees to take no
action against the Controlling Class Represen-
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tative or any of its officers, directors, employees, principals or agents as a
result of such a special relationship or conflict and that the Controlling
Class Representative will not be deemed to have been grossly negligent or
reckless, or to have acted in bad faith or engaged in willful misfeasance or to
have recklessly disregarded any exercise of its rights by reason of its having
acted solely in the interests of the Controlling Class and that the Controlling
Class Representative will have no liability whatsoever for having so acted.
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 (a "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
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Serviced Mortgage Loan, and with respect to any other Mortgaged Property, may
perform or cause to be performed such inspection upon written notice to the
Master Servicer. In addition, beginning in 1999 the Master 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 $2 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 Master Servicer and the Special Servicer
will each be required to prepare a written report of each such inspection
performed by it that describes the condition of the Mortgaged Property and that
specifies the existence with respect thereto of any sale, transfer or
abandonment or any material change in its condition or value that is apparent
from such inspection.
The Master Servicer or the Special Servicer, as the case may be, is also
required to use reasonable efforts to collect from the related borrower and
review the annual, and to the extent required by the related Mortgage,
quarterly, operating statements of each Mortgaged Property and to cause annual
operating statements to be prepared for each REO Property. Each of the
Mortgages requires the related borrower to deliver an annual property operating
statement. However, there can be no assurance that any operating statements
required to be delivered will in fact be delivered, nor is the Master Servicer
or the Special Servicer likely to have any practical means of compelling such
delivery in the case of an otherwise performing Mortgage Loan.
Copies of the inspection reports and operating statements referred to
above are required to be available for review by Certificateholders during
normal business hours at the offices of the Trustee and to be delivered to the
Controlling Class Representative. See "DESCRIPTION OF THE CERTIFICATES--Reports
to Certificateholders; Available Information" herein.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Depositor's Mortgage Pass Through Certificates, Series 1998-C3 (the
"Certificates") will be issued pursuant to a Pooling and Servicing Agreement,
to be dated as of December 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 Agreement relating to Mortgage
Loan document delivery requirements and the representations and warranties of
the Mortgage Loan Seller 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 A-3, Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class J and Class K Certificates
(collectively, the "Sequential Pay Certificates"); (ii) the Class IO
Certificates (together with the Sequential Pay Certificates, the "REMIC Regular
Certificates"); (iii) the Class L Certificates; and (iv) one or more classes of
REMIC residual certificates (collectively, the "REMIC Residual Certificates").
Only the Class A-1, Class A-2, Class A-3, Class B, Class C, Class D, Class
E and Class IO Certificates (collectively, the "Offered Certificates") are
offered hereby. The Class F, Class G, Class H, Class J, Class K, Class L and
REMIC Residual Certificates (collectively, the "Private Certificates") have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), and are not offered hereby. Accordingly, information herein regarding
the terms of the Private Certificates is provided solely because of its
potential relevance to a prospective purchaser of an Offered Certificate.
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be issued in book-entry format through the
facilities of The Depository Trust Company ("DTC"). Each Offered Certificate
will be issued in denominations of not less than $1,000 actual or notional
principal amount and in integral multiples of $1 in excess thereof.
DTC management is aware that some computer applications, systems, and the
like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed its Participants and other members of the financial
community (the "Industry") that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries, and settlement of trades within DTC ("DTC Services"), continue to
function appropriately. This program includes a technical assessment and
remediation plan, each of which is complete. Additionally, DTC's plan includes
a testing phase, which is expected to be completed within appropriate time
frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information of the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the Industry that it is contracting (and will
continue to contact) third party vendors from whom DTC acquires services to:
(i) impress upon them the importance of such services being year 2000
compliant; and (ii) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) of their services. In addition, DTC
is in the process of developing such contingency plans as it deems appropriate.
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According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
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 Cede &
Co., as the registered holder thereof, for distribution to the related
Certificate Owners through the Participants in accordance with DTC procedures.
The form of such payments and transfers may result in certain delays in receipt
of payments by an investor and may restrict an investor's ability to pledge its
securities. None of the Depositor, the Master Servicer, the Special Servicer or
the Trustee or any of their respective affiliates will have any liability for
any actions taken by DTC or its nominee, including, without limitation, actions
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in Offered Certificates held by Cede & Co., as
nominee for DTC, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests. See "DESCRIPTION OF THE
CERTIFICATES--Book-Entry Registration and Definitive Certificates" and "RISK
FACTORS--Book-Entry Registration of Certificates Affects Ownership of
Certificates and Receipt of Payment" in the Prospectus.
CERTIFICATE BALANCES AND NOTIONAL AMOUNTS
Upon initial issuance, and in each case subject to a permitted variance of
plus or minus 5%, the Sequential Pay Certificates will have the Certificate
Balances, representing the approximate percentage of the Initial Pool Balance
as set forth in the following table:
<TABLE>
<CAPTION>
INITIAL PERCENT OF INITIAL
CLASS OF CERTIFICATE CERTIFICATE BALANCE POOL BALANCE
- -------------------------- --------------------- -------------------
<S> <C> <C>
Class A-1 .............. $129,870,000 20.34%
Class A-2 .............. $ 75,490,000 11.82%
Class A-3 .............. $243,122,000 38.08%
Class B ................ $ 33,516,000 5.25%
Class C ................ $ 35,112,000 5.50%
Class D ................ $ 38,305,000 6.00%
Class E ................ $ 7,980,000 1.25%
Class F ................ $ 35,113,000 5.50%
Class G ................ $ 4,788,000 0.75%
Class H ................ $ 14,364,000 2.25%
Class J ................ $ 3,192,000 0.50%
Class K ................ $ 17,556,605 2.75%
</TABLE>
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.
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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 12 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 Sequential Pay 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.
The Class L Certificates will not have Certificate Balances, but will
represent the right to receive Additional Interest in respect of ARD Loans in
accordance with the Pooling and Servicing Agreement. Except as described in the
preceding sentence, the holders of the Class L Certificates will not be
entitled to distributions of interest or principal.
None of the REMIC Residual Certificates will have a Certificate Balance.
PASS-THROUGH RATES
For each Distribution Date, each Class of Sequential Pay Certificates will
earn interest at the rate set forth in the table at the beginning of the
Summary (the "Pass-Through Rate").
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, Class
A-2 and Class A-3 Components for each Distribution Date will equal the Weighted
Average Net Mortgage Rate for such Distribution Date minus 5.65%, 5.87% and
5.88%, respectively (but not less than zero); the Strip Rates applicable to the
Class B, Class C, Class D and Class E Components for each Distribution Date
will equal 0.92%, 0.54%, 0.00% and 0.00%, respectively; and the Strip Rates
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 6.00% (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
Determination Date occurring in the previous month, 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, 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 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
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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 immediately preceding 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
January 15, 1999 (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,
(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, as
successor servicer, with respect to such Distribution Date;
(c) any Compensating Interest Payment made by the Master Servicer to
cover the aggregate of any Prepayment Interest Shortfalls experienced
during the related Collection Period. See "SERVICING OF THE MORTGAGE
LOANS--Servicing and Other Compensation and Payment of Expenses" and
"--P&I Advances" herein and "DESCRIPTION OF THE POOLING
AGREEMENTS--Certificate Account" in the Prospectus.
Any Prepayment Premiums 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:
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(1) to distributions of interest to the holders of the Class A-1,
Class A-2, Class A-3 and Class IO Certificates (in each case, so long as
any such Class remains outstanding), pro rata, in accordance with the
respective amounts of Distributable Certificate Interest (as defined
herein) 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) after the Class A-1 and Class A-2 Certificates have been retired,
to distributions of principal to the holders of the Class A-3 Certificates
in an amount (not to exceed the then outstanding Certificate Balance of
such Class of Certificates) equal to the Principal Distribution Amount for
such Distribution Date, less any portion thereof distributed in respect of
the Class A-1 and Class A-2 Certificates;
(5) to distributions to the holders of the Class A-1, Class A-2 and
Class A-3 Certificates, pro rata, in accordance with the amount of
Realized Losses and Additional Trust Fund Expenses, if any, previously
allocated to such Classes of Certificates for which no reimbursement has
previously been received, to reimburse such holders for all Realized
Losses and Additional Trust Fund Expenses, if any, plus interest on any
such Realized Losses or Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(6) to distributions of interest to the holders of the Class B
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and,
to the extent not previously paid, for all prior Distribution Dates;
(7) after the Class A-1, Class A-2 and Class A-3 Certificates have
been retired, to distributions of principal to the holders of the Class B
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of the Class B Certificates) equal to the Principal Distribution
Amount for such Distribution Date, less any portion thereof distributed in
respect of the Class A-1, Class A-2 and/or Class A-3 Certificates on such
Distribution Date;
(8) to distributions to the holders of the Class B Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received, plus interest on
any such Realized Losses or Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(9) to distributions of interest to the holders of the Class C
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and,
to the extent not previously paid, for all prior Distribution Dates;
(10) after the Class A-1, Class A-2, Class A-3 and Class B
Certificates have been retired, to distributions of principal to the
holders of the Class C Certificates in an amount (not to exceed the then
outstanding Certificate Balance of the Class C Certificates) equal to the
Principal Distribution Amount for such Distribution Date, less any portion
thereof distributed in respect of the Class A-1, Class A-2, Class A-3
and/or Class B Certificates on such Distribution Date;
(11) to distributions to the holders of the Class C Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of
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Certificates and for which no reimbursement has previously been received,
plus interest on any such Realized Losses or Additional Trust Fund
Expenses, accrued at the applicable Pass-Through Rate from the date such
Realized Losses and/or Additional Trust Fund Expenses were allocated to
such Class;
(12) to distributions of interest to the holders of the Class D
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and,
to the extent not previously paid, for all prior Distribution Dates;
(13) after the Class A-1, Class A-2, Class A-3, Class B and Class C
Certificates have been retired, to distributions of principal to the
holders of the Class D Certificates in an amount (not to exceed the then
outstanding Certificate Balance of the Class D Certificates) equal to the
Principal Distribution Amount for such Distribution Date, less any portion
thereof distributed in respect of the Class A-1, Class A-2, Class A-3,
Class B and/or Class C Certificates on such Distribution Date;
(14) to distributions to the holders of the Class D Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received, plus interest on
any such Realized Losses or Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(15) to distributions of interest to the holders of the Class E
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and,
to the extent not previously paid, for all prior Distribution Dates;
(16) after the Class A-1, Class A-2, Class A-3, Class B, Class C and
Class D Certificates have been retired, to distributions of principal to
the holders of the Class E Certificates in an amount (not to exceed the
then outstanding Certificate Balance of such Class of Certificates) equal
to the Principal Distribution Amount for such Distribution Date, less any
portion thereof distributed in respect of the Class A-1, Class A-2, Class
A-3, Class B, Class C and/or Class D Certificates;
(17) to distributions to the holders of the Class E Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received, plus interest on
any such Realized Losses or Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(18) to distributions of interest to the holders of the Class F
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and,
to the extent not previously paid, for all prior Distribution Dates;
(19) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D and Class E Certificates have been retired, to distributions of
principal to the holders of the Class F Certificates in an amount (not to
exceed the then outstanding Certificate Balance of such Class of
Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1, Class A-2, Class A-3, Class B, Class C, Class D and/or Class E
Certificates;
(20) to distributions to the holders of the Class F Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received, plus interest on
any such Realized Losses or Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(21) to distributions of interest to the holders of the Class G
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and,
to the extent not previously paid, for all prior Distribution Dates;
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(22) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D, Class E and Class F Certificates have been retired, to
distributions of principal to the holders of the Class G Certificates in
an amount (not to exceed the then outstanding Certificate Balance of such
Class of Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1, Class A-2, Class A-3, Class B, Class C, Class D, Class E and/or
Class F Certificates;
(23) to distributions to the holders of the Class G Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received, plus interest on
any such Realized Losses or Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(24) to distributions of interest to the holders of the Class H
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and,
to the extent not previously paid, for all prior Distribution Dates;
(25) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D, Class E, Class F and Class G Certificates have been retired, to
distributions of principal to the holders of the Class H Certificates in
an amount (not to exceed the then outstanding Certificate Balance of such
Class of Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1, Class A-2, Class A-3, Class B, Class C, Class D, Class E, Class
F and/or Class G Certificates;
(26) to distributions to the holders of the Class H Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to each such Class of Certificates
and for which no reimbursement has previously been received, plus interest
on any such Realized Losses or Additional Trust Fund Expenses, accrued at
the applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(27) to distributions of interest to the holders of the Class J
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and,
to the extent not previously paid, for all prior Distribution Dates;
(28) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D, Class E, Class F, Class G and Class H Certificates have been
retired, to distributions of principal to the holders of the Class J
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of such Class of Certificates) equal to the Principal Distribution
Amount for such Distribution Date, less any portion thereof distributed in
respect of the Class A-1, Class A-2, Class A-3, Class B, Class C, Class D,
Class E, Class F, Class G and/or Class H Certificates;
(29) to distributions to the holders of the Class J Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to each such Class of Certificates
and for which no reimbursement has previously been received, plus interest
or any such Realized Losses or Additional Trust Fund Expenses, accrued at
the applicable Pass-Through Rate from the date of such Realized Losses
and/or Additional Trust Fund Expenses were allocated to such Class;
(30) 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;
(31) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D, Class E, Class F, Class G, Class H and Class J Certificates 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
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Class of Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1, Class A-2, Class A-3, Class B, Class C, Class D, Class E, Class
F, Class G, Class H and/or Class J Certificates;
(32) 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, plus interest
or any such Realized Losses or Additional Trust Fund Expenses, accrued at
the applicable Pass-Through Rate from the date of such Realized Losses
and/or Additional Trust Fund Expenses were allocated to such Class; and
(33) 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 the above clauses.
After the Certificate Balance of the Subordinate Certificates is reduced
to zero, distributions of principal will be made, pro rata, to the Class A-1,
Class A-2 and Class A-3 Certificates.
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 (other than
Specially Serviced 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"). Holders of the Certificates (other than the Class L
Certificates) will not be entitled to receive any amounts collected as
Additional Interest on any ARD Loans.
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.
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
due (other than Balloon Payments), to the extent received or advanced, 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);
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(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 and Substitution Shortfall Amounts that were
received on or in respect of Mortgage Loans or REO 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 or REO 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.
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
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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 in its
capacity as successor servicer will be required to make P&I Advances in respect
of such Mortgage Loan, in all cases as if such Mortgage Loan had remained
outstanding. References to "Mortgage 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 Class A-1, Class A-2, Class A-3, Class B,
Class C, Class D, Class E, Class F and Class G Certificates and the Class IO
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 set forth in the related Mortgage
Loan documents or otherwise 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 as set forth in The Wall Street Journal (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 as reported in The Wall Street Journal on
the date of such prepayment. 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 and the Trustee make 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 (other than the Class L
Certificates) (collectively, the "Subordinate Certificates") to receive
distributions of amounts collected or advanced on the Mortgage Loans will be
subordinated, to
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the extent described herein, to the rights of holders of the Class A-1, Class
A-2, Class A-3 and Class IO Certificates (collectively, the "Senior
Certificates") and each other such Class of Subordinate Certificates, if any,
with an earlier alphabetical Class designation. This subordination is intended
to enhance the likelihood of timely receipt by the holders of the Senior
Certificates of the full amount of Distributable Certificate Interest payable
in respect of such Classes of Certificates on each Distribution Date, and the
ultimate receipt by the holders of the Class A-1, Class A-2 and Class A-3
Certificates of principal in an amount equal to the entire respective
Certificate 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-3
Certificates will receive principal payments only after the Certificate Balance
of the Class A-2 Certificates has been reduced to zero, and the Class A-2
Certificates will receive principal payments only after the Certificate Balance
of the Class A-1 Certificates has been reduced to zero. However, the Class A-1,
Class A-2, Class A-3 and Class IO Certificates will bear shortfalls in
collections and losses incurred in respect of the Mortgage Loans, pro rata. No
other form of credit support will be available for the benefit of the holders
of the Offered Certificates.
On each Distribution Date, following all distributions on the Certificates
to be made on such date, the aggregate of all Realized Losses and Additional
Trust Fund Expenses (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, the Class A-2 Certificates and the Class A-3
Certificates, pro rata, in proportion to their outstanding Certificate
Balances, until the remaining Certificate Balances of such Classes of
Certificates are reduced to zero.
Any Realized Loss 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.
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"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
(excluding Additional Interest) 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 principal
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 (to the extent not reimbursed out
of default interest) 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--REMICs--Taxation of Owners of REMIC
Residual Certificates--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.
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 prior to the making of such P&I Advance. 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
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Mortgage Loan only an amount equal to (a) the principal amount of the P&I
Advance for such Mortgage Loan plus (b) the product of (i) the amount of the
interest component of the P&I Advance for such Mortgage Loan 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 "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 monthly 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 default interest and 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) with
respect to which sixty days elapse after a receiver is appointed and continues
in such capacity in respect of a Mortgaged Property securing any Mortgage Loan,
(5) with respect to which sixty days elapse after 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
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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 and interest
thereon 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. If an Appraisal Reduction Amount exists with respect to any
Required Appraisal Loan, the Controlling Class Representative may, at its
expense (i) direct the Special Servicer to obtain and deliver to the Master
Servicer and the Trustee an appraisal meeting the requirements for a Required
Appraisal, and, to the extent the appraisals are different, an independent
third party appraiser will determine the appropriate amount to be used in
determining the Appraisal Reduction Amount or (ii) upon the expiration of six
months from the date on which the appraisal was obtained by the Special
Servicer with respect to such Required Appraisal Loan, and upon review of the
Special Servicer's plan for servicing such Required Appraisal Loan, direct the
Special Servicer to obtain and deliver to the Master Servicer and the Trustee
an update of the appraisal previously obtained by the Special Servicer in
connection with such Required Appraisal Loan for the purpose of determining the
appropriate amount to be used in determining the Appraisal Reduction Amount.
Notwithstanding the foregoing, if any Required Appraisal Loan as to which
an Appraisal Reduction Amount has been established in accordance with the
preceding paragraph becomes a Corrected Mortgage Loan, then the Appraisal
Reduction Amount shall be deemed to be zero, subject to such Mortgage Loan
again becoming subject to the appraisal requirement described above; provided,
that, in the case of any Required Appraisal Loan that has been modified as
described in the immediately preceding paragraph, the Appraisal Reduction
Amount will be deemed to exist for so long as the terms of the modification are
in effect.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
On each Distribution Date, 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 on
its website at www.globaltrustservices.com 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 (x) a statement (a "Statement to Certificateholders"),
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,
and (y) certain additional information regarding the Mortgage Loans in the form
of Annex D. Although the form of the Statement to Certificateholders 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
Statement to Certificateholders, 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
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"DESCRIPTION OF THE CERTIFICATES--Reports to Certificateholders" in the
Prospectus. It is anticipated that a portion of the Statement to
Certificateholders 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 none of the Master Servicer, the
Special Servicer nor the Trustee will have any responsibility therefor.
The Trustee may make available each month, to any interested party, the
Statement to Certificateholders via the Trustee's Internet Website or via
facsimile upon request. The Trustee's website will be located at
"www.globaltrustservices.com". The Trustee's electronic bulletin board may be
accessed by calling (800) 204-2737 or (713) 216-2933 for loan level
information, and interested parties may request such information by calling
(212) 946-3471. For assistance with regard to the above-mentioned services,
investors may call (212) 946-3246.
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 Statement to
Certificateholders delivered to holders of the relevant Class of Offered
Certificates since the Closing Date, (c) all officer's certificates delivered
to the Trustee since the Closing Date as described under "DESCRIPTION OF THE
POOLING AGREEMENTS--Evidence as to Compliance" in the Prospectus, (d) all
accountants' reports delivered to the Trustee since the Closing Date as
described under "DESCRIPTION OF THE POOLING AGREEMENTS--Evidence as to
Compliance" in the Prospectus, (e) the most recent property inspection report
prepared by or on behalf of the Special Servicer in respect of each Mortgaged
Property and delivered to the Trustee, (f) the most recent Mortgaged Property
annual operating statements and rent roll, if any, collected by or on behalf of
the Special Servicer and delivered to the Trustee, (g) any and all
modifications, waivers and amendments of the terms of a Mortgage Loan entered
into by the Special Servicer and delivered to the Trustee and (h) any and all
officers' certificates and other evidence delivered to the Trustee to support
the Master Servicer's (or the Trustee's) determination that any Advance was or,
if made, would not be recoverable from related proceeds. Copies of any and all
of the foregoing items will be available from the Trustee upon request;
however, the Trustee will be permitted to require payment from the requesting
party 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
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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 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 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 at the requesting party's expense.
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, Class A-2 and Class
A-3 Certificates will be treated as one Class for determining the Controlling
Class of Sequential Pay Certificates. See "DESCRIPTION OF THE
CERTIFICATES--Voting Rights" in the Prospectus.
TERMINATION
The obligations created by the Pooling and Servicing Agreement will
terminate upon the final distribution to the Certificateholders, which shall
follow the earlier of (i) the final payment (or advance in respect thereof) or
other liquidation of the last Mortgage Loan or REO Property subject thereto and
(ii) the purchase of all of the Mortgage Loans and all of the REO Properties
remaining in the Trust Fund, if any, by the Majority Subordinate
Certificateholder or, if not exercised by such person, the Depositor, the
Master Servicer or the Special Servicer. Written notice of termination of the
Pooling and Servicing Agreement will be given to each Certificateholder, and
the final distribution will be made only upon surrender and cancellation of the
Certificates at the office of the Trustee or other registrar for the
Certificates or at such other location as may be specified in such notice of
termination.
Any such purchase by the Majority Subordinate Certificateholder or, if not
exercised by such person, the Depositor, Master Servicer or the Special
Servicer of all the Mortgage Loans and all of the REO Properties, if any,
remaining in the Trust Fund is required to be made at a price equal to (i) the
aggregate Purchase Price of all the Mortgage Loans (other than REO Loans) then
included in the Trust Fund, plus (ii) the fair market value of all REO
Properties then included in the Trust Fund, as determined by an appraiser
mutually agreed upon by the Master Servicer and the Trustee, minus (iii) if the
purchaser is the Master Servicer or the Special Servicer, the aggregate of
amounts payable or reimbursable to the Master Servicer or the Special Servicer,
under the Pooling and Servicing Agreement. Such purchase will effect early
retirement of the then outstanding Offered Certificates, but the right of the
Majority Subordinate Certificateholder, the Master Servicer, the Depositor or
the Special Servicer 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
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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
The Chase Manhattan Bank ("Chase") will act as Trustee pursuant to the
Pooling and Servicing Agreement. Chase is a direct, wholly owned subsidiary of
Chase Manhattan Corporation. Chase's principal office is located at 450 West
33rd Street, 8th Floor, New York, New York 10001, Attn.: Structured Finance
Services-CMBS. Certificate transfer services are conducted at 450 West 33rd
Street, 8th Floor, New York, New York 10001, Attn.: SFS Transfer Operations.
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 0.0045%.
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 and the Depositor," "--Events of Default" and "--Rights
Upon Event of Default" in the Prospectus.
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YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on the price at
which such Certificate is purchased by an investor and the rate, timing and
amount of distributions on such Certificate. The rate, timing and amount of
distributions on any Offered Certificate will in turn depend on, among other
things, (i) the Pass-Through Rate for such Certificate, (ii) the rate and
timing of principal payments (including principal prepayments) and other
principal collections on the Mortgage Loans and the extent to which such
amounts are to be applied in reduction of the Certificate Balance or notional
amount of the related Class, (iii) the rate, timing and severity of Realized
Losses and Additional Trust Fund Expenses and the extent to which such losses
and expenses are allocable in reduction of the Certificate Balance or notional
amount of the related Class and (iv) the timing and severity of any Net
Aggregate Prepayment Interest Shortfalls and the extent to which such
shortfalls are allocable in reduction of the Distributable Certificate Interest
payable on the related Class.
Rate and Timing of Principal Payment. The yield to holders of the Class
IO Certificates will be extremely sensitive to, and the yield to holders of any
other Offered Certificates purchased at a discount or premium will be affected
by, the rate and timing of principal payments made in reduction of the
Certificate Balance of such Certificates (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 A-3 Certificates, the Class B Certificates, the Class C Certificates,
the Class D Certificates and the Class E Certificates, in that order, in each
case until the Certificate Balance of such Class of Certificates is reduced to
zero. However, if the Class B Certificates are reduced to zero and the Senior
Certificates remain outstanding, the Principal Distribution Amount on each
Distribution Date will be made, pro rata, on the Class A-1, Class A-2 and Class
A-3 Certificates. 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
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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 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 Rates applicable to the Class A-1, Class A-2 and
Class A-3 Components for each Distribution Date will equal the Weighted Average
Net Mortgage Rate for such Distribution Date minus 5.65%, 5.87% and 5.88%
respectively (but not less than zero); the Strip Rates applicable to the Class
B, Class C, Class D and Class E Components for each Distribution Date will
equal 0.92%, 0.54%, 0.00% and 0.00%, respectively; and the Strip Rates
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 6.00% (but not less than zero).
Pass-Through Rates. Because (i) the Pass-Through Rate for the Class IO
Certificates is equal to the weighted average of the Strip Rates of each of its
Components and (ii) the Pass-Through Rates for the Class B, Class C, Class D
and Class E Certificates are equal to the Weighted Average Net Mortgage Rate
minus 0.92%, 0.54%, 0.00% and 0.00%, respectively, the Pass-Through Rate for
the Class IO Certificates will be sensitive to changes in both the Weighted
Average Net Mortgage Rate and the weighted average Pass-Through Rates, and the
Pass-Through Rates for the Class B, Class C, Class D and Class E Certificates
will be sensitive to changes in the Weighted Average Net Mortgage Rate.
The weighted average Pass-Through Rate will fluctuate based on the
relative sizes of the Certificate Balances of the Sequential Pay Certificates.
The Weighted Average Net Mortgage Rate will fluctuate over the life of the
Class IO, Class B, Class C, Class D and Class E Certificates as a result of
scheduled amortization, voluntary prepayments and liquidations and repurchases
of Mortgage Loans. If principal payments, including voluntary and involuntary
Principal Prepayments, are made on a Mortgage Loan with a relatively high Net
Mortgage Rate at a rate faster than the rate of principal payments on all of
the Mortgage Loans as a whole, the Pass-Through Rates applicable to the Class
IO, Class B, Class C, Class D and Class E Certificates will be adversely
affected. Accordingly, the yield on each such Class of Certificates will be
sensitive to changes in the outstanding principal balances of the Mortgage
Loans as a result of scheduled amortization, voluntary prepayments, repurchases
and liquidations of Mortgage Loans.
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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--Certain Risk Factors associated with the
Mortgage Loans" and "DESCRIPTION OF THE MORTGAGE POOL" herein and "YIELD AND
MATURITY CONSIDERATIONS--Yield and Prepayment Considerations" 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 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.
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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.
WEIGHTED AVERAGE LIFE
The weighted average life of any Class A-1, Class A-2, Class A-3, Class B,
Class C, Class D or Class E Certificate refers to the average amount of time
that will elapse from the date of its issuance until each dollar allocable to
principal of such Certificate is distributed to the investor. The weighted
average life of any such Offered Certificate will be influenced by, among other
things, the rate at which principal on the Mortgage Loans is paid or otherwise
collected or advanced and applied to pay principal of such Offered Certificate.
Any delay in collection of a Balloon Payment due at the maturity of a Mortgage
Loan or the repayment of the principal balance of a Mortgage Loan on its
respective 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 A-3 Certificates, the Class B Certificates, the Class C
Certificates, the Class D Certificates and the Class E Certificates, in that
order, in each case until the Certificate Balance of each such Class of
Certificates is reduced to zero.
The following tables indicate the percentage of the initial Certificate
Balance of each Class of Offered Certificates (other than the Class IO
Certificates) that would be outstanding after each of the dates shown under
each of the designated scenarios (each, a "Scenario") and the corresponding
weighted average life of each such Class of Offered Certificates. The tables
have been prepared on the basis of, among others, the assumptions described
below. To the extent that the Mortgage Loans or the Certificates have
characteristics that differ from those assumed in preparing the tables, the
Class A-1, Class A-2, Class A-3, Class B, Class C, Class D and/or Class E
Certificates may mature earlier or later than indicated by the tables.
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 following
assumptions: (i) 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, (ii) there are no delinquencies or
Additional Trust Fund Expenses, (iii) 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, (iv) partial prepayments on the Mortgage
Loans are permitted, but are assumed not to affect the amortization schedules,
(v) neither the Master Servicer nor the Depositor exercises its right of
optional termination of the Trust Fund described herein, (vi) no Mortgage Loan
is required to be purchased from the Trust Fund, (vii) there are no Prepayment
Interest Shortfalls or Appraisal Reductions and (viii) distributions on the
Certificates are made on the 15th day (each assumed to be a business day) of
each month, commencing in January 1999; provided, 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 during the Lockout Period) prepays during a month in
which a Lockout Period is in effect or in which
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<PAGE>
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 seven 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.
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
December 15, 1999 ......... 94 94 94 94 94
December 15, 2000 ......... 87 87 87 87 87
December 15, 2001 ......... 80 80 80 80 80
December 15, 2002 ......... 73 73 73 73 72
December 15, 2003 ......... 63 62 61 60 57
December 15, 2004 ......... 49 46 44 41 37
December 15, 2005 ......... 9 8 7 6 4
December 15, 2006 (and
thereafter) .............. 0 0 0 0 0
Weighted Average Life
(in years) ............... 5.0 5.0 4.9 4.9 4.8
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-2 CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT,
OR YLD. MAINT.-OTHERWISE
AT INDICATED CPR
---------------------------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (25% CPR)
DISTRIBUTION DATE 1 2 3 4 5
- --------------------------- --------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Closing Date .............. 100 100 100 100 100
December 15, 1999 ......... 100 100 100 100 100
December 15, 2000 ......... 100 100 100 100 100
December 15, 2001 ......... 100 100 100 100 100
December 15, 2002 ......... 100 100 100 100 100
December 15, 2003 ......... 100 100 100 100 100
December 15, 2004 ......... 100 100 100 100 100
December 15, 2005 ......... 100 100 100 100 100
December 15, 2006 ......... 99 96 94 93 90
December 15, 2007 ......... 55 52 49 46 42
December 15, 2008 (and
thereafter) .............. 0 0 0 0 0
Weighted Average Life
(in years) ............... 9.0 9.0 8.9 8.9 8.8
</TABLE>
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<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-3 CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT,
OR YLD. MAINT.-OTHERWISE
AT INDICATED CPR
---------------------------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (25% CPR)
DISTRIBUTION DATE 1 2 3 4 5
- --------------------------- --------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Closing Date .............. 100 100 100 100 100
December 15, 1999 ......... 100 100 100 100 100
December 15, 2000 ......... 100 100 100 100 100
December 15, 2001 ......... 100 100 100 100 100
December 15, 2002 ......... 100 100 100 100 100
December 15, 2003 ......... 100 100 100 100 100
December 15, 2004 ......... 100 100 100 100 100
December 15, 2005 ......... 100 100 100 100 100
December 15, 2006 ......... 100 100 100 100 100
December 15, 2007 ......... 100 100 100 100 100
December 15, 2008 ( and
thereafter) .............. 0 0 0 0 0
Weighted Average Life
(in years) ............... 9.7 9.7 9.7 9.7 9.7
</TABLE>
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
December 15, 1999 ......... 100 100 100 100 100
December 15, 2000 ......... 100 100 100 100 100
December 15, 2001 ......... 100 100 100 100 100
December 15, 2002 ......... 100 100 100 100 100
December 15, 2003 ......... 100 100 100 100 100
December 15, 2004 ......... 100 100 100 100 100
December 15, 2005 ......... 100 100 100 100 100
December 15, 2006 ......... 100 100 100 100 100
December 15, 2007 ......... 100 100 100 100 100
December 15, 2008 ......... 30 30 30 30 30
December 15, 2009 (and
thereafter) .............. 0 0 0 0 0
Weighted Average Life
(in years) ............... 10.1 10.1 10.1 10.1 10.1
</TABLE>
S-85
<PAGE>
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
December 15, 1999 ......... 100 100 100 100 100
December 15, 2000 ......... 100 100 100 100 100
December 15, 2001 ......... 100 100 100 100 100
December 15, 2002 ......... 100 100 100 100 100
December 15, 2003 ......... 100 100 100 100 100
December 15, 2004 ......... 100 100 100 100 100
December 15, 2005 ......... 100 100 100 100 100
December 15, 2006 ......... 100 100 100 100 100
December 15, 2007 ......... 100 100 100 100 100
December 15, 2008 ......... 100 100 100 100 100
December 15, 2009 ......... 62 62 62 62 62
December 15, 2010 ......... 22 22 22 22 22
December 15, 2011 (and
thereafter) .............. 0 0 0 0 0
Weighted Average Life
(in years) ............... 11.5 11.5 11.5 11.5 11.5
</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
December 15, 1999 ......... 100 100 100 100 100
December 15, 2000 ......... 100 100 100 100 100
December 15, 2001 ......... 100 100 100 100 100
December 15, 2002 ......... 100 100 100 100 100
December 15, 2003 ......... 100 100 100 100 100
December 15, 2004 ......... 100 100 100 100 100
December 15, 2005 ......... 100 100 100 100 100
December 15, 2006 ......... 100 100 100 100 100
December 15, 2007 ......... 100 100 100 100 100
December 15, 2008 ......... 100 100 100 100 100
December 15, 2009 ......... 100 100 100 100 100
December 15, 2010 ......... 100 100 100 100 100
December 15, 2011 ......... 95 95 95 95 95
December 15, 2012 ......... 78 76 74 71 66
December 15, 2013 (and
thereafter) .............. 0 0 0 0 0
Weighted Average Life
(in years) ............... 14.3 14.3 14.2 14.2 14.1
</TABLE>
S-86
<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
December 15, 1999 ......... 100 100 100 100 100
December 15, 2000 ......... 100 100 100 100 100
December 15, 2001 ......... 100 100 100 100 100
December 15, 2002 ......... 100 100 100 100 100
December 15, 2003 ......... 100 100 100 100 100
December 15, 2004 ......... 100 100 100 100 100
December 15, 2005 ......... 100 100 100 100 100
December 15, 2006 ......... 100 100 100 100 100
December 15, 2007 ......... 100 100 100 100 100
December 15, 2008 ......... 100 100 100 100 100
December 15, 2009 ......... 100 100 100 100 100
December 15, 2010 ......... 100 100 100 100 100
December 15, 2011 ......... 100 100 100 100 100
December 15, 2012 ......... 100 100 100 100 100
December 15, 2013 (and
thereafter) .............. 0 0 0 0 0
Weighted Average Life
(in years) ............... 14.7 14.7 14.7 14.7 14.7
</TABLE>
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<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 (other than rights to any Additional
Interest), 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 A-3, Class B and Class C Certificates will
not, and the Class D, 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
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<PAGE>
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.
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,
Class A-3 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.
S-89
<PAGE>
Because none of the Class A-1, Class A-2, Class A-3 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, Class A-2 and
Class A-3 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
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
S-90
<PAGE>
services to the Plan (or by virtue of having certain specified relationships to
such a person) solely as a result of the Plan's ownership of the Senior
Certificates. A purchaser of any such Certificate should be aware, however,
that even if the conditions specified in one or more Exemptions are satisfied,
the scope of relief provided by an Exemption may not cover all acts that may be
considered prohibited transactions.
Before purchasing any Senior Certificate, a fiduciary of a Plan should
itself confirm that the specific and general conditions of the Exemption and
the other requirements set forth in the Exemption would be satisfied. In
addition to making its own determination as to the availability of the
exemptive relief provided in the Exemption, the Plan fiduciary should consider
the availability of any other prohibited transaction exemptions. See "ERISA
CONSIDERATIONS" in the Prospectus.
The characteristics of the Class B, Class C, Class D and Class E
Certificates do not meet the requirements of the Exemptions. Accordingly,
Certificates of those Classes may not be acquired by a Plan, other than an
insurance company general account, which may be able to rely on Section III of
PTE 95-60 (discussed below).
Section III of Prohibited Transaction Class Exemption 95-60 ("PTE 95-60")
exempts from the application of the prohibited transaction provisions of
Sections 406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code
transactions in connection with the servicing, management and operation of a
trust (such as the Trust Fund) in which an insurance company general account
has an interest as a result of its acquisition of certificates issued by the
trust, provided that certain conditions are satisfied. If these conditions are
met, insurance company general accounts would be allowed to purchase classes of
Certificates (such as the Class B, Class C, Class D and Class E Certificates)
which do not meet the requirements of the Exemption solely because they (i) are
subordinated to other classes of Certificates in the Trust Fund and/or (ii)
have not received a rating at the time of the acquisition in one of the three
highest rating categories from Standard & Poor's, Moody's, DCR or Fitch. All
other conditions of the Exemption would have to be satisfied in order for PTE
95-60 to be available. Before purchasing Class B, Class C, Class D 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.
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<PAGE>
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting
agreement (the "Underwriting Agreement") between the Depositor and the
Underwriter, the Depositor has agreed to sell to Merrill Lynch and Merrill
Lynch has agreed to purchase 100% of the respective Certificate Balances of
each Class of Offered Certificates.
In the Underwriting Agreement, the Underwriter has generally agreed to
purchase all of the Offered Certificates if any are purchased. Proceeds to the
Depositor from the sale of the Offered Certificates, before deducting expenses
payable by the Depositor, will be approximately $605,715,848, which includes
accrued interest.
Distribution of the Offered Certificates will be made by the Underwriter
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. The Underwriter may effect such transactions
by selling the Offered Certificates to or through dealers, and such dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from such Underwriter. In connection with the purchase and sale of
the Offered Certificates, the Underwriter may be deemed to have received
compensation from the Depositor in the form of underwriting discounts. The
Underwriter and any dealers that participate with the Underwriter in the
distribution of the Offered Certificates may be deemed to be underwriters and
any profit on the resale of the Offered Certificates positioned by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Purchasers of the Offered Certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be
"underwriters" within the meaning of the Securities Act in connection with
reoffers and sales by them of Offered Certificates. Certificateholders should
consult with their legal advisors in this regard prior to any such reoffer or
sale.
The Depositor also has been advised by the Underwriter that it, through
one or more of its affiliates, currently intends to make a market in the
Offered Certificates; however, the Underwriter has no 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 FACTOR--Limited Liquidity for Offered Certificates".
The Depositor has agreed to indemnify the Underwriter and each person, if
any, who controls the Underwriter within the meaning of Section 15 of the
Securities Act against, or make contributions to the Underwriter and each such
controlling person with respect to, certain liabilities, including liabilities
under the Securities Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and the
Underwriter by Willkie Farr & Gallagher, New York, New York.
RATINGS
It is a condition of their issuance that the Class A-1, Class A-2 and
Class A-3 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
S-92
<PAGE>
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 the excess of default
interest collected during the related Collection Period over the reimbursement
to the Trustee, the Master Servicer or the Special Servicer for any
unreimbursed Advances and interest accrued and payable on any unreimbursed
Advances 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 on Certificates" in the Prospectus.
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<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
30/360 basis ................................ S-36
Accrued Certificate Interest ................ S-70
actual/360 basis ............................ S-36
Additional Interest ......................... S-37
Additional Trust Fund Expenses .............. S-74
Adjusted Mortgage Rate ...................... S-37
Administrative Cost Rate .................... S-42
Advance ..................................... S-75
Anticipated Repayment Date .................. S-37
Appraisal Reduction Amount .................. S-76
ARD Loans ................................... S-37
Assumed Scheduled Payment ................... S-71
Available Distribution Amount ............... S-66
Balloon Loans ............................... S-37
Balloon Payment ............................. S-37
Casualty or Condemnation Rights ............. S-40
Certificate Balance ......................... S-64
Certificate Owner ........................... S-64
Certificate Registrar ....................... S-77
Certificateholders .......................... S-66
Certificates ................................ S-63
Chase ....................................... S-79
Class ....................................... S-63
Code ........................................ S-51
Collection Period ........................... S-65
Compensating Interest Payment ............... S-57
Component ................................... S-10, S-65
Controlling Class of Sequential Pay
Certificates ................................ S-55
Controlling Class Representative ............ S-55
Corrected Mortgage Loan ..................... S-56
Credit Lease ................................ S-27
Credit Lease Assignment ..................... S-40
Credit Lease Loans .......................... S-27
Credit Lease Tenant ......................... S-27
Cross-Collateralized Loans .................. S-33
Custodian ................................... S-50
Cut-Off Date Balance ........................ S-36
Cut-Off Date DSCR ........................... S-40
Cut-Off Date LTV ............................ S-41
DCR ......................................... S-89
Debt Service Coverage Ratio ................. S-40
Debt Service Coverage Ratios ................ S-40
Defeasance Collateral ....................... S-20, S-37
Definitive Offered Certificate .............. S-64
Depositor ................................... S-3
Determination Date .......................... S-66
Discount Rate ............................... S-72
Distributable Certificate Interest .......... S-10, S-11,
S-70
Distribution Date ........................... S-66
DSCR ........................................ S-40
DTC ......................................... S-63
DTC Services ................................ S-63
Due Dates ................................... S-37
ERISA ....................................... S-89
Excluded Plan ............................... S-90
Exemption ................................... S-89
Fitch ....................................... S-89
Form 8-K .................................... S-53
Fully Amortizing Loans ...................... S-37
Guarantor ................................... S-27
Industry .................................... S-63
Initial Pool Balance ........................ S-36
Initial Reserves at Closing ................. S-42
IRS ......................................... S-88
Loan per Sq ft, Unit, Pad, Room or
Bed ......................................... S-41
Lockout Period .............................. S-37
Loss of Rents ............................... S-40
Majority Subordinate Certificateholder ...... S-55
Master Servicer ............................. S-54
Master Servicing Fee ........................ S-56
Mortgage File ............................... S-50
Mortgage Loan ............................... S-36
Mortgage Loan Purchase Agreement ............ S-50
Mortgage Loan Seller ........................ S-8
Mortgage Loans .............................. S-36
Mortgage Rate ............................... S-42
Mortgaged Properties ........................ S-36
NAP ......................................... S-42
Net Aggregate Prepayment Interest
Shortfall ................................... S-70
Net Cash Flow ............................... S-40
Net Mortgage Rate ........................... S-11, S-65
Nonrecoverable P&I Advance .................. S-75
Occupancy Percentage ........................ S-42
Offered Certificates ........................ S-63
OID Regulations ............................. S-88
Participants ................................ S-64
Party in Interest ........................... S-90
Pass-Through Rate ........................... S-65
Percentage Premium .......................... S-72
P&I Advance ................................. S-74
Plan ........................................ S-89
Pooling and Servicing Agreement ............. S-63
Prepayment Interest Excess .................. S-57
Prepayment Interest Shortfall ............... S-57
Prepayment Premium .......................... S-72
Primary Term ................................ S-39
Principal Distribution Amount ............... S-10, S-70
Principal Recovery Fee ...................... S-57
Private Certificates ........................ S-63
PTE 95-60 ................................... S-91
</TABLE>
S-94
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<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Purchase Price ........................... S-50
Qualified Appraiser ...................... S-75
Qualified Substitute Mortgage Loan ....... S-51
Rate Differential ........................ S-72
Rating Agencies .......................... S-16
Realized Losses .......................... S-74
Reimbursement Rate ....................... S-75
Related Proceeds ......................... S-75
Remain Amort. Term ....................... S-40
Remaining Cash Flow ...................... S-37
REMIC .................................... S-15
REMIC Administrator ...................... S-79
REMIC Regular Certificates ............... S-63
REMIC Residual Certificates .............. S-63
Rental Property .......................... S-40
REO Extension ............................ S-61
REO Loan ................................. S-72
REO Property ............................. S-56
REO Tax .................................. S-61
Repayment LTV ............................ S-41
Required Appraisal Date .................. S-75
Required Appraisal Loan .................. S-75
Restricted Group ......................... S-89
Scenario ................................. S-83
Scheduled Payment ........................ S-71
SEC ...................................... S-78
Securities Act ........................... S-63
Senior Certificates ...................... S-73
Sequential Pay Certificates .............. S-63
Servicing Fees ........................... S-56
SMMEA .................................... S-91
Special Servicer ......................... S-55
Special Servicing Fee .................... S-57
Special Servicing Fee Rate ............... S-57
Specially Serviced Mortgage Loans ........ S-56
Specially Serviced Trust Fund Assets ..... S-56
Stated Principal Balance ................. S-11, S-65
Stated Remaining Term .................... S-42
Statement to Certificateholders .......... S-76
Subordinate Certificates ................. S-22, S-72
Substitution Shortfall Amount ............ S-50
Systems .................................. S-63
Trust Fund ............................... S-63
Trustee Fee .............................. S-79
Trustee Fee Rate ......................... S-79
Underwriting Agreement ................... S-92
Underwriting Reserves .................... S-42
Voting Rights ............................ S-78
Weighted Average Net Mortgage Rate ....... S-11, S-65
Year 2000 problems ....................... S-63
Year Built ............................... S-42
Yield Maintenance Charges ................ S-72
Zoning Laws .............................. S-32
</TABLE>
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<TABLE>
<CAPTION>
CONTROL
NO. PROPERTY NAME ADDRESS CITY
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MLMI-003 1700 Broadway 1700 Broadway New York
MLMI-135 Independence Green Apartments 36700 Grand River Avenue Farmington Hills
MLMI-048 The Ansonia Commercial 2109 Broadway New York
MLMI-064 Mercer Mall 3371 Brunswick Pike Lawrence
MLMI-011 Bentworth Apartments 11655 Briar Forest Drive Houston
MLMI-102 Embassy Suites - Oklahoma City 1815 S. Meridian Avenue Oklahoma City
MLMI-051 The Wic Building 4700 Wissahickson Ave Philadelphia
MLMI-128 Quality Inn City Center 154 West 600 South Salt Lake City
MLMI-050 The Shelton 5909 Luther Lane Dallas
MLMI-153 Holiday on the Bay Kettle Creek Road Toms River
MLMI-041 Ramada Inn Airport 76 Industrial Highway Essington
MLMI-043 Republic Beverage Building 1010 Isuzu Parkway Grand Prarie
MLMI-001 1 Beach 1 Beach Street San Francisco
MLMI-004 2 Northpoint 2 Northpoint Street San Francisco
MLMI-034 Myrtle Cove Apartments 9760 & 9860 Scyene Road Dallas
MLMI-110 Station Plaza Shopping Center 13408 - 13450 Jefferson Davis Highway Woodbridge
MLMI-031 Holcomb Woods Shopping Center 1570 Holcomb Bridge Road Roswell
MLMI-117 Willowbrook Court Shopping Center 17776 Tomball Parkway Houston
MLMI-026 Federal Express Building 528 West 34th Street New York
MLMI-005 3737 Hillcroft Apartments 3737 Hillcroft Houston
MLMI-104 BJ's Wholesale Club 2044 Red Lion Road Philadelphia
MLMI-134 Kenmore Estates 18810 68th Avenue NE Bothell
MLMI-019 Corr-Pro (Mystic) Warehouse 301 SW 27th Street Renton
MLMI-045 Sommerset Apartments 830 S. Rancho Santa Fe Rd. San Marcos
MLMI-152 Chateau Brickyard 3080 South 1300 East Salt Lake City
MLMI-118 Waterbury Crossing 425 Bank Street Waterbury
MLMI-068 Redwood Village Apartments 253-349 Redwood Avenue Paterson
MLMI-023 Deerfield Apartments 640 Windsor Avenue Windsor
MLMI-062 Cerritos Village 19101-19151 Bloomfield Avenue & 12506-12544 South St. Cerritos
MLMI-027 Foxmoor Apartments 10843 N. Central Expwy. Dallas
MLMI-012 Beverly-Brighton Shops 362-370 N. Beverly Drive Beverly Hills
MLMI-032 Kingsley Plaza Apartments 444 S. Kingsley Drive Los Angeles
MLMI-133 Sammamish Ridge 14820 Redmond Way Redmond
MLMI-007 6900 Lindbergh Blvd 6900 Lindbergh Blvd and 3125 South 70th Street Philadelphia
MLMI-124 Fairfield Inn - Beaverton 15583 N.W. Gateway Court Beaverton
MLMI-042 Reeve - Wildcreek Apartments 1511 Faro Drive Austin
MLMI-109 Quadrangle Square 630 Skylark Road Charleston
MLMI-006 502 West Office Center 502 West Office Center Fort Washington
MLMI-115 Santa Monica Sav-On 8491 West Santa Monica Boulevard West Hollywood
MLMI-022 Deane Hill Apartments 7700 Gleason Drive Knoxville
MLMI-101 2333 Walton Boulevard 2333 Walton Boulevard Auburn Hills
MLMI-125 Courtyard by Marriott - Newburgh One Govenor Drive Newburgh
MLMI-126 Albany Thruway Courtyard 1455 Washington Avenue Albany
MLMI-106 Crown Care Center 3001 East Elm Street Harrisonville
MLMI-142 Aspen Shadows 4025 Lake Mary Road Flagstaff
MLMI-105 Country Club Care Center 503 Regent Drive Warrensburg
MLMI-160 PetsMart, Inc. 8210 Plaza Drive West Madison
MLMI-013 Bishops Landing Apartments 333 East Brooks Street Norman
MLMI-067 Phelan Village Shopping Center 4013-4083 Phelan Road Phelan
MLMI-144 AAAABCO Gibson Mini Storage 975 Suffelbeam Henderson
MLMI-020 Crosspointe Vista Apartments 620 Comstock Street Seattle
MLMI-033 MeadowCrest Apartments 9525 Lorene Lane San Antonio
MLMI-040 Quarters Apartments 6415 Melody Lane Dallas
MLMI-161 Heilig Meyers 1406 E. 53rd Street Anderson
MLMI-164 Kings Court Shopping Center 9530 Philadelphia Road Rossville
MLMI-120 Office Max 5895 Katella Ave. Cypress
MLMI-065 Springfield Apartments 1000 E. Lindsey Street Norman
MLMI-018 Clarendon Apartments 1214 Crown Point Norman
MLMI-035 O'Neill Industrial Center 1210 Stanbridge Street Norristown
MLMI-056 Willowbrook Apartments 14095 S. W. Walker Road Beaverton
MLMI-127 Fairfield Inn - Henrietta 4695 West Henrietta Road Henrietta
MLMI-114 Oak Lawn Promenade 6310-6356 West 95th Street Oak Lawn
MLMI-008 Alexander House Apartments 6060 Gulfton Houston
MLMI-049 The Atrium Cellini Apartments 6303 Gulfton Drive Houston
MLMI-057 Wilshire Village Shopping Center 6102 E. Mockingbird Lane Dallas
MLMI-096 Pine Valley Court (Colony Greene) Apartments 116 Blackwood Clementon Rd Clementon
MLMI-052 Tiffany Apartments 9600 McCombs Street El Paso
MLMI-060 Woodhollow Apartments 480 Highway 332 Lake Jackson
MLMI-058 Windsor Court Apartments 219 S. 156th Street Burien
MLMI-017 City Villas 837 16th Street San Diego
MLMI-029 Hartford Apartments 4301 Hartford Drive Dallas
MLMI-036 Pep Boys Plaza 511-581 N. Main Steet Corona
MLMI-010 Bassett Furniture 1915 S. Stemmons Freeway Lewisville
MLMI-061 332 East 95th Street 332 East 95th Street New York
MLMI-116 Seneca Park Plaza Shopping Center 13501-13541 Clopper Road Germantown
MLMI-066 Orleans East Apartments 1541 East Larned Street Detroit
MLMI-107 1401 Morehead St. - Coca Cola 1401 W. Morehead St Charlotte
MLMI-111 Shenandoah Square Shopping Center 932-958 Edwards Ferry Road Leesburg
MLMI-047 Tara Hall Apartments 1601-1717 College Street Houston
MLMI-141 Chapelcroft 9629 Buselton Avenue Philadelphia
MLMI-002 124 West 34th Street 124 West 34th Street New York
MLMI-140 Colonial House 818 2nd Street, PL NE Hickory
MLMI-097 Doheny Drive Apartments 215-217 South Doheny Drive Beverly Hills
MLMI-092 11660 Chenault Avenue 11660 Chenault Avenue Los Angeles
MLMI-015 Charleston Apartments 2073 West Lindsay Street Norman
MLMI-098 Hacienda de Camarillo 831 Paseo Camarillo Camarillo
MLMI-059 Wong Family Trust Apartments 1102-1106 W. St. Georges Ave Linden
MLMI-016 Childs Instant Homes 861 East Butler Ave Doylestown
MLMI-009 Arlington Park I 3121 East Park Row Drive Arlington
MLMI-139 Walkers Ridge Nifong Blvd. @ Old Mill Creek Road Columbia
MLMI-108 Beacon Square 140-169 West 6th Street San Pedro
MLMI-021 Crown Gardens Apartments 7001 Hillcroft Houston
MLMI-143 Antelope Manor Apartments 7764 Poplar Avenue Citrus Heights
MLMI-028 Gazebo Inn 2424 West Highway 76 Branson
MLMI-162 Rite Aid 1109 Benns Church Blvd. Smithfield
MLMI-054 Village Square Apartments 2612 Throckmorton Drive Dallas
MLMI-024 East 61st Street Brownstone 156 East 61st Street New York
MLMI-025 Eastgate Apartments 847 Dryden Road Dryden
MLMI-099a Peachtree Apts 211 College Street Florence
MLMI-099b Willow Lake Apartments 106 Briarhill Road Florence
- -----------------------------------------------------------------------------------------------------------------------------------
MLMI-099 Aggregate Loan Level Info. (2 Properties)
MLMI-146 49er Mini Storage 527 Truck Street Placerville
MLMI-053 Village at Brookside Apartments 1404 East 41st Street Tulsa
MLMI-086 Rainbow Center 2051 S. Rainbow Blvd. Las Vegas
MLMI-073 12460 Gladstone 12460 Gladstone Sylmar
MLMI-119 The LeConte Building 10966 Le Conte Ave Los Angeles
MLMI-055 Westcliff Apartments 1404 Moore Avenue Portland
MLMI-038 Pippin-Good Samaritan Center 2475 West Galbraith Road Cincinnati
MLMI-039 Pond Plaza 1160 Post Road Warwick
MLMI-163 Heilig Meyers 3521 Park Plaza Road Paducah
MLMI-044 Royal Knight Apartments 2610 Knight Street Dallas
MLMI-100 Hastings Entertainment 1630 Rio Rancho Blvd. Rio Rancho
MLMI-081 Gabela Partners 26860 Jefferson Avenue Murrietta
MLMI-037 Peppertree Apartments 1850 Pepper Valley Lane El Cajon
MLMI-093 1346 Pine Street 1346 Pine Street San Francisco
MLMI-095 2790 Pine Street 2790 Pine Street San Francisco
MLMI-046 Super 8 Rockwall 1130 E 1-30 Rockwall
MLMI-014 Cedar Village Mobile Home Park County Routes 224 & 214 Lincoln
MLMI-091 11307 Morrison 11307 Morrison Street North Hollywood
MLMI-094 1850 Williams Street 1850 Williams Street Simi Valley
MLMI-089 Spring Valley Plaza 1551 E.Spring Valley Rd Richardson
MLMI-083 Marie Cook Trustee 2398 Railroad Street Corona
MLMI-030 Heritage Apartments 2522-2532 Columbia Avenue Swissvale
MLMI-071 Woodsdale Apartments 100 Eastland Drive Woodruff
MLMI-070 Sundown Apartments Cecil Lane Montgomery
MLMI-080 Clifford Family Trust 501 E. Holt Ave Pomona
MLMI-082 Hotton 1528-1532 Locust Street Walnut Creek
MLMI-087 Rita A. Quam Family Trust 3065-3069 Sheridan Street Las Vegas
MLMI-078 BHB Properties LLC 865 West Avenue I Lancaster
MLMI-074 2019 North Main Street 2019 North Main Street Royal Oak
MLMI-085 Patio World 23855 Hawthorne Blvd Torrance
MLMI-077 Balboa Plaza 16844 Sherman Way Van Nuys
MLMI-079 Cherry Hills Apartments 1536 E 3rd Street Newberg
MLMI-076 Ashikita 1331 7th Street Santa Monica
MLMI-084 Parkside Plaza, LLC 6683-6687 Bells Ferry Road Woodstock
MLMI-088 Rivard 3890 E. Craig Road Las Vegas
MLMI-072 11707 Otsego Street 11707 Otsego Street Los Angeles
MLMI-112 Holt and Eleanor Center 416 East Holt Avenue Pomona
MLMI-090 Stuart Sackley 909 N. Aviation Blvd Manhattan Beach
MLMI-069 Argonne Avenue Apts 711 Argonne Avenue Atlanta
MLMI-075 8245 Florin Road 8245 Florin Road Sacramento
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF CUMULATIVE % OF
ZIP ORIGINAL DATE % OF INITIAL INITIAL POOL BORROWER
STATE CODE PROPERTY TYPE BALANCE BALANCE POOL BALANCE BALANCE AFFILIATED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NY 10019 Office $60,000,000 $59,845,380 9.37% 9.37%
MI 48335 Multifamily 35,000,000 34,890,416 5.47% 14.84%
NY 10023 Retail 29,000,000 28,781,905 4.51% 19.35%
NJ 08648 Retail 24,000,000 23,979,568 3.76% 23.10%
TX 77077 Multifamily 18,030,000 17,878,407 2.80% 25.90%
OK 73108 Hospitality 17,250,000 17,214,166 2.70% 28.60%
PA 19129 Industrial 15,550,000 15,514,008 2.43% 31.03%
UT 84101 Hospitality 13,700,000 13,683,354 2.14% 33.17%
TX 75225 Multifamily 13,600,000 13,509,337 2.12% 35.29%
NJ 08753 Multifamily 12,000,000 12,000,000 1.88% 37.17%
PA 19029 Hospitality 10,750,000 10,735,275 1.68% 38.85%
TX 75050 Industrial 10,680,000 10,658,301 1.67% 40.52%
CA 94133 Office 10,500,000 10,480,964 1.64% 42.16% MLMI-004
CA 94133 Office 10,500,000 10,480,964 1.64% 43.80% MLMI-001
TX 75227 Multifamily 9,520,000 9,452,864 1.48% 45.29%
VA 22191 Retail 9,200,000 9,186,673 1.44% 46.72%
GA 30076 Retail 8,175,000 8,157,432 1.28% 48.00%
TX 77064 Retail 8,000,000 7,988,270 1.25% 49.25%
NY 10001 Industrial 7,999,000 7,948,040 1.24% 50.50%
TX 77057 Multifamily 7,650,000 7,574,170 1.19% 51.68%
PA 19115 Retail 7,200,000 7,189,570 1.13% 52.81%
WA 98011 Multifamily 6,800,000 6,765,511 1.06% 53.87%
WA 98055 Industrial 6,500,000 6,455,558 1.01% 54.88%
CA 92069 Multifamily 6,400,000 6,369,214 1.00% 55.88%
UT 84106 Healthcare 6,300,000 6,295,086 0.99% 56.87%
CT 06708 Retail 6,300,000 6,277,956 0.98% 57.85%
NJ 07055 Multifamily 6,200,000 6,191,946 0.97% 58.82%
CT 06095 Multifamily 6,000,000 5,980,327 0.94% 59.76%
CA 90703 Retail 5,625,000 5,617,946 0.88% 60.64%
TX 75231 Multifamily 5,650,000 5,607,996 0.88% 61.51%
CA 90210 Retail 5,320,000 5,311,134 0.83% 62.35%
CA 90020 Multifamily 5,100,000 5,063,421 0.79% 63.14%
WA 98052 Multifamily 5,000,000 5,000,000 0.78% 63.92%
PA 19142 Industrial 5,000,000 4,982,001 0.78% 64.70%
OR 97005 Hospitality 4,900,000 4,894,635 0.77% 65.47%
TX 78741 Multifamily 4,900,000 4,860,272 0.76% 66.23%
SC 29202 Retail 4,860,000 4,848,614 0.76% 66.99%
PA 19034 Office 4,850,000 4,839,004 0.76% 67.75%
CA 90036 Retail 4,850,000 4,831,809 0.76% 68.50% MLMI-112
TN 37830 Multifamily 4,850,000 4,830,724 0.76% 69.26%
MI 48326 Industrial 4,680,000 4,659,887 0.73% 69.99%
NY 12550 Hospitality 4,625,000 4,619,728 0.72% 70.72% MLMI-127; MLMI-126
NY 12206 Hospitality 4,525,000 4,519,842 0.71% 71.42% MLMI-127; MLMI-125
MO 64701 Healthcare 4,125,000 4,102,798 0.64% 72.07% MLMI-105
AZ 86001 Multifamily 4,000,000 3,991,293 0.63% 72.69%
MO 64093 Healthcare 3,875,000 3,854,143 0.60% 73.29% MLMI-106
WI 53719 CTL 3,751,130 3,737,476 0.59% 73.88% MLMI-161; MLMI-163
OK 73069 Multifamily 3,700,000 3,682,407 0.58% 74.46% MLMI-015; MLMI-018
CA 92371 Retail 3,625,000 3,621,867 0.57% 75.02%
NV 89014 Mini Storage 3,600,000 3,587,622 0.56% 75.59%
WA 98109 Multifamily 3,600,000 3,567,480 0.56% 76.15%
TX 78216 Multifamily 3,500,000 3,472,281 0.54% 76.69%
TX 75231 Multifamily 3,337,500 3,329,451 0.52% 77.21%
IN 46013 CTL 3,217,226 3,204,462 0.50% 77.71% MLMI-160; MLMI-163
MD 21237 Retail 3,100,000 3,090,856 0.48% 78.20%
CA 90630 Retail 3,015,000 3,010,956 0.47% 78.67%
OK 73071 Multifamily 3,000,000 2,997,102 0.47% 79.14%
OK 73069 Multifamily 2,943,750 2,929,753 0.46% 79.60% MLMI-013; MLMI-015
PA 19401 Industrial 2,900,000 2,895,585 0.45% 80.05%
OR 97005 Multifamily 2,900,000 2,889,197 0.45% 80.50%
NY 14467 Hospitality 2,850,000 2,846,751 0.45% 80.95% MLMI-125; MLMI-126
IL 60453 Retail 2,790,000 2,786,199 0.44% 81.39%
TX 77081 Multifamily 2,800,000 2,776,994 0.43% 81.82%
TX 77081 Multifamily 2,720,000 2,702,445 0.42% 82.24%
TX 75214 Retail 2,605,000 2,589,399 0.41% 82.65%
NJ 08021 Multifamily 2,600,000 2,581,590 0.40% 83.05%
TX 79924 Multifamily 2,550,000 2,535,861 0.40% 83.45%
TX 77566 Multifamily 2,530,000 2,512,045 0.39% 83.84%
WA 98148 Multifamily 2,500,000 2,497,769 0.39% 84.24%
CA 92101 Multifamily 2,500,000 2,495,307 0.39% 84.63% MLMI-037
TX 75219 Multifamily 2,500,000 2,484,318 0.39% 85.02% MLMI-044; MLMI-054
CA 91720 Retail 2,400,000 2,391,401 0.37% 85.39%
TX 75067 Retail 2,400,000 2,391,060 0.37% 85.76%
NY 10128 Multifamily 2,350,000 2,347,999 0.37% 86.13%
MD 20874 Retail 2,350,000 2,341,734 0.37% 86.50%
MI 48207 Multifamily 2,300,000 2,297,915 0.36% 86.86%
NC 28208 Office 2,300,000 2,295,108 0.36% 87.22%
VA 20176 Retail 2,272,000 2,264,133 0.35% 87.57%
TX 77057 Multifamily 2,264,000 2,252,315 0.35% 87.93%
PA 19115 Multifamily 2,225,000 2,221,969 0.35% 88.27%
NY 10001 Retail 2,200,000 2,192,712 0.34% 88.62%
NC 28601 Multifamily 2,100,000 2,092,588 0.33% 88.95%
CA 90211 Multifamily 2,100,000 2,086,311 0.33% 89.27%
CA 90049 Multifamily 2,050,000 2,042,949 0.32% 89.59%
OK 73069 Multifamily 2,051,200 2,041,447 0.32% 89.91% MLMI-013; MLMI-018
CA 93010 Multifamily 2,050,000 2,040,496 0.32% 90.23%
NJ 07036 Multifamily 2,000,000 1,992,973 0.31% 90.54%
PA 18901 Mobile Home Park 2,000,000 1,992,560 0.31% 90.86%
TX 76010 Multifamily 2,000,000 1,990,112 0.31% 91.17%
MO 65205 Multifamily 2,000,000 1,988,791 0.31% 91.48%
CA 90731 Office 1,920,000 1,915,087 0.30% 91.78%
TX 77057 Multifamily 1,886,000 1,860,740 0.29% 92.07%
CA 95610 Multifamily 1,830,000 1,825,736 0.29% 92.36%
MO 65616 Hospitality 1,800,000 1,789,201 0.28% 92.64%
VA 23430 CTL 1,745,000 1,738,278 0.27% 92.91%
TX 75219 Multifamily 1,700,000 1,689,183 0.26% 93.17% MLMI-044; MLMI-029
NY 10021 Multifamily 1,699,900 1,680,709 0.26% 93.44%
NY 14850 Multifamily 1,650,000 1,648,535 0.26% 93.70%
MS 39073 Multifamily 750,750 745,775
MS 39073 Multifamily 899,250 894,930
- -----------------------------------------------------------------------------------------------------------------------------------
1,650,000 1,640,704 0.26% 93.95%
CA 95667 Mini Storage 1,574,000 1,568,913 0.25% 94.20%
OK 74105 Multifamily 1,500,000 1,485,635 0.23% 94.43%
NV 89102 Retail 1,500,000 1,474,921 0.23% 94.66%
CA 91342 Industrial 1,480,000 1,471,868 0.23% 94.89%
CA 90024 Retail 1,475,000 1,469,973 0.23% 95.12%
TX 78374 Multifamily 1,440,000 1,431,187 0.22% 95.35%
OH 45239 Mixed Use 1,440,000 1,428,498 0.22% 95.57%
RI 02888 Retail 1,430,000 1,420,966 0.22% 95.79%
KY 42001 CTL 1,415,580 1,409,963 0.22% 96.01% MLMI-161; MLMI-160
TX 75219 Multifamily 1,352,000 1,348,604 0.21% 96.22% MLMI-029; MLMI-054
NM 87124 Retail 1,350,000 1,348,157 0.21% 96.44%
CA 92590 Industrial 1,260,000 1,255,096 0.20% 96.63%
CA 92021 Multifamily 1,230,000 1,226,935 0.19% 96.82% MLMI-017
CA 94109 Multifamily 1,200,000 1,196,503 0.19% 97.01% MLMI-095
CA 94109 Multifamily 1,200,000 1,196,503 0.19% 97.20% MLMI-093
TX 75087 Hospitality 1,200,000 1,193,656 0.19% 97.39%
DE 19960 Mobile Home Park 1,170,000 1,165,188 0.18% 97.57%
CA 91601 Multifamily 1,124,000 1,116,673 0.17% 97.74%
CA 93065 Multifamily 1,064,000 1,057,001 0.17% 97.91%
TX 75080 Retail 911,250 906,992 0.14% 98.05%
CA 91720 Industrial 900,000 894,454 0.14% 98.19%
PA 15218 Multifamily 840,000 830,421 0.13% 98.32%
SC 29388 Multifamily 825,000 821,462 0.13% 98.45%
AL 36109 Multifamily 810,000 806,453 0.13% 98.58%
CA 91767 Retail 780,000 775,194 0.12% 98.70%
CA 94596 Retail 775,000 772,431 0.12% 98.82%
NV 89102 Industrial 740,000 736,289 0.12% 98.93%
CA 93534 Retail 735,000 732,139 0.11% 99.05%
MI 48073 Multifamily 705,000 702,480 0.11% 99.16%
CA 90505 Retail 700,000 695,766 0.11% 99.27% MLMI-090
CA 91406 Retail 625,000 622,567 0.10% 99.37%
OR 97132 Multifamily 595,000 593,125 0.09% 99.46%
CA 90401 Retail 575,000 573,045 0.09% 99.55%
GA 30189 Mixed Use 563,500 560,569 0.09% 99.64%
NV 89030 Industrial 540,000 535,602 0.08% 99.72%
CA 91607 Multifamily 480,000 477,428 0.07% 99.80%
CA 91767 Retail 430,000 423,510 0.07% 99.86% MLMI-115
CA 90266 Retail 378,000 376,809 0.06% 99.92% MLMI-085
GA 30308 Multifamily 270,000 269,388 0.04% 99.96%
CA 95828 Mixed Use 240,000 238,421 0.04% 100.00%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATED ORIG REM
ORIG REM AMORT AMORT
INTEREST ACCRUAL MORTGAGE ADMINISTRATIVE TERM TERM TERM TERM
CROSSED METHOD RATE COST RATE (MOS.) (MOS.) (MOS.) (MOS.)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Actual/360 6.810% 0.1095% 180 177 360 357
Actual/360 6.700 0.1095 120 116 360 356
Actual/360 6.790 0.1095 84 75 360 351
Actual/360 7.250 0.1095 120 119 360 359
Actual/360 7.538 0.1095 120 107 360 347
Actual/360 7.500 0.1095 120 118 300 298
Actual/360 7.250 0.1095 120 118 300 298
Actual/360 7.100 0.1095 120 119 300 299
Actual/360 6.850 0.1095 120 112 360 352
Actual/360 6.850 0.1095 180 180 360 360
Actual/360 6.625 0.1095 120 119 300 299
30/360 6.530 0.1295 240 239 240 239
30/360 6.500 0.1095 132 130 360 358
30/360 6.500 0.1095 132 130 360 358
30/360 6.730 0.0995 120 112 360 352
Actual/360 7.000 0.1095 120 118 360 358
Actual/360 7.320 0.1095 240 238 300 298
Actual/360 6.950 0.1095 120 118 360 358
Actual/360 6.780 0.1295 180 178 180 178
Actual/360 7.544 0.1095 84 70 360 346
Actual/360 7.000 0.1095 180 178 360 358
Actual/360 6.980 0.1095 84 77 360 353
Actual/360 7.250 0.1095 120 111 360 351
Actual/360 7.010 0.1095 180 174 360 354
Actual/360 7.250 0.1095 120 119 360 359
Actual/360 7.050 0.1095 120 117 300 297
Actual/360 7.000 0.1295 120 119 300 299
Actual/360 6.870 0.1095 120 116 360 356
Actual/360 7.250 0.1095 120 119 300 299
Actual/360 7.180 0.1295 240 236 240 236
Actual/360 6.760 0.1095 144 142 360 358
Actual/360 7.020 0.1095 120 111 360 351
30/360 6.890 0.1095 120 116 IO IO
Actual/360 7.220 0.1095 120 117 300 297
Actual/360 7.750 0.1095 120 119 300 299
Actual/360 7.125 0.1095 120 112 324 316
Actual/360 6.875 0.1095 120 117 360 357
Actual/360 7.375 0.1295 144 142 300 298
Actual/360 7.175 0.1095 288 285 288 285
Actual/360 6.920 0.1095 120 115 360 355
Actual/360 7.510 0.1095 180 177 264 261
MLMI-127; MLMI-126 Actual/360 7.500 0.1095 120 119 300 299
MLMI-127; MLMI-125 Actual/360 7.500 0.1095 120 119 300 299
MLMI-105 Actual/360 7.300 0.1095 240 237 240 237
Actual/360 7.200 0.1095 120 117 360 357
MLMI-106 Actual/360 7.300 0.1095 240 237 240 237
30/360 8.580 0.1095 120 114 360 354
Actual/360 7.125 0.1295 180 176 300 296
Actual/360 7.160 0.1095 120 119 360 359
Actual/360 7.150 0.1095 120 117 300 297
Actual/360 7.130 0.0995 84 73 360 349
Actual/360 7.390 0.1095 180 170 360 350
Actual/360 7.000 0.1295 120 118 300 298
30/360 7.420 0.1095 156 152 322 318
Actual/360 6.950 0.1095 120 116 360 356
Actual/360 7.313 0.1095 178 176 360 358
Actual/360 6.500 0.1295 180 179 360 359
Actual/360 7.125 0.1295 180 176 300 296
Actual/360 7.200 0.1095 120 118 360 358
Actual/360 7.000 0.1095 300 297 300 297
MLMI-125; MLMI-126 Actual/360 7.500 0.1095 120 119 300 299
Actual/360 7.250 0.1095 120 118 360 358
Actual/360 7.050 0.0995 120 112 324 316
Actual/360 7.010 0.0995 120 112 360 352
Actual/360 7.000 0.0995 120 115 300 295
30/360 8.375 0.1095 120 109 360 349
Actual/360 7.000 0.1095 120 113 360 353
Actual/360 7.210 0.1095 120 110 360 350
Actual/360 6.970 0.0995 120 119 360 359
Actual/360 6.170 0.1295 120 118 360 358
Actual/360 7.150 0.1295 120 112 360 352
Actual/360 7.250 0.1295 84 81 300 297
Actual/360 7.000 0.1095 120 117 300 297
Actual/360 7.250 0.1295 120 119 360 359
Actual/360 7.020 0.1095 120 117 300 297
Actual/360 6.875 0.1295 120 119 360 359
Actual/360 7.375 0.1095 120 118 300 298
Actual/360 7.110 0.1095 120 117 300 297
Actual/360 7.340 0.0995 120 113 360 353
Actual/360 7.250 0.1095 180 178 360 358
Actual/360 7.750 0.1295 120 117 300 297
Actual/360 7.000 0.1095 180 177 300 297
30/360 7.750 0.1095 120 111 360 351
30/360 6.800 0.1095 120 116 360 356
Actual/360 7.125 0.1295 180 176 300 296
30/360 7.375 0.1095 120 114 360 354
Actual/360 7.375 0.1295 180 177 300 297
Actual/360 7.125 0.1295 240 238 240 238
Actual/360 6.875 0.1295 120 114 360 354
Actual/360 6.990 0.1095 240 237 240 237
Actual/360 7.500 0.1095 120 117 330 327
Actual/360 7.647 0.1095 120 107 300 287
Actual/360 6.900 0.1095 120 117 360 357
Actual/360 7.375 0.1095 120 116 264 260
30/360 6.875 0.1095 240 237 298 295
Actual/360 7.080 0.1295 120 112 360 352
30/360 8.000 0.1095 120 104 360 344
Actual/360 7.000 0.1295 240 239 360 359
- --------------------------------------------------------------------------------------------------------------------------
30/360 7.875 0.1095 120 112 360 352
Actual/360 7.500 0.1095 120 117 300 297
Actual/360 7.160 0.1095 84 76 300 292
30/360 8.375 0.1095 120 110 240 230
30/360 8.000 0.1095 60 52 360 352
Actual/360 7.200 0.1095 120 117 300 297
Actual/360 6.870 0.0995 120 115 300 295
30/360 7.770 0.1095 120 109 360 349
Actual/360 6.875 0.1295 180 178 180 178
30/360 7.420 0.1095 156 152 322 318
Actual/360 6.750 0.1295 120 118 300 298
Actual/360 6.650 0.1095 120 119 300 299
30/360 8.250 0.1095 120 114 360 354
Actual/360 6.800 0.1295 120 118 300 298
Actual/360 7.000 0.1095 120 116 360 356
Actual/360 7.000 0.1095 120 116 360 356
Actual/360 7.740 0.1295 240 237 240 237
Actual/360 8.000 0.1295 84 80 300 296
30/360 7.750 0.1095 120 111 360 351
30/360 8.250 0.1095 120 110 360 350
30/360 8.125 0.1095 60 53 360 353
30/360 8.250 0.1095 120 114 300 294
30/360 8.580 0.1095 120 102 360 342
Actual/360 7.750 0.1095 120 116 300 296
Actual/360 7.625 0.1095 180 176 300 296
30/360 8.250 0.1095 120 114 300 294
30/360 8.125 0.1095 120 115 360 355
30/360 8.375 0.1095 120 115 300 295
30/360 8.250 0.1095 120 114 360 354
30/360 7.750 0.1095 120 115 360 355
30/360 8.125 0.1095 120 111 360 351
30/360 8.250 0.1095 120 114 360 354
30/360 8.375 0.1095 120 115 360 355
30/360 8.000 0.1095 120 115 360 355
Actual/360 7.875 0.1095 120 117 240 237
30/360 9.625 0.1095 120 104 360 344
30/360 8.125 0.1095 120 112 360 352
Actual/360 6.950 0.1095 132 129 132 129
30/360 8.375 0.1095 120 115 360 355
Actual/360 7.375 0.1095 120 118 300 298
30/360 8.250 0.1095 120 110 360 350
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANTICIPATED BALLOON /
ORIGINATION REPAYMENT ANTICIPATED REPAYMENT
DATE DATE BALANCE MATURITY TERM PREPAYMENT RESTRICTIONS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
08/20/98 09/01/2013 $44,385,897 ARD L(167),O(13)
07/30/98 08/01/2008 30,334,084 Balloon L(113),O(7)
02/13/98 03/01/2005 26,439,205 ARD L(60),1(11),O(13)
10/13/98 11/01/2008 20,801,652 Balloon L(116),O(4)
10/24/97 11/01/2007 15,747,089 Balloon L(60),YM(56),O(4)
09/11/98 10/01/2008 14,052,969 Balloon L(116),O(4)
09/03/98 10/01/2008 12,387,855 Balloon L(116),O(4)
10/09/98 11/01/2008 11,023,023 Balloon L(12),YM(104),O(4)
03/20/98 04/01/2008 11,678,860 Balloon L(60),YM(53),O(7)
11/30/98 12/01/2013 9,144,780 ARD L(176),O(4)
10/05/98 11/01/2008 8,413,263 Balloon L(116),O(4)
10/01/98 11/01/2018 NAP Fully Amort L(236),O(4)
09/18/98 10/01/2009 8,696,339 Balloon L(128),O(4)
09/18/98 10/01/2009 8,696,339 Balloon L(128),O(4)
03/05/98 04/01/2008 8,132,714 Balloon L(113),O(7)
09/03/98 10/01/2008 8,038,880 Balloon L(116),O(4)
09/18/98 10/01/2018 3,350,418 Balloon L(236),O(4)
09/04/98 10/01/2008 6,981,138 Balloon L(116),O(4)
09/04/98 10/01/2013 NAP Fully Amort L(176),O(4)
09/19/97 10/01/2004 7,055,507 Balloon L(48),YM(32),O(4)
09/25/98 10/01/2013 5,524,783 Balloon L(176),O(4)
04/06/98 05/01/2005 6,266,137 Balloon L(36),YM(44),O(4)
02/05/98 03/01/2008 5,636,021 ARD L(60),YM(56),O(4)
05/23/98 06/01/2013 4,772,213 Balloon L(95),YM(81),O(4)
10/21/98 11/01/2008 5,538,712 Balloon L(116),O(4)
08/07/98 09/01/2008 5,061,405 Balloon L(120),O()
10/14/98 11/01/2008 4,904,308 Balloon L(116),O(4)
07/02/98 08/01/2008 5,154,897 Balloon L(116),O(4)
10/29/98 11/01/2008 4,480,240 Balloon L(116),O(4)
07/31/98 08/01/2018 NAP Fully Amort L(236),O(4)
09/17/98 10/01/2010 4,332,534 Balloon L(72),YM(68),O(4)
02/12/98 03/01/2008 4,398,823 Balloon L(60),YM(56),O(4)
07/29/98 08/01/2008 5,000,000 Balloon L(120),O()
08/05/98 09/01/2008 3,979,173 Balloon L(113),O(7)
10/09/98 11/01/2008 4,019,632 Balloon L(116),O(4)
03/20/98 04/01/2008 4,047,677 Balloon L(60),YM(56),O(4)
08/06/98 09/01/2008 4,231,354 Balloon L(116),O(4)
09/04/98 10/01/2010 3,576,699 Balloon L(140),O(4)
08/21/98 09/01/2022 NAP Fully Amort L(227),O(61)
06/18/98 07/01/2008 4,172,602 Balloon L(59),YM(57),O(4)
08/21/98 09/01/2013 2,504,228 Balloon L(176),O(4)
10/07/98 11/01/2008 3,766,336 Balloon L(113),O(7)
10/07/98 11/01/2008 3,684,896 Balloon L(113),O(7)
08/25/98 09/01/2018 NAP Fully Amort L(236),O(4)
08/31/98 09/01/2008 3,512,265 Balloon L(120),O()
08/25/98 09/01/2018 NAP Fully Amort L(236),O(4)
05/29/98 06/01/2008 3,333,909 Balloon L(120),O()
07/16/98 08/01/2013 2,288,599 Balloon L(96),YM(80),O(4)
10/15/98 11/01/2008 3,135,508 Balloon L(116),O(4)
08/31/98 09/01/2008 2,901,091 Balloon L(116),O(4)
12/31/97 01/01/2005 3,297,495 Balloon L(48),YM(29),O(7)
01/30/98 02/01/2013 2,647,462 Balloon L(96),YM(77),O(7)
09/30/98 10/01/2008 2,640,531 Balloon L(116),O(4)
07/31/98 08/01/2011 2,399,160 Balloon L(154),O(2)
07/16/98 08/01/2008 2,704,753 Balloon L(116),O(4)
09/30/98 08/01/2013 2,357,769 Balloon L(174),O(4)
10/09/98 11/01/2013 2,192,173 Balloon L(96),YM(80),O(4)
07/16/98 08/01/2013 1,820,828 Balloon L(96),YM(80),O(4)
09/29/98 10/01/2008 2,511,191 Balloon L(116),O(4)
08/20/98 09/01/2023 NAP Fully Amort L(296),O(4)
10/07/98 11/01/2008 2,320,877 Balloon L(113),O(7)
09/08/98 10/01/2008 2,453,725 Balloon L(116),O(4)
03/16/98 04/01/2008 2,308,494 Balloon L(60),YM(56),O(4)
03/19/98 04/01/2008 2,344,583 Balloon L(60),YM(56),O(4)
06/30/98 07/01/2008 2,060,995 Balloon L(60),YM(56),O(4)
12/17/97 01/01/2008 2,301,782 Balloon YM(113),O(7)
04/09/98 05/01/2008 2,197,962 Balloon L(60),YM(56),O(4)
01/23/98 02/01/2008 2,192,826 Balloon L(59),YM(54),O(7)
10/05/98 11/01/2008 2,152,943 Balloon L(116),O(4)
09/14/98 10/01/2008 2,111,215 Balloon L(116),O(4)
03/12/98 04/01/2008 2,161,919 Balloon L(116),O(4)
08/25/98 09/01/2005 2,098,115 Balloon L(48),YM(32),O(4)
08/03/98 09/01/2008 1,898,438 ARD L(60),YM(56),O(4)
10/08/98 11/01/2008 2,036,828 Balloon L(116),O(4)
08/14/98 09/01/2008 1,886,246 Balloon L(116),O(4)
10/15/98 11/01/2008 1,976,280 Balloon L(113),O(7)
09/11/98 10/01/2008 1,866,754 Balloon L(116),O(4)
08/06/98 09/01/2008 1,828,679 Balloon L(120),O()
04/30/98 05/01/2008 1,966,647 Balloon L(60),YM(56),O(4)
09/17/98 10/01/2013 1,726,538 Balloon L(176),O(4)
08/28/98 09/01/2008 1,775,684 Balloon L(60),YM(56),O(4)
08/14/98 09/01/2013 1,334,671 Balloon L(176),O(4)
02/12/98 03/01/2008 1,835,783 Balloon YM(114),O(6)
07/07/98 08/01/2008 1,754,213 Balloon L(47),YM(66),O(7)
07/16/98 08/01/2013 1,268,750 Balloon L(96),YM(80),O(4)
05/26/98 06/01/2008 1,777,598 Balloon YM(113),O(7)
08/26/98 09/01/2013 1,251,041 Balloon L(96),YM(80),O(4)
09/03/98 10/01/2018 NAP Fully Amort L(120),YM(116),O(4)
05/29/98 06/01/2008 1,718,501 Balloon L(113),O(7)
08/14/98 09/01/2018 NAP Fully Amort L(236),O(4)
08/13/98 09/01/2008 1,639,294 Balloon L(116),O(4)
10/17/97 11/01/2007 1,520,204 Balloon L(60),YM(56),O(4)
08/14/98 09/01/2008 1,594,344 Balloon L(116),O(4)
07/29/98 08/01/2008 1,326,097 Balloon L(116),O(4)
08/20/98 09/01/2018 610,570 Balloon L(240),O()
03/16/98 04/01/2008 1,467,744 Balloon L(116),O(4)
07/22/97 08/01/2007 1,493,747 Balloon L(60),YM(56),O(4)
10/07/98 11/01/2018 956,226 Balloon L(236),O(4)
- ----------------------------------------------------------------------------------------------------------------------
03/17/98 04/01/2008 1,446,177 Balloon YM(114),O(6)
08/10/98 09/01/2008 1,281,827 Balloon L(113),O(7)
03/11/98 04/01/2005 1,309,195 Balloon L(24),YM(56),O(4)
01/23/98 02/01/2008 1,051,547 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
03/02/98 04/01/2003 1,408,504 Balloon L(53),O(7)
08/20/98 09/01/2008 1,190,451 Balloon L(120),O(0)
06/23/98 07/01/2008 1,135,127 Balloon L(60),YM(56),O(4)
12/12/97 01/01/2008 1,259,352 Balloon L(60),YM(56),O(4)
09/15/98 10/01/2013 NAP Fully Amort L(96),YM(80),O(4)
07/31/98 08/01/2011 1,055,629 Balloon L(154),O(2)
09/01/98 10/01/2008 1,062,126 Balloon L(116),O(4)
10/07/98 11/01/2008 1,057,313 Balloon L(116),O(4)
05/13/98 06/01/2008 1,112,758 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
09/08/98 10/01/2008 967,664 Balloon L(60),YM(56),O(4)
07/16/98 08/01/2008 1,048,379 Balloon L(35),YM(78),O(7)
07/16/98 08/01/2008 1,048,379 Balloon L(35),YM(78),O(7)
08/28/98 09/01/2018 NAP Fully Amort L(236),O(4)
07/27/98 08/01/2005 1,036,113 Balloon L(48),YM(32),O(4)
02/24/98 03/01/2008 982,581 Balloon YM(113),O(7)
12/29/97 02/01/2008 939,662 Balloon YM(114),O(6)
04/08/98 05/01/2003 868,196 Balloon L(53),O(7)
05/06/98 06/01/2008 733,499 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
05/24/97 06/01/2007 746,570 Balloon L(48),YM(68),O(4)
07/01/98 08/01/2008 665,882 Balloon L(116),O(4)
07/02/98 08/01/2013 512,273 Balloon L(173),O(7)
05/06/98 06/01/2008 635,699 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
06/22/98 07/01/2008 682,736 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
05/27/98 07/01/2008 604,940 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
05/05/98 06/01/2008 649,109 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
06/15/98 07/01/2008 616,299 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
02/10/98 03/01/2008 616,665 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
05/20/98 06/01/2008 551,963 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
05/26/98 07/01/2008 526,754 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
06/17/98 07/01/2008 505,268 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
08/17/98 09/01/2008 390,460 Balloon L(116),O(4)
07/15/97 08/01/2007 488,801 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
03/16/98 04/01/2008 422,856 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
08/21/98 09/01/2009 NAP Fully Amort L(128),O(4)
06/05/98 07/01/2008 334,644 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
09/14/98 10/01/2008 215,824 Balloon L(116),O(4)
01/21/98 02/01/2008 211,954 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL UNDERWRITTEN UNDERWRITTEN
DEBT TOTAL TOTAL UNDERWRITTEN UNDERWRITTEN APPRAISED
SERVICE REVENUE EXPENSE NCF DSCR VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$4,746,343 $19,350,601 $11,226,010 6,604,065 1.39x $97,000,000
2,710,167 6,741,746 3,357,876 3,383,870 1.25 44,000,000
2,289,812 3,976,032 821,737 3,042,804 1.33 39,000,000
1,985,179 5,577,283 1,990,692 3,434,983 1.73 40,000,000
1,536,841 4,279,301 2,353,188 1,926,113 1.25 23,800,000
1,529,712 7,619,066 5,445,564 2,173,502 1.42 23,500,000
1,361,522 2,994,501 864,386 1,861,190 1.37 21,000,000
1,172,454 6,819,096 5,149,343 1,669,753 1.42 18,600,000
1,080,382 2,680,625 1,292,221 1,388,404 1.29 17,000,000
943,573 1,877,822 675,629 1,202,193 1.27 16,060,000
888,889 6,988,250 5,504,457 1,483,792 1.67 17,200,000
957,791 1,795,458 597,977 1,197,481 1.25 15,400,000
796,406 2,358,023 547,820 1,641,428 2.06 20,520,000
796,406 2,863,630 964,764 1,705,116 2.14 18,150,000
739,440 2,326,773 1,283,215 1,043,558 1.41 11,900,000
734,494 1,238,760 294,962 928,681 1.26 11,400,000
713,504 1,527,252 415,822 1,044,637 1.46 10,900,000
635,470 1,275,883 353,416 852,020 1.34 10,800,000
856,297 2,937,133 772,307 2,164,826 2.53 31,000,000
651,973 2,254,953 1,414,516 840,437 1.29 9,800,000
574,821 782,239 26,116 737,101 1.28 9,200,000
541,791 1,222,899 606,317 616,582 1.14 8,900,000
537,812 918,742 223,286 695,457 1.29 8,700,000
516,789 1,042,275 422,767 619,509 1.20 8,100,000
515,725 1,576,331 917,738 658,593 1.28 8,450,000
536,739 989,174 228,863 760,311 1.42 8,900,000
530,651 1,963,723 1,159,888 803,835 1.51 9,200,000
477,598 1,400,309 670,829 729,479 1.53 7,800,000
492,456 877,463 200,839 645,449 1.31 7,500,000
537,326 2,698,631 1,769,776 928,856 1.73 12,200,000
418,691 673,790 108,870 553,522 1.32 7,450,000
412,289 1,163,918 632,758 531,160 1.29 6,375,000
344,500 810,487 372,571 437,916 1.27 7,500,000
436,569 1,002,866 283,819 674,931 1.55 7,100,000
444,133 1,891,283 1,204,957 686,327 1.55 7,000,000
413,288 1,373,358 793,418 579,940 1.40 6,700,000
383,121 713,185 195,749 488,616 1.28 6,080,000
429,441 828,375 222,747 605,628 1.41 6,100,000
424,182 550,000 13,750 536,250 1.26 6,175,000
388,082 1,104,331 630,283 474,048 1.22 6,200,000
435,318 603,843 22,775 565,436 1.30 5,940,000
410,140 1,964,199 1,389,605 574,594 1.40 6,500,000
401,272 2,030,908 1,468,858 562,050 1.40 6,400,000
392,737 2,738,188 2,118,409 619,779 1.58 5,500,000
325,818 664,641 263,038 401,602 1.23 5,000,000
368,935 2,543,000 2,044,650 498,350 1.35 5,700,000
348,671 348,671 - 348,671 1.00 3,820,000
320,337 1,237,963 739,688 498,275 1.56 5,240,000
297,145 615,631 188,190 409,107 1.38 4,850,000
309,475 661,936 243,687 418,249 1.35 4,900,000
294,182 563,624 203,527 360,098 1.22 5,200,000
293,521 912,514 510,663 401,851 1.37 5,140,000
285,684 1,036,149 582,847 453,302 1.59 4,450,000
276,659 276,659 - 276,659 1.00 3,320,000
246,245 499,754 148,722 337,508 1.37 4,100,000
248,347 323,689 8,824 314,865 1.27 3,800,000
229,774 937,357 504,602 432,755 1.88 5,650,000
254,863 797,048 408,175 388,873 1.53 3,925,000
238,702 635,223 239,271 351,060 1.47 4,100,000
248,214 698,511 322,051 376,460 1.52 4,850,000
252,735 1,147,506 791,887 355,619 1.41 3,800,000
228,393 646,296 339,404 286,957 1.26 3,635,000
234,484 1,115,747 781,377 334,369 1.43 3,540,000
219,640 791,174 477,888 313,285 1.43 3,400,000
223,013 530,071 173,041 319,758 1.43 3,800,000
237,143 668,827 370,131 298,696 1.26 3,495,000
205,721 699,062 412,391 286,671 1.39 3,400,000
208,623 815,243 542,344 272,899 1.31 3,500,000
201,018 410,328 156,380 253,948 1.26 3,200,000
184,913 470,201 218,078 252,123 1.36 3,300,000
204,758 775,416 465,022 310,394 1.52 3,150,000
210,120 749,439 366,822 367,336 1.75 3,200,000
205,418 325,617 19,716 305,901 1.49 3,300,000
194,382 389,149 152,194 236,955 1.22 3,300,000
199,672 407,670 114,342 277,153 1.39 3,200,000
183,149 706,812 417,727 289,085 1.58 3,250,000
201,723 345,704 65,135 272,618 1.35 3,025,000
194,614 386,378 88,868 281,340 1.45 3,550,000
189,013 755,454 472,660 282,794 1.50 2,830,000
182,141 629,239 399,027 230,213 1.26 2,775,000
201,355 418,950 115,743 295,047 1.47 3,600,000
178,108 508,789 281,040 227,749 1.28 2,610,000
180,536 276,573 58,665 217,908 1.21 2,900,000
160,374 310,358 109,916 200,442 1.25 3,030,000
177,588 663,327 406,952 256,375 1.44 3,200,000
169,906 645,841 258,586 387,255 2.28 4,450,000
177,073 524,082 241,311 282,771 1.60 3,300,000
189,387 1,033,348 618,761 414,587 2.19 5,700,000
159,285 914,330 664,974 249,356 1.57 2,522,000
185,928 339,634 114,784 224,850 1.21 3,465,000
165,129 340,812 104,326 220,067 1.33 2,400,000
171,312 754,497 531,748 222,749 1.30 2,800,000
144,629 294,655 109,754 184,900 1.28 2,500,000
167,065 706,617 420,894 285,723 1.71 2,500,000
146,705 197,179 3,409 193,770 1.32 2,210,000
138,254 482,060 266,799 215,261 1.56 2,150,000
149,679 254,790 67,774 187,016 1.25 2,300,000
133,078 269,964 83,539 186,426 1.40 2,100,000
146,580 57,190 89,390 1,000,000
179,376 67,939 111,437 1,200,000
- -----------------------------------------------------------------------------------------------------------------------------------
143,564 325,956 125,129 200,827 1.40 2,200,000
139,581 316,397 133,682 182,715 1.31 2,125,000
130,284 465,137 295,845 169,292 1.30 2,100,000
154,787 275,325 50,326 224,998 1.45 2,200,000
130,317 225,237 60,149 165,088 1.27 2,115,000
127,367 196,331 23,681 165,448 1.30 2,100,000
121,821 407,848 246,930 160,918 1.32 1,800,000
124,035 222,446 59,851 157,222 1.27 1,920,000
154,005 359,499 120,872 209,230 1.36 2,190,000
121,730 121,730 - 121,730 1.00 1,420,000
113,106 338,892 176,515 162,377 1.44 1,690,000
111,887 190,159 21,575 163,538 1.46 1,800,000
113,592 234,874 71,197 150,087 1.32 1,970,000
103,375 249,748 116,742 133,005 1.29 1,600,000
95,804 249,227 102,101 147,126 1.54 2,160,000
95,804 270,648 116,355 154,292 1.61 2,300,000
119,124 581,214 384,641 196,573 1.65 2,040,000
109,456 280,816 141,256 139,561 1.28 1,600,000
96,630 205,563 81,786 123,777 1.28 1,410,000
95,922 205,584 83,915 121,669 1.27 1,450,000
81,192 185,789 66,931 109,858 1.35 1,305,000
85,153 122,910 10,189 106,339 1.25 1,310,000
78,079 197,788 108,373 89,415 1.15 1,050,000
75,517 248,370 132,524 115,846 1.53 1,100,000
73,333 181,035 80,558 100,477 1.37 1,010,000
73,799 114,570 20,736 93,834 1.27 1,120,000
69,052 120,892 21,272 92,402 1.34 1,150,000
70,758 146,490 22,499 110,968 1.57 1,175,000
66,262 105,260 19,673 85,587 1.29 1,000,000
60,609 135,240 61,920 73,320 1.21 1,020,000
62,370 103,050 23,003 76,048 1.22 1,000,000
56,345 159,468 43,463 109,439 1.94 991,000
54,269 171,296 85,178 86,119 1.59 1,070,000
50,630 91,200 21,317 67,131 1.33 875,000
56,513 114,420 28,911 80,665 1.43 800,000
55,079 88,231 7,337 76,288 1.39 850,000
42,768 83,722 32,014 51,707 1.21 640,000
56,027 74,100 3,578 70,522 1.26 700,000
34,477 68,520 14,399 45,530 1.32 615,000
23,907 57,946 21,897 36,049 1.51 350,000
21,636 50,100 21,420 28,680 1.33 360,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALLOON / LOAN PER
CUT-OFF ANTICIPATED SQ FT, UNITS, SQ FT, UNIT, INITIAL
APPRAISAL DATE REPAYMENT YEAR BEDS, PADS, BED, PAD, OCCUPANCY RESERVES
YEAR LTV LTV BUILT OR ROOM OR ROOM PERCENTAGE AT CLOSING
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 61.7% 45.8% 1969 581,354 sq. ft. $103 per unit 95% -
1998 79.3 68.9 1966 981 units 35,566 per unit 92% 472,656
1997 73.8 67.8 1904 111,060 sq. ft. 259 per sq. ft. 100% -
1998 59.9 52.0 1975 386,275 sq. ft. 62 per sq. ft. 100% 360,938
1998 75.1 66.2 1978 680 units 26,292 per unit 95% 28,319
1998 73.3 59.8 1981 236 rooms 72,941 per room NAP 28,750
1998 73.9 59.0 1926 679,438 sq. ft. 23 per sq. ft. 95% 427,563
1998 73.6 59.3 1964 311 rooms 43,998 per room NAP 38,625
1998 79.5 68.7 1982 125 units 108,075 per unit 97% -
1998 74.7 56.9 1975 226 units 53,097 per unit 93% -
1998 62.4 48.9 1974 292 rooms 36,765 per room NAP 339,085
1998 69.2 NAP 1998 384,895 sq. ft. 28 per sq. ft. 100% 625
1998 51.1 42.4 1924 97,015 sq. ft. 108 per sq. ft. 100% 187,813
1998 57.7 47.9 1973 110,593 sq. ft. 95 per sq. ft. 100% -
1997 79.4 68.3 1984 464 units 20,373 per unit 88% 16,188
1998 80.6 70.5 1973 165,895 sq. ft. 55 per sq. ft. 99% 4,156
1998 74.8 30.7 1985 101,868 sq. ft. 80 per sq. ft. 98% -
1998 74.0 64.6 1981 119,404 sq. ft. 67 per sq. ft. 100% -
1998 25.6 NAP 1928 207,216 sq. ft. 38 per sq. ft. 100% -
1998 77.3 72.0 1968 381 units 19,880 per unit 94% 35,750
1998 78.1 60.1 1987 104,708 sq. ft. 69 per sq. ft. 100% 4,513
1998 76.0 70.4 1977 163 units 41,506 per unit 94% -
1997 74.2 64.8 1985 190,780 sq. ft. 34 per sq. ft. 100% -
1998 78.6 58.9 1987 120 units 53,077 per unit 97% 98,450
1998 74.5 65.5 1988 107 units 58,833 per unit 94% 9,250
1998 70.5 56.9 1997 69,489 sq. ft. 90 per sq. ft. 100% 4,688
1998 67.3 53.3 1968 290 units 21,352 per unit 97% 12,000
1998 76.7 66.1 1963 176 units 33,979 per unit 98% 39,500
1998 74.9 59.7 1979 48,192 sq. ft. 117 per sq. ft. 91% -
1998 46.0 NAP 1974 495 units 11,329 per unit 98% -
1998 71.3 58.2 1931 11,687 sq. ft. 454 per sq. ft. 100% -
1997 79.4 69.0 1972 162 units 31,256 per unit 97% -
1998 66.7 66.7 1981 96 units 52,083 per unit 95% 365,563
1998 70.2 56.0 1965 229,790 sq. ft. 22 per sq. ft. 88% 50,750
1998 69.9 57.4 1997 106 rooms 46,176 per room NAP 1,250
1998 72.5 60.4 1984 232 units 20,949 per unit 93% 20,000
1998 79.7 69.6 1980 75,793 sq. ft. 64 per sq. ft. 93% 12,500
1998 79.3 58.6 1979 47,000 sq. ft. 103 per sq. ft. 100% -
1998 78.2 NAP 1940 27,500 sq. ft. 176 per sq. ft. 100% -
1998 77.9 67.3 1965 186 units 25,972 per unit 84% 23,000
1998 78.4 42.2 1998 46,600 sq. ft. 100 per sq. ft. 100% -
1998 71.1 57.9 1997 78 rooms 59,227 per room NAP -
1998 70.6 57.6 1997 78 rooms 57,947 per room NAP -
1998 74.6 NAP 1996 106 Beds 38,706 per bed 85% -
1998 79.8 70.2 1988 80 units 49,891 per unit 96% 1,375
1998 67.6 NAP 1996 104 Beds 37,059 per bed 86% -
1998 97.8 87.3 1998 26,988 sq. ft. 138 per sq. ft. 100% -
1998 70.3 43.7 1965 261 units 14,109 per unit 98% 3,000
1998 74.7 64.6 1990 58,619 sq. ft. 62 per sq. ft. 94% -
1998 73.2 59.2 1996 1,331 units 2,695 per unit 86% 5,067
1997 68.6 63.4 1988 55 units 64,863 per unit 100% 14,938
1997 67.6 51.5 1970 178 units 19,507 per unit 98% 17,875
1998 74.8 59.3 1972 208 units 16,007 per unit 91% 360,000
1998 96.5 72.3 1996 27,200 sq. ft. 118 per sq. ft. 100% -
1998 75.4 66.0 1980 62,732 sq. Ft. 49 per sq. ft. 100% 31,276
1998 79.2 62.0 1998 23,500 sq. ft. 128 per sq. ft. 100% -
1998 53.0 38.8 1977 225 units 13,320 per unit 98% 48,125
1998 74.6 46.4 1971 177 units 16,552 per unit 97% 3,000
1998 70.6 61.2 1928 131,971 sq. ft. 22 per sq. ft. 96% 61,625
1998 59.6 NAP 1980 105 units 27,516 per unit 94% -
1998 74.9 61.1 1995 63 rooms 45,187 per room NAP -
1998 76.6 67.5 1986 32,732 sq. ft. 85 per sq. ft. 93% 4,500
1998 78.4 65.2 1975 234 units 11,867 per unit 98% -
1998 79.5 69.0 1982 98 units 27,576 per unit 95% 75,000
1998 68.1 54.2 1978 61,210 sq. ft. 42 per sq. ft. 96% -
1997 73.9 65.9 1964 132 units 19,557 per unit 95% -
1997 74.6 64.6 1983 159 units 15,949 per unit 90% -
1998 71.8 62.7 1978 180 units 13,956 per unit 89% -
1998 78.1 67.3 1994 54 units 46,255 per unit 100% -
1998 75.6 64.0 1988 70 units 35,647 per unit 96% -
1998 78.9 68.6 1968 137 units 18,134 per unit 94% -
1998 74.7 65.6 1989 50,775 sq. ft. 47 per sq. ft. 86% 13,625
1997 72.5 57.5 1997 22,900 sq. ft. 104 per sq. ft. 100% -
1998 71.2 61.7 1900 41 units 57,268 per unit 95% 49,700
1998 73.2 58.9 1986 24,926 sq. ft. 94 per sq. ft. 100% 7,188
1998 70.7 60.8 1972 114 units 20,157 per unit 98% 31,050
1998 75.9 61.7 1930 39,735 sq. ft. 58 per sq. ft. 100% 28,813
1998 63.8 51.5 1993 29,426 sq. ft. 77 per sq. ft. 82% -
1998 79.6 69.5 1964 165 units 13,650 per unit 98% 22,875
1998 80.1 62.2 1964 105 units 21,162 per unit 98% 33,550
1998 60.9 49.3 1920 2,400 sq. ft. 914 per sq. ft. 100% -
1998 80.2 51.1 1967 97 units 21,573 per unit 90% 103,750
1998 71.9 63.3 1957 14 units 149,022 per unit 100% -
1998 67.4 57.9 1955 28 units 72,962 per unit 100% -
1998 63.8 39.6 1974 163 units 12,524 per unit 88% 3,000
1998 45.9 39.9 1985 73 units 27,952 per unit 99% -
1998 60.4 37.9 1979 64 units 31,140 per unit 100% 12,063
1998 35.0 NAP 1946 257 pads 7,753 per pad 90% 143,188
1998 78.9 68.1 1975 188 units 10,586 per unit 96% 25,188
1998 57.4 NAP 1994 30 units 66,293 per unit 100% -
1998 79.8 68.3 1979 21,625 sq. ft. 89 per sq. ft. 100% 5,875
1998 66.5 54.3 1965 164 units 11,346 per unit 88% 21,250
1998 73.0 63.8 1989 48 units 38,036 per unit 98% 12,313
1997 71.6 53.0 1991 73 rooms 24,510 per room NAP -
1998 78.7 27.6 1998 11,057 sq. ft. 157 per sq. ft. 100% -
1998 78.6 68.3 1968 74 units 22,827 per unit 97% -
1997 73.1 64.9 1890 8 units 210,089 per unit 100% 3,750
1998 78.5 45.5 1996 25 units 65,941 per unit 100% 16,863
1998 1993 28 units 89%
1998 1993 36 units 81%
- -------------------------------------------------------------------------------------------------------------------------------
74.6 65.7 64 units 25,636 per unit -
1998 73.8 60.3 1984 412 units 3,808 per unit 97% 16,188
1997 70.7 62.3 1965 91 units 16,326 per unit 96% 33,864
1997 67.0 47.8 1991 15,638 sq. ft. 94 per sq. ft. 100% -
1998 69.6 66.6 1968 40,580 sq. ft. 36 per sq. ft. 100% -
1998 70.0 56.7 1954 10,560 sq. ft. 139 per sq. ft. 100% -
1998 79.5 63.1 1972 83 units 17,243 per unit 95% 44,750
1997 74.4 65.6 1991 18,182 sq. ft. 79 per sq. ft. 100% 67
1998 64.9 NAP 1955 31,650 sq. ft. 45 per sq. ft. 93% 94,063
1998 99.3 74.3 1996 27,355 sq. ft. 52 per sq. ft. 100% -
1998 79.8 62.8 1961 57 units 23,660 per unit 100% -
1998 74.9 58.7 1990 12,350 sq. ft. 109 per sq. ft. 100% -
1998 63.7 56.5 1986 41,128 sq. ft. 31 per sq. ft. 100% -
1998 76.7 60.5 1985 31 units 39,579 per unit 93% -
1998 55.4 48.5 1910 36 units 33,236 per unit 100% -
1998 52.0 45.6 1910 21 units 56,976 per unit 100% -
1998 58.5 NAP 1986 60 rooms 19,894 per room NAP -
1998 72.8 64.8 1968 146 pads 7,981 per pad 99% 40,000
1998 79.2 69.7 1988 29 units 38,506 per unit 100% -
1997 72.9 64.8 1989 31 units 34,097 per unit 100% -
1997 69.5 66.5 1984 23,179 sq. ft. 39 per sq. ft. 95% -
1998 68.3 56.0 1990 26,954 sq. ft. 33 per sq. ft. 100% -
1997 79.1 71.1 1967 36 units 23,067 per unit 97% 24,813
1998 74.7 60.5 1975 52 units 15,797 per unit 89% 9,031
1998 79.8 50.7 1981 36 units 22,401 per unit 100% -
1998 69.2 56.8 1998 6,050 sq. ft. 128 per sq. ft. 100% -
1998 67.2 59.4 1964 4,464 sq. ft. 173 per sq. ft. 100% -
1998 62.7 51.5 1968 28,362 sq. ft. 26 per sq. ft. 100% -
1998 73.2 64.9 1998 5,400 sq. ft. 136 per sq. ft. 100% -
1998 68.9 60.4 1963 22 units 31,931 per unit 90% -
1998 69.6 61.7 1961 17,000 sq. ft. 41 per sq. ft. 100% 183
1998 62.8 55.7 1975 9,461 sq. ft. 66 per sq. ft. 100% -
1998 55.4 49.2 1971 26 units 22,813 per unit 92% 56,000
1998 65.5 57.7 1953 2,642 sq. ft. 217 per sq. ft. 100% -
1998 70.1 48.8 1990 11,600 sq. ft. 48 per sq. ft. 100% -
1997 63.0 57.5 1978 19,500 sq. ft. 27 per sq. ft. 100% -
1998 74.6 66.1 1986 11 units 43,403 per unit 100% -
1998 60.5 NAP 1932 6,136 sq. ft. 69 per sq. ft. 100% 2,313
1998 61.3 54.4 1969 5,625 sq. ft. 67 per sq. ft. 100% -
1998 77.0 61.7 1959 10 units 26,939 per unit 100% -
1997 66.2 58.9 1983 6,335 sq. ft. 38 per sq. ft. 88% -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LARGEST TENANT
----------------------------------------------------------------
UNDERWRITTEN RESERVES AREA LEASED
RESERVES COLLECTED NAME (SQ. FT.)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
0.20 none per unit Time Warner 110,500
305 305 per unit
0.15 none per sq. ft. Food Emporium 30,204
0.15 none per sq. ft. Kmart 88,905
247 250 per unit
1,291 1,291 per room
0.15 none per sq. ft. City of Philadelphia 184,128
877 877 per room
303 276 per unit
250 250 per unit
4% none of revenue
0.20 none per sq. ft. Republic Beverage Company 384,895
0.15 none per sq. ft. CNET, Inc. 97,015
0.15 none per sq. ft. Hal Riney & Partners, Inc. 110,593
230 230 per unit
0.10 0.10 per sq. ft. K-Mart 103,203
0.18 none per sq. ft. Carmike Cinema 19,285
0.10 0.10 per sq. ft. Salons in the Park 13,988
0.15 none per sq. ft. Federal Express 207,216
200 200 per unit
0.10 0.10 per sq. ft. BJ's Wholesale Club 104,708
250 225 per unit
0.15 none per sq. ft. Corr-Pro Associates LLC 190,780
255 250 per unit
288 288 per unit
0.10 0.10 per sq. ft. The Sports Authority 43,400
250 250 per unit
265 265 per unit
0.15 none per sq. ft. Carrows Restaurant 5,623
270 270 per unit
0.15 none per sq. ft. The Gap, Inc 7,187
250 250 per unit
327 327 per unit
0.15 none per sq. ft. Reynolds & Reynolds 74,700
714 714 per room
250 250 per unit
0.28 0.28 per sq. ft. Piggly Wiggly 31,778
0.17 none per sq. ft. Fort Washington Holdings 47,000
0.10 0.10 per sq. ft. Sav-On Drug Store 27,500
250 250 per unit
0.10 0.10 per sq. ft. Snap-On Tools Company 46,600
1,007 1,007 per room
1,041 1,041 per room
250 250 per bed
233 233 per unit
250 250 per bed
none per sq. ft. PetsMart, Inc. 26,988
300 300 per unit
0.16 none per sq. ft. Thrifty/Payless/RiteAid 31,472
0.16 0.16 per sq. ft.
250 250 per unit
225 225 per unit
250 250 per unit
none per sq. ft. Heilig Meyers 27,200
0.15 0.15 per sq. ft. Mars Supermarket 24,000
0.10 0.10 per sq. ft. OfficeMax 23,500
300 300 per unit
275 275 per unit
0.17 none per sq. ft. Best Weld 46,460
260 260 per unit
729 729 per room
0.45 0.45 per sq. ft. R & R Goldman dba Discovery 6,036
255 255 per unit
226 226 per unit
0.15 none per sq. ft. MJ Design 27,930
250 250 per unit
250 250 per unit
250 250 per unit
250 250 per unit
250 250 per unit
250 250 per unit
0.15 none per sq. ft. Pep Boys 22,193
0.15 none per sq. ft. Bassett Furniture 22,900
265 265 per unit
0.30 0.30 per sq. ft. Germantown Child Development 4,558
265 265 per unit
0.15 0.15 per sq. ft. Atkinson, Dyer, and Watson (Architects) 15,000
0.10 0.10 per sq. ft. Dollar Tree Stores, Inc. 3,176
250 250 per unit
288 288 per unit
0.15 none per sq. ft. Magic Jewlery 1,400
265 265 per unit
250 250 per unit
293 none per unit
275 275 per unit
315 none per unit
250 250 per unit
51 51 per pad
263 263 per unit
235 235 per unit
0.19 0.19 per sq. ft. APL Limited* 6,970
250 250 per unit
287 287 per unit
4% 4% of revenue
0.13 0.13 per sq. ft. Rite Aid 11,057
250 250 per unit
283 283 per unit
301 301 per unit
250 none per unit
250 none per unit
- ---------------------------------------------------------------------------------------------------------
250 none per unit
19 19 per unit
250 250 per unit
0.15 none per sq. ft. Purrfect 2,648
0.15 none per sq. ft. Hughes Aircraft Co 40,580
0.25 0.25 per sq. ft. Infotrieve 4,875
200 200 per unit
0.36 0.04 per sq. ft. Good Samaritan Hospital 8,112
0.15 none per sq. ft. Fitness Connection 10,500
0.00 none per sq. ft. Heilig Meyers 27,355
250 250 per unit
0.15 none per sq. ft. Hastings Books Music Video 12,350
0.15 none per sq. ft. Rancho Gymnastics 11,616
250 250 per unit
310 none per unit
250 none per unit
4% 4% of revenue
50 50 per pad
480 250 per unit
250 250 per unit
0.15 0.20 per sq. ft. Dollar General 6,593
0.15 none per sq. ft. Pemco Engineers 26,954
279 316 per unit
250 250 per unit
250 250 per unit
0.15 none per sq. ft. Chief Auto Parts 6,050
0.55 none per sq. ft. Reeds Camera / Lutheran Social Svc. Thrift 1,600 / 1,600
0.15 none per sq. ft. Golden Triangle 14,300
0.15 none per sq. ft. Chief Auto Parts 5,400
250 150 per unit
0.15 0.13 per sq. ft. Patio World 17,000
0.15 none per sq. ft. 7-11 Store 2,400
250 200 per unit
0.30 none per sq. ft. Soshin, inc 2,642
0.20 none per sq. ft. Dr. Gregg Cohen / Sub&Pizza Co. 1,800
0.15 none per sq. ft. Enviromed Inc. 19,500
250 none per unit
0.10 0.10 per sq. ft. Spin Cycle 6,136
0.15 none per sq. ft. Vogue Nails 1,250
250 250 per unit
0.15 none per sq. ft. Free Wheeler 1,300
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------
LEASE CONTROL
EXP DATE NO.
- ----------------------------------------
<S> <C>
02/28/2006 MLMI-003
MLMI-135
06/30/2017 MLMI-048
11/24/2000 MLMI-064
MLMI-011
MLMI-102
12/31/1999 MLMI-051
MLMI-128
MLMI-050
MLMI-153
MLMI-041
08/31/2018 MLMI-043
05/31/2008 MLMI-001
05/31/2008 MLMI-004
MLMI-034
07/27/2014 MLMI-110
08/31/2005 MLMI-031
05/31/2007 MLMI-117
12/31/2017 MLMI-026
MLMI-005
03/31/2014 MLMI-104
MLMI-134
07/31/2015 MLMI-019
MLMI-045
MLMI-152
04/30/2017 MLMI-118
MLMI-068
MLMI-023
04/30/2005 MLMI-062
MLMI-027
03/07/2006 MLMI-012
MLMI-032
MLMI-133
06/30/2003 MLMI-007
MLMI-124
MLMI-042
10/31/2009 MLMI-109
06/30/2013 MLMI-006
08/31/2022 MLMI-115
MLMI-022
08/03/2008 MLMI-101
MLMI-125
MLMI-126
MLMI-106
MLMI-142
MLMI-105
05/31/2018 MLMI-160
MLMI-013
02/01/2016 MLMI-067
MLMI-144
MLMI-020
MLMI-033
MLMI-040
07/31/2018 MLMI-161
02/01/2005 MLMI-164
08/31/2013 MLMI-120
MLMI-065
MLMI-018
04/30/1999 MLMI-035
MLMI-056
MLMI-127
08/31/2007 MLMI-114
MLMI-008
MLMI-049
12/30/2002 MLMI-057
MLMI-096
MLMI-052
MLMI-060
MLMI-058
MLMI-017
MLMI-029
01/21/2010 MLMI-036
04/14/2013 MLMI-010
MLMI-061
06/01/2002 MLMI-116
MLMI-066
07/31/2007 MLMI-107
09/30/2000 MLMI-111
MLMI-047
MLMI-141
12/31/2004 MLMI-002
MLMI-140
MLMI-097
MLMI-092
MLMI-015
MLMI-098
MLMI-059
MLMI-016
MLMI-009
MLMI-139
03/31/2001 MLMI-108
MLMI-021
MLMI-143
MLMI-028
08/31/2018 MLMI-162
MLMI-054
MLMI-024
MLMI-025
MLMI-099a
MLMI-099b
- ----------------------------------------
MLMI-099
MLMI-146
MLMI-053
05/14/2000 MLMI-086
07/31/2004 MLMI-073
06/30/2006 MLMI-119
MLMI-055
10/31/2011 MLMI-038
01/31/2000 MLMI-039
07/31/2018 MLMI-163
MLMI-044
09/11/2006 MLMI-100
09/30/2000 MLMI-081
MLMI-037
MLMI-093
MLMI-095
MLMI-046
MLMI-014
MLMI-091
MLMI-094
01/31/2000 MLMI-089
06/30/2002 MLMI-083
MLMI-030
MLMI-071
MLMI-070
01/31/2008 MLMI-080
11/30/2001 / 6/30/2000 MLMI-082
11/01/2000 MLMI-087
02/29/2008 MLMI-078
MLMI-074
06/03/2001 MLMI-085
08/31/2000 MLMI-077
MLMI-079
05/31/2003 MLMI-076
08/31/2001 MLMI-084
09/30/2000 MLMI-088
MLMI-072
10/31/2009 MLMI-112
02/28/2000 MLMI-090
MLMI-069
06/02/2002 MLMI-075
</TABLE>
<PAGE>
[MERRILL LYNCH LOGO] ANNEX B
MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 17, 1998
- -------------------------------------------------------------------------------
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C3
TOTAL POOL SIZE = $638,408,606 (139 LOANS/140 PROPERTIES)
<TABLE>
<CAPTION>
Expected Initial % of Initial Pass- Weighted Cash Flow
Rating by Certificate Initial Pool Credit Through Average Life or Principal
Class S&P/Moody's Balance(1) Balance(1) Support Description Rate (years) (2) Window (2)
- ----- ----------- ---------- ---------- -------- ----------- ---- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Offered Certificates
Class A-1 AAA/Aaa $129,870,000 20.34% 29.75% Fixed Rate 5.65% 5.0 1/99 - 12/06
Class A-2 AAA/Aaa $75,490,000 11.82% 29.75% Fixed Rate 5.87% 9.0 12/06 - 4/08
Class A-3 AAA/Aaa $243,122,000 38.08% 29.75% Fixed Rate 5.88% 9.7 4/08 - 11/08
Class IO AAAr/Aaa (3) (3) Variable Rate I/O (4) N/A N/A
(4)
Class B AA/Aa2 $33,516,000 5.25% 24.50% Net WAC (5) 10.1 11/08 - 10/09
Class C A/A2 $35,112,000 5.50% 19.00% Net WAC (5) 11.5 10/09 - 9/11
Class D BBB/Baa2 $38,305,000 6.00% 13.00% Net WAC (5) 14.3 9/11 - 9/13
Class E BBB-/Baa3 $7,980,000 1.25% 11.75% Net WAC (5) 14.7 9/13 - 9/13
Private Certificates
Class F (6) $35,113,000 5.50% 6.25% Fixed Rate 6.00% 14.7 9/13 - 10/13
Class G (6) $4,788,000 0.75% 5.50% Fixed Rate 6.00% 14.8 10/13 - 11/13
Class H (6) $14,364,000 2.25% 3.25% Fixed Rate 6.00% 15.1 11/13 - 12/14
Class J (6) $3,192,000 0.50% 2.75% Fixed Rate 6.00% 16.5 12/14 - 1/16
Class K (6) $17,556,605 2.75% 0.00% Fixed Rate 6.00% 19.5 1/16 - 9/23
</TABLE>
- ----------------------------
(1) Subject to a permitted variance of plus or minus 5%.
(2) The weighted average life (expressed in years) and the period (expressed in
months following the Closing Date and commencing with the month of the first
Distribution Date) during which distributions of principal would be received
(the "Principal Window") set forth in the foregoing table are based on the
Maturity Assumptions and a pricing speed of 0% CPR applied to each Mortgage
Loan during any period that it permits voluntary prepayments of principal
without imposing a Yield Maintenance Premium in connection therewith.
(3) 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
of any Distribution Date, each Component will have a notional amount equal
to the Certificate Balance of the Class of Sequential Pay Certificates with
the same Class designation.
(4) On each Distribution Date, 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 on its
Strip Rate. The Strip Rate applicable to the Class A-1, Class A-2, and Class
A-3 Components for each Distribution Date will equal the Weighted Average
Net Mortgage Rate for such Distribution Date minus 5.65%, 5.87% and 5.88%
respectively (but not less than zero); the Strip Rate applicable to the
Class B, Class C, Class D, Class E Components will equal 0.92%, 0.54%,
0.00% and 0.00% 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 6.00% (but not less than zero).
(5) The Pass-Through Rates for the Class B, Class C, Class D, and Class E
Certificates will equal the Weighted Average Net Mortgage Rate minus 0.92%,
0.54%, 0.00% and 0.00% respectively.
(6) Not publicly offered.
- -------------------------------------------------------------------------------
KEY FEATURES:
o PASS-THROUGH STRUCTURE: Senior/subordinated, sequential pay pass-through
bonds.
o UNDERWRITER: Merrill Lynch & Co. ("Merrill Lynch" or the "Underwriter").
o DEPOSITOR: Merrill Lynch Mortgage Investors, Inc.
o MASTER SERVICER: GE Capital Loan Services, Inc.
o SPECIAL SERVICER: GE Capital Realty Group, Inc.
o TRUSTEE: The Chase Manhattan Bank, a New York banking corporation.
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 any case, no earlier than the fourth
business day following the Determination Date).
o DETERMINATION DATE: The 10th day of the month, or if such day is not a
business day, the immediately preceding business day.
o DELIVERY: The Depository Trust Company ("DTC") through Cede & Co.
o ERISA: Only Class A-1, Class A-2, Class A-3 and Class IO 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.
[MERRILL LYNCH LOGO]
(212) 449-3860
- -------------------------------------------------------------------------------
Prospective investors are advised to read carefully, and should rely solely on,
the final prospectus and prospectus supplement (the "Final 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>
[MERRILL LYNCH LOGO] ANNEX B
MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 17, 1998
- -------------------------------------------------------------------------------
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C3
TOTAL POOL SIZE = $638,408,606 (139 LOANS/140 PROPERTIES)
OVERVIEW: o The transaction is collateralized by 139 multifamily and
commercial loans, with an aggregate pool balance of
approximately $638,408,606 secured by properties located
throughout 30 states.
o Approximately, 93.9% of the loans were originated in 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: $ 638,408,606 (139 loans/140 properties)
AVG./MAX BALANCE: $ 4.59 million/$ 59.8 million
LOAN TYPES: All fixed rate; 75.5% balloons,
7.3% fully amortizing, 17.1% ARD
GROSS WAC(1): 7.088% (Range = 6.17% - 9.625%)
NET WAC(1): 6.976%
Wtg. AVG. SEASONING: 4.2 months
WTG. AVG. RTM(2): 11.3 years (135 mos.)
WTG. AVG. REM. AMORT.: 27.2 years (326 mos.)
WTG. AVG. DSCR: 1.43x
WTG. AVG. CUT-OFF LTV: 70.4%
CALL PROTECTION: All loans are currently locked out or have yield
maintenance
BORROWER CONCENTRATION: None greater than 9.4% of the pool
CROSS COLLATERALIZATION 2 loan groups representing 3.1% of the pool are
cross-collateralized.
(1) WAC = Weighted Average Mortgage Rate
(2) RTM = Remaining Term to Maturity
PROPERTY TYPE DESCRIPTION
WTG.
# OF % OF AVG.
TYPE PROPS POOL DSCR
----------------------------------------
Multifamily: 65 38.18% 1.35x
Retail: 34 23.57 1.41x
Office: 6 14.08 1.56x
Hospitality: 9 9.63 1.48x
Industrial: 12 9.09 1.51x
Health Care: 3 2.23 1.38x
CTL: 4 1.58 NAP
Mini Storage: 2 0.81 1.34x
Mobile Home Park : 2 0.49 1.85x
Mixed Use: 3 0.35 1.31x
TOT/WTG. AVG.: 140 100.00% 1.43X
GEOGRAPHIC DISTRIBUTION
(Total of 30 States)
# OF % OF
STATE PROPERTIES POOL
--------------------------------------
New York: 10 18.24%
Texas: 25 18.01
California: 36 13.74
Pennsylvania: 9 8.02
New Jersey: 5 7.32
Michigan: 4 6.67
POOL TOTALS 140 100.0%
------
CUT-OFF DATE BALANCES
# OF % OF CUMULATIVE WTG. AVG.
BALANCE RANGE LOANS POOL % OF POOL CUT-OFF LTV
----------------------- ------- --------- --------- -----------
$ 238,421 - $ 999,999 21 2.09% 2.09% 69.02%
1,000,000 - 1,999,999 32 7.68 9.77 69.22
2,000,000 - 2,999,999 30 11.56 21.33 71.41
3,000,000 - 3,999,999 12 6.60 27.93 73.03
4,000,000 - 4,999,999 11 8.14 36.08 74.80
5,000,000 - 5,999,999 6 5.10 41.18 69.10
6,000,000 - 6,999,999 6 6.01 47.19 73.59
7,000,000 - 7,999,999 4 4.81 52.00 63.25
8,000,000 - 8,999,999 1 1.28 53.28 74.84
9,000,000 - 9,999,999 2 2.92 56.20 80.00
10,000,000 - 14,999,999 7 12.77 68.97 67.75
15,000,000 - 19,999,999 3 7.93 76.90 74.10
20,000,000 - 24,999,999 1 3.76 80.65 59.95
25,000,000 - 29,999,999 1 4.51 85.16 73.80
30,000,000 - 34,999,999 1 5.47 90.63 79.30
40,000,000 - 59,845,380 1 9.37 100.00 61.70
----------------------- ------- --------- --------- -----------
TOTALS 139 100.00% 100.00% 70.41%
DEBT SERVICE COVERAGE RATIOS
DSCR # OF % OF CUMULATIVE WTG. AVG.
RANGE LOANS POOL % OF POOL CUT-OFF LTV
----------- -------- ------------ ------------ ------------
CTL Loans 4 1.58% 1.58% NAP
1.10 - 3 2.19 3.77 77.39%
1.19
1.20 - 45 32.07 35.83 75.98
1.29
1.30 - 30 26.34 62.18 69.02
1.39
1.40 - 24 16.44 78.62 73.55
1.49
1.50 - 19 8.31 86.93 71.02
1.59
1.60 - 3 2.06 88.98 61.11
1.69
1.70 - 4 5.29 94.27 59.29
1.79
1.80 - 1 0.47 94.74 53.05
1.89
1.90 - 1 0.10 94.84 62.82
1.99
2.00 - 4 3.92 98.76 52.16
2.49
2.50 - 1 1.24 100.00 25.64
2.53
----------- -------- ------------ ------------ ------------
TOTALS 139 100.00% 100.00% 70.41%
Weighted Average DSCR = 1.43x
CUT-OFF DATE LTV RATIOS
# OF % OF CUMULATIVE
LTV RANGE LOANS POOL % OF POOL
- --------------- --------- ---------- ----------------
CTL Loans 4 1.58% 1.58%
0.01% - 50.00% 4 2.76 4.34
50.01 - 60.00 10 8.93 13.26
60.01 - 70.00 34 21.70 34.97
70.01 - 80.00 84 62.92 97.89
80.01 - 80.58 3 2.11 100.00
- --------------- --------- ---------- ----------------
TOTALS 139 100.00% 100.00%
Weighted Average Cut-Off LTV = 70.4%
ORIGINAL TERMS
TERM # OF LOANS % OF POOL
- --------------------- ----------- ----------------
5 Year Balloon 2 0.37%
6 to 9 Year Balloon 6 3.59
10 Year Balloon 92 57.32
11 to 14 Year 6 5.60
Balloon
15 Year Balloon 13 6.81
16 to 20 Year 3 1.81
Balloon
6 to 9 Year ARD 1 4.51
10 Year ARD 2 1.39
15 Year ARD 2 11.25
Fully Amortizing 12 7.35
- --------------------- ----------- ----------------
TOTALS 139 100.00%
B-2
<PAGE>
[MERRILL LYNCH LOGO]
MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 17, 1998
- -------------------------------------------------------------------------------
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C3
TOTAL POOL SIZE = $638,408,606 (139 LOANS/140 PROPERTIES)
<TABLE>
<CAPTION>
DESCRIPTION OF PROPERTY TYPES:
- -----------------------------------------------------------------------------------------------------------------------------------
LOAN CHARACTERISTICS BY PROPERTY TYPE
- -----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGES
-------------------------------------------------
AVERAGE HIGHEST
CUT-OFF % OF CUT-OFF CUT-OFF
DATE INITIAL DATE DATE CUT-OFF REPAY-
PROPERTY BALANCE NO. OF POOL BALANCE BALANCE DSCR DATE MENT PROPERTY
TYPES ($MM) PROPS. BALANCE ($MM) ($MM) (A) LTV (A) LTV (A) SIZE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MULTIFAMILY $243.72 65 38.18% $3.75 $34.89 1.35x 73.95% 60.43% 326
RETAIL 150.44 34 23.57 4.42 28.78 1.41 71.76 56.87 126,165
OFFICE 89.86 6 14.08 14.98 59.85 1.56 61.69 47.20 415,410
HOSPITALITY 61.50 9 9.63 6.83 17.21 1.48 70.55 55.99 212
INDUSTRIAL 58.01 12 9.09 4.83 15.51 1.51 65.67 39.20 355,006
HEALTH CARE 14.25 3 2.23 4.75 6.30 1.38 72.67 28.95 106
CTL 10.09 4 1.58 2.52 3.74 NAP (D) NAP (D) NAP (D) 24,362
MINI STORAGE 5.16 2 0.81 2.58 3.59 1.34 73.40 59.55 1,051
MOBILE HOME 3.16 2 0.49 1.58 1.99 1.85 48.93 23.89 216
PARK
MIXED USE 2.23 3 0.35 0.74 1.43 1.31 72.44 60.65 15,258
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. $638.41 140 100.00% $4.56 $59.85 1.43x 70.41% 54.39% NAP
AVG.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
- --------------------------------------------
WEIGHTED AVERAGES
- --------------------------------------------
LOAN PER
SQ. FT.,
UNIT, BED,
OCCU- KEY, PAD
PROPERTY PANCY OR ROOM
TYPES % (B) (C)
- --------------------------------------------
<S> <C> <C>
MULTIFAMILY 95% 37,724
RETAIL 98 139
OFFICE 97 101
HOSPITALITY NAP (D) 52,200
INDUSTRIAL 97 34
HEALTH CARE 89 47,150
CTL 100 123
MINI STORAGE 89 3,034
MOBILE HOME 93 7,837
PARK
MIXED USE 99 67
- --------------------------------------------
TOTAL/WTG. 96% NAP
AVG.
- --------------------------------------------
</TABLE>
(A) THE CUT-OFF DATE DSCR AND LTV RATIO INFORMATION SHOWN ABOVE DO NOT REFLECT
THE FOUR CREDIT LEASE LOANS, REPRESENTING 1.6% OF THE INITIAL POOL BALANCE,
WHICH TYPICALLY HAVE DEBT SERVICE COVERAGE RATIOS EQUAL TO OR LESS THAN
1.00X AND LOAN TO VALUE RATIOS IN EXCESS OF 79.0%.
(B) 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
(C) 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.
(D) NAP = NOT APPLICABLE
B-3
<PAGE>
[MERRILL LYNCH LOGO]
MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 17, 1998
- -------------------------------------------------------------------------------
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C3
TOTAL POOL SIZE = $638,408,606 (139 LOANS/140 PROPERTIES)
PREPAYMENT PROTECTION: o Currently 98.4% of the loans are locked out
and 1.7% are subject to yield maintenance
charges.
o All of the loans have yield maintenance charges
which are calculated at flat-to-treasuries.
o 67.5% of the loans by balance provide for
defeasance.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
TABLE 1
PREPAYMENT RESTRICTION CATEGORIES
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted Averages
AGGREGATE ---------------------------------------------------------
NUMBER OF CUT-OFF DATE % OF INITIAL TERM TO REMAINING # OF MONTHS OF OPEN
MORTGAGE BALANCE POOL ARD/MATURITY LOCKOUT/DEFEASANCE PREPAYMENT PRIOR TO
PREPAYMENT RESTRICTION (A) LOANS (MM) BALANCE (MOS.) TERM (MOS.) ARD/MATURITY(MOS.)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
LO or LO, then DEF (B) 76 $433,360,592 67.88% 146 140 95.81% 6
LO, then PP 17 40,237,671 6.30 86 51 59.76 11
LO, then YM 40 154,287,568 24.17 120 52 43.76 5
YM Only 6 10,522,775 1.65 111 0 NAP 7
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. AVGS. 139 $638,408,606 100.00% 135 111 81.95% 6
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted Average Term to End of Locked Out/Defeasance Term (for Locked Out/Defeasance loans): 140 months.
Weighted Average Term to End of Locked Out/Defeasance Term (for all loans): 111 months.
Weighted Average Number of Months Loans are Open to Prepayment Prior to ARD/Maturity: 6 months
(A) LO=Locked Out, DEF=Defeasance, YM=Yield Maintenance, PP=Percentage Premium
(B) Includes two mortgages loans (0.37%), which are not defeasance loans
- ------------------------------------------------------------------------------------------------------------------------------------
ALLOCATION OF Prepayment premiums will be allocated among the Class A-1, A-2, A-3, B, C, D, E, F, G and IO
PREPAYMENT PREMIUMS: Certificates as follows:
o Any yield maintenance charges and percentage prepayment premiums will be allocated among
the Class A-1, A-2, A-3, B, C, D, E, F, G and IO 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.
<PAGE>
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 as reported in The Wall
Street Journal on the date of such prepayment.
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.
</TABLE>
B-4
<PAGE>
[MERRILL LYNCH LOGO]
MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 17, 1998
- -------------------------------------------------------------------------------
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C3
TOTAL POOL SIZE = $638,408,606 (139 LOANS/140 PROPERTIES)
<TABLE>
<CAPTION>
PREPAYMENT LOCK-OUT /PREMIUM ANALYSIS
- --------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT RESTRICTION ASSUMING NO PREPAYMENT
----------------------------------------------------------------------------------------
CURRENT 12 MO. 24 MO. 36 MO. 48 MO. 60 MO. 72 MO. 84 MO.
PREPAYMENT DEC. DEC. DEC. DEC. DEC. DEC. DEC. DEC.
RESTRICTION
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 98.4 96.2 96.0 93.2 87.9 72.6 72.6 78.1
Yield Maintenance 1.6 3.8 4.0 6.8 11.6 21.0 20.1 19.9
- --------------------------------------------------------------------------------------------------------------------------
Percentage Premium
5.00% and greater 0.0 0.0 0.0 0.0 0.1 1.7 0.0 0.0
4.00 to 4.99 0.0 0.0 0.0 0.0 0.0 0.1 1.7 0.0
3.00 to 3.99 0.0 0.0 0.0 0.0 0.0 0.0 0.1 1.9
2.00 to 2.99 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1
1.00 to 1.99 0.0 0.0 0.0 0.0 0.0 4.6 0.0 0.0
Open 0.0 0.0 0.0 0.0 0.4 0.0 5.4 0.0
- --------------------------------------------------------------------------------------------------------------------------
TOTALS 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Mortgage Pool Balance ($mm) 638.4 630.4 622.0 612.8 602.9 590.0 571.7 519.8
% of Initial Pool Balance 100.0 98.7 97.4 96.0 94.4 92.4 89.6 81.4
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
PREPAYMENT LOCK-OUT/PREMIUM ANALYSIS
- --------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT RESTRICTION ASSUMING NO PREPAYMENT
----------------------------------------------------------------------------------------------
96 MO. 108 MO. 120 MO. 132 MO. 144 MO. 156 MO. 168 MO. 180 MO.
PREPAYMENT DEC. DEC. DEC. DEC. DEC. DEC. DEC. DEC.
RESTRICTION
- --------------------------------------------------------------------------------------------------------------------------
Locked Out 73.9 74.0 84.5 82.6 84.8 84.4 44.1 96.7
Yield Maintenance 24.2 12.0 15.5 17.4 15.2 15.6 13.3 3.3
- --------------------------------------------------------------------------------------------------------------------------
Percentage Premium
5.00% and greater 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
4.00 to 4.99 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
3.00 to 3.99 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.00 to 2.99 1.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1.00 to 1.99 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Open 0.0 14.0 0.0 0.0 0.0 0.0 42.6 0.0
- --------------------------------------------------------------------------------------------------------------------------
TOTALS 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Mortgage Pool Balance ($mm) 507.6 474.6 166.5 143.0 129.1 119.4 112.9 23.5
% of Initial Pool Balance 79.5 74.3 26.1 22.4 20.2 18.7 17.7 3.7
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-5
<PAGE>
[MERRILL LYNCH LOGO]
MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 17, 1998
- -------------------------------------------------------------------------------
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C3
TOTAL POOL SIZE = $638,408,606 (139 LOANS/140 PROPERTIES)
SPECIAL SERVICER/LOAN The initial Special Servicer will be GE
MODIFICATIONS: Capital Realty Group, Inc. The Special
Servicer will be responsible for performing
certain servicing functions with respect to
Mortgage Loans that, in general, are in
default or as to which default is imminent,
and for administering any REO Properties.
The holders of the majority of the
Controlling Class of Sequential Pay
Certificates will have the right, subject to
certain conditions described herein, to
replace the Special Servicer and to select a
"Controlling Class Representative" from whom
the Special Servicer will seek advice and
approval and take directions under certain
circumstances
The Special Servicer will be permitted to
extend the date on which any Balloon Payment
is scheduled to be due for up to three
one-year extensions at or above the
prevailing market rate for a similar loan,
provided that the Balloon Loan is not a
Specially Serviced Mortgage Loan and has not
been delinquent in the preceeding 12 months.
REMOVAL OF THE SPECIAL The Pooling and Servicing Agreement permits
SERVICER/CONTROLLING CLASS (subject to certain conditions) the
REPRESENTATIVE: Controlling 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,
the Class of Sequential Pay Certificates
with the latest alphabetical Class
designation). The Class A-1, Class A-2 and
Class A-3 Certificates will be treated as
one Class for determining the Controlling
Class of Sequential Pay Certificates.
B-6
<PAGE>
[MERRILL LYNCH LOGO]
MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 17, 1998
- -------------------------------------------------------------------------------
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C3
TOTAL POOL SIZE = $638,408,606 (139 LOANS/140 PROPERTIES)
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) with respect to which sixty
days elapse after a receiver is appointed
and continues in such capacity in respect
of a Mortgaged Property securing any
Mortgage Loan, (5) with respect to which
sixty days elapse after 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
unless such an appraisal had been
previously obtained within the prior twelve
months.
If an Appraisal Reduction Amount exists
with respect to any Required Appraisal
Loan, the Controlling Class Representative
may, at its expense (i) direct the Special
Servicer to obtain and deliver to the
Master Servicer and the Trustee an
appraisal meeting the requirements for a
Required Appraisal and to the extent the
appraisals are different, an independent
third party appraiser will determine the
appropriate amount to be used in
determining the Appraisal Reduction Amount
or (ii) upon the expiration of six months
from the date on which the appraisal was
obtained by the Special Servicer with
respect to such Required Appraisal Loan,
and upon review of the Special Servicer's
plan for servicing such Required Appraisal
Loan, direct the Special Servicer to obtain
and deliver to the Master Servicer, the
Special Servicer and the Trustee an update
of the appraisal previously obtained by the
Special Servicer in connection with such
Required Appraisal Loan for the purpose of
determining the appropriate amount to be
used in determining the Appraisal Reduction
Amount.
The Appraisal Reduction Amount for any
Required Appraisal Loan will equal the
excess, if any, of (a) the sum of, without
duplication, 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 Additional Trust Fund Expenses in
respect of such Required Appraisal Loan,
(iv) all related unreimbursed Advances,
plus interests thereon, 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.
B-7
<PAGE>
MLMI, SERIES 1998-C3
- -------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS A-1
BOND TYPE - FIXED
Settlement Date: 12/22/98 Current Balance: $129,870,000
Next Payment: 1/15/99 Current Coupon: 5.730%
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
0% CPR While Subject to Lockout or Yield Maintenance*
-----------------------------------------------------------------------------------------------------
0.00 CPR 15.00 CPR 25.00 CPR 50.00 CPR 75.00 CPR 100.00 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 5.99 4.13 6.00 4.05 6.01 4.00 6.03 3.89 6.05 3.80 6.07 3.63
99-04 5.96 5.97 5.98 6.00 6.01 6.03
99-08 5.93 5.94 5.95 5.97 5.98 6.00
99-12 5.90 5.91 5.92 5.93 5.95 5.97
99-16 5.87 4.14 5.88 4.06 5.89 4.01 5.90 3.90 5.91 3.81 5.93 3.64
99-20 5.84 5.85 5.85 5.87 5.88 5.90
99-24 5.81 5.82 5.82 5.84 5.85 5.86
99-28 5.78 5.79 5.79 5.81 5.82 5.83
100-00 5.75 4.15 5.76 4.06 5.76 4.01 5.77 3.91 5.78 3.81 5.79 3.65
100-04 5.72 5.72 5.73 5.74 5.75 5.76
100-08 5.69 5.69 5.70 5.71 5.72 5.73
100-12 5.66 5.66 5.67 5.68 5.69 5.69
100-16 5.63 4.16 5.63 4.07 5.64 4.02 5.65 3.91 5.65 3.82 5.66 3.65
100-20 5.60 5.60 5.61 5.61 5.62 5.62
100-24 5.57 5.57 5.58 5.58 5.59 5.59
100-28 5.54 5.54 5.55 5.55 5.56 5.56
101-00 5.51 4.16 5.51 4.08 5.51 4.03 5.52 3.92 5.52 3.83 5.52 3.66
101-04 5.48 5.48 5.48 5.49 5.49 5.49
101-08 5.45 5.45 5.45 5.46 5.46 5.46
101-12 5.42 5.42 5.42 5.43 5.43 5.42
101-16 5.39 4.17 5.39 4.09 5.39 4.04 5.39 3.93 5.40 3.83 5.39 3.67
101-20 5.36 5.36 5.36 5.36 5.36 5.35
101-24 5.33 5.33 5.33 5.33 5.33 5.32
101-28 5.30 5.30 5.30 5.30 5.30 5.29
102-00 5.27 4.18 5.27 4.09 5.27 4.04 5.27 3.94 5.27 3.84 5.25 3.67
WAL 5.00 4.88 4.81 4.65 4.52 4.29
1st Prin 1/15/99 1/15/99 1/15/99 1/15/99 1/15/99 1/15/99
Mat. 12/15/06 7/15/06 6/15/06 3/15/06 2/15/06 2/15/06
</TABLE>
- -------------------------------------------------------------------------------
* Assumes required application of prepayment penalties allocated to bondholders
- -------------------------------------------------------------------------------
These tables have been based upon the assumptions described above. These
assumptions will most likely not represent the actual experience of the Mortgage
Pool in the future.
The tables are intended to illustrate variations in yield on the Offered
Securities under such assumptions.
No representation is made herein as to the actual rate or timing of principal
payments on any of the underlying Mortgage Loans in the Mortgage Pool or the
performance characteristics of the Offered Securities.
B-8
<PAGE>
MLMI, SERIES 1998-C3
- -------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS A-2
BOND TYPE - FIXED
Settlement Date: 12/22/98 Current Balance: $75,490,000
Next Payment: 1/15/99 Current Coupon: 5.950%
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
0% CPR While Subject to Lockout or Yield Maintenance*
------------------------------------------------------------------------------------------------------
0.00 CPR 15.00 CPR 25.00 CPR 50.00 CPR 75.00 CPR 100.00 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 6.14 6.76 6.14 6.70 6.14 6.66 6.14 6.61 6.14 6.58 6.14 6.48
99-04 6.12 6.12 6.12 6.12 6.12 6.12
99-08 6.10 6.10 6.10 6.10 6.10 6.10
99-12 6.08 6.08 6.08 6.08 6.08 6.08
99-16 6.06 6.77 6.07 6.71 6.07 6.67 6.07 6.62 6.07 6.58 6.07 6.49
99-20 6.05 6.05 6.05 6.05 6.05 6.05
99-24 6.03 6.03 6.03 6.03 6.03 6.03
99-28 6.01 6.01 6.01 6.01 6.01 6.01
100-00 5.99 6.78 5.99 6.71 5.99 6.68 5.99 6.62 5.99 6.59 5.99 6.50
100-04 5.97 5.97 5.97 5.97 5.97 5.97
100-08 5.95 5.95 5.95 5.95 5.95 5.95
100-12 5.94 5.94 5.94 5.93 5.93 5.93
100-16 5.92 6.79 5.92 6.72 5.92 6.69 5.92 6.63 5.91 6.60 5.91 6.51
100-20 5.90 5.90 5.90 5.90 5.90 5.89
100-24 5.88 5.88 5.88 5.88 5.88 5.87
100-28 5.86 5.86 5.86 5.86 5.86 5.86
101-00 5.84 6.79 5.84 6.73 5.84 6.70 5.84 6.64 5.84 6.61 5.84 6.52
101-04 5.83 5.82 5.82 5.82 5.82 5.82
101-08 5.81 5.81 5.81 5.80 5.80 5.80
101-12 5.79 5.79 5.79 5.79 5.78 5.78
101-16 5.77 6.80 5.77 6.74 5.77 6.70 5.77 6.65 5.76 6.62 5.76 6.52
101-20 5.75 5.75 5.75 5.75 5.75 5.74
101-24 5.74 5.73 5.73 5.73 5.73 5.72
101-28 5.72 5.72 5.71 5.71 5.71 5.70
102-00 5.70 6.81 5.70 6.75 5.70 6.71 5.69 6.66 5.69 6.62 5.69 6.53
WAL 9.00 8.89 8.83 8.73 8.68 8.52
1st Prin 12/15/06 7/15/06 6/15/06 3/15/06 2/15/06 2/15/06
Mat. 4/15/08 4/15/08 4/15/08 3/15/08 3/15/08 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-9
<PAGE>
MLMI, SERIES 1998-C3
- -------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS A-3
BOND TYPE - FIXED
Settlement Date: 12/22/98 Current Balance: $243,122,000
Next Payment: 1/15/99 Current Coupon: 5.980%
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
0% CPR While Subject to Lockout or Yield Maintenance*
-------------------------------------------------------------------------------------------------------------
0.00 CPR 15.00 CPR 25.00 CPR 50.00 CPR 75.00 CPR 100.00 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 6.16 7.15 6.16 7.14 6.16 7.14 6.16 7.13 6.16 7.11 6.16 6.99
99-04 6.14 6.14 6.15 6.15 6.15 6.15
99-08 6.13 6.13 6.13 6.13 6.13 6.13
99-12 6.11 6.11 6.11 6.11 6.11 6.11
99-16 6.09 7.16 6.09 7.15 6.09 7.15 6.09 7.14 6.09 7.12 6.09 7.00
99-20 6.07 6.07 6.07 6.07 6.07 6.08
99-24 6.06 6.06 6.06 6.06 6.06 6.06
99-28 6.04 6.04 6.04 6.04 6.04 6.04
100-00 6.02 7.17 6.02 7.16 6.02 7.16 6.02 7.15 6.02 7.13 6.02 7.01
100-04 6.01 6.01 6.01 6.01 6.00 6.00
100-08 5.99 5.99 5.99 5.99 5.99 5.99
100-12 5.97 5.97 5.97 5.97 5.97 5.97
100-16 5.95 7.18 5.95 7.17 5.95 7.17 5.95 7.16 5.95 7.14 5.95 7.02
100-20 5.94 5.94 5.94 5.94 5.94 5.93
100-24 5.92 5.92 5.92 5.92 5.92 5.92
100-28 5.90 5.90 5.90 5.90 5.90 5.90
101-00 5.88 7.19 5.88 7.18 5.88 7.18 5.88 7.16 5.88 7.15 5.88 7.03
101-04 5.87 5.87 5.87 5.87 5.87 5.86
101-08 5.85 5.85 5.85 5.85 5.85 5.85
101-12 5.83 5.83 5.83 5.83 5.83 5.83
101-16 5.82 7.20 5.82 7.19 5.82 7.19 5.82 7.17 5.81 7.16 5.81 7.03
101-20 5.80 5.80 5.80 5.80 5.80 5.79
101-24 5.78 5.78 5.78 5.78 5.78 5.78
101-28 5.76 5.76 5.76 5.76 5.76 5.76
102-00 5.75 7.21 5.75 7.20 5.75 7.19 5.75 7.18 5.75 7.16 5.74 7.04
WAL 9.71 9.70 9.69 9.67 9.64 9.42
1st Prin 4/15/08 4/15/08 4/15/08 3/15/08 3/15/08 12/15/07
Mat. 11/15/08 11/15/08 11/15/08 11/15/08 11/15/08 8/15/08
</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-10
<PAGE>
MLMI, SERIES 1998-C3
- -------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS B
BOND TYPE - NET WAC
Settlement Date: 12/22/98 Current Balance: $33,516,000
Next Payment: 1/15/99 Current Coupon: NWAC - 0.81
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
0% CPR While Subject to Lockout or Yield Maintenance*
----------------------------------------------------------------------------------------------------------
0.00 CPR 15.00 CPR 25.00 CPR 50.00 CPR 75.00 CPR 100.00 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 6.44 7.27 6.43 7.26 6.43 7.26 6.43 7.26 6.43 7.25 6.43 7.17
99-04 6.42 6.42 6.41 6.41 6.41 6.41
99-08 6.40 6.40 6.40 6.39 6.39 6.39
99-12 6.38 6.38 6.38 6.38 6.38 6.38
99-16 6.37 7.28 6.36 7.27 6.36 7.27 6.36 7.27 6.36 7.26 6.36 7.18
99-20 6.35 6.35 6.35 6.34 6.34 6.34
99-24 6.33 6.33 6.33 6.33 6.32 6.32
99-28 6.31 6.31 6.31 6.31 6.31 6.31
100-00 6.30 7.28 6.29 7.28 6.29 7.28 6.29 7.28 6.29 7.27 6.29 7.19
100-04 6.28 6.28 6.28 6.27 6.27 6.27
100-08 6.26 6.26 6.26 6.26 6.26 6.25
100-12 6.25 6.24 6.24 6.24 6.24 6.24
100-16 6.23 7.29 6.23 7.29 6.23 7.29 6.22 7.29 6.22 7.28 6.22 7.20
100-20 6.21 6.21 6.21 6.21 6.21 6.20
100-24 6.20 6.19 6.19 6.19 6.19 6.19
100-28 6.18 6.18 6.17 6.17 6.17 6.17
101-00 6.16 7.30 6.16 7.30 6.16 7.30 6.16 7.30 6.15 7.29 6.15 7.21
101-04 6.14 6.14 6.14 6.14 6.14 6.13
101-08 6.13 6.13 6.12 6.12 6.12 6.12
101-12 6.11 6.11 6.11 6.11 6.10 6.10
101-16 6.09 7.31 6.09 7.31 6.09 7.31 6.09 7.31 6.09 7.30 6.08 7.22
101-20 6.08 6.07 6.07 6.07 6.07 6.07
101-24 6.06 6.06 6.06 6.05 6.05 6.05
101-28 6.04 6.04 6.04 6.04 6.04 6.03
102-00 6.03 7.32 6.02 7.32 6.02 7.32 6.02 7.32 6.02 7.31 6.01 7.23
WAL 10.12 10.11 10.11 10.10 10.09 9.94
1st Prin 11/15/08 11/15/08 11/15/08 11/15/08 11/15/08 8/15/08
Mat. 10/15/09 10/15/09 10/15/09 10/15/09 10/15/09 7/15/09
</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>
MLMI, SERIES 1998-C3
- -------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS C
BOND TYPE - NET WAC
Settlement Date: 12/22/98 Current Balance: $35,112,000
Next Payment: 1/15/99 Current Coupon: NWAC - 0.52
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
0% CPR While Subject to Lockout or Yield Maintenance*
----------------------------------------------------------------------------------------------------------
0.00 CPR 15.00 CPR 25.00 CPR 50.00 CPR 75.00 CPR 100.00 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 7.83 6.71 7.83 6.71 7.83 6.71 7.83 6.71 7.83 6.70 7.77
99-04 6.70 6.69 6.69 6.69 6.69 6.69
99-08 6.68 6.68 6.68 6.67 6.67 6.67
99-12 6.66 6.66 6.66 6.66 6.66 6.66
99-16 6.65 7.85 6.65 7.84 6.64 7.84 6.64 7.84 6.64 7.84 6.64 7.78
99-20 6.63 6.63 6.63 6.63 6.63 6.62
99-24 6.62 6.61 6.61 6.61 6.61 6.61
99-28 6.60 6.60 6.60 6.59 6.59 6.59
100-00 6.58 7.86 6.58 7.86 6.58 7.86 6.58 7.86 6.58 7.85 6.58 7.79
100-04 6.57 6.57 6.56 6.56 6.56 6.56
100-08 6.55 6.55 6.55 6.55 6.55 6.54
100-12 6.54 6.53 6.53 6.53 6.53 6.53
100-16 6.52 7.87 6.52 7.87 6.52 7.87 6.52 7.87 6.51 7.87 6.51 7.80
100-20 6.51 6.50 6.50 6.50 6.50 6.50
100-24 6.49 6.49 6.49 6.48 6.48 6.48
100-28 6.47 6.47 6.47 6.47 6.47 6.46
101-00 6.46 7.88 6.46 7.88 6.45 7.88 6.45 7.88 6.45 7.88 6.45 7.81
101-04 6.44 6.44 6.44 6.44 6.44 6.43
101-08 6.43 6.42 6.42 6.42 6.42 6.42
101-12 6.41 6.41 6.41 6.41 6.40 6.40
101-16 6.40 7.89 6.39 7.89 6.39 7.89 6.39 7.89 6.39 7.89 6.39 7.83
101-20 6.38 6.38 6.38 6.37 6.37 6.37
101-24 6.36 6.36 6.36 6.36 6.36 6.35
101-28 6.35 6.35 6.35 6.34 6.34 6.34
102-00 6.33 7.90 6.33 7.90 6.33 7.90 6.33 7.90 6.33 7.90 6.32 7.84
WAL 11.54 11.54 11.53 11.53 11.53 11.39
1st Prin 10/15/09 10/15/09 10/15/09 10/15/09 10/15/09 7/15/09
Mat. 9/15/11 9/15/11 9/15/11 9/15/11 9/15/11 9/15/11
</TABLE>
- -------------------------------------------------------------------------------
* Assumes required application of prepayment penalties allocated to bondholders
- -------------------------------------------------------------------------------
These tables have been based upon the assumptions described above. These
assumptions will most likely not represent the actual experience of the
Mortgage Pool in the future.
The tables are intended to illustrate variations in yield on the Offered
Securities under such assumptions.
No representation is made herein as to the actual rate or timing of principal
payments on any of the underlying Mortgage Loans in the Mortgage Pool or the
performance characteristics of the Offered Securities.
B-12
<PAGE>
MLMI, SERIES 1998-C3
- -------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS D
BOND TYPE - NET WAC
Settlement Date: 12/22/98 Current Balance: $38,305,000
Next Payment: 1/15/99 Current Coupon: NWAC
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
0% CPR While Subject to Lockout or Yield Maintenance*
----------------------------------------------------------------------------------------------------
0.00 CPR 15.00 CPR 25.00 CPR 50.00 CPR 75.00 CPR 100.00 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>
94-16 7.76 8.53 7.76 8.50 7.76 8.48 7.77 8.42 7.77 8.38 7.77 8.31
94-20 7.75 7.75 7.75 7.75 7.75 7.76
94-24 7.73 7.73 7.73 7.73 7.74 7.74
94-28 7.71 7.72 7.72 7.72 7.72 7.73
95-00 7.70 8.55 7.70 8.52 7.70 8.49 7.70 8.44 7.71 8.39 7.71 8.33
95-04 7.68 7.68 7.69 7.69 7.69 7.69
95-08 7.67 7.67 7.67 7.67 7.68 7.68
95-12 7.65 7.65 7.65 7.66 7.66 7.66
95-16 7.64 8.57 7.64 8.53 7.64 8.51 7.64 8.46 7.64 8.41 7.65 8.34
95-20 7.62 7.62 7.62 7.63 7.63 7.63
95-24 7.61 7.61 7.61 7.61 7.61 7.62
95-28 7.59 7.59 7.59 7.60 7.60 7.60
96-00 7.58 8.59 7.58 8.55 7.58 8.53 7.58 8.48 7.58 8.43 7.59 8.36
96-04 7.56 7.56 7.56 7.56 7.57 7.57
96-08 7.55 7.55 7.55 7.55 7.55 7.55
96-12 7.53 7.53 7.53 7.53 7.54 7.54
96-16 7.52 8.60 7.52 8.57 7.52 8.55 7.52 8.49 7.52 8.44 7.52 8.38
96-20 7.50 7.50 7.50 7.50 7.51 7.51
96-24 7.49 7.49 7.49 7.49 7.49 7.49
96-28 7.47 7.47 7.47 7.47 7.48 7.48
97-00 7.46 8.62 7.46 8.59 7.46 8.56 7.46 8.51 7.46 8.46 7.46 8.39
97-04 7.44 7.44 7.44 7.44 7.45 7.45
97-08 7.43 7.43 7.43 7.43 7.43 7.43
97-12 7.41 7.41 7.41 7.41 7.42 7.42
97-16 7.40 8.64 7.40 8.60 7.40 8.58 7.40 8.53 7.40 8.48 7.40 8.41
WAL 14.30 14.20 14.13 13.97 13.83 13.64
1st Prin 9/15/11 9/15/11 9/15/11 9/15/11 9/15/11 9/15/11
Mat. 9/15/13 9/15/13 8/15/13 6/15/13 3/15/13 9/15/12
</TABLE>
- -------------------------------------------------------------------------------
* Assumes required application of prepayment penalties allocated to bondholders
- -------------------------------------------------------------------------------
These tables have been based upon the assumptions described above. These
assumptions will most likely not represent the actual experience of the
Mortgage Pool in the future.
The tables are intended to illustrate variations in yield on the Offered
Securities under such assumptions.
No representation is made herein as to the actual rate or timing of principal
payments on any of the underlying Mortgage Loans in the Mortgage Pool or the
performance characteristics of the Offered Securities.
B-13
<PAGE>
MLMI, SERIES 1998-C3
- -------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS E
BOND TYPE - NET WAC
Settlement Date: 12/22/98 Current Balance: $7,980,000
Next Payment: 1/15/99 Current Coupon: NWAC
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
0% CPR While Subject to Lockout or Yield Maintenance*
-----------------------------------------------------------------------------------------------------
0.00 CPR 15.00 CPR 25.00 CPR 50.00 CPR 75.00 CPR 100.00 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>
88-25 8.47 8.46 8.47 8.46 8.47 8.46 8.48 8.42 8.49 8.35 8.52 8.14
88-29 8.46 8.45 8.46 8.46 8.47 8.51
89-01 8.44 8.44 8.44 8.44 8.45 8.49
89-05 8.42 8.42 8.42 8.43 8.44 8.47
89-09 8.41 8.48 8.41 8.48 8.41 8.48 8.41 8.44 8.42 8.37 8.46 8.16
89-13 8.39 8.39 8.39 8.39 8.40 8.44
89-17 8.37 8.37 8.37 8.38 8.39 8.42
89-21 8.36 8.36 8.36 8.36 8.37 8.40
89-25 8.34 8.50 8.34 8.50 8.34 8.49 8.34 8.45 8.35 8.39 8.39 8.18
89-29 8.33 8.32 8.32 8.33 8.34 8.37
90-01 8.31 8.31 8.31 8.31 8.32 8.35
90-05 8.29 8.29 8.29 8.30 8.31 8.34
90-09 8.28 8.52 8.28 8.52 8.28 8.51 8.28 8.47 8.29 8.41 8.32 8.20
90-13 8.26 8.26 8.26 8.26 8.27 8.30
90-17 8.24 8.24 8.24 8.25 8.26 8.29
90-21 8.23 8.23 8.23 8.23 8.24 8.27
90-25 8.21 8.54 8.21 8.54 8.21 8.53 8.21 8.49 8.22 8.43 8.25 8.22
90-29 8.20 8.19 8.19 8.20 8.21 8.24
91-01 8.18 8.18 8.18 8.18 8.19 8.22
91-05 8.16 8.16 8.16 8.17 8.17 8.20
91-09 8.15 8.56 8.15 8.56 8.15 8.55 8.15 8.51 8.16 8.45 8.19 8.23
91-13 8.13 8.13 8.13 8.13 8.14 8.17
91-17 8.12 8.11 8.11 8.12 8.13 8.15
91-21 8.10 8.10 8.10 8.10 8.11 8.14
91-25 8.09 8.58 8.08 8.58 8.08 8.57 8.09 8.53 8.09 8.46 8.12 8.25
WAL 14.73 14.73 14.71 14.58 14.37 13.73
1st Prin 9/15/13 9/15/13 8/15/13 6/15/13 3/15/13 9/15/12
Mat. 9/15/13 9/15/13 9/15/13 8/15/13 6/15/13 9/15/12
</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-14
<PAGE>
ANNEX C
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C3
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: PAGE # 1
RECORD DATE:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Original Beginning Prepayment Collateral Support Ending
Certificate Certificate Principal Interest Penalties Deficit Total Certificate
Class Cusip # Balance Balance Distribution Distribution (PP/YMC) Allocation/(Reimb) Distribution Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Original Beginning Prepayment Ending
Notional Notional Interest Penalties Total Notional
Class Cusip # Amount Amount Distribution (PP/YMC) Distribution Balance
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Factor Information Per $1,000
- ------------------------------------------------------------------------------------------
Principal Interest End Prin Pass Through
Class Cusip # Distribution Distribution Balance Rate
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
</TABLE>
If there are any questions or comments, please contact the Administrator
listed below
---------------------------------
Tom Provenzano
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
(212) 946-3246
---------------------------------
[CHASE LOGO]
SERVICER (C) COPYRIGHT 1996, CHASE MANHATTAN CORPORATION
C-1
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C3
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: PAGE # 2
RECORD DATE:
P & I Advances
--------------------------------
Realized Losses Class Loss Amount
--------------------------------
--------------------------------
Aggregate Stated Principal Balance
----------------------------------
Loan Number Balance Date
----------------------------------
Principal Balance of REO Loan
and REO Date
----------------------------------
----------------------------------
Loan Number Proceeds Date
----------------------------------
REO Proceeds from Final Recovery
Determination And Date
----------------------------------
----------------------------------
Loan Number Balance Date
----------------------------------
Outstanding Principal Balance of
REO Loan and Appraisal Value
----------------------------------
Servicing Compensation
Special Servicing Fee
Prepayment Premium
Yield Maintenance
Excess Interest
Default Interest
[CHASE LOGO]
SERVICER (C) COPYRIGHT 1996, CHASE MANHATTAN CORPORATION
C-2
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C3
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: DISTRIBUTION OF MORTGAGE LOAN CHARACTERISTICS PAGE # 3
RECORD DATE:
<TABLE>
<CAPTION>
STRATIFICATION BY CURRENT LOAN BALANCE
- -------------------------------------------------------------------------------------------------------
Weighted Average
# of % of Agg -----------------------
Current Scheduled Principal Balance Loans Principal Balance Prin Balance WAM Note rate DSCR
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
TOTALS
- -------------------------------------------------------------------------------------------------------
Average Principal Balance:
</TABLE>
<TABLE>
<CAPTION>
STRATIFICATION BY REMAINING STATED TERM (BALLOON LOANS ONLY)
- -------------------------------------------------------------------------------------------------------
Weighted Average
# of % of Agg -----------------------
Remaining Stated Term Loans Principal Balance Prin Balance WAM Note rate DSCR
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
TOTALS
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STRATIFICATION BY MORTGAGE LOAN CURRENT NOTE RATE
- -------------------------------------------------------------------------------------------------------
Weighted Average
# of % of Agg -----------------------
Current Note Rate Loans Principal Balance Prin Balance WAM Note rate DSCR
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
TOTALS
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STRATIFICATION BY REMAINING STATED TERM (FULLY AMORTIZING LOANS ONLY)
- -------------------------------------------------------------------------------------------------------
Weighted Average
# of % of Agg -----------------------
Remaining Stated Term Loans Principal Balance Prin Balance WAM Note rate DSCR
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
TOTALS
- -------------------------------------------------------------------------------------------------------
</TABLE>
[CHASE LOGO]
SERVICER (C) COPYRIGHT 1996, CHASE MANHATTAN CORPORATION
C-3
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C3
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: DISTRIBUTION OF MORTGAGE LOAN CHARACTERISTICS PAGE # 4
RECORD DATE:
<TABLE>
<CAPTION>
STRATIFICATION BY DEBT SERVICE COVERAGE RATIO (DSCR)
- -------------------------------------------------------------------------------------------------------
Weighted Average
# of % of Agg -----------------------
Debt Service Coverage Ratio Loans Principal Balance Prin Balance WAM Note rate DSCR
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
TOTALS
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STRATIFICATION BY STATE
- -------------------------------------------------------------------------------------------------------
Weighted Average
# of % of Agg -----------------------
State Loans Principal Balance Prin Balance WAM Note rate DSCR
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
TOTALS
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STRATIFICATION BY SEASONING
- -------------------------------------------------------------------------------------------------------
Weighted Average
# of % of Agg -----------------------
Seasoning Loans Principal Balance Prin Balance WAM Note rate DSCR
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
TOTALS
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STRATIFICATION BY PROPERTY TYPE
- -------------------------------------------------------------------------------------------------------
Weighted Average
# of % of Agg -----------------------
Property Type Loans Principal Balance Prin Balance WAM Note rate DSCR
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
TOTALS
- -------------------------------------------------------------------------------------------------------
</TABLE>
Debt Coverage Service 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 Paying Agent makes no representation as to the
accuracy of the data provided by the borrower for this calculation.
[CHASE LOGO]
SERVICER (C) COPYRIGHT 1996, CHASE MANHATTAN CORPORATION
C-4
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C3
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: MONTHLY LOAN STATUS DETAIL PAGE # 5
RECORD DATE:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Offering Metropolitan Neg.
Memorandum Property Statistical Monthly Gross Maturity Amort
Loan ID Cross-Reference Type (1) Area State P&I Coupon Date (Y/N)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Beginning Ending Paid Appraisal Appraisal Has Loan Ever Loan
Scheduled Scheduled Thru Reduction Reduction Been Specially Status
Balance Balance Date Date Amount Serviced?(Y/N) Code (II)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
</TABLE>
(I) PROPERTY TYPE CODE
1. Single Family
2. Multi-Family
3. Condominium or Co-Operative
4. Mobile Home
5. Plan Unit Development
6. Commercial (Non-Exempt)
7. Commercial (Church)
8. Commercial (School, HCF, WF)
9. Commercial (Retail)
10. Commercial (Office)
11. Commercial (Retail/Office)
12. Commercial (Hotel)
13. Commercial (Industrial)
14. Commercial (Industrial/Flex)
15. Commercial (Multiple Properties)
16. Commercial (Ministorage)
(II) LOAN STATUS CODE
1. Specially Serviced
2. Foreclosure
3. Bankruptcy
4. REO
5. Prepayment in Full
6. Discounted Payoff
7. Foreclosure Sale
8. Bankruptcy Sale
9. REO Disposal
10. Modification/Workout
11. Rehabilitated/Corrected
[CHASE LOGO]
SERVICER (C) COPYRIGHT 1996, CHASE MANHATTAN CORPORATION
C-5
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C3
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: PRINCIPAL PREPAYMENT DETAIL PAGE # 6
RECORD DATE:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Offering Memorandum Curtailment Net Liquidation Net Insurance Mortgage Repurchase
Loan Number Cross-Reference Amount Payoff Amount Proceeds Proceeds Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[CHASE LOGO]
SERVICER (C) COPYRIGHT 1996, CHASE MANHATTAN CORPORATION
C-6
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C3
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: HISTORICAL INFORMATION PAGE # 7
RECORD DATE:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Delinquencies Prepayments Rates & Maturities
- ------------------------------------------------------------------------------------------------------------------------------------
1 Month 2 Months 3+ Months Foreclosure REO Modifications Curtailment Payoff Net Weighted Avg.
Distrib. ---------------------------------------------------------------------------------------------------------------------------
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>
[CHASE LOGO]
SERVICER (C) COPYRIGHT 1996, CHASE MANHATTAN CORPORATION
C-7
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C3
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: ADVANCE SUMMARY PAGE # 8
RECORD DATE:
Master Servicer P&I Advances Made
Master Servicer Unreimbursed P&I Advances Outstanding
Interest Accrued & Payable to Master Service in Respect of Advances Made
SERVICING FEE BREAKDOWN
Current Period Accrued Servicing Fees
Less Delinquent Servicing Fees
Plus Additional Servicing Fees
Less Reduction to Servicing Fees
Plus Servicing Fees for Delinquent Payments Received
Plus Adjustments for Prior Servicing Calculation
Total Servicing Fees Collected
ALLOCATION OF INTEREST SHORTFALLS, LOSSES & EXPENSES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Accrued Prepayment Beginning Total Certificate Ending
Certificate Interest Unpaid Interest Interest Interest Unpaid
Class Interest Shortfall Interest Loss Expenses Payable Distributable Interest
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[CHASE LOGO]
SERVICER (C) COPYRIGHT 1996, CHASE MANHATTAN CORPORATION
C-8
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C3
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: DELINQUENCY LOAN DETAIL PAGE # 9
RECORD DATE:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Offering
Memorandum # of Paid
Cross- Months Thru Current P&I Outstanding P&I Advance Loan
Loan Number Reference Delinq. Date Advances Advances** Description(I) Status(II)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Totals
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Special Current Outstanding
Servicer Property Property Outstanding
Transfer Foreclosure Protection Protection Property REO
Date Date Advances Advances Bankruptcy Date Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(I) ADVANCE DESCRIPTION
A. P&I Advance - Loan in Grace Period
B. P&I Advance - Late Payment but (less than) one Month Delinquent
1. P&I Advance - Loan Delinquent 1 month
2. P&I Advance - Loan Delinquent 2 months
3. P&I Advance - Loan Delinqunet 3 months or more
(II) LOAN STATUS
1. Specially Serviced
2. Foreclosure
3. Bankruptcy
4. REO
5. Prepaid in Full
6. Discount Pay Off
7. Foreclosure Sale
8. Bankruptcy Sale
9. REO Dispositions
10. Modification/Workout
11. Rehabilitated/Corrected
** Outstanding P & I Advances include the current period advance
[CHASE LOGO]
SERVICER (C) COPYRIGHT 1996, CHASE MANHATTAN CORPORATION
C-9
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C3
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: SPECIALLY SERVICED LOAN DETAIL PAGE # 10
RECORD DATE:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Offering Date of Specially Current Balance Net
Distrib Memorandum Transfer to Serviced Scheduled Transfer Property Interest Operating
Date Loan Number Cross-Reference Spec. Serv. Code (I) Balance Date Type (II) State Rate Income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
- --------------------------------------------------
Remaining
NOI Note Maturity Amort
Date DSCR Date Date Terms
- --------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------
</TABLE>
(I) Specially Serviced Code
(1) Request for waiver of Prepayment Penalty
(2) Payment default
(3) Request for Loan Modification or Workout
(4) Loan with Borrower Bankruptcy
(5) Loan in Process of Foreclosure
(6) Loan now REO Property
(7) Loan Paid Off
(8) Loan Returned to Master Servicer
(II) Property Type Code
1. Single Family
2. Multi-Family
3. Condominium or Co-Operative
4. Mobile Home
5. Plan Unit Development
6. Commercial (Non-Exempt)
7. Commercial (Church)
8. Commercial (School, HCF, WF)
9. Commercial (Retail)
10. Commercial (Office)
11. Commercial (Retail/Office)
12. Commercial (Hotel)
13. Commercial (Industrial)
14. Commercial (Industrial/Flex)
15. Commercial (Multiple Properties)
16. Commercial (Ministorage)
[CHASE LOGO]
SERVICER (C) COPYRIGHT 1996, CHASE MANHATTAN CORPORATION
C-10
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C3
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: SPECIALLY SERVICED LOAN DETAIL PAGE # 11
RECORD DATE:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Specially Site
Distribution Offering Memo Serviced Inspection Phase 1 Appraisal Appraisal
Date Loan Number Cross-Reference Code (I) Date Date Date Value Comment
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(I) Specially Serviced Code
(1) Request for waiver of Prepayment Penalty
(2) Payment default
(3) Request for Loan Modification or Workout
(4) Loan with Borrower Bankruptcy
(5) Loan in Process of Foreclosure
(6) Loan now REO Property
(7) Loan Paid Off
(8) Loan Returned to Master Servicer
[CHASE LOGO]
SERVICER (C) COPYRIGHT 1996, CHASE MANHATTAN CORPORATION
C-11
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C3
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: MODIFIED LOAN DETAIL PAGE # 12
RECORD DATE:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Offering Memorandum Modification
Loan Number Cross-Reference Date Modification Description
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
</TABLE>
[CHASE LOGO]
SERVICER (C) COPYRIGHT 1996, CHASE MANHATTAN CORPORATION
C-12
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-C3
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: REALIZED LOSS DETAIL PAGE # 13
RECORD DATE:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Offering Beginning Gross Proceeds
Memorandum Appraisal Appraisal Scheduled Gross as a % of
Loan Number Cross-Reference Date Value Balance Proceeds Sched Principal
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Current Total
- ------------------------------------------------------------------------------------------------
Cumulative
- ------------------------------------------------------------------------------------------------
</TABLE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
- -------------------------------------------------------
Aggregate Net Net Proceeds
Liquidation Liquidation as a % of Realized
Expenses* Proceeds Sched Balance Loss
- -------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Current Total
- ------------------------------------------------------------------------------------------------
Cumulative
- ------------------------------------------------------------------------------------------------
</TABLE>
* Aggregate liquidation expenses also include outstanding P&I advances and
unpaid servicing fees, unpaid trustee fees, etc.
[CHASE LOGO]
SERVICER
(C) COPYRIGHT 1996, CHASE MANHATTAN CORPORATION
C-13
<PAGE>
ANNEX D
CSSA
SERIES 1998-C3
DELINQUENT LOAN STATUS REPORT
AS OF _____________
PRO- NAME PROPERTY CITY STATE SQ. FT. OR PAID
SPECTUS TYPE UNITS THRU
ID DATE
90+ DAYS DELINQUENT
60+ DAYS DELINQUENT
30+ DAYS DELINQUENT
CURRENT & SPECIAL SERVICER
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
SCHEDULED TOTAL P&I TOTAL OTHER TOTAL CURRENT CURRENT
LOAN ADVANCES EXPENSES ADVANCES EXPOSURE MONTHLY INTEREST
BALANCE TO DATE TO DATE (TAXES & P&I RATE
ESCROW)
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
MATURITY LTM LTM LTM ***CAP VALUE VALUATION APPRAISAL LOSS USING
DATE NOI NOI DSCR RATE USING NOI DATE BPO OR 90%
DATE ASSIGNED & CAP INTERNAL APPR. OR
RATE VALUE** BPO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ESTIMATED TOTAL TRANSFER RESOLUTION FCL START EXPECTED WORKOUT COMMENTS
RECOVERY % APPRAISAL DATE DATE DATE FCL SALE STRATEGY
REDUCTION DATE
REALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
FCL - Foreclosure
LTM - Latest 12 Months either Last Annual or Trailing 12 months
*Workout Strategy should match the CSSA Loan file using abbreviated words in
place of a code number such as (FCL - In Foreclosure, MOD - Modification,
DPO - Discount Payoff, NS - Note Sale, BK - Bankruptcy, PP - Payment Plan)
TBD - To Be Determined
It is possible to combine the status codes if the loan is going in more than
one direction. (ie. FCL/MOD, BK/MOD, BK/FCL/DPO)
**App - Appraisal, BPO - Broker Opinion, Int. - Internal Value
***How to determine the cap rate is agreed upon by Underwriter and
Servicers - to be provided by third party.
D-1
<PAGE>
CSSA
SERIES 1998-C3
HISTORICAL LOSS REPORT
AS OF _____________
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PROSPECTUS ID NAME PROPERTY CITY STATE % LAST EFFECT SALES PRICE
TYPE RECEIVED APPRAISAL OR DATE OF
FROM BROKERS SALE
SALE OPINION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ALL LOANS: $0.00
CURRENT MONTH ONLY: $0.00
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET AMT SCHEDULED TOTAL P&I TOTAL SERVICING FEES NET PROCEEDS ACTUAL LOSSES
RECEIVED BALANCE ADVANCED EXPENSES EXPENSES PASSED THRU
FROM SALE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
DATE LOSS MINOR ADJ MINOR ADJ TOTAL LOSS LOSS % OF
PASSED THRU TO TRUST PASSED THRU WITH SCHEDULED
ADJUSTMENTS BALANCE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
</TABLE>
D-2
<PAGE>
CSSA
SERIES 1998-C3
HISTORICAL MODIFICATION REPORT
AS OF ____________
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PROSPECTUS ID CITY STATE MOD/ EFFECT DATE BALANCE BALANCE AT THE
EXTENSION WHEN SENT EFFECTIVE DATE OF
FLAG TO SPECIAL REHABILITATION
SERVICER
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FOR ALL LOANS:
TOTAL FOR LOANS IN CURRENT MONTH:
# OF LOANS $ BALANCE
MODIFICATIONS: 0 $0.00
MATURITY DATE EXTENSIONS: 0 $0.00
----------------------------------------------------------
TOTAL: 0 $0.00
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
OLD RATE # MTHS FOR NEW OLD P&I NEW P&I OLD NEW TOTAL #
RATE RATE MATURITY MATURITY MTHS FOR
CHANGE CHANGE OF
MOD
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
- -----------------------------------------------------------------
(1) REALIZED (2) EST. COMMENT
LOSS TO FUTURE
TRUST INTEREST LOSS
TO TRUST
- -----------------------------------------------------------------
(1) Actual principal loss taken by bonds
(2) Expected future loss due to a rate reduction. This is just an estimate at
the time of the modification.
- -------------------------------------------------------------------------------
D-3
<PAGE>
CSSA
SERIES 1998-C3
REO STATUS REPORT
AS OF ___________
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PRO- NAME PROPER- CITY STATE SQ. FT. OR PAID SCHEDULED TOTAL P&I TOTAL
SPECTUS TY UNITS THRU LOAN ADVANCES EXPENSES
ID TYPE DATE BALANCE TO DATE TO DATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER TOTAL CURRENT MATURITY LTM LTM CAP VALUATION VALUE APPRAISAL
ADVANCES EXPOSURE MONTHLY DATE NOI NOI/ RATE DATE USING NOI BPO OR
(TAXES & P&I DATE DSC ASSIGN*** & CAP INTERNAL
ESCROW) RATE VALUE**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
LOSS USING ESTIMATED TOTAL TRANSFER REO PENDING COMMENTS
92% RECOVERY % APPRAISAL DATE ACQUISITION RESOLUTION
APPR. OR REDUCTION DATE DATE
BPO REALIZED
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
App. - Appraisal, BPO - Brokers Opinion, Int - Internal
*** How to determine the cap rate is agreed upon by Underwriting and
servicers - to be provided by third party.
D-4
<PAGE>
CSSA
SERIES 1998-C3
COMPARATIVE FINANCIAL STATEMENT ANALYSIS REPORT
AS OF ____________
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
PROSPECTUS ACCOUNT CITY STATE LAST SCHEDULED PAID ANNUAL
ID # PROPERTY LOAN BALANCE THRU DEBT
INSPECTION DATE SERVICE
DATE
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
ORIGINAL UNDERWRITING INFORMATION 2ND PRECEDING ANNUAL OPERATING INFORMATION
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
BASIS YEAR AS OF ______ NORMALIZED
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
FINANCIAL % TOTAL $ (1) FINANCIAL % TOTAL $ (1)
INFO AS OF OCC REVENUE NOI DSCR INFO AS OF OCC REVENUE NOI DSCR
DATE DATE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PRECEDING ANNUAL OPERATING INFORMATION TRAILING FINANCIAL OR YTD INFORMATION
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
AS OF ______ NORMALIZED ACTUAL
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
FINANCIAL % TOTAL $ (1) FS START FS END TOTAL $ (1)
INFO AS OF OCC REVENUE NOI DSCR DATE DATE REVENUE NOI DSCR
DATE
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
- --------------------------------
NET CHANGE (2)
- --------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
PRECEDING & BASIS
- --------------------------------
- --------------------------------
% % (1)
OCC TOTAL DSCR
REVENUE
- --------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
(1) DSCR should match to Operating Statement and is normally calculated
using NOI/Debt Service.
(2) Net change should compare the latest year to the underwriting year.
D-5
<PAGE>
CSSA
SERIES 1998-C3
WATCH LIST
AS OF ___________
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PROSPECTUS ID NAME PROPERTY CITY STATE SCHEDULED PAID MATURITY LTM* DSCR
TYPE LOAN BALANCE THRU DATE
DATE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL $
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
- ----------------------------------------------------------------
COMMENT / REASON ON WATCH LIST
* LTM - Last 12 months either trailing or last annual.
D-6
<PAGE>
NOI ADJUSTMENT WORKSHEET FOR YEAR
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PROPERTY OVERVIEW
------------------
Prospectus Number
------------------
GE Loan Number
-------------------------------------------------------------------------------
Asset Name
-------------------------------------------------------------------------------
Property Type:
-------------------------------------------------------------------------------
Property Address:
-------------------------------------------------------------------------------
Net Rentable Square Feet or # of Units:
------------------
-----------------------------------
Year Built/ Year Renovated:
-----------------------------------
-------------------------------------------------------------------------------
Adjustment Normalized
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Occupancy Rate *
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Average Rental Income
-------------------------------------------------------------------------------
* Occupancy rates are year end or the ending date
of the financial statement for the period.
INCOME:
Number of Months Annualized 1998
-------------------------------------------------------------------------------
Borrower
Actual Adjustment Normalized
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Rental Income $0 $0 $0
-------------------------------------------------------------------------------
Percentage Rents $0 $0 $0
-------------------------------------------------------------------------------
Expense Recoveries $0 $0 $0
-------------------------------------------------------------------------------
Other Income $0 $0 $0
-------------------------------------------------------------------------------
Less: Vacancies $0 $0 $0
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
EFFECTIVE GROSS INCOME $0 $0 $0
-------------------------------------------------------------------------------
Normalized - Full year financial statements that
have been reviewed by the underwriter or the Servicer
** Servicer will not be expected to "Normalize" these
YTD numbers
OPERATING EXPENSES:
-------------------------------------------------------------------------------
Real Estate Taxes $0 $0 $0
-------------------------------------------------------------------------------
Property Insurance $0 $0 $0
-------------------------------------------------------------------------------
Utilities $0 $0 $0
-------------------------------------------------------------------------------
General & Administration $0 $0 $0
-------------------------------------------------------------------------------
Repairs and Maintenance $0 $0 $0
-------------------------------------------------------------------------------
Management Fees $0 $0 $0
-------------------------------------------------------------------------------
Payroll & Benefits Expense $0 $0 $0
-------------------------------------------------------------------------------
Advertising & Marketing $0 $0 $0
-------------------------------------------------------------------------------
Professional Fees $0 $0 $0
-------------------------------------------------------------------------------
Other Expenses $0 $0 $0
-------------------------------------------------------------------------------
Ground Rent $0 $0 $0
-------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $0 $0 $0
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
OPERATING EXPENSE RATIO
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NET OPERATING INCOME $0 $0 $0
-------------------------------------------------------------------------------
<PAGE>
-------------------------------------------------------------------------------
Leasing Commissions $0 $0 $0
-------------------------------------------------------------------------------
Tenant Improvements $0 $0 $0
-------------------------------------------------------------------------------
Replacement Reserve $0 $0 $0
-------------------------------------------------------------------------------
TOTAL CAPITAL ITEMS $0 $0 $0
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
N.O.I. AFTER CAPITAL ITEMS $0 $0 $0
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
DEBT SERVICE (PER SERVICER) $0 $0 $0
-------------------------------------------------------------------------------
CASH FLOW AFTER DEBT SERVICE $0 $0 $0
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
DSCR: (NOI/DEBT SERVICE)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
DSCR: (AFTER RESERVES\CAPITAL EXP.)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SOURCE OF FINANCIAL DATA:
-------------------------------------------------------------------------------
(ie. operating statements, financial statements,
tax return, other)
NOTES AND ASSUMPTIONS:
- ---------------------------------------------------------------------------------------------------------------------------------
This report should be completed by the Servicer for any "Normalization" of the Borrower's numbers
INCOME:
EXPENSE:
CAPITAL ITEMS:
</TABLE>
D-7
<PAGE>
<TABLE>
<CAPTION>
OPERATING STATEMENT ANALYSIS
<S> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW
------------------
Prospectus Number
------------------
------------------
GE Loan Number
------------------
---------------------------------------------------------------------
Property Name
---------------------------------------------------------------------
---------------------------------------------------------------------
Property Type:
---------------------------------------------------------------------
---------------------------------------------------------------------
Property Address, City, State:
---------------------------------------------------------------------
------------------
Net Rentable Square Feet or # of Units:
------------------
-----------------------------------
Year Built/ Year Renovated:
-----------------------------------
---------------------------------------------------------------------
Year of Operations
---------------------------------------------------------------------
---------------------------------------------------------------------
Occupancy Rate *
---------------------------------------------------------------------
---------------------------------------------------------------------
Average Rental Income
---------------------------------------------------------------------
* Occupancy rates are year end or the ending date of the financial
statement for the period.
INCOME:
Number of Months 3rd Prior Year 2nd Prior Year Prior Year
---------------------------------------------------------------------
Period Ended Underwriting
Statement Classification Base Line Normalized Normalized Normalized
---------------------------------------------------------------------
---------------------------------------------------------------------
Rental Income $0 $0 $0 $0
---------------------------------------------------------------------
Percentage Rents $0 $0 $0 $0
---------------------------------------------------------------------
Expense Recoveries $0 $0 $0 $0
---------------------------------------------------------------------
Other Income $0 $0 $0 $0
---------------------------------------------------------------------
Less: Vacancies $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
EFFECTIVE GROSS INCOME $0 $0 $0 $0
---------------------------------------------------------------------
Normalized - Full year financial statements that have been reviewed
by the underwriter or the Servicer
** Servicer will not be expected to "Normalize" these YTD numbers
OPERATING EXPENSES:
---------------------------------------------------------------------
Real Estate Taxes $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Property Insurance $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Utilities $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
General & Administation $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Repairs and Maintenance $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Management Fees $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Payroll & Benefits Expense $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Advertising & Marketing $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Professional Fees $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Other Expenses $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Ground Rent $0 $0 $0 $0
---------------------------------------------------------------------
TOTAL OPERATING EXPENSES $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
OPERATING EXPENSE RATIO
---------------------------------------------------------------------
---------------------------------------------------------------------
NET OPERATING INCOME $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Leasing Commissions $0 $0 $0 $0
---------------------------------------------------------------------
Tenant Improvements $0 $0 $0 $0
---------------------------------------------------------------------
Replacement Reserve $0 $0 $0 $0
---------------------------------------------------------------------
Total Capital Items $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
N.O.I. AFTER CAPITAL ITEMS $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
DEBT SERVICE (PER SERVICER) $0 $0 $0 $0
---------------------------------------------------------------------
CASH FLOW AFTER DEBT SERVICE $0 $0 $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
DSCR: (NOI/DEBT SERVICE)
---------------------------------------------------------------------
---------------------------------------------------------------------
DSCR: (AFTER RESERVES\CAPITAL EXP.)
---------------------------------------------------------------------
---------------------------------------------------------------------
SOURCE OF FINANCIAL DATA:
---------------------------------------------------------------------
(ie. operating statements, financial statements, tax return, other)
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PROPERTY OVERVIEW
Prospectus Number
GE Loan Number
-----------------------------------
Property Name
-----------------------------------
-----------------------------------
Property Type:
-----------------------------------
-----------------------------------
Property Address, City, State:
-----------------------------------
Net Rentable Square Feet or # of Units:
Year Built/ Year Renovated:
-----------------------------------
Year of Operations 1998 YTD
-----------------------------------
-----------------------------------
Occupancy Rate *
-----------------------------------
-----------------------------------
Average Rental Income
-----------------------------------
INCOME: No. of Mos.
-----------------
Number of Months Current Year 0
-----------------
---------------------------------------------------------------------
Period Ended 1998 Current to Base Current to prior
Statement Classification Normalized Variance Variance
---------------------------------------------------------------------
---------------------------------------------------
Rental Income $0 $0
---------------------------------------------------------------------
----------------------------------
Percentage Rents $0 $0
---------------------------------------------------------------------
----------------------------------
Expense Recoveries $0 $0
---------------------------------------------------------------------
----------------------------------
Other Income $0 $0
---------------------------------------------------------------------
----------------------------------
Less: Vacancies $0 $0
---------------------------------------------------------------------
-----------------
------------------ ----------------------------------
EFFECTIVE GROSS INCOME $0 $0
---------------------------------------------------------------------
OPERATING EXPENSES:
---------------------------------------------------------------------
Real Estate Taxes $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Property Insurance $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Utilities $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
General & Administation $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Repairs and Maintenance $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Management Fees $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Payroll & Benefits Expense $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Advertising & Marketing $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Professional Fees $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Other Expenses $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Ground Rent $0 $0
---------------------------------------------------------------------
----------------------------------
TOTAL OPERATING EXPENSES $0 $0
---------------------------------------------------------------------
-----------------------------------
OPERATING EXPENSE RATIO
-----------------------------------
---------------------------------------------------------------------
NET OPERATING INCOME $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Leasing Commissions $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Tenant Improvements $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
Replacement Reserve $0 $0
---------------------------------------------------------------------
---------------------------------------
TOTAL CAPITAL ITEMS $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
N.O.I. AFTER CAPITAL ITEMS $0 $0
---------------------------------------------------------------------
---------------------------------------------------------------------
DEBT SERVICE (PER SERVICER) $0 $0
---------------------------------------------------------------------
---------------------------------------
CASH FLOW AFTER DEBT SERVICE $0 $0
---------------------------------------------------------------------
-----------------------------------
DSCR: (NOI/DEBT SERVICE)
-----------------------------------
-----------------------------------
DSCR: (AFTER RESERVES\CAPITAL EXP.)
-----------------------------------
-----------------------------------
SOURCE OF FINANCIAL DATA:
-----------------------------------
NOTES AND ASSUMPTIONS:
- --------------------------------------------------------------------------------
The years shown above will roll always showing a three year history.
Base line operating information is YTD as of:
INCOME:
</TABLE>
EXPENSE:
CAPITAL ITEMS:
D-8
<PAGE>
ANNEX E
THE 1700 BROADWAY LOAN
The Loan. The largest Mortgage Loan (the "1700 Broadway Loan"), which
represents approximately 9.4% of the Initial Pool Balance was originated by the
Mortgage Loan Seller on August 20, 1998, and has a Cut-Off Date Balance of
$59,845,380. The 1700 Broadway Loan is secured by a first mortgage encumbering
the leasehold interest in an office building located in midtown Manhattan, New
York (the "1700 Broadway Property"). The 1700 Broadway Loan was made to 1700
Broadway Co., (the "Borrower"), a special purpose, bankruptcy remote, New York
limited partnership sponsored by the Lawrence Ruben Company. The Lawrence Ruben
Company has been developing properties in major east coast cities for more than
thirty years. It has participated in the development, acquisition and
management of over five million square feet of office space, as well as
numerous luxury residential properties in New York City, Washington, D.C. and
Boston. Its properties include One Dag Hammarskjold Plaza, 630 Third Avenue,
600 Madison Avenue and 52 Broadway in Manhattan, The Devonshire and One Exeter
Plaza in Boston and Pennsylvania Plaza in Washington, D.C.
The 1700 Broadway Loan has a remaining amortization term of 357 months and
matures on September 1, 2028 (the "Maturity Date"). The 1700 Broadway Loan is
subject to Defeasance in lieu of prepayment in full at any time after the date
which is two years after the Closing Date. The 1700 Broadway Loan is an ARD
Loan with an Anticipated Repayment Date of September 1, 2013. If the Loan is
not repaid in full by September 1, 2013 (the "Optional Prepayment Date"), the
interest rate shall adjust to a rate per annum equal to the greater of: (x)
8.81% or (y) the Treasury Bond maturing closest to the maturity date of the
loan plus three and 40/100 percent (3.40%).
The Property. The 1700 Broadway Property is located on the southeast
corner of 53rd Street at the intersection of Broadway and 53rd Street in
midtown Manhattan. Constructed in 1969, the building is situated on
approximately 0.63 acres. The property is a 42-story, Class A office building
with a net rentable area of 581,354 square feet of office and retail space and
a 122-car parking garage located in the basement of the building. The property
is currently fully leased. Major tenants lease approximately 413,348 square
feet (71.1%) of the 1700 Broadway Property. The ten largest tenants occupy
approximately 457,086 square feet and include tenants listed in the following
table:
<TABLE>
<CAPTION>
TENANT SF RENT/SF START DATE END DATE
- --------------------------------- --------- ----------------- ------------ ---------
<S> <C> <C> <C> <C>
Time Warner Enter. Co. .......... 110,500 $22.26 12/94 2/06
$24.12 - 4/99
$26.44 - 4/02
Reuters America ................. 105,231 $33.94 varies 5/01
The Hearst Corp. ................ 65,429 $29.21 varies 3/01
Worldvision ..................... 58,098 $24.26 varies 9/07
$26.12 - 10/99
$27.99 - 10/02
$29.86 - 10/03
$31.72 - 10/04
$33.59 - 10/05
$35.45 - 10/06
Erisco .......................... 24,420 $29.22 6/89 5/06
$31.05 - 6/01
$32.87 - 6/03
King World Production ........... 25,250 $26.88 1/95 1/05
$28.73 - 2/01
The Talbots ..................... 22,100 $24.12 1/97 1/08
$25.05 - 1/01
$26.90 - Jan 04
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
TENANT SF RENT/SF START DATE END DATE
- ------------------------- -------- ----------------- ------------ ---------
<S> <C> <C> <C> <C>
Friedman Alpren & Green 20,808 $21.30 5/89 8/02
$23.61 - 9/98
$24.54 - 9/00
ABKCO ................... 12,625 $27.34 12/83 12/03
$28.73 - 2/01
Law & Economics ......... 12,625 $29.91 7/97 7/07
$31.78 - 8/00
$33.65 - 8/03
</TABLE>
Property Management. The Lawrence Company, an affiliate of the Borrower,
manages the 1700 Broadway Property. The 1700 Broadway Loan documents provide
that the property manager may be terminated upon the occurrence of an Event of
Default (as defined in the 1700 Broadway Loan documents), mismanagement, or if
the DSCR is less than 1.25.
Operating History:
<TABLE>
<CAPTION>
TRAILING
12 MONTHS
ENDING
1996 1997 6/98 UNDERWRITING
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Gross Potential Rent ....... $ 13,448,455 $ 14,281,495 $ 15,152,356 $17,237,484
Total Vacancy .............. (976,620)
------------ ------------ ------------ -----------
Net Rental Income .......... 13,448,455 14,281,495 15,152,356 16,260,864
Expenses Reimbursement...... 1,468,948 2,589,264 2,799,969 2,679,888
Other Income ............... 410,868 395,989 324,262 409,849
------------ ------------ ------------ -----------
Effective Gross Income ..... 15,328,271 17,266,748 18,276,587 19,350,601
Utilities .................. 889,376 917,029 763,760 949,125
Repairs & Maintenance ...... 2,885,704 3,001,302 2,933,610 3,106,348
General & Administrative ... 358,309 324,176 292,569 335,522
Payroll & Benefits ......... 152,060 164,853 169,889 170,623
Property Taxes ............. 3,286,109 3,078,108 3,078,108 3,185,842
Management Fee ............. 292,757 332,082 353,446 774,024
Insurance .................. 82,740 83,316 83,285 86,232
Ground Rent ................ 2,502,370 2,502,370 2,484,370 2,502,024
Reserves for Replacement ... -- -- -- 116,271
------------ ------------ ------------ -----------
Total Expenses ............. 10,449,425 10,403,236 10,159,036 11,226,010
------------ ------------ ------------ -----------
NOI ........................ 4,878,847 6,863,512 8,117,551 8,124,591
------------ ------------ ------------ -----------
Capital Improvements .......
Leasing Commissions ........ 192,226
Tenant Improvements ........ 1,328,299
------------ ------------ ------------ -----------
Net Cash Flow (NCF) ........ $ 4,878,847 $ 6,863,512 $ 8,117,551 $ 6,604,065
============ ============ ============ ===========
Occupancy .................. 95.5
OER ........................ 68.2% 60.3% 55.6% 58.0%
Debt Service ............... $ 4,746,343 $ 4,746,343 $ 4,746,343 $ 4,746,343
DSCR based on NOI .......... 1.03x 1.45x 1.71x 1.71x
DSCR based UW NCF .......... 1.39x
</TABLE>
E-2
<PAGE>
Lease Expiration Schedule:
<TABLE>
<CAPTION>
SQUARE FEET PERCENTAGE
------------- -----------
<S> <C> <C>
Vacant ................................ 26,370 4.5%
Twelve months ending 9/30/99 .......... 19,811 3.4%
Twelve months ending 9/30/00 .......... 17,148 3.0%
Twelve months ending 9/30/01 .......... 158,450 27.3%
Twelve months ending 9/30/02 .......... 48,930 8.4%
Twelve months ending 9/30/03 .......... 5,640 1.0%
Twelve months ending 9/30/04 .......... 22,946 3.9%
Twelve months ending 9/30/06 .......... 26,144 4.5%
Twelve months ending 9/30/07 .......... 134,920 23.2%
Twelve months ending 9/30/08 .......... 21,343 3.7%
Twelve months ending 9/30/09 .......... 83,690 14.4%
</TABLE>
Lockbox and Reserves. The 1700 Broadway Loan documents provide for
reserves for taxes, deferred ground rent payment and on-going replacements. A
$2,000,000 TI & LC reserve account has been established to facilitate the
re-letting of the Reuter's Space. Upon the reletting of two-thirds of the
Reuters space, the TI & LC reserve shall be reduced to $1,000,000 and shall be
maintained until maturity. The loan documents also require the establishment of
a lock box account with a minimum balance of $1,031,417 which must be
maintained through the maturity date. Upon an event of Default or commencing on
the Optional Prepayment Date, all existing and future tenants of the Property
shall be required to make their rental payments and other amounts due under
their leases into the Lockbox.
Ground Lease. The building is subject to a 99-year ground lease
established in April, 1965 and amended November, 1966 (the "Ground Lease"). The
owner of the fee interest is the Schubert Foundation. Pursuant to the Ground
Lease, the Borrower has four renewal options, occurring every 21-years, through
March, 2064. The Ground Lease is currently in the first renewal period, which
began in 1990. Upon renewal, the rent due under the Ground Lease was reset and
amounts to $2,502,024 annually. Since the renewal, the Borrower has paid and
currently pays a fixed annual rent equal to $216,000 through March 31, 2000.
The difference between the contractual rent and the amount actually paid since
1990 ($2,502,024 -- $216,000) equals the annual Deferred Principal Ground
Rent. Commencing April 1, 2000, the Borrower will pay the Deferred Principal
Ground Rent balance plus interest at 6%. The beginning Deferred Principal
Ground Rent balance, $22,863,700 plus the deferred ground rent payment and the
accrued deferred interest, $6,916,269 will total an estimated $29,779,969 on
April 1, 2000.
Letter of Credit/Ground Lease Reserves. A letter of credit ("Letter of
Credit") in the amount of $24,438,436 has been provided by the Borrower to the
Lender in accordance with the Letter of Credit Agreement. Commencing October,
1998 and continuing through March 31, 2000, Borrower shall deposit with Lender
funds in the amount of $268,692 (which amount has been included in the
calculation of Ground Rent in the "Operating History" table) monthly, to
establish a reserve to pay all deferred ground rent (the "Deferred Ground
Rent") under the ground lease dated November 1, 1966, by and between The
Shubert Organization and Borrower. If the sum of (i) the amount of the Letter
of Credit and (ii) the amount of the funds in the Ground Lease Reserves are at
any time less than the amount of the Deferred Ground Rent that shall then be
required to be maintained, such difference being hereinafter referred to as
"Ground Rent Shortfall," Borrower shall, on a quarterly basis, pay an
additional amount equal to the Ground Rent Shortfall into the Ground Rent
Reserve Account.
E-3
<PAGE>
INDEPENDENCE GREEN APARTMENTS
The Loan. The second largest Mortgage Loan (the "Independence Green
Apartments Loan"), which represents approximately 5.5% of the Initial Pool
Balance, was originated by WMF Capital Corp. on July 30, 1998, and has a
Cut-Off Date Balance, of $34,890,416. The loan was made to Atlantic IX, LLC., a
special purpose entity. The principal and indemnitor of Atlantic IX, LLC., Mr.
David Clapper, has been involved in real estate acquisition and management for
over 20 years.
The Independence Green Apartments Loan has, as of the Cut-Off Date, a
remaining amortization term of 356 months and matures in August, 2008. The
Independence Green Apartments Loan, however, is subject to Defeasance, in lieu
of prepayment, in whole or in part, at any time after the date which is two
years after the Closing Date. In order for a partial Defeasance to be effected,
written confirmation from each Rating Agency must be obtained that states that
such release will not cause such Rating Agency to downgrade, qualify or
withdraw any of its then current ratings of any Certificates. Notwithstanding,
the foregoing, the loan may be prepaid, in whole or in part, without payment of
a Prepayment Premium at any time following the six months prior to maturity.
The Property. Independence Green Apartments is located at 36700 Grand
River Avenue, Farmington Hills, MI (the "Independence Property"). The
ninety-one acre site is improved with 41, two-story garden style apartment
buildings. The buildings, which were constructed between 1966 and 1971, contain
a total of 981 units. The unit mix consists of one and two bedroom units, as
well as townhouse units. Additional improvements/amenities include; a clubhouse
with community room, fireplace, indoor pool, sauna and leasing office; outdoor
swimming pool, tennis courts; sand volleyball court; and an 18-hole golf
course. There are 2,100 parking spaces.
Release. A certain portion of the Independence Property ("Release
Property") is eligible for release from the Independence Green Apartments Loan.
Any such release is subject to the following conditions: (a) such release must
be accompanied by a partial prepayment or partial Defeasance of the
Independence Green Loan equal to 125% of the allocated loan amount of the
Release Property and (b) the then current DSCR of the Remaining Property
calculated for the 12 month period immediately prior to the release shall not
be less than the greater of (x) the debt service coverage ratio for the
Independence Property, including the Release Property, that existed on the date
the Loan was closed (1.25x) or (y) the DSCR for the Independence Property,
including the Release Property, that existed for the 12 month period
immediately prior to the release; and (ii) the then current LTV ratio for the
Released Property shall not exceed the lesser of (x) the LTV ratio of the
Independence Property, including the Release Property, that existed on the date
the loan was closed (79.55%) or (y) the LTV ratio for the Property, including
the Release Property, that existed for the 12 month period immediately prior to
such release, in each case as determined by Mortgagee in its sole
determination.
Property Management. The Independence Property is managed by Atlantic
Management Corporation. The indemnitor, Mr. David Clapper, formed Atlantic
Management Corporation in 1987 to manage his portfolio of 4,000 multifamily
units, and 500,000 sq. ft. of commercial real estate.
E-4
<PAGE>
Operating History:
<TABLE>
<CAPTION>
TRAILING
TWELVE MONTHS
1996 1997 ENDING 5/98 UNDERWRITING
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Gross Potential Rent ........... $ 6,458,195 $ 6,461,348 $ 6,382,808 $ 7,498,796
Total Vacancy .................. 0 0 0 (1,115,988)
----------- ----------- ----------- ------------
Net Rental Income .............. 6,458,195 6,461,348 6,382,808 6,382,808
Other Income ................... 282,364 283,409 358,938 358,938
----------- ----------- ----------- ------------
Effective Gross Income ......... 6,740,559 6,744,757 6,741,746 6,741,746
Utilities ...................... 449,545 439,448 411,593 439,448
Repairs & Maintenance .......... 292,024 296,049 243,445 296,049
General & Administrative ....... 96,034 99,707 175,860 99,707
Payroll & Benefits ............. 994,361 1,063,973 897,577 1,063,973
Property Taxes ................. 594,858 594,804 649,409 692,349
Management Fee1 ................ 269,622 269,790 269,670 269,670
Advertising .................... 75,596 76,007 45,423 76,007
Insurance ...................... 105,706 106,339 120,956 121,468
Other Expenses ................. -- -- 20,164 --
Reserves for Replacement ....... 299,205
----------- ----------- ----------- ------------
Total Expenses ................. 2,877,746 2,946,117 2,834,097 3,357,876
----------- ----------- ----------- ------------
NOI ............................ 3,862,813 3,798,640 3,907,649 3,383,870
----------- ----------- ----------- ------------
Net Cash Flow (NCF) ............ $ 3,862,813 $ 3,798,640 $ 3,907,649 $ 3,383,870
=========== =========== =========== ============
1 Management fee adjusted historically to 4% of effective net revenue
Occupancy ...................... 93.0% 93.0% 92.2% 92.2%
OER ............................ 42.7% 43.7% 42.0% 49.8%
Debt Service ................... $ 2,710,167 $ 2,710,167 $ 2,710,167 $ 2,710,167
DSCR based on NOI .............. 1.43x 1.40x 1.44x 1.25x
DSCR based UW NCF .............. 1.25x
</TABLE>
Lockbox and Reserves. The Independence Green Loan documents provide for
reserves for on-going replacements, immediate repairs, environmental reserves,
debt service, and taxes and insurance. No Lockbox is required for the
Independence Green Apartments Loan.
E-5
<PAGE>
THE ANSONIA LOAN
The Loan. The third largest Mortgage Loan (the "Ansonia Loan"), which
represents approximately 4.5% of the Initial Pool Balance was originated on
behalf of the Mortgage Loan Seller on February 13, 1998, and has a Cut-Off Date
Balance of $28,781,905. The Ansonia Loan is secured by a first mortgage (the
"Ansonia Mortgage") encumbering the commercial condominium (the "Ansonia
Property") called The Ansonia Commercial Condominium, located in Manhattan, New
York. The Ansonia Loan was made to Ansonia Commercial, L.L.C. (the "Ansonia
Borrower"), a special purpose Delaware limited liability company. The Ansonia
Borrower is controlled by Stanley Stahl and Albert Schussler who are both
actively involved in the New York City real estate market. Stanley Stahl has
been an owner and operator of commercial and residential real estate in New
York for almost 50 years. Mr. Stahl's real estate investments include
approximately four million square feet of office space, apartment buildings
containing more than 3,000 units and numerous retail buildings located
predominately in New York City.
The Ansonia Loan has, as of the Cut-Off Date, a remaining amortization
term of 351 months and matures in March 2028. The Ansonia Loan may not be
prepaid prior to April 1, 2003. Between April 1, 2003 to February 29, 2004 ,
the Ansonia Loan may be prepaid, with a 1% prepayment penalty. On or after
March 1, 2004, the Ansonia Loan may be prepaid, without payment of a prepayment
penalty. The Ansonia Loan is an ARD Loan with an Anticipated Repayment Date of
March 1, 2005. On March 1, 2005 (the "Anticipated Repayment Date"), if the Loan
has not been paid in full, the Mortgage Interest Rate shall adjust to a rate
per annum equal to the greater of (a) the initial Note Rate of 6.79% plus two
percent (2%) or (b) the interpolated Treasury yield index most closely
approximating the maturity date plus a spread equating to 3.25% on the
Anticipated Repayment Date.
The Property. The Ansonia Property is a commercial condominium located in
the City of New York comprising approximately 111,060 leasable square feet of
space, which includes approximately 54,845 square feet of retail space,
approximately 34,909 square feet of office space and an approximately 21,306
square foot parking garage. This commercial condominium is situated in the
first two floors and the cellar of a 17 story, turn-of-the century beaux-arts
building. Based on the Ansonia Borrower's June, 1998 rent roll, the Ansonia
Property was approximately 100% leased at an approximate average rent per
square foot of $35.17. Among the tenants leasing space at the Ansonia Property
are A&P (approximately 30,204 square feet), The Gap (approximately 3,633 square
feet), and General Nutrition Center (approximately 2,275 square feet).
<TABLE>
<CAPTION>
TENANT SF RENT/SF START EXPIRATION RENT STEPS
- -------------------------- -------- ----------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
A&P .................... 30,204 $ 50.82 11/97 11/17 11/03 - $55.90
11/07 - $61.49
11/13 - $67.64
The Gap ................ 3,633 $ 39.91 3/80 1/02 None
General Nutrition ...... 2,275 $ 65.93 4/92 4/02 None
</TABLE>
Property Management. The Ansonia Property is managed by Lefferts/Fore
Associates an affiliate of the Ansonia Borrower. The Ansonia Loan documents
provide that after the lender takes title to the Ansonia Property, the contract
with the property manager may be terminated upon 30 days notice.
E-6
<PAGE>
Operating History:
<TABLE>
<CAPTION>
TRAILING
TWELVE MONTHS
1995 1996 ENDING 8/98(1) UNDERWRITING
--------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C>
Gross Potential Rent ........... $ 3,227,598 $ 2,190,317 $ 2,273,927 $3,906,100
Total Vacancy .................. -- -- -- (118,555)
----------- ----------- ----------- ----------
Net Rental Income .............. 3,227,598 2,190,317 2,273,927 3,787,545
Other Income ................... 281,788 197,375 266,440 188,487
----------- ----------- ----------- ----------
Effective Gross Income ......... 3,509,386 2,387,692 2,540,367 3,976,032
Repairs & Maintenance .......... 47,598 36,803 48,000 49,680
General & Administrative ....... 15,250 15,000 14,000 14,490
Payroll & Benefits ............. 40,000 40,000 40,000 41,400
Property Taxes ................. 220,002 204,467 207,744 193,763
Management Fee ................. 73,735 45,692 69,996 159,041
Common Charges ................. 265,758 322,397 334,980 346,704
Reserves for Replacement ....... 16,659
----------- ----------- ----------- ----------
Total Expenses ................. 662,343 664,359 714,720 821,737
----------- ----------- ----------- ----------
NOI ............................ 2,847,043 1,723,333 1,825,647 3,154,295
----------- ----------- ----------- ----------
Leasing Commissions ............ 46,766
Tenant Improvements ............ 64,724
----------- ----------- ----------- ----------
Net Cash Flow (NCF) ............ $ 2,847,043 $ 1,723,333 $ 1,825,647 $3,042,804
=========== =========== =========== ==========
- ------------
1 The Trailing 12-months includes no income from A&P. A&P began paying rent October, 1998.
Occupancy ...................... 97.0%
OER ............................ 18.9% 27.8% 28.1% 20.7%
Debt Service ................... $ 2,289,812 $ 2,289,812 $ 2,289,812 $2,289,812
DSCR based on NOI .............. 1.24x .75x .79x 1.38
DSCR based UW NCF .............. 1.33x
</TABLE>
Lease Expiration Schedule:
<TABLE>
<CAPTION>
SQUARE FEET PERCENTAGE
------------- -----------
<S> <C> <C>
Vacant ................................ 0 0.0%
Twelve Months Ending 1/31/99 .......... 2,562 2.3%
Twelve Months Ending 1/31/00 .......... 0 0.0%
Twelve Months Ending 1/31/01 .......... 1,893 1.7%
Twelve Months Ending 1/31/02 .......... 1,202 1.1%
Twelve Months Ending 1/31/03 .......... 16,376 14.7%
Twelve Months Ending 1/31/04 .......... 46,311 41.7%
Twelve Months Ending 1/31/05 .......... 990 0.9%
Twelve Months Ending 1/31/06 .......... 976 0.9%
Twelve Months Ending 1/31/07 .......... 2,562 2.3%
Twelve Months Ending 1/31/08 .......... 8,704 7.8%
Twelve Months Ending 1/31/09 .......... 1,842 1.7%
</TABLE>
Lockbox and Reserves. The Ansonia Loan documents provide for reserves for
taxes. In the event that the Ansonia Borrower does not tender, to Lender, a
firm commitment to refinance the Property from a third-party lender (prior to
four (4) months preceding March 1, 2005) the Borrower shall be required to
enter into a lockbox agreement whereby the gross income derived from the
Property shall be deposited into a lockbox under the control of the Lender.
Commencing on the Optional Prepayment Date, all excess cash flow after the
payment of expenses and debt service under the Note will be utilized to pay
down the principal balance of the Loan.
E-7
<PAGE>
THE MERCER MALL LOAN
The Loan. The fourth largest Mortgage Loan (the "Mercer Mall Loan"), which
represents approximately 3.8% of the Initial Pool Balance was originated on
behalf of the Mortgage Loan Seller on October 13, 1998, and has a Cut-Off Date
Balance of $23,979,568. The Mercer Mall Loan is secured by a first fee and
leasehold mortgage (the "Mercer Mall Mortgage") encumbering the shopping center
(the "Mercer Mall Property") called The Mercer Mall, located in Lawrence, New
Jersey. The Mercer Mall Loan was made to Mercer Mall Property Group (the
"Mercer Mall Borrower"), a New York general partnership. The principal owners
of the Mercer Mall Borrower are Harvey Siegal and Harvey Parker. The principal
owners control partnerships which have developed approximately two million
square feet of retail projects in the New York metropolitan area.
The Mercer Mall Loan has, as of the Cut-Off Date, a remaining amortization
term of 359 months and matures in November 2008. The Mercer Mall Loan may not
be prepaid prior to August 1, 2008. However, the Mercer Mall Loan is subject to
Defeasance, in lieu of prepayment, at any time after the date which is the
earlier to occur of (i) two (2) years after the Closing Date or (ii) five (5)
years after the date of the October 13, 1998 closing of the loan.
The Property. The Mercer Mall Property is an anchored shopping center
comprising 386,275 leasable square feet of retail space located in Mercer
County in central New Jersey. The Mercer Mall Property was constructed in
several phases with the first one completed in 1975 and has approximately 2,058
parking spaces. Based on the Mercer Mall Borrower's September, 1998 rent roll,
the Mercer Mall Property was approximately 100% leased at an approximate
average rent per square foot of $11.33. Among the larger tenants leasing space
at the Mercer Mall Property are Kmart (approximately 88,905 square feet),
General Cinema (approximately 32,863 square feet), TJ Maxx (approximately
28,133 square feet), Ross Dress for Less (approximately 23,787 square feet) and
Drug Emporium (approximately 23,600 square feet).
<TABLE>
<CAPTION>
TENANT SF RENT/SF START EXPIRATION RENT STEPS
- ---------------------------- -------- --------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Kmart(1) ................ 88,905 $ 3.32 11/76 11/00 None
General Cinema .......... 32,863 $ 14.58 1/83 12/13 None
TJ Maxx ................. 28,133 $ 8.56 10/94 10/04 None
Ross Dress for
Less .................. 23,787 $ 17.15 10/90 1/09 None
Drug Emporium ........... 23,600 $ 13.00 8/93 8/03 None
</TABLE>
- ----------
(1) Kmart has ten, five year, renewal options beyond the term of the lease.
The rental rate will not increase for the renewal periods.
Ground Leases: In addition to a fee parcel there are two ground leases and
a sub sub ground lease for the Mercer Mall Property.
Ground Lease One: Mercer Mall Borrower leases a portion of the site from
James and Jane Swift. The lease commenced on February 1, 1975 and expires on
January 31, 2074. The initial term is thirty years, expiring on January 31,
2005. The lease term is automatically renewable for seven periods, the first
six renewal periods are ten years each, and the seventh renewal period is nine
years. The current annual rent is $36,465.19 which is comprised of a base rent
of $30,000 and an overage rent. The base rent will be increased to $36,000 per
annum if the landlord subordinates the lease to obtain tenant financing. Base
rent during the first ten year renewal term increases by 15% over the base rent
during the initial term and by an additional 15% during the second renewal
term. Thereafter, base rent is to increase based upon the percentage increase
in the CPI over the previous five years.
Ground Lease Two: Mercer Mall Borrower leases a portion of the site from
Americana Diner and Restaurant, Inc. The term of the lease commenced on
February 1, 1975 and expires on February 1, 2074. The annual rent is currently
$36,000 through January 31, 2000. Thereafter, base rent increases by 15% over
the base rent for the immediately preceding ten-year period on each of February
1, 2000 (to $41,400 per annum) and February 1, 2010 (to $47,610 per annum) and
by 7.5% (to $51,180.75 per annum) on February 1, 2020. Thereafter, base rent is
calculated based upon the percentage increase in the CPI over the immediately
preceding five year period.
E-8
<PAGE>
Sub Sub Lease: Mercer-Mail Borrower leases a portion of the site under a
sub sub lease agreement from Pic N Run. The sub sub lease commenced on October
1, 1989 and expires on October 31, 2088. The annual rent is currently $54,000.
Every four years, the rent increases by $6,000 over the prior four year period.
For the period after November 2038, the parties shall agree upon the fair
market value for the rental term. If they cannot agree, then FMV shall be
decided by three appraisers. The sub sub lease is subordinate to the mortgage
loan.
Property Management. The Mercer Mall Property is managed by Bristol
Development Corp. an affiliate of the Mercer Mall Borrower. There is no
management agreement.
Operating History:
<TABLE>
<CAPTION>
TRAILING
TWELVE MONTHS
1996 1997 ENDING 6/98 UNDERWRITING
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Gross Potential Rent ....... $4,378,694
Total Vacancy .............. (218,935)
----------- ----------- ----------- ----------
Net Rental Income .......... $ 3,722,107 $ 4,113,941 $ 4,108,967 4,159,759
Percentage Rents ........... 31,661 29,086 11,608 12,014
Expense Reimbursement ...... 1,116,388 1,281,443 1,357,980 1,405,509
----------- ----------- ----------- ----------
Effective Gross Income ..... 4,870,156 5,424,470 5,478,555 5,577,283
CAM ........................ 577,032 504,685 490,632 507,804
General & Administrative ... 21,683 124,644 137,292 142,097
Property Taxes ............. 763,723 784,471 788,148 817,359
Management Fee ............. 243,508 271,224 273,928 278,864
Insurance .................. 59,438 64,808 64,808 60,161
Ground Rent ................ 118,728 125,229 124,728 126,465
Reserves for Replacement ... 57,941
----------- ----------- ----------- ----------
Total Expenses ............. 1,784,112 1,875,061 1,879,536 1,990,692
----------- ----------- ----------- ----------
NOI ........................ 3,086,044 3,549,410 3,599,019 3,586,591
----------- ----------- ----------- ----------
Capital Improvements .......
Leasing Commissions ........ 38,500 36,000 -- 42,070
Tenant Improvements ........ -- -- -- 109,538
----------- ----------- ----------- ----------
Net Cash Flow (NCF) ........ $ 3,047,544 $ 3,513,410 $ 3,599,019 $3,434,983
=========== =========== =========== ==========
Occupancy .................. 98.2% 95.0%
OER ........................ 36.6% 34.6% 34.3% 35.7%
Debt Service ............... $ 1,985,179 $ 1,985,179 $ 1,985,179 $1,985,179
DSCR based on NOI .......... 1.54x 1.77x 1.81x 1.81x
DSCR based UW NCF .......... 1.73x
</TABLE>
E-9
<PAGE>
Lease Expiration Schedule:
<TABLE>
<CAPTION>
SQUARE FEET PERCENTAGE
------------- -----------
<S> <C> <C>
Vacant ................................ 3,200 0.8%
Twelve Months Ending 7/31/99 .......... 11,175 2.9%
Twelve Months Ending 7/31/00 .......... 1,900 0.5%
Twelve Months Ending 7/31/01 .......... 101,505 26.3%
Twelve Months Ending 7/31/02 .......... 14,800 3.8%
Twelve Months Ending 7/31/03 .......... 13,500 3.5%
Twelve Months Ending 7/31/04 .......... 42,150 10.9%
Twelve Months Ending 7/31/05 .......... 33,833 8.8%
Twelve Months Ending 7/31/06 .......... 1,555 0.4%
Twelve Months Ending 7/31/07 .......... 3,650 0.9%
Twelve Months Ending 7/31/08 .......... 5,092 1.3%
Twelve Months Ending 7/31/09 .......... 23,787 6.2%
</TABLE>
Lockbox and Reserves. The Mercer Mall Loan documents provide for reserves
for taxes and insurance. The Mercer Mall Loan documents do not require the
establishment of a lockbox or cash collateral account.
E-10
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<TABLE>
<CAPTION>
ANNEX F
CERTAIN CHARACTERSTICS OF MULTIFAMILY MORTGAGED PROPERTIES
CONTROL CUT-OFF
NUMBER PROPERTY NAME STATE COUNTY DATE BALANCE ELEVATOR
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MLMI-005 3737 Hillcroft Apartments TX Harris $ 7,574,170 No
MLMI-008 Alexander House Apartments TX Harris 2,776,994 No
MLMI-009 Arlington Park I TX Tarrant 1,990,112 No
MLMI-011 Bentworth Apartments TX Harris 17,878,407 No
MLMI-013 Bishops Landing Apartments OK Cleveland 3,682,407 No
MLMI-015 Charleston Apartments OK Cleveland 2,041,447 No
MLMI-017 City Villas CA San Diego 2,495,307 Yes
MLMI-018 Clarendon Apartments OK Cleveland 2,929,753 No
MLMI-020 Crosspointe Vista Apartments WA King 3,567,480 Yes
MLMI-021 Crown Gardens Apartments TX Harris 1,860,740 No
MLMI-022 Deane Hill Apartments TN Knox 4,830,724 No
MLMI-023 Deerfield Apartments CT Hartford 5,980,327 No
MLMI-024 East 61st Street Brownstone NY New York 1,680,709 No
MLMI-025 Eastgate Apartments NY Tompkins 1,648,535 No
MLMI-027 Foxmoor Apartments TX Dallas 5,607,996 No
MLMI-029 Hartford Apartments TX Dallas 2,484,318 No
MLMI-030 Heritage Apartments PA Allegheny 830,421 No
MLMI-032 Kingsley Plaza Apartments CA Los Angeles 5,063,421 Yes
MLMI-033 MeadowCrest Apartments TX Bexar 3,472,281 No
MLMI-034 Myrtle Cove Apartments TX Dallas 9,452,864 No
MLMI-037 Peppertree Apartments CA San Diego 1,226,935 No
MLMI-040 Quarters Apartments TX Dallas 3,329,451 No
MLMI-042 Reeve - Wildcreek Apartments TX Travis 4,860,272 No
MLMI-044 Royal Knight Apartments TX Dallas 1,348,604 No
MLMI-045 Sommerset Apartments CA San Diego 6,369,214 No
MLMI-047 Tara Hall Apartments TX Harris 2,252,315 No
MLMI-049 The Atrium Cellini Apartments TX Harris 2,702,445 Yes
MLMI-050 The Shelton TX Dallas 13,509,337 Yes
MLMI-052 Tiffany Apartments TX El Paso 2,535,861 No
MLMI-053 Village at Brookside Apartments OK Tulsa 1,485,635 No
MLMI-054 Village Square Apartments TX Dallas 1,689,183 No
MLMI-055 Westcliff Apartments TX San Patricio 1,431,187 No
MLMI-056 Willowbrook Apartments OR Washington 2,889,197 No
MLMI-058 Windsor Court Apartments WA King 2,497,769 Yes
MLMI-059 Wong Family Trust Apartments NJ Union 1,992,973 No
MLMI-060 Woodhollow Apartments TX Brazoria 2,512,045 No
MLMI-061 332 East 95th Street NY New York 2,347,999 No
MLMI-065 Springfield Apartments OK Cleveland 2,997,102 No
MLMI-066 Orleans East Apartments MI Wayne 2,297,915 No
MLMI-068 Redwood Village Apartments NJ Passaic 6,191,946 No
MLMI-069 Argonne Avenue Apts GA Fulton 269,388 No
MLMI-070 Sundown Apartments AL Montgomery 806,453 No
MLMI-071 Woodsdale Apartments SC Spartanburg 821,462 No
MLMI-072 11707 Otsego Street CA Los Angeles 477,428 No
MLMI-074 2019 North Main Street MI Oakland 702,480 No
MLMI-079 Cherry Hills Apartments OR Yamhill 593,125 No
MLMI-091 11307 Morrison CA Los Angeles 1,116,673 Yes
MLMI-092 11660 Chenault Avenue CA Los Angeles 2,042,949 No
MLMI-093 1346 Pine Street CA San Francisco 1,196,503 Yes
MLMI-094 1850 Williams Street CA Ventura 1,057,001 No
MLMI-095 2790 Pine Street CA San Francisco 1,196,503 No
MLMI-096 Pine Valley Court (Colony Greene) ApartmentsNJ Camden 2,581,590 No
MLMI-097 Doheny Drive Apartments CA Los Angeles 2,086,311 No
MLMI-098 Hacienda de Camarillo CA Ventura 2,040,496 No
MLMI-099a Peachtree Apts MS Rankin 745,775 No
MLMI-099b Willow Lake Apartments MS Rankin 894,930 No
MLMI-133 Sammamish Ridge WA King 5,000,000 No
MLMI-134 Kenmore Estates WA King 6,765,511 No
MLMI-135 Independence Green Apartments MI Oakland 34,890,416 No
MLMI-139 Walkers Ridge MO Boone 1,988,791 No
MLMI-140 Colonial House NC Catawba 2,092,588 No
MLMI-141 Chapelcroft PA Philadelphia 2,221,969 Yes
MLMI-142 Aspen Shadows AZ Coconino 3,991,293 No
MLMI-143 Antelope Manor Apartments CA Sacramento 1,825,736 No
MLMI-152 Chateau Brickyard UT Salt Lake Co. 6,295,086 Yes
MLMI-153 Holiday on the Bay NJ Ocean 12,000,000 No
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NO. STUDIOS
CONTROL UTILITIES # WTG AVG HIGHEST
NUMBER TENANT PAYS UNITS RENT/MONTH RENT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MLMI-005 Electric
MLMI-008 Electric
MLMI-009 None
MLMI-011 Electric
MLMI-013 None
MLMI-015 Electric & Gas
MLMI-017 Electric & Gas
MLMI-018 Electric & Gas
MLMI-020 Electric 8 695 705
MLMI-021 Electric
MLMI-022 Electric
MLMI-023 Electric
MLMI-024 Electric 3 2,500 2,500
MLMI-025 Electric, Gas, Water, Cable
MLMI-027 All Utilities
MLMI-029 3 blds none / 4th bld electric 20 440 440
MLMI-030 Electric 6 397 397
MLMI-032 Electric 35 500 500
MLMI-033 Electric
MLMI-034 Electric
MLMI-037 Water & Trash
MLMI-040 Electric
MLMI-042 Electric & Gas
MLMI-044 24 of 57 units all bills are paid 9 377 377
MLMI-045 Electric & Gas
MLMI-047 Electric
MLMI-049 Electric
MLMI-050 Electric
MLMI-052 Electric
MLMI-053 Electric
MLMI-054 None 2 450 450
MLMI-055 Electric
MLMI-056 Electric
MLMI-058 All Utilities
MLMI-059 Electric 6 609 609
MLMI-060 Electric
MLMI-061 Electric & Gas 2 754 754
MLMI-065 Electric
MLMI-066 Electric
MLMI-068 Electric
MLMI-069 Electric & Gas
MLMI-070 Electric, water/sewer
MLMI-071 Gas & Electric
MLMI-072 Electric & Gas 11 661 661
MLMI-074 Electric & Gas
MLMI-079 Electric & Gas
MLMI-091 Electric & Gas
MLMI-092 Electric & Gas
MLMI-093 Electric & Gas 18 618 618
MLMI-094 none
MLMI-095 Electric & Gas
MLMI-096 Electric, Gas, Water and Trash
MLMI-097 Electric & Gas
MLMI-098 Electric & Gas
MLMI-099a Electricity & Gas
MLMI-099b Electricity & Gas
MLMI-133 Electric
MLMI-134 Heat, Electric, Gas
MLMI-135 Heat, Electric, Gas
MLMI-139 Heat, Electric, Gas
MLMI-140 Heat, Electric, Gas
MLMI-141 Electric 5 405 405
MLMI-142 Heat, Electric, Gas
MLMI-143 Heat, Electric, Gas
MLMI-152 None 12 1,197 1,265
MLMI-153 Heat, Electric, Gas
</TABLE>
F-1
<PAGE>
CERTAIN CHARACTERSTICS OF MULTIFAMILY MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
NO. 1 BEDROOMS NO. 2 BEDROOMS NO. 3 BEDROOMS
# WTG AVG HIGHEST # WTG AVG HIGHEST # WTG AVG HIGHEST
UNITS RENT RENT UNITS RENT RENT UNITS RENT RENT
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
257 423 465 124 584 636
104 354 374 130 452 518
161 396 410 27 535 535
92 434 434 364 512 538 224 598 624
180 386 389 81 486 486
58 313 325 95 405 440 10 545 545
58 541 593 12 720 720
76 352 352 96 404 421 5 574 574
29 875 925 18 1,150 1,400
99 360 375 57 470 480 8 605 610
36 472 485 116 574 598 34 701 709
45 605 605 131 718 769
3 2,567 2,567 2 3,575 3,575
13 821 863 12 965 965
393 468 769 102 716 989
104 489 550 13 750 750
7 456 456 23 509 509
107 607 607
120 434 450 58 599 700
272 384 395 192 525 565
21 649 649 10 791 791
124 385 405 84 531 598
116 487 487 116 495 495
33 491 575 15 616 667
48 680 680 32 800 800 40 900 900
98 362 365 51 445 445 16 519 535
12 600 600 86 775 1,000
88 1,729 2,550 33 2,198 2,813 4 3,363 3,363
58 353 350 98 390 390
47 379 396 42 490 625 2 602 602
60 559 620 12 750 750
43 385 385 40 471 495
21 490 501 63 573 592 21 680 693
42 596 596 12 744 744
47 718 718 11 812 812
88 333 360 68 453 485 24 585 585
33 838 838 4 858 858
97 315 315 118 361 450 10 675 675
114 551 623
231 588 588 59 693 693
10 500 525
36 432 440
10 380 380 26 410 410 16 445 445
22 559 559
13 538 538 13 617 617
13 566 566 16 731 731
14 725 725 12 1,131 1,200 2 1,390 1,390
18 618 618
31 597 597
7 1,211 1,211 14 999 999
88 450 450 44 450 450
8 1,341 1,341 4 1,813 1,813 2 2,925 2,925
16 675 675 57 789 865
28 488 488
36 469 469
96 780 900
62 566 610 101 671 720
746 589 615 210 747 755 25 1,454 1,550
18 422 490 78 485 540 1 825 825
58 490 490 37 590 590
12 625 650 20 810 875
34 478 535 14 597 630
74 1,471 1,870 8 1,740 2,080
173 630 704 53 681 735
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NO. 4 BEDROOMS OTHER
# WTG AVG HIGHEST # WTG AVG HIGHEST
UNITS RENT RENT UNITS RENT RENT TYPE
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
20 726 726 1.5 br
3 350 35 Efficiency
30 983 1,125 Houses
5 430 430 Jr. 1Br.
48 720 790 2BR 1.5b
4 864 1,002 suite beds
</TABLE>
F-2
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<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.
-----------------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE 18 OF THIS PROSPECTUS AND SUCH INFORMATION AS MAY BE SET FORTH
UNDER THE CAPTION "RISK FACTORS" IN THE RELATED PROSPECTUS SUPPLEMENT BEFORE
PURCHASING ANY OFFERED CERTIFICATE.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
Prior to issuance there will have been no market for the Certificates of
any series and there can be no assurance that a secondary market for any
Offered Certificates will develop or that, if it does develop, it will
continue. See "Risk Factors." This Prospectus may not be used to consummate
sales of the Offered Certificates of any series unless accompanied by the
Prospectus Supplement for such series.
The Offered Certificates of any series may be offered through one or more
different methods, including offerings through underwriters, as more fully
described under "Method of Distribution" herein and in the related Prospectus
Supplement.
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
2
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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.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of an offering of Offered Certificates evidencing interests therein. The
Depositor, upon request, will provide or cause to be provided without charge to
each person to whom this Prospectus is delivered in connection with the
offering of one or more classes of Offered Certificates, a copy of any or all
documents or reports incorporated herein by reference, in each case to the
extent such documents or reports relate to one or more of such classes of such
Offered Certificates, other than the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents).
Requests to the Depositor should be directed in writing to its principal
executive office at 250 Vesey Street, Fifteenth Floor, New York, New York
10281-1315, Attention: Secretary, or by telephone at (212) 449-0336. The
Depositor has determined that its financial statements will not be material to
the offering of any Offered Certificates.
3
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TABLE OF CONTENTS
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PROSPECTUS SUPPLEMENT .................................................................... 2
AVAILABLE INFORMATION .................................................................... 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE ........................................ 3
SUMMARY OF PROSPECTUS .................................................................... 8
RISK FACTORS ............................................................................. 18
Limited Liquidity for Offered Certificates .............................................. 18
Limited Assets to Support Payment on Certificates ....................................... 18
Prepayments on Mortgage Loans; Effects on Average Life of Certificates; Effects on
Yields on Certificates ................................................................ 19
Optional Early Termination .............................................................. 20
Limited Nature of Ratings on Certificates ............................................... 20
Effects of Pre-Funding and Acquisition of Additional Mortgage Assets .................... 21
Risks to Lenders Associated With Certain Mortgage Loans and
Income Producing Properties ........................................................... 21
Risks Associated with Mortgage Loans Secured by Multifamily Properties ................ 22
Risks Associated with Mortgage Loans Secured by Retail Properties ..................... 22
Risks Associated with Mortgage Loans Secured by Hospitality Properties ................ 23
Risks Associated with Mortgage Loans Secured by Office Buildings ...................... 23
Risks Associated with Mortgage Loans Secured by Industrial & Mixed-Use Facilities ..... 23
Risks Associated with Mortgage Loans Secured by Residential Healthcare Facilities ..... 24
Risk Associated with Mortgage Loans Secured by Health Care-Related Properties ......... 24
Risks Associated with Mortgage Loans Secured by Warehouse and Storage Facilities ...... 26
Management Risks ........................................................................ 26
Balloon Payments on Mortgage Loans; Heightened Risk of Borrower Default ................. 26
Leases and Rents Serving as Security for Mortgage Loans Pose Special Risks .............. 27
Delinquent Mortgage Loans ............................................................... 27
Environmental Liability May Affect Lien on Mortgaged Property
and Expose Lender to Costs ............................................................ 27
Credit Support Limitations--May Not Cover All Risks or Full Payment on Certificates ..... 28
Certain Federal Tax Considerations Regarding REMIC Residual Certificates ................ 28
ERISA Considerations--Covered Investors May Experience Liability ........................ 29
Book-Entry Registration of Certificates Affects Ownership of Certificates
and Receipt of Payment ................................................................ 29
DESCRIPTION OF THE TRUST FUNDS ........................................................... 30
General ................................................................................. 30
Mortgage Loans .......................................................................... 30
General ............................................................................... 30
Default and Loss Considerations with Respect to the Mortgage Loans .................... 30
Payment Provisions of the Mortgage Loans .............................................. 32
Mortgage Loan Information in Prospectus Supplements ................................... 32
MBS ..................................................................................... 33
Certificate Accounts .................................................................... 34
Credit Support .......................................................................... 34
Cash Flow Agreements .................................................................... 34
Pre-Funding ............................................................................. 34
YIELD AND MATURITY CONSIDERATIONS ........................................................ 35
General ................................................................................. 35
Pass-Through Rate ....................................................................... 35
Payment Delays .......................................................................... 35
Certain Shortfalls in Collections of Interest ........................................... 35
Yield and Prepayment Considerations ..................................................... 36
Weighted Average Life and Maturity ...................................................... 37
Controlled Amortization Classes and Companion Classes ................................... 38
Other Factors Affecting Yield, Weighted Average Life and Maturity ....................... 38
Balloon Payments; Extensions of Maturity .............................................. 38
</TABLE>
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Negative Amortization .................................................. 39
Foreclosures and Payment Plans ......................................... 39
Losses and Shortfalls on the Mortgage Assets ........................... 39
Additional Certificate Amortization .................................... 40
THE DEPOSITOR ............................................................. 40
USE OF PROCEEDS ........................................................... 40
DESCRIPTION OF THE CERTIFICATES ........................................... 41
General .................................................................. 41
Distributions ............................................................ 41
Distributions of Interest on the Certificates ............................ 42
Distributions of Certificate Principal ................................... 43
Distributions on the Certificates in Respect of Prepayment Premiums or
in Respect of Equity Participations .................................... 43
Allocation of Losses and Shortfalls ...................................... 43
Advances in Respect of Delinquencies ..................................... 44
Reports to Certificateholders ............................................ 44
Voting Rights ............................................................ 46
Termination .............................................................. 47
Book-entry Registration and Definitive Certificates ...................... 47
DESCRIPTION OF THE POOLING AGREEMENTS ..................................... 49
General .................................................................. 49
Assignment of Mortgage Loans; Repurchases ................................ 49
Representations and Warranties; Repurchases .............................. 50
Certificate Account ...................................................... 50
General ................................................................ 50
Deposits ............................................................... 51
Withdrawals ............................................................ 52
Collection and Other Servicing Procedures ................................ 53
Modifications, Waivers And Amendments of Mortgage Loans .................. 53
Sub-Servicers ............................................................ 54
Special Servicers ........................................................ 54
Realization Upon Defaulted Mortgage Loans ................................ 54
Hazard Insurance Policies ................................................ 56
Due-on-Sale and Due-on-Encumbrance Provisions ............................ 57
Servicing Compensation and Payment of Expenses ........................... 57
Evidence as to Compliance ................................................ 57
Certain Matters Regarding the Master Servicer and the Depositor .......... 58
Events of Default ........................................................ 59
Rights Upon Event of Default ............................................. 59
Amendment ................................................................ 60
List of Certificateholders ............................................... 60
The Trustee .............................................................. 60
Duties of the Trustee .................................................... 60
Certain Matters Regarding the Trustee .................................... 61
Resignation and Removal of the Trustee ................................... 61
DESCRIPTION OF CREDIT SUPPORT ............................................. 62
General .................................................................. 62
Subordinate Certificates ................................................. 62
Cross-support Provisions ................................................. 62
Insurance or Guarantees with Respect to Mortgage Loans ................... 63
Letter of Credit ......................................................... 63
Certificate Insurance and Surety Bonds ................................... 63
Reserve Funds ............................................................ 63
Credit Support with Respect to MBS ....................................... 64
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS ................................... 65
General .................................................................. 65
Types of Mortgage Instruments ............................................ 65
Leases and Rents ......................................................... 65
</TABLE>
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Personalty ............................................................. 66
Junior Mortgages; Rights of Senior Lenders ............................. 66
Foreclosure ............................................................ 67
General .............................................................. 67
Foreclosure Procedures Vary From State to State ...................... 67
Judicial Foreclosure ................................................. 67
Non-Judicial Foreclosure/Power of Sale ............................... 67
Limitations on the Rights of Mortgage Lenders ........................ 68
Rights of Redemption ................................................. 69
Anti-Deficiency Legislation .......................................... 69
Leasehold Considerations ............................................. 69
Bankruptcy Laws ........................................................ 70
Environmental Considerations ........................................... 71
General .............................................................. 71
Superlien Laws ....................................................... 71
CERCLA ............................................................... 71
Certain State and Other Federal Laws ................................. 72
Additional Considerations ............................................ 72
Due-on-Sale And Due-on-Encumbrance ..................................... 72
Subordinate Financing .................................................. 73
Default Interest and Limitations on Prepayments ........................ 73
Applicability of Usury Laws ............................................ 73
Soldiers' and Sailors' Civil Relief Act of 1940 ........................ 73
Americans with Disabilities Act ........................................ 74
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ................................ 75
General ................................................................ 75
REMICs ................................................................. 75
Classification of REMICs ............................................. 75
Characterization of Investments in REMIC Certificates ................ 76
Tiered REMIC Structures .............................................. 76
Taxation of Owners of Remic Regular Certificates ....................... 77
General .............................................................. 77
Original Issue Discount .............................................. 77
Market Discount ...................................................... 79
Premium .............................................................. 80
Realized Losses ...................................................... 81
Taxation of Owners of Remic Residual Certificates ...................... 81
General .............................................................. 81
Taxable Income of the REMIC .......................................... 82
Basis Rules, Net Losses and Distributions ............................ 83
Excess Inclusions .................................................... 84
Noneconomic REMIC Residual Certificates .............................. 85
Mark-to-Market Rules ................................................. 86
Possible Pass-Through of Miscellaneous Itemized Deductions ........... 86
Sales of REMIC Certificates .......................................... 86
Prohibited Transactions Tax and Other Taxes .......................... 87
Tax and Restrictions on Transfers of REMIC Residual Certificates
to Certain Organizations ............................................ 88
Termination .......................................................... 89
Reporting and Other Administrative Matters ........................... 89
Backup Withholding with Respect to REMIC Certificates ................ 90
Foreign Investors in REMIC Certificates .............................. 90
Grantor Trust Funds .................................................... 91
Classification of Grantor Trust Funds ................................ 91
Characterization of Investments in Grantor Trust Certificates .......... 91
Grantor Trust Fractional Interest Certificates ....................... 91
Grantor Trust Strip Certificates ..................................... 91
Taxation of Owners of Grantor Trust Fractional Interest Certificates ... 92
</TABLE>
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General ........................................................... 92
If Stripped Bond Rules Apply ...................................... 92
If Stripped Bond Rules Do Not Apply ............................... 94
Market Discount ................................................... 95
Premium ........................................................... 97
Taxation of Owners of Grantor Trust Strip Certificates ............ 97
Possible Application of Proposed Contingent Payment Rules ......... 98
Sales of Grantor Trust Certificates ............................... 98
Grantor Trust Reporting ........................................... 99
Backup Withholding ................................................ 99
Foreign Investors ................................................. 99
STATE AND OTHER TAX CONSEQUENCES ..................................... 100
ERISA CONSIDERATIONS ................................................. 100
General ............................................................. 100
Plan Asset Regulations .............................................. 100
Prohibited Transaction Exemptions ................................... 101
LEGAL INVESTMENT ..................................................... 102
METHOD OF DISTRIBUTION ............................................... 104
LEGAL MATTERS ........................................................ 105
FINANCIAL INFORMATION ................................................ 105
RATING ............................................................... 105
INDEX OF DEFINITIONS ................................................. 106
</TABLE>
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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 will consist of a pool of
mortgage loans (collectively, the "Mortgage
Loans") secured by liens on, or security
interests in, (i) residential properties
consisting of five or more rental or
cooperatively-owned dwelling units (the
"Multifamily Properties") or (ii) 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
8
<PAGE>
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.
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
9
<PAGE>
interest in, or will be secured by a pledge of,
one or more mortgage loans that conform to the
descriptions of the Mortgage Loans contained
herein. See "Description of the Trust
Funds--MBS."
Each Mortgage Asset will be selected by the
Depositor for inclusion in a Trust Fund from
among those purchased, either directly or
indirectly, from a prior holder thereof (a
"Mortgage Asset Seller"), which prior holder
may or may not be the originator of such
Mortgage Loan or the issuer of such MBS and may
be an affiliate of the Depositor.
B. Certificate Account..... Each Trust Fund will include one or more
accounts (collectively, the "Certificate
Account") established and maintained on behalf
of the Certificateholders into which the person
or persons designated in the related Prospectus
Supplement will, to the extent described herein
and in such Prospectus Supplement, deposit all
payments and collections received or advanced
with respect to the Mortgage Assets and other
assets in the Trust Fund. A Certificate Account
may be maintained as an interest bearing or a
non-interest bearing account, and funds held
therein may be held as cash or invested in
certain short-term, investment grade
obligations, in each case as described in the
related Prospectus Supplement. See "Description
of the Trust Funds--Certificate Accounts" and
"Description of the Pooling Agreements--
Certificate Account."
C. Credit Support.......... If so provided in the related Prospectus
Supplement, partial or full protection against
certain defaults and losses on the Mortgage
Assets in the related Trust Fund may be
provided to one or more classes of Certificates
of the related series in the form of
subordination of one or more 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
10
<PAGE>
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 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.
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<PAGE>
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 certain REMIC Residual
Certificates) of each series will accrue at the
applicable Pass-Through Rate
12
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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 prin-
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cipal payment schedule (any such class, a
"Controlled Amortization Class"); and (iv) may
be contingent on the specified principal
payment schedule for a Controlled Amortization
Class of the same series and the rate at which
payments and other collections of principal on
the Mortgage Assets in the related Trust Fund
are received (any such class, a "Companion
Class"). Unless otherwise specified in the
related Prospectus Supplement, distributions of
principal of any class of Certificates will be
made on a pro rata basis among all of the
Certificates of such class. See "Description of
the Certificates--Distributions of Certificate
Principal."
Advances.................... If and to the extent provided in the related
Prospectus Supplement, the Master Servicer
and/or other specified person will be obligated
to make, or have the option of making, certain
advances with respect to delinquent scheduled
payments of principal and/or interest on the
Mortgage Loans in the related Trust Fund. Any
such advances made with respect to a particular
Mortgage Loan will be reimbursable from
subsequent recoveries in respect of such
Mortgage Loan and otherwise to the extent
described herein and in the related Prospectus
Supplement. If and to the extent provided in
the Prospectus Supplement for a series of
Certificates, the Master Servicer or other
specified person will be entitled to receive
interest on its advances for the period that
they are outstanding, payable from amounts in
the related Trust Fund. See "Description of the
Certificates--Advances in Respect of
Delinquencies." If a Trust Fund includes MBS,
any comparable advancing obligation of a party
to the related Pooling Agreement, or of a party
to the related MBS Agreement, will be described
in the related Prospectus Supplement.
Termination................. If so specified in the related Prospectus
Supplement, a series of Certificates may be
subject to optional early termination by means
of the repurchase of the Mortgage Assets in the
related Trust Fund by the party or parties
specified therein, under the circumstances and
in the manner set forth therein. If so provided
in the related Prospectus Supplement, upon the
reduction of the Certificate Balance of a
specified 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
Cer-
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tificates") 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 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
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<PAGE>
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.
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
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<PAGE>
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 Trust
Funds."
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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<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.
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<PAGE>
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 of the related series may be highly unpredictable. Prepayments on
the Mortgage Loans in any Trust Fund will result in a faster rate of principal
payments on one or more classes of the related Certificates than if payments on
such Mortgage Loans were made as scheduled. Thus, the prepayment experience on
the Mortgage Loans may affect the average life of each class of such
Certificates, including a class of Offered Certificates. The rate of principal
payments on pools of mortgage loans varies among pools and from time to time is
influenced by a variety of economic, demographic, geographic, social, tax,
legal and other factors. For example, if prevailing interest rates fall
significantly below the Mortgage Rates borne by the Mortgage Loans included in
a Trust Fund, principal prepayments are likely to be higher than if prevailing
rates remain at or above the rates borne by those Mortgage Loans. Conversely,
if prevailing interest rates rise significantly above the Mortgage Rates borne
by the Mortgage Loans included in a Trust Fund, principal prepayments thereon
are likely to be lower than if prevailing interest rates remain at or below the
rates borne by those Mortgage Loans. There can be no assurance as to the rate
of prepayments on the Mortgage Loans in any Trust Fund or that such rate will
conform to any model described herein or in any Prospectus Supplement. As a
result, depending on the anticipated rate of prepayment for the Mortgage Loans
in any Trust Fund, the retirement of any class of Certificates of the related
series could occur significantly earlier or later than expected.
The extent to which prepayments on the Mortgage Loans in any Trust Fund
ultimately affect the average life of any class of Certificates of the related
series will depend on the terms of such Certificates. A class of Certificates,
including a class of Offered Certificates, may provide that on any Distribution
Date the holders of such Certificates are entitled to (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.
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<PAGE>
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 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
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<PAGE>
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
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.
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<PAGE>
Risks Associated with Mortgage Loans Secured by Multifamily Properties. It
is expected that Mortgage Loans secured by multi-family properties will
constitute a material concentration 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 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 concentration 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.
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Risks Associated with Mortgage Loans Secured by Hospitality
Properties. Mortgage Loans secured by hospitality properties may constitute a
material concentration 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 concentration 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. 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 concentration 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
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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 concentration 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 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.
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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
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
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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
local 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 concentration 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 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
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and the related Mortgaged Property, tax laws, rent control laws (with respect
to certain residential properties), Medicaid and Medicare reimbursement rates
(with respect to hospitals and nursing homes), prevailing general economic
conditions and the availability of credit for loans secured by commercial or
multifamily, as the case may be, real properties generally.
If and to the extent specified in the related Prospectus Supplement, in
order to maximize recoveries on defaulted Mortgage Loans, the Master Servicer
or a Special Servicer will be permitted (within prescribed limits) to extend
and modify Mortgage Loans that are in default or as to which a payment default
is imminent. While a Master Servicer generally will be required to determine
that any such extension or modification is reasonably likely to produce a
greater recovery on a present value basis than liquidation, there can be no
assurance that any such extension or modification will in fact increase the
present value of receipts from or proceeds of the affected Mortgage Loans. 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 the Trust
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 includes Mortgage Loans and the related
Prospectus Supplement does not otherwise specify, the related Pooling Agreement
will contain provisions
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generally to the effect that the Master Servicer, acting on behalf of the Trust
Fund, may not acquire title to a Mortgaged Property or assume control of its
operation unless the Master Servicer, based upon a report prepared by a person
who regularly conducts environmental site assessments, has made the
determination that it is appropriate to do so, as described under "Description
of the Pooling Agreements--Realization Upon Defaulted Mortgage Loans." These
provisions are designed to reduce substantially the risk of liability for costs
associated with remediation of hazardous substances, but there can be no
assurance in a given case that those risks can be eliminated entirely.
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
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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.
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."
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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.
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.
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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 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
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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 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
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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.
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CERTIFICATE ACCOUNTS
Each Trust Fund will include one or more accounts (collectively, the
"Certificate Account") established and maintained on behalf of the
Certificateholders into which the person or persons designated in the related
Prospectus Supplement will, to the extent described herein and in such
Prospectus Supplement, deposit all payments and collections received or
advanced with respect to the Mortgage Assets and other assets in the Trust
Fund. A Certificate Account may be maintained as an interest bearing or a
non-interest bearing account, and funds held therein may be held as cash or
invested in certain short-term, investment grade obligations, in each case as
described in the related Prospectus Supplement.
CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Mortgage Assets in the
related Trust Fund may be provided to one or more classes of Certificates in
the related series in the form of subordination of one or more other classes of
Certificates in such series or by one or more other 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."
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YIELD AND PREPAYMENT CONSIDERATIONS
A Certificate's yield to maturity will be affected by the rate of
principal payments on the Mortgage Loans in the related Trust Fund and the
allocation thereof to reduce the principal balance (or Notional Amount, if
applicable) of such Certificate. The rate of principal payments on the Mortgage
Loans will in turn be affected by the amortization schedules thereof (which, in
the case of ARM Loans, will change periodically to accommodate adjustments to
their Mortgage Rates), the dates on which any balloon payments are due, and the
rate of principal prepayments thereon (including for this purpose, prepayments
resulting from liquidations of Mortgage Loans due to defaults, casualties or
condemnations affecting the Mortgaged Properties, or purchases of Mortgage
Loans out of the Trust Fund). Because the rate of principal prepayments on the
Mortgage Loans in any Trust Fund will depend on future events and a variety of
factors (as discussed more fully below), it is impossible to predict with
assurance.
The extent to which the yield to maturity of a class of Offered
Certificates of any series may vary from the anticipated yield will depend upon
the degree to which they are purchased at a discount or premium and when, and
to what degree, payments of principal on the Mortgage Loans in the related
Trust Fund are in turn distributed on such Certificates (or, in the case of a
class of Stripped Interest Certificates, result in the reduction of the
Notional Amount thereof). Further, an investor should consider, in the case of
any Offered Certificate purchased at a discount, the risk that a slower than
anticipated rate of principal payments on the Mortgage Loans in the related
Trust Fund could result in an actual yield to such investor that is lower than
the anticipated yield and, in the case of any Offered Certificate purchased at
a premium, the risk that a faster than anticipated rate of principal payments
could result in an actual yield to such investor that is lower than the
anticipated yield. In general, the earlier a prepayment of principal on the
Mortgage Loans is distributed on an Offered Certificate purchased at a discount
or premium (or, if applicable, is allocated in reduction of the Notional Amount
thereof), the greater will be the effect on the investor's yield to maturity.
As a result, the effect on such investor's yield of principal payments (to the
extent distributable in reduction of the principal balance or Notional Amount
of such investor's Offered Certificates) occurring at a rate higher (or lower)
than the rate anticipated by the investor during any particular period would
not be fully offset by a subsequent like reduction (or increase) in the rate of
principal payments.
A class of Certificates, including a class of Offered Certificates, may
provide that on any Distribution Date the holders of such Certificates are
entitled to a pro rata share of the prepayments (including prepayments
occasioned by defaults) on the Mortgage Loans in the related Trust Fund that
are distributable on such date, to a disproportionately large share (which, in
some cases, may be all) of such prepayments, or to a disproportionately small
share (which, in some cases, may be none) of such prepayments. As and to the
extent described in the related Prospectus Supplement, the respective
entitlements of the various classes of Certificateholders of any series to
receive payments (and, in particular, prepayments) of principal of the Mortgage
Loans in the related Trust Fund may vary based on the occurrence of certain
events (e.g., the retirement of one or more classes of Certificates of such
series) or subject to certain contingencies (e.g., prepayment and default rates
with respect to such Mortgage Loans).
In general, the Notional Amount of a class of Stripped Interest
Certificates will either (i) be based on the principal balances of some or all
of the Mortgage Assets in the related Trust Fund or (ii) equal the Certificate
Balances of one or more of the other classes of Certificates of the same
series. Accordingly, the yield on such Stripped Interest Certificates will be
directly related to the amortization of such Mortgage Assets or such classes of
Certificates, as the case may be. Thus, if a class of Certificates of any
series consists of Stripped Interest Certificates or Stripped Principal
Certificates, a lower than anticipated rate of principal prepayments on the
Mortgage Loans in the related Trust Fund will negatively affect the yield to
investors in Stripped Principal Certificates, and a higher than anticipated
rate of principal prepayments on such Mortgage Loans will negatively affect the
yield to investors in Stripped Interest Certificates.
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
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affected by a number of factors, including, without limitation, the
availability of mortgage credit, the relative economic vitality of the area in
which the Mortgaged Properties are located, the quality of management of the
Mortgaged Properties, the servicing of the Mortgage Loans, possible changes in
tax laws and other opportunities for investment. In addition, the rate of
principal payments on the Mortgage Loans in any Trust Fund may be affected by
the existence of Lock-out Periods and requirements that principal prepayments
be accompanied by Prepayment Premiums, and by the extent to which such
provisions may be practicably enforced.
The rate of prepayment on a pool of mortgage loans is also affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
coupon, a borrower may have an increased incentive to refinance its mortgage
loan. In addition, as prevailing market interest rates decline, even borrowers
with ARM Loans that have experienced a corresponding interest rate decline may
have an increased incentive to refinance for purposes of either (i) converting
to a fixed rate loan and thereby "locking in" such rate or (ii) taking
advantage of the initial "teaser rate" (a mortgage interest rate below what it
would otherwise be if the applicable index and gross margin were applied) on
another adjustable rate mortgage loan.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell
Mortgaged Properties in order to realize their equity therein, to meet cash
flow needs or to make other investments. In addition, some borrowers may be
motivated by federal and state tax laws (which are subject to change) to sell
Mortgaged Properties prior to the exhaustion of tax depreciation benefits. The
Depositor will make no representation as to the particular factors that will
affect the prepayment of the Mortgage Loans in any Trust Fund, as to the
relative importance of such factors, as to the percentage of the principal
balance of such Mortgage Loans that will be paid as of any date or as to the
overall rate of prepayment on such Mortgage Loans.
WEIGHTED AVERAGE LIFE AND MATURITY
The rate at which principal payments are received on the Mortgage Loans in
any Trust Fund will affect the ultimate maturity and the weighted average life
of one or more classes of the Certificates of such series. Weighted average
life refers to the average amount of time that will elapse from the date of
issuance of an instrument until each dollar of the principal amount of such
instrument is repaid to the investor.
The weighted average life and maturity of a class of Certificates of any
series will be influenced by the rate at which principal on the related
Mortgage Loans, whether in the form of scheduled amortization or prepayments
(for this purpose, the term "prepayment" includes voluntary prepayments,
liquidations due to default and purchases of Mortgage Loans out of the related
Trust Fund), is paid to such class. Prepayment rates on loans are commonly
measured relative to a prepayment standard or model, such as the Constant
Prepayment Rate ("CPR") prepayment model or the Standard Prepayment Assumption
("SPA") prepayment model. CPR represents an assumed constant rate of prepayment
each month (expressed as an annual percentage) relative to the then outstanding
principal balance of a pool of loans for the life of such loans. SPA represents
an assumed variable rate of prepayment each month (expressed as an annual
percentage) relative to the then outstanding principal balance of a pool of
loans, with different prepayment assumptions often expressed as percentages of
SPA. For example, a prepayment assumption of 100% of SPA assumes prepayment
rates of 0.2% per annum of the then outstanding principal balance of such loans
in the first month of the life of the loans and an additional 0.2% per annum in
each month thereafter until the thirtieth month. Beginning in the thirtieth
month, and in each month thereafter during the life of the loans, 100% of SPA
assumes a constant prepayment rate of 6% per annum each month.
Neither CPR nor SPA nor any other prepayment model or assumption purports
to be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any particular pool of loans. Moreover, the
CPR and SPA models were developed based upon historical prepayment experience
for single-family loans. Thus, it is unlikely that the prepayment experience of
the Mortgage Loans included in any Trust Fund will conform to any particular
level of CPR or SPA.
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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 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
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distributions of principal on a class of Offered Certificates and thereby
extend the weighted average life of such Certificates and, if such Certificates
were purchased at a discount, reduce the yield thereon.
Negative Amortization. The weighted average life of a class of
Certificates can be affected by Mortgage Loans that permit negative
amortization. In general, such Mortgage Loans by their terms limit the amount
by which scheduled payments may adjust in response to changes in Mortgage Rates
and/or provide that scheduled payment amounts will adjust less frequently than
the Mortgage Rates. Accordingly, during a period of rising interest rates, the
scheduled payment on a Mortgage Loan that permits negative amortization may be
less than the amount necessary to amortize the loan fully over its remaining
amortization schedule and pay interest at the then applicable Mortgage Rate. In
that case, the Mortgage Loan balance would amortize more slowly than necessary
to repay it over such schedule and, if the amount of scheduled payment were
less than the amount necessary to pay current interest at the applicable
Mortgage Rate, the loan balance would negatively amortize to the extent of the
amount of the interest shortfall. Conversely, during a period of declining
interest rates, the scheduled payment on such a Mortgage Loan may exceed the
amount necessary to amortize the loan fully over its remaining amortization
schedule and pay interest at the then applicable Mortgage Rate. In that case,
the excess would be applied to principal, thereby resulting in amortization at
a rate faster than necessary to repay the Mortgage Loan balance over such
schedule.
A slower or negative rate of Mortgage Loan amortization would
correspondingly be reflected in a slower or negative rate of amortization for
one or more classes of Certificates of the related series. Accordingly, the
weighted average lives of Mortgage Loans that permit negative amortization (and
that of the classes of Certificates to which any such negative amortization
would be allocated or which would bear the effects of a slower rate of
amortization on such Mortgage Loans) may increase as a result of such feature.
A faster rate of Mortgage Loan amortization will shorten the weighted average
life of such Mortgage Loans and, correspondingly, the weighted average lives of
those classes of Certificates then entitled to a portion of the principal
payments on such Mortgage Loans. The related Prospectus 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.
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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.
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.
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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
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
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the account of a Certificateholder at a bank or other entity having appropriate
facilities therefor, if such Certificateholder has provided the Trustee or
other person required to make such payments with wiring instructions (which may
be provided in the form of a standing order applicable to all subsequent
distributions) no later than the date specified in the related Prospectus
Supplement (and, if so provided in the related Prospectus Supplement, such
Certificateholder holds Certificates in the requisite amount or denomination
specified therein), or by check mailed to the address of such Certificateholder
as it appears on the Certificate Register; provided, however, that the final
distribution in retirement of any class of Certificates (whether Definitive
Certificates or Book-Entry Certificates) will be made only upon presentation
and surrender of such Certificates at the location specified in the notice to
Certificateholders of such final distribution.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of Certificates of each series (other than certain classes of
Stripped Principal Certificates and certain REMIC Residual Certificates that
have no Pass-Through Rate) may have a different Pass-Through Rate, which may be
fixed, variable or adjustable. The related Prospectus Supplement will specify
the Pass-Through Rate or, in the case of a variable or adjustable Pass-Through
Rate, the method for determining the Pass-Through Rate, for each class. Unless
otherwise specified in the related Prospectus Supplement, interest on the
Certificates of each series will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
Distributions of interest in respect of the Certificates of any class
(other than any class of Certificates that will be entitled to distributions of
accrued interest commencing only on the Distribution Date, or under the
circumstances, specified in the related Prospectus Supplement ("Accrual
Certificates"), and other than any class of Stripped Principal Certificates or
REMIC Residual Certificates that is not entitled to any distributions of
interest) will be made on each Distribution Date based on the Accrued
Certificate Interest for such class and such Distribution Date, subject to the
sufficiency of the portion of the Available Distribution Amount allocable to
such class on such Distribution Date. Prior to the time interest is
distributable on any class of Accrual Certificates, the amount of Accrued
Certificate Interest otherwise distributable on such class will be added to the
Certificate Balance thereof on each Distribution Date. With respect to each
class of Certificates (other than certain classes of Stripped Interest
Certificates and REMIC Residual Certificates), "Accrued Certificate Interest"
for each Distribution Date will be equal to interest at the applicable
Pass-Through Rate accrued for a specified period (generally the period between
Distribution Dates) on the outstanding Certificate Balance thereof immediately
prior to such Distribution Date. Unless otherwise provided in the related
Prospectus Supplement, Accrued Certificate Interest for each Distribution Date
on Stripped Interest Certificates will be similarly calculated except that it
will accrue on a notional amount (a "Notional Amount") that is either (i) based
on the principal balances of some or all of the Mortgage Assets in the related
Trust Fund or (ii) equal to the Certificate Balances of one or more other
classes of Certificates of the same series. Reference to a Notional Amount with
respect to a class of Stripped Interest Certificates is solely for convenience
in making certain calculations and does not represent the right to receive any
distributions of principal. If so specified in the related Prospectus
Supplement, the amount of Accrued Certificate Interest that is otherwise
distributable on (or, in the case of Accrual Certificates, that may otherwise
be added to the Certificate Balance of) one or more classes of the Certificates
of a series will be reduced to the extent that any Prepayment Interest
Shortfalls, as described under "Yield and Maturity Considerations--Certain
Shortfalls in Collections of Interest," exceed the amount of any sums
(including, if and to the extent specified in the related Prospectus
Supplement, the Master Servicer's servicing compensation) that are applied to
offset such shortfalls. The particular manner in which such shortfalls will be
allocated among some or all of the classes of Certificates of that series will
be specified in the related Prospectus Supplement. The related Prospectus
Supplement will also describe the extent to which the amount of Accrued
Certificate Interest that is 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
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to such class of a portion of any deferred interest on or in respect of the
Mortgage Assets in the related Trust Fund will result in a corresponding
increase in the Certificate Balance of such class. See "Risk
Factors--Prepayments; Average Life of Certificates; Yields" and "Yield and
Maturity Considerations."
DISTRIBUTIONS OF CERTIFICATE PRINCIPAL
Each class of Certificates of each series (other than certain classes of
Stripped Interest Certificates of REMIC Residual Certificates) will have a
"Certificate Balance" which, at any time, will equal the then maximum amount
that the holders of Certificates of such class will be entitled to receive in
respect of principal out of the future cash flow on the Mortgage Assets and
other assets included in the related Trust Fund. The outstanding Certificate
Balance of a class of Certificates will be reduced by distributions of
principal made thereon from time to time and, if so provided in the related
Prospectus Supplement, further by any losses incurred in respect of the related
Mortgage Assets allocated thereto from time to time. In turn, the outstanding
Certificate Balance of a class of Certificates may be increased as a result of
any deferred interest on or in respect of the related Mortgage Assets that is
allocated thereto from time to time, and will be increased, in the case of a
class of Accrual Certificates prior to the Distribution Date on which
distributions of interest thereon are required to commence, by the amount of
any Accrued Certificate Interest in respect thereof (reduced as described
above). Unless otherwise provided in the related Prospectus Supplement, the
initial aggregate Certificate Balance of all classes of a series of
Certificates will not be greater than the aggregate outstanding principal
balance of the related Mortgage Assets as of the applicable Cut-off Date, after
application of scheduled payments due on or before such date, whether or not
received. As and to the extent described in the related Prospectus Supplement,
distributions of principal with respect to a series of Certificates will be
made on each Distribution Date to the holders of the class or classes of
Certificates of such series entitled thereto until the Certificate Balances of
such Certificates have been reduced to zero. Distributions of principal with
respect to one or more classes of Certificates may be made at a rate that is
faster (and, in some cases, substantially faster) than the rate at which
payments or other collections of principal are received on the Mortgage Assets
in the related Trust Fund, may not commence until the occurrence of certain
events, such as the retirement of one or more other classes of Certificates of
the same series, or may be made at a rate that is slower (and, in some cases,
substantially slower) than the rate at which payments or other collections of
principal are received on such Mortgage Assets. In addition, distributions of
principal with respect to one or more classes of Certificates (each such class,
a "Controlled Amortization Class") may be made, subject to available funds,
based on a specified principal payment schedule and, with respect to one or
more classes of Certificates (each such class, a "Companion Class"), may be
contingent on the specified principal payment schedule for a Controlled
Amortization Class of the same series and the rate at which payments and other
collections of principal on the Mortgage Assets in the related Trust Fund are
received. Unless otherwise specified in the related Prospectus Supplement,
distributions of principal of any class of Certificates will be made on a pro
rata basis among all of the Certificates of such class.
DISTRIBUTIONS ON THE CERTIFICATES IN RESPECT OF PREPAYMENT PREMIUMS OR IN
RESPECT OF EQUITY PARTICIPATIONS
If so provided in the related Prospectus Supplement, Prepayment Premiums
or payments in respect of Equity Participations received on or in connection
with the Mortgage Assets in any Trust Fund will be distributed on each
Distribution Date to the holders of the class of Certificates of the related
series entitled thereto in accordance with the provisions described in such
Prospectus Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
The amount of any losses or shortfalls in collections on the Mortgage
Assets in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of Credit Support) will be allocated among
the respective classes of Certificates of the related series in the priority
and manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may result in reductions in the entitlements to interest
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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,
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will forward to each such holder, a statement (a "Distribution Date Statement")
that, unless otherwise provided in the related Prospectus Supplement, will set
forth, among other things, in each case to the extent applicable:
(i) the amount of such distribution to holders of Certificates of
such class that was applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of Certificates of
such class that is allocable to Accrued Certificate Interest;
(iii) the amount, if any, of such distribution to holders of
Certificates of such class that is allocable to (A) Prepayment Premiums
and (B) payments on account of Equity Participations;
(iv) the amount of servicing compensation received by the related
Master Servicer (and, if payable directly out of the related Trust Fund,
by any Special Servicer and any Sub-Servicer) and such other customary
information as such Master Servicer or the related Trustee, as the case
may be, deems necessary or desirable, or that a Certificateholder
reasonably requests, to enable Certificateholders to prepare their tax
returns;
(v) the aggregate amount of advances included in such distribution,
and the aggregate amount of unreimbursed advances at the close of business
on such Distribution Date;
(vi) the aggregate principal balance of the related Mortgage Loans
on, or as of a specified date shortly prior to, such Distribution Date;
(vii) the number and aggregate principal balance of any Mortgage
Loans in respect of which (A) one scheduled payment is delinquent, (B) two
scheduled payments are delinquent, (C) three or more scheduled payments
are delinquent and (D) foreclosure proceedings have been commenced;
(viii) with respect to each Mortgage Loan that is delinquent in
respect of three or more scheduled payments, (A) the loan number thereof,
(B) the unpaid balance thereof, (C) whether the delinquency is in respect
of any balloon payment, (D) the aggregate amount of unreimbursed servicing
expenses and unreimbursed advances in respect thereof, (E) if applicable,
the aggregate amount of any interest accrued and payable to the related
Master Servicer, a Special Servicer and/or any other entity on related
servicing expenses and related advances, (F) whether a notice of
acceleration has been sent to the borrower and, if so, the date of such
notice and (G) a brief description of the status of any foreclosure
proceedings or negotiations with the borrower;
(ix) with respect to any Mortgage Loan liquidated during the related
Prepayment Period (that is, the specified period, generally equal in
length to the time period between Distribution Dates, during which
prepayments and other unscheduled collections on the Mortgage Loans in the
related Trust Fund must be received in order to be distributed on a
particular Distribution Date) in connection with a default thereon or by
reason of being purchased out of the related Trust Fund, (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
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in respect of such REO Property or the related Mortgage Loan and (D) the
amount of any loss to Certificateholders in respect of the related
Mortgage Loan;
(xii) the Certificate Balance or Notional Amount, as the case may be,
of each class of Certificates (including any class of Certificates not
offered hereby) at the close of business on such Distribution Date,
separately identifying any reduction in such Certificate Balance due to
the allocation of any losses in respect of the related Mortgage Loans and
any increase in the Certificate Balance of a class of Accrual Certificates
in the event that Accrued Certificate Interest has been added to such
balance;
(xiii) the aggregate amount of principal prepayments made on the
Mortgage Loans during the related Prepayment Period;
(xiv) the amount deposited in or withdrawn from any reserve fund on
such Distribution Date, and the amount remaining on deposit in such
reserve fund as of the close of business on such Distribution Date;
(xv) the amount of any Accrued Certificate Interest due but not paid
on such class of Offered Certificates at the close of business on such
Distribution Date;
(xvi) if such class of Offered Certificates has a variable
Pass-Through Rate or an adjustable Pass-Through Rate, the Pass-Through
Rate applicable thereto for such Distribution Date and, if determinable,
for the next succeeding Distribution Date; and
(xvii) if the related Trust Fund includes one or more instruments of
Credit Support, such as a letter of credit, an insurance policy and/or a
surety bond, the amount of coverage under each such instrument as of the
close of business on such Distribution Date.
In the case of information furnished pursuant to subclauses (i)-(iv)
above, the amounts will be expressed as a dollar amount per minimum
denomination of the relevant class of Offered Certificates or per a specified
portion of such minimum denomination. The Prospectus Supplement for each series
of Offered Certificates will describe any additional information to be included
in reports to the holders of such Certificates.
Within a reasonable period of time after the end of each calendar year,
the related Master Servicer or Trustee, as the case may be, will be required to
furnish to each person who at any time during the calendar year was a holder of
an Offered Certificate a statement containing the information set forth in
subclauses (i)-(iv) above, aggregated for such calendar year or the applicable
portion thereof during which such person was a Certificateholder. Such
obligation will be deemed to have been satisfied to the extent that
substantially comparable information is provided pursuant to any requirements
of the Code as are from time to time in force. See, however, "Description of
the Certificates--Book-Entry Registration and Definitive Certificates."
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
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amounts of Certificates of a particular series will have the collective right
to remove the related Trustee and also to cause the removal of the related
Master Servicer in the case of an Event of Default on the part of the Master
Servicer. See "Description of the Pooling Agreements--Events of Default,"
"--Rights Upon Event of Default" and "--Resignation and Removal of the
Trustee."
TERMINATION
The obligations created by the Pooling Agreement for each series of
Certificates will terminate upon the payment (or provision for payment) to
Certificateholders of that series of all amounts held in the related
Certificate Account, or otherwise by the related Master Servicer or Trustee or
by a Special Servicer, and required to be paid to such Certificateholders
pursuant to such Pooling Agreement following the earlier of (i) the final
payment or other liquidation of the last Mortgage Asset subject thereto or the
disposition of all property acquired upon foreclosure of any Mortgage Loan
subject thereto and (ii) the purchase of all of the assets of the related Trust
Fund by the party entitled to effect such termination, under the circumstances
and in the manner that will be described in the related Prospectus Supplement.
Written notice of termination of a Pooling Agreement will be given to each
Certificateholder of the related series, and the final distribution will be
made only upon presentation and surrender of the Certificates of such series at
the location to be specified in the notice of termination.
If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination through the
repurchase of the assets in the related Trust Fund by a party that will be
specified therein, under the circumstances and in the manner set forth therein.
If so provided in the related Prospectus Supplement, upon the reduction of the
Certificate Balance of a specified class or classes of Certificates by a
specified percentage or amount, a party identified therein will be authorized
or required to solicit bids for the purchase of all the assets of the related
Trust Fund, or of a sufficient portion of such assets to retire such class or
classes, under the circumstances and in the manner set forth therein. 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
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interest of each actual purchaser of a Book-Entry Certificate (a "Certificate
Owner") will in turn be recorded on the records of Direct and Indirect
Participants. Certificate Owners will not receive written confirmation from DTC
of their purchases, but Certificate Owners are expected to receive written
confirmations providing details of such transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which each Certificate Owner entered into the transaction. Transfers of
ownership interest in the Book-Entry Certificates will be accomplished by
entries made on the books of Participants acting on behalf of Certificate
Owners. Certificate Owners will not receive certificates representing their
ownership interests in the Book-Entry Certificates, except in the event that
use of the book-entry system for the Book-Entry Certificates of any series is
discontinued as described below.
DTC will not know the identity of actual Certificate Owners of the
Book-Entry Certificates; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Certificates are credited. The Participants
will remain responsible for keeping account of their holdings on behalf of
their customers. Notices and other communications conveyed by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Certificate Owners will be governed
by arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Distributions on the Book-Entry Certificates will be made to DTC. DTC's
practice is to credit "Direct Participants" accounts on the related
Distribution Date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
such date. Disbursement of such distributions by Participants to Certificate
Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of each such
Participant (and not of DTC, the Depositor or any Trustee or Master Servicer),
subject to any statutory or regulatory requirements as may be in effect from
time to time. Under a book-entry system, Certificate Owners may receive
payments after the related Distribution Date.
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.
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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 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
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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
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
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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");
(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";
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(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";
(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";
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(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.
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SUB-SERVICERS
A Master Servicer may delegate its servicing obligations in respect of the
Mortgage Loans serviced by it to one or more third-party servicers (each, a
"Sub-Servicer"), but the Master Servicer will remain liable for such
obligations under the related Pooling Agreement unless otherwise provided in
the related Prospectus Supplement. Unless otherwise provided in the related
Prospectus Supplement, each sub-servicing agreement between a Master Servicer
and a Sub-Servicer (a "Sub-Servicing Agreement") must provide that, if for any
reason the Master Servicer is no longer acting in such capacity, the Trustee or
any successor Master Servicer may assume the Master Servicer's rights and
obligations under such Sub-Servicing Agreement.
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
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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 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
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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 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.
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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 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
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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, 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,
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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
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
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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
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Agreement. However, upon receipt of any of the various certificates, reports or
other instruments required to be furnished to it pursuant to the Pooling
Agreement, the Trustee will be required to examine such documents and to
determine whether they conform to the requirements of the Pooling Agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
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.
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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 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.
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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
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
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reinvestment income or other gain from such investments will be credited to the
related reserve fund for such series, and any loss resulting from such
investments will be charged to such reserve fund. However, such income may be
payable to any related Master Servicer or another service provider as
additional compensation for its services. The reserve fund, if any, for a
series will not be a part of the Trust Fund unless otherwise specified in the
related Prospectus Supplement.
CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the Prospectus Supplement for a series of Certificates,
any MBS included in the related Trust Fund and/or the related underlying
mortgage loans may be covered by one or more of the types of Credit Support
described herein. The related Prospectus Supplement will specify, as to each
such form of Credit Support, the information indicated above with respect
thereto, to the extent such information is material and available.
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CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties.
Because such legal aspects are governed by applicable state law (which laws may
differ substantially), the summaries do not purport to be complete, to reflect
the laws of any particular state, or to encompass the laws of all states in
which the security for the Mortgage Loans (or mortgage loans underlying any
MBS) is situated. Accordingly, the summaries are qualified in their entirety by
reference to the applicable laws of those states. See "Description of the Trust
Funds--Mortgage Loans." For purposes of the following discussion, "Mortgage
Loan" includes a mortgage loan underlying an MBS.
GENERAL
Each Mortgage Loan will be evidenced by a note or bond and secured by an
instrument granting a security interest in real property, which may be a
mortgage, deed of trust or a deed to secure debt, depending upon the prevailing
practice and law in the state in which the related Mortgaged Property is
located. Mortgages, deeds of trust and deeds to secure debt are herein
collectively referred to as "mortgage instruments." A mortgage instrument
creates a lien upon, or grants a title interest in, the real property covered
thereby, and represents the security for the repayment of the indebtedness
customarily evidenced by a promissory note. The priority of the lien created or
interest granted will depend on the terms of the mortgage instrument and, in
some cases, on the terms of separate subordination agreements or intercreditor
agreements with others that hold interests in the real property, the knowledge
of the parties to the mortgage instrument as to the existence of prior liens
and, generally, the order of recordation of the mortgage instrument in the
appropriate public recording office. However, the lien of a recorded mortgage
instrument will generally be subordinate to later-arising liens for real estate
taxes and assessments and other charges imposed under governmental police
powers.
TYPES OF MORTGAGE INSTRUMENTS
There are two parties to a mortgage: a mortgagor (the borrower and usually
the owner of the subject property) and a mortgagee (the lender). In a mortgage,
the mortgagor grants a lien on the subject property in favor of the mortgagee.
A deed of trust is a three-party instrument, among a trustor (the equivalent of
a borrower), a trustee to whom the real property is conveyed, and a beneficiary
(the lender) for whose benefit the conveyance is made. Under a deed of trust,
the trustor grants the property to the trustee, in trust, irrevocably until the
debt is paid, and generally with a power of sale. A deed to secure debt
typically has two parties. The borrower, or grantor, conveys title to the real
property to the grantee, or lender, generally with a power of sale, until such
time as the debt is repaid. In a case where the borrower is a land trust, there
would be an additional party to a mortgage instrument because legal title to
the property is held by a land trustee under a land trust agreement for the
benefit of the borrower. At origination of a mortgage loan involving a land
trust, the borrower generally executes a separate undertaking to make payments
on the mortgage note. The mortgagee's authority under a mortgage, the trustee's
authority under a deed of trust and the grantee's authority under a deed to
secure debt are governed by the express provisions of the related instrument,
the law of the state in which the real property is located, certain federal
laws and, in some deed of trust transactions, the directions of the
beneficiary.
LEASES AND RENTS
Mortgage instruments that encumber income-producing property often contain
or are accompanied by an assignment of rents and leases, pursuant to which the
borrower assigns to the lender the borrower's right, title and interest as
landlord under each lease and the income derived therefrom, while (unless rents
are to be paid directly to the lender) retaining a revocable license to collect
the rents for so long as there is no default. If the borrower defaults, the
license terminates and the lender is entitled to collect the rents.
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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.
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
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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 indebtedness 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 management and leasing agreements for the
mortgaged property. Tenants will often refuse to execute leases unless the
lender executes a written agreement with the tenant not to disturb the tenant's
possession of its premises in the event of a foreclosure. A senior lender may
refuse to consent to matters approved by a junior lender, with the result that
the value of the security for the junior mortgage instrument is diminished.
FORECLOSURE
General. Foreclosure is a legal procedure that allows the lender to
recover the borrower's mortgage debt by enforcing its rights and available
legal remedies under the mortgage instrument. If the borrower defaults in
payment or performance of its obligations under the note or mortgage
instrument, the lender has the right to institute foreclosure proceedings to
sell the real property at public auction to satisfy the indebtedness.
Foreclosure Procedures Vary From State to State. Two primary methods of
foreclosing a mortgage instrument are judicial foreclosure, involving court
proceedings, and non-judicial foreclosure pursuant to a power of sale granted
in the mortgage instrument. Other foreclosure procedures are available in some
states, but they are either infrequently used or available only in limited
circumstances. A foreclosure action is subject to most of the delays and
expenses of other lawsuits if defenses are raised or counterclaims are
interposed, and sometimes requires several years to complete.
Judicial Foreclosure. A judicial foreclosure proceeding is conducted in a
court having jurisdiction over the mortgaged property. Generally, the action is
initiated by the service of legal pleadings upon all parties having a
subordinate interest of record in the real property and all parties in
possession of the property, under leases or otherwise, whose interests are
subordinate to the mortgage. Delays in completion of the foreclosure may
occasionally result from difficulties in locating defendants. When the lender's
right to foreclose is contested, the legal proceedings can be time-consuming.
Upon successful completion of a judicial foreclosure proceeding, the court
generally issues a judgment of foreclosure and appoints a referee or other
officer to conduct a public sale of the mortgaged property, the proceeds of
which are used to satisfy the judgment. Such sales are made in accordance with
procedures that vary from state to state.
Non-Judicial Foreclosure/Power of Sale. Foreclosure of a deed of trust is
generally accomplished by a non-judicial trustee's sale pursuant to a power of
sale typically granted in the deed of trust. A power of sale may also be
contained in any other type of mortgage instrument (in particular, a deed to
secure debt) if applicable law so permits. A power of sale under a deed of
trust allows a non-judicial public sale to be conducted generally following a
request from the beneficiary/lender to the trustee to sell the property upon
default by the borrower and after notice of sale is given in accordance with
the terms of the deed
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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. Section Section
101-1330 (the "Bankruptcy Code")) and, therefore, could be rescinded in favor
of the bankrupt's estate, if (i) the foreclosure sale was held while the debtor
was insolvent and not more than one year prior to the filing of the bankruptcy
petition and (ii) the price paid for the foreclosed property did not represent
"fair consideration" ("reasonably equivalent value" under the Bankruptcy Code).
Although the reasoning and result of Durrett were rejected by the United States
Supreme Court in May, 1994, the case could nonetheless be persuasive to a court
applying a state fraudulent conveyance law with provisions similar to those
construed in Durrett. For these reasons, it is common for the lender to
purchase the mortgaged property for an amount equal to the secured indebtedness
and accrued and unpaid interest plus the expenses of foreclosure, in which
event the borrower's debt will be extinguished. Thereafter, subject to the
borrower's right in some states to remain in possession during a redemption
period, the lender will become the owner of the property and have both the
benefits and burdens of ownership, including the obligation to pay debt service
on any senior mortgage loans, to pay taxes, to obtain casualty insurance and to
make such repairs as are necessary to render the property suitable for sale.
The costs of operating and maintaining a commercial or multifamily residential
property may be significant and may be greater than the income derived from
that property. The lender also will commonly obtain the services of a real
estate broker and pay the broker's commission in connection with the sale or
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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
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mortgage loans secured by a lien on the fee estate of the borrower. The most
significant of these risks is that if the borrower's leasehold were to be
terminated (for example, as a result of a lease default or the bankruptcy of
the ground lessor or the borrower/ground lessee), the leasehold mortgagee would
be left without its security. This risk may be substantially lessened if the
ground lease contains provisions protective of the leasehold mortgagee, such as
a provision that requires the ground lessor to give the leasehold mortgagee
notices of lessee defaults and an opportunity to cure them, a provision that
permits the leasehold estate to be assigned to and by the leasehold mortgagee
or the purchaser at a foreclosure sale, a provision that gives the leasehold
mortgagee the right to enter into a new ground lease with the 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
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commencement or continuation of any state court proceeding for past due rent,
for accelerated rent, for damages or for a summary eviction order with respect
to a default under the lease that occurred prior to the filing of the lessee's
petition. In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (i) assume the
lease and retain it or assign it to a third party or (ii) reject the lease. If
the lease is assumed, the trustee or debtor-in-possession (or assignee, if
applicable) must cure any defaults under the lease, compensate the lessor for
its losses and provide the lessor with "adequate assurance" of future
performance. Such remedies may be insufficient, and any assurances provided to
the lessor may, in fact, be inadequate. If the lease is rejected, the lessor
will be treated as an unsecured creditor with respect to its claim for damages
for termination of the lease. The Bankruptcy Code also limits a lessor's
damages for lease rejection to the 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
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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.
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.
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SUBORDINATE FINANCING
Certain of the Mortgage Loans may not restrict the ability of the borrower
to use the Mortgaged Property as security for one or more additional loans.
Where a borrower encumbers a mortgaged property with one or more junior liens,
the senior lender is subjected to additional risk. First, the borrower may have
difficulty servicing and repaying multiple loans. Moreover, if the subordinate
financing permits recourse to the borrower (as is frequently the case) and the
senior loan does not, a borrower may have more incentive to repay sums due on
the subordinate loan. Second, acts of the senior lender that prejudice the
junior lender or impair the junior lender's security may create a superior
equity in favor of the junior lender. For example, if the borrower and the
senior lender agree to an increase in the principal amount of or the interest
rate payable on the senior loan, the senior lender may lose its priority to the
extent any existing junior lender is harmed or the borrower is additionally
burdened. Third, if the borrower defaults on the senior loan and/or any junior
loan or loans, the existence of junior loans and actions taken by junior
lenders can impair the security available to the senior lender and can
interfere with or delay the taking of action by the senior lender. Moreover,
the bankruptcy of a junior lender may operate to stay foreclosure or similar
proceedings by the senior lender.
DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
Notes and mortgages may contain provisions that obligate the borrower to
pay a late charge or additional interest if payments are not timely made, and
in some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In certain states, there are or may be specific
limitations upon the late charges that a lender may collect from a borrower for
delinquent payments. Certain states also limit the amounts that a lender may
collect from a borrower as an additional charge if the loan is prepaid. In
addition, the enforceability of provisions that provide for prepayment fees or
penalties upon an involuntary prepayment is unclear under the laws of many
states.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980 ("Title V") provides that state usury limitations shall not apply
to certain types of residential (including multifamily) first mortgage loans
originated by certain lenders after March 31, 1980. Title V authorized any
state to reimpose interest rate limits by adopting, before April 1, 1983, a law
or constitutional provision that expressly rejects application of the federal
law. In addition, even where Title V is not so rejected, any state is
authorized by the law to adopt a provision limiting discount points or other
charges on mortgage loans covered by Title V. Certain states have taken action
to reimpose interest rate limits and/or to limit discount points or other
charges.
No Mortgage Loan originated in any state in which application of Title V
has been expressly rejected or a provision limiting discount points or other
charges has been adopted, will (if originated after that rejection or adoption)
be eligible for inclusion in a Trust Fund unless (i) such Mortgage Loan
provides for such interest rate, discount points and charges as are permitted
in such state or (ii) such Mortgage Loan provides that the terms thereof are to
be construed in accordance with the laws of another state under which such
interest rate, discount points and charges would not be usurious and the
borrower's counsel has rendered an opinion that such choice of law provision
would be given effect.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a borrower who enters military service after the
origination of such borrower's mortgage loan (including a borrower who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such borrower's active duty status, unless a
court orders otherwise upon application of the lender. The
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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 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.
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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
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the related Pooling Agreement, the related Trust Fund (or each applicable
portion thereof) will qualify as a REMIC and the REMIC Certificates offered
with respect thereto will be considered to evidence ownership of "regular
interests" ("REMIC Regular Certificates") or "residual interests" ("REMIC
Residual Certificates") in that REMIC within the meaning of the REMIC
Provisions.
If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for such status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In that event, such entity may be taxable as a corporation
under Treasury regulations, and the related REMIC Certificates may not be
accorded the status or given the tax treatment described below. Although the
Code authorizes the Treasury Department to issue regulations providing relief
in the event of an inadvertent termination of REMIC status, no such regulations
have been issued. Any such relief, moreover, may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the Trust
Fund's income for the period in which the requirements for such status are not
satisfied. The Pooling Agreement with respect to each REMIC will include
provisions designed to maintain the Trust Fund's status as a REMIC under the
REMIC Provisions. It is not anticipated that the status of any Trust Fund as a
REMIC will be terminated.
Characterization of Investments in REMIC Certificates. In general, 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.
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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.
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").
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In addition, if the accrued interest to be paid on the first Distribution
Date is computed with respect to a period that begins prior to the Closing
Date, a portion of the purchase price paid for a REMIC Regular Certificate will
reflect such accrued interest. In such cases, information returns provided to
the Certificateholders and the IRS will be based on the position that the
portion of the purchase price paid for the interest accrued with respect to
periods prior to the Closing Date is treated as part of the overall cost of
such REMIC Regular Certificate (and not as a separate asset the cost of which
is recovered entirely out of interest received on the next Distribution Date)
and that portion of the interest paid on the first Distribution Date in excess
of interest accrued for a number of days corresponding to the number of days
from the Closing Date to the first Distribution Date should be included in the
stated redemption price of such REMIC Regular Certificate. However, the OID
Regulations state that all or some portion of such accrued interest may be
treated as a separate asset the cost of which is recovered entirely out of
interest paid on the first Distribution Date. It is unclear how an election to
do so would be made under the OID Regulations and whether such an election
could be made unilaterally by a Certificateholder.
Notwithstanding the general definition of original issue discount,
original issue discount on a REMIC Regular Certificate will be considered to be
de minimis if it is less than 0.25% of the stated redemption price of the REMIC
Regular Certificate multiplied by its weighted average life. For this purpose,
the weighted average life of the REMIC Regular Certificate is computed as the
sum of the 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
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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 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.
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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
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.
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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 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
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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 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.
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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.
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
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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 on any required or
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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
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Certificate will not be considered "noneconomic" for purposes of the
above-described rules. See "--Foreign Investors in REMIC Certificates--REMIC
Residual Certificates" below for additional restrictions applicable to
transfers of certain REMIC Residual Certificates to foreign persons.
Mark-to-Market Rules. On December 24, 1996, the IRS released final
regulations (the "Mark-to-Market Regulations") relating to the requirement that
a securities dealer mark to market securities held for sale to customers. This
mark-to-market requirement applies to all securities owned by a dealer, except
to the extent that the dealer has specifically identified a security as held
for investment. The Mark-to-Market Regulations provide that for purposes of
this mark-to-market requirement, a REMIC Residual Certificate issued after
January 4, 1995 is not treated as a security and thus may not be marked to
market. Prospective purchasers of REMIC Residual 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.
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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 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.
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In addition, certain contributions to a REMIC made after the day on which
the REMIC issues all of its interests could result in the imposition of a tax
on the REMIC equal to 100% of the value of the contributed property (a
"Contributions Tax"). Each Pooling Agreement will include provisions designed
to prevent the acceptance of any contributions that would be subject to such
tax.
REMICs also are subject to federal income tax at the highest corporate
rate on "net income from foreclosure property," determined by reference to the
rules applicable to real estate investment trusts. "Net income from foreclosure
property" generally means gain from the sale of a foreclosure property that is
inventory property and gross income from foreclosure property other than
qualifying rents and other qualifying income for a real estate investment
trust. Unless otherwise disclosed in the related Prospectus Supplement, it is
not anticipated that any REMIC will recognize "net income from foreclosure
property" subject to federal income tax.
Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any material state or local income or franchise tax will be
imposed on any REMIC.
Unless otherwise stated in the related Prospectus Supplement, and to the
extent permitted by then applicable laws, any Prohibited Transactions Tax,
Contributions Tax, tax on "net income from foreclosure property" or state or
local income or franchise tax that may be imposed on the REMIC will be borne by
the related Master Servicer, Special Servicer or Trustee in any case out of its
own funds, provided that such person has sufficient assets to do so, and
provided further that such tax arises out of a breach of such person's
obligations under the related Pooling Agreement and in respect of compliance
with applicable laws and regulations. Any such tax not borne by a Master
Servicer, Special Servicer or Trustee will be charged against the related Trust
Fund resulting in a reduction in amounts payable to holders of the related
REMIC Certificates.
Tax and Restrictions on Transfers of REMIC Residual Certificates to
Certain Organizations. If a REMIC Residual Certificate is transferred to a
"disqualified organization" (as defined below), a tax would be imposed in an
amount (determined under the REMIC Regulations) equal to the product of (i) the
present value (discounted using the "applicable Federal rate" for obligations
whose term ends on the close of the last quarter in which excess inclusions are
expected to accrue with respect to the REMIC Residual Certificate, which rate
is computed and published monthly by the IRS) of the total anticipated excess
inclusions with respect to such REMIC Residual Certificate for periods after
the transfer and (ii) the highest marginal federal income tax rate applicable
to corporations. The anticipated excess inclusions must be determined as of the
date that the REMIC Residual Certificate is transferred and must be based on
events that have occurred up to the time of such transfer, the Prepayment
Assumption and any required or permitted clean up calls or required liquidation
provided for in the REMIC's organizational documents. Such a tax generally
would be imposed on the transferor of the REMIC Residual Certificate, except
that where such transfer is through an agent for a disqualified organization,
the tax would instead be imposed on such agent. However, a transferor of a
REMIC Residual Certificate would in no event be liable for such tax with
respect to a transfer if the transferee furnishes to the transferor an
affidavit that the transferee is not a disqualified organization and, as of the
time of the transfer, the transferor does not have actual knowledge that such
affidavit is false. Moreover, an entity will not qualify as a REMIC unless
there are reasonable arrangements designed to ensure that (i) residual
interests in such entity are not held by disqualified organizations and (ii)
information necessary for the application of the tax described herein will be
made available. Restrictions on the transfer of REMIC Residual Certificates and
certain other provisions that are intended to meet this requirement will be
included in the Pooling Agreement, and will be discussed more fully in any
Prospectus Supplement relating to the offering of any REMIC Residual
Certificate.
In addition, if a "pass-through entity" (as defined below) includes in
income excess inclusions with respect to a REMIC Residual Certificate, and a
disqualified organization is the record holder of an interest in such entity,
then a tax will be imposed on such entity equal to the product of (i) the
amount of excess inclusions on the REMIC Residual Certificate that are
allocable to the interest in the pass-through entity held by such disqualified
organization and (ii) the highest marginal federal income tax rate imposed on
corporations. A pass-through entity will not be subject to this tax for any
period,
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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.
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
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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 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.
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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
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.
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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.
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.
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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 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.
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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
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each payment included in the stated redemption price of such Mortgage Loan, by
multiplying (i) the number of complete years (rounding down for partial years)
from the issue date until such payment is expected to be made by (ii) a
fraction, the numerator of which is the amount of the payment and the
denominator of which is the stated redemption price of the Mortgage Loan. Under
the OID Regulations, original issue discount of only a de minimis amount (other
than de minimis original issue discount attributable to a so-called "teaser"
rate or initial interest holiday) will be included in income as each payment of
stated principal price is made, based on the product of the total amount of
such de minimis original issue discount and a fraction, the numerator of which
is the amount of each such payment and the denominator of which is the
outstanding stated principal amount of the Mortgage Loan. The OID Regulations
also permit a Certificateholder to elect to accrue de minimis original issue
discount into income currently based on a constant yield method. See
"--Taxation of Owners of Grantor Trust Fractional Interest Certificates--Market
Discount" below.
If original issue discount is in excess of a de minimis amount, all
original issue discount with respect to a Mortgage Loan will be required to be
accrued and reported in income each month, based on a constant yield. The OID
Regulations suggest that no prepayment assumption is appropriate in computing
the yield on prepayable obligations issued with original issue discount. In the
absence of statutory or administrative clarification, it currently is not
intended to base information reports or returns to the IRS and
Certificateholders on the use of a prepayment assumption in transactions not
subject to the stripped bond rules. However, Section 1272(a)(6) of the Code may
require that a prepayment assumption be made in computing yield with respect to
all mortgage-backed securities. Certificateholders are advised to consult their
own tax advisors concerning whether a prepayment assumption should be used in
reporting original issue discount with respect to Grantor Trust Fractional
Interest Certificates. Certificateholders should refer to the related
Prospectus Supplement with respect to each series to determine whether and in
what manner the original issue discount rules will apply to Mortgage Loans in
such series.
A purchaser of a Grantor Trust Fractional Interest Certificate that
purchases such Grantor Trust Fractional Interest Certificate at a cost less
than such Certificate's allocable portion of the aggregate remaining stated
redemption price of the Mortgage Loans held in the related Trust Fund will also
be required to include in gross income such Certificate's daily portions of any
original issue discount with respect to such Mortgage Loans. However, each such
daily portion will be reduced, if the cost of such Grantor Trust Fractional
Interest Certificate to such purchaser is in excess of such Certificate's
allocable portion of the aggregate "adjusted issue prices" of the Mortgage
Loans held in the related Trust Fund, approximately in proportion to the ratio
such excess bears to such Certificate's allocable portion of the aggregate
original issue discount remaining to be accrued on such Mortgage Loans. The
adjusted issue price of a Mortgage Loan on any given day equals the sum of (i)
the adjusted issue price (or, in the case of the first accrual period, the
issue price) of such Mortgage Loan at the beginning of the accrual period that
includes such day and (ii) the daily portions of original issue discount for
all days during such accrual period prior to such day. The adjusted issue price
of a Mortgage Loan at the beginning of any accrual period will equal the issue
price of such Mortgage Loan, increased by the aggregate amount of original
issue discount with respect to such Mortgage Loan that accrued in prior accrual
periods, and reduced by the amount of any payments made on such Mortgage Loan
in prior accrual periods of amounts included in its stated redemption price.
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
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generally will be required to include in income in each month the amount of
such discount that has accrued (under the rules described in the next
paragraph) through such month that has not previously been included in income,
but limited, in the case of the portion of such discount that is allocable to
any Mortgage Loan, to the payment of stated redemption price on such Mortgage
Loan that is received by (or, in the case of accrual basis Certificateholders,
due to) the Trust Fund in that month. A Certificateholder may elect to include
market discount in income currently as it accrues (under a constant yield
method based on the yield of the Certificate to such holder) rather than
including it on a deferred basis in accordance with the foregoing. If made,
such election will apply to all market discount bonds acquired by such
Certificateholder during or after the first taxable year to which such election
applies. In addition, the OID Regulations would permit a Certificateholder to
elect to accrue all interest, discount (including de minimis market or original
issue discount) and premium in income as interest, based on a constant yield
method. If such an election were made with respect to a Mortgage Loan with
market discount, the Certificateholder would be deemed to have made an election
to include currently market discount in income with respect to all other debt
instruments having market discount that such Certificateholder acquires during
the taxable year of the election and thereafter, and possibly previously
acquired instruments. Similarly, a Certificateholder that made this election
for a Certificate acquired at a premium would be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Certificateholder owns or acquires. See
"--REMICs--Taxation of Owners of REMIC Regular Certificates--Premium." Each of
these elections to accrue interest, discount and premium with respect to a
Certificate on a constant yield method or as interest is irrevocable.
Section 1276(b)(3) of the Code authorized the Treasury Department to issue
regulations providing for the method for accruing market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. Under those rules, in each
accrual period market discount on the Mortgage Loans should accrue, at the
Certificateholder's option: (i) on the basis of a constant yield method, (ii)
in the case of a Mortgage Loan issued without original issue discount, in an
amount that bears the same ratio to the total remaining market discount as the
stated interest paid in the accrual period bears to the total stated interest
remaining to be paid on the Mortgage Loan as of the beginning of the accrual
period, or (iii) in the case of a Mortgage Loan issued with original issue
discount, in an amount that bears the same ratio to the total remaining market
discount as the original issue discount accrued in the accrual period bears to
the total original issue discount remaining at the beginning of the accrual
period. The prepayment assumption, if any, used in calculating the accrual of
original issue discount is to be used in calculating the accrual of market
discount. The effect of using a prepayment assumption could be to accelerate
the reporting of such discount income. Because the regulations referred to in
this paragraph have not been issued, it is not possible to predict what effect
such regulations might have on the tax treatment of a Mortgage Loan purchased
at a discount in the secondary market.
Because the Mortgage Loans will provide for periodic payments of stated
redemption price, such discount may be required to be included in income at a
rate that is not significantly slower than the rate at which such discount
would be included in income if it were original issue discount.
Market discount with respect to Mortgage Loans generally will be
considered to be de minimis if it is less than 0.25% of the stated redemption
price of the Mortgage Loans multiplied by the number of complete years to
maturity remaining after the date of its purchase. In interpreting a similar
rule with respect to original issue discount on obligations payable in
installments, the OID Regulations refer to the weighted average maturity of
obligations, and it 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
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amount may require the deferral of interest expense deductions attributable to
accrued market discount not yet includible in income, unless an election has
been made to report market discount currently as it accrues. This rule applies
without regard to the origination dates of the Mortgage Loans.
Premium. If a Certificateholder is treated as acquiring the underlying
Mortgage Loans at a premium, that is, at a price in excess of their remaining
stated redemption price, such Certificateholder may elect under Section 171 of
the Code to amortize using a constant yield method the portion of such premium
allocable to Mortgage Loans originated after September 27, 1985. Amortizable
premium is treated as an offset to interest income on the related debt
instrument, rather than as a separate interest deduction. However, premium
allocable to Mortgage Loans originated before September 28, 1985 or to Mortgage
Loans for which an amortization election is not made, should be allocated among
the payments of stated redemption price on the Mortgage Loan and be allowed as
a deduction as such payments are made (or, for a Certificateholder using the
accrual method of accounting, when such payments of stated redemption price are
due).
It is unclear whether a prepayment assumption should be used in computing
amortization of premium allowable under Section 171 of the Code. If premium is
not subject to amortization using a prepayment assumption and a Mortgage Loan
prepays in full, the holder of a Grantor Trust Fractional Interest Certificate
acquired at a premium should recognize a loss, equal to the difference between
the portion of the prepaid principal amount of the Mortgage Loan that is
allocable to the Certificate and the portion of the adjusted basis of the
Certificate that is allocable to the Mortgage Loan. If a prepayment assumption
is used to amortize such premium, it appears that such a loss would be
unavailable. Instead, if a prepayment assumption is used, a prepayment should
be treated as a partial payment of the stated redemption price of the Grantor
Trust Fractional Interest Certificate and accounted for under a method similar
to that described for taking account of original issue discount on REMIC
Regular Certificates. See "--REMICs--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount." It is unclear whether any other
adjustments would be required to reflect differences between the prepayment
assumption used, if any, and the actual rate of prepayments.
Taxation of Owners of Grantor Trust Strip Certificates. The "stripped
coupon" rules of Section 1286 of the Code will apply to the Grantor Trust Strip
Certificates. Except as described above in "--Taxation of Owners of Grantor
Trust Fractional Interest Certificates--If Stripped Bond Rules Apply," no
regulations or published rulings under Section 1286 of the Code have been
issued and some uncertainty exists as to how it will be applied to securities
such as the Grantor Trust Strip Certificates. Accordingly, holders of Grantor
Trust Strip Certificates should consult their own tax advisors concerning the
method to be used in reporting income or loss with respect to such
Certificates.
The OID Regulations do not apply to "stripped coupons," although they
provide general guidance as to how the original issue discount sections of the
Code will be applied. In addition, the discussion below is subject to the
discussion under "--Possible Application of Proposed Contingent Payment Rules"
below and assumes that the holder of a Grantor Trust Strip Certificate will not
own any Grantor Trust Fractional Interest Certificates.
Under the stripped coupon rules, it appears that original issue discount
will be required to be accrued in each month on the Grantor Trust Strip
Certificates based on a constant yield method. In effect, each holder of
Grantor Trust Strip Certificates would include as interest income in each month
an amount equal to the product of such holder's adjusted basis in such Grantor
Trust Strip Certificate at the beginning of such month and the yield of such
Grantor Trust Strip Certificate to such holder. Such yield would be calculated
based on the price paid for that Grantor Trust Strip Certificate by its holder
and the payments remaining to be made thereon at the time of the purchase, plus
an allocable portion of the servicing fees and expenses to be paid with respect
to the Mortgage Loans. See "--Taxation of Owners of Grantor Trust Fractional
Interest Certificates--If Stripped Bond Rules Apply" above.
As noted above, Section 1272(a)(6) of the Code requires that a prepayment
assumption be used in computing the accrual of original issue discount with
respect to certain categories of debt instruments, and that adjustments be made
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
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Grantor Trust Strip Certificates. It is unclear whether those provisions would
be applicable to the Grantor Trust Strip Certificates or whether use of a
prepayment assumption may be required or permitted in the absence of such
regulations. It is also uncertain, if a prepayment assumption is used, whether
the assumed prepayment rate would be determined based on conditions at the time
of the first sale of the Grantor Trust Strip Certificate or, with respect to
any subsequent holder, at the time of purchase of the Grantor Trust Strip
Certificate by that holder.
The accrual of income on the Grantor Trust Strip Certificates will be
significantly slower if a prepayment assumption is permitted to be made than if
yield is computed assuming no prepayments. In the absence of statutory or
administrative clarification, it currently is intended to base information
returns or reports to the IRS and Certificateholders on the Prepayment
Assumption disclosed in the related Prospectus Supplement and on a constant
yield computed using a representative initial offering price for each class of
Certificates. However, neither the Depositor nor any other person will make any
representation that the Mortgage Loans will in fact prepay at a rate conforming
to the Prepayment Assumption or at any other rate and Certificateholders should
bear in mind that the use of a representative initial offering price will mean
that such information returns or reports, even if otherwise accepted as
accurate by the IRS, will in any event be accurate only as to the initial
Certificateholders of each series who bought at that price. Prospective
purchasers of the Grantor Trust Strip Certificates should consult their own tax
advisors regarding the use of the Prepayment Assumption.
It is unclear under what circumstances, if any, the prepayment of a
Mortgage Loan will give rise to a loss to the holder of a Grantor Trust Strip
Certificate. If a Grantor Trust Strip Certificate is treated as a single
instrument (rather than an interest in discrete mortgage loans) and the effect
of prepayments is taken into account in computing yield with respect to such
Grantor Trust Strip Certificate, it appears that no loss may be available as a
result of any particular prepayment unless prepayments occur at a rate faster
than the Prepayment Assumption. However, if a Grantor Trust Strip Certificate
is treated as an interest in discrete Mortgage Loans, or if the Prepayment
Assumption is not used, then when a Mortgage Loan is prepaid, the holder of a
Grantor Trust Strip Certificate should be able to recognize a loss equal to the
portion of the adjusted issue price of the Grantor Trust Strip Certificate that
is allocable to such Mortgage Loan.
Possible Application of Proposed Contingent Payment Rules. The coupon
stripping rules' general treatment of stripped coupons is to regard them as
newly issued debt instruments in the hands of each purchaser. To the extent
that payments on the Grantor Trust Strip Certificates would cease if the
Mortgage Loans were prepaid in full, the Grantor Trust Strip Certificates could
be considered to be debt instruments providing for contingent payments. Under
the OID Regulations, debt instruments providing for contingent payments are not
subject to the same rules as debt instruments providing for noncontingent
payments, but no final regulations have been promulgated with respect to
contingent payment debt instruments. Proposed regulations were promulgated in
1994 regarding contingent payment debt instruments, but have not been made
final and are likely to be substantially revised before being made final.
Moreover, like the OID Regulations, such proposed regulations do not
specifically address securities, such as the Grantor Trust Strip Certificates,
that are subject to the stripped bond rules of Section 1286 of the Code.
Certificateholders should consult their tax advisors concerning the
possible application of the contingent payment rules to the Grantor Trust Strip
Certificates.
Sales of Grantor Trust Certificates. Any gain or loss, equal to the
difference between the amount realized on the sale or exchange of a Grantor
Trust Certificate and its adjusted basis, recognized on such sale or exchange
of a Grantor Trust Certificate by an investor who holds such Grantor Trust
Certificate as a capital asset, will be capital gain or loss, except to the
extent of accrued and unrecognized market discount, which will be treated as
ordinary income, and (in the case of banks and other financial institutions)
except as provided under Section 582(c) of the Code. The adjusted basis of a
Grantor Trust Certificate generally will equal its cost, increased by any
income reported by the seller (including original issue discount and market
discount income) and reduced (but not below zero) by any previously reported
losses, any amortized premium and by any distributions with respect to such
Grantor Trust Certificate.
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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 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.
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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
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
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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
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
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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
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Selection of Securities Dealers and Unsuitable Investment Practices (to the
extent adopted by their respective regulatory authorities), setting forth, in
relevant part, certain investment practices deemed to be unsuitable for an
institution's investment portfolio, as well as guidelines for investing in
certain types of mortgage related securities.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits and provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying."
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Offered Certificates or
to purchase Offered Certificates representing more than a specified percentage
of the investor's assets. Investors should consult their own legal advisors in
determining whether and to what extent the Offered Certificates constitute
legal investments for such investors.
METHOD OF DISTRIBUTION
The Offered Certificates offered hereby and by the Prospectus Supplements
hereto will be offered in series. The distribution of the Offered Certificates
may be effected from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
to be determined at the time of sale or at the time of commitment therefor. The
Prospectus Supplement for the Offered Certificates of each series will, as to
each class of such Certificates, set forth the method of the offering, either
the initial public offering price or the method by which the price at which the
Certificates of such class will be sold to the public can be determined, the
amount of any underwriting discounts, concessions and commissions to
underwriters, any discounts or commissions to be allowed to dealers and the
proceeds of the offering to the Depositor.
If so specified in the related Prospectus Supplement, the Offered
Certificates of a series will be distributed in a firm commitment underwriting,
subject to the terms and conditions of the underwriting agreement, by Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") acting as
underwriter with other underwriters, if any, named therein. Alternatively, the
Prospectus Supplement may specify that Offered Certificates will be distributed
by Merrill Lynch acting as agent. If Merrill Lynch acts as agent in the sale of
Offered Certificates, Merrill Lynch will receive a selling commission with
respect to such Offered Certificates, depending on market conditions, expressed
as a percentage of the aggregate Certificate Balance or Notional Amount of such
Offered Certificates as of the date of issuance. The exact percentage for each
series of Certificates will be disclosed in the related Prospectus Supplement.
To the extent that Merrill Lynch elects to purchase Offered Certificates as
principal, Merrill Lynch may realize losses or profits based upon the
difference between its purchase price and the sales price. The Prospectus
Supplement with respect to any series offered other than through underwriters
will contain information regarding the nature of such offering and any
agreements to be entered into between the Depositor and purchasers of Offered
Certificates of such series.
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.
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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.
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
<TABLE>
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<S> <C>
Accrual Certificates ..................... 13, 42
Accrued Certificate Interest ............. 42
Act ...................................... 71
Acute Care Facilities .................... 24
ADA ...................................... 74
ARM Loans ................................ 32
Assisted Living Facilities ............... 24
Available Distribution Amount ............ 41
Bankruptcy Code .......................... 68
Book-Entry Certificates .................. 14, 41
call risk ................................ 19, 38
Capitalized Interest Account ............. 11, 34
Cash Flow Agreement ...................... 11, 34
Cash Flow Agreements ..................... 1
CERCLA ................................... 27, 71
Certificate Account ...................... 10, 34, 50
Certificate Balance ...................... 2, 12
Certificate Owner ........................ 15, 48
Certificateholders ....................... 1
Certificates ............................. 1, 8
Closing Date ............................. 77
Code ..................................... 15, 75
Commercial Properties .................... 8, 30
Commission ............................... 2
Committee Report ......................... 77
Companion Class .......................... 14, 43
CON ...................................... 25
Contributions Tax ........................ 88
Controlled Amortization Class ............ 14, 43
Cooperatives ............................. 30
CPR ...................................... 37
Credit Support ........................... 1, 10, 34
Cut-off Date ............................. 13
Debt Service Coverage Ratio .............. 31
Definitive Certificate ................... 15
Definitive Certificates .................. 41, 48
Depositor ................................ 8, 30
Determination Date ....................... 41
Direct Participants ...................... 47, 48
Distribution Date ........................ 13
Distribution Date Statement .............. 45
DOL ...................................... 100
DTC ...................................... 2, 15, 41, 47
Due Dates ................................ 32
Due Period ............................... 44
Duff & Phelps ............................ 101
Equity Participation ..................... 32
ERISA .................................... 17, 100
Events of Default ........................ 59
Excess Funds ............................. 40
Exchange Act ............................. 3
Exemption ................................ 101
extension risk ........................... 19, 38
FAMC ..................................... 9
FASIT .................................... 15, 75
FHLMC .................................... 9
Fitch .................................... 101
FNMA ..................................... 9
Garn Act ................................. 72
GNMA ..................................... 9
Grantor Trust Certificates ............... 15, 75
Grantor Trust Fractional Interest
Certificates ............................. 16
Grantor Trust Fund ....................... 75
Grantor Trust Strip Certificate .......... 91
Health Care-Related Facilities ........... 24
holder ................................... 75
Indirect Participants .................... 47
Insurance Proceeds ....................... 51
IRS ...................................... 77
Issue Premium ............................ 83
L/C Bank ................................. 63
Liquidation Proceeds ..................... 51
Loan-to-Value Ratio ...................... 31
Lock-out Expiration Date ................. 32
Lock-out Period .......................... 32
Mark-to-Market Regulations ............... 86
Master Servicer .......................... 2, 8
MBS ...................................... 1, 9, 30
MBS Agreement ............................ 33
MBS Issuer ............................... 33
MBS Servicer ............................. 33
MBS Trustee .............................. 33
Merrill Lynch ............................ 104
Moody's .................................. 101
Mortgage Asset Seller .................... 10, 30
Mortgage Assets .......................... 1, 30
mortgage instruments ..................... 65
Mortgage Loans ........................... 1, 8, 30
Mortgage Notes ........................... 30
Mortgage Rate ............................ 9, 32
Mortgaged Properties ..................... 30
Mortgages ................................ 30
Multifamily Properties ................... 8, 30
Net Leases ............................... 31
Net Operating Income ..................... 31
Nonrecoverable Advance ................... 44
Notional Amount .......................... 12, 42
OCC ...................................... 103
Offered Certificates ..................... 1
OID Regulations .......................... 75
Originator ............................... 30
PAC ...................................... 38
</TABLE>
106
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Participants ............................ 29, 47
Parties in Interest ..................... 100
pass-through entity ..................... 86, 88, 89
Pass-Through Rate ....................... 2, 12
Permitted Investments ................... 51
Plans ................................... 100
Pooling Agreement ....................... 11, 49
Pre-Funding Account ..................... 1, 11, 34
Pre-Funding Period ...................... 11, 34
prepayment .............................. 37
Prepayment Assumption ................... 77, 94
Prepayment Interest Shortfall ........... 35
Prepayment Premium ...................... 32
Prohibited Transactions Tax ............. 87
Prospectus Supplement ................... 1
Rating Agency ........................... 17
RCRA .................................... 71
Record Date ............................. 41
Related Proceeds ........................ 44
Relief Act .............................. 73
REMIC ................................... 1, 75
REMIC Certificates ...................... 75
REMIC Provisions ........................ 75
REMIC Regular Certificates .............. 15, 76
REMIC Regulations ....................... 75
REMIC Residual Certificates ............. 15, 76
REO Property ............................ 45, 53
Restricted Group ........................ 101
Senior Certificates ..................... 12, 41
Senior Housing .......................... 24
Servicing Standard ...................... 53
Skilled Nursing Facilities .............. 24
SMMEA ................................... 102
SPA ..................................... 37
Special Servicer ........................ 2, 8, 54
Standard & Poor's ....................... 101
Stripped Interest Certificates .......... 12, 41
Stripped Principal Certificates ......... 12, 41
Subordinate Certificates ................ 12, 41
Sub-Servicer ............................ 54
Sub-Servicing Agreement ................. 54
TAC ..................................... 38
Tiered REMICs ........................... 76
Title V ................................. 73
Trust Assets ............................ 2
Trust Fund .............................. 1
Trustee ................................. 2, 8
UCC ..................................... 66
Underwriter ............................. 101
United States person .................... 90
Value ................................... 31
Voting Rights ........................... 46
Warranting Party ........................ 50
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTROL
NO. PROPERTY NAME ADDRESS CITY
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MLMI-003 1700 Broadway 1700 Broadway New York
MLMI-135 Independence Green Apartments 36700 Grand River Avenue Farmington Hills
MLMI-048 The Ansonia Commercial 2109 Broadway New York
MLMI-064 Mercer Mall 3371 Brunswick Pike Lawrence
MLMI-011 Bentworth Apartments 11655 Briar Forest Drive Houston
MLMI-102 Embassy Suites - Oklahoma City 1815 S. Meridian Avenue Oklahoma City
MLMI-051 The Wic Building 4700 Wissahickson Ave Philadelphia
MLMI-128 Quality Inn City Center 154 West 600 South Salt Lake City
MLMI-050 The Shelton 5909 Luther Lane Dallas
MLMI-153 Holiday on the Bay Kettle Creek Road Toms River
MLMI-041 Ramada Inn Airport 76 Industrial Highway Essington
MLMI-043 Republic Beverage Building 1010 Isuzu Parkway Grand Prarie
MLMI-001 1 Beach 1 Beach Street San Francisco
MLMI-004 2 Northpoint 2 Northpoint Street San Francisco
MLMI-034 Myrtle Cove Apartments 9760 & 9860 Scyene Road Dallas
MLMI-110 Station Plaza Shopping Center 13408 - 13450 Jefferson Davis Highway Woodbridge
MLMI-031 Holcomb Woods Shopping Center 1570 Holcomb Bridge Road Roswell
MLMI-117 Willowbrook Court Shopping Center 17776 Tomball Parkway Houston
MLMI-026 Federal Express Building 528 West 34th Street New York
MLMI-005 3737 Hillcroft Apartments 3737 Hillcroft Houston
MLMI-104 BJ's Wholesale Club 2044 Red Lion Road Philadelphia
MLMI-134 Kenmore Estates 18810 68th Avenue NE Bothell
MLMI-019 Corr-Pro (Mystic) Warehouse 301 SW 27th Street Renton
MLMI-045 Sommerset Apartments 830 S. Rancho Santa Fe Rd. San Marcos
MLMI-152 Chateau Brickyard 3080 South 1300 East Salt Lake City
MLMI-118 Waterbury Crossing 425 Bank Street Waterbury
MLMI-068 Redwood Village Apartments 253-349 Redwood Avenue Paterson
MLMI-023 Deerfield Apartments 640 Windsor Avenue Windsor
MLMI-062 Cerritos Village 19101-19151 Bloomfield Avenue & 12506-12544 South St. Cerritos
MLMI-027 Foxmoor Apartments 10843 N. Central Expwy. Dallas
MLMI-012 Beverly-Brighton Shops 362-370 N. Beverly Drive Beverly Hills
MLMI-032 Kingsley Plaza Apartments 444 S. Kingsley Drive Los Angeles
MLMI-133 Sammamish Ridge 14820 Redmond Way Redmond
MLMI-007 6900 Lindbergh Blvd 6900 Lindbergh Blvd and 3125 South 70th Street Philadelphia
MLMI-124 Fairfield Inn - Beaverton 15583 N.W. Gateway Court Beaverton
MLMI-042 Reeve - Wildcreek Apartments 1511 Faro Drive Austin
MLMI-109 Quadrangle Square 630 Skylark Road Charleston
MLMI-006 502 West Office Center 502 West Office Center Fort Washington
MLMI-115 Santa Monica Sav-On 8491 West Santa Monica Boulevard West Hollywood
MLMI-022 Deane Hill Apartments 7700 Gleason Drive Knoxville
MLMI-101 2333 Walton Boulevard 2333 Walton Boulevard Auburn Hills
MLMI-125 Courtyard by Marriott - Newburgh One Govenor Drive Newburgh
MLMI-126 Albany Thruway Courtyard 1455 Washington Avenue Albany
MLMI-106 Crown Care Center 3001 East Elm Street Harrisonville
MLMI-142 Aspen Shadows 4025 Lake Mary Road Flagstaff
MLMI-105 Country Club Care Center 503 Regent Drive Warrensburg
MLMI-160 PetsMart, Inc. 8210 Plaza Drive West Madison
MLMI-013 Bishops Landing Apartments 333 East Brooks Street Norman
MLMI-067 Phelan Village Shopping Center 4013-4083 Phelan Road Phelan
MLMI-144 AAAABCO Gibson Mini Storage 975 Suffelbeam Henderson
MLMI-020 Crosspointe Vista Apartments 620 Comstock Street Seattle
MLMI-033 MeadowCrest Apartments 9525 Lorene Lane San Antonio
MLMI-040 Quarters Apartments 6415 Melody Lane Dallas
MLMI-161 Heilig Meyers 1406 E. 53rd Street Anderson
MLMI-164 Kings Court Shopping Center 9530 Philadelphia Road Rossville
MLMI-120 Office Max 5895 Katella Ave. Cypress
MLMI-065 Springfield Apartments 1000 E. Lindsey Street Norman
MLMI-018 Clarendon Apartments 1214 Crown Point Norman
MLMI-035 O'Neill Industrial Center 1210 Stanbridge Street Norristown
MLMI-056 Willowbrook Apartments 14095 S. W. Walker Road Beaverton
MLMI-127 Fairfield Inn - Henrietta 4695 West Henrietta Road Henrietta
MLMI-114 Oak Lawn Promenade 6310-6356 West 95th Street Oak Lawn
MLMI-008 Alexander House Apartments 6060 Gulfton Houston
MLMI-049 The Atrium Cellini Apartments 6303 Gulfton Drive Houston
MLMI-057 Wilshire Village Shopping Center 6102 E. Mockingbird Lane Dallas
MLMI-096 Pine Valley Court (Colony Greene) Apartments 116 Blackwood Clementon Rd Clementon
MLMI-052 Tiffany Apartments 9600 McCombs Street El Paso
MLMI-060 Woodhollow Apartments 480 Highway 332 Lake Jackson
MLMI-058 Windsor Court Apartments 219 S. 156th Street Burien
MLMI-017 City Villas 837 16th Street San Diego
MLMI-029 Hartford Apartments 4301 Hartford Drive Dallas
MLMI-036 Pep Boys Plaza 511-581 N. Main Steet Corona
MLMI-010 Bassett Furniture 1915 S. Stemmons Freeway Lewisville
MLMI-061 332 East 95th Street 332 East 95th Street New York
MLMI-116 Seneca Park Plaza Shopping Center 13501-13541 Clopper Road Germantown
MLMI-066 Orleans East Apartments 1541 East Larned Street Detroit
MLMI-107 1401 Morehead St. - Coca Cola 1401 W. Morehead St Charlotte
MLMI-111 Shenandoah Square Shopping Center 932-958 Edwards Ferry Road Leesburg
MLMI-047 Tara Hall Apartments 1601-1717 College Street Houston
MLMI-141 Chapelcroft 9629 Buselton Avenue Philadelphia
MLMI-002 124 West 34th Street 124 West 34th Street New York
MLMI-140 Colonial House 818 2nd Street, PL NE Hickory
MLMI-097 Doheny Drive Apartments 215-217 South Doheny Drive Beverly Hills
MLMI-092 11660 Chenault Avenue 11660 Chenault Avenue Los Angeles
MLMI-015 Charleston Apartments 2073 West Lindsay Street Norman
MLMI-098 Hacienda de Camarillo 831 Paseo Camarillo Camarillo
MLMI-059 Wong Family Trust Apartments 1102-1106 W. St. Georges Ave Linden
MLMI-016 Childs Instant Homes 861 East Butler Ave Doylestown
MLMI-009 Arlington Park I 3121 East Park Row Drive Arlington
MLMI-139 Walkers Ridge Nifong Blvd. @ Old Mill Creek Road Columbia
MLMI-108 Beacon Square 140-169 West 6th Street San Pedro
MLMI-021 Crown Gardens Apartments 7001 Hillcroft Houston
MLMI-143 Antelope Manor Apartments 7764 Poplar Avenue Citrus Heights
MLMI-028 Gazebo Inn 2424 West Highway 76 Branson
MLMI-162 Rite Aid 1109 Benns Church Blvd. Smithfield
MLMI-054 Village Square Apartments 2612 Throckmorton Drive Dallas
MLMI-024 East 61st Street Brownstone 156 East 61st Street New York
MLMI-025 Eastgate Apartments 847 Dryden Road Dryden
MLMI-099a Peachtree Apts 211 College Street Florence
MLMI-099b Willow Lake Apartments 106 Briarhill Road Florence
- -----------------------------------------------------------------------------------------------------------------------------------
MLMI-099 Aggregate Loan Level Info. (2 Properties)
MLMI-146 49er Mini Storage 527 Truck Street Placerville
MLMI-053 Village at Brookside Apartments 1404 East 41st Street Tulsa
MLMI-086 Rainbow Center 2051 S. Rainbow Blvd. Las Vegas
MLMI-073 12460 Gladstone 12460 Gladstone Sylmar
MLMI-119 The LeConte Building 10966 Le Conte Ave Los Angeles
MLMI-055 Westcliff Apartments 1404 Moore Avenue Portland
MLMI-038 Pippin-Good Samaritan Center 2475 West Galbraith Road Cincinnati
MLMI-039 Pond Plaza 1160 Post Road Warwick
MLMI-163 Heilig Meyers 3521 Park Plaza Road Paducah
MLMI-044 Royal Knight Apartments 2610 Knight Street Dallas
MLMI-100 Hastings Entertainment 1630 Rio Rancho Blvd. Rio Rancho
MLMI-081 Gabela Partners 26860 Jefferson Avenue Murrietta
MLMI-037 Peppertree Apartments 1850 Pepper Valley Lane El Cajon
MLMI-093 1346 Pine Street 1346 Pine Street San Francisco
MLMI-095 2790 Pine Street 2790 Pine Street San Francisco
MLMI-046 Super 8 Rockwall 1130 E 1-30 Rockwall
MLMI-014 Cedar Village Mobile Home Park County Routes 224 & 214 Lincoln
MLMI-091 11307 Morrison 11307 Morrison Street North Hollywood
MLMI-094 1850 Williams Street 1850 Williams Street Simi Valley
MLMI-089 Spring Valley Plaza 1551 E.Spring Valley Rd Richardson
MLMI-083 Marie Cook Trustee 2398 Railroad Street Corona
MLMI-030 Heritage Apartments 2522-2532 Columbia Avenue Swissvale
MLMI-071 Woodsdale Apartments 100 Eastland Drive Woodruff
MLMI-070 Sundown Apartments Cecil Lane Montgomery
MLMI-080 Clifford Family Trust 501 E. Holt Ave Pomona
MLMI-082 Hotton 1528-1532 Locust Street Walnut Creek
MLMI-087 Rita A. Quam Family Trust 3065-3069 Sheridan Street Las Vegas
MLMI-078 BHB Properties LLC 865 West Avenue I Lancaster
MLMI-074 2019 North Main Street 2019 North Main Street Royal Oak
MLMI-085 Patio World 23855 Hawthorne Blvd Torrance
MLMI-077 Balboa Plaza 16844 Sherman Way Van Nuys
MLMI-079 Cherry Hills Apartments 1536 E 3rd Street Newberg
MLMI-076 Ashikita 1331 7th Street Santa Monica
MLMI-084 Parkside Plaza, LLC 6683-6687 Bells Ferry Road Woodstock
MLMI-088 Rivard 3890 E. Craig Road Las Vegas
MLMI-072 11707 Otsego Street 11707 Otsego Street Los Angeles
MLMI-112 Holt and Eleanor Center 416 East Holt Avenue Pomona
MLMI-090 Stuart Sackley 909 N. Aviation Blvd Manhattan Beach
MLMI-069 Argonne Avenue Apts 711 Argonne Avenue Atlanta
MLMI-075 8245 Florin Road 8245 Florin Road Sacramento
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF CUMULATIVE % OF
ZIP ORIGINAL DATE % OF INITIAL INITIAL POOL BORROWER
STATE CODE PROPERTY TYPE BALANCE BALANCE POOL BALANCE BALANCE AFFILIATED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NY 10019 Office $60,000,000 $59,845,380 9.37% 9.37%
MI 48335 Multifamily 35,000,000 34,890,416 5.47% 14.84%
NY 10023 Retail 29,000,000 28,781,905 4.51% 19.35%
NJ 08648 Retail 24,000,000 23,979,568 3.76% 23.10%
TX 77077 Multifamily 18,030,000 17,878,407 2.80% 25.90%
OK 73108 Hospitality 17,250,000 17,214,166 2.70% 28.60%
PA 19129 Industrial 15,550,000 15,514,008 2.43% 31.03%
UT 84101 Hospitality 13,700,000 13,683,354 2.14% 33.17%
TX 75225 Multifamily 13,600,000 13,509,337 2.12% 35.29%
NJ 08753 Multifamily 12,000,000 12,000,000 1.88% 37.17%
PA 19029 Hospitality 10,750,000 10,735,275 1.68% 38.85%
TX 75050 Industrial 10,680,000 10,658,301 1.67% 40.52%
CA 94133 Office 10,500,000 10,480,964 1.64% 42.16% MLMI-004
CA 94133 Office 10,500,000 10,480,964 1.64% 43.80% MLMI-001
TX 75227 Multifamily 9,520,000 9,452,864 1.48% 45.29%
VA 22191 Retail 9,200,000 9,186,673 1.44% 46.72%
GA 30076 Retail 8,175,000 8,157,432 1.28% 48.00%
TX 77064 Retail 8,000,000 7,988,270 1.25% 49.25%
NY 10001 Industrial 7,999,000 7,948,040 1.24% 50.50%
TX 77057 Multifamily 7,650,000 7,574,170 1.19% 51.68%
PA 19115 Retail 7,200,000 7,189,570 1.13% 52.81%
WA 98011 Multifamily 6,800,000 6,765,511 1.06% 53.87%
WA 98055 Industrial 6,500,000 6,455,558 1.01% 54.88%
CA 92069 Multifamily 6,400,000 6,369,214 1.00% 55.88%
UT 84106 Healthcare 6,300,000 6,295,086 0.99% 56.87%
CT 06708 Retail 6,300,000 6,277,956 0.98% 57.85%
NJ 07055 Multifamily 6,200,000 6,191,946 0.97% 58.82%
CT 06095 Multifamily 6,000,000 5,980,327 0.94% 59.76%
CA 90703 Retail 5,625,000 5,617,946 0.88% 60.64%
TX 75231 Multifamily 5,650,000 5,607,996 0.88% 61.51%
CA 90210 Retail 5,320,000 5,311,134 0.83% 62.35%
CA 90020 Multifamily 5,100,000 5,063,421 0.79% 63.14%
WA 98052 Multifamily 5,000,000 5,000,000 0.78% 63.92%
PA 19142 Industrial 5,000,000 4,982,001 0.78% 64.70%
OR 97005 Hospitality 4,900,000 4,894,635 0.77% 65.47%
TX 78741 Multifamily 4,900,000 4,860,272 0.76% 66.23%
SC 29202 Retail 4,860,000 4,848,614 0.76% 66.99%
PA 19034 Office 4,850,000 4,839,004 0.76% 67.75%
CA 90036 Retail 4,850,000 4,831,809 0.76% 68.50% MLMI-112
TN 37830 Multifamily 4,850,000 4,830,724 0.76% 69.26%
MI 48326 Industrial 4,680,000 4,659,887 0.73% 69.99%
NY 12550 Hospitality 4,625,000 4,619,728 0.72% 70.72% MLMI-127; MLMI-126
NY 12206 Hospitality 4,525,000 4,519,842 0.71% 71.42% MLMI-127; MLMI-125
MO 64701 Healthcare 4,125,000 4,102,798 0.64% 72.07% MLMI-105
AZ 86001 Multifamily 4,000,000 3,991,293 0.63% 72.69%
MO 64093 Healthcare 3,875,000 3,854,143 0.60% 73.29% MLMI-106
WI 53719 CTL 3,751,130 3,737,476 0.59% 73.88% MLMI-161; MLMI-163
OK 73069 Multifamily 3,700,000 3,682,407 0.58% 74.46% MLMI-015; MLMI-018
CA 92371 Retail 3,625,000 3,621,867 0.57% 75.02%
NV 89014 Mini Storage 3,600,000 3,587,622 0.56% 75.59%
WA 98109 Multifamily 3,600,000 3,567,480 0.56% 76.15%
TX 78216 Multifamily 3,500,000 3,472,281 0.54% 76.69%
TX 75231 Multifamily 3,337,500 3,329,451 0.52% 77.21%
IN 46013 CTL 3,217,226 3,204,462 0.50% 77.71% MLMI-160; MLMI-163
MD 21237 Retail 3,100,000 3,090,856 0.48% 78.20%
CA 90630 Retail 3,015,000 3,010,956 0.47% 78.67%
OK 73071 Multifamily 3,000,000 2,997,102 0.47% 79.14%
OK 73069 Multifamily 2,943,750 2,929,753 0.46% 79.60% MLMI-013; MLMI-015
PA 19401 Industrial 2,900,000 2,895,585 0.45% 80.05%
OR 97005 Multifamily 2,900,000 2,889,197 0.45% 80.50%
NY 14467 Hospitality 2,850,000 2,846,751 0.45% 80.95% MLMI-125; MLMI-126
IL 60453 Retail 2,790,000 2,786,199 0.44% 81.39%
TX 77081 Multifamily 2,800,000 2,776,994 0.43% 81.82%
TX 77081 Multifamily 2,720,000 2,702,445 0.42% 82.24%
TX 75214 Retail 2,605,000 2,589,399 0.41% 82.65%
NJ 08021 Multifamily 2,600,000 2,581,590 0.40% 83.05%
TX 79924 Multifamily 2,550,000 2,535,861 0.40% 83.45%
TX 77566 Multifamily 2,530,000 2,512,045 0.39% 83.84%
WA 98148 Multifamily 2,500,000 2,497,769 0.39% 84.24%
CA 92101 Multifamily 2,500,000 2,495,307 0.39% 84.63% MLMI-037
TX 75219 Multifamily 2,500,000 2,484,318 0.39% 85.02% MLMI-044; MLMI-054
CA 91720 Retail 2,400,000 2,391,401 0.37% 85.39%
TX 75067 Retail 2,400,000 2,391,060 0.37% 85.76%
NY 10128 Multifamily 2,350,000 2,347,999 0.37% 86.13%
MD 20874 Retail 2,350,000 2,341,734 0.37% 86.50%
MI 48207 Multifamily 2,300,000 2,297,915 0.36% 86.86%
NC 28208 Office 2,300,000 2,295,108 0.36% 87.22%
VA 20176 Retail 2,272,000 2,264,133 0.35% 87.57%
TX 77057 Multifamily 2,264,000 2,252,315 0.35% 87.93%
PA 19115 Multifamily 2,225,000 2,221,969 0.35% 88.27%
NY 10001 Retail 2,200,000 2,192,712 0.34% 88.62%
NC 28601 Multifamily 2,100,000 2,092,588 0.33% 88.95%
CA 90211 Multifamily 2,100,000 2,086,311 0.33% 89.27%
CA 90049 Multifamily 2,050,000 2,042,949 0.32% 89.59%
OK 73069 Multifamily 2,051,200 2,041,447 0.32% 89.91% MLMI-013; MLMI-018
CA 93010 Multifamily 2,050,000 2,040,496 0.32% 90.23%
NJ 07036 Multifamily 2,000,000 1,992,973 0.31% 90.54%
PA 18901 Mobile Home Park 2,000,000 1,992,560 0.31% 90.86%
TX 76010 Multifamily 2,000,000 1,990,112 0.31% 91.17%
MO 65205 Multifamily 2,000,000 1,988,791 0.31% 91.48%
CA 90731 Office 1,920,000 1,915,087 0.30% 91.78%
TX 77057 Multifamily 1,886,000 1,860,740 0.29% 92.07%
CA 95610 Multifamily 1,830,000 1,825,736 0.29% 92.36%
MO 65616 Hospitality 1,800,000 1,789,201 0.28% 92.64%
VA 23430 CTL 1,745,000 1,738,278 0.27% 92.91%
TX 75219 Multifamily 1,700,000 1,689,183 0.26% 93.17% MLMI-044; MLMI-029
NY 10021 Multifamily 1,699,900 1,680,709 0.26% 93.44%
NY 14850 Multifamily 1,650,000 1,648,535 0.26% 93.70%
MS 39073 Multifamily 750,750 745,775
MS 39073 Multifamily 899,250 894,930
- -----------------------------------------------------------------------------------------------------------------------------------
1,650,000 1,640,704 0.26% 93.95%
CA 95667 Mini Storage 1,574,000 1,568,913 0.25% 94.20%
OK 74105 Multifamily 1,500,000 1,485,635 0.23% 94.43%
NV 89102 Retail 1,500,000 1,474,921 0.23% 94.66%
CA 91342 Industrial 1,480,000 1,471,868 0.23% 94.89%
CA 90024 Retail 1,475,000 1,469,973 0.23% 95.12%
TX 78374 Multifamily 1,440,000 1,431,187 0.22% 95.35%
OH 45239 Mixed Use 1,440,000 1,428,498 0.22% 95.57%
RI 02888 Retail 1,430,000 1,420,966 0.22% 95.79%
KY 42001 CTL 1,415,580 1,409,963 0.22% 96.01% MLMI-161; MLMI-160
TX 75219 Multifamily 1,352,000 1,348,604 0.21% 96.22% MLMI-029; MLMI-054
NM 87124 Retail 1,350,000 1,348,157 0.21% 96.44%
CA 92590 Industrial 1,260,000 1,255,096 0.20% 96.63%
CA 92021 Multifamily 1,230,000 1,226,935 0.19% 96.82% MLMI-017
CA 94109 Multifamily 1,200,000 1,196,503 0.19% 97.01% MLMI-095
CA 94109 Multifamily 1,200,000 1,196,503 0.19% 97.20% MLMI-093
TX 75087 Hospitality 1,200,000 1,193,656 0.19% 97.39%
DE 19960 Mobile Home Park 1,170,000 1,165,188 0.18% 97.57%
CA 91601 Multifamily 1,124,000 1,116,673 0.17% 97.74%
CA 93065 Multifamily 1,064,000 1,057,001 0.17% 97.91%
TX 75080 Retail 911,250 906,992 0.14% 98.05%
CA 91720 Industrial 900,000 894,454 0.14% 98.19%
PA 15218 Multifamily 840,000 830,421 0.13% 98.32%
SC 29388 Multifamily 825,000 821,462 0.13% 98.45%
AL 36109 Multifamily 810,000 806,453 0.13% 98.58%
CA 91767 Retail 780,000 775,194 0.12% 98.70%
CA 94596 Retail 775,000 772,431 0.12% 98.82%
NV 89102 Industrial 740,000 736,289 0.12% 98.93%
CA 93534 Retail 735,000 732,139 0.11% 99.05%
MI 48073 Multifamily 705,000 702,480 0.11% 99.16%
CA 90505 Retail 700,000 695,766 0.11% 99.27% MLMI-090
CA 91406 Retail 625,000 622,567 0.10% 99.37%
OR 97132 Multifamily 595,000 593,125 0.09% 99.46%
CA 90401 Retail 575,000 573,045 0.09% 99.55%
GA 30189 Mixed Use 563,500 560,569 0.09% 99.64%
NV 89030 Industrial 540,000 535,602 0.08% 99.72%
CA 91607 Multifamily 480,000 477,428 0.07% 99.80%
CA 91767 Retail 430,000 423,510 0.07% 99.86% MLMI-115
CA 90266 Retail 378,000 376,809 0.06% 99.92% MLMI-085
GA 30308 Multifamily 270,000 269,388 0.04% 99.96%
CA 95828 Mixed Use 240,000 238,421 0.04% 100.00%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATED ORIG REM
ORIG REM AMORT AMORT
INTEREST ACCRUAL MORTGAGE ADMINISTRATIVE TERM TERM TERM TERM
CROSSED METHOD RATE COST RATE (MOS.) (MOS.) (MOS.) (MOS.)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Actual/360 6.810% 0.1095% 180 177 360 357
Actual/360 6.700 0.1095 120 116 360 356
Actual/360 6.790 0.1095 84 75 360 351
Actual/360 7.250 0.1095 120 119 360 359
Actual/360 7.538 0.1095 120 107 360 347
Actual/360 7.500 0.1095 120 118 300 298
Actual/360 7.250 0.1095 120 118 300 298
Actual/360 7.100 0.1095 120 119 300 299
Actual/360 6.850 0.1095 120 112 360 352
Actual/360 6.850 0.1095 180 180 360 360
Actual/360 6.625 0.1095 120 119 300 299
30/360 6.530 0.1295 240 239 240 239
30/360 6.500 0.1095 132 130 360 358
30/360 6.500 0.1095 132 130 360 358
30/360 6.730 0.0995 120 112 360 352
Actual/360 7.000 0.1095 120 118 360 358
Actual/360 7.320 0.1095 240 238 300 298
Actual/360 6.950 0.1095 120 118 360 358
Actual/360 6.780 0.1295 180 178 180 178
Actual/360 7.544 0.1095 84 70 360 346
Actual/360 7.000 0.1095 180 178 360 358
Actual/360 6.980 0.1095 84 77 360 353
Actual/360 7.250 0.1095 120 111 360 351
Actual/360 7.010 0.1095 180 174 360 354
Actual/360 7.250 0.1095 120 119 360 359
Actual/360 7.050 0.1095 120 117 300 297
Actual/360 7.000 0.1295 120 119 300 299
Actual/360 6.870 0.1095 120 116 360 356
Actual/360 7.250 0.1095 120 119 300 299
Actual/360 7.180 0.1295 240 236 240 236
Actual/360 6.760 0.1095 144 142 360 358
Actual/360 7.020 0.1095 120 111 360 351
30/360 6.890 0.1095 120 116 IO IO
Actual/360 7.220 0.1095 120 117 300 297
Actual/360 7.750 0.1095 120 119 300 299
Actual/360 7.125 0.1095 120 112 324 316
Actual/360 6.875 0.1095 120 117 360 357
Actual/360 7.375 0.1295 144 142 300 298
Actual/360 7.175 0.1095 288 285 288 285
Actual/360 6.920 0.1095 120 115 360 355
Actual/360 7.510 0.1095 180 177 264 261
MLMI-127; MLMI-126 Actual/360 7.500 0.1095 120 119 300 299
MLMI-127; MLMI-125 Actual/360 7.500 0.1095 120 119 300 299
MLMI-105 Actual/360 7.300 0.1095 240 237 240 237
Actual/360 7.200 0.1095 120 117 360 357
MLMI-106 Actual/360 7.300 0.1095 240 237 240 237
30/360 8.580 0.1095 120 114 360 354
Actual/360 7.125 0.1295 180 176 300 296
Actual/360 7.160 0.1095 120 119 360 359
Actual/360 7.150 0.1095 120 117 300 297
Actual/360 7.130 0.0995 84 73 360 349
Actual/360 7.390 0.1095 180 170 360 350
Actual/360 7.000 0.1295 120 118 300 298
30/360 7.420 0.1095 156 152 322 318
Actual/360 6.950 0.1095 120 116 360 356
Actual/360 7.313 0.1095 178 176 360 358
Actual/360 6.500 0.1295 180 179 360 359
Actual/360 7.125 0.1295 180 176 300 296
Actual/360 7.200 0.1095 120 118 360 358
Actual/360 7.000 0.1095 300 297 300 297
MLMI-125; MLMI-126 Actual/360 7.500 0.1095 120 119 300 299
Actual/360 7.250 0.1095 120 118 360 358
Actual/360 7.050 0.0995 120 112 324 316
Actual/360 7.010 0.0995 120 112 360 352
Actual/360 7.000 0.0995 120 115 300 295
30/360 8.375 0.1095 120 109 360 349
Actual/360 7.000 0.1095 120 113 360 353
Actual/360 7.210 0.1095 120 110 360 350
Actual/360 6.970 0.0995 120 119 360 359
Actual/360 6.170 0.1295 120 118 360 358
Actual/360 7.150 0.1295 120 112 360 352
Actual/360 7.250 0.1295 84 81 300 297
Actual/360 7.000 0.1095 120 117 300 297
Actual/360 7.250 0.1295 120 119 360 359
Actual/360 7.020 0.1095 120 117 300 297
Actual/360 6.875 0.1295 120 119 360 359
Actual/360 7.375 0.1095 120 118 300 298
Actual/360 7.110 0.1095 120 117 300 297
Actual/360 7.340 0.0995 120 113 360 353
Actual/360 7.250 0.1095 180 178 360 358
Actual/360 7.750 0.1295 120 117 300 297
Actual/360 7.000 0.1095 180 177 300 297
30/360 7.750 0.1095 120 111 360 351
30/360 6.800 0.1095 120 116 360 356
Actual/360 7.125 0.1295 180 176 300 296
30/360 7.375 0.1095 120 114 360 354
Actual/360 7.375 0.1295 180 177 300 297
Actual/360 7.125 0.1295 240 238 240 238
Actual/360 6.875 0.1295 120 114 360 354
Actual/360 6.990 0.1095 240 237 240 237
Actual/360 7.500 0.1095 120 117 330 327
Actual/360 7.647 0.1095 120 107 300 287
Actual/360 6.900 0.1095 120 117 360 357
Actual/360 7.375 0.1095 120 116 264 260
30/360 6.875 0.1095 240 237 298 295
Actual/360 7.080 0.1295 120 112 360 352
30/360 8.000 0.1095 120 104 360 344
Actual/360 7.000 0.1295 240 239 360 359
- --------------------------------------------------------------------------------------------------------------------------
30/360 7.875 0.1095 120 112 360 352
Actual/360 7.500 0.1095 120 117 300 297
Actual/360 7.160 0.1095 84 76 300 292
30/360 8.375 0.1095 120 110 240 230
30/360 8.000 0.1095 60 52 360 352
Actual/360 7.200 0.1095 120 117 300 297
Actual/360 6.870 0.0995 120 115 300 295
30/360 7.770 0.1095 120 109 360 349
Actual/360 6.875 0.1295 180 178 180 178
30/360 7.420 0.1095 156 152 322 318
Actual/360 6.750 0.1295 120 118 300 298
Actual/360 6.650 0.1095 120 119 300 299
30/360 8.250 0.1095 120 114 360 354
Actual/360 6.800 0.1295 120 118 300 298
Actual/360 7.000 0.1095 120 116 360 356
Actual/360 7.000 0.1095 120 116 360 356
Actual/360 7.740 0.1295 240 237 240 237
Actual/360 8.000 0.1295 84 80 300 296
30/360 7.750 0.1095 120 111 360 351
30/360 8.250 0.1095 120 110 360 350
30/360 8.125 0.1095 60 53 360 353
30/360 8.250 0.1095 120 114 300 294
30/360 8.580 0.1095 120 102 360 342
Actual/360 7.750 0.1095 120 116 300 296
Actual/360 7.625 0.1095 180 176 300 296
30/360 8.250 0.1095 120 114 300 294
30/360 8.125 0.1095 120 115 360 355
30/360 8.375 0.1095 120 115 300 295
30/360 8.250 0.1095 120 114 360 354
30/360 7.750 0.1095 120 115 360 355
30/360 8.125 0.1095 120 111 360 351
30/360 8.250 0.1095 120 114 360 354
30/360 8.375 0.1095 120 115 360 355
30/360 8.000 0.1095 120 115 360 355
Actual/360 7.875 0.1095 120 117 240 237
30/360 9.625 0.1095 120 104 360 344
30/360 8.125 0.1095 120 112 360 352
Actual/360 6.950 0.1095 132 129 132 129
30/360 8.375 0.1095 120 115 360 355
Actual/360 7.375 0.1095 120 118 300 298
30/360 8.250 0.1095 120 110 360 350
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANTICIPATED BALLOON /
ORIGINATION REPAYMENT ANTICIPATED REPAYMENT
DATE DATE BALANCE MATURITY TERM PREPAYMENT RESTRICTIONS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
08/20/98 09/01/2013 $44,385,897 ARD L(167),O(13)
07/30/98 08/01/2008 30,334,084 Balloon L(113),O(7)
02/13/98 03/01/2005 26,439,205 ARD L(60),1(11),O(13)
10/13/98 11/01/2008 20,801,652 Balloon L(116),O(4)
10/24/97 11/01/2007 15,747,089 Balloon L(60),YM(56),O(4)
09/11/98 10/01/2008 14,052,969 Balloon L(116),O(4)
09/03/98 10/01/2008 12,387,855 Balloon L(116),O(4)
10/09/98 11/01/2008 11,023,023 Balloon L(12),YM(104),O(4)
03/20/98 04/01/2008 11,678,860 Balloon L(60),YM(53),O(7)
11/30/98 12/01/2013 9,144,780 ARD L(176),O(4)
10/05/98 11/01/2008 8,413,263 Balloon L(116),O(4)
10/01/98 11/01/2018 NAP Fully Amort L(236),O(4)
09/18/98 10/01/2009 8,696,339 Balloon L(128),O(4)
09/18/98 10/01/2009 8,696,339 Balloon L(128),O(4)
03/05/98 04/01/2008 8,132,714 Balloon L(113),O(7)
09/03/98 10/01/2008 8,038,880 Balloon L(116),O(4)
09/18/98 10/01/2018 3,350,418 Balloon L(236),O(4)
09/04/98 10/01/2008 6,981,138 Balloon L(116),O(4)
09/04/98 10/01/2013 NAP Fully Amort L(176),O(4)
09/19/97 10/01/2004 7,055,507 Balloon L(48),YM(32),O(4)
09/25/98 10/01/2013 5,524,783 Balloon L(176),O(4)
04/06/98 05/01/2005 6,266,137 Balloon L(36),YM(44),O(4)
02/05/98 03/01/2008 5,636,021 ARD L(60),YM(56),O(4)
05/23/98 06/01/2013 4,772,213 Balloon L(95),YM(81),O(4)
10/21/98 11/01/2008 5,538,712 Balloon L(116),O(4)
08/07/98 09/01/2008 5,061,405 Balloon L(120),O()
10/14/98 11/01/2008 4,904,308 Balloon L(116),O(4)
07/02/98 08/01/2008 5,154,897 Balloon L(116),O(4)
10/29/98 11/01/2008 4,480,240 Balloon L(116),O(4)
07/31/98 08/01/2018 NAP Fully Amort L(236),O(4)
09/17/98 10/01/2010 4,332,534 Balloon L(72),YM(68),O(4)
02/12/98 03/01/2008 4,398,823 Balloon L(60),YM(56),O(4)
07/29/98 08/01/2008 5,000,000 Balloon L(120),O()
08/05/98 09/01/2008 3,979,173 Balloon L(113),O(7)
10/09/98 11/01/2008 4,019,632 Balloon L(116),O(4)
03/20/98 04/01/2008 4,047,677 Balloon L(60),YM(56),O(4)
08/06/98 09/01/2008 4,231,354 Balloon L(116),O(4)
09/04/98 10/01/2010 3,576,699 Balloon L(140),O(4)
08/21/98 09/01/2022 NAP Fully Amort L(227),O(61)
06/18/98 07/01/2008 4,172,602 Balloon L(59),YM(57),O(4)
08/21/98 09/01/2013 2,504,228 Balloon L(176),O(4)
10/07/98 11/01/2008 3,766,336 Balloon L(113),O(7)
10/07/98 11/01/2008 3,684,896 Balloon L(113),O(7)
08/25/98 09/01/2018 NAP Fully Amort L(236),O(4)
08/31/98 09/01/2008 3,512,265 Balloon L(120),O()
08/25/98 09/01/2018 NAP Fully Amort L(236),O(4)
05/29/98 06/01/2008 3,333,909 Balloon L(120),O()
07/16/98 08/01/2013 2,288,599 Balloon L(96),YM(80),O(4)
10/15/98 11/01/2008 3,135,508 Balloon L(116),O(4)
08/31/98 09/01/2008 2,901,091 Balloon L(116),O(4)
12/31/97 01/01/2005 3,297,495 Balloon L(48),YM(29),O(7)
01/30/98 02/01/2013 2,647,462 Balloon L(96),YM(77),O(7)
09/30/98 10/01/2008 2,640,531 Balloon L(116),O(4)
07/31/98 08/01/2011 2,399,160 Balloon L(154),O(2)
07/16/98 08/01/2008 2,704,753 Balloon L(116),O(4)
09/30/98 08/01/2013 2,357,769 Balloon L(174),O(4)
10/09/98 11/01/2013 2,192,173 Balloon L(96),YM(80),O(4)
07/16/98 08/01/2013 1,820,828 Balloon L(96),YM(80),O(4)
09/29/98 10/01/2008 2,511,191 Balloon L(116),O(4)
08/20/98 09/01/2023 NAP Fully Amort L(296),O(4)
10/07/98 11/01/2008 2,320,877 Balloon L(113),O(7)
09/08/98 10/01/2008 2,453,725 Balloon L(116),O(4)
03/16/98 04/01/2008 2,308,494 Balloon L(60),YM(56),O(4)
03/19/98 04/01/2008 2,344,583 Balloon L(60),YM(56),O(4)
06/30/98 07/01/2008 2,060,995 Balloon L(60),YM(56),O(4)
12/17/97 01/01/2008 2,301,782 Balloon YM(113),O(7)
04/09/98 05/01/2008 2,197,962 Balloon L(60),YM(56),O(4)
01/23/98 02/01/2008 2,192,826 Balloon L(59),YM(54),O(7)
10/05/98 11/01/2008 2,152,943 Balloon L(116),O(4)
09/14/98 10/01/2008 2,111,215 Balloon L(116),O(4)
03/12/98 04/01/2008 2,161,919 Balloon L(116),O(4)
08/25/98 09/01/2005 2,098,115 Balloon L(48),YM(32),O(4)
08/03/98 09/01/2008 1,898,438 ARD L(60),YM(56),O(4)
10/08/98 11/01/2008 2,036,828 Balloon L(116),O(4)
08/14/98 09/01/2008 1,886,246 Balloon L(116),O(4)
10/15/98 11/01/2008 1,976,280 Balloon L(113),O(7)
09/11/98 10/01/2008 1,866,754 Balloon L(116),O(4)
08/06/98 09/01/2008 1,828,679 Balloon L(120),O()
04/30/98 05/01/2008 1,966,647 Balloon L(60),YM(56),O(4)
09/17/98 10/01/2013 1,726,538 Balloon L(176),O(4)
08/28/98 09/01/2008 1,775,684 Balloon L(60),YM(56),O(4)
08/14/98 09/01/2013 1,334,671 Balloon L(176),O(4)
02/12/98 03/01/2008 1,835,783 Balloon YM(114),O(6)
07/07/98 08/01/2008 1,754,213 Balloon L(47),YM(66),O(7)
07/16/98 08/01/2013 1,268,750 Balloon L(96),YM(80),O(4)
05/26/98 06/01/2008 1,777,598 Balloon YM(113),O(7)
08/26/98 09/01/2013 1,251,041 Balloon L(96),YM(80),O(4)
09/03/98 10/01/2018 NAP Fully Amort L(120),YM(116),O(4)
05/29/98 06/01/2008 1,718,501 Balloon L(113),O(7)
08/14/98 09/01/2018 NAP Fully Amort L(236),O(4)
08/13/98 09/01/2008 1,639,294 Balloon L(116),O(4)
10/17/97 11/01/2007 1,520,204 Balloon L(60),YM(56),O(4)
08/14/98 09/01/2008 1,594,344 Balloon L(116),O(4)
07/29/98 08/01/2008 1,326,097 Balloon L(116),O(4)
08/20/98 09/01/2018 610,570 Balloon L(240),O()
03/16/98 04/01/2008 1,467,744 Balloon L(116),O(4)
07/22/97 08/01/2007 1,493,747 Balloon L(60),YM(56),O(4)
10/07/98 11/01/2018 956,226 Balloon L(236),O(4)
- ----------------------------------------------------------------------------------------------------------------------
03/17/98 04/01/2008 1,446,177 Balloon YM(114),O(6)
08/10/98 09/01/2008 1,281,827 Balloon L(113),O(7)
03/11/98 04/01/2005 1,309,195 Balloon L(24),YM(56),O(4)
01/23/98 02/01/2008 1,051,547 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
03/02/98 04/01/2003 1,408,504 Balloon L(53),O(7)
08/20/98 09/01/2008 1,190,451 Balloon L(120),O(0)
06/23/98 07/01/2008 1,135,127 Balloon L(60),YM(56),O(4)
12/12/97 01/01/2008 1,259,352 Balloon L(60),YM(56),O(4)
09/15/98 10/01/2013 NAP Fully Amort L(96),YM(80),O(4)
07/31/98 08/01/2011 1,055,629 Balloon L(154),O(2)
09/01/98 10/01/2008 1,062,126 Balloon L(116),O(4)
10/07/98 11/01/2008 1,057,313 Balloon L(116),O(4)
05/13/98 06/01/2008 1,112,758 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
09/08/98 10/01/2008 967,664 Balloon L(60),YM(56),O(4)
07/16/98 08/01/2008 1,048,379 Balloon L(35),YM(78),O(7)
07/16/98 08/01/2008 1,048,379 Balloon L(35),YM(78),O(7)
08/28/98 09/01/2018 NAP Fully Amort L(236),O(4)
07/27/98 08/01/2005 1,036,113 Balloon L(48),YM(32),O(4)
02/24/98 03/01/2008 982,581 Balloon YM(113),O(7)
12/29/97 02/01/2008 939,662 Balloon YM(114),O(6)
04/08/98 05/01/2003 868,196 Balloon L(53),O(7)
05/06/98 06/01/2008 733,499 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
05/24/97 06/01/2007 746,570 Balloon L(48),YM(68),O(4)
07/01/98 08/01/2008 665,882 Balloon L(116),O(4)
07/02/98 08/01/2013 512,273 Balloon L(173),O(7)
05/06/98 06/01/2008 635,699 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
06/22/98 07/01/2008 682,736 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
05/27/98 07/01/2008 604,940 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
05/05/98 06/01/2008 649,109 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
06/15/98 07/01/2008 616,299 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
02/10/98 03/01/2008 616,665 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
05/20/98 06/01/2008 551,963 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
05/26/98 07/01/2008 526,754 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
06/17/98 07/01/2008 505,268 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
08/17/98 09/01/2008 390,460 Balloon L(116),O(4)
07/15/97 08/01/2007 488,801 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
03/16/98 04/01/2008 422,856 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
08/21/98 09/01/2009 NAP Fully Amort L(128),O(4)
06/05/98 07/01/2008 334,644 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
09/14/98 10/01/2008 215,824 Balloon L(116),O(4)
01/21/98 02/01/2008 211,954 Balloon L(59),5(12),4(12),3(12),2(12),1(6),O(7)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL UNDERWRITTEN UNDERWRITTEN
DEBT TOTAL TOTAL UNDERWRITTEN UNDERWRITTEN APPRAISED
SERVICE REVENUE EXPENSE NCF DSCR VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$4,746,343 $19,350,601 $11,226,010 6,604,065 1.39x $97,000,000
2,710,167 6,741,746 3,357,876 3,383,870 1.25 44,000,000
2,289,812 3,976,032 821,737 3,042,804 1.33 39,000,000
1,985,179 5,577,283 1,990,692 3,434,983 1.73 40,000,000
1,536,841 4,279,301 2,353,188 1,926,113 1.25 23,800,000
1,529,712 7,619,066 5,445,564 2,173,502 1.42 23,500,000
1,361,522 2,994,501 864,386 1,861,190 1.37 21,000,000
1,172,454 6,819,096 5,149,343 1,669,753 1.42 18,600,000
1,080,382 2,680,625 1,292,221 1,388,404 1.29 17,000,000
943,573 1,877,822 675,629 1,202,193 1.27 16,060,000
888,889 6,988,250 5,504,457 1,483,792 1.67 17,200,000
957,791 1,795,458 597,977 1,197,481 1.25 15,400,000
796,406 2,358,023 547,820 1,641,428 2.06 20,520,000
796,406 2,863,630 964,764 1,705,116 2.14 18,150,000
739,440 2,326,773 1,283,215 1,043,558 1.41 11,900,000
734,494 1,238,760 294,962 928,681 1.26 11,400,000
713,504 1,527,252 415,822 1,044,637 1.46 10,900,000
635,470 1,275,883 353,416 852,020 1.34 10,800,000
856,297 2,937,133 772,307 2,164,826 2.53 31,000,000
651,973 2,254,953 1,414,516 840,437 1.29 9,800,000
574,821 782,239 26,116 737,101 1.28 9,200,000
541,791 1,222,899 606,317 616,582 1.14 8,900,000
537,812 918,742 223,286 695,457 1.29 8,700,000
516,789 1,042,275 422,767 619,509 1.20 8,100,000
515,725 1,576,331 917,738 658,593 1.28 8,450,000
536,739 989,174 228,863 760,311 1.42 8,900,000
530,651 1,963,723 1,159,888 803,835 1.51 9,200,000
477,598 1,400,309 670,829 729,479 1.53 7,800,000
492,456 877,463 200,839 645,449 1.31 7,500,000
537,326 2,698,631 1,769,776 928,856 1.73 12,200,000
418,691 673,790 108,870 553,522 1.32 7,450,000
412,289 1,163,918 632,758 531,160 1.29 6,375,000
344,500 810,487 372,571 437,916 1.27 7,500,000
436,569 1,002,866 283,819 674,931 1.55 7,100,000
444,133 1,891,283 1,204,957 686,327 1.55 7,000,000
413,288 1,373,358 793,418 579,940 1.40 6,700,000
383,121 713,185 195,749 488,616 1.28 6,080,000
429,441 828,375 222,747 605,628 1.41 6,100,000
424,182 550,000 13,750 536,250 1.26 6,175,000
388,082 1,104,331 630,283 474,048 1.22 6,200,000
435,318 603,843 22,775 565,436 1.30 5,940,000
410,140 1,964,199 1,389,605 574,594 1.40 6,500,000
401,272 2,030,908 1,468,858 562,050 1.40 6,400,000
392,737 2,738,188 2,118,409 619,779 1.58 5,500,000
325,818 664,641 263,038 401,602 1.23 5,000,000
368,935 2,543,000 2,044,650 498,350 1.35 5,700,000
348,671 348,671 - 348,671 1.00 3,820,000
320,337 1,237,963 739,688 498,275 1.56 5,240,000
297,145 615,631 188,190 409,107 1.38 4,850,000
309,475 661,936 243,687 418,249 1.35 4,900,000
294,182 563,624 203,527 360,098 1.22 5,200,000
293,521 912,514 510,663 401,851 1.37 5,140,000
285,684 1,036,149 582,847 453,302 1.59 4,450,000
276,659 276,659 - 276,659 1.00 3,320,000
246,245 499,754 148,722 337,508 1.37 4,100,000
248,347 323,689 8,824 314,865 1.27 3,800,000
229,774 937,357 504,602 432,755 1.88 5,650,000
254,863 797,048 408,175 388,873 1.53 3,925,000
238,702 635,223 239,271 351,060 1.47 4,100,000
248,214 698,511 322,051 376,460 1.52 4,850,000
252,735 1,147,506 791,887 355,619 1.41 3,800,000
228,393 646,296 339,404 286,957 1.26 3,635,000
234,484 1,115,747 781,377 334,369 1.43 3,540,000
219,640 791,174 477,888 313,285 1.43 3,400,000
223,013 530,071 173,041 319,758 1.43 3,800,000
237,143 668,827 370,131 298,696 1.26 3,495,000
205,721 699,062 412,391 286,671 1.39 3,400,000
208,623 815,243 542,344 272,899 1.31 3,500,000
201,018 410,328 156,380 253,948 1.26 3,200,000
184,913 470,201 218,078 252,123 1.36 3,300,000
204,758 775,416 465,022 310,394 1.52 3,150,000
210,120 749,439 366,822 367,336 1.75 3,200,000
205,418 325,617 19,716 305,901 1.49 3,300,000
194,382 389,149 152,194 236,955 1.22 3,300,000
199,672 407,670 114,342 277,153 1.39 3,200,000
183,149 706,812 417,727 289,085 1.58 3,250,000
201,723 345,704 65,135 272,618 1.35 3,025,000
194,614 386,378 88,868 281,340 1.45 3,550,000
189,013 755,454 472,660 282,794 1.50 2,830,000
182,141 629,239 399,027 230,213 1.26 2,775,000
201,355 418,950 115,743 295,047 1.47 3,600,000
178,108 508,789 281,040 227,749 1.28 2,610,000
180,536 276,573 58,665 217,908 1.21 2,900,000
160,374 310,358 109,916 200,442 1.25 3,030,000
177,588 663,327 406,952 256,375 1.44 3,200,000
169,906 645,841 258,586 387,255 2.28 4,450,000
177,073 524,082 241,311 282,771 1.60 3,300,000
189,387 1,033,348 618,761 414,587 2.19 5,700,000
159,285 914,330 664,974 249,356 1.57 2,522,000
185,928 339,634 114,784 224,850 1.21 3,465,000
165,129 340,812 104,326 220,067 1.33 2,400,000
171,312 754,497 531,748 222,749 1.30 2,800,000
144,629 294,655 109,754 184,900 1.28 2,500,000
167,065 706,617 420,894 285,723 1.71 2,500,000
146,705 197,179 3,409 193,770 1.32 2,210,000
138,254 482,060 266,799 215,261 1.56 2,150,000
149,679 254,790 67,774 187,016 1.25 2,300,000
133,078 269,964 83,539 186,426 1.40 2,100,000
146,580 57,190 89,390 1,000,000
179,376 67,939 111,437 1,200,000
- -----------------------------------------------------------------------------------------------------------------------------------
143,564 325,956 125,129 200,827 1.40 2,200,000
139,581 316,397 133,682 182,715 1.31 2,125,000
130,284 465,137 295,845 169,292 1.30 2,100,000
154,787 275,325 50,326 224,998 1.45 2,200,000
130,317 225,237 60,149 165,088 1.27 2,115,000
127,367 196,331 23,681 165,448 1.30 2,100,000
121,821 407,848 246,930 160,918 1.32 1,800,000
124,035 222,446 59,851 157,222 1.27 1,920,000
154,005 359,499 120,872 209,230 1.36 2,190,000
121,730 121,730 - 121,730 1.00 1,420,000
113,106 338,892 176,515 162,377 1.44 1,690,000
111,887 190,159 21,575 163,538 1.46 1,800,000
113,592 234,874 71,197 150,087 1.32 1,970,000
103,375 249,748 116,742 133,005 1.29 1,600,000
95,804 249,227 102,101 147,126 1.54 2,160,000
95,804 270,648 116,355 154,292 1.61 2,300,000
119,124 581,214 384,641 196,573 1.65 2,040,000
109,456 280,816 141,256 139,561 1.28 1,600,000
96,630 205,563 81,786 123,777 1.28 1,410,000
95,922 205,584 83,915 121,669 1.27 1,450,000
81,192 185,789 66,931 109,858 1.35 1,305,000
85,153 122,910 10,189 106,339 1.25 1,310,000
78,079 197,788 108,373 89,415 1.15 1,050,000
75,517 248,370 132,524 115,846 1.53 1,100,000
73,333 181,035 80,558 100,477 1.37 1,010,000
73,799 114,570 20,736 93,834 1.27 1,120,000
69,052 120,892 21,272 92,402 1.34 1,150,000
70,758 146,490 22,499 110,968 1.57 1,175,000
66,262 105,260 19,673 85,587 1.29 1,000,000
60,609 135,240 61,920 73,320 1.21 1,020,000
62,370 103,050 23,003 76,048 1.22 1,000,000
56,345 159,468 43,463 109,439 1.94 991,000
54,269 171,296 85,178 86,119 1.59 1,070,000
50,630 91,200 21,317 67,131 1.33 875,000
56,513 114,420 28,911 80,665 1.43 800,000
55,079 88,231 7,337 76,288 1.39 850,000
42,768 83,722 32,014 51,707 1.21 640,000
56,027 74,100 3,578 70,522 1.26 700,000
34,477 68,520 14,399 45,530 1.32 615,000
23,907 57,946 21,897 36,049 1.51 350,000
21,636 50,100 21,420 28,680 1.33 360,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALLOON / LOAN PER
CUT-OFF ANTICIPATED SQ FT, UNITS, SQ FT, UNIT, INITIAL
APPRAISAL DATE REPAYMENT YEAR BEDS, PADS, BED, PAD, OCCUPANCY RESERVES
YEAR LTV LTV BUILT OR ROOM OR ROOM PERCENTAGE AT CLOSING
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 61.7% 45.8% 1969 581,354 sq. ft. $103 per unit 95% -
1998 79.3 68.9 1966 981 units 35,566 per unit 92% 472,656
1997 73.8 67.8 1904 111,060 sq. ft. 259 per sq. ft. 100% -
1998 59.9 52.0 1975 386,275 sq. ft. 62 per sq. ft. 100% 360,938
1998 75.1 66.2 1978 680 units 26,292 per unit 95% 28,319
1998 73.3 59.8 1981 236 rooms 72,941 per room NAP 28,750
1998 73.9 59.0 1926 679,438 sq. ft. 23 per sq. ft. 95% 427,563
1998 73.6 59.3 1964 311 rooms 43,998 per room NAP 38,625
1998 79.5 68.7 1982 125 units 108,075 per unit 97% -
1998 74.7 56.9 1975 226 units 53,097 per unit 93% -
1998 62.4 48.9 1974 292 rooms 36,765 per room NAP 339,085
1998 69.2 NAP 1998 384,895 sq. ft. 28 per sq. ft. 100% 625
1998 51.1 42.4 1924 97,015 sq. ft. 108 per sq. ft. 100% 187,813
1998 57.7 47.9 1973 110,593 sq. ft. 95 per sq. ft. 100% -
1997 79.4 68.3 1984 464 units 20,373 per unit 88% 16,188
1998 80.6 70.5 1973 165,895 sq. ft. 55 per sq. ft. 99% 4,156
1998 74.8 30.7 1985 101,868 sq. ft. 80 per sq. ft. 98% -
1998 74.0 64.6 1981 119,404 sq. ft. 67 per sq. ft. 100% -
1998 25.6 NAP 1928 207,216 sq. ft. 38 per sq. ft. 100% -
1998 77.3 72.0 1968 381 units 19,880 per unit 94% 35,750
1998 78.1 60.1 1987 104,708 sq. ft. 69 per sq. ft. 100% 4,513
1998 76.0 70.4 1977 163 units 41,506 per unit 94% -
1997 74.2 64.8 1985 190,780 sq. ft. 34 per sq. ft. 100% -
1998 78.6 58.9 1987 120 units 53,077 per unit 97% 98,450
1998 74.5 65.5 1988 107 units 58,833 per unit 94% 9,250
1998 70.5 56.9 1997 69,489 sq. ft. 90 per sq. ft. 100% 4,688
1998 67.3 53.3 1968 290 units 21,352 per unit 97% 12,000
1998 76.7 66.1 1963 176 units 33,979 per unit 98% 39,500
1998 74.9 59.7 1979 48,192 sq. ft. 117 per sq. ft. 91% -
1998 46.0 NAP 1974 495 units 11,329 per unit 98% -
1998 71.3 58.2 1931 11,687 sq. ft. 454 per sq. ft. 100% -
1997 79.4 69.0 1972 162 units 31,256 per unit 97% -
1998 66.7 66.7 1981 96 units 52,083 per unit 95% 365,563
1998 70.2 56.0 1965 229,790 sq. ft. 22 per sq. ft. 88% 50,750
1998 69.9 57.4 1997 106 rooms 46,176 per room NAP 1,250
1998 72.5 60.4 1984 232 units 20,949 per unit 93% 20,000
1998 79.7 69.6 1980 75,793 sq. ft. 64 per sq. ft. 93% 12,500
1998 79.3 58.6 1979 47,000 sq. ft. 103 per sq. ft. 100% -
1998 78.2 NAP 1940 27,500 sq. ft. 176 per sq. ft. 100% -
1998 77.9 67.3 1965 186 units 25,972 per unit 84% 23,000
1998 78.4 42.2 1998 46,600 sq. ft. 100 per sq. ft. 100% -
1998 71.1 57.9 1997 78 rooms 59,227 per room NAP -
1998 70.6 57.6 1997 78 rooms 57,947 per room NAP -
1998 74.6 NAP 1996 106 Beds 38,706 per bed 85% -
1998 79.8 70.2 1988 80 units 49,891 per unit 96% 1,375
1998 67.6 NAP 1996 104 Beds 37,059 per bed 86% -
1998 97.8 87.3 1998 26,988 sq. ft. 138 per sq. ft. 100% -
1998 70.3 43.7 1965 261 units 14,109 per unit 98% 3,000
1998 74.7 64.6 1990 58,619 sq. ft. 62 per sq. ft. 94% -
1998 73.2 59.2 1996 1,331 units 2,695 per unit 86% 5,067
1997 68.6 63.4 1988 55 units 64,863 per unit 100% 14,938
1997 67.6 51.5 1970 178 units 19,507 per unit 98% 17,875
1998 74.8 59.3 1972 208 units 16,007 per unit 91% 360,000
1998 96.5 72.3 1996 27,200 sq. ft. 118 per sq. ft. 100% -
1998 75.4 66.0 1980 62,732 sq. Ft. 49 per sq. ft. 100% 31,276
1998 79.2 62.0 1998 23,500 sq. ft. 128 per sq. ft. 100% -
1998 53.0 38.8 1977 225 units 13,320 per unit 98% 48,125
1998 74.6 46.4 1971 177 units 16,552 per unit 97% 3,000
1998 70.6 61.2 1928 131,971 sq. ft. 22 per sq. ft. 96% 61,625
1998 59.6 NAP 1980 105 units 27,516 per unit 94% -
1998 74.9 61.1 1995 63 rooms 45,187 per room NAP -
1998 76.6 67.5 1986 32,732 sq. ft. 85 per sq. ft. 93% 4,500
1998 78.4 65.2 1975 234 units 11,867 per unit 98% -
1998 79.5 69.0 1982 98 units 27,576 per unit 95% 75,000
1998 68.1 54.2 1978 61,210 sq. ft. 42 per sq. ft. 96% -
1997 73.9 65.9 1964 132 units 19,557 per unit 95% -
1997 74.6 64.6 1983 159 units 15,949 per unit 90% -
1998 71.8 62.7 1978 180 units 13,956 per unit 89% -
1998 78.1 67.3 1994 54 units 46,255 per unit 100% -
1998 75.6 64.0 1988 70 units 35,647 per unit 96% -
1998 78.9 68.6 1968 137 units 18,134 per unit 94% -
1998 74.7 65.6 1989 50,775 sq. ft. 47 per sq. ft. 86% 13,625
1997 72.5 57.5 1997 22,900 sq. ft. 104 per sq. ft. 100% -
1998 71.2 61.7 1900 41 units 57,268 per unit 95% 49,700
1998 73.2 58.9 1986 24,926 sq. ft. 94 per sq. ft. 100% 7,188
1998 70.7 60.8 1972 114 units 20,157 per unit 98% 31,050
1998 75.9 61.7 1930 39,735 sq. ft. 58 per sq. ft. 100% 28,813
1998 63.8 51.5 1993 29,426 sq. ft. 77 per sq. ft. 82% -
1998 79.6 69.5 1964 165 units 13,650 per unit 98% 22,875
1998 80.1 62.2 1964 105 units 21,162 per unit 98% 33,550
1998 60.9 49.3 1920 2,400 sq. ft. 914 per sq. ft. 100% -
1998 80.2 51.1 1967 97 units 21,573 per unit 90% 103,750
1998 71.9 63.3 1957 14 units 149,022 per unit 100% -
1998 67.4 57.9 1955 28 units 72,962 per unit 100% -
1998 63.8 39.6 1974 163 units 12,524 per unit 88% 3,000
1998 45.9 39.9 1985 73 units 27,952 per unit 99% -
1998 60.4 37.9 1979 64 units 31,140 per unit 100% 12,063
1998 35.0 NAP 1946 257 pads 7,753 per pad 90% 143,188
1998 78.9 68.1 1975 188 units 10,586 per unit 96% 25,188
1998 57.4 NAP 1994 30 units 66,293 per unit 100% -
1998 79.8 68.3 1979 21,625 sq. ft. 89 per sq. ft. 100% 5,875
1998 66.5 54.3 1965 164 units 11,346 per unit 88% 21,250
1998 73.0 63.8 1989 48 units 38,036 per unit 98% 12,313
1997 71.6 53.0 1991 73 rooms 24,510 per room NAP -
1998 78.7 27.6 1998 11,057 sq. ft. 157 per sq. ft. 100% -
1998 78.6 68.3 1968 74 units 22,827 per unit 97% -
1997 73.1 64.9 1890 8 units 210,089 per unit 100% 3,750
1998 78.5 45.5 1996 25 units 65,941 per unit 100% 16,863
1998 1993 28 units 89%
1998 1993 36 units 81%
- -------------------------------------------------------------------------------------------------------------------------------
74.6 65.7 64 units 25,636 per unit -
1998 73.8 60.3 1984 412 units 3,808 per unit 97% 16,188
1997 70.7 62.3 1965 91 units 16,326 per unit 96% 33,864
1997 67.0 47.8 1991 15,638 sq. ft. 94 per sq. ft. 100% -
1998 69.6 66.6 1968 40,580 sq. ft. 36 per sq. ft. 100% -
1998 70.0 56.7 1954 10,560 sq. ft. 139 per sq. ft. 100% -
1998 79.5 63.1 1972 83 units 17,243 per unit 95% 44,750
1997 74.4 65.6 1991 18,182 sq. ft. 79 per sq. ft. 100% 67
1998 64.9 NAP 1955 31,650 sq. ft. 45 per sq. ft. 93% 94,063
1998 99.3 74.3 1996 27,355 sq. ft. 52 per sq. ft. 100% -
1998 79.8 62.8 1961 57 units 23,660 per unit 100% -
1998 74.9 58.7 1990 12,350 sq. ft. 109 per sq. ft. 100% -
1998 63.7 56.5 1986 41,128 sq. ft. 31 per sq. ft. 100% -
1998 76.7 60.5 1985 31 units 39,579 per unit 93% -
1998 55.4 48.5 1910 36 units 33,236 per unit 100% -
1998 52.0 45.6 1910 21 units 56,976 per unit 100% -
1998 58.5 NAP 1986 60 rooms 19,894 per room NAP -
1998 72.8 64.8 1968 146 pads 7,981 per pad 99% 40,000
1998 79.2 69.7 1988 29 units 38,506 per unit 100% -
1997 72.9 64.8 1989 31 units 34,097 per unit 100% -
1997 69.5 66.5 1984 23,179 sq. ft. 39 per sq. ft. 95% -
1998 68.3 56.0 1990 26,954 sq. ft. 33 per sq. ft. 100% -
1997 79.1 71.1 1967 36 units 23,067 per unit 97% 24,813
1998 74.7 60.5 1975 52 units 15,797 per unit 89% 9,031
1998 79.8 50.7 1981 36 units 22,401 per unit 100% -
1998 69.2 56.8 1998 6,050 sq. ft. 128 per sq. ft. 100% -
1998 67.2 59.4 1964 4,464 sq. ft. 173 per sq. ft. 100% -
1998 62.7 51.5 1968 28,362 sq. ft. 26 per sq. ft. 100% -
1998 73.2 64.9 1998 5,400 sq. ft. 136 per sq. ft. 100% -
1998 68.9 60.4 1963 22 units 31,931 per unit 90% -
1998 69.6 61.7 1961 17,000 sq. ft. 41 per sq. ft. 100% 183
1998 62.8 55.7 1975 9,461 sq. ft. 66 per sq. ft. 100% -
1998 55.4 49.2 1971 26 units 22,813 per unit 92% 56,000
1998 65.5 57.7 1953 2,642 sq. ft. 217 per sq. ft. 100% -
1998 70.1 48.8 1990 11,600 sq. ft. 48 per sq. ft. 100% -
1997 63.0 57.5 1978 19,500 sq. ft. 27 per sq. ft. 100% -
1998 74.6 66.1 1986 11 units 43,403 per unit 100% -
1998 60.5 NAP 1932 6,136 sq. ft. 69 per sq. ft. 100% 2,313
1998 61.3 54.4 1969 5,625 sq. ft. 67 per sq. ft. 100% -
1998 77.0 61.7 1959 10 units 26,939 per unit 100% -
1997 66.2 58.9 1983 6,335 sq. ft. 38 per sq. ft. 88% -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LARGEST TENANT
----------------------------------------------------------------
UNDERWRITTEN RESERVES AREA LEASED
RESERVES COLLECTED NAME (SQ. FT.)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
0.20 none per unit Time Warner 110,500
305 305 per unit
0.15 none per sq. ft. Food Emporium 30,204
0.15 none per sq. ft. Kmart 88,905
247 250 per unit
1,291 1,291 per room
0.15 none per sq. ft. City of Philadelphia 184,128
877 877 per room
303 276 per unit
250 250 per unit
4% none of revenue
0.20 none per sq. ft. Republic Beverage Company 384,895
0.15 none per sq. ft. CNET, Inc. 97,015
0.15 none per sq. ft. Hal Riney & Partners, Inc. 110,593
230 230 per unit
0.10 0.10 per sq. ft. K-Mart 103,203
0.18 none per sq. ft. Carmike Cinema 19,285
0.10 0.10 per sq. ft. Salons in the Park 13,988
0.15 none per sq. ft. Federal Express 207,216
200 200 per unit
0.10 0.10 per sq. ft. BJ's Wholesale Club 104,708
250 225 per unit
0.15 none per sq. ft. Corr-Pro Associates LLC 190,780
255 250 per unit
288 288 per unit
0.10 0.10 per sq. ft. The Sports Authority 43,400
250 250 per unit
265 265 per unit
0.15 none per sq. ft. Carrows Restaurant 5,623
270 270 per unit
0.15 none per sq. ft. The Gap, Inc 7,187
250 250 per unit
327 327 per unit
0.15 none per sq. ft. Reynolds & Reynolds 74,700
714 714 per room
250 250 per unit
0.28 0.28 per sq. ft. Piggly Wiggly 31,778
0.17 none per sq. ft. Fort Washington Holdings 47,000
0.10 0.10 per sq. ft. Sav-On Drug Store 27,500
250 250 per unit
0.10 0.10 per sq. ft. Snap-On Tools Company 46,600
1,007 1,007 per room
1,041 1,041 per room
250 250 per bed
233 233 per unit
250 250 per bed
none per sq. ft. PetsMart, Inc. 26,988
300 300 per unit
0.16 none per sq. ft. Thrifty/Payless/RiteAid 31,472
0.16 0.16 per sq. ft.
250 250 per unit
225 225 per unit
250 250 per unit
none per sq. ft. Heilig Meyers 27,200
0.15 0.15 per sq. ft. Mars Supermarket 24,000
0.10 0.10 per sq. ft. OfficeMax 23,500
300 300 per unit
275 275 per unit
0.17 none per sq. ft. Best Weld 46,460
260 260 per unit
729 729 per room
0.45 0.45 per sq. ft. R & R Goldman dba Discovery 6,036
255 255 per unit
226 226 per unit
0.15 none per sq. ft. MJ Design 27,930
250 250 per unit
250 250 per unit
250 250 per unit
250 250 per unit
250 250 per unit
250 250 per unit
0.15 none per sq. ft. Pep Boys 22,193
0.15 none per sq. ft. Bassett Furniture 22,900
265 265 per unit
0.30 0.30 per sq. ft. Germantown Child Development 4,558
265 265 per unit
0.15 0.15 per sq. ft. Atkinson, Dyer, and Watson (Architects) 15,000
0.10 0.10 per sq. ft. Dollar Tree Stores, Inc. 3,176
250 250 per unit
288 288 per unit
0.15 none per sq. ft. Magic Jewlery 1,400
265 265 per unit
250 250 per unit
293 none per unit
275 275 per unit
315 none per unit
250 250 per unit
51 51 per pad
263 263 per unit
235 235 per unit
0.19 0.19 per sq. ft. APL Limited* 6,970
250 250 per unit
287 287 per unit
4% 4% of revenue
0.13 0.13 per sq. ft. Rite Aid 11,057
250 250 per unit
283 283 per unit
301 301 per unit
250 none per unit
250 none per unit
- ---------------------------------------------------------------------------------------------------------
250 none per unit
19 19 per unit
250 250 per unit
0.15 none per sq. ft. Purrfect 2,648
0.15 none per sq. ft. Hughes Aircraft Co 40,580
0.25 0.25 per sq. ft. Infotrieve 4,875
200 200 per unit
0.36 0.04 per sq. ft. Good Samaritan Hospital 8,112
0.15 none per sq. ft. Fitness Connection 10,500
0.00 none per sq. ft. Heilig Meyers 27,355
250 250 per unit
0.15 none per sq. ft. Hastings Books Music Video 12,350
0.15 none per sq. ft. Rancho Gymnastics 11,616
250 250 per unit
310 none per unit
250 none per unit
4% 4% of revenue
50 50 per pad
480 250 per unit
250 250 per unit
0.15 0.20 per sq. ft. Dollar General 6,593
0.15 none per sq. ft. Pemco Engineers 26,954
279 316 per unit
250 250 per unit
250 250 per unit
0.15 none per sq. ft. Chief Auto Parts 6,050
0.55 none per sq. ft. Reeds Camera / Lutheran Social Svc. Thrift 1,600 / 1,600
0.15 none per sq. ft. Golden Triangle 14,300
0.15 none per sq. ft. Chief Auto Parts 5,400
250 150 per unit
0.15 0.13 per sq. ft. Patio World 17,000
0.15 none per sq. ft. 7-11 Store 2,400
250 200 per unit
0.30 none per sq. ft. Soshin, inc 2,642
0.20 none per sq. ft. Dr. Gregg Cohen / Sub&Pizza Co. 1,800
0.15 none per sq. ft. Enviromed Inc. 19,500
250 none per unit
0.10 0.10 per sq. ft. Spin Cycle 6,136
0.15 none per sq. ft. Vogue Nails 1,250
250 250 per unit
0.15 none per sq. ft. Free Wheeler 1,300
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------
LEASE CONTROL
EXP DATE NO.
- ----------------------------------------
<S> <C>
02/28/2006 MLMI-003
MLMI-135
06/30/2017 MLMI-048
11/24/2000 MLMI-064
MLMI-011
MLMI-102
12/31/1999 MLMI-051
MLMI-128
MLMI-050
MLMI-153
MLMI-041
08/31/2018 MLMI-043
05/31/2008 MLMI-001
05/31/2008 MLMI-004
MLMI-034
07/27/2014 MLMI-110
08/31/2005 MLMI-031
05/31/2007 MLMI-117
12/31/2017 MLMI-026
MLMI-005
03/31/2014 MLMI-104
MLMI-134
07/31/2015 MLMI-019
MLMI-045
MLMI-152
04/30/2017 MLMI-118
MLMI-068
MLMI-023
04/30/2005 MLMI-062
MLMI-027
03/07/2006 MLMI-012
MLMI-032
MLMI-133
06/30/2003 MLMI-007
MLMI-124
MLMI-042
10/31/2009 MLMI-109
06/30/2013 MLMI-006
08/31/2022 MLMI-115
MLMI-022
08/03/2008 MLMI-101
MLMI-125
MLMI-126
MLMI-106
MLMI-142
MLMI-105
05/31/2018 MLMI-160
MLMI-013
02/01/2016 MLMI-067
MLMI-144
MLMI-020
MLMI-033
MLMI-040
07/31/2018 MLMI-161
02/01/2005 MLMI-164
08/31/2013 MLMI-120
MLMI-065
MLMI-018
04/30/1999 MLMI-035
MLMI-056
MLMI-127
08/31/2007 MLMI-114
MLMI-008
MLMI-049
12/30/2002 MLMI-057
MLMI-096
MLMI-052
MLMI-060
MLMI-058
MLMI-017
MLMI-029
01/21/2010 MLMI-036
04/14/2013 MLMI-010
MLMI-061
06/01/2002 MLMI-116
MLMI-066
07/31/2007 MLMI-107
09/30/2000 MLMI-111
MLMI-047
MLMI-141
12/31/2004 MLMI-002
MLMI-140
MLMI-097
MLMI-092
MLMI-015
MLMI-098
MLMI-059
MLMI-016
MLMI-009
MLMI-139
03/31/2001 MLMI-108
MLMI-021
MLMI-143
MLMI-028
08/31/2018 MLMI-162
MLMI-054
MLMI-024
MLMI-025
MLMI-099a
MLMI-099b
- ----------------------------------------
MLMI-099
MLMI-146
MLMI-053
05/14/2000 MLMI-086
07/31/2004 MLMI-073
06/30/2006 MLMI-119
MLMI-055
10/31/2011 MLMI-038
01/31/2000 MLMI-039
07/31/2018 MLMI-163
MLMI-044
09/11/2006 MLMI-100
09/30/2000 MLMI-081
MLMI-037
MLMI-093
MLMI-095
MLMI-046
MLMI-014
MLMI-091
MLMI-094
01/31/2000 MLMI-089
06/30/2002 MLMI-083
MLMI-030
MLMI-071
MLMI-070
01/31/2008 MLMI-080
11/30/2001 / 6/30/2000 MLMI-082
11/01/2000 MLMI-087
02/29/2008 MLMI-078
MLMI-074
06/03/2001 MLMI-085
08/31/2000 MLMI-077
MLMI-079
05/31/2003 MLMI-076
08/31/2001 MLMI-084
09/30/2000 MLMI-088
MLMI-072
10/31/2009 MLMI-112
02/28/2000 MLMI-090
MLMI-069
06/02/2002 MLMI-075
</TABLE>
<PAGE>
[MERRILL LYNCH LOGO] ANNEX B
MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 17, 1998
- -------------------------------------------------------------------------------
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C3
TOTAL POOL SIZE = $638,408,606 (139 LOANS/140 PROPERTIES)
<TABLE>
<CAPTION>
Expected Initial % of Initial Pass- Weighted Cash Flow
Rating by Certificate Initial Pool Credit Through Average Life or Principal
Class S&P/Moody's Balance(1) Balance(1) Support Description Rate (years) (2) Window (2)
- ----- ----------- ---------- ---------- -------- ----------- ---- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Offered Certificates
Class A-1 AAA/Aaa $129,870,000 20.34% 29.75% Fixed Rate 5.65% 5.0 1/99 - 12/06
Class A-2 AAA/Aaa $75,490,000 11.82% 29.75% Fixed Rate 5.87% 9.0 12/06 - 4/08
Class A-3 AAA/Aaa $243,122,000 38.08% 29.75% Fixed Rate 5.88% 9.7 4/08 - 11/08
Class IO AAAr/Aaa (3) (3) Variable Rate I/O (4) N/A N/A
(4)
Class B AA/Aa2 $33,516,000 5.25% 24.50% Net WAC (5) 10.1 11/08 - 10/09
Class C A/A2 $35,112,000 5.50% 19.00% Net WAC (5) 11.5 10/09 - 9/11
Class D BBB/Baa2 $38,305,000 6.00% 13.00% Net WAC (5) 14.3 9/11 - 9/13
Class E BBB-/Baa3 $7,980,000 1.25% 11.75% Net WAC (5) 14.7 9/13 - 9/13
Private Certificates
Class F (6) $35,113,000 5.50% 6.25% Fixed Rate 6.00% 14.7 9/13 - 10/13
Class G (6) $4,788,000 0.75% 5.50% Fixed Rate 6.00% 14.8 10/13 - 11/13
Class H (6) $14,364,000 2.25% 3.25% Fixed Rate 6.00% 15.1 11/13 - 12/14
Class J (6) $3,192,000 0.50% 2.75% Fixed Rate 6.00% 16.5 12/14 - 1/16
Class K (6) $17,556,605 2.75% 0.00% Fixed Rate 6.00% 19.5 1/16 - 9/23
</TABLE>
- ----------------------------
(1) Subject to a permitted variance of plus or minus 5%.
(2) The weighted average life (expressed in years) and the period (expressed in
months following the Closing Date and commencing with the month of the first
Distribution Date) during which distributions of principal would be received
(the "Principal Window") set forth in the foregoing table are based on the
Maturity Assumptions and a pricing speed of 0% CPR applied to each Mortgage
Loan during any period that it permits voluntary prepayments of principal
without imposing a Yield Maintenance Premium in connection therewith.
(3) 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
of any Distribution Date, each Component will have a notional amount equal
to the Certificate Balance of the Class of Sequential Pay Certificates with
the same Class designation.
(4) On each Distribution Date, 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 on its
Strip Rate. The Strip Rate applicable to the Class A-1, Class A-2, and Class
A-3 Components for each Distribution Date will equal the Weighted Average
Net Mortgage Rate for such Distribution Date minus 5.65%, 5.87% and 5.88%
respectively (but not less than zero); the Strip Rate applicable to the
Class B, Class C, Class D, Class E Components will equal 0.92%, 0.54%,
0.00% and 0.00% 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 6.00% (but not less than zero).
(5) The Pass-Through Rates for the Class B, Class C, Class D, and Class E
Certificates will equal the Weighted Average Net Mortgage Rate minus 0.92%,
0.54%, 0.00% and 0.00% respectively.
(6) Not publicly offered.
- -------------------------------------------------------------------------------
KEY FEATURES:
o PASS-THROUGH STRUCTURE: Senior/subordinated, sequential pay pass-through
bonds.
o UNDERWRITER: Merrill Lynch & Co. ("Merrill Lynch" or the "Underwriter").
o DEPOSITOR: Merrill Lynch Mortgage Investors, Inc.
o MASTER SERVICER: GE Capital Loan Services, Inc.
o SPECIAL SERVICER: GE Capital Realty Group, Inc.
o TRUSTEE: The Chase Manhattan Bank, a New York banking corporation.
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 any case, no earlier than the fourth
business day following the Determination Date).
o DETERMINATION DATE: The 10th day of the month, or if such day is not a
business day, the immediately preceding business day.
o DELIVERY: The Depository Trust Company ("DTC") through Cede & Co.
o ERISA: Only Class A-1, Class A-2, Class A-3 and Class IO 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.
MERRILL LYNCH
(212) 449-3860
- -------------------------------------------------------------------------------
Prospective investors are advised to read carefully, and should rely solely on,
the final prospectus and prospectus supplement (the "Final 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>
[MERRILL LYNCH LOGO] ANNEX B
MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 17, 1998
- -------------------------------------------------------------------------------
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C3
TOTAL POOL SIZE = $638,408,606 (139 LOANS/140 PROPERTIES)
OVERVIEW: o The transaction is collateralized by 139 multifamily and
commercial loans, with an aggregate pool balance of
approximately $638,408,606 secured by properties located
throughout 30 states.
o Approximately, 93.9% of the loans were originated in 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: $ 638,408,606 (139 loans/140 properties)
AVG./MAX BALANCE: $ 4.59 million/$ 59.8 million
LOAN TYPES: All fixed rate; 75.5% balloons,
7.3% fully amortizing, 17.1% ARD
GROSS WAC(1): 7.088% (Range = 6.17% - 9.625%)
NET WAC(1): 6.976%
Wtg. AVG. SEASONING: 4.2 months
WTG. AVG. RTM(2): 11.3 years (135 mos.)
WTG. AVG. REM. AMORT.: 27.2 years (326 mos.)
WTG. AVG. DSCR: 1.43x
WTG. AVG. CUT-OFF LTV: 70.4%
CALL PROTECTION: All loans are currently locked out or have yield
maintenance
BORROWER CONCENTRATION: None greater than 9.4% of the pool
CROSS COLLATERALIZATION 2 loan groups representing 3.1% of the pool are
cross-collateralized.
(1) WAC = Weighted Average Mortgage Rate
(2) RTM = Remaining Term to Maturity
PROPERTY TYPE DESCRIPTION
WTG.
# OF % OF AVG.
TYPE PROPS POOL DSCR
----------------------------------------
Multifamily: 65 38.18% 1.35x
Retail: 34 23.57 1.41x
Office: 6 14.08 1.56x
Hospitality: 9 9.63 1.48x
Industrial: 12 9.09 1.51x
Health Care: 3 2.23 1.38x
CTL: 4 1.58 NAP
Mini Storage: 2 0.81 1.34x
Mobile Home Park : 2 0.49 1.85x
Mixed Use: 3 0.35 1.31x
TOT/WTG. AVG.: 140 100.00% 1.43X
GEOGRAPHIC DISTRIBUTION
(Total of 30 States)
# OF % OF
STATE PROPERTIES POOL
--------------------------------------
New York: 10 18.24%
Texas: 25 18.01
California: 36 13.74
Pennsylvania: 9 8.02
New Jersey: 5 7.32
Michigan: 4 6.67
POOL TOTALS 140 100.0%
-----
CUT-OFF DATE BALANCES
# OF % OF CUMULATIVE WTG. AVG.
BALANCE RANGE LOANS POOL % OF POOL CUT-OFF LTV
----------------------- ------- --------- --------- -----------
$ 238,421 - $ 999,999 21 2.09% 2.09% 69.02%
1,000,000 - 1,999,999 32 7.68 9.77 69.22
2,000,000 - 2,999,999 30 11.56 21.33 71.41
3,000,000 - 3,999,999 12 6.60 27.93 73.03
4,000,000 - 4,999,999 11 8.14 36.08 74.80
5,000,000 - 5,999,999 6 5.10 41.18 69.10
6,000,000 - 6,999,999 6 6.01 47.19 73.59
7,000,000 - 7,999,999 4 4.81 52.00 63.25
8,000,000 - 8,999,999 1 1.28 53.28 74.84
9,000,000 - 9,999,999 2 2.92 56.20 80.00
10,000,000 - 14,999,999 7 12.77 68.97 67.75
15,000,000 - 19,999,999 3 7.93 76.90 74.10
20,000,000 - 24,999,999 1 3.76 80.65 59.95
25,000,000 - 29,999,999 1 4.51 85.16 73.80
30,000,000 - 34,999,999 1 5.47 90.63 79.30
40,000,000 - 59,845,380 1 9.37 100.00 61.70
----------------------- ------- --------- --------- -----------
TOTALS 139 100.00% 100.00% 70.41%
DEBT SERVICE COVERAGE RATIOS
DSCR # OF % OF CUMULATIVE WTG. AVG.
RANGE LOANS POOL % OF POOL CUT-OFF LTV
----------- -------- ------------ ------------ ------------
CTL Loans 4 1.58% 1.58% NAP
1.10 - 3 2.19 3.77 77.39%
1.19
1.20 - 45 32.07 35.83 75.98
1.29
1.30 - 30 26.34 62.18 69.02
1.39
1.40 - 24 16.44 78.62 73.55
1.49
1.50 - 19 8.31 86.93 71.02
1.59
1.60 - 3 2.06 88.98 61.11
1.69
1.70 - 4 5.29 94.27 59.29
1.79
1.80 - 1 0.47 94.74 53.05
1.89
1.90 - 1 0.10 94.84 62.82
1.99
2.00 - 4 3.92 98.76 52.16
2.49
2.50 - 1 1.24 100.00 25.64
2.53
----------- -------- ------------ ------------ ------------
TOTALS 139 100.00% 100.00% 70.41%
Weighted Average DSCR = 1.43x
CUT-OFF DATE LTV RATIOS
# OF % OF CUMULATIVE
LTV RANGE LOANS POOL % OF POOL
- --------------- --------- ---------- ----------------
CTL Loans 4 1.58% 1.58%
0.01% - 50.00% 4 2.76 4.34
50.01 - 60.00 10 8.93 13.26
60.01 - 70.00 34 21.70 34.97
70.01 - 80.00 84 62.92 97.89
80.01 - 80.58 3 2.11 100.00
- --------------- --------- ---------- ----------------
TOTALS 139 100.00% 100.00%
Weighted Average Cut-Off LTV = 70.4%
ORIGINAL TERMS
TERM # OF LOANS % OF POOL
- --------------------- ----------- ----------------
5 Year Balloon 2 0.37%
6 to 9 Year Balloon 6 3.59
10 Year Balloon 92 57.32
11 to 14 Year 6 5.60
Balloon
15 Year Balloon 13 6.81
16 to 20 Year 3 1.81
Balloon
6 to 9 Year ARD 1 4.51
10 Year ARD 2 1.39
15 Year ARD 2 11.25
Fully Amortizing 12 7.35
- --------------------- ----------- ----------------
TOTALS 139 100.00%
B-2
<PAGE>
[MERRILL LYNCH LOGO]
MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 17, 1998
- -------------------------------------------------------------------------------
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C3
TOTAL POOL SIZE = $638,408,606 (139 LOANS/140 PROPERTIES)
<TABLE>
<CAPTION>
DESCRIPTION OF PROPERTY TYPES:
- -----------------------------------------------------------------------------------------------------------------------------------
LOAN CHARACTERISTICS BY PROPERTY TYPE
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted Averages
-------------------------------------------------
Average Highest
Cut-off % of Cut-Off Cut-Off
Date Initial Date Date Cut-Off Repay-
Property Balance No. of Pool Balance Balance DSCR Date ment Property
Types ($MM) Props. Balance ($MM) ($MM) (A) LTV (A) LTV (A) Size
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MULTIFAMILY $243.72 65 38.18% $3.75 $34.89 1.35x 73.95% 60.43% 326
RETAIL 150.44 34 23.57 4.42 28.78 1.41 71.76 56.87 126,165
OFFICE 89.86 6 14.08 14.98 59.85 1.56 61.69 47.20 415,410
HOSPITALITY 61.50 9 9.63 6.83 17.21 1.48 70.55 55.99 212
INDUSTRIAL 58.01 12 9.09 4.83 15.51 1.51 65.67 39.20 355,006
HEALTH CARE 14.25 3 2.23 4.75 6.30 1.38 72.67 28.95 106
CTL 10.09 4 1.58 2.52 3.74 NAP (D) NAP (D) NAP (D) 24,362
MINI STORAGE 5.16 2 0.81 2.58 3.59 1.34 73.40 59.55 1,051
MOBILE HOME 3.16 2 0.49 1.58 1.99 1.85 48.93 23.89 216
PARK
MIXED USE 2.23 3 0.35 0.74 1.43 1.31 72.44 60.65 15,258
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. $638.41 140 100.00% $4.56 $59.85 1.43x 70.41% 54.39% NAP
AVG.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
- --------------------------------------------
Weighted Averages
- --------------------------------------------
Loan per
sq. ft.,
unit, bed,
Occu- key, pad
Property Pancy or room
Types % (B) (C)
- --------------------------------------------
<S> <C> <C>
MULTIFAMILY 95% 37,724
RETAIL 98 139
OFFICE 97 101
HOSPITALITY NAP (D) 52,200
INDUSTRIAL 97 34
HEALTH CARE 89 47,150
CTL 100 123
MINI STORAGE 89 3,034
MOBILE HOME 93 7,837
PARK
MIXED USE 99 67
- --------------------------------------------
TOTAL/WTG. 96% NAP
AVG.
- --------------------------------------------
</TABLE>
(A) THE CUT-OFF DATE DSCR AND LTV RATIO INFORMATION SHOWN ABOVE DO NOT REFLECT
THE FOUR CREDIT LEASE LOANS, REPRESENTING 1.6% OF THE INITIAL POOL BALANCE,
WHICH TYPICALLY HAVE DEBT SERVICE COVERAGE RATIOS EQUAL TO OR LESS THAN
1.00X AND LOAN TO VALUE RATIOS IN EXCESS OF 79.0%.
(B) 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
(C) 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.
(D) NAP = NOT APPLICABLE
B-3
<PAGE>
[MERRILL LYNCH LOGO]
MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 17, 1998
- -------------------------------------------------------------------------------
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C3
TOTAL POOL SIZE = $638,408,606 (139 LOANS/140 PROPERTIES)
PREPAYMENT PROTECTION: o Currently 98.4% of the loans are locked out
and 1.7% are subject to yield maintenance
charges.
o All of the loans have yield maintenance charges
which are calculated at flat-to-treasuries.
o 67.5% of the loans by balance provide for
defeasance.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
TABLE 1
PREPAYMENT RESTRICTION CATEGORIES
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted Averages
AGGREGATE ---------------------------------------------------------
NUMBER OF CUT-OFF DATE % OF INITIAL TERM TO REMAINING # OF MONTHS OF OPEN
MORTGAGE BALANCE POOL ARD/MATURITY LOCKOUT/DEFEASANCE PREPAYMENT PRIOR TO
PREPAYMENT RESTRICTION (A) LOANS (MM) BALANCE (MOS.) TERM (MOS.) ARD/MATURITY(MOS.)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
LO or LO, then DEF (B) 76 $433,360,592 67.88% 146 140 95.81% 6
LO, then PP 17 40,237,671 6.30 86 51 59.76 11
LO, then YM 40 154,287,568 24.17 120 52 43.76 5
YM Only 6 10,522,775 1.65 111 0 NAP 7
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. AVGS. 139 $638,408,606 100.00% 135 111 81.95% 6
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted Average Term to End of Locked Out/Defeasance Term (for Locked Out/Defeasance loans): 140 months.
Weighted Average Term to End of Locked Out/Defeasance Term (for all loans): 111 months.
Weighted Average Number of Months Loans are Open to Prepayment Prior to ARD/Maturity: 6 months
(A) LO=Locked Out, DEF=Defeasance, YM=Yield Maintenance, PP=Percentage Premium
(B) Includes two mortgages loans (0.37%), which are not defeasance loans
- ------------------------------------------------------------------------------------------------------------------------------------
ALLOCATION OF Prepayment premiums will be allocated among the Class A-1, A-2, A-3, B, C, D, E, F, G and IO
PREPAYMENT PREMIUMS: Certificates as follows:
o Any yield maintenance charges and percentage prepayment premiums will be allocated among
the Class A-1, A-2, A-3, B, C, D, E, F, G and IO 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 ---------------------------------
=
(Mortgaged 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.
<PAGE>
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 as reported in The Wall
Street Journal on the date of such prepayment.
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.
</TABLE>
B-4
<PAGE>
[MERRILL LYNCH LOGO]
MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 17, 1998
- -------------------------------------------------------------------------------
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C3
TOTAL POOL SIZE = $638,408,606 (139 LOANS/140 PROPERTIES)
<TABLE>
<CAPTION>
PREPAYMENT LOCK-OUT /PREMIUM ANALYSIS
- --------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT RESTRICTION ASSUMING NO PREPAYMENT
----------------------------------------------------------------------------------------
Current 12 Mo. 24 Mo. 36 Mo. 48 Mo. 60 Mo. 72 Mo. 84 Mo.
PREPAYMENT Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec.
RESTRICTION
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 98.4 96.2 96.0 93.2 87.9 72.6 72.6 78.1
Yield Maintenance 1.6 3.8 4.0 6.8 11.6 21.0 20.1 19.9
- --------------------------------------------------------------------------------------------------------------------------
Percentage Premium
5.00% and greater 0.0 0.0 0.0 0.0 0.1 1.7 0.0 0.0
4.00 to 4.99 0.0 0.0 0.0 0.0 0.0 0.1 1.7 0.0
3.00 to 3.99 0.0 0.0 0.0 0.0 0.0 0.0 0.1 1.9
2.00 to 2.99 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1
1.00 to 1.99 0.0 0.0 0.0 0.0 0.0 4.6 0.0 0.0
Open 0.0 0.0 0.0 0.0 0.4 0.0 5.4 0.0
- --------------------------------------------------------------------------------------------------------------------------
TOTALS 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Mortgage Pool Balance ($mm) 638.4 630.4 622.0 612.8 602.9 590.0 571.7 519.8
% of Initial Pool Balance 100.0 98.7 97.4 96.0 94.4 92.4 89.6 81.4
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
PREPAYMENT LOCK-OUT/PREMIUM ANALYSIS
- --------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT RESTRICTION ASSUMING NO PREPAYMENT
----------------------------------------------------------------------------------------------
96 Mo. 108 Mo. 120 Mo. 132 Mo. 144 Mo. 156 Mo. 168 Mo. 180 Mo.
PREPAYMENT Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec.
RESTRICTION
- --------------------------------------------------------------------------------------------------------------------------
Locked Out 73.9 74.0 84.5 82.6 84.8 84.4 44.1 96.7
Yield Maintenance 24.2 12.0 15.5 17.4 15.2 15.6 13.3 3.3
- --------------------------------------------------------------------------------------------------------------------------
Percentage Premium
5.00% and greater 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
4.00 to 4.99 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
3.00 to 3.99 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.00 to 2.99 1.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1.00 to 1.99 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Open 0.0 14.0 0.0 0.0 0.0 0.0 42.6 0.0
- --------------------------------------------------------------------------------------------------------------------------
TOTALS 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Mortgage Pool Balance ($mm) 507.6 474.6 166.5 143.0 129.1 119.4 112.9 23.5
% of Initial Pool Balance 79.5 74.3 26.1 22.4 20.2 18.7 17.7 3.7
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-5
<PAGE>
[MERRILL LYNCH LOGO]
MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 17, 1998
- -------------------------------------------------------------------------------
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C3
TOTAL POOL SIZE = $638,408,606 (139 LOANS/140 PROPERTIES)
SPECIAL SERVICER/LOAN The initial Special Servicer will be GE
MODIFICATIONS: Capital Realty Group, Inc. The Special
Servicer will be responsible for performing
certain servicing functions with respect to
Mortgage Loans that, in general, are in
default or as to which default is imminent,
and for administering any REO Properties.
The holders of the majority of the
Controlling Class of Sequential Pay
Certificates will have the right, subject to
certain conditions described herein, to
replace the Special Servicer and to select a
"Controlling Class Representative" from whom
the Special Servicer will seek advice and
approval and take directions under certain
circumstances
The Special Servicer will be permitted to
extend the date on which any Balloon Payment
is scheduled to be due for up to three
one-year extensions at or above the
prevailing market rate for a similar loan,
provided that the Balloon Loan is not a
Specially Serviced Mortgage Loan and has not
been delinquent in the preceding 12 months.
REMOVAL OF THE SPECIAL The Pooling and Servicing Agreement permits
SERVICER/CONTROLLING CLASS (subject to certain conditions) the
REPRESENTATIVE: Controlling 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,
the Class of Sequential Pay Certificates
with the latest alphabetical Class
designation). The Class A-1, Class A-2 and
Class A-3 Certificates will be treated as
one Class for determining the Controlling
Class of Sequential Pay Certificates.
B-6
<PAGE>
[MERRILL LYNCH LOGO]
MORTGAGE SECURITY NEW ISSUE TERM SHEET DECEMBER 17, 1998
- -------------------------------------------------------------------------------
$563,395,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C3
TOTAL POOL SIZE = $638,408,606 (139 LOANS/140 PROPERTIES)
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) with respect to which sixty
days elapse after a receiver is appointed
and continues in such capacity in respect
of a Mortgaged Property securing any
Mortgage Loan, (5) with respect to which
sixty days elapse after 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
unless such an appraisal had been
previously obtained within the prior twelve
months.
If an Appraisal Reduction Amount exists
with respect to any Required Appraisal
Loan, the Controlling Class Representative
may, at its expense (i) direct the Special
Servicer to obtain and deliver to the
Master Servicer and the Trustee an
appraisal meeting the requirements for a
Required Appraisal and to the extent the
appraisals are different, an independent
third party appraiser will determine the
appropriate amount to be used in
determining the Appraisal Reduction Amount
or (ii) upon the expiration of six months
from the date on which the appraisal was
obtained by the Special Servicer with
respect to such Required Appraisal Loan,
and upon review of the Special Servicer's
plan for servicing such Required Appraisal
Loan, direct the Special Servicer to obtain
and deliver to the Master Servicer, the
Special Servicer and the Trustee an update
of the appraisal previously obtained by the
Special Servicer in connection with such
Required Appraisal Loan for the purpose of
determining the appropriate amount to be
used in determining the Appraisal Reduction
Amount.
The Appraisal Reduction Amount for any
Required Appraisal Loan will equal the
excess, if any, of (a) the sum of, without
duplication, 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 Additional Trust Fund Expenses in
respect of such Required Appraisal Loan,
(iv) all related unreimbursed Advances,
plus interests thereon, 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.
B-7
<PAGE>
MLMI, SERIES 1998-C3
- -------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS A-1
BOND TYPE - FIXED
Settlement Date: 12/22/98 Current Balance: $129,870,000
Next Payment: 1/15/99 Current Coupon: 5.730%
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
0% CPR While Subject to Lockout or Yield Maintenance*
-----------------------------------------------------------------------------------------------------
0.000 CPR 15.00 CPR 25.00 CPR 50.00 CPR 75.00 CPR 100.00 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 5.99 4.13 6.00 4.05 6.01 4.00 6.03 3.89 6.05 3.80 6.07 3.63
99-04 5.96 5.97 5.98 6.00 6.01 6.03
99-08 5.93 5.94 5.95 5.97 5.98 6.00
99-12 5.90 5.91 5.92 5.93 5.95 5.97
99-16 5.87 4.14 5.88 4.06 5.89 4.01 5.90 3.90 5.91 3.81 5.93 3.64
99-20 5.84 5.85 5.85 5.87 5.88 5.90
99-24 5.81 5.82 5.82 5.84 5.85 5.86
99-28 5.78 5.79 5.79 5.81 5.82 5.83
100-00 5.75 4.15 5.76 4.06 5.76 4.01 5.77 3.91 5.78 3.81 5.79 3.65
100-04 5.72 5.72 5.73 5.74 5.75 5.76
100-08 5.69 5.69 5.70 5.71 5.72 5.73
100-12 5.66 5.66 5.67 5.68 5.69 5.69
100-16 5.63 4.16 5.63 4.07 5.64 4.02 5.65 3.91 5.65 3.82 5.66 3.65
100-20 5.60 5.60 5.61 5.61 5.62 5.62
100-24 5.57 5.57 5.58 5.58 5.59 5.59
100-28 5.54 5.54 5.55 5.55 5.56 5.56
101-00 5.51 4.16 5.51 4.08 5.51 4.03 5.52 3.92 5.52 3.83 5.52 3.66
101-04 5.48 5.48 5.48 5.49 5.49 5.49
101-08 5.45 5.45 5.45 5.46 5.46 5.46
101-12 5.42 5.42 5.42 5.43 5.43 5.42
101-16 5.39 4.17 5.39 4.09 5.39 4.04 5.39 3.93 5.40 3.83 5.39 3.67
101-20 5.36 5.36 5.36 5.36 5.36 5.35
101-24 5.33 5.33 5.33 5.33 5.33 5.32
101-28 5.30 5.30 5.30 5.30 5.30 5.29
102-00 5.27 4.18 5.27 4.09 5.27 4.04 5.27 3.94 5.27 3.84 5.25 3.67
WAL 5.00 4.88 4.81 4.65 4.52 4.29
1st Prin 1/15/99 1/15/99 1/15/99 1/15/99 1/15/99 1/15/99
Mat. 12/15/06 7/15/06 6/15/06 3/15/06 2/15/06 2/15/06
</TABLE>
- -------------------------------------------------------------------------------
* Assumes required application of prepayment penalties allocated to bondholders
- -------------------------------------------------------------------------------
These tables have been based upon the assumptions described above. These
assumptions will most likely not represent the actual experience of the Mortgage
Pool in the future.
The tables are intended to illustrate variations in yield on the Offered
Securities under such assumptions.
No representation is made herein as to the actual rate or timing of principal
payments on any of the underlying Mortgage Loans in the Mortgage Pool or the
performance characteristics of the Offered Securities.
B-8
<PAGE>
MLMI, SERIES 1998-C3
- -------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS A-2
BOND TYPE - FIXED
Settlement Date: 12/22/98 Current Balance: $75,490,000
Next Payment: 1/15/99 Current Coupon: 5.950%
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
0% CPR While Subject to Lockout or Yield Maintenance*
------------------------------------------------------------------------------------------------------
0.00 CPR 15.00 CPR 25.00 CPR 50.00 CPR 75.00 CPR 100.00 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 6.14 6.76 6.14 6.70 6.14 6.66 6.14 6.61 6.14 6.58 6.14 6.48
99-04 6.12 6.12 6.12 6.12 6.12 6.12
99-08 6.10 6.10 6.10 6.10 6.10 6.10
99-12 6.08 6.08 6.08 6.08 6.08 6.08
99-16 6.06 6.77 6.07 6.71 6.07 6.67 6.07 6.62 6.07 6.58 6.07 6.49
99-20 6.05 6.05 6.05 6.05 6.05 6.05
99-24 6.03 6.03 6.03 6.03 6.03 6.03
99-28 6.01 6.01 6.01 6.01 6.01 6.01
100-00 5.99 6.78 5.99 6.71 5.99 6.68 5.99 6.62 5.99 6.59 5.99 6.50
100-04 5.97 5.97 5.97 5.97 5.97 5.97
100-08 5.95 5.95 5.95 5.95 5.95 5.95
100-12 5.94 5.94 5.94 5.93 5.93 5.93
100-16 5.92 6.79 5.92 6.72 5.92 6.69 5.92 6.63 5.91 6.60 5.91 6.51
100-20 5.90 5.90 5.90 5.90 5.90 5.89
100-24 5.88 5.88 5.88 5.88 5.88 5.87
100-28 5.86 5.86 5.86 5.86 5.86 5.86
101-00 5.84 6.79 5.84 6.73 5.84 6.70 5.84 6.64 5.84 6.61 5.84 6.52
101-04 5.83 5.82 5.82 5.82 5.82 5.82
101-08 5.81 5.81 5.81 5.80 5.80 5.80
101-12 5.79 5.79 5.79 5.79 5.78 5.78
101-16 5.77 6.80 5.77 6.74 5.77 6.70 5.77 6.65 5.76 6.62 5.76 6.52
101-20 5.75 5.75 5.75 5.75 5.75 5.74
101-24 5.74 5.73 5.73 5.73 5.73 5.72
101-28 5.72 5.72 5.71 5.71 5.71 5.70
102-00 5.70 6.81 5.70 6.75 5.70 6.71 5.69 6.66 5.69 6.62 5.69 6.53
WAL 9.00 8.89 8.83 8.73 8.68 8.52
1st Prin 12/15/06 7/15/06 6/15/06 3/15/06 2/15/06 2/15/06
Mat. 4/15/08 4/15/08 4/15/08 3/15/08 3/15/08 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-9
<PAGE>
MLMI, SERIES 1998-C3
- -------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS A-3
BOND TYPE - FIXED
Settlement Date: 12/22/98 Current Balance: $243,122,000
Next Payment: 1/15/99 Current Coupon: 5.980%
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
0% CPR While Subject to Lockout or Yield Maintenance*
-------------------------------------------------------------------------------------------------------------
0.00 CPR 15.00 CPR 25.00 CPR 50.00 CPR 75.00 CPR 100.00 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 6.16 7.15 6.16 7.14 6.16 7.14 6.16 7.13 6.16 7.11 6.16 6.99
99-04 6.14 6.14 6.15 6.15 6.15 6.15
99-08 6.13 6.13 6.13 6.13 6.13 6.13
99-12 6.11 6.11 6.11 6.11 6.11 6.11
99-16 6.09 7.16 6.09 7.15 6.09 7.15 6.09 7.14 6.09 7.12 6.09 7.00
99-20 6.07 6.07 6.07 6.07 6.07 6.08
99-24 6.06 6.06 6.06 6.06 6.06 6.06
99-28 6.04 6.04 6.04 6.04 6.04 6.04
100-00 6.02 7.17 6.02 7.16 6.02 7.16 6.02 7.15 6.02 7.13 6.02 7.01
100-04 6.01 6.01 6.01 6.01 6.00 6.00
100-08 5.99 5.99 5.99 5.99 5.99 5.99
100-12 5.97 5.97 5.97 5.97 5.97 5.97
100-16 5.95 7.18 5.95 7.17 5.95 7.17 5.95 7.16 5.95 7.14 5.95 7.02
100-20 5.94 5.94 5.94 5.94 5.94 5.93
100-24 5.92 5.92 5.92 5.92 5.92 5.92
100-28 5.90 5.90 5.90 5.90 5.90 5.90
101-00 5.88 7.19 5.88 7.18 5.88 7.18 5.88 7.16 5.88 7.15 5.88 7.03
101-04 5.87 5.87 5.87 5.87 5.87 5.86
101-08 5.85 5.85 5.85 5.85 5.85 5.85
101-12 5.83 5.83 5.83 5.83 5.83 5.83
101-16 5.82 7.20 5.82 7.19 5.82 7.19 5.82 7.17 5.81 7.16 5.81 7.03
101-20 5.80 5.80 5.80 5.80 5.80 5.79
101-24 5.78 5.78 5.78 5.78 5.78 5.78
101-28 5.76 5.76 5.76 5.76 5.76 5.76
102-00 5.75 7.21 5.75 7.20 5.75 7.19 5.75 7.18 5.75 7.16 5.74 7.04
WAL 9.71 9.70 9.69 9.67 9.64 9.42
1st Prin 4/15/08 4/15/08 4/15/08 3/15/08 3/15/08 12/15/07
Mat. 11/15/08 11/15/08 11/15/08 11/15/08 11/15/08 8/15/08
</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-10
<PAGE>
MLMI, SERIES 1998-C3
- -------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS B
BOND TYPE - NET WAC
Settlement Date: 12/22/98 Current Balance: $33,516,000
Next Payment: 1/15/99 Current Coupon: NWAC - 0.81
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
0% CPR While Subject to Lockout or Yield Maintenance*
----------------------------------------------------------------------------------------------------------
0.00 CPR 15.00 CPR 25.00 CPR 50.00 CPR 75.00 CPR 100.00 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 6.44 7.27 6.43 7.26 6.43 7.26 6.43 7.26 6.43 7.25 6.43 7.17
99-04 6.42 6.42 6.41 6.41 6.41 6.41
99-08 6.40 6.40 6.40 6.39 6.39 6.39
99-12 6.38 6.38 6.38 6.38 6.38 6.38
99-16 6.37 7.28 6.36 7.27 6.36 7.27 6.36 7.27 6.36 7.26 6.36 7.18
99-20 6.35 6.35 6.35 6.34 6.34 6.34
99-24 6.33 6.33 6.33 6.33 6.32 6.32
99-28 6.31 6.31 6.31 6.31 6.31 6.31
100-00 6.30 7.28 6.29 7.28 6.29 7.28 6.29 7.28 6.29 7.27 6.29 7.19
100-04 6.28 6.28 6.28 6.27 6.27 6.27
100-08 6.26 6.26 6.26 6.26 6.26 6.25
100-12 6.25 6.24 6.24 6.24 6.24 6.24
100-16 6.23 7.29 6.23 7.29 6.23 7.29 6.22 7.29 6.22 7.28 6.22 7.20
100-20 6.21 6.21 6.21 6.21 6.21 6.20
100-24 6.20 6.19 6.19 6.19 6.19 6.19
100-28 6.18 6.18 6.17 6.17 6.17 6.17
101-00 6.16 7.30 6.16 7.30 6.16 7.30 6.16 7.30 6.15 7.29 6.15 7.21
101-04 6.14 6.14 6.14 6.14 6.14 6.13
101-08 6.13 6.13 6.12 6.12 6.12 6.12
101-12 6.11 6.11 6.11 6.11 6.10 6.10
101-16 6.09 7.31 6.09 7.31 6.09 7.31 6.09 7.31 6.09 7.30 6.08 7.22
101-20 6.08 6.07 6.07 6.07 6.07 6.07
101-24 6.06 6.06 6.06 6.05 6.05 6.05
101-28 6.04 6.04 6.04 6.04 6.04 6.03
102-00 6.03 7.32 6.02 7.32 6.02 7.32 6.02 7.32 6.02 7.31 6.01 7.23
WAL 10.12 10.11 10.11 10.10 10.09 9.94
1st Prin 11/15/08 11/15/08 11/15/08 11/15/08 11/15/08 8/15/08
Mat. 10/15/09 10/15/09 10/15/09 10/15/09 10/15/09 7/15/09
</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>
MLMI, SERIES 1998-C3
- -------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS C
BOND TYPE - NET WAC
Settlement Date: 12/22/98 Current Balance: $35,112,000
Next Payment: 1/15/99 Current Coupon: NWAC - 0.52
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
0% CPR While Subject to Lockout or Yield Maintenance*
----------------------------------------------------------------------------------------------------------
0.00 CPR 15.00 CPR 25.00 CPR 50.00 CPR 75.00 CPR 100.00 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 7.83 6.71 7.83 6.71 7.83 6.71 7.83 6.71 7.83 6.70 7.77
99-04 6.70 6.69 6.69 6.69 6.69 6.69
99-08 6.68 6.68 6.68 6.67 6.67 6.67
99-12 6.66 6.66 6.66 6.66 6.66 6.66
99-16 6.65 7.85 6.65 7.84 6.64 7.84 6.64 7.84 6.64 7.84 6.64 7.78
99-20 6.63 6.63 6.63 6.63 6.63 6.62
99-24 6.62 6.61 6.61 6.61 6.61 6.61
99-28 6.60 6.60 6.60 6.59 6.59 6.59
100-00 6.58 7.86 6.58 7.86 6.58 7.86 6.58 7.86 6.58 7.85 6.58 7.79
100-04 6.57 6.57 6.56 6.56 6.56 6.56
100-08 6.55 6.55 6.55 6.55 6.55 6.54
100-12 6.54 6.53 6.53 6.53 6.53 6.53
100-16 6.52 7.87 6.52 7.87 6.52 7.87 6.52 7.87 6.51 7.87 6.51 7.80
100-20 6.51 6.50 6.50 6.50 6.50 6.50
100-24 6.49 6.49 6.49 6.48 6.48 6.48
100-28 6.47 6.47 6.47 6.47 6.47 6.46
101-00 6.46 7.88 6.46 7.88 6.45 7.88 6.45 7.88 6.45 7.88 6.45 7.81
101-04 6.44 6.44 6.44 6.44 6.44 6.43
101-08 6.43 6.42 6.42 6.42 6.42 6.42
101-12 6.41 6.41 6.41 6.41 6.40 6.40
101-16 6.40 7.89 6.39 7.89 6.39 7.89 6.39 7.89 6.39 7.89 6.39 7.83
101-20 6.38 6.38 6.38 6.37 6.37 6.37
101-24 6.36 6.36 6.36 6.36 6.36 6.35
101-28 6.35 6.35 6.35 6.34 6.34 6.34
102-00 6.33 7.90 6.33 7.90 6.33 7.90 6.33 7.90 6.33 7.90 6.32 7.84
WAL 11.54 11.54 11.53 11.53 11.53 11.39
1st Prin 10/15/09 10/15/09 10/15/09 10/15/09 10/15/09 7/15/09
Mat. 9/15/11 9/15/11 9/15/11 9/15/11 9/15/11 9/15/11
</TABLE>
- -------------------------------------------------------------------------------
* Assumes required application of prepayment penalties allocated to bondholders
- -------------------------------------------------------------------------------
These tables have been based upon the assumptions described above. These
assumptions will most likely not represent the actual experience of the
Mortgage Pool in the future.
The tables are intended to illustrate variations in yield on the Offered
Securities under such assumptions.
No representation is made herein as to the actual rate or timing of principal
payments on any of the underlying Mortgage Loans in the Mortgage Pool or the
performance characteristics of the Offered Securities.
B-12
<PAGE>
MLMI, SERIES 1998-C3
- -------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS D
BOND TYPE - NET WAC
Settlement Date: 12/22/98 Current Balance: $38,305,000
Next Payment: 1/15/99 Current Coupon: NWAC
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
0% CPR While Subject to Lockout or Yield Maintenance*
----------------------------------------------------------------------------------------------------
0.00 CPR 15.00 CPR 25.00 CPR 50.00 CPR 75.00 CPR 100.00 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>
94-16 7.76 8.53 7.76 8.50 7.76 8.48 7.77 8.42 7.77 8.38 7.77 8.31
94-20 7.75 7.75 7.75 7.75 7.75 7.76
94-24 7.73 7.73 7.73 7.73 7.74 7.74
94-28 7.71 7.72 7.72 7.72 7.72 7.73
95-00 7.70 8.55 7.70 8.52 7.70 8.49 7.70 8.44 7.71 8.39 7.71 8.33
95-04 7.68 7.68 7.69 7.69 7.69 7.69
95-08 7.67 7.67 7.67 7.67 7.68 7.68
95-12 7.65 7.65 7.65 7.66 7.66 7.66
95-16 7.64 8.57 7.64 8.53 7.64 8.51 7.64 8.46 7.64 8.41 7.65 8.34
95-20 7.62 7.62 7.62 7.63 7.63 7.63
95-24 7.61 7.61 7.61 7.61 7.61 7.62
95-28 7.59 7.59 7.59 7.60 7.60 7.60
96-00 7.58 8.59 7.58 8.55 7.58 8.53 7.58 8.48 7.58 8.43 7.59 8.36
96-04 7.56 7.56 7.56 7.56 7.57 7.57
96-08 7.55 7.55 7.55 7.55 7.55 7.55
96-12 7.53 7.53 7.53 7.53 7.54 7.54
96-16 7.52 8.60 7.52 8.57 7.52 8.55 7.52 8.49 7.52 8.44 7.52 8.38
96-20 7.50 7.50 7.50 7.50 7.51 7.51
96-24 7.49 7.49 7.49 7.49 7.49 7.49
96-28 7.47 7.47 7.47 7.47 7.48 7.48
97-00 7.46 8.62 7.46 8.59 7.46 8.56 7.46 8.51 7.46 8.46 7.46 8.39
97-04 7.44 7.44 7.44 7.44 7.45 7.45
97-08 7.43 7.43 7.43 7.43 7.43 7.43
97-12 7.41 7.41 7.41 7.41 7.42 7.42
97-16 7.40 8.64 7.40 8.60 7.40 8.58 7.40 8.53 7.40 8.48 7.40 8.41
WAL 14.30 14.20 14.13 13.97 13.83 13.64
1st Prin 9/15/11 9/15/11 9/15/11 9/15/11 9/15/11 9/15/11
Mat. 9/15/13 9/15/13 8/15/13 6/15/13 3/15/13 9/15/12
</TABLE>
- -------------------------------------------------------------------------------
* Assumes required application of prepayment penalties allocated to bondholders
- -------------------------------------------------------------------------------
These tables have been based upon the assumptions described above. These
assumptions will most likely not represent the actual experience of the
Mortgage Pool in the future.
The tables are intended to illustrate variations in yield on the Offered
Securities under such assumptions.
No representation is made herein as to the actual rate or timing of principal
payments on any of the underlying Mortgage Loans in the Mortgage Pool or the
performance characteristics of the Offered Securities.
B-13
<PAGE>
MLMI, SERIES 1998-C3
- -------------------------------------------------------------------------------
PRICE/YIELD TO MATURITY TABLE
BOND SENSITIVITIES
CLASS E
BOND TYPE - NET WAC
Settlement Date: 12/22/98 Current Balance: $7,980,000
Next Payment: 1/15/99 Current Coupon: NWAC
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
0% CPR While Subject to Lockout or Yield Maintenance*
-----------------------------------------------------------------------------------------------------
0.00 CPR 15.00 CPR 25.00 CPR 50.00 CPR 75.00 CPR 100.00 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>
88-25 8.47 8.46 8.47 8.46 8.47 8.46 8.48 8.42 8.49 8.35 8.52 8.14
88-29 8.46 8.45 8.46 8.46 8.47 8.51
89-01 8.44 8.44 8.44 8.44 8.45 8.49
89-05 8.42 8.42 8.42 8.43 8.44 8.47
89-09 8.41 8.48 8.41 8.48 8.41 8.48 8.41 8.44 8.42 8.37 8.46 8.16
89-13 8.39 8.39 8.39 8.39 8.40 8.44
89-17 8.37 8.37 8.37 8.38 8.39 8.42
89-21 8.36 8.36 8.36 8.36 8.37 8.40
89-25 8.34 8.50 8.34 8.50 8.34 8.49 8.34 8.45 8.35 8.39 8.39 8.18
89-29 8.33 8.32 8.32 8.33 8.34 8.37
90-01 8.31 8.31 8.31 8.31 8.32 8.35
90-05 8.29 8.29 8.29 8.30 8.31 8.34
90-09 8.28 8.52 8.28 8.52 8.28 8.51 8.28 8.47 8.29 8.41 8.32 8.20
90-13 8.26 8.26 8.26 8.26 8.27 8.30
90-17 8.24 8.24 8.24 8.25 8.26 8.29
90-21 8.23 8.23 8.23 8.23 8.24 8.27
90-25 8.21 8.54 8.21 8.54 8.21 8.53 8.21 8.49 8.22 8.43 8.25 8.22
90-29 8.20 8.19 8.19 8.20 8.21 8.24
91-01 8.18 8.18 8.18 8.18 8.19 8.22
91-05 8.16 8.16 8.16 8.17 8.17 8.20
91-09 8.15 8.56 8.15 8.56 8.15 8.55 8.15 8.51 8.16 8.45 8.19 8.23
91-13 8.13 8.13 8.13 8.13 8.14 8.17
91-17 8.12 8.11 8.11 8.12 8.13 8.15
91-21 8.10 8.10 8.10 8.10 8.11 8.14
91-25 8.09 8.58 8.08 8.58 8.08 8.57 8.09 8.53 8.09 8.46 8.12 8.25
WAL 14.73 14.73 14.71 14.58 14.37 13.73
1st Prin 9/15/13 9/15/13 8/15/13 6/15/13 3/15/13 9/15/12
Mat. 9/15/13 9/15/13 9/15/13 8/15/13 6/15/13 9/15/12
</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-14
<PAGE>
This diskette contains a file: The file "98C3black.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. The information
contained on the diskette will be filed by the Depositor with the Securities
and Exchange Commission as part of the Prospectus Supplement. All of the
information contained on the diskette is subject to the same limitations and
qualifications as are set forth in the paper portion of this Prospectus
Supplement. Prospective investors are strongly urged to read the paper portion
of this Prospectus Supplement in its entirety prior to accessing the diskette.
If the diskette was not received in a sealed package, there can be no assurance
that they remain in their original format and should not be relied upon for any
purpose.
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
<TABLE>
<S> <C>
PAGE
---
PROSPECTUS SUPPLEMENT
Summary ............................................... S-7
Risk Factors .......................................... S-21
Certain Risks Associated with the Certificates ...... S-21
Certain Risks Associated with the Mortgage Loans..... S-23
Description of the Mortgage Pool ...................... S-36
Servicing of the Mortgage Loans ....................... S-54
Description of the Certificates ....................... S-63
Yield and Maturity Considerations ..................... S-80
Use of Proceeds ....................................... S-88
Material Federal Income Tax Consequences .............. S-88
ERISA Considerations .................................. S-89
Legal Investment ...................................... S-91
Method of Distribution ................................ S-92
Legal Matters ......................................... S-92
Ratings ............................................... S-92
Index of Principal Definitions ........................ S-94
Annex A ............................................... A-1
Annex B ............................................... B-1
Annex C ............................................... C-1
Annex D ............................................... D-1
Annex E ............................................... E-1
Annex F ............................................... F-1
PROSPECTUS
Prospectus Supplement ................................. 2
Available Information ................................. 2
Incorporation of Certain Information by Reference ..... 3
Summary of Prospectus ................................. 8
Risk Factors .......................................... 18
Description of the Trust Funds ........................ 30
Yield and Maturity Considerations ..................... 35
The Depositor ......................................... 40
Use of Proceeds ....................................... 40
Description of the Certificates ....................... 41
Description of the Pooling Agreements ................. 49
Description of Credit Support ......................... 62
Certain Legal Aspects of Mortgage Loans ............... 65
Material Federal Income Tax Consequences .............. 75
State and Other Tax Considerations .................... 100
ERISA Considerations .................................. 100
Legal Investment ...................................... 102
Method of Distribution ................................ 104
Legal Matters ......................................... 105
Financial Information ................................. 105
Rating ................................................ 105
Index of Principal Definitions ........................ 106
</TABLE>
Until March 17, 1999, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
Prospectus Supplement and Prospectus. This delivery requirement is in addition
to the dealers' obligation to deliver a Prospectus Supplement and Prospectus
when acting as underwriters and with respect to their unsold allotments and
subscriptions.
MERRILL LYNCH MORTGAGE
INVESTORS, INC.
(DEPOSITOR)
$563,395,000
(APPROXIMATE)
MORTGAGE PASS-THROUGH
CERTIFICATES
SERIES 1998-C3
---------------------
PROSPECTUS SUPPLEMENT
---------------------
MERRILL LYNCH & CO.
DECEMBER 17, 1998
===============================================================================
