<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration Statement No. 333-38073
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED OCTOBER 15, 1999
$531,719,000 (APPROXIMATE)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES SERIES 1999-C1
------------------------
THE TRUST FUND:
o The Trust Fund will consist of a
pool of 106 conventional, fixed
rate Mortgage Loans.
o The Mortgage Loans are generally
secured by first liens on
commercial and multifamily
properties.
o The Mortgage Loans are expected to
have an initial aggregate principal
balance of $592,445,159.
THE CERTIFICATES:
o The Trust Fund will issue 15
classes of Certificates.
o Only the Certificates described on
the following table are being
offered by this Prospectus
Supplement and the Prospectus.
YOU SHOULD CAREFULLY CONSIDER THE RISK
FACTORS BEGINNING ON PAGE S-22 OF THIS
PROSPECTUS SUPPLEMENT AND ON PAGE 17 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 October 15, 1999.
<TABLE>
<CAPTION>
INITIAL % OF INITIAL
CERTIFICATE POOL PASS- RATED FINAL EXPECTED
BALANCE BALANCE THROUGH DISTRIBUTION RATING
CLASS (+/-5%) (+/-5%) RATE DATE(1) CUSIP NO. (S&P/DCR)
<S> <C> <C> <C> <C> <C> <C>
Class A-1......... $ 97,600,000 16.47% 7.37% November 15, 2031 589929 UC 0 AAA/AAA
Class A-2......... $337,847,000 57.03% 7.56% November 15, 2031 589929 UD 8 AAA/AAA
Class B........... $ 32,584,000 5.50% 7.71%(2) November 15, 2031 589929 UE 6 AA/AA
Class C........... $ 26,660,000 4.50% 7.85%(2) November 15, 2031 589929 UF 3 A/A
Class D........... $ 8,887,000 1.50% 7.85%(2) November 15, 2031 589929 UG 1 A-/A-
Class E........... $ 20,735,000 3.50% 7.85%(2) November 15, 2031 589929 UH 9 BBB/BBB
Class F........... $ 7,406,000 1.25% 7.85%(2) November 15, 2031 589929 UJ 5 BBB-/BBB-
Class IO.......... (3) N/A (3) November 15, 2031 589929 UK 2 AAAr/AAA
</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 November 4, 1999, Merrill Lynch Mortgage Investors, Inc. will
sell these securities to Merrill Lynch, Pierce, Fenner & Smith Incorporated and
PaineWebber 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. PAINEWEBBER INCORPORATED
------------------------
October 29, 1999
<PAGE>
MERRILL LYNCH MORTGAGE INVESTORS, INC.
MORTGAGE PASS-THROUGH CERTIFICATES SERIES 1999-C1
[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 MAP OF CONTINENTAL UNITED STATES]
WASHINGTON MASSACHUSETTS COLORADO
1 property 3 properties 3 properties
$8,269,850 $16,216,933 $11,522,353
1.40% of total 2.74% of total 1.94% of total
ARKANSAS MARYLAND ARIZONA
1 property 2 properties 1 property
$1,709,613 $44,529,018 $3,216,174
0.29% of total 7.52% of total 0.54% of total
ILLINOIS VIRGINIA UTAH
2 properties 6 properties 1 property
$6,010,100 $21,285,252 $18,170,833
1.01% of total 3.59% of total 3.07% of total
NORTH CAROLINA NEVADA MICHIGAN
4 properties 3 properties 1 Property
$3,255,996 $19,544,204 $11,962,178
0.55% of total 3.30% of total 2.02% of total
<PAGE>
LOUISIANA CALIFORNIA INDIANA
3 properties 12 properties 2 Properties
$13,915,620 $69,728,053 $24,936,192
2.35% of total 11.77% of total 4.21% of total
SOUTH CAROLINA OREGON OHIO
2 properties 1 property 4 Properties
$28,933,747 $8,490,237 $14,506,475
4.88% of total 1.43% of total 2.45% of total
GEORGIA WYOMING PENNSYLVANIA
1 property 1 property 3 Properties
$1,920,705 $6,094,765 $11,243,552
0.32% of total 1.03% of total 1.90% of total
TENNESSEE FLORIDA NEW YORK
4 properties 4 properties 11 Properties
$8,276,400 $12,668,849 $48,380,931
1.40% of total 2.14% of total 8.17% of total
ALABAMA IDAHO RHODE ISLAND
1 property 1 property 1 Property
$2,247,636 $4,643,851 $4,208,441
0.38% of total 0.78% of total 0.71% of total
-2-
<PAGE>
MISSISSIPPI CONNECTICUT TEXAS
1 property 7 Properties 23 Properties
$1,736,253 $43,066,467 $111,830,425
0.29% of total 7.27% of total 18.88% of total
NEW JERSEY OKLAHOMA
2 Properties 3 Properties
$3,984,681 $5,939,372
0.67% of total 1.00% of total
[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 10.1% of Initial Pool Balance
[Primary Property Type by Cut-Off Date Balance ]
[3-D PIE CHART]
Mobile Home Park 1.06%
Mixed 1.35%
Health Club 1.42%
Hospitality 3.25%
Healthcare 1.35%
Industrial 8.11%
Unanchored Retail 1.80%
-3-
<PAGE>
Anchored Retail 21.61%
Office 27.29%
Multifamily 32.05%
Self Storage 0.31%
Other 0.40%
-4-
<PAGE>
[SIXTEEN PHOTOGRAPHS]
Picture of
Pond View Corporate Center, Farmington, CT (ML-117)
Picture of
Tanglewood Apartments, Hammond, IN (ML-129)
Picture of
Bend River Mall, Bend, OR (PW-7942)
Picture of
Hampton Point North Apartments, Silver Spring, MD (ML-126)
Picture of
Sunset Hills Apartments, Henderson, NV (PW-8763)
Picture of
Saw Mill Apartments, Columbus, OH (ML-124)
Picture of
Frazier-King Building, Irving, TX (ORIX-2965)
Picture of
Helix Building, Las Vegas, NV (PW-8352)
Picture of
Lakeside Plaza Office Center, Salt Lake City, UT (ORIX-3325)
Picture of
Lexus Training Center, Parsippany, NJ (PW-7789)
Picture of
College Square, Cerritos, CA (ML-156)
Picture of
Blue Cross Blue Shield Building, Columbia, SC (PW-7905)
Picture of
Seacrest Oceanfront Resort & Conference Center, North Falmouth, MA (ML-138)
Picture of
Spectrum Club, Thousand Oaks, CA (ORIX-3257)
Picture of
Creekside Apartments, Dallas, TX (ML-103)
Picture of
Putnam Plaza, Hamden, CT (ORIX-3208)
-5-
<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 OFFERED
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 1999-C1 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 1999-C1 Certificates and a description of the
Mortgage Loans; and
Risk Factors, commencing on page S-22 of this Prospectus Supplement,
which describe risks that apply to the Series 1999-C1 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-113 in this Prospectus
Supplement. The capitalized terms used in the Prospectus are defined on the
pages indicated under the caption "Index of Definitions" beginning on page 103
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, Class E
and Class F Certificates for any Distribution Date will equal the lesser of
(i) the indicated fixed rate per annum for such Class and (ii) the Weighted
Average Net Mortgage Rate for such Distribution Date, as more fully
described in "DESCRIPTION OF THE CERTIFICATES--General" herein.
(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>
<S> <C>
SUMMARY OF PROSPECTUS SUPPLEMENT......................................................................... S-7
RISK FACTORS............................................................................................. S-22
Certain Risks Associated with the Certificates......................................................... S-22
Limited Assets...................................................................................... S-22
Certain Yield and Maturity Considerations........................................................... S-22
Risks Related to the Rate of Prepayment of the Mortgage Loans....................................... S-23
Risks Related to Enforcement of Prepayment Restrictions and Defeasance Provisions................... S-24
Potential Conflicts of Interest..................................................................... S-25
Risk of Year 2000................................................................................... S-25
Limited Liquidity for Offered Certificates.......................................................... S-25
Lack of Control Over Trust Fund..................................................................... S-26
Servicing Transfer Risk............................................................................. S-26
Certain Risk Factors Associated with the Mortgage Loans................................................ S-26
Risks of Lending on Income-Producing Properties..................................................... S-26
Limited Alternative Uses of Mortgaged Properties.................................................... S-31
Issues Involving Significant Single-Tenant Mortgage Loans........................................... S-31
Factors Affecting the Repayment of Mortgage Loans Secured by Condominium Properties ........ ....... S-32
Nonrecourse Mortgage Loans.......................................................................... S-32
Environmental Law Considerations.................................................................... S-32
Risks Associated with Balloon Loans and ARD Loans................................................... S-34
Risks Associated with Related Borrowers............................................................. S-35
Geographic Concentration of Properties Increasing Isolated Geographic Risk.......................... S-35
Risks Associated with Concentration of Mortgage Loans............................................... S-35
Recently Constructed Properties Do Not Have Operating Histories..................................... S-36
No Reunderwriting of Mortgage Loans................................................................. S-36
Tax Considerations Related to Foreclosure........................................................... S-36
Special Hazards Losses.............................................................................. S-36
Other Financing..................................................................................... S-37
Risks Related to the Borrower's Form of Entity...................................................... S-38
Limitations of Appraisals and Engineering Reports................................................... S-38
Zoning Compliance................................................................................... S-38
Costs of Compliance with Applicable Laws and Regulations............................................ S-39
Limitations on Enforceability of Due-on-Sale Clauses and Assignments of Leases and Rents............ S-39
Litigation.......................................................................................... S-39
Condemnations....................................................................................... S-40
Risks of Different Timing of Mortgage Loan Amortization............................................. S-40
Risks Associated with Ground Leases and Other Leasehold Interests................................... S-40
Risks Associated with the Mortgage Loan Sellers..................................................... S-41
DESCRIPTION OF THE MORTGAGE POOL......................................................................... S-42
General................................................................................................ S-42
Certain Terms and Conditions of the Mortgage Loans..................................................... S-42
Mortgage Rates; Calculations of Interest............................................................ S-42
Due Dates........................................................................................... S-42
Amortization........................................................................................ S-43
Prepayment Provisions............................................................................... S-43
Defeasance.......................................................................................... S-43
Nonrecourse Obligations............................................................................. S-43
"Due-on-Sale" and "Due-on-Encumbrance" Provisions................................................... S-44
Cross-Default and Cross-Collateralization of Certain Mortgage Loans................................. S-44
Assessment of Property Condition....................................................................... S-44
Property Inspection................................................................................. S-44
Appraisals.......................................................................................... S-44
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
Environmental Assessments........................................................................... S-44
Engineering Assessments............................................................................. S-45
Earthquake Analyses................................................................................. S-45
Zoning Compliance................................................................................... S-45
Largest Mortgage Loan Concentrations................................................................... S-45
Additional Mortgage Loan Information................................................................... S-48
The Mortgage Pool................................................................................... S-48
The Mortgage Loan Sellers.............................................................................. S-58
Merrill Lynch Mortgage Capital Inc.'s Underwriting Standards........................................... S-58
General............................................................................................. S-58
Cash Flow Analysis.................................................................................. S-58
Appraisal and Loan-to-Value Ratio................................................................... S-58
DSCR and LTV Ratio.................................................................................. S-58
Evaluation of Borrower.............................................................................. S-58
Tax and Insurance Reserves.......................................................................... S-59
Replacement Reserves................................................................................ S-59
Property Inspection................................................................................. S-59
Environmental Assessments........................................................................... S-59
Engineering Assessments............................................................................. S-59
Earthquake Analyses................................................................................. S-59
Title Insurance Policy.............................................................................. S-60
Property Insurance.................................................................................. S-60
Paine Webber Real Estate Securities Inc.'s Underwriting Standards...................................... S-60
General............................................................................................. S-60
Evaluation of Borrower.............................................................................. S-60
Financial Analysis.................................................................................. S-60
Physical Condition Review........................................................................... S-61
Appraisal and Loan-to-Value Ratio................................................................... S-61
Escrow Requirements................................................................................. S-61
ORIX Real Estate Capital Markets, LLC's Underwriting Standards......................................... S-61
General............................................................................................. S-61
Cash Flow Analysis.................................................................................. S-61
Appraisal and Loan-to-Value Ratio................................................................... S-61
DSCR and LTV Ratio.................................................................................. S-62
Evaluation of Borrower.............................................................................. S-62
Property Inspection................................................................................. S-62
Environmental Assessments........................................................................... S-62
Engineering Assessments............................................................................. S-62
Escrow Requirements................................................................................. S-62
Title Insurance Policy.............................................................................. S-62
Property Insurance.................................................................................. S-63
Assignment of the Mortgage Loans; Repurchases and Substitutions........................................ S-63
Representations and Warranties; Repurchases and Substitutions.......................................... S-65
Changes in Mortgage Pool Characteristics............................................................... S-69
SERVICING OF THE MORTGAGE LOANS.......................................................................... S-70
General................................................................................................ S-70
The Master Servicer.................................................................................... S-72
The Special Servicer................................................................................... S-72
Servicing and Other Compensation and Payment of Expenses............................................... S-73
Modifications, Waivers and Amendments.................................................................. S-75
The Controlling Class Representative................................................................... S-76
Limitation on Liability of Controlling Class Representative............................................ S-77
REO Properties......................................................................................... S-77
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
Inspections; Collection of Operating Information....................................................... S-78
DESCRIPTION OF THE CERTIFICATES.......................................................................... S-80
General................................................................................................ S-80
Registration and Denominations......................................................................... S-80
Certificate Balances and Notional Amounts.............................................................. S-81
Pass-Through Rates..................................................................................... S-82
Distributions.......................................................................................... S-83
General............................................................................................. S-83
The Available Distribution Amount................................................................... S-83
Application of Available Distribution Amount........................................................ S-83
Distributable Certificate Interest.................................................................. S-87
Principal Distribution Amount....................................................................... S-87
Treatment of REO Properties......................................................................... S-88
Allocation of Prepayment Premiums................................................................... S-89
Subordination; Allocation of Losses and Certain Expenses............................................... S-89
Advances............................................................................................... S-91
Appraisal Reductions................................................................................... S-92
Reports to Certificateholders; Available Information................................................... S-94
Voting Rights.......................................................................................... S-96
Termination............................................................................................ S-96
The Trustee............................................................................................ S-97
YIELD AND MATURITY CONSIDERATIONS........................................................................ S-98
Yield Considerations................................................................................... S-98
General............................................................................................. S-98
Rate and Timing of Principal Payment................................................................ S-98
Losses and Shortfalls............................................................................... S-99
Pass-Through Rates.................................................................................. S-99
Certain Relevant Factors............................................................................ S-100
Delay in Payment of Distributions................................................................... S-100
Unpaid Distributable Certificate Interest........................................................... S-100
Yield Sensitivity of the Class IO Certificates...................................................... S-100
Weighted Average Life.................................................................................. S-101
USE OF PROCEEDS.......................................................................................... S-107
MATERIAL FEDERAL INCOME TAX CONSEQUENCES................................................................. S-107
ERISA CONSIDERATIONS..................................................................................... S-108
LEGAL INVESTMENT......................................................................................... S-110
METHOD OF DISTRIBUTION................................................................................... S-111
LEGAL MATTERS............................................................................................ S-112
RATINGS.................................................................................................. S-112
INDEX OF PRINCIPAL DEFINITIONS........................................................................... S-113
ANNEX A--CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS................................................... A-1
ANNEX B--FORM OF INVESTOR CERTIFICATION.................................................................. B-1
ANNEX C--FORM OF DISTRIBUTION DATE STATEMENT............................................................. C-1
ANNEX D--FORM OF SERVICER REPORTS........................................................................ D-1
ANNEX E-- CERTAIN CHARACTERISTICS OF MULTIFAMILY MORTGAGED PROPERTIES.................................... E-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. WE ARE NOT OFFERING THE PRIVATE CERTIFICATES PURSUANT TO
THIS PROSPECTUS SUPPLEMENT.
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, AS DESCRIBED IN THIS
PROSPECTUS SUPPLEMENT.
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
1999-C1. Each Certificate represents an undivided beneficial 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>
[Class G, Class H, Class J and Class K and the corresponding rows are shaded]
INITIAL PERCENT OF PASS- WEIGHTED CASH FLOW
CERTIFICATE INITIAL POOL CREDIT THROUGH AVERAGE LIFE OR PRINCIPAL
CLASS BALANCE(1) BALANCE(1) SUPPORT DESCRIPTION RATE (YEARS)(2) WINDOW(2)
---------- ------------ ------ ------- ---------------- ----- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A-1 ... $ 97,600,000 16.47% 26.50% Fixed Coupon 7.37% 5.6 12/99-06/08
Class A-2 ... $337,847,000 57.03% 26.50% Fixed Coupon 7.56% 9.6 06/08-09/09
Class B ..... $ 32,584,000 5.50% 21.00% Fixed Coupon (4) 7.71%(4) 9.9 09/09-09/09
Class C ..... $ 26,660,000 4.50% 16.50% Fixed Coupon (4) 7.85%(4) 9.9 09/09-09/09
Class D ..... $ 8,887,000 1.50% 15.00% Fixed Coupon (4) 7.85%(4) 9.9 09/09-09/09
Class E ..... $ 20,735,000 3.50% 11.50% Fixed Coupon (4) 7.85%(4) 9.9 09/09-09/09
Class F ..... $ 7,406,000 1.25% 10.25% Fixed Coupon (4) 7.85%(4) 9.9 09/09-09/09
Class IO .... (5) N/A N/A Variable IO Strip (5) N/A 12/99-06/11
- ------------------------------------------------------------------------------------------------------------------------------------
Class G ..... $ 23,698,000 4.00% 6.25% Fixed Coupon (4) 6.71%(4) 9.9 09/09-10/09
Class H .... $ 20,735,000 3.50% 2.75% Fixed Coupon (4) 6.71%(4) 9.9 10/09-10/09
Class J .... $ 2,963,000 0.50% 2.25% Fixed Coupon (4) 7.21%(4) 9.9 10/09-10/09
Class K .... $ 13,330,159 2.25% N/A Fixed Coupon (4) 7.21%(4) 10.8 10/09-06/11
<CAPTION>
EXPECTED
RATING(3)
---------
<S> <C>
Class A-1 ... AAA/AAA
Class A-2 ... AAA/AAA
Class B ..... AA/AA
Class C ..... A/A
Class D ..... A-/A-
Class E ..... BBB/BBB
Class F ..... BBB-/BBB-
Class IO .... AAAr/AAA
- --------------------------------------------------------------------
Class G ..... BB/BB
Class H .... B/B
Class J .... B-/B-
Class K .... N.R.(6)
</TABLE>
- ---------------
(1) Subject to a permitted variance of plus or minus 5.0%.
(2) Based on no prepayments (other than for ARD Loans which are assumed to
prepay in full on their respective Anticipated Repayment Dates) and the
other assumptions set forth under "YIELD AND MATURITY
CONSIDERATIONS--Weighted Average Life" in this Prospectus Supplement.
(3) By each of Standard and Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. ("S&P") and Duff & Phelps Credit Rating Co.
("DCR").
(4) The Pass-Through Rates applicable to the Class B, Class C, Class D,
Class E, Class F, Class G, Class H, Class J and Class K Certificates for any
Distribution Date will equal the lesser of (i) the indicated fixed rate per
annum for such Class and (ii) the Weighted Average Net Mortgage Rate for
such Distribution Date, as more fully described in "DESCRIPTION OF THE
CERTIFICATES--General" herein.
(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) Not rated.
[Not shaded] Offered Certificates
[Shaded] Private Certificates
S-7
<PAGE>
<TABLE>
<S> <C>
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 a Mortgage Loan Seller,
and an affiliate of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, an 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 SELLERS................. Merrill Lynch Mortgage Capital Inc., the Depositor's corporate parent
and an affiliate of one of the Underwriters, Paine Webber Real Estate
Securities Inc., an affiliate of one of the Underwriters, and ORIX
Real Estate Capital Markets, LLC (formerly known as Banc One Mortgage
Capital Markets, LLC), which is also the Master Servicer and Special
Servicer. For more information, see "DESCRIPTION OF THE MORTGAGE
POOL--The Mortgage Loan Sellers" in this Prospectus Supplement. On
the Closing Date, the Mortgage Loan Sellers 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....................... ORIX Real Estate Capital Markets, LLC will be the Master Servicer.
The Master Servicer will be primarily responsible for collecting
payments and gathering information with respect to the Mortgage
Loans. See "SERVICING OF THE MORTGAGE LOANS--The Master Servicer"
herein.
THE SPECIAL SERVICER...................... ORIX Real Estate Capital Markets, LLC will 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 condi-
tions 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. We anticipate that ORIX Real Estate Capital
Markets, LLC will be purchasing some or all of the Private Certif-
icates, except the REMIC Residual Certificates. See "SERVICING OF THE
MORTGAGE LOANS--The Special Servicer" herein.
THE TRUSTEE............................... Norwest Bank Minnesota, National Association, a national banking
association. The Trustee will be responsible for distributing
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
payments to Certificateholders and delivering to Certificateholders
certain reports on the Mortgage Loans and the Certificates. See
"DESCRIPTION OF THE CERTIFICATES--The Trustee" herein.
THE UNDERWRITERS.......................... Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of
the Depositor and one of the Mortgage Loan Sellers, and PaineWebber
Incorporated, an affiliate of one of the Mortgage Loan Sellers. The
Underwriters will purchase the Offered Certificates from the
Depositor and you may purchase Offered Certificates from the
Underwriters on and after the Closing Date.
IMPORTANT DATES AND PERIODS
CLOSING DATE.............................. On or about November 4, 1999.
CUT-OFF DATE.............................. November 1, 1999 for all but eight of the Mortgage Loans. For eight
of the Mortgage Loans (2.13%) whose Due Dates are on the fifth day of
the month, the Cut-Off Date is November 5, 1999.
DISTRIBUTION DATE......................... The 15th day of each month (or if such day is not a business day, the
next succeeding business day) beginning on December 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 immedi-
ately 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.
RECORD DATE............................... With respect to each Distribution Date, the last business day of the
month preceding the month in which that Distribution Date occurs.
ASSUMED FINAL DISTRIBUTION DATE........... We expect that the final distribution on each Class of Offered Cer-
tificates will be made on the following dates (which we refer to as
the related "Assumed Final Distribution Date"), assuming that there
are no prepayments (other than with respect to ARD Loans, which we
assume will prepay on their respective Anticipated Repayment Dates),
defaults, delinquencies or modifications with respect to the Mortgage
Loans after the Cut-Off Date:
</TABLE>
<TABLE>
<CAPTION>
CLASS ASSUMED FINAL
DESIGNATION DISTRIBUTION DATE
-------------------------------------------- ------------------
<S> <C> <C>
CLASS A-1................................... June 15, 2008
CLASS A-2................................... September 15, 2009
CLASS IO.................................... June 15, 2011
CLASS B..................................... September 15, 2009
CLASS C..................................... September 15, 2009
CLASS D..................................... September 15, 2009
CLASS E..................................... September 15, 2009
CLASS F..................................... September 15, 2009
</TABLE>
S-9
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<TABLE>
<S> <C>
RATED FINAL DISTRIBUTION DATE............. November 15, 2031, which is the first Distribution Date that fol-
lows 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 CERTIFICATES
OFFERED CERTIFICATES...................... The Depositor is offering the Class A-1, Class A-2, Class B,
Class C, Class D, Class E, Class F and Class IO Certificates of its
Mortgage Pass-Through Certificates, Series 1999-C1 to you pursuant to
this Prospectus Supplement. See "DESCRIPTION OF THE CERTIFICATES"
herein.
PRIVATE CERTIFICATES...................... The Class G, Class H, Class J and Class K Certificates and the REMIC
Residual Certificates of the Depositor's Mortgage Pass-Through
Certificates, Series 1999-C1 are being offered by the Depositor in a
private transaction. See "DESCRIPTION OF THE CERTIFICATES" herein.
PRINCIPAL DISTRIBUTIONS................... Each of the Class A-1, Class A-2, Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class J and Class K Certificates (the
"Sequential Pay Certificates") will be issued with an initial ag-
gregate 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 re-
duced below zero.
The Class IO Certificates and the REMIC Residual 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.
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.
</TABLE>
S-10
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<TABLE>
<S> <C>
See "DESCRIPTION OF THE CERTIFICATES--Distributions" herein.
INTEREST.................................. On each Distribution Date, the holders of each class of Offered
Certificates will be entitled to receive:
o the Distributable Certificate Interest for such class; 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 Sequential Pay 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 Master
Servicer or the Trustee.
The Class IO Certificates will have 11 components (each a "Com-
ponent"), with a Component corresponding to each class of Se-
quential Pay Certificates. On each Distribution Date, each Compo-
nent 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 corresponding class of
Sequential Pay Certificates.
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 $592,445,159.
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 Master
Servicer or the Trustee.
Interest on the Certificates will be calculated on a 30/360 basis.
See "DESCRIPTION OF THE CERTIFICATES--Distributions" herein.
</TABLE>
S-11
<PAGE>
<TABLE>
<S> <C>
PASS-THROUGH RATES........................ The per annum interest rate for the Class A-1 and Class A-2 Cer-
tificates 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 for all other classes of
Sequential Pay Certificates on each Distribution Date will be the
lesser of the applicable per annum interest rate set forth in the
table at the beginning of this Summary and the Weighted Average Net
Mortgage Rate for such Distribution Date.
The Pass-Through Rate for 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 Sequential Pay
Certificates.
The "Weighted Average Net Mortgage Rate" for each Distribution Date
is the weighted average of the Net Mortgage Rates for the Mortgage
Loans, weighted on the basis of their respective Stated Principal
Balances outstanding immediately prior to such Distribution Date.
The "Net Mortgage Rate" for each Mortgage Loan will generally equal
(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. Since all of the Mortgage Loans accrue
interest on an actual/360 basis, solely for the purpose of
calculating the Weighted Average Net Mortgage Rate, the Mortgage Rate
referred to in clause (x) and the servicing and trustee fee rates
will be adjusted, if necessary, to compensate for months which have
more or less than 30 days, as described in this Prospectus
Supplement.
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
(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 other-
wise removed from the Trust Fund in any Collection Period, the Stated
Principal Balance of such Mortgage Loan will be zero on and after the
next Distribution Date.
See "DESCRIPTION OF THE CERTIFICATES--Pass-Through Rates" herein.
</TABLE>
S-12
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<TABLE>
<S> <C>
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 were advanced during the related Collection Period after
deducting certain fees and expenses. See "DESCRIPTION OF THE
CERTIFICATES--Subordination; Allocation of Losses and Certain
Expenses" herein.
The Trustee will, to the extent of the Available Distribution Amount,
distribute interest to the holders of a class of the Certificates
(other than the holders of the REMIC Residual 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 of the Available Distribution Amount,
distribute the Principal Distribution Amount to holders of a class of
Sequential Pay Certificates:
o only to the extent funds remain after the Trustee makes all
distributions of (i) principal and interest on each class of
Certificates with a higher priority of distribution and (ii)
distribution of interest to such class; and
o in an amount not greater than the outstanding Certificate Balance
of such class.
The Trustee will distribute such amounts, to the extent of the
Available Distribution Amount, in the following order of priority to
pay:
(1) Interest, pro rata, on the Class IO, Class A-1 and Class A-2
Certificates.
(2) Principal on the Class A-1 Certificates.
(3) Principal on the Class A-2 Certificates.
(4) Reimbursement to the Class A-1 and Class A-2 Certificates, pro
rata, for any realized losses and unanticipated trust fund
expenses previously applied to such classes, plus interest on
such losses or expenses.
(5) Interest on the Class B Certificates.
(6) Principal on the Class B Certificates.
(7) 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.
</TABLE>
S-13
<PAGE>
<TABLE>
<S> <C>
(8) Interest on the Class C Certificates.
(9) Principal on the Class C Certificates.
(10) 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.
(11) Interest on the Class D Certificates.
(12) Principal on the Class D Certificates.
(13) 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.
(14) Interest on the Class E Certificates.
(15) Principal on the Class E Certificates.
(16) 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.
(17) Interest on the Class F Certificates.
(18) Principal on the Class F Certificates.
(19) Reimbursement to the Class F Certificates for any realized
losses and unanticipated trust fund expenses previously applied
to such class, plus interest on such losses or expenses.
(20) 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,
distributions of principal will be made, pro rata, to the outstanding
Class A-1 and Class A-2 Certificates.
You may, in certain circumstances, also receive distributions of
percentage premiums and yield maintenance charges collected on the
Mortgage Loans. Such distributions are in addition to the
distributions of principal and interest described above.
See "DESCRIPTION OF THE CERTIFICATES--Distributions" herein.
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 from the Mortgage Loans generally are
made in alphabetical or numerical order, as applicable, and
</TABLE>
S-14
<PAGE>
<TABLE>
<S> <C>
o losses on the Mortgage Loans are allocated to classes in reverse
alphabetical order, as indicated on the following table:
</TABLE>
<TABLE>
<CAPTION>
ORDER OF APPLICATION OF LOSSES AND EXPENSES
% OF
INITIAL INITIAL
CERTIFICATE POOL
CLASS DESIGNATION BALANCE BALANCE
--------------------------- ------------ -----
<S> <C> <C> <C>
Private Certificates....... $ 60,726,159 10.25%
Class F.................... $ 7,406,000 1.25%
Class E.................... $ 20,735,000 3.50%
Class D.................... $ 8,887,000 1.50%
Class C.................... $ 26,660,000 4.50%
Class B.................... $ 32,584,000 5.50%
Class A-1 and
Class A-2 ................. $435,447,000 73.50%
The Certificate Balance of a class of Sequential Pay
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.
See "DESCRIPTION OF THE CERTIFICATES--Subordination; Allocation
of Losses and Certain Expenses" herein.
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 and, if it fails to do so, the
Trustee, have agreed to advance certain payments to the Trust
Fund. Subject to reduction under certain circumstances, as
described under "DESCRIPTION OF THE CERTIFICATES--Appraisal
Reductions," the Master Servicer or the Trustee, as the case
may be, will make cash advances with respect to delinquent
payments of principal (other than Balloon Payments) and
interest on the Mortgage Loans to the extent the Master
Servicer or the Trustee, as the case may be, determines that
such payments will be ultimately recoverable. These cash
advances are only intended to maintain a regular flow of
scheduled interest and principal payments on the Certificates
and are not intended to guarantee or insure against losses. The
Trust Fund will pay interest to the Master Servicer or the
Trustee, as the case may be, on the amount of such advance at
the prime rate and will reimburse the Master Servicer or the
Trustee, as the case may be, first from default interest and
late collections and then from general collections on the
Mortgage Loans for any such advances that are not recoverable.
See "DESCRIPTION OF THE CERTIFICATES--Advances" herein.
</TABLE>
S-15
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<TABLE>
<S> <C>
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.
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.
See "DESCRIPTION OF THE CERTIFICATES--Registration and
Denominations" herein.
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 Sequential Pay
Certificates and the Class IO Certificates, will evidence
"regular interests" in a REMIC and generally will be treated as
debt instruments of such REMIC. The Trust Fund will also issue
one or more classes of REMIC residual certificates (the "REMIC
Residual Certificates"). The REMIC Residual Certificates are
not offered hereby.
The Class A-1, Class A-2, Class B, Class C and Class D
Certificates will not, and the Class E, Class F 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 and Class IO Certificates may rely upon Merrill
Lynch's or PaineWebber's Prohibited Transaction Exemption.
See "ERISA CONSIDERATIONS" in this Prospectus Supplement and in
the Prospectus.
</TABLE>
S-16
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<TABLE>
<S> <C>
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.
RATINGS................................... The Offered Certificates will not be offered unless they
receive the following ratings from S&P and DCR (the "Rating
Agencies"):
</TABLE>
<TABLE>
<CAPTION>
CLASS RATING FROM S&P/DCR
--------------------------- -------------------
<S> <C>
Class A-1.................. AAA/AAA
Class A-2.................. AAA/AAA
Class B.................... AA/AA
Class C.................... A/A
Class D.................... A-/A-
Class E.................... BBB/BBB
Class F.................... BBB-/BBB-
Class IO................... AAAr/AAA
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. 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.
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.
S&P assigns the additional symbol of "r" to highlight classes of
securities that S&P 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.
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.
</TABLE>
S-17
<PAGE>
THE MORTGAGE LOANS
<TABLE>
<S> <C>
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>
<TABLE>
<S> <C>
Number of Mortgage Loans.................................................................. 106
Initial Pool Balance...................................................................... $592,445,159
Minimum Cut-Off Date Balance.............................................................. $721,001
Maximum Cut-Off Date Balance.............................................................. $26,086,864
Average Cut-Off Date Balance.............................................................. $5,589,105
Minimum Mortgage Rate..................................................................... 6.98%
Maximum Mortgage Rate..................................................................... 9.50%
Weighted Average Mortgage Rate............................................................ 7.99%
Minimum Remaining Term to Maturity (months)(1)............................................ 63
Maximum Remaining Term to Maturity (months)(1)............................................ 139
Weighted Average Remaining Term to Maturity (months)(1)................................... 114
Minimum Remaining Amortization Term (months).............................................. 274
Maximum Remaining Amortization Term (months).............................................. 360
Weighted Average Remaining Amortization Term (months)..................................... 346
Minimum Cut-Off Date DSCR................................................................. 1.20x
Maximum Cut-Off Date DSCR................................................................. 3.89x
Weighted Average Cut-Off Date DSCR........................................................ 1.40x
Minimum Cut-Off Date LTV.................................................................. 40.54%
Maximum Cut-Off Date LTV.................................................................. 79.85%
Weighted Average Cut-Off Date LTV......................................................... 70.53%
Minimum Repayment LTV(2).................................................................. 33.90%
Maximum Repayment LTV(2).................................................................. 73.18%
Weighted Average Repayment LTV(2)......................................................... 62.46%
</TABLE>
- ------------------
(1) Term to maturity of Balloon Loans and term to Anticipated Repayment Date of
ARD Loans.
(2) At maturity for Balloon Loans only or at Anticipated Repayment Date for ARD
Loans.
<TABLE>
<S> <C>
o Thirty-eight (38) of the Mortgage Loans (47.26%) are being assigned
to the Depositor by MLMC, 36 of the Mortgage Loans (28.72)% are
being assigned to the Depositor by Paine Webber Real Estate
Securities Inc., and 32 of the Mortgage Loans (24.02%) are being
assigned to the Depositor by ORIX Real Estate Capital Markets, LLC.
o One (1) of the Mortgage Loans (1.44%) was originated in 1997. Seven
(7) of the Mortgage Loans (9.25%) were originated in 1998.
Ninety-eight (98) of the Mortgage Loans (89.31%) were originated
in 1999.
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.
For more information about the Mortgage Loans and the related
Mortgaged Properties, you should review the tables under "DESCRIPTION
OF THE MORTGAGE POOL--Additional
</TABLE>
S-18
<PAGE>
<TABLE>
<S> <C>
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>
<TABLE>
<CAPTION>
PERCENTAGE OF
REAL ESTATE NUMBER OF INITIAL POOL
INTEREST MORTGAGE LOANS BALANCE
--------------------------- -------------- -------------
<S> <C> <C> <C>
Fee Simple Estate ......... 104 98.69%
Leasehold Estate .......... 1 0.95%
Fee Simple Estate and
Leasehold Estate .......... 1 0.35%
</TABLE>
<TABLE>
<S> <C>
PROPERTY TYPES............................ The following table lists the uses for the Mortgaged Properties:
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
MORTGAGED INITIAL POOL
PROPERTY TYPE PROPERTIES BALANCE
------------------------------------------ --------- -------------
<S> <C> <C> <C>
Multifamily .............................. 31 32.05%
Office ................................... 20 27.29%
Retail ................................... 32 23.41%
Industrial/Warehouse ..................... 14 8.11%
Hospitality .............................. 3 3.25%
Health Club .............................. 1 1.42%
Healthcare ............................... 4 1.35%
Mixed Use ................................ 2 1.35%
Mobile Home Park ......................... 6 1.06%
Other .................................... 1 0.40%
Self-Storage ............................. 1 0.31%
</TABLE>
<TABLE>
<S> <C>
GEOGRAPHIC CONCENTRATIONS................. The Mortgaged Properties are located throughout 32 states. The
following table lists the number and percentage of Mortgaged
Properties in states which have concentrations of Mortgaged
Properties above 5%:
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
MORTGAGED INITIAL POOL
STATES PROPERTIES BALANCE
------------------------------------------ --------- -------------
<S> <C> <C> <C>
Texas .................................... 23 18.88%
California ............................... 12 11.77%
New York ................................. 11 8.17%
Maryland ................................. 2 7.52%
Connecticut .............................. 7 7.27%
</TABLE>
<TABLE>
<S> <C>
PRINCIPAL AND INTEREST PAYMENT TERMS...... All of the Mortgage Loans accrue interest at a fixed rate, although
the rates for those Mortgage Loans which have anticipated repayment
dates may increase if such Mortgage Loans are not repaid on such
anticipated repayment dates.
Except for eight Mortgage Loans (2.13%) for which payments are due on
the fifth day of each month, payments on the Mortgage Loans are due
on the first day of each month.
</TABLE>
S-19
<PAGE>
<TABLE>
<S> <C>
All of the Mortgage Loans bear interest on an actual/360 basis.
TYPE OF AMORTIZATION...................... The following table lists the amortization characteristics of the
Mortgage Loans:
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF INITIAL POOL
TYPE OF AMORTIZATION MORTGAGE LOANS BALANCE
------------------------------------- -------------- -------------
<S> <C> <C> <C>
Balloon Loans ....................... 97 84.37%
ARD Loans ........................... 9 15.63%
</TABLE>
<TABLE>
<S> <C>
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 to a lockbox 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.
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>
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
TYPE OF PREPAYMENT MORTGAGE INITIAL POOL
RESTRICTION LOANS BALANCE
------------------------------------ -------------- -------------
<S> <C> <C> <C>
Prohibit Prepayments for most
of term .......................... 99 89.91%
Prohibit Prepayment until date
specified in related Note and then
impose a Yield Maintenance Charge
or Percentage Premium for most of
remaining term ................... 7 10.09%
</TABLE>
<TABLE>
<S> <C>
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.
</TABLE>
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<TABLE>
<S> <C>
DEFEASANCE................................ With respect to 99 Mortgage Loans (89.91%), 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.
INFORMATION AVAILABLE TO
CERTIFICATEHOLDERS...................... On each Distribution Date, the Trustee will make available on its
website to any interested party, a statement as of such date setting
forth the amounts distributed to the holders of each Class of
Certificates on such Distribution Date and a report, based on
information that it receives from the Master Servicer or Special
Servicer, containing certain information regarding the Mortgage Loans
as of the end of the related Collection Period.
In addition, subject to the limitations set forth in the Pooling and
Servicing Agreement, the Trustee or the Master Servicer, as
appropriate, must also make available to you at its office (i) all
statements delivered to holders of Offered Certificates on each
Distribution Date since the Closing Date, (ii) the most recent
property inspection report prepared by or on behalf of the Special
Servicer in respect of each Mortgaged Property, (iii) any and all
statements and reports delivered to, or collected by, the Master
Servicer or the Special Servicer, from the borrowers, including the
most recent annual property operating statements, rent rolls and
borrower financial statements, (iv) any and all modifications,
waivers and amendments of the terms of a Mortgage Loan entered into
by the Master Servicer or Special Servicer and delivered to the
Trustee and (v) the Pooling and Servicing Agreement and any
amendments thereto.
In addition, the Trustee will make available to you certain reports
that are prepared by the Master Servicer in the form attached to this
Prospectus Supplement as "Annex D".
We provide more detailed information about the reports that you will
receive in "DESCRIPTION OF THE CERTIFICATES--Reports to
Certificateholders; Available Information."
</TABLE>
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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 related Pass-Through Rate (and whether, except in the case of the
Class A-1 and Class A-2 Certificates, such rate is limited by the
Weighted Average Net Mortgage Rate of the Mortgage Loans);
o the purchase price paid for such Certificates (and whether such price
represents a premium over or discount to the principal amount represented
by such Certificate);
o The rate, amount and timing of principal payments and collections on the
Mortgage Loans. 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 or
termination of the Trust Fund. A buyer of the
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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,
Class E, Class F, Class G, Class H, Class J and Class K Certificates for each
Distribution Date will equal the lesser of (i) 7.71%, 7.85%, 7.85%, 7.85%,
7.85%, 6.71%, 6.71%, 7.21% and 7.21%, respectively, and (ii) the Weighted
Average Net Mortgage Rate. The Pass-Through Rates applicable to each of the
Components for each Distribution Date will equal the Weighted Average Net
Mortgage Rate minus the Pass-Through Rate then applicable to the corresponding
Class of Sequential Pay Certificates for such Distribution Date (but not less
than zero). Accordingly, the Pass-Through Rates on such Classes of Certificates
and on the Components and, correspondingly, the yield on the Class IO
Certificates, will be sensitive to changes in the relative composition of the
Mortgage Pool as a result of scheduled amortization, voluntary 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.
Generally, the Private Certificates (other than the REMIC Residual
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, Class E and Class F Certificates will bear such shortfalls and
losses prior to the Class A-1 and Class A-2 Certificates, in reverse
alphabetical order of class designation. The Class A-1 and Class A-2
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, Class F Certificates and the Private
Certificates (other than the REMIC Residual Certificates) (the "Subordinate
Certificates") has been reduced to zero, 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-1 and Class A-2 Certificates will have 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 (including the Staples Escrow), defaults and liquidations.
The Pass-Through Rate applicable to each 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" and
DESCRIPTION OF THE MORTGAGE POOL--Largest Mortgage Loans Concentrations--College
Square in this Prospectus Supplement.
Risks Related to the Rate of Prepayment of the Mortgage Loans. If you
purchase your Certificates at a discount, you should consider the risk that a
slower than anticipated rate of principal payments on the Mortgage Loans may
result in an actual yield that is lower than your expected yield. Conversely, if
you purchase your Certificates at a premium, you should consider the risk that a
faster than anticipated rate of principal payments on the Mortgage Loans may
result in an actual yield that is lower than your expected yield. Insofar as
your initial investment in any Offered Certificate is repaid, you may not be
able to
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<PAGE>
reinvest such amounts in an alternative investment with a yield comparable to
the yield on your Certificates.
We cannot predict the actual rate of prepayment of principal of the
Mortgage Loans. See "--Certain Risk Factors Associated with the Mortgage
Loans--Enforcement of Prepayment Restrictions" below for a more complete
discussion of prepayment issues.
The investment performance of your Certificates may vary materially and
adversely from your investment expectations due to prepayments on the Mortgage
Loans (whether voluntary or otherwise) being higher or lower than you
anticipated. Even if the actual yield is equal to your anticipated yield, you
may not realize your expected total return on investment or the expected
weighted average life of your Certificate.
If you purchase Class IO Certificates, your yield to maturity will be
extremely sensitive to the rate and timing of principal payments (including
prepayments) and principal losses with respect to the Mortgage Loans. Investors
should fully consider the associated risks, including the risk that a rapid rate
of principal payments and/or principal losses on the Mortgage Pool could result
in the failure by investors in the Class IO Certificates to fully recoup their
initial investments. See "Yield Considerations--Yield Sensitivity of the Class
IO Certificates."
In deciding whether to purchase any Certificates, you should make an
independent decision as to the appropriate prepayment assumptions to be used.
Risks Related to Enforcement of Prepayment Restrictions and Defeasance
Provisions. All of the Mortgage Loans contain provisions prohibiting voluntary
prepayments for a specified amount of time after origination (the "Lockout
Period") and/or allow voluntary prepayments only with the payment of a
Prepayment Premium (as defined herein) for a specified amount of time from
origination. The requirement to pay Prepayment Premiums in connection with a
prepayment is intended to result in prepayments of the Mortgage Loans occurring
at a lower rate than would have been the case if the borrowers were not required
to pay such additional amount. However, we cannot give you any assurance that
the imposition of a Prepayment Premium will provide a sufficient disincentive to
prevent a voluntary principal prepayment. For example:
o in certain circumstances, such as markedly low interest rate
environments, the terms of refinancing or sale may be so attractive that
borrowers will prepay their Mortgage Loans notwithstanding the obligation
to pay Prepayment Premiums,
o Prepayment Premiums may be unenforceable under state or federal law
(including federal bankruptcy law) under certain circumstances,
particularly if they are required to be paid following a default, and may
constitute interest for usury purposes,
o certain state or federal laws (including federal bankruptcy law) may
limit the amount that may be collected from a borrower.
Even if the requirement to pay a Prepayment Premium following default is
enforceable, the foreclosure proceeds received with respect to a defaulted
Mortgage Loan may be insufficient to make such payment. For a description of
Prepayment Premiums and related Lockout Periods, see "Description of the
Mortgage Pool" herein.
Most of the Mortgage Loans that do not permit prepayment do permit the
borrower to defease the Mortgage Loan with non-callable U.S. government
securities as described herein. The ability to enforce defeasance provisions is
subject to some of the same risks that affect prepayment, particularly to the
extent that defeasance provisions may be challenged as a penalty that
effectuates a restraint on alienation of real property. However, a Mortgage Loan
that locks the borrower out from prepayment but permits defeasance may, under
the laws of certain states, be less susceptible to legal challenges than a
Mortgage
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<PAGE>
Loan that locks the borrower out from prepayment and does not permit the
borrower to obtain the release of the related Mortgaged Property.
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 is initially expected to
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 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.
We anticipate that the initial Special Servicer or its affiliate will
purchase some or all of the Private Certificates (other than the REMIC Residual
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.
In addition, the Master Servicer and the Special Servicer each services and
will, in the future, service, in the ordinary course of its business, existing
and new loans for third parties, including portfolios of loans similar to the
loans that will be included in the Trust Fund. The real properties securing
these other loans may be in the same markets as, and compete with, certain of
the real properties securing the Mortgage Loans. Consequently, personnel of the
Master Servicer and Special Servicer may perform services, on behalf of the
Trust Fund, with respect to the Mortgage Loans at the same time as they are
performing services, on behalf of other persons, with respect to other mortgage
loans secured by properties that compete with the real properties securing the
Mortgage Loans. This may pose inherent conflicts for the Master Servicer or
Special Servicer.
Certain of the Mortgage Loans included in the Trust Fund may have been
refinancings of debt previously held by an affiliate of one of the Mortgage Loan
Sellers.
Substantially all of the managers for the mortgaged properties (or their
affiliates) manage additional properties, including properties that may compete
with the mortgaged properties. Affiliates of the managers, and certain of the
managers themselves, also may own other properties, including competing
properties. The managers of the mortgaged properties may accordingly experience
conflicts of interest in the management of such mortgaged properties.
Risk of Year 2000. The Master Servicer, the Special Servicer and the
Trustee will represent and warrant that, to their best knowledge, any
custom-made software or hardware designed, purchased or licensed by the Master
Servicer, the Special Servicer or the Trustee, identified as being critical to
its operations and for compiling, reporting or generating data required by the
Pooling and Servicing Agreement, are capable of accurately performing
calculations or other processing with respect to dates after December 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 Underwriters currently
intend to make a secondary market in the Offered Certificates, they are under no
obligation to do so. Accordingly, we cannot assure you that a secondary market
for your Certificates will develop or, if it develops, that it will provide you
with liquidity of
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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.
Servicing Transfer Risk. In the event of the resignation or removal of
ORECM as the Master Servicer, ORECM will be entitled to continue to receive an
amount equal to the Master Servicing Fee in respect of the ORECM Mortgage Loans.
Accordingly, no additional Master Servicing Fee will be available on the ORECM
Mortgage Loans to compensate any successor Master Servicer. If the aggregate
Master Servicing Fee in respect of the remaining Mortgage Loans is insufficient
to attract a successor master servicer, in the event of a resignation or removal
of the Master Servicer, the Trustee may be required to use a portion of
available funds as additional compensation for the successor master servicer,
which may have an adverse effect on the funds available to make distributions on
the Certificates and which may lead to a downgrade of the ratings of the
Certificates.
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;
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 commercial 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;
o increases in vacancy rates; and
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o the proximity and attractiveness of competing properties.
If leases are not renewed or replaced, if tenants default, 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 the related property) 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;
o retroactive changes in building codes; and
o the public's perception of safety for customers and clients.
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-producing 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. Additionally, office
demand can be affected by the strength of the local economy and the
desirability of the area as a business location (including quality of
life for employees, labor costs and quality, and tax environment).
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 result in an oversupply of units, in a
relatively short period of time. Also, multifamily apartment units are
typically leased on a short-term basis, so that tenants who reside in a
particular project within such a market may easily move to alternative
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projects with more desirable amenities or locations. Multifamily
properties secure 31 of the Mortgage Loans (32.05%). 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.
o Section 8 Multifamily Properties. Three (3) of the Mortgage Loans
(3.26%) (control numbers PW-6437, PW-8703 and PW-8085), are secured by
multifamily properties in which the rent charged to a proportion of the
tenants is subsidized by housing assistance payments under the
Section 8 Tenant-Based Assistance Rental Voucher Program or the
Section 8 Tenant-Based Assistance Rental Certificate Program
(collectively, the "Program") of the United States Department of Housing
and Urban Development ("HUD"). We can give you no assurance that other
Mortgage Loans are not secured by Mortgaged Properties with any
concentration of Section 8 tenants.
o Rent subsidy payments are made pursuant to Housing Assistance
Payments Contracts ("HAP Contracts") between the borrower and
a local housing authority which receives Section 8 funds from
HUD. The term of each HAP Contract is limited to the terms of
the related tenant lease, generally one year, renewable at the
option of the tenant. Tenants may choose to move out of the
Mortgaged Properties and to utilize their vouchers elsewhere,
and we cannot assure you that the units so vacated will be
re-rented at rental rates equivalent to the subsidized rent,
which may be in excess of market rental rates. The HAP
Contracts impose certain management and maintenance
obligations on the borrowers, and housing assistance payments
can be suspended, reduced or terminated if HUD or the local
housing authority determines that the borrowers have breached
the HAP Contracts. HUD may in the future elect, or be required
by Congress, to take actions that have the effect of limiting
increases in rents subsidized under Section 8, or reducing
rent levels currently in effect. The ability of the respective
borrowers to pay their Mortgage Loans, and the value of their
Mortgaged Properties and consequent ability to refinance the
Mortgage Loans which are subject to HAP Contracts, could be
adversely affected by some or all of the risks that we have
described above.
o We cannot give you any assurance that the Program will be
continued in its present form or that the level of assistance
provided to tenants will be sufficient to assure revenues
sufficient for the borrower to meet its obligations under
these Mortgage Loans and to pay for necessary property
operations.
o Certain information with respect to the Mortgage Loans secured by
multifamily properties is set forth in Annex E hereto.
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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 (or if the anchor tenant owns its own site, a decision to vacate),
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 (i.e. outlet centers, home shopping networks,
internet websites, and telemarketing). Continued growth of these
alternative retail outlets (which often have lower operating costs) could
adversely affect the rents collectible at the retail properties included
in the mortgage pool. 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. The breach of various other covenants in anchor store leases or
operating agreements also may permit those stores to cease operating.
Certain non-anchor tenants also may be permitted to terminate if they or
certain other stores fail to meet specified business objectives. 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 are subject to special
risks not faced by owners of other types of properties. The economic
performance of an industrial property can be affected by the availability
of labor, a change in the proximity of supply sources, changes in access,
energy prices, strike, relocation of highways, or construction of new
highways or airports and reduced demand due to a decline in a particular
industry segment (for example, a decline in defense spending). In
addition, 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" 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
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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 Healthcare Facilities. Residential healthcare 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 and maintenance
of 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 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.
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 healthcare 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 healthcare 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
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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.
o Other factors that may adversely affect the value and successful
operation of a healthcare property include:
o increasing governmental regulation and supervision;
o a decline in the financial health, skill or reputation of the
operator;
o increased operating expenses; and
o competing facilities owned by non-profit organizations or government
agencies supported by endowments, charitable contributions, tax
revenues, or other sources.
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.
o Health Club Facilities. Factors affecting loans secured by properties
leased to health clubs include adverse changes in economic and social
conditions, changes to consumer tastes or preferences (for example, to
multi-purpose clubs from single-purpose clubs), and shifts in consumer
demand due to demographic changes (for example, population decreases or
changes in average age or income). Additionally, properties leased to
health club facilities can be affected by the creditworthiness of the
tenant, the tenant's exposure to current and future competition in its
marketplace, and the ease with which a leased space can be converted to
alternative uses in the event the tenant vacates. In addition, health
clubs are operating businesses that are affected by factors unique to its
industry, including:
o the quality of management;
o management's ability to control membership growth and attrition;
o the popularity of competing franchises; and
o management's ability to adapt to changing technology and consumer
preferences.
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. 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.
Issues Involving Significant Single-Tenant Mortgaged Properties. In the
case of 31 Mortgaged Properties (22.65%), the related borrower has leased the
related Mortgaged Property entirely (or at least 80% of the related Mortgaged
Property based on total net square footage) to a single tenant (each such
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Mortgaged Property, a "Single-Tenant Mortgaged Property" and each such Mortgage
Loan, a "Single-Tenant Mortgage Loan").
The underwriting of a Single-Tenant Mortgage Loan is often based primarily
upon the monthly rental payments due from the tenant under the lease of the
related Mortgaged Property. Where the primary lease term expires before the
scheduled maturity date (or Anticipated Repayment Date, where applicable) of a
Single-Tenant Mortgage Loan, the related lender considered the incentives for
the tenant to re-lease the premises and the anticipated rental value of the
premises at the end of the primary lease term. If, however, the current tenant
does not renew its lease on comparable economic terms to the expired lease, or
if a suitable replacement tenant does not enter into a new lease on similar
economic terms, there could be a negative impact on the payments on the related
Mortgage Loan and the value of the Mortgaged Property.
With respect to certain Single-Tenant Mortgage Properties, the lease
encumbering such Mortgaged Property requires the related tenant to pay all real
property taxes and assessments levied or assessed against such Mortgaged
Property and all charges for utility services, insurance and other operating
expenses incurred in connection with operating such Mortgaged Property.
Generally, the tenants under such leases are required, at their expense, to
maintain the related Single-Tenant Mortgaged Properties in good order and
repair.
Factors Affecting the Repayment of Mortgage Loans Secured by Condominium
Properties. Three Mortgage Loans (2.74%) (control numbers ML-137, ML-138 and
ORIX-3290) are secured by the related borrower's ownership interest in all or a
majority of the units/space in a residential or commercial condominium project
and the related voting rights in the owners' association for such project. In
most cases, the holder of the related Mortgage Loan has a controlling vote in
the owners' association. Due to the nature of condominiums and each borrower's
ownership interest in the related properties, a default on any such Mortgage
Loan will not allow the holder of the Mortgage Loan the same flexibility in
realizing upon the Mortgaged Property as is generally available with respect to
Mortgaged Properties that are not condominiums. The rights of other unit owners,
certain restrictive covenants with respect to the properties, the governing
documents of the owners' association and the state and local laws applicable to
the condominiums must be considered and respected. Consequently, servicing and
realizing upon the collateral of such Mortgage Loans could subject the Trust
Fund to greater delay, expense and risk than a loan secured by a Mortgaged
Property that is not a condominium.
Nonrecourse Mortgage Loans. The Mortgage Loans are not insured or
guaranteed by any governmental entity or private mortgage insurer. 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 a 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 applicable
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;
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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 collect claims against issuers of secured creditor
environmental insurance policies;
o the inability to sell the related Mortgage Loan in the secondary market
or to lease such Mortgaged Property to potential tenants; and
o the failure of borrowers to implement operations and maintenance programs
or abatement programs.
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.
Except for two Mortgage Loans (0.29%) for which a "Transaction Screen"
environmental assessment was performed in accordance with ASTME 1528, a
third-party environmental consultant conducted a "Phase I" environmental site
assessment (or updated a previously conducted "Phase I" environmental site
assessment). Each such "Phase I" environmental site assessment or update
generally complied with industry-wide standards. A "Phase II" environmental site
assessment was also performed on certain Mortgaged Properties. In each case
where the "Phase I" or "Phase II" environmental site assessment or update
revealed a material adverse environmental condition or circumstance at any
mortgaged property, then (depending on the nature of the condition or
circumstance) one or more of the following actions has been or is expected to be
taken--
o an environmental indemnity was obtained from an affiliate of the
borrower; or
o an environmental insurance policy, having the characteristics described
under "DESCRIPTION OF THE MORTGAGE POOL--Assessment of Property
Condition--Environmental Assessments," was obtained from a third-party
insurer; or
o either (i) an operations and maintenance program, including, in several
cases, with respect to asbestos-containing materials, lead-based paint
and/or radon, or periodic monitoring of nearby properties, has been or is
expected to be implemented in the manner and within the time frames
specified in the related loan documents, or (ii) remediation in
accordance with applicable law has been performed; or
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o an escrow reserve was established to cover the estimated cost of
remediation, with each remediation required to be completed within a
reasonable time frame in accordance with the related loan documents.
There can be no assurance, however, that the environmental assessments
identified all environmental conditions and risks, that the related borrowers
will implement all recommended operations and maintenance plans, that such plans
will adequately remediate the environmental condition, or that any environmental
indemnity, insurance or escrow will fully cover all potential environmental
issues. In addition, the environmental condition of the underlying real
properties could be adversely affected by tenants or by the condition of land or
operations in the vicinity of the properties, such as underground storage tanks.
The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a Mortgaged Property prior to taking
possession of the property through foreclosure or otherwise or assuming control
of its operation. Such requirement effectively precludes enforcement of the
security for the related Mortgage Note until a satisfactory environmental site
assessment is obtained (or until any required remedial action is thereafter
taken), but will decrease the likelihood that the Trust Fund will become liable
for a material adverse environmental condition at the Mortgaged Property.
However, 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 and ARD Loans. Ninety-seven (97) of
the Mortgage Loans (84.37%) do not fully amortize over their stated terms to
maturity and will have substantial payments of principal ("Balloon Payments")
due on their Stated Maturity Dates unless they are prepaid before that date. In
addition, nine of the Mortgage Loans (15.63%) have Anticipated Repayment Dates
and are expected to have a substantial scheduled principal balance as of such
date.
o Loans that require the borrower to make a significant principal payment
at maturity (or on the Anticipated Repayment Date) 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
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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. Other than three Mortgage Loans
made to entities under the control of Associated Estates Realty Corporation
(7.24%), there are no related borrower concentrations in excess of 3.00% of the
Initial Pool Balance. In circumstances where borrowers under the Mortgage Loans
are affiliated or under common control with one another, any adverse
circumstances relating to a borrower or an affiliate thereof and affecting one
of the related Mortgage Loans or Mortgaged Properties could also affect other
Mortgage Loans or Mortgaged Properties of the related borrower. In particular,
the bankruptcy or insolvency of any such borrower or affiliate could have an
adverse effect on the operation of all of the Mortgaged Properties of that
borrower and its affiliates and on the ability of such related Mortgaged
Properties to produce sufficient cash flow to make required payments on the
Mortgage Loans. For example, if a person that owns or directly or indirectly
controls several Mortgaged Properties experiences financial difficulty at one
Mortgaged Property, it could defer maintenance at one or more other Mortgaged
Properties in order to satisfy current expenses with respect to the Mortgaged
Property experiencing financial difficulty, or it could attempt to avert
foreclosure by filing a bankruptcy petition that might have the effect of
interrupting payments for an indefinite period on all the related Mortgage
Loans. In particular, such person experiencing financial difficulty or becoming
subject to a bankruptcy proceeding may have an adverse effect on the funds
available to make distributions on the Certificates and may lead to a downgrade,
withdrawal or qualification of the ratings of the Certificates. See Annex A,
attached hereto which indicates the Mortgage Loans with affiliated borrowers.
Geographic Concentration of Properties Increasing Isolated Geographic
Risk. Twenty-three (23) Mortgaged Properties (18.88%) are located in Texas, 12
Mortgaged Properties (11.77%) are located in California, 11 Mortgage Properties
(8.17%) are located in New York, two Mortgaged Properties (7.52%) are located in
Maryland and seven properties (7.27%) are located in Connecticut. 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 these five states.
Risks Associated with Concentration of Mortgage Loans. Several of the
Mortgage Loans 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 4.40% 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 12.20% of the aggregate principal balance of the Mortgage
Loans as of the Cut-Off Date.
o The ten largest Mortgage Loans by Cut-Off Date Principal Balance and
affiliated borrower concentration represent, in the aggregate,
approximately 37.22% of the aggregate principal balance of the Mortgage
Loans as of the Cut-Off Date.
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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 32.05% of the aggregate
principal balance of the mortgage pool as of the Cut-Off Date;
o office properties represent approximately 27.29% 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); and
o retail properties represent approximately 23.41% 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).
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.
Recently Constructed Properties Do Not Have Operating Histories. Eighteen
(18) Mortgaged Properties (11.92%), were constructed after January 1, 1998 and
consequently do not have significant operating histories. There can be no
assurance that the businesses operated at such Mortgaged Properties will be
successful. There can be no assurances that current occupancy levels of such
Mortgaged Properties will be maintained or that full occupancy will be achieved
or maintained or that as yet undiscovered physical or design problems with the
recently constructed Mortgaged Properties will not adversely affect occupancy
levels of any such Mortgaged Property.
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 each Mortgage Loan Seller, and each 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 applicable 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
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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. Substantially all of the Mortgage Loans permit the
Mortgagor to incur limited unsecured indebtedness in the ordinary course of
business. However, 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. With respect to any such future secured subordinate debt, a
violation of such prohibition may not become evident until the related Mortgage
Loan otherwise defaults. With respect to one of the Mortgage Loans (3.53%)
(control number ML-117), related Mortgage Loan documents allow the borrower,
under certain specified circumstances, to maintain existing unsecured
subordinate debt and to incur unsecured subordinate debt in the future, provided
that such subordinate debt is subject to a subordination and standstill
agreement, and with respect to one of the Mortgage Loans (3.18%) (control number
ML-156), the related Mortgage Loan documents allow the borrower to incur
unsecured subordinate debt in the future, provided that such subordinate debt is
subject to a subordination and standstill agreement. As of the Cut-Off Date,
none of the Mortgaged Properties is encumbered by secured subordinate 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;
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.
In addition, three Mortgage Loans (7.27%) (control numbers ML-107, ML-109
and ML-111) permit the owners of the related borrowers to pledge their limited
partnership interests or other ownership interests in the borrower as security
for mezzanine debt that was in existence as of the date of origination of the
related Mortgage Loan.
"Mezzanine debt" is debt that is incurred by the owner of equity in one or
more borrowers and is secured by a guaranty of the borrower or by a pledge of
the equity ownership interests in such borrowers. Because mezzanine debt is
secured by the obligor's equity interest in the related borrowers, such
financing effectively reduces the obligor's economic stake in the related
Mortgaged Property. The existence of mezzanine debt may reduce cash flow on the
borrower's Mortgaged Property after the payment of debt
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service and may increase the likelihood that the owner of a borrower will permit
the value or income producing potential of a Mortgaged Property to suffer by not
making capital infusions to support the Mortgaged Property and may create a
slightly greater risk that a borrower will default on the Mortgage Loan secured
by a Mortgaged Property whose value or income is relatively weak.
Upon a default under mezzanine debt, the holder of such mezzanine debt
would be entitled to foreclose upon the equity in the related mortgagor, which
has been pledged to secure payment of such mezzanine debt. Such transfer of
equity would not trigger the "due on sale" clause under the related Mortgage
Loan, as described in this Prospectus Supplement. An attempt to foreclose upon
such pledge of equity may cause the obligor under such mezzanine debt to file
for bankruptcy, which could negatively affect the operation of the related
Mortgaged Property and such borrower's ability to make payments on the related
Mortgage Loan in a timely manner.
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. To the extent a borrower is an individual or an entity other than a
bankruptcy-remote entity, it is 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, (2) individuals who have personal liabilities unrelated to the
property, or (3) able to incur additional debt. With respect to 11 Mortgage
Loans (3.29%) neither the borrower's organizational documents nor the related
mortgage loan documents prohibit the borrower from incurring subordinate debt in
the future, provided that such debt may not encumber the related Mortgaged
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. Furthermore, with respect to any
related borrowers, creditors of a common parent in bankruptcy may seek to
consolidate the assets of such borrowers with those of the parent. Consolidation
of the assets of such borrowers would likely have an adverse effect on the funds
available to make distributions on the certificates, and may lead to a
downgrade, withdrawal or qualification of the ratings of the Certificates. 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.
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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 or structure, 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 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. Certain Mortgage Loans permit one or more
transfers of the Mortgaged Property so long as the transferee is reasonably
acceptable to the holder of the Mortgage Loan, and in some cases, the Rating
Agencies. 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.
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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. Two (2)
of the Mortgage Loans (1.31%) 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.
Each of the ground leases securing Mortgaged Properties provides that the
ground rent payable thereunder increases during the term of the lease. These
increases may adversely affect the cash flow and net income of the borrower from
the Mortgaged Property.
In some jurisdictions, if tenant leases are subordinate to the liens
created by the mortgage and do not contain attornment provisions (i.e.,
provisions requiring the tenant to recognize a successor owner following
foreclosure as landlord under the lease), the leases may terminate upon the
transfer of the property to a foreclosing lender or purchaser at foreclosure.
Not all leases were reviewed to ascertain the existence of attornment or
subordination provisions. Accordingly, if a mortgaged property is located in
such a jurisdiction and is leased to one or more desirable tenants under leases
that are subordinate to the mortgage and do not contain attornment provisions,
such mortgaged property could experience a further decline in value if such
tenants' leases were terminated. This is particularly likely if such tenants
were paying above-market rents or could not be replaced.
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If a lease is not subordinate to a mortgage, the Trust Fund will not
possess the right to dispossess the tenant upon foreclosure of the mortgaged
property (unless it has otherwise agreed with the tenant). If the lease contains
provisions inconsistent with the mortgage (e.g., provisions relating to
application of insurance proceeds or condemnation awards) or which could affect
the enforcement of the lender's rights (e.g., a right of first refusal to
purchase the property), the provisions of the lease will take precedence over
the provisions of the mortgage.
Risks Associated with the Mortgage Loan Sellers. The Mortgage Loan Sellers
will be the sole warranting parties in respect of the Mortgage Loans sold by the
Mortgage Loan Sellers to the Depositor. Neither the Depositor nor any of its
affiliates (other than MLMC, to the extent described herein) will be obligated
to repurchase any Mortgage Loan in connection with either a breach of any
Mortgage Loan Seller's representations and warranties or any document defects,
if such Mortgage Loan Seller defaults on its obligation to do so. The Depositor
can give no assurance that the applicable Mortgage Loan Seller will have the
financial ability to effect such repurchases. In addition, one or more of the
Mortgage Loan Sellers has acquired a portion of the Mortgage Loans in one or
more secondary market purchases. Such purchases may be challenged as fraudulent
conveyances under certain limited circumstances. Such a challenge, if
successful, may have a negative impact on the distributions to the
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 106 conventional, fixed rate
mortgage loans (each, a "Mortgage Loan," and collectively, the "Mortgage Loans")
with an aggregate Cut-Off Date Balance of $592,445,159 (the "Initial Pool
Balance") which are secured by first liens on 115 commercial and multifamily
properties (the "Mortgaged Properties"). The Cut-Off Date Balances of the
Mortgage Loans will range from $721,001 to $26,086,864 and the Mortgage Loans
will have an average Cut-Off Date Balance of $5,589,105. 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 allocated to such Mortgaged
Properties based on their respective appraised values or respective net cash
flow.
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.
One hundred four (104) Mortgage Loans (98.69%) are secured by a first
mortgage lien on the borrower's fee simple estate in the related Mortgaged
Property, one Mortgage Loan (0.95%) is secured by a first mortgage lien on the
borrower's leasehold interest in the related Mortgaged Property, and one
Mortgage Loan (0.35%) is secured by a first mortgage lien on both a fee simple
estate and a leasehold interest in the related Mortgaged Property.
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......................................................... 1.44%
1998......................................................... 9.25%
1999......................................................... 89.31%
</TABLE>
None of the Mortgage Loans will be 30 days or more delinquent as of the
Cut-Off Date.
Other than three Mortgage Loans (7.24%), no Mortgage Loan or group of
Mortgage Loans to related borrowers exceeds 3.00% 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. All of the Mortgage Loans accrue interest on the basis (an
"actual/360 basis") of the actual number of days elapsed over a 360-day year.
Due Dates. Except for eight Mortgage Loans (2.13%) for which scheduled
payments of principal and interest (the "Periodic Payments") are due on the
fifth day of each month, 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.
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Amortization. Ninety-seven (97) of the Mortgage Loans (84.37%) 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. Nine (9) Mortgage Loans (15.63%) (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.
Prepayment Provisions. As of the Cut-Off Date, all of the Mortgage Loans
restrict or prohibit voluntary principal prepayments. In general, the Mortgage
Loans (subject to the provisions 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 (seven Mortgage Loans (10.09%));or (ii) prohibit
voluntary prepayments of principal for most of their remaining term to maturity
(99 Mortgage Loans (89.91%)). 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. The Mortgage Loans generally do not
impose any Yield Maintenance Charges or Percentage Premiums for prepayments
related to casualty or condemnation of the Mortgaged Property.
Defeasance. Ninety-nine (99) of the Mortgage Loans (89.91%), 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"
consists of 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
until maturity (or, in the case of the ARD Loans, until the Anticipated
Repayment Date) with respect to the defeased Mortgage Loan, with each such
payment being equal to or greater than (with any excess to be returned to the
borrower) the Periodic Payments and the Balloon Payment with respect to such
defeased Mortgage Loan (or, in the case of an ARD Loan, the payment anticipated
on the related Anticipated Repayment Date).
Nonrecourse Obligations. The Mortgage Loans are generally non-recourse
obligations of the respective borrowers and, upon any such borrower's default in
the payment of any amount due under the related
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Mortgage Loan, the holder thereof may look only to the related Mortgaged
Property for satisfaction of the borrower's obligations. In addition, in those
cases where recourse to a borrower or guarantor is purportedly permitted, the
Depositor has not undertaken an evaluation of the financial condition of any
such person, and prospective investors should thus consider all of the Mortgage
Loans to be nonrecourse. No Mortgage Loan will be insured or guaranteed by any
governmental entity or private insurer.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. Generally, the
Mortgages contain "due-on-sale" and "due-on-encumbrance" clauses that, in most
circumstances, (i) permit the holder of the Mortgage to accelerate the maturity
of the related Mortgage Loan if the borrower sells or otherwise transfers or
encumbers the related Mortgaged Property or (ii) prohibit the borrower from
doing so without the consent of the holder of the Mortgage, which consent, in
certain cases, may not be unreasonably withheld if certain conditions are met.
For example, the transferee must be reasonably acceptable to the holder of the
Mortgage Loan and, in some cases, the Rating Agencies. 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. None
of the Mortgage Loans are cross-collateralized and cross-defaulted with any
other Mortgage Loans.
ASSESSMENT OF PROPERTY CONDITION
Property Inspection. Each Mortgaged Property was inspected by a member of
the applicable Mortgage Loan Seller's professional staff or by a direct agent of
such Mortgage Loan Seller. Additionally, each Mortgage Loan Seller has relied on
inspections by third party engineers for assessments of the condition and
structural integrity of each Mortgaged Property as described below under
"--Property Condition Assessments." 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. Each
such appraisal was stated to be in compliance with FIRREA and the Code of
Professional Ethics and Standards of Professional Practice of the Appraisal
Institute and/or the Uniform Standards of Professional Appraisal Practice as
adopted by the Appraisal Standards Board of the Appraisal Foundation. 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 "Transaction Screen" environmental site
assessment in compliance with ASTME-1528 was performed with respect to the
Mortgaged Properties securing two Mortgage Loans (0.29%) in connection with the
origination of such Mortgage Loans. A "Phase I" environmental site assessment
was performed with respect to all other 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. With respect to three Mortgaged Properties, a "Phase II"
environmental site assessment as performed. In each case where environmental
assessments recommended further action, the originator of the related Mortgage
Loan determined that the necessary remediation or testing was being undertaken
in a satisfactory manner or that such remediation or testing would be adequately
addressed post-closing. In some instances, the originator of the related
Mortgage Loan required that reserves be established to cover the estimated cost
of such remediation. Generally, with respect to such Mortgaged Properties, the
related borrowers were required to deposit with the lender or its designee at
the origination of the related Mortgage Loans an amount equal to approximately
125% of the independent consultant's estimated cost of the recommended action.
In other instances, borrowers were required to purchase a secured
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creditor environmental insurance policy in lieu of environmental escrows
provided: (i) the policy premium for the term is fully paid and all deductibles
are escrowed at closing or the deductible is less than 0.6% of initial principal
balance of the Mortgage Loan, (ii) at issuance, the issuer has a claims paying
ability of not less than "AA" by S&P or if not rated by S&P, such comparable
rating by another nationally recognized statistical rating agency, and
(iii) the policy is in an amount not less than the full principal amount of the
loan. There can be no assurance, however, that should such coverage be needed,
coverage would be available or uncontested, that the terms and conditions of
such coverage would be met, that coverage would be sufficient for the claims at
issue or that coverage would not be subject to certain deductibles.
Engineering Assessments. A licensed engineer or architect inspected the
related Mortgaged Property with respect to all of the Mortgage Loans to assess
the structure, exterior walls, roofing, interior structure and mechanical and
electrical systems. Certain of the resulting reports indicated certain deferred
maintenance items and/or recommended capital improvements with respect to
certain of such Mortgaged Properties. The related borrowers generally deposited
with the Lender or its designee at the origination of the related Mortgage Loans
an amount equal to approximately 125% of the licensed engineer's or architect's
estimated cost of any material recommended repairs, corrections or replacements
not completed by closing, to assure their completion.
Earthquake Analyses. 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
loss for the property in an earthquake scenario. The maximum loss is calculated
using a return period of not less than 100 years, a window of 10 to 50 years and
a 10% probability of exceedance. If the resulting reports conclude that in the
event of an earthquake, the probable maximum loss to Mortgaged Property would
exceed 20% of the amount of the estimated replacement cost of its improvements,
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 LOAN CONCENTRATIONS
Below is a brief summary of the ten largest concentrations of Mortgage
Loans (by Cut-Off Date Balance or affiliated borrower concentration) in the
Mortgage Pool. The ten largest concentrations of Mortgage Loans represent, in
the aggregate, less than 38% of the Initial Pool Balance and no single Mortgage
Loan represents more than 4.40% of the Initial Pool Balance. The borrower and,
in the case of any Mortgage Loan secured by an indemnity deed of trust on a
Mortgaged Property, the guarantor, under each of these Mortgage Loans is a
single purpose entity. The Cut-Off Date Balance of each of such Mortgage Loans
is indicated in parentheses following the name of the related Mortgaged
Property.
Associated Estates Realty Portfolio (Approx. $42,865,247). This Portfolio
of three Mortgage Loans is secured by three multifamily communities located in
Silver Springs, Maryland, Farmington Hills, Michigan and Columbus, Ohio. The
borrowing entities for these loans are controlled by Associated Estates Realty
Corporation ("AERC"), a publicly traded REIT. AERC is one of the largest owners
of multifamily communities in the United States with over 35,000 apartments.
AERC has over 30 years experience in the
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business of developing and managing apartment complexes. On October 22, 1999,
Moody's lowered its rating of AERC's senior unsecured debt from "B1" to "B2" and
has placed AERC under review for further possible downgrade, and on October 21,
1999, S&P which has a corporate rating for AERC of "BB+", placed AERC on credit
watch with negative implications. See "RISK FACTORS--Risks Associated with
Related Borrowers" and--Risks Related to the Borrower's Form of Entity" herein.
The property breakdown is as follows:
Hampton Point (Approx. $18,442,154) which was constructed in 1986, is
located in Silver Springs (Montgomery County), Maryland, approximately 14
miles north of Washington, DC. The Mortgaged Property is located between
U.S. Route 29 and Interstate 95, and provides access to the surrounding
Prince George's, Montgomery and Howard Counties. The complex consists of
352 units garden style apartments and offers amenities that include a
swimming pool, cabana area and children's playground. The occupancy rate at
Hampton Point averaged 98% for the trailing three month period ending
June 1999. As of April 1999, the appraised value of the property was
$26,400,000, indicating Cut-Off Date LTV of 69.86%. The Underwritten Net
Cash Flow is $1,907,604, indicating a DSCR of 1.23x.
Spring Valley (Approx. $11,962,178) consists of seventeen two-story
buildings containing 224 one-and two-bedroom units. All units are equipped
with full sized washer/dryer, microwave, self-cleaning oven and have either
a patio or balcony. Selected units also have sunrooms, fireplaces, vaulted
ceilings and mini storage. The complex was built in 1987. The complex is
located in Farmington Hills (Oakland County), Michigan, a suburb of
Detroit. Occupancy at Spring Valley averaged 93% for the trailing three
months ending June 1999 and, as of June 1999 was 93%. As of April 1999, the
appraised value of the property was $15,720,000, indicating Cut-Off Date
LTV of 76.10%. The Underwritten Net Cash Flow is $1,221,573, indicating a
DSCR of 1.22x.
Saw Mill Village (Approx. $12,460,915) is located 10 miles northwest
of the Columbus, Ohio central business district. The complex consists of
twelve two- and three-story garden apartment buildings containing 340 one,
two and three bedroom units. The complex was built in 1987 on a 22.61 acre
site. The property's amenities include a clubhouse with fitness center,
racquetball court, indoor pool and jacuzzi, outdoor pool and jacuzzi and
tennis, basketball and volleyball courts. Occupancy for the trailing three
month period ending June 1999 averaged 96%. As of April 1999, the appraised
value of the property was $17,430,000, indicating Cut-Off Date LTV of
71.49%. The Underwritten Net Cash Flow is $1,377,547, indicating a DSCR of
1.31x.
Potomac Heights Apartments (Approx. $26,086,864). This Mortgage Loan is
secured by the Potomac Heights Apartments complex. The property is located in
Fort Washington (Prince George's County), Maryland. It is situated approximately
three miles south of the Capital Beltway and about seven miles southwest of
Andrews Air Force Base. This 27.82 acre site is improved with a 606-unit garden
complex containing 13 three- and four-story buildings. The Prince George's
County market has remained stable over the past seven years with occupancy rates
exceeding 95%. As of May 1999, the trailing three month occupancy was
approximately 95%. As of March 1999, the appraised value was $32,700,000,
indicating a Cut-Off Date LTV of 79.78%. The Underwritten Net Cash Flow is
$2,816,555, indicating a DSCR of 1.34x.
Blue Cross Blue Shield Building (Approx. $25,288,017). This Mortgage Loan
is secured by a 348,410 square foot office building in Columbia, South Carolina.
The property is 100% leased to Blue Cross Blue Shield of South Carolina. As of
August 1999, the appraised value was $45,780,000 indicating a Cut-Off Date LTV
of 55.24%. The Underwritten Net Cash Flow is $3,926,149, indicating a DSCR of
1.79x.
Pond View Corporate Center (Approx. $20,930,804). This Mortgage Loan is
secured by two multi-tenant office buildings aggregating 232,538 rentable square
feet located in Farmington, Connecticut. The Pond View Corporate Center was
built in two phases, in 1986 and 1988. The subject property was developed by the
Fusco Corporation (an affiliate of the borrowing entity). Fusco Corporation has
been in existence over 75 years and is one of the largest real estate and
development companies in the State of Connecticut. Occupancy average as for the
trailing twelve month period ending August 1999 was 98%. Major tenants
S-46
<PAGE>
include Kaiser, Allstate, Transamerica, Microsoft, Kelly Services and the law
firm of Levy & Droney. As of March 1999, the appraised value was $29,000,000,
indicating a Cut-Off Date LTV of 72.18%. The Underwritten Net Cash Flow is
$2,298,790, indicating a DSCR of 1.25x.
College Square (Approx. $18,825,623). This Mortgage Loan (the "College
Square Loan") is secured by a 180,523 square foot shopping center. The property
is located in Cerritos (Los Angeles County), California within the Greater Los
Angeles Area defined as within a 60-mile radius of the Los Angeles Central
Business District. The subject was built in 1973 and underwent renovations in
1986, 1992 and 1999. The center has remained above 96% occupancy over the past
five years, and is currently 100% occupied. The center is anchored by two
investment grade tenants, Staples and Home Depot, as well as LA Fitness. The
Staples space is scheduled to be delivered and Staples is scheduled to take
occupancy of its space in November 1999. Pursuant to the lease, rental payments
commence 60 days following delivery of the premises to Staples. The borrower has
placed into escrow approximately $1,700,000 (the "Staples Escrow") of the
proceeds of the College Square Loan to cover certain contingencies with respect
to the Staples space. The Staples Escrow will not be paid to the borrower if,
among other factors, Staples does not take occupancy or the borrower fails to
uphold certain covenants in the lease, but may instead be applied as a
prepayment on the Mortgage Loan or towards scheduled debt service on the College
Square Loan. The appraised value was $24,900,000, indicating a Cut-Off Date LTV
of 75.60%. The Underwritten Net Cash Flow is $2,092,544, indicating a DSCR of
1.25x.
First American Building (Approx. $18,568,200). This Mortgage Loan is
secured by a 230,700 square foot office building in Dallas, Texas. The property,
which houses the division headquarters and national operations center of First
American Real Estate Tax Service, is a single tenant office building with an
occupancy rate of 100%. As of June 1999 the appraised value was $24,400,000,
indicating a Cut-Off Date LTV of 76.10%. The Underwritten Net Cash Flow is
$2,096,867, indicating a DSCR of 1.26x.
Lakeside Plaza Office Center (Approx. $18,170,833). This Mortgage Loan is
secured by an office complex in Salt Lake City, Utah. As of July 1999, the
office complex was 100% occupied. Major tenants include Providian Bancorp
Services and United Health Services. As of June 1999, the appraised value was
$25,000,000 indicating a Cut-Off date LTV of 72.68%. The Underwritten Net Cash
Flow is $2,030,179 indicating a DSCR of 1.27x.
Virginia Apartment Portfolio (Approx. $17,374,119). This Mortgage Loan is
secured by four separate multi-family developments in the Hampton Roads and
Richmond-St. Petersburg, Virginia area. As of April 1999, the combined appraised
value of all four properties was $25,185,000, indicating a Cut-Off date LTV of
68.99%. The Underwritten Net Cash Flow for all four properties is $2,331,033,
indicating a DSCR of 1.49x. The property breakdown is as follows:
Lee Hall Apartments. This property, located in Petersburg, Virginia,
consists of 146 two-story and eight single-story apartment buildings. As of
April 1999, the appraised value was $12,855,000. As of May 1999, the
property had a 91% occupancy rate.
Colonial Court. This property, located in Colonial Heights, Virginia,
consists of a 64-unit apartment complex. As of April 1999, the appraised
value was $1,530,000. As of May 1999, the property had a 94% occupancy
rate.
River Drive Apartments. This property, located in Newport News,
Virginia, consists of 44 two-and three-story apartment buildings. As of
April 1999, the appraised value was $5,650,000. As of June 1999, the
property had a 95% occupancy rate.
Norport Apartments. This property, located in Portsmouth, Virginia,
consists of 20 two-story apartment buildings. As of April 1999, the
appraised value was $5,150,000. As of April 1999, the property had an 89%
occupancy rate.
Frazier/King Building (Approx. $16,439,315). This Mortgage Loan is secured
by an office complex located within the Las Colinas area of Irving, Texas. As of
April 1999, the office complex was 91% occupied.
S-47
<PAGE>
Major Tenants include GTE, Fox Sports Southwest, and Arthur Andersen. As of
April 1999, the appraised value was $23,000,000 indicating a Cut-Off Date LTV of
71.48%.The Underwritten Net Cash Flow is $1,761,742, indicating a DSCR of 1.27x.
Tanglewood Apartments (Approx. $15,969,297). This Mortgage Loan is secured
by the Tanglewood Apartments located in Hammond, Indiana. The area is fully
developed and approximately 30 minutes from downtown Chicago. The 19.71 acre
site is improved with 17 three story apartment buildings containing 408 units.
Amenities include laundry facilities, outdoor swimming pool, sauna, clubhouse,
tennis courts, playground, picnic area, and storage. The Mortgaged Property is
easily accessible to public transportation and is within close proximity to
Interstate 80 and Interstate 90. Historical occupancy for the subject has been
92%, 92%, 93% and 94% for 1996, 1997, 1998, and the trailing 12-month period
respectively. The Mortgaged Property had 63% of the tenants in occupancy for two
years or more and 34% of the tenants in occupancy for four years or more. As of
June 1999, the appraised value of the subject was $20,000,000, indicating a
Cut-Off Date LTV of 79.85%. The underwritten net cash flow is $1,710,861,
indicating a DSCR of 1.23x.
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) Underwritten Net Cash Flow that is available for debt service (that is,
cash flow that remains after payment of non-capital expenses of operation,
and reserves for tenant improvements, leasing commissions and replacement
reserves during the term of the Mortgage Loan) to (b) required annual 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" or "DSCR" for any Mortgage Loan is the ratio
of "Underwritten 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 Underwritten Net
Cash Flow for a Mortgaged Property is determined by each Mortgage Loan
Seller on the basis of Mortgaged Property operating statements, generally
unaudited rent rolls or occupancy reports (as applicable) supplied by the
related borrower in the case of multifamily, mixed use, retail,
manufactured housing community, healthcare, industrial, self storage,
healthclub, parking, hospitality and office properties (each, a "Rental
Property").
In general, each 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 rent rolls or occupancy reports (as
applicable) for all Rental Properties that were current as of a date not earlier
than six months prior to the respective date of origination or acquisition in
determining Net Cash Flow for the Mortgaged Properties. References to "Cut-Off
Date DSCR" are references to the DSCR as of the Cut-Off Date. In general, "net
cash flow" is the revenue derived from the use and operation of a Mortgaged
Property less operating expenses (such as utilities, administrative expenses,
repairs and maintenance, management fees and advertising), fixed expenses (such
as insurance, real estate taxes and, if applicable, ground lease payments), and
reserves for tenant improvement costs, leasing commissions and replacement
reserves. Underwritten 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.
S-48
<PAGE>
In determining the "revenue" component of Net Cash Flow for each Rental
Property, each Mortgage Loan Seller generally relied on the most recent rent
roll supplied 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 determining rental revenue for multifamily properties, each
Mortgage Loan Seller either used rental revenue shown on the rolling 12-month
operating statements or annualized the rental revenue shown on rent rolls or
operating statements. For the other Rental Properties, each Mortgage Loan Seller
generally annualized rental revenue shown on the most recent rent roll, after
applying a vacancy factor, without further regard to the terms (including
expiration dates) of the leases shown thereon. In the case of hospitality
properties and skilled healthcare facilities, 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 healthcare facilities.
In determining the "expense" component of Net Cash Flow for each Mortgaged
Property, each 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, if
available, except that (a) if real estate tax or insurance expense information
more current than that reflected in the financial statements was available, the
newer information was reviewed, (b) property management fees were generally
assumed to be 4% to 5% of effective gross revenue (except for certain Single
Tenant Mortgaged Properties with triple net leases where management fees were
generally assumed to be 3% 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. In addition, in some instances, each Mortgage Loan
Seller recharacterized as capital expenditures certain items reported by
borrowers as operating expenses (thus increasing "net cash flow") where each
Mortgage Loan Seller determined appropriate.
The borrower's financial information used to determine Net Cash Flow was in
most cases unaudited, and neither the Mortgage Loan Sellers nor the Depositor
verified their accuracy.
(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
each Mortgage Loan Seller.
(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 each 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, office or healthclub property, (2) a 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 healthcare
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 or office property, references to the
Cut-Off Date Balance of such Mortgage Loan divided by the rentable
square footage of the related Mortgaged Property.
S-49
<PAGE>
(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 or
in the event of substantial renovation or rehabilitation of a
Mortgaged Property, the year in which such renovation or
rehabilitation was completed.
(v) References to "weighted averages" are references to averages weighted
on the basis of the Cut-Off Date Balances of the related Mortgage
Loans.
(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, remedies 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
minimis or 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 each 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 mobile home parks, 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 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
S-50
<PAGE>
PROPERTY TYPES
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
--------------------------------------------
% OF AVERAGE HIGHEST
NUMBER OF AGGREGATE INITIAL CUT-OFF CUT-OFF STATED REMAINING CUT-OFF
MORTGAGED CUT-OFF DATE POOL DATE DATE MORTGAGE REMAINING AMORT. DATE
PROPERTY TYPES PROPERTIES BALANCE BALANCE BALANCE BALANCE RATE TERM (MO.) TERM (MO.) DSCR
- ------------------- --------- ------------ ------- ---------- ----------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MULTIFAMILY 31 $189,891,684 32.05% $6,125,538 $26,086,864 7.688% 108 350 1.32x
OFFICE 20 161,703,928 27.29 8,085,196 25,288,017 7.982 116 351 1.47
RETAIL
Anchored Retail 27 128,027,741 21.61 4,741,768 18,825,623 8.170 117 351 1.33
Unanchored Retail 5 10,655,002 1.80 2,131,000 2,538,293 8.324 117 357 1.34
- ----------------------------------------------------------------------------------------------------------------------------------
SubTotal 32 138,682,743 23.41 4,333,836 18,825,623 8.182 117 352 1.33
INDUSTRIAL
Industrial 9 37,433,346 6.32 4,159,261 9,338,999 8.376 117 336 1.32
Industrial/Office 3 6,268,167 1.06 2,089,389 3,048,754 8.187 118 337 1.36
Industrial/Warehouse,
Flex 2 4,328,882 0.73 2,164,441 2,385,021 8.048 112 341 1.26
- ----------------------------------------------------------------------------------------------------------------------------------
SubTotal 14 48,030,395 8.11 3,430,743 9,338,999 8.322 117 337 1.32
HOSPITALITY
Full Service 1 11,777,780 1.99 11,777,780 11,777,780 8.480 118 298 1.62
Limited Service 2 7,481,826 1.26 3,740,913 4,986,533 7.827 117 313 2.26
- ----------------------------------------------------------------------------------------------------------------------------------
SubTotal 3 19,259,605 3.25 6,419,868 11,777,780 8.226 118 304 1.87
HEALTH CLUB 1 8,394,533 1.42 8,394,533 8,394,533 8.950 119 299 1.40
MIXED
Multifamily/Retail 1 1,096,789 0.19 1,096,789 1,096,789 9.500 116 296 1.31
Office/Retail 1 6,879,600 1.16 6,879,600 6,879,600 8.068 117 357 1.26
- ----------------------------------------------------------------------------------------------------------------------------------
SubTotal 2 7,976,388 1.35 3,988,194 6,879,600 8.264 117 349 1.27
HEALTHCARE 4 8,004,455 1.35 2,001,114 2,402,837 8.013 111 291 2.44
MOBILE HOME PARK 6 6,263,010 1.06 1,043,835 1,920,705 7.807 117 342 1.56
OTHER 1 2,393,501 0.40 2,393,501 2,393,501 8.500 117 297 1.36
SELF STORAGE 1 1,844,916 0.31 1,844,916 1,844,916 8.420 117 297 1.48
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. AVG. 115 $592,445,159 100.00% $5,151,697 $26,086,864 7.990% 114 346 1.40x
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------
LOAN PER
SQ FT,
CUT-OFF UNIT, BED AVERAGE
DATE REPAYMENT OCCUPANCY KEY OR PROPERTY
PROPERTY TYPES LTV LTV PERCENTAGE (A) ROOM SIZE (B)
- ------------------- ------- --------- -------------- --------- --------
<S> <C> <C> <C> <C> <C>
MULTIFAMILY 74.07% 66.07% 95% 35,138 331
OFFICE 69.15 61.38 97 84 227,618
RETAIL
Anchored Retail 71.09 63.29 96 150 94,647
Unanchored Retail 70.42 63.16 99 93 28,351
- -------------------
SubTotal 71.04 63.28 96 146 89,553
INDUSTRIAL
Industrial 70.13 61.04 99 42 140,267
Industrial/Office 73.05 64.13 97 64 37,471
Industrial/Warehou
Flex 74.01 65.89 99 65 34,401
- -------------------
SubTotal 70.86 61.88 99 47 117,311
HOSPITALITY
Full Service 57.17 47.08 51 44,277 266
Limited Service 43.02 35.77 76 35,366 121
- -------------------
SubTotal 51.67 42.69 61 40,816 210
HEALTH CLUB 64.57 54.83 100 106 79,015
MIXED
Multifamily/Retail 54.84 46.28 96 43,872 25
Office/Retail 77.30 68.30 100 155 44,450
- -------------------
SubTotal 74.21 65.27 99 6,166 38,341
HEALTHCARE 57.41 47.91 81 16,532 125
MOBILE HOME PARK 66.34 58.16 97 13,929 98
OTHER 63.83 52.63 100 107 22,293
SELF STORAGE 69.62 57.30 95 48 38,735
- ------------------- -----------------------------------------------------------
TOTAL/WTG. AVG. 70.53% 62.46% 95% 13,106 94,562
</TABLE>
- ------------------
(A) Weighted average of the occupancy percentage for the corresponding property
type determined on the basis of the individual occupancy percentage set
forth on Annex A.
(B) Average Property Size refers to total leaseable 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 healthcare facilities.
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
WEIGHTED
AVERAGES
-------
NUMBER OF AGGREGATE CUT-OFF
STATE OR MORTGAGED CUT-OFF DATE % OF INITIAL DATE
DISTRICT PROPERTIES BALANCE POOL BALANCE DSCR
- ------------------------------- --------- ------------ ------------ -------
<S> <C> <C> <C> <C>
Texas 23 $111,830,425 18.88% 1.35x
California 12 69,728,053 11.77 1.33
New York 11 48,380,931 8.17 1.33
Maryland 2 44,529,018 7.52 1.29
Connecticut 7 43,066,467 7.27 1.32
South Carolina 2 28,933,747 4.88 1.73
Indiana 2 24,936,192 4.21 1.26
Virginia 6 21,285,252 3.59 1.46
Nevada 3 19,544,204 3.30 1.28
Utah 1 18,170,833 3.07 1.27
Massachusetts 3 16,216,933 2.74 1.58
Ohio 4 14,506,475 2.45 1.37
Louisiana 3 13,915,620 2.35 1.42
Florida 4 12,668,849 2.14 1.34
Michigan 1 11,962,178 2.02 1.22
Colorado 3 11,522,353 1.94 1.28
Pennsylvania 3 11,243,552 1.90 2.90
Oregon 1 8,490,237 1.43 1.73
Tennessee 4 8,276,400 1.40 1.36
Washington 1 8,269,850 1.40 1.40
Wyoming 1 6,094,765 1.03 1.21
Illinois 2 6,010,100 1.01 2.34
Oklahoma 3 5,939,372 1.00 1.34
Idaho 1 4,643,851 0.78 1.41
Rhode Island 1 4,208,441 0.71 1.30
New Jersey 2 3,984,681 0.67 1.30
North Carolina 4 3,255,996 0.55 1.41
Arizona 1 3,216,174 0.54 1.35
Alabama 1 2,247,636 0.38 1.41
Georgia 1 1,920,705 0.32 1.63
Mississippi 1 1,736,253 0.29 1.25
Arkansas 1 1,709,613 0.29 1.25
- --------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. AVG. 115 $592,445,159 100.00% 1.40x
<CAPTION>
WEIGHTED AVERAGES
- --------------------------------------------------------------
CUT-OFF
STATE OR DATE REPAYMENT
DISTRICT LTV LTV
- ------------------------------- ------- ---------
<S> <C> <C>
Texas 71.59% 63.92%
California 72.74 63.19
New York 69.33 60.75
Maryland 75.67 67.03
Connecticut 70.34 62.37
South Carolina 58.25 52.03
Indiana 76.93 67.91
Virginia 68.82 61.97
Nevada 73.04 64.58
Utah 72.68 65.13
Massachusetts 57.87 48.17
Ohio 71.53 63.57
Louisiana 72.19 65.19
Florida 73.94 65.93
Michigan 76.10 69.85
Colorado 75.57 68.07
Pennsylvania 73.95 67.36
Oregon 53.06 47.49
Tennessee 66.32 57.69
Washington 68.92 56.72
Wyoming 78.14 70.62
Illinois 46.09 39.40
Oklahoma 73.02 66.20
Idaho 66.48 58.49
Rhode Island 62.81 56.42
New Jersey 75.90 67.32
North Carolina 67.69 56.88
Arizona 78.44 69.69
Alabama 57.85 52.17
Georgia 64.02 57.09
Mississippi 70.15 63.49
Arkansas 75.98 68.81
- -------------------------------------------------------------
TOTAL/WTG. AVG. 70.53% 62.46%
</TABLE>
- ------------------
Mortgaged Properties are located in 32 states.
S-51
<PAGE>
YEARS BUILT
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
--------------------------------------------------------
NUMBER OF AGGREGATE CUMULATIVE % STATED REMAINING CUT-OFF
RANGE OF MORTGAGED CUT-OFF DATE % OF INITIAL OF INITIAL MORTGAGE REMAINING AMORT. SEASONING DATE
YEARS BUILT PROPERTIES BALANCE POOL BALANCE POOL BALANCE RATE TERM (MO.) TERM (MO.) (MO.)(A) DSCR
- -------------- --------- ------------ ------------ ------------ -------- ---------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1872 - 1899 2 $ 8,252,507 1.39% 1.39% 8.820% 117 300 3 1.50x
1900 - 1929 4 17,087,398 2.88 4.28 8.450 116 347 4 2.30
1930 - 1959 16 67,190,942 11.34 15.62 8.289 116 332 4 1.46
1960 - 1969 12 63,957,599 10.80 26.41 7.696 105 343 11 1.43
1970 - 1979 19 94,275,401 15.91 42.33 8.079 117 351 3 1.35
1980 - 1989 32 221,912,116 37.46 79.78 7.890 113 347 5 1.33
1990 - 1999 30 119,769,196 20.22 100.00 7.969 117 353 3 1.39
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG.
AVG. 115 $592,445,159 100.00% 100.00% 7.990% 114 346 5 1.40x
<CAPTION>
WEIGHTED AVERAGES
- -----------------------------------
CUT-OFF
RANGE OF DATE REPAYMENT
YEARS BUILT LTV LTV
- -------------- ------- ---------
<S> <C> <C>
1872 - 1899 59.61% 49.80%
1900 - 1929 71.83 64.39
1930 - 1959 67.90 59.16
1960 - 1969 73.50 65.46
1970 - 1979 71.57 63.45
1980 - 1989 71.01 62.92
1990 - 1999 69.30 61.67
- -----------------------------------
TOTAL/WTG.
AVG. 70.53% 62.46%
</TABLE>
- ------------------
(A) Number of months elapsed since the first Due Date following origination.
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------
RANGE OF NUMBER OF AGGREGATE CUMULATIVE % STATED REMAINING CUT-OFF
DEBT SERVICE MORTGAGE CUT-OFF DATE % OF INITIAL OF INITIAL MORTGAGE REMAINING AMORT. DATE
COVERAGE RATIOS LOANS BALANCE POOL BALANCE POOL BALANCE RATE TERM (MO.) TERM (MO.) DSCR
- ---------------- --------- ------------ ------------ ------------ -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.20x - 1.29x 48 $305,279,537 51.53% 51.53% 7.945% 114 353 1.25x
1.30 - 1.39 24 123,754,577 20.89 72.42 7.830 110 348 1.34
1.40 - 1.49 15 70,851,307 11.96 84.38 8.306 116 328 1.44
1.50 - 1.59 4 12,301,886 2.08 86.45 8.243 117 329 1.56
1.60 - 1.69 4 22,685,181 3.83 90.28 8.241 118 320 1.63
1.70 - 1.79 5 37,891,220 6.40 96.68 7.917 118 356 1.77
2.00 - 2.49 3 6,021,926 1.02 97.69 7.952 111 291 2.23
2.50 - 2.99 1 4,986,533 0.84 98.54 7.500 117 321 2.57
3.00 - 3.49 1 1,982,529 0.33 98.87 8.200 111 291 3.10
3.50 - 3.89 1 6,690,463 1.13 100.00 9.050 116 356 3.89
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG.
AVG. 106 $592,445,159 100.00% 100.00% 7.990% 114 346 1.40x
<CAPTION>
WEIGHTED AVERAGES
- --------------------------------------
RANGE OF CUT-OFF
DEBT SERVICE DATE REPAYMENT
COVERAGE RATIOS LTV LTV
- ---------------- ------- ---------
<S> <C> <C>
1.20x - 1.29x 74.08% 65.87%
1.30 - 1.39 72.65 64.83
1.40 - 1.49 66.78 57.99
1.50 - 1.59 67.05 58.36
1.60 - 1.69 57.58 48.75
1.70 - 1.79 56.10 50.02
2.00 - 2.49 53.00 44.15
2.50 - 2.99 40.54 33.90
3.00 - 3.49 70.80 59.34
3.50 - 3.89 79.65 73.18
- --------------------------------------
TOTAL/WTG.
AVG. 70.53% 62.46%
</TABLE>
S-52
<PAGE>
CUT-OFF DATE LTV RATIOS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF ----------------------------------------------------------
RANGE OF NUMBER OF AGGREGATE INITIAL CUMULATIVE % STATED REMAINING CUT-OFF CUT-OFF
CUT-OFF DATE MORTGAGE CUT-OFF DATE POOL OF INITIAL MORTGAGE REMAINING AMORT. DATE DATE
LTV RATIOS LOANS BALANCE BALANCE POOL BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV
- ---------------- --------- ------------ ------- ------------ -------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40.54% - 50.00% 3 $ 9,537,172 1.61% 1.61% 7.810% 116 309 2.28x 42.61%
50.01 - 60.00 9 54,923,473 9.27 10.88 8.075 118 338 1.71 55.49
60.01 - 70.00 38 169,474,815 28.61 39.49 8.170 114 339 1.39 66.86
70.01 - 79.85 56 358,509,699 60.51 100.00 7.896 113 352 1.34 75.32
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. AVG. 106 $592,445,159 100.00% 100.00% 7.990% 114 346 1.40x 70.53%
<CAPTION>
WEIGHTED AVERAGES
- ---------------------------
RANGE OF
CUT-OFF DATE REPAYMENT
LTV RATIOS LTV
- ---------------- ---------
<S> <C>
40.54% - 50.00% 35.40%
50.01 - 60.00 48.34
60.01 - 70.00 58.87
70.01 - 79.85 67.04
- ---------------------------
TOTAL/WTG. AVG. 62.46%
</TABLE>
REPAYMENT LTV RATIOS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF ----------------------------------------------------------
RANGE OF NUMBER OF AGGREGATE INITIAL CUMULATIVE % STATED REMAINING CUT-OFF CUT-OFF
REPAYMENT MORTGAGE CUT-OFF DATE POOL OF INITIAL MORTGAGE REMAINING AMORT. DATE DATE
LTV RATIOS LOANS BALANCE BALANCE POOL BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV
- ---------------- --------- ------------ ------- ------------ -------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
33.90% - 50.00% 11 $ 62,213,009 10.50% 10.50% 8.028% 118 333 1.80x 53.43%
50.01 - 60.00 27 99,065,922 16.72 27.22 8.262 116 322 1.45 65.21
60.01 - 70.00 58 345,414,628 58.30 85.53 7.978 114 354 1.30 73.03
70.01 - 73.18 10 85,751,600 14.47 100.00 7.694 107 351 1.48 79.03
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. AVG. 106 $592,445,159 100.00% 100.00% 7.990% 114 346 1.40x 70.53%
<CAPTION>
RANGE OF
REPAYMENT REPAYMENT
LTV RATIOS LTV
- ---------------- ---------
<S> <C>
33.90% - 50.00% 46.22%
50.01 - 60.00 55.91
60.01 - 70.00 65.19
70.01 - 73.18 70.81
- ---------------------------
TOTAL/WTG. AVG. 62.46%
</TABLE>
MORTGAGE RATES
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF ----------------------------------------------------------
NUMBER OF AGGREGATE INITIAL CUMULATIVE % STATED REMAINING CUT-OFF CUT-OFF
RANGE OF MORTGAGE CUT-OFF DATE POOL OF INITIAL MORTGAGE REMAINING AMORT. DATE DATE
MORTGAGE RATES LOANS BALANCE BALANCE POOL BALANCE RATE TERM (MO.) TERM (MO.) DSCR LTV
- ---------------- --------- ------------ ------- ------------ -------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6.977% - 6.999% 1 $ 26,086,864 4.40% 4.40% 6.977% 103 343 1.34x 79.78%
7.000 - 7.124 1 9,507,210 1.60 6.01 7.080 63 339 1.26 75.45
7.125 - 7.249 1 4,843,129 0.82 6.83 7.170 104 344 1.49 73.38
7.250 - 7.374 1 8,503,715 1.44 8.26 7.350 98 338 1.25 78.74
7.375 - 7.499 2 19,450,598 3.28 11.54 7.455 81 350 1.27 73.75
7.500 - 7.624 5 61,295,812 10.35 21.89 7.516 115 352 1.38 68.52
7.625 - 7.749 2 10,828,084 1.83 23.72 7.725 116 356 1.32 75.08
7.750 - 7.874 14 104,354,966 17.61 41.33 7.819 118 348 1.43 68.40
7.875 - 7.999 10 73,960,275 12.48 53.82 7.937 117 354 1.41 68.45
8.000 - 8.124 8 39,767,824 6.71 60.53 8.026 117 351 1.33 72.01
8.125 - 8.249 9 62,209,173 10.50 71.03 8.191 117 353 1.41 73.70
8.250 - 8.374 8 23,843,137 4.02 75.05 8.313 117 345 1.26 74.88
8.375 - 8.499 24 77,589,996 13.10 88.15 8.417 117 339 1.36 68.69
8.500 - 8.624 9 28,055,644 4.74 92.89 8.535 118 333 1.37 66.93
8.625 - 8.749 2 7,181,544 1.21 94.10 8.641 119 359 1.31 68.72
8.750 - 8.874 2 9,285,484 1.57 95.67 8.800 116 356 1.40 70.09
8.875 - 8.999 2 15,376,847 2.60 98.26 8.916 118 298 1.43 62.58
9.000 - 9.124 1 6,690,463 1.13 99.39 9.050 116 356 3.89 79.65
9.125 - 9.249 2 1,720,394 0.29 99.68 9.169 118 298 1.41 67.51
9.250 - 9.374 1 797,213 0.13 99.81 9.350 115 295 1.71 75.21
9.500 - 9.500 1 1,096,789 0.19 100.00 9.500 116 296 1.31 54.84
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. AVG. 106 $592,445,159 100.00% 100.00% 7.990% 114 346 1.40x 70.53%
<CAPTION>
RANGE OF REPAYMENT
MORTGAGE RATES LTV
- ---------------- ---------
<S> <C>
6.977% - 6.999% 70.58%
7.000 - 7.124 70.32
7.125 - 7.249 65.17
7.250 - 7.374 69.62
7.375 - 7.499 68.12
7.500 - 7.624 60.70
7.625 - 7.749 66.09
7.750 - 7.874 59.84
7.875 - 7.999 60.65
8.000 - 8.124 63.70
8.125 - 8.249 66.01
8.250 - 8.374 66.69
8.375 - 8.499 60.25
8.500 - 8.624 58.63
8.625 - 8.749 62.51
8.750 - 8.874 64.07
8.875 - 8.999 52.66
9.000 - 9.124 73.18
9.125 - 9.249 57.71
9.250 - 9.374 64.71
9.500 - 9.500 46.28
- ---------------------------
TOTAL/WTG. AVG. 62.46%
</TABLE>
S-53
<PAGE>
ORIGINAL TERMS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF ------------------------------------------------------------------
NUMBER OF AGGREGATE INITIAL STATED REMAINING CUT-OFF CUT-OFF
ORIGINAL MORTGAGE CUT-OFF DATE POOL MORTGAGE REMAINING AMORT. SEASONING DATE DATE
TERMS LOANS BALANCE BALANCE RATE TERM (MO.) TERM (MO.) (MO.)(A) DSCR LTV
- ------------------------- --------- ------------ ------- -------- ---------- ---------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 to 9 Year Balloon 3 $ 28,957,808 4.89% 7.332% 75 346 14 1.27x 74.31%
10 Year Balloon 93 462,742,165 78.11 8.064 116 344 4 1.41 70.25
10 Year ARD 9 92,621,804 15.63 7.837 114 354 6 1.44 70.22
11 to 14 Year Balloon 1 8,123,382 1.37 7.830 139 355 5 1.26 76.64
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG.
AVG. 106 $592,445,159 100.00% 7.990% 114 346 5 1.40x 70.53%
<CAPTION>
ORIGINAL REPAYMENT
TERMS LTV
- ------------------------- ---------
<S> <C>
6 to 9 Year Balloon 68.84%
10 Year Balloon 61.94
10 Year ARD 62.88
11 to 14 Year Balloon 64.51
- ------------------------------------
TOTAL/WTG.
AVG. 62.46%
</TABLE>
- ------------------
(A) Number of months elapsed since the first Due Date following origination.
REMAINING TERMS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------
RANGE OF NUMBER OF AGGREGATE CUMULATIVE % STATED REMAINING CUT-OFF
REMAINING MORTGAGE CUT-OFF DATE % OF INITIAL OF INITIAL MORTGAGE REMAINING AMORT. DATE
TERMS (MO.) LOANS BALANCE POOL BALANCE POOL BALANCE RATE TERM (MO.) TERM (MO.) DSCR
- ----------------- --------- ------------ ------------ ------------ -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
63 - 72 2 $ 16,995,630 2.87% 2.87% 7.234% 64 340 1.30x
85 - 96 1 11,962,178 2.02 4.89 7.470 91 355 1.22
97 - 108 3 39,433,708 6.66 11.54 7.081 102 342 1.34
109 - 120 99 515,930,261 87.08 98.63 8.099 117 346 1.42
121 - 139 1 8,123,382 1.37 100.00 7.830 139 355 1.26
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. AVG. 106 $592,445,159 100.00% 100.00% 7.990% 114 346 1.40x
<CAPTION>
RANGE OF CUT-OFF
REMAINING DATE REPAYMENT
TERMS (MO.) LTV LTV
- ----------------- ------- ---------
<S> <C> <C>
63 - 72 73.04% 68.13%
85 - 96 76.10 69.85
97 - 108 78.77 69.71
109 - 120 69.60 61.51
121 - 139 76.64 64.51
- ---------------------------------------
TOTAL/WTG. AVG. 70.53% 62.46%
</TABLE>
YEARS OF SCHEDULED MATURITY OR ANTICIPATED REPAYMENT DATE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------
SCHEDULED NUMBER OF AGGREGATE % OF CUMULATIVE % STATED REMAINING CUT-OFF
MATURITY OR MORTGAGE CUT-OFF DATE INITIAL POOL OF INITIAL MORTGAGE REMAINING AMORT. DATE
ARD YEAR LOANS BALANCE BALANCE POOL BALANCE RATE TERM (MO.) TERM (MO.) DSCR
- ---------------- --------- ------------ ------------ ------------ -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2005 2 $ 16,995,630 2.87% 2.87% 7.234% 64 340 1.30x
2007 1 11,962,178 2.02 4.89 7.470 91 355 1.22
2008 3 39,433,708 6.66 11.54 7.081 102 342 1.34
2009 99 515,930,261 87.08 98.63 8.099 117 346 1.42
2011 1 8,123,382 1.37 100.00 7.830 139 355 1.26
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. AVG. 106 $592,445,159 100.00% 100.00% 7.990% 114 346 1.40x
<CAPTION>
SCHEDULED CUT-OFF
MATURITY OR DATE REPAYMENT
ARD YEAR LTV LTV
- ---------------- ------- ---------
<S> <C> <C>
2005 73.04% 68.13%
2007 76.10 69.85
2008 78.77 69.71
2009 69.60 61.51
2011 76.64 64.51
- --------------------------------------
TOTAL/WTG. AVG. 70.53% 62.46%
</TABLE>
S-54
<PAGE>
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF CUMULATIVE ----------------------------------------------
CUT-OFF NUMBER OF AGGREGATE INITIAL % OF INITIAL STATED REMAINING CUT-OFF
DATE MORTGAGE CUT-OFF DATE POOL POOL MORTGAGE REMAINING AMORT DATE
BALANCES LOANS BALANCE BALANCE BALANCE RATE TERM(MO.) TERM (MO.) DSCR
- -------------------------- --------- ------------ ------- ------------ -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 721,001 - $ 999,999 6 $ 5,199,857 0.88% 0.88% 8.705% 116 316 1.40x
1,000,000 - 1,999,999 22 34,897,971 5.89 6.77 8.287 116 329 1.47
2,000,000 - 2,999,999 22 51,755,572 8.74 15.50 8.265 116 337 1.46
3,000,000 - 3,999,999 8 27,567,589 4.65 20.16 8.380 118 351 1.30
4,000,000 - 4,999,999 8 36,933,995 6.23 26.39 7.827 115 345 1.53
5,000,000 - 5,999,999 2 11,532,147 1.95 28.34 7.917 115 316 1.24
6,000,000 - 6,999,999 12 77,742,701 13.12 41.46 8.354 117 351 1.58
7,000,000 - 7,999,999 2 15,471,458 2.61 44.07 7.657 91 349 1.31
8,000,000 - 8,999,999 7 59,655,993 10.07 54.14 7.960 117 337 1.37
9,000,000 - 9,999,999 3 28,386,930 4.79 58.93 8.008 100 352 1.27
10,000,000 - 14,999,999 4 47,205,721 7.97 66.90 7.853 110 341 1.35
15,000,000 - 19,999,999 7 123,789,541 20.89 87.80 7.880 117 357 1.29
20,000,000 - 24,999,999 1 20,930,804 3.53 91.33 7.790 115 355 1.25
25,000,000 - 26,086,864 2 51,374,881 8.67 100.00 7.407 111 351 1.56
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG.
AVG. 106 $592,445,159 100.00% 100.00% 7.990% 114 346 1.40x
<CAPTION>
CUT-OFF CUT-OFF
DATE DATE REPAYMENT
BALANCES LTV LTV
- -------------------------- ------- ---------
<S> <C> <C>
$ 721,001 - $ 999,999 70.35% 60.89%
1,000,000 - 1,999,999 68.74 60.02
2,000,000 - 2,999,999 66.19 58.08
3,000,000 - 3,999,999 73.49 65.62
4,000,000 - 4,999,999 66.30 58.51
5,000,000 - 5,999,999 75.39 64.07
6,000,000 - 6,999,999 72.23 64.63
7,000,000 - 7,999,999 68.20 62.36
8,000,000 - 8,999,999 70.20 60.81
9,000,000 - 9,999,999 72.67 66.15
10,000,000 - 14,999,999 68.81 60.67
15,000,000 - 19,999,999 73.46 65.43
20,000,000 - 24,999,999 72.18 63.51
25,000,000 - 26,086,864 67.70 60.13
- -----------------------------------------------
TOTAL/WTG.
AVG. 70.53% 62.46%
</TABLE>
- ------------------
Average Cut-Off Date Balance is $5,589,105
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
S-55
<PAGE>
PREPAYMENT PENALTY CATEGORIES
<TABLE>
<CAPTION>
WEIGHTED LOCKOUT/DEFEASANCE
AGGREGATE % OF AVERAGE TERM (MO.)/
NUMBER OF CUT-OFF INITIAL STATED % OF WEIGHTED AVERAGE
PREPAYMENT MORTGAGE DATE POOL REMAINING STATED REMAINING TERM
RESTRICTIONS(A) LOANS BALANCE BALANCE TERM (MO.) OF LOCKOUT
- ------------------------ --------- ------------ ------- ---------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LO, then D 99 $532,675,214 89.91% 116 113 97.51%
LO, then PP 1 7,488,420 1.26 65 5 7.69
LO, then YM 6 52,281,526 8.82 103 40 38.34
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. AVG. 106 $592,445,159 100.00% 114 105 92.12%
<CAPTION>
WEIGHTED AVERAGE
# OF MONTHS
PREPAYMENT OPEN TO PREPAYMENT
RESTRICTIONS(A) PRIOR TO MATURITY
- ------------------------ ------------------
<S> <C>
LO, then D 3
LO, then PP 3
LO, then YM 4
- ------------------------
TOTAL/WTG. AVG. 3
</TABLE>
- ---------------
(A) LO=Locked Out, D=Defeasance Collateral, YM=Yield Maintenance, PP=Percentage
Premium.
PREPAYMENT RESTRICTIONS BY ORIGINAL TERM
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
-------------------------------------------
AGGREGATE % OF REMAINING
NUMBER OF CUT-OFF INITIAL STATED MONTHS REMAINING
PREPAYMENT MORTGAGE DATE POOL MORTGAGE REMAINING LOCKED MONTHS
ORIGINAL TERM RESTRICTIONS (A) LOANS BALANCE BALANCE RATE TERM (MO.) OUT YM
- ---------------------- ---------------- --------- ------------ ------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 to 9 Year Balloon LO, then D 1 $ 11,962,178 2.02% 7.470% 91 87 0
LO, then PP 1 7,488,420 1.26 7.430 65 5 0
LO, then YM 1 9,507,210 1.60 7.080 63 26 33
-------------------------------------------------------------------------------------------------
SubTotal 3 28,957,808 4.89 7.332 75 46 11
10 Year Balloon LO, then D 88 419,967,849 70.89 8.089 116 113 0
LO, then YM 5 42,774,316 7.22 7.824 112 43 66
- ---------------------------------------------------------------------------------------------------------------------------
SubTotal 93 462,742,165 78.11 8.064 116 107 6
10 Year ARD LO, then D 9 92,621,804 15.63 7.837 114 113 0
11 to 14 Year Balloon LO, then D 1 8,123,382 1.37 7.830 139 135 0
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL/WTG. AVG. 106 $592,445,159 100.00% 7.990% 114 105 5
<CAPTION>
REMAINING
REMAINING MONTHS OPEN
MONTHS PRIOR TO
ORIGINAL TERM PP MATURITY/ARD
- ---------------------- --------- ------------
<S> <C> <C>
6 to 9 Year Balloon 0 4
57 3
0 4
15 4
10 Year Balloon 0 3
0 4
- ----------------------
0 3
10 Year ARD 0 1
11 to 14 Year Balloon 0 4
- ----------------------
TOTAL/WTG. AVG. 1 3
</TABLE>
- ---------------
(A) LO=Locked Out, D=Defeasance Collateral, YM=Yield Maintenance, PP=Percentage
Premium.
S-56
<PAGE>
PREPAYMENT LOCK-OUT/PREMIUM ANALYSIS
<TABLE>
<CAPTION>
CURRENT 12 MO. 24 MO. 36 MO. 48 MO. 60 MO. 72 MO. 84 MO. 96 MO. 108 MO.
PREPAYMENT NOV. NOV. NOV. NOV. NOV. NOV. NOV. NOV. NOV. NOV.
RESTRICTIONS 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- -------------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out and/or
Defeasance 100.0% 98.7% 97.0% 95.4% 94.0% 90.0% 92.6% 92.6% 92.4% 89.5%
Yield Maintenance 0.0 0.0 1.8 3.4 4.8 7.2 7.4 7.4 6.1 6.5
Percentage Premium
5.00% 0.0 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
4.00 0.0 0.0 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0
3.00 0.0 0.0 0.0 1.3 0.0 0.0 0.0 0.0 0.0 0.0
2.00 0.0 0.0 0.0 0.0 1.3 0.0 0.0 0.0 0.0 0.0
1.00 0.0 0.0 0.0 0.0 0.0 1.2 0.0 0.0 0.0 0.0
Open 0.0 0.0 0.0 0.0 0.0 1.6 0.0 0.0 1.5 3.9
- -----------------------------------------------------------------------------------------------------------------------------------
TOTALS 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Mortgage Pool
Balance
($millions) $592.4 $587.5 $582.0 $576.0 $569.5 $562.6 $539.4 $531.4 $511.9 $468.4
% of Initial Pool
Balance 100.0% 99.2% 98.2% 97.2% 96.1% 95.0% 91.0% 89.7% 86.4% 79.1%
<CAPTION>
120 MO. 132 MO.
PREPAYMENT NOV. NOV.
RESTRICTIONS 2009 2010
- -------------------- ------- -------
<S> <C> <C>
Locked Out and/or
Defeasance 100.0% 100.0%
Yield Maintenance 0.0 0.0
Percentage Premium
5.00% 0.0 0.0
4.00 0.0 0.0
3.00 0.0 0.0
2.00 0.0 0.0
1.00 0.0 0.0
Open 0.0 0.0
- ------------------------------------------
TOTALS 100% 100%
Mortgage Pool
Balance
($millions) $ 7.1 $ 6.9
% of Initial Pool
Balance 1.2% 1.2%
</TABLE>
S-57
<PAGE>
THE MORTGAGE LOAN SELLERS
On or prior to the Closing Date, the Depositor will acquire the Mortgage
Loans from the Mortgage Loan Sellers pursuant to three separate mortgage loan
purchase agreements (each, a "Mortgage Loan Purchase Agreement"). Each Mortgage
Loan Seller acquired or originated the Mortgage Loans as described above under
"--General." The ORECM Mortgage Loans to be sold to the Depositor will not
include the right to receive a portion of the interest due on such Mortgage
Loans equal to the respective Master Servicing Fee set forth in Annex A hereto
(the "Retained Interest") for such Mortgage Loans. ORECM will be entitled to
receive the Retained Interest whether or not it remains as Master Servicer with
respect to the ORECM Mortgage Loans. See "RISK FACTORS--Servicing Transfer
Risks" and "SERVICING OF THE MORTGAGE LOANS--Servicing and Other Compensation
and Payment of Expenses" herein.
MERRILL LYNCH MORTGAGE CAPITAL INC.'S UNDERWRITING STANDARDS
General. Thirty-Four (34) Mortgage Loans, representing approximately
35.62% of the Initial Pool Balance, were originated by Merrill Lynch Mortgage
Capital Inc. ("MLMC") directly, three Mortgage Loans, representing approximately
7.24% of the Initial Pool Balance, were originated or purchased by The Chase
Manhattan Bank ("Chase"), a third-party originator not affiliated with MLMC, and
subsequently purchased by MLMC and one Mortgage Loan, representing approximately
4.40% of the Initial Pool Balance, was originated or purchased by WMF Capital
Corp. ("WMF"), a third party originator not affiliated with MLMC, and
subsequently purchased by MLMC. The Mortgage Loans originated by MLMC were
generally underwritten to MLMC guidelines. In addition, MLMC applied its general
guidelines to its acquisition of the Mortgage Loans purchased from WMF and
Chase; provided, however, that MLMC generally relied on information provided to
it by WMF or Chase, without independent investigation. In some instances, one or
more provisions of the guidelines were waived or modified where it was
determined by MLMC not to adversely affect the value of such Mortgage Loans in
any material respect.
Cash Flow Analysis. Generally, MLMC reviews operating statements and rent
rolls provided by the borrower as well as industry data and independent
appraisals. MLMC also generally reconciles lease summaries and estoppels to rent
rolls and makes adjustments in order to determine the DSCR. DSCRs are used by
MLMC 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, DSCRs only measure the current, or recent, ability of
a property to service mortgage debt. See "--Underwritten Net Cash Flow" above.
Appraisal and Loan-to-Value Ratio. For each mortgaged property, MLMC
obtains a current narrative appraisal prepared by an MAI appraiser which must be
prepared in accordance with the Uniform Standards of Professional Appraisal
Practice and FIRREA. See "--Assessments of Property Condition--Appraisals"
above. MLMC determines the loan-to-value ratio of the mortgage loan at the date
of origination based on the value set forth in the appraisal.
DSCR and LTV Ratio. MLMC's underwriting standards generally require, for
all mortgage loans, minimum DSCR and maximum LTV ratios for various indicated
property types. MLMC's DSCR guidelines are calculated based on the Underwritten
Net Cash Flow at the time of origination and MLMC's LTV Ratio guidelines are
based upon appraisals obtained in connection with the origination of the related
mortgage loan. Therefore, the DSCR and LTV Ratio for each Mortgage Loan as
reported elsewhere in this Prospectus Supplement may differ from the ratios
calculated at the time of origination. Certain Mortgage Loans may deviate from
MLMC's underwriting guidelines.
Evaluation of Borrower. MLMC evaluates the borrower and its principals
with respect to financial capacity to meet obligations, credit history and prior
experience as an owner and operator of commercial real estate properties. The
evaluation generally includes obtaining and reviewing a credit report or other
reliable indication of the borrower's financial capacity; obtaining and
verifying credit references and/or business and trade references; and obtaining
and reviewing certifications provided by the borrower as to prior real estate
experience and current contingent liabilities. In addition, in general, each
borrower for mortgage loans above a
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minimum loan amount is required to be organized as a single-purpose entity, and
MLMC reviews the organizational documents of the borrower to verify compliance
with this requirement. Finally, although mortgage loans generally are
non-recourse in nature, in the case of certain mortgage loans, the borrower and
certain principals thereof are generally required to assume legal responsibility
for liabilities relating to fraud, misrepresentation, misappropriation of funds,
breach of environmental or hazardous materials requirements and unauthorized
transfer of title to the property.
Tax and Insurance Reserves. Generally, the borrowers are required to make
an initial deposit and monthly deposits into a tax and insurance reserve account
for payment of real estate taxes and insurance premiums in connection with the
mortgaged property.
Replacement Reserves. MLMC requires that capital reserves be deducted as
an expense in the determination of net cash flow. Generally, these amounts are
the greater of the amount determined to be needed by the physical assessment
report preparer or the minimum amount required under MLMC's underwriting
guidelines. Additionally, generally, an initial deposit and monthly replacement
reserves are collected for use by the borrower throughout the term of the loan
to maintain the mortgaged property.
Property Inspection. MLMC causes a site inspection to be performed on each
mortgaged property in connection with the origination of the related mortgage
loan to assess its general condition. Generally, the site inspections are done
by the MLMC underwriter. See "--Assessments of Property Condition--Property
Inspection" above.
Environmental Assessments. MLMC generally obtains a "Phase I"
environmental site assessment meeting American Society for Testing and Materials
(ASTM ESA-Standard E 1527-97) with respect to each mortgaged property in
connection with the origination of the related mortgage loan. Furthermore, MLMC
generally obtains a desktop review of the "Phase I" site assessment from another
environmental firm to (1) verify that the MLMC scope of work was followed and
(2) verify that the conclusions are appropriate. In certain cases, additional
environmental testing, as recommended by such "Phase I" assessment, was
performed. In each case where environmental assessments recommended further
action, MLMC determines whether the necessary remediation or testing was being
undertaken in a satisfactory manner or that such remediation or testing would be
adequately addressed post-closing. In most instances, MLMC requires that
reserves be established to cover the estimated cost of such remediation,
monitoring or testing. Generally, with respect to such mortgaged properties, the
related borrowers would be required to deposit with the lender or its designee
at the origination of the related mortgage loans an amount ranging from 125% to
200% of the licensed inspector's estimated cost of the recommended action. See
"Assessments of Property Condition--Environmental Site Assessments" above.
Engineering Assessments. MLMC causes a licensed engineer or architect to
inspect the related mortgaged property 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 the related
properties. Unless the cost is de minimis and can be paid through property cash
flow, 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 independent consultant's estimated cost of any
material recommended repairs, corrections or replacements not completed by
closing, to assure their completion. See "Assessment of Property
Condition--Property Condition Assessments" above.
Earthquake Analyses. An architectural or engineering consultant performs
an analysis on each of the mortgaged properties located in seismic zones 3 or 4
in order to evaluate the structural and seismic condition of the property and to
assess, based primarily on statistical information, the probable maximum loss
for the property in an earthquake scenario. The probable maximum loss is
calculated using a return period of not less than 475 years, a window of
50 years and a 10% probability of exceedance. If the resulting reports conclude
that in the event of an earthquake, the probable maximum loss to mortgaged
property would exceed 20% of the amount of the estimated replacement cost of its
improvements, earthquake insurance on such mortgaged properties was obtained.
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Title Insurance Policy. The borrower is required to provide, and MLMC or
its counsel reviews, a title insurance policy for each mortgaged property. The
title insurance policy must meet the following requirements: (a) the policy must
be written by a title insurer licensed to do business in the jurisdiction where
the mortgaged property is located, (b) the policy must be in an amount equal to
the original principal balance of the mortgage loan, (c) the protection and
benefits must run to the mortgagee and its successors and assigns, (d) the
policy should be written on a standard policy form of the American Land Title
Association ("ALTA") or equivalent policy promulgated in the jurisdiction where
the mortgaged property is located and (e) the legal description of the mortgaged
property in the title policy must conform to that shown on the survey of the
mortgaged property.
Property Insurance. The borrower is required to provide, and an insurance
consultant reviews, certificates evidencing required insurance with respect to
the mortgaged property. Such insurance generally may include: (1) commercial
general liability insurance for bodily injury or death and property damage;
(2) an "All Risk of Physical Loss" policy; (3) if applicable, boiler and
machinery coverage; (4) if the mortgaged property is located in a special flood
hazard area where mandatory flood insurance requirements apply, flood insurance;
and (5) such other coverage as MLMC may require based on the specific
characteristics of the mortgaged property.
PAINE WEBBER REAL ESTATE SECURITIES INC.'S UNDERWRITING STANDARDS
General. Twenty-two (22) Mortgage Loans, representing approximately 17.72%
of the Initial Pool Balance, were originated by PW Real Estate Investments Inc
("PWREI") and 14 Mortgage Loans sold to the Depositor by PWRES, representing
approximately 11.00% of the Initial Pool Balance, were originated by seven
third-party originators, none of which is affiliated with PWRES. The Mortgage
Loans originated by PWREI and such third-party originators and sold by PWRES to
the Depositor were generally underwritten to PWRES guidelines as set forth
below. In some instances, one or more provisions of the underwriting guidelines
were waived or modified where it was determined by PWRES not to adversely affect
such Mortgage Loans in any material respect.
PWRES' underwriting process for mortgage loans incorporates an evaluation
of the borrower a property financial analysis, a physical condition review,
loan-to-value and debt service coverage tests and escrow requirements.
Evaluation of Borrower. PWRES evaluates the borrower and its principals
with respect to financial capacity to meet obligations, credit history and prior
experience as an owner and operator of commercial real estate properties. The
evaluation generally includes obtaining and reviewing a credit report or other
reliable indication of the borrower's and principals' financial capacity;
obtaining and verifying credit references and/or business and trade references;
and obtaining and reviewing certifications provided by the principals as to
prior real estate experience. In addition, in general, each borrower for
mortgage loans is required to be organized as a single-purpose entity, and PWRES
reviews the organizational documents of the borrower to verify compliance with
this requirement. Finally, although mortgage loans generally are non-recourse in
nature, in the case of certain mortgage loans, the borrower and certain
principals thereof may be required to assume legal responsibility for
liabilities relating to fraud, misrepresentation, misappropriation of funds,
breach of environmental or hazardous materials requirements and unauthorized
transfer of title to the property.
Financial Analysis. In underwriting a mortgage loan, PWRES examines
borrower-provided property financial statements and rent rolls. Additionally,
property operating history, industry data regarding the local real estate market
and an independent appraisal are reviewed. The underwriting of certain Mortgage
Loans may vary from the PWRES underwriting guidelines, with respect to items
such as (i) debt service coverage ratios; (ii) property vacancy, which PWRES
Underwriting Guidelines recommends to be generally the greater of actual
property vacancy or market vacancy, but in no case less than 5%;
(iii) replacement reserves, which PWRES Underwriting Guidelines recommends to be
the greater of the amount determined by an independent third party engineer or
the minimum amount recommended by PWRES' Underwriting Guidelines. Such minimum
reserves include $250 per unit for multi-family loans, $50 per pad for mobile
home park loans, and a range of $0.10 to $0.15 per square foot for office,
industrial and retail properties; (iv) management fees
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which PWRES Underwriting Guidelines recommends to range from 2% to 5% of
underwritten effective gross income. and (v) operating expenses, assuming that
operating expenses with respect to the Mortgaged Property are derived from
actual historical operating expenses disclosed by the borrower and/or expense
levels based upon published industry statistics for comparable properties.
Physical Condition Review. An engineering study and an environmental
review are prepared by qualified consultants as described in "--Assessment of
Property Condition" above.
Appraisal and Loan-to-Value Ratio. For each mortgaged property, PWRES
obtains a current appraisal prepared by an MAI appraiser which must be prepared
in accordance with the Uniform Standards of Professional Appraisal Practice and
FIRREA. See "--Assessments of Property Condition--Appraisals" above. PWRES
determines the loan-to-value ratio of the mortgage loan at the date of
origination based on the value set forth in the appraisal. For each loan PWRES
Underwriting Guidelines are that, the loan-to-value ratio does not exceed 80% of
the values set forth in the appraisal.
Escrow Requirements. For substantially all mortgage loans sold by PWRES to
the Depositor, the related borrowers are required to fund various escrows for
taxes, insurance, capital reserves and replacement reserves. Generally, the
required escrows are as follows:
o TAXES--typically an initial deposit at closing and monthly escrow
deposits equal to 1/12th of annual amount due are required such that
the amount in the escrow will be sufficient to pay the full amount
of taxes when due.
o INSURANCE--typically an initial deposit at closing and monthly
escrow deposits equal to 1/12th of annual amounts due are required
such that the amount in the escrow will be sufficient to pay the
full amount of the insurance premium when due..
o CAPITAL RESERVES--Capital reserves for deferred maintenance and
environmental matters are typically based on third party reports and
are generally deposited upon the funding of the mortgage loan in an
amount equal to at least 125% of the estimated cost of identified
required repairs or replacements.
o REPLACEMENT RESERVES--These accounts, which are generally required,
are typically established at the greater of the amount determined by
an independent third-party engineer, based upon an on-site analysis,
or the minimum amount required under PWRES' Underwriting Guidelines.
ORIX REAL ESTATE CAPITAL MARKETS, LLC'S UNDERWRITING STANDARDS
General. Thirty-two (32) Mortgage Loans, representing approximately 24.02%
of the Initial Pool Balance, were directly originated by ORIX Real Estate
Capital Markets, LLC ("ORECM") (formerly known as Banc One Mortgage Capital
Markets, LLC), and were generally underwritten to ORECM guidelines. In some
instances, one or more provisions of the guidelines were waived or modified
where it was determined by ORECM not to adversely affect the value of such
Mortgage Loans in any material respect.
Cash Flow Analysis. ORECM reviews operating statements and rent rolls
provided by the borrower and makes adjustments in order to determine the DSCR.
DSCRs are used by ORECM 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, DSCRs only measure the current, or
recent, ability of a property to service mortgage debt. See "--Underwritten Net
Cash Flow" above.
Appraisal and Loan-to-Value Ratio. For each mortgaged property, ORECM
obtains a current full narrative appraisal conforming to the requirements of
FIRREA and the Uniform Standards of Professional Appraisal Practices. See
"--Assessments of Property Condition--Appraisals" above. ORECM determines the
loan-to-value ratio of the Mortgage Loan at the date of origination based on the
value set forth in the appraisal.
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DSCR and LTV Ratio. ORECM's underwriting standards generally require, for
all mortgage loans, minimum DSCR and maximum LTV ratios for various indicated
property types. ORECM's DSCR guidelines are calculated based on the Underwritten
Net Cash Flow at the time of origination, and ORECM's LTV Ratio guidelines are
based upon appraisals obtained in connection with the origination of the related
mortgage loan. Therefore, the DSCR and LTV Ratio for each Mortgage Loan as
reported elsewhere in this Prospectus Supplement may differ from the ratios
calculated at the time of origination. Certain Mortgage Loans may deviate from
ORECM's guidelines.
Evaluation of Borrower. ORECM evaluates the borrower and its principals
with respect to financial capacity to meet obligations, credit history and prior
experience as an owner and operator of commercial real estate properties. The
evaluation generally includes obtaining and reviewing a credit report or other
reliable indication of the borrower's financial capacity; obtaining and
verifying credit references and/or business and trade references; and obtaining
and reviewing certifications provided by the borrower as to prior real estate
experience and current contingent liabilities. In addition, in general, each
borrower for mortgage loans above a minimum loan amount is required to be
organized as a single-purpose entity, and ORECM reviews the organizational
documents of the borrower to verify compliance with this requirement. Finally,
although Mortgage Loans generally are non-recourse in nature, in the case of
certain mortgage loans, the borrower and certain principals thereof may be
required to assume legal responsibility for liabilities relating to fraud,
misrepresentation, misappropriation of funds, breach of environmental or
hazardous materials requirements and unauthorized transfer of title to the
property.
Property Inspection. ORECM performs a site inspection on each Mortgaged
Property in connection with the origination of the related Mortgage Loan to
assess its general condition. See "--Assessments of Property Condition--Property
Inspection" above.
Environmental Assessments. ORECM obtains a "Phase I" environmental site
assessment meeting American Society for Testing and Materials (ASTM ESA-Standard
E 1527-97) with respect to each Mortgaged Property in connection with the
origination of the related Mortgage Loan. In certain cases, additional
environmental testing, as recommended by such "Phase I" assessment, was
performed. In each case where environmental assessments recommended further
action, ORECM determines whether the necessary remediation or testing has been
undertaken in a satisfactory manner or whether such remediation or testing can
be adequately addressed post-closing. In some instances, ORECM requires that
reserves be established to cover the estimated cost of such remediation.
Generally, with respect to such mortgaged properties, the related borrowers
would be 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. In other
instances, ORECM may allow borrowers to purchase a secured creditor
environmental insurance policy in lieu of environmental escrows provided: (i)
the policy premium is fully paid at Closing, (ii) the term of the policy extends
at least five (5) years beyond the term of the loan, (iii) at issuance, the
issuer has a claims paying ability of not less than "AA" by S&P or, if not rated
by S&P, such comparable rating by another nationally recognized statistical
rating agency, and (iv) the policy is in an amount not less than the full
principal amount of the loan. See "Assessments of Property Condition--
Environmental Site Assessments" above.
Engineering Assessments. ORECM causes a licensed engineer or architect to
inspect the related mortgaged property 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 the related
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. See "Assessment of Property
Condition--Property Condition Assessments" above.
Escrow Requirements. ORECM generally requires borrowers to fund various
escrows for taxes, insurance, capital reserves, replacement reserves, and (if
necessary) environmental remediation.
Title Insurance Policy. The borrower is required to provide, and ORECM or
its counsel reviews, a title insurance policy for each Mortgaged Property. The
title insurance policy must meet the following
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requirements: (a) the policy must be written by a title insurer licensed to do
business in the jurisdiction where the Mortgaged Property is located, (b) the
policy must be in an amount equal to the original principal balance of the
Mortgage Loan, (c) the protection and benefits must run to the mortgagee and its
successors and assigns, (d) the policy should be written on a standard policy
form of the American Land Title Association ("ALTA") or equivalent policy
promulgated in the jurisdiction where the Mortgaged Property is located and
(e) the legal description of the Mortgaged Property in the title policy must
conform to that shown on the survey of the Mortgaged Property in cases where a
survey has been required.
Property Insurance. The borrower is required to provide, and ORECM and its
insurance consultants review, certificates of required insurance with respect to
the mortgaged property. Such insurance generally may include: (1) commercial
general liability insurance for bodily injury or death and property damage;
(2) an "All Risk of Physical Loss" policy; (3) if applicable, boiler and
machinery coverage; (4) if improvements to the Mortgaged Property are located in
a special flood hazard area where mandatory flood insurance requirements apply,
flood insurance; and (5) such other coverage as ORECM may require based on the
specific characteristics of the Mortgaged Property.
ASSIGNMENT OF THE MORTGAGE LOANS; REPURCHASES AND SUBSTITUTIONS
On or prior to the Closing Date, the Depositor will transfer the Mortgage
Loans, without recourse, to the Trustee on behalf of the Trust Fund for the
benefit of the Certificateholders. In connection with such transfer, the
Depositor will require each Mortgage Loan Seller to deliver to the Trustee or to
a document custodian appointed by the Trustee (a "Custodian"), among other
things, the following documents with respect to each Mortgage Loan
(collectively, as to each Mortgage Loan, the "Mortgage File"): (i) the original
Mortgage Note, endorsed, without recourse, to the order of the Trustee;
(ii) the original or a copy of the Mortgage, together with an original or copy
of any intervening assignments of the Mortgage, in each case with evidence of
recording indicated thereon; (iii) the original or a copy of any related
assignment of leases (if such item is a document separate from the Mortgage),
together with an original or a copy of any intervening assignments of any such
assignments of leases, in each case with evidence of recording indicated
thereon; (iv) an original assignment of the Mortgage in favor of the Trustee and
in recordable form; (v) an original assignment of any related assignment of
leases (if such item is a document separate from the Mortgage) in favor of the
Trustee and in recordable form; (vi) originals or copies of all written
modification agreements in those instances in which the terms or provisions of
the Mortgage or Mortgage Note have been modified; (vii) the original or a copy
of the policy or certificate of lender's title insurance issued in connection
with the origination of such Mortgage Loan, or, if such policy has not been
issued, an irrevocable, binding commitment to issue such title insurance policy;
(viii) any file copies of any UCC financing statements in the possession of the
applicable Mortgage Loan Seller; and (ix) an original assignment in favor of the
Trustee of any financing statement executed and filed in favor of the related
Mortgage Loan Seller in the relevant jurisdiction.
The Trustee or a Custodian on its behalf will be required to review each
Mortgage File within a specified period following its receipt thereof. If during
the course of such review or if any other party to the Pooling and Servicing
Agreement becomes aware that any of the above-described documents are missing
from any Mortgage File or defective, and in either case such omission or defect
materially and adversely affects the interests of the Certificateholders or the
value of the affected Mortgage Loan, the applicable Mortgage Loan Seller, if it
cannot deliver the document or cure the defect (other than omissions solely due
to a document not having been returned by the related recording office) within a
period of 90 days following its receipt of notice thereof, will be obligated
pursuant to the related 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 (or as such period may be
extended) 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 within such 90-day
period and pay the Trustee a shortfall amount equal to the difference between
the Purchase Price of the deleted Mortgage
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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. Each 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 applicable 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 two 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, with
respect to S&P only, 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 applicable 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 in its sole discretion; 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.
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REPRESENTATIONS AND WARRANTIES; REPURCHASES AND SUBSTITUTIONS
In each Mortgage Loan Purchase Agreement, the Mortgage Loan Sellers 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 date specified below, or if no such date is specified, the Cut-Off
Date, that (among other things):
1. Immediately prior to the sale of the Mortgage Loan to the
Depositor, the applicable Mortgage Loan Seller had good and marketable
title to and was the sole owner and holder of each Mortgage Loan, and the
assignment validly transferred its ownership of the Mortgage Loan, free and
clear of any and all liens, pledges and other encumbrances (other than such
Mortgage Loan Seller's obligation to repurchase defective Mortgage Loans),
subject to certain permitted exceptions set forth in the applicable
Mortgage Loan Purchase Agreement.
2. No monthly payment of principal of or interest on any Mortgage
Loan has been more than 30 days delinquent since origination and as of the
Cut-Off Date for such Mortgage Loan, no monthly payment of or interest on
such Mortgage Loan is 30 days or more delinquent.
3. To the applicable Mortgage Loan Seller's knowledge, there is no
material default, breach, violation or event of acceleration existing under
the related Mortgage or Mortgage Note, and to such Mortgage Loan Seller's
knowledge, there is no event (other than payments due but not yet
delinquent) which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute such a default,
breach, violation or event of acceleration.
4. Since origination, such Mortgage Loan has not been modified,
altered, satisfied, canceled, subordinated or rescinded, with the exception
of any modification, alteration, satisfaction, cancellation, subordination
or rescission specifically disclosed in a written instrument that (A) was
entered into prior to the Cut-Off Date, (B) has been recorded in the
applicable public recording office if necessary to maintain the priority of
the lien of the related Mortgage and related Security Agreements, if any,
and (C) is being delivered to the Trustee or Custodian as part of the
related Mortgage File. No material portion of the related Mortgaged
Property has been released from the lien of the related Mortgage, in each
case, in any manner which materially and adversely affects the value of the
Mortgage Loan or materially interferes with the security intended to be
provided by such Mortgage. The related Mortgage contains no terms which
provide for or require release of any portion of the related Mortgaged
Property from the lien of the Mortgage in any manner which materially and
adversely affects the adequacy of the security provided by the Mortgaged
Property.
5. The Mortgage Loan constitutes a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code (but without regard to the rule
in Treasury Regulation Section 1.860G-2(f)(2) that treats a defective
obligation as a "qualified mortgage" or any substantially similar successor
provision) and any and all Percentage Premiums and Yield Maintenance
Charges constitute "customary prepayment penalties" within the meaning of
Treasury Regulation Section 1.860G-1(b)(2).
6. The Mortgage Loan requires the related Mortgagor to provide annual
operating statements, rent rolls, and other information that the holder of
the Mortgage Loan may reasonably request in connection with the related
Mortgagor and the related Mortgaged Property.
7. The proceeds of the Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder and each Mortgage
Loan Seller covenants that it will not make any future advances under the
Mortgage Loan to the related Mortgagor. No advance of funds has been made
by any Mortgage Loan Seller, any affiliate or any third party originator to
the related Mortgagor (other than mezzanine debt) and no funds have been
received from or on behalf of any person other than the related Mortgagor
for, or on account of, payments due on the Mortgage Loan.
8. Other than the ARD Loans, which may have negative amortization
from and after their respective Anticipated Repayment Dates, the Mortgage
Loan does not provide for a shared appreciation or equity participation
feature, any other contingent or additional interest feature or the
negative amortization of interest.
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9. The Mortgage Loan is a whole loan. No Mortgage Loan Seller nor any
affiliate thereof has any obligation to make any capital contributions to
the Mortgagor other than contributions made on or prior to the closing
date.
10. Each related Mortgage Note, Mortgage, Assignment of Leases (if
any), and other agreement executed in connection with each Mortgage Loan is
the legal, valid and binding obligation of the related Mortgagor,
enforceable in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, receivership, reorganization,
moratorium, redemption or other laws affecting the enforcement of
creditors' rights generally or by general principles of equity (regardless
of whether such enforcement is considered in a proceeding in equity or at
law).
11. Unless the related Mortgaged Property is owner occupied, the
Mortgage File for such Mortgage Loan contains an Assignment of Leases,
either as a separate instrument or incorporated into the related Mortgage,
which creates in favor of the holder thereof a valid, collateral or first
priority assignment of, or a valid first priority security interest in,
certain rights under the related leases, subject only to a license granted
to the related Mortgagor to exercise certain rights and to perform certain
obligations of the lessor under such leases, including the right to operate
the related Mortgaged Property. Each related assignment of Mortgage from
the Mortgage Loan Seller to the Depositor (or the Trustee as its assignee)
and any related reassignment of assignment of leases, if any, or assignment
of any other agreement executed in connection with each Mortgage Loan, from
the Mortgage Loan Seller to the Depositor (or the Trustee as its assignee)
constitutes the legal, valid, binding and enforceable assignment from the
Mortgage Loan Seller to the Depositor (or the Trustee as its assignee)
except as such enforcement may be limited by bankruptcy, insolvency,
receivership, reorganization, moratorium, redemption or other laws
affecting the enforcement of creditors' rights generally or by general
principles of equity (regardless of whether such enforcement is considered
in a proceeding in equity or at law).
12. The Mortgage is a valid and enforceable first lien on the related
Mortgaged Property subject only to certain permitted liens, covenants,
easements and other restrictions, as described in the applicable Mortgage
Loan Purchase Agreement.
13. The related Mortgage contains customary and enforceable (subject
to bankruptcy, insolvency, moratorium, redemption or other similar laws
affecting creditors' rights generally or by general principles of equity)
provisions so as to render the rights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the benefits
of the security, including realization by judicial or, if applicable,
non-judicial foreclosure, and there is no exemption available to the
Mortgagor which would interfere with such right to foreclose (except as may
be imposed by bankruptcy, insolvency, moratorium, redemption or other
similar laws affecting creditors' rights generally or by general principles
of equity).
14. As of the date of origination of each Mortgage Loan, and, to the
Mortgage Loan Seller's knowledge, as of the Cut-Off Date, each related
Mortgagor was in possession of all material licenses, permits and other
authorizations necessary and required by all applicable laws for the
conduct of its business and all such licenses, permits and authorizations
were valid and in full force and effect.
15. The Mortgage Rate (exclusive of any excess interest on an ARD Loan
after the related Anticipated Repayment Date and any Default Interest, late
charges, Percentage Premiums and Yield Maintenance Charges) of each
Mortgage Loan compiled as of the date of origination with, or is exempt
from, applicable state or federal laws, regulations and other requirements
pertaining to usury; and any and all other requirements of any federal,
state or local laws, including, without limitation, truth-in-lending, real
estate settlement procedures, equal credit opportunity or disclosure laws,
applicable to each Mortgage Loan have been complied with as of the date of
origination of each Mortgage Loan.
16. Each related Mortgage or loan agreement contains provisions for
the acceleration of the payment of the unpaid principal balance of such
Mortgage Loan if, without complying with the requirements of the Mortgage
or loan agreement, the related Mortgaged Property, or any controlling
interest therein, is directly or indirectly transferred or sold (other than
transfers for estate planning purposes and other purposes where no change
of control occurs) or encumbered in connection with subordinate financing
(other than certain indebtedness described in the applicable Mortgage Loan
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Purchase Agreement) and each related Mortgage or loan agreement prohibits
the pledge or encumbrance of the Mortgaged Property without the consent of
the holder of the Mortgage Loan.
17. All amounts required to have been deposited by each Mortgagor
under each Mortgage Loan Documents have been deposited. All of the Mortgage
Loan Seller's interest in these amounts will be conveyed to the trust. All
requirements for escrows are memorialized in one or more written agreements
that are contained within the Mortgage File for such Mortgage Loan.
18. To each Mortgage Loan Seller's knowledge, based upon a site
inspection conducted in connection with the origination of the Mortgage
Loan and a review of the related engineering report, each related Mortgaged
Property is free and clear of any material damage that would affect
materially and adversely the value of such Mortgaged Property as security
for the Mortgage Loan; no Mortgage Loan Seller has received actual notice
of (A) any proceeding pending for the total or partial condemnation of such
Mortgaged Property or (B) any damage to such Mortgaged Property that
materially and adversely affects the value of such Mortgaged Property.
19. There are no delinquent taxes, ground rents, insurance premiums or
assessments (including, without limitation, assessments payable in future
installments or other similar outstanding charges, water charges or sewer
rents) affecting the Mortgaged Property or such amounts, if existing and in
dispute, have been escrowed or covered by a letter of credit. For purposes
of this representation, an obligation shall become "delinquent" on the date
on which both of the following conditions are satisfied: (A) interest
and/or penalties are due with respect to the unpaid amount and
(B) enforcement action can be taken by the related taxing authorities.
20. The improvements located on or forming part of each Mortgaged
Property materially comply with applicable zoning and building laws,
ordinances and regulations, or constitute a legal non-conforming use or
structure or, if any such improvement does not so comply, such
non-compliance does not materially and adversely affect the value of the
related Mortgaged Property.
21. Each Mortgage Loan Seller has inspected or caused to be inspected
each related Mortgaged Property within the past twelve months.
22. The lien of each related Mortgage is a first priority lien on the
fee or leasehold interest of the related Mortgagor in the original
principal amount of the related Mortgage Loan or allocated loan amount of
the portions of the Mortgaged Property covered thereby (as set forth in the
related Mortgage) and is insured by an ALTA lender's title insurance policy
or its equivalent (or a binding commitment therefor), insuring each
Mortgage Loan Seller, its successors and assigns in the original principal
amount of the Mortgage Loan after all advances of principal have been paid,
subject only to (A) the lien of current real property taxes, ground rents,
water charges, sewer rents and assessments not yet due and payable,
(B) covenants, conditions and restrictions, rights of way, easements and
other matters of public record, none of which, individually or in the
aggregate, materially interferes with the current use of the Mortgaged
Property or the security intended to be provided by such Mortgage or with
the Mortgagor's ability to pay its obligations when they become due or the
value of the Mortgaged Property and (C) the exclusions and exceptions
(general and specific) set forth in such policy, none of which,
individually or in the aggregate, materially interferes with the current
use of the Mortgaged Property or materially interferes with the security
intended to be provided by such Mortgage or with the related Mortgagor's
ability to pay its obligations when they become due or the value of the
Mortgaged Property. The premium for such policy was paid in full; such
policy was issued by a title insurance company licensed to issue policies
in the state in which the related Mortgaged Property is located and is
assignable to the Depositor and the Trustee without the consent of or any
notification to the insurer, and is in full force and effect upon the
consummation of the transactions contemplated by the applicable Mortgage
Loan Purchase Agreement; no claims have been made under such policy and no
Mortgage Loan Seller has undertaken any action or omitted to take any
action, and has no knowledge of any such act or omission, which would
impair or diminish the coverage of such policy.
23. A Phase I environmental report, and with respect to certain
Mortgage Loans, a Phase II environmental report, was conducted by a
reputable environmental engineer in connection with such Mortgage Loan,
which report did not indicate any material non-compliance or material
existence of
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hazardous material or, if any material non-compliance or material existence
of hazardous materials was indicated in any such report (i) the remedial
action recommended to be taken in the report has been or is being taken,
including implementation of an operations and maintenance program,
(ii) funds sufficient to cover any recommended remedial action have been
escrowed by the related Mortgagor and held by the Mortgage Loan Seller
under the related Mortgage, or (iii) the related Mortgaged Property is
insured under a policy of insurance subject to certain per occurrence and
aggregate limits and a deductible, against certain losses arising from such
circumstance or condition. To the best of each Mortgage Loan Seller's
knowledge, in reliance on such environmental reports, each Mortgaged
Property is in material compliance with all applicable federal, state and
local laws pertaining to environmental hazards other than as disclosed in
such environmental reports, and to the best of each Mortgage Loan Seller's
knowledge, no notice of violation of such laws has been issued by any
governmental agency or authority, except as indicated in certain
environmental reports or other documents previously provided to the Rating
Agencies; no Mortgage Loan Seller has taken any action which would cause
the Mortgaged Property not to be in compliance with all federal, state and
local laws pertaining to environmental hazards. Each Mortgagor represents
and warrants in the related Mortgage Loan documents that except as set
forth in certain environmental reports and to the best of its knowledge it
has not used, caused or permitted to exist and will not use, cause or
permit to exist on the related Mortgaged Property any hazardous materials
in any manner which violates federal, state or local laws, ordinances,
regulations, orders, directives or policies governing the use, storage,
treatment, transportation, manufacture, refinement, handling, production or
disposal of hazardous materials. Each Mortgagor (or an affiliate thereof)
has agreed to indemnify, defend and hold each Mortgage Loan Seller and its
successors and assigns harmless from and against any and all losses,
liabilities, damages, injuries, penalties, fines, expenses, and claims of
any kind whatsoever (including attorney's fees and costs) paid, incurred or
suffered by, or asserted against, any such party resulting from a breach of
environmental representations, warranties or covenants given by the
Mortgagor in connection with such Mortgage Loan.
24. The Mortgage Loan requires that the Mortgaged Property be covered
by the following insurance policies naming the Mortgagee and its successors
and assigns as additional insured, in an amount at least equal to the
lesser of the value of the replacement cost of the related Mortgaged
Property or the principal balance of the related Mortgage Loan, and
sufficient to avoid the operation of any co-insurance provisions: (A) fire
and extended perils (included within the classification "All Risk of
Physical Loss"), (B) 12 months of business interruption or rental loss
insurance, (C) flood insurance if, based solely on a flood zone
certification or a survey of the related Mortgaged Property, the property
improvements are located in a 100-year flood plain, or if any portion of
the improvements on the Mortgaged Property is located in a federally
designated flood area "A" and (D) comprehensive general liability insurance
in amounts generally required by institutional lenders for similar
properties. All premiums on such insurance policies required to be paid as
of the Cut-Off Date have been paid; such insurance policies may not be
terminated or cancelled without 30 days prior written notice to the insured
(for defaults other than non-payment, for which there is a minimum of
10 days written notice of cancellation) and no such notice has been
received by the insured. The insurance provider of each such insurance
policy has an A.M. Best's rating of at least "A:X" or a claims paying
ability rating of at least "A" from S&P or its equivalent. Each related
Mortgage Loan obligates the related Mortgagor to maintain all such
insurance and, at such Mortgagor's failure to do so, authorizes the
mortgagee to maintain such insurance at the Mortgagor's cost and expense
and to seek reimbursement therefor from such Mortgagor.
25. The Mortgage Loan is directly secured by a Mortgage on a
commercial, industrial, self storage, healthcare related, retail, office,
health club, mixed use, hospitality, mobile home park or multifamily
residential property, and either (A) substantially all of the proceeds of
the Mortgage Loan were used to acquire, improve or protect an interest in
such real property which, as of the origination date, was the sole security
for such Mortgage Loan (unless the Mortgage Loan has been modified in a
manner that constituted a deemed exchange under Section 1001 of the Code at
a time when the Mortgage Loan was not in default or default with respect
thereto was not reasonably foreseeable) or (B) the fair market value of
such real property was at least equal to 80% of the principal amount of the
Mortgage Loan (1) at origination (or if the Mortgage Loan has been modified
in a manner that constituted a deemed exchange
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under Section 1001 of the Code at a time when the Mortgage Loan was not in
default or default with respect thereto was not reasonably foreseeable, the
date of the last such modification) or (2) at the Closing Date; provided
that the fair market value of the real property interest must first be
reduced by (I) the amount of any lien on the real property interest that is
senior to the Mortgage Loan (unless such senior lien also secures a
Mortgage Loan, in which event the computation described in clauses (1) and
(2) shall be made on an aggregate basis) and (II) a proportionate amount of
any lien that is in parity with the Mortgage Loan (unless such other lien
secures a Mortgage Loan that is cross-collateralized with such Mortgage
Loan, in which event the computation described in clauses (B)(1) and
(B)(2) shall be made on an aggregate basis.
26. An appraisal was performed and signed by a qualified appraiser,
who, to the best of the applicable Mortgage Loan Seller's knowledge, had no
interest, direct or indirect, in the Mortgaged Property or the Mortgagor or
in any loan made on the security thereof, and whose compensation is not
affected by the approval or disapproval of the Mortgage Loan; the appraisal
and appraiser both satisfy the requirements of the "Uniform Standards of
Professional Appraisal Practice" as adopted by the Appraisal Standards
Board of the Appraisal Foundation, all as in effect on the date the
Mortgage Loan was originated.
In the case of a breach of any of the foregoing representations and
warranties or any other representations and warranties contained in the related
Mortgage Loan Purchase Agreement that materially and adversely affects the
interests of the Certificateholders or the value of the affected Mortgage Loan,
the applicable Mortgage Loan Seller, if it cannot cure such breach within a
period of 90 days following its receipt of notice thereof, will be obligated
pursuant to the related Mortgage Loan Purchase Agreement (the relevant rights
under which will be assigned by the Depositor to the Trustee) to either
(i) substitute a Qualified Substitute Mortgage Loan and pay any Substitution
Shortfall Amount within such 90-day period, or (ii) 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 or repurchase the affected Mortgage Loan 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 or cure obligation will constitute
the sole remedy available to the Certificateholders and the Trustee for any
uncured breach of any Mortgage Loan Seller's representations and warranties
regarding the Mortgage Loans. The Mortgage Loan Sellers will be the sole
warranting parties 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 any Mortgage Loan Seller's representations and
warranties if the applicable 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 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 servicing of the Mortgage Loans and any REO Properties will be governed
by the Pooling and Servicing Agreement. The following summaries describe certain
provisions of the Pooling and Servicing Agreement relating to the servicing and
administration of the Mortgage Loans and any REO Properties. The summaries do
not purport to be complete and are subject, and qualified in their entirety by
reference, to the provisions of the Pooling and Servicing Agreement. Reference
is made to the Prospectus for additional information regarding the terms of the
Pooling and Servicing Agreement relating to the servicing and administration of
the Mortgage Loans and any REO Properties, provided that the information herein
supersedes any contrary information set forth in the Prospectus. See
"Description of the Agreements" in the Prospectus.
Each of the Master Servicer and the Special Servicer will be required to
service and administer the Mortgage Loans for which it is responsible. The
Master Servicer will initially perform primary servicing for all of the Mortgage
Loans except for three of the Mortgage Loans (7.24%).
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, with the same care, skill, prudence and diligence
with which the Master Servicer or the Special Servicer, as the case may be,
(i) services and administers similar mortgage loans for other third-party
portfolios, giving due consideration to the customary and usual standards of
practice of prudent institutional, commercial, multifamily and manufactured
housing mortgage lenders servicing their own mortgage loans or (ii) services and
administers commercial, multifamily and manufactured housing mortgage loans
owned by the Master Servicer or the Special Servicer, as the case may be,
whichever standard is higher, and with a view to the maximization of timely
recovery of principal and interest on a present value basis on the Mortgage
Loans or Specially Serviced Mortgage Loans, as applicable, and the best
interests of the Trust Fund and the Certificateholders, notwithstanding:
(A) 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, any
Mortgage Loan Seller (including, without limitation, any Mortgage Loan Seller's
repurchase obligation) or any other party to the Pooling and Servicing
Agreement; (B) the ownership of any Certificate by the Master Servicer or the
Special Servicer, as the case may be, or any affiliate thereof; (C) the Master
Servicer's obligation to make Advances; (D) the Master Servicer's or the Special
Servicer's, as the case may be, right to receive compensation for its services
under the Pooling and Servicing Agreement or with respect to any particular
transaction and (E) owning or managing any other mortgage loans or mortgaged
properties for third parties (the foregoing, collectively referred to as the
"Servicing Standard"). Each of the Master Servicer and Special Servicer has full
power and authority, acting alone, to do or cause to be done any and all things
in connection with the servicing and administration of the Mortgage Loans which
it may deem necessary or desirable, subject only to the Servicing Standard and
the terms of the Pooling and Servicing Agreement and the respective Mortgage
Loans.
Set forth below 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).
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Except as otherwise described under "--Inspections; Collection of Operating
Information" below, the Master Servicer initially will be responsible for the
servicing of the entire Mortgage Pool. With respect to any Mortgage Loan:
(i) as to which a payment default has occurred at its Maturity Date
(or, with respect to a Monthly Payment which is a Balloon Payment, as to
which the Balloon Payment is over 30 days past due), or, if the Stated
Maturity Date has been extended, at its extended maturity,
(ii) as to which any Monthly Payment (other than a Balloon Payment) is
more than 60 days delinquent,
(iii) as to which the Master Servicer determines that a payment
default has occurred or is imminent and is not likely to be cured by the
related borrower within 60 days,
(iv) as to which the borrower has entered into or consented to
bankruptcy, appointment of a receiver or conservator or a similar
insolvency proceeding, or the borrower has become the subject of a petition
seeking such a proceeding (provided that if such appointment, decree or
order is dismissed, or such consent revoked within 60 days after filing of
the petition such Mortgage Loan shall no longer be considered a Specially
Serviced Mortgage Loan), or the related borrower has admitted in writing
its inability to pay its debts generally as they become due,
(v) as to which the Master Servicer or Special Servicer shall have
received actual notice of the foreclosure or proposed foreclosure of any
other lien on the Mortgaged Property, or
(vi) as to which a default has occurred, of which the Master Servicer
has actual notice (other than a failure by the related borrower to pay
principal or interest), which materially and adversely affects the
interests of the Certificateholders and which remains unremediated for the
applicable grace period specified in such Mortgage Loan (or if no grace
period is specified, 60 days),
the Master Servicer will transfer its servicing responsibilities to the Special
Servicer, but 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 and prepare certain
reports to the Certificateholders with respect to such Mortgage Loan. If the
related Mortgaged Property is acquired in respect of any such Mortgage Loan
(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. A Mortgage Loan serviced
by the Special Servicer and any Mortgage Loan that has become an REO Property is
referred to herein as a "Specially Serviced Mortgage Loan". The Master Servicer
shall have no responsibility for the performance by the Special Servicer of its
duties under the Pooling and Servicing Agreement.
If any Specially Serviced Mortgage Loan, in accordance with its original
terms or as modified in accordance with the Pooling and Servicing Agreement,
becomes current and remains current for three consecutive monthly payments
(provided no additional event of default is foreseeable in the reasonable
judgment of the Special Servicer), the Special Servicer will return servicing of
such Mortgage Loan (a "Corrected Mortgage Loan") to the Master Servicer.
The Special Servicer will prepare a report (an "Asset Status Report") for
each Mortgage Loan which becomes a Specially Serviced Mortgage Loan not later
than 30 days after the servicing of such Mortgage Loan is transferred to the
Special Servicer. Each Asset Status Report will be delivered to the Controlling
Class Representative (as defined below), the Trustee and the Rating Agencies. If
the Controlling Class Representative does not disapprove an Asset Status Report
within 10 business days, the Special Servicer shall implement the recommended
action as outlined in such Asset Status Report. The Controlling Class
Representative may object to any Asset Status Report within 10 business days of
receipt; provided, however, that the Special Servicer shall implement the
recommended action as outlined in such Asset Status Report if it makes an
affirmative determination that such objection is not in the best interest of all
of the Certificateholders. If the Controlling Class Representative disapproves
such Asset Status Report and the Special Servicer has not made the affirmative
determination described above, the Special Servicer will revise such Asset
Status Report as soon as practicable thereafter, but in no event later than
30 days after such
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disapproval. The Special Servicer will revise such Asset Status Report until the
Controlling Class Representative fails to disapprove such revised Asset Status
Report as described above or until the Special Servicer makes a determination
that such objection is not in the best interests of the all of the
Certificateholders.
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
ORIX Real Estate Capital Markets, LLC ("ORECM") or an affiliate thereof
will act as the master servicer (the "Master Servicer") pursuant to the Pooling
and Servicing Agreement. ORECM is a Delaware limited liability company. ORECM
manages a servicing portfolio of commercial and multifamily loans encompassing
10,874 assets with an aggregate principal balance, as of June 30, 1999, of
approximately $28.5 billion, the collateral for which is located in 50 states,
Puerto Rico, the District of Columbia, Canada, the Dominican Republic and the
Virgin Islands. ORECM's servicing operations are located at 1717 Main Street,
Dallas, Texas 75201. 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 to
directly service certain of the Mortgage Loans as long as they are not Specially
Serviced Mortgage Loans, as defined above under "--General", the Master Servicer
will remain liable for its servicing obligations under the Pooling and Servicing
Agreement. The Master Servicer's principal offices are located at 1717 Main
Street, Dallas, Texas 75201.
THE SPECIAL SERVICER
ORECM or an affiliate thereof is expected to act as the special servicer
(the "Special Servicer") pursuant to the Pooling and Servicing Agreement. As of
June 30, 1999, ORECM served as the named Special Servicer on 63 securitized
transactions encompassing 18,039 loans, with an aggregate principal balance of
approximately $46.1 billion. For further information about ORECM, please see
"--The Master Servicer" above.
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 Certificateholder 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 than 20% of its original Certificate
Balance, the Class of Sequential Pay Certificates with the latest alphabetical
Class designation). The Class A-1 and Class A-2 Certificates will be treated as
one Class for determining the Controlling Class of Sequential Pay Certificates.
Any replacement of the Special Servicer by the Controlling Class of Sequential
Pay Certificates will be subject to, among other things, (i) the delivery of
notice of the proposed replacement to the Rating Agencies and receipt of notice
from the Rating Agencies that the replacement will not result in a downgrade,
withdrawal or, with respect to S&P only, qualification 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.
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SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The primary compensation to be paid to the Master Servicer in respect of
its servicing activities (including fees to be paid to any sub-servicer) will be
the Master Servicing Fee (together with the Special Servicing Fee, the
"Servicing Fees"). The "Master Servicing Fee" will be payable monthly on a
loan-by-loan basis from amounts received in respect of interest on each Mortgage
Loan or as otherwise described herein, will accrue at the related Master
Servicing Fee Rate and will be computed on the basis of the Stated Principal
Balance of 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 0.06199%. ORECM will be entitled to receive
such Master Servicing Fee on the ORECM Mortgage Loans as the Retained Interest
following the resignation or termination of ORECM as Master Servicer. See "RISK
FACTORS--Servicing Transfer Risks" and "DESCRIPTION OF THE MORTGAGE POOL--The
Mortgage Loan Sellers" herein.
In addition to the Master Servicing Fee, the Master Servicer will be
entitled to retain, as additional servicing compensation, (i) Prepayment
Interest Excesses, to the extent not used to off-set Prepayment Interest
Shortfalls, and (ii) with respect to Mortgage Loans that are not Specially
Serviced Mortgage Loans, all interest accrued on escrow balances 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 or late charges are applied to offset interest accrued on
Advances with respect to the related Mortgage Loan), exit fees and repayment
fees collected from borrowers on the related Mortgage Loans and (iii) interest
and other income on funds held in the Certificate Account.
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 and Trustee Fees) that accrues on the Mortgage Loan
during such Collection Period will be less (such shortfall, a "Prepayment
Interest Shortfall") than the amount of interest (net of related Servicing Fees
and Trustee Fees and without regard to any Prepayment Premium 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
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 with respect to Mortgage Loans
other than Specially Serviced Mortgage Loans but only up to the sum of its
aggregate Master Servicing Fee for the related Collection Period (other than the
Retained Interest if ORECM is no longer the Master Servicer) and Prepayment
Interest Excesses. 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, first from
default interest and late charges and then 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, the Workout Fee and the
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Liquidation Fee. 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 Stated Principal Balance of and for the same period respecting which any
related interest payment on the Specially Serviced Mortgage Loan is computed.
However, earned Special Servicing Fees will be payable out of general
collections on the Mortgage Loans then on deposit in the Certificate Account.
The Special Servicing Fee with respect to any Specially Serviced Mortgage Loan
will cease to accrue if such Mortgage Loan is liquidated or becomes a Corrected
Mortgage Loan. The Special Servicer will be entitled to a "Workout Fee" with
respect to each Corrected Mortgage Loan, which Workout Fee generally will be in
an amount equal to 1% of all amounts received in respect thereof and allocable
as a recovery of interest (other than Additional Interest and default interest)
and principal. The Workout Fee with respect to any Corrected Mortgage Loan will
cease to be payable if such Corrected Mortgage Loan again becomes a Specially
Serviced Mortgage Loan; provided that a new Workout Fee will become payable if
and when such Mortgage Loan again becomes a Corrected Mortgage Loan. If the
Special Servicer is terminated by the Controlling Class Representative (other
than for cause, and only if such Controlling Class Representative is not an
affiliate of the Master Servicer), it shall retain the right to receive any and
all Workout Fees payable with respect to Mortgage Loans that became Corrected
Mortgage Loans during the period that it acted as Special Servicer and were
still such at the time of such termination or resignation (and the successor
Special Servicer shall not be entitled to any portion of such Workout Fees), in
each case until the Workout Fee for any such loan ceases to be payable in
accordance with the preceding sentence.
A "Liquidation Fee" will be payable with respect to each Specially Serviced
Mortgage Loan other than a Corrected Mortgage Loan as to which the Special
Servicer obtains a full or partial payoff with respect thereto from the related
borrower and, except as otherwise described below, with respect to any Specially
Serviced Mortgage Loan or REO Property as to which the Special Servicer receives
any Liquidation Proceeds (as defined in the Prospectus). As to each such
Specially Serviced Mortgage Loan, the Liquidation Fee will be payable from, and
will be calculated by application of a "Liquidation Fee Rate" of 1% to the
Liquidation Proceeds (net of costs and expenses associated with the related
liquidation). Notwithstanding anything to the contrary described above, no
Liquidation Fee will be payable based on, or out of, Liquidation Proceeds
received in connection with the repurchase of any Mortgage Loan by any Mortgage
Loan Seller for a breach of representation or warranty or for defective or
deficient Mortgage Loan documentation, the purchase of any Specially Serviced
Mortgage Loan by the Master Servicer or the Special Servicer or the purchase of
all of the Mortgage Loans and REO Properties in connection with an optional
termination of the Trust Fund. If, however, Liquidation Proceeds are received
with respect to any Corrected Mortgage Loan and the Special Servicer is properly
entitled to a Workout Fee, such Workout Fee will be payable based on and out of
the portion of such Liquidation Proceeds that constitutes principal and/or
interest.
The Special Servicer will be entitled to additional servicing compensation
in the form of all assumption fees, modification fees and extension fees on or
with respect to Specially Serviced Mortgage Loans. The Special Servicer will
also be entitled to late payment charges and default interest on Specially
Serviced Mortgage Loans, but only to the extent such amounts are not needed to
pay interest on Advances.
Neither the Master Servicer or the Special Servicer shall be entitled to
receive Additional Interest with respect to any ARD Loan.
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
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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, in accordance
with the Servicing Standard, (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 and
(z) such modification, waiver or amendment does not result in a tax being
imposed on the Trust Fund or cause any of the REMICs created pursuant to the
Pooling and Servicing Agreement to fail to qualify as a REMIC at any time the
Certificates are outstanding. 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, or (ii) if the Mortgage
Loan is secured by a ground lease, extend the maturity date of such Mortgage
Loan beyond a date which is 20 years prior to the expiration of the term of such
ground lease, including renewal options. Unless the Special Special Servicer
determines, in its good faith judgment, that such extension or deferral would
increase the recovery to Certificateholders on a net present value basis, the
Special Servicer will not (i) 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), or (ii) 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
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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) other modifications, waivers or
amendments, subject to the provisions of the Pooling and Servicing Agreement,
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. To the extent permitted by the
Pooling and Servicing Agreement, the Special Servicer may waive any due-on-sale
or due-on-encumbrance clause with respect to a Specially Serviced Mortgage Loan,
and the Master Servicer may waive any due-on-sale or due-on-encumbrance clause
with respect to a Mortgage Loan which is not a Specially Serviced Mortgage Loan.
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.
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, except as otherwise required under the
Mortgage Loan documents;
(vi) any waiver of a "due-on-sale" or "due-on-encumbrance" clause;
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(vii) any acceptance of an assumption agreement releasing a borrower
from liability under a Specially Serviced Mortgage Loan; and
(viii) any acceptance of a discounted pay-off.
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, 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.
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
Representative 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 (an "REO Extension") or (ii) the Special Servicer obtains an opinion of
counsel generally to the effect that the holding of the property for more than
three years after the end of the taxable year in which the Trust Fund acquires
such property will not result in the imposition of a tax on the Trust Fund or
cause any REMIC created pursuant to the Pooling and Servicing Agreement to fail
to qualify as a REMIC under the Code. Subject to the foregoing, the Special
Servicer will generally be required to solicit bids for any Mortgaged Property
so acquired in such a manner as will be reasonably likely to realize a fair
price for such property. The Special Servicer may retain an independent
contractor to operate and manage any REO Property; however, the retention of an
independent contractor will not relieve the Special Servicer of its obligations
with respect to such REO Property.
In general, the Special Servicer or an independent contractor employed by
the Special Servicer at the expense of the Trust Fund will be obligated to
operate and manage any Mortgaged Property acquired as REO Property in a manner
that would, to the extent commercially reasonable, maximize the Trust Fund's net
after-tax proceeds from such property. After the Special Servicer reviews the
operation of such property and consults with the Trustee to determine the Trust
Fund's federal income tax reporting position with respect to the income it is
anticipated that the Trust Fund would derive from such property, the Special
Servicer could
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determine (particularly in the case of an REO Property that is a hospitality or
residential healthcare 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 Master Servicer will perform (at its own expense), or will cause to be
performed (at its own expense), physical inspections of each Mortgaged Property
at such times and in such manner as are consistent with the Servicing Standard,
but in any event shall inspect each Mortgaged Property securing a Mortgage Note
with a scheduled principal balance of (A) $2,000,000 or more at least once every
12 months and (B) less than $2,000,000 at least once every 24 months, in each
case commencing in the calendar year 2000; provided, however, that if the Master
Servicer has a reasonable basis to believe that (i) the DSCR with respect to any
Mortgage Loan has decreased by 25% or more from the DSCR as of the Cut-Off Date
or (ii) the DSCR with respect to any Mortgaged Property has decreased to 1.05x
or less, the Master Servicer shall inspect the related Mortgaged Property as
soon as practicable thereafter if no inspection has been performed in the last
6 months (the reasonable cost of which inspection shall be at the expense of the
Trust Fund); provided, further, however, that if any scheduled payment becomes
more than 60 days delinquent on the related Mortgage Loan, the Special Servicer
shall inspect the related Mortgaged Property as soon as practicable thereafter
if no inspection has been performed in the last 6 months (the reasonable cost of
which inspection shall be at the expense of the Trust Fund); provided, further,
however, as soon as practical after the Master Servicer transfers its servicing
responsibilities to the Special Servicer with respect to a Specially Serviced
Mortgage Loan, the Special Servicer shall inspect the related Mortgaged Property
if no inspection has been performed in the last 6 months (the reasonable cost of
which shall be at the expense of the Trust Fund). The Special Servicer or the
Master Servicer, as applicable, will prepare or cause to be prepared a written
report of each such inspection describing the condition of and any damage to the
Mortgaged Property and specifying the existence of any material vacancies in the
Mortgaged Property, of any sale, transfer or abandonment of the Mortgaged
Property, of any material change in the condition of the Mortgaged Property, or
of any waste committed thereon. The Master Servicer and the Special Servicer
will deliver a copy of each such report prepared by the Master Servicer and
Special Servicer to each other, each Rating Agency and the Trustee. The Special
Servicer will have the right to inspect or cause to be inspected (at its own
expense) every calendar year any Mortgaged Property related to a loan that is
not a Specially Serviced Mortgage Loan, provided that the Special Servicer
notifies the Master Servicer prior to such inspection, and provides a copy of
such inspection to the Master Servicer. The Special Servicer may, upon notice to
the Master Servicer, perform or cause to be performed (at its own expense) the
inspections otherwise required to be performed by the Master Servicer under
certain circumstances specified in the Pooling and Servicing Agreement.
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With respect to each Mortgage Loan that requires the borrower to deliver
such statements, the Special Servicer or the Master Servicer, as applicable, is
also required to collect and review the annual operating statements of the
related Mortgaged Property. There can be no assurance that any operating
statements required to be delivered under the Mortgages will in fact be
delivered, nor is the Special Servicer or the Master 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 to be available for review by Certificateholders during normal business
hours at the offices of the Trustee. See "DESCRIPTION OF THE
CERTIFICATES--Reports to Certificateholders; Available Information" herein.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Depositor's Mortgage Pass Through Certificates, Series 1999-C1 (the
"Certificates") will be issued pursuant to a Pooling and Servicing Agreement, to
be dated as of November 1, 1999, among the Depositor, the Master Servicer, the
Special Servicer, and the Trustee (the "Pooling and Servicing Agreement"). The
Certificates will represent in the aggregate the entire beneficial ownership
interest in a trust fund (the "Trust Fund") consisting primarily of: (i) the
Mortgage Loans and all payments and other collections in respect of the Mortgage
Loans received or applicable to periods after the Cut-Off Date (exclusive of
payments of principal and interest due, and principal prepayments received, on
or before the Cut-Off Date); (ii) any REO Property acquired on behalf of the
Trust Fund; (iii) such funds or assets as from time to time are deposited in the
Certificate Account (see "DESCRIPTION OF THE POOLING AGREEMENTS--Certificate
Account" in the Prospectus); and (iv) certain rights of the Depositor under the
Mortgage Loan Purchase Agreements relating to Mortgage Loan document delivery
requirements and the representations and warranties of each 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 B, Class C, Class D,
Class E, Class F, Class G, Class H, Class J and Class K Certificates
(collectively, the "Sequential Pay Certificates"); (ii) the Class IO
Certificates (together with the Sequential Pay Certificates, the "REMIC Regular
Certificates"); and (iii) one or more classes of REMIC residual certificates
(collectively, the "REMIC Residual Certificates").
Only the Class A-1, Class A-2, Class B, Class C, Class D, Class E, Class F
and Class IO Certificates (collectively, the "Offered Certificates") are offered
hereby. The Class G, Class H, Class J, Class K and REMIC Residual Certificates
(collectively, the "Private Certificates") have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and are not offered
hereby. Accordingly, information herein regarding the terms of the Private
Certificates is provided solely because of its potential relevance to a
prospective purchaser of an Offered Certificate.
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be issued in book-entry format through the
facilities of The Depository Trust Company ("DTC"). Each Offered Certificate
will be issued in denominations of not less than $1,000 actual or notional
principal amount and in integral multiples of $1 in excess thereof.
DTC management is aware that some computer applications and systems 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, either Underwriter, 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>
CLASS OF CERTIFICATE INITIAL CERTIFICATE BALANCE PERCENT OF INITIAL POOL BALANCE
- ------------------------------------------------- --------------------------- -------------------------------
<S> <C> <C>
Class A-1........................................ $ 97,600,000 16.47%
Class A-2........................................ $ 337,847,000 57.03%
Class B.......................................... $ 32,584,000 5.50%
Class C.......................................... $ 26,660,000 4.50%
Class D.......................................... $ 8,887,000 1.50%
Class E.......................................... $ 20,735,000 3.50%
Class F.......................................... $ 7,406,000 1.25%
Class G.......................................... $ 23,698,000 4.00%
Class H.......................................... $ 20,735,000 3.50%
Class J.......................................... $ 2,963,000 0.50%
Class K.......................................... $ 13,330,159 2.25%
</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 11 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.
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
subject to the limitation, if any, described in the applicable footnote to such
table (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 Pass-Through
Rate on its related notional amount. The Pass-Through Rate applicable to each of
the Components for each Distribution Date will equal the Weighted Average Net
Mortgage Rate for such Distribution Date minus the Pass-Through Rate applicable
to the corresponding Class of Certificates for such Distribution Date (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, 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 since each Mortgage Loan accrues interest on
an actual/360 basis, solely for the purpose of calculating the Weighted Average
Net Mortgage Rate, the Mortgage Rate referred to in clause (x) and the
Administrative Cost Rate will, to the extent appropriate, be adjusted to
compensate for months which have more or less than 30 days. With respect to all
Mortgage Loans, interest may be transferred from certain months with 31 days to
the February accrual period for distribution on the following Distribution Date
and the Mortgage Rate and Administrative Cost Rate of such Mortgage Loans will
not be adjusted for such accrual periods with 31 days or for the February
accrual period that follows. 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.
The "Collection Period" for each Distribution Date will be the period that
begins immediately following the Determination Date in the month preceding the
month in which such Distribution Date occurs (or, in the case of the initial
Distribution Date, immediately following the Cut-Off Date) and ends on and
includes the Determination Date in the same month as such Distribution Date. The
"Determination Date" will be the 10th day of each month (or, if not a business
day, the immediately preceding business day).
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DISTRIBUTIONS
General. Distributions on the Certificates will be made by the Trustee, to
the extent of the Available Distribution Amount, 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 December 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 (the "Record Date") 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, without
duplication:
(i) any Periodic Payments collected but due on a Due Date after
the related Collection Period;
(ii) any Prepayment Premiums;
(iii) Additional Interest;
(iv) default interest; and
(v) all amounts in the Certificate Account that are payable or
reimbursable to any person other than the Certificateholders, including,
without limitation, 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 Additional Interest will be distributed to the REMIC Residual
Certificates to the extent not applied to payment of certain shortfalls that
would otherwise be allocated to any other Class in accordance with the Pooling
and Servicing Agreement. Any Prepayment Premiums actually collected will be
distributed separately from the Available Distribution Amount, as described
under "--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
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for the following purposes and in the following order of priority, in each case
to the extent of the Available Distribution Amount:
(1) to distributions of interest to the holders of the Class A-1,
Class A-2 and Class IO Certificates (in each case, so long as any such
Class remains outstanding), pro rata, in accordance with the respective
amounts of Distributable Certificate Interest (as defined herein) in
respect of such Classes of Certificates on such Distribution Date in an
amount equal to all Distributable Certificate Interest in respect of each
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(2) to distributions of principal to the holders of the Class A-1
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of such Class of Certificates) equal to the Principal Distribution
Amount (as defined herein) for such Distribution Date;
(3) after the Class A-1 Certificates have been retired, to
distributions of principal to the holders of the Class A-2 Certificates in
an amount (not to exceed the then outstanding Certificate Balance of such
Class of Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1 Certificates;
(4) to distributions to the holders of the Class A-1 and Class A-2
Certificates, pro rata, in accordance with the amount of Realized Losses
and Additional Trust Fund Expenses, if any, previously allocated to such
Classes of Certificates for which no reimbursement has previously been
received, to reimburse such holders for all Realized Losses and Additional
Trust Fund Expenses, if any, 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;
(5) to distributions of interest to the holders of the Class B
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(6) after the Class A-1 and Class A-2 Certificates have been retired,
to distributions of principal to the holders of the Class B Certificates in
an amount (not to exceed the then outstanding Certificate Balance of such
Class of Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1 and/or Class A-2 Certificates on such Distribution Date;
(7) to distributions to the holders of the Class B Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received, 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;
(8) to distributions of interest to the holders of the Class C
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(9) after the Class A-1, Class A-2 and Class B Certificates have been
retired, to distributions of principal to the holders of the Class C
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of such Class of Certificates) equal to the Principal Distribution
Amount for such Distribution Date, less any portion thereof distributed in
respect of the Class A-1, Class A-2 and/or Class B Certificates on such
Distribution Date;
(10) to distributions to the holders of the Class C Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received, 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;
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(11) to distributions of interest to the holders of the Class D
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(12) after the Class A-1, Class A-2, Class B and Class C Certificates
have been retired, to distributions of principal to the holders of the
Class D Certificates in an amount (not to exceed the then outstanding
Certificate Balance of such Class of Certificates) equal to the Principal
Distribution Amount for such Distribution Date, less any portion thereof
distributed in respect of the Class A-1, Class A-2, Class B and/or Class C
Certificates on such Distribution Date;
(13) to distributions to the holders of the Class D Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received, 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;
(14) to distributions of interest to the holders of the Class E
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(15) after the Class A-1, Class A-2, Class B, Class C and Class D
Certificates have been retired, to distributions of principal to the
holders of the Class E Certificates in an amount (not to exceed the then
outstanding Certificate Balance of such Class of Certificates) equal to the
Principal Distribution Amount for such Distribution Date, less any portion
thereof distributed in respect of the Class A-1, Class A-2, Class B,
Class C and/or Class D Certificates on such Distribution Date;
(16) to distributions to the holders of the Class E Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received, 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;
(17) to distributions of interest to the holders of the Class F
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(18) after the Class A-1, Class A-2, Class B, Class C, Class D and
Class E Certificates have been retired, to distributions of principal to
the holders of the Class F Certificates in an amount (not to exceed the
then outstanding Certificate Balance of such Class of Certificates) equal
to the Principal Distribution Amount for such Distribution Date, less any
portion thereof distributed in respect of the Class A-1, Class A-2,
Class B, Class C, Class D and/or Class E Certificates on such Distribution
Date;
(19) to distributions to the holders of the Class F Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received, 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;
(20) to distributions of interest to the holders of the Class G
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(21) after the Class A-1, Class A-2, Class B, Class C, Class D, Class
E and Class F Certificates have been retired, to distributions of principal
to the holders of the Class G Certificates in an amount (not to exceed the
then outstanding Certificate Balance of such Class of Certificates) equal
to the Principal Distribution Amount for such Distribution Date, less any
portion thereof distributed in respect of the Class A-1, Class A-2,
Class B, Class C, Class D, Class E and/or Class F Certificates on such
Distribution Date;
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<PAGE>
(22) to distributions to the holders of the Class G Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received, 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;
(23) to distributions of interest to the holders of the Class H
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(24) after the Class A-1, Class A-2, Class B, Class C, Class D, Class
E, Class F and Class G Certificates have been retired, to distributions of
principal to the holders of the Class H Certificates in an amount (not to
exceed the then outstanding Certificate Balance of such Class of
Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1, Class A-2, Class B, Class C, Class D, Class E, Class F and/or
Class G Certificates on such Distribution Date;
(25) to distributions to the holders of the Class H Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to 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;
(26) to distributions of interest to the holders of the Class J
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(27) after the Class A-1, Class A-2, Class B, Class C, Class D, Class
E, Class F, Class G and Class H Certificates have been retired, to
distributions of principal to the holders of the Class J Certificates in an
amount (not to exceed the then outstanding Certificate Balance of such
Class of Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1, Class A-2, Class B, Class C, Class D, Class E, Class F, Class G
and/or Class H Certificates on such Distribution Date;
(28) to distributions to the holders of the Class J Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to 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;
(29) to distributions of interest to the holders of the Class K
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(30) after the Class A-1, Class A-2, Class B, Class C, Class D, Class
E, Class F, Class G, Class H and Class J Certificates have been retired, to
distributions of principal to the holders of the Class K Certificates in an
amount (not to exceed the then outstanding Certificate Balance of such
Class of Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1, Class A-2, Class B, Class C, Class D, Class E, Class F, Class G,
Class H and/or Class J Certificates on such Distribution Date;
(31) to distributions to the holders of the Class K Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to 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; and
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(32) to distributions to the holders of the REMIC Residual
Certificates in an amount equal to the balance, if any, of the Available
Distribution Amount remaining after the distributions to be made on such
Distribution Date as described in the above clauses.
After the Certificate Balance of the Subordinate Certificates is reduced to
zero, distributions of principal will be made to the Class A-1 and Class A-2
Certificates pro rata, based on their respective Class Certificate Balances.
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' allocable share (calculated as described below)
of the aggregate of any Prepayment Interest Shortfalls resulting from voluntary
principal prepayments made on the Mortgage Loans during the related Collection
Period that are not covered by the Master Servicer's Compensating Interest
Payment for such Distribution Date (the aggregate of such Prepayment Interest
Shortfalls that are not so covered, as to such Distribution Date, the "Net
Aggregate Prepayment Interest Shortfall").
The "Accrued Certificate Interest" in respect of each Class of Sequential
Pay Certificates for each Distribution Date is equal to one month's interest at
the Pass-Through Rate applicable to such Class of Certificates and such
Distribution Date accrued during the immediately preceding calendar month on the
related Certificate Balance outstanding immediately prior to such Distribution
Date. The "Accrued Certificate Interest" in respect of the Class IO Certificates
for each Distribution Date is equal to the sum of one month's interest at the
Pass-Through 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 the principal portions of all Scheduled Payments
(other than Balloon Payments) due on or in respect of the Mortgage Loans
for their respective Due Dates occurring before the related Collection
Period (but not before the Cut-Off Date), to the extent received or
advanced during the related Collection Period and not previously received
or advanced; provided that this amount will not include any Liquidation
Proceeds or Insurance Proceeds;
(c) the aggregate of all principal prepayments received on the
Mortgage Loans during the related Collection Period (including any
Remaining Cash Flow);
(d) 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
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respect of such Mortgage Loan on a Due Date during or prior to the related
Collection Period and not previously recovered;
(e) 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
(f) 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 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").
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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 B, Class C,
Class D, Class E and Class F 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 a reinvestment rate equal to the
applicable U.S. Treasury rate in effect on the date of prepayment as set forth
in The Wall Street Journal.
On each Distribution Date, Percentage Premiums collected during the related
Collection Period will be distributed as follows: the holders of each of the
Class A-1, Class A-2, Class B, Class C, Class D, Class E and Class F
Certificates will be entitled to an amount equal to the product of (a) a
fraction, the numerator of which is the amount distributed as principal to such
Class on such Distribution Date, and the denominator of which is the total
amount distributed as principal to all Classes of Certificates on such
Distribution Date, (b) 25% and (c) the total amount of Percentage Premiums
collected during the related Collection Period. Any Percentage Premiums
collected during the related Collection Period remaining after such
distributions will be distributed to the holders of the Class IO Certificates.
On each Distribution Date, Yield Maintenance Charges collected during the
related Collection Period will be distributed as follows: the holders of each of
the Class A-1, Class A-2, Class B, Class C, Class D, Class E and Class F
Certificates will be entitled to an amount equal to the amount of such Yield
Maintenance Charges, 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 such Class of Certificates entitled
to distributions of such principal on any particular Distribution Date on which
a Yield Maintenance Charge is distributable, the aggregate amount of such Yield
Maintenance Charge will be allocated among all such Classes up to, and on a pro
rata basis in accordance with, their respective entitlements thereto in
accordance with, the foregoing sentence. The portion, if any, of the Yield
Maintenance Charge 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" to be used in distribution of Yield Maintenance Charges
will be equal to the yield (monthly equivalent) 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, Class E and
Class F Certificates and each Class of the Private Certificates (other than the
REMIC Residual Certificates) (collectively, the "Subordinate Certificates") to
receive distributions of amounts collected or advanced on the Mortgage Loans
will be subordinated, to the extent described herein, to the rights of holders
of the Class A-1, Class A-2 and Class IO
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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 and Class A-2 Certificates of principal in an amount equal to
the entire respective Certificate Balance of such Classes of Certificates.
Similarly, but to decreasing degrees, this subordination is also intended to
enhance the likelihood of timely receipt by the holders of the Class B,
Class C, Class D, Class E and Class F 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 F
Certificates by means of the subordination of the Private Certificates, to the
holders of the Class E Certificates by means of the subordination of the Class F
and the Private Certificates, to the holders of the Class D Certificates by
means of the subordination of the Class E, Class F and the Private Certificates,
to the holders of the Class C Certificates by means of the subordination of the
Class D, Class E, Class F and the Private Certificates, to the holders of the
Class B Certificates by means of subordination of the Class C, Class D,
Class E, Class F and the Private Certificates and to the holders of the Senior
Certificates by means of the subordination of the Subordinate Certificates, will
be accomplished by (i) the application of the Available Distribution Amount on
each Distribution Date in accordance with the order of priority described under
"--Distributions--Application of the Available Distribution Amount" above and
(ii) the allocation of Realized Losses and Additional Trust Fund Expenses as
described below. The Class A-2 Certificates will receive principal payments only
after the Certificate Balance of the Class A-1 Certificates has been reduced to
zero. However, the Class A-1, Class A-2 and Class IO Certificates will bear
shortfalls in collections of interest and the Class A-1 and Class A-2
Certificates will bear 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 holders of the Class B
Certificates until the remaining Certificate Balance of such Class is reduced to
zero. Thereafter, additional Realized Losses and Additional Trust Fund Expenses
will be allocated to the Class A-1 Certificates and the Class A-2 Certificates,
pro rata, in proportion to their outstanding Certificate Balances, until the
remaining Certificate Balances of such Classes of Certificates are reduced to
zero.
Any Realized Loss or Additional Trust Fund Expense allocated in reduction
of the Certificate Balance of any Class of Sequential Pay Certificates will
result in a corresponding reduction in the notional amount for the related
Component and a reduction in the amount of interest to be distributed on future
Distribution Dates to the Class IO Certificateholders.
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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, Liquidation Fees or Workout 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 prior to 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 (but subject to reduction as described in the
following paragraph) the aggregate of all Scheduled Payments (other than Balloon
Payments) and any Assumed Scheduled Payments, net of related Master Servicing
Fees and, if any, Liquidation Fees and Workout 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. Subject to the recoverability determination, 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, Liquidation
Fees and Workout Fees) in respect of subsequent delinquencies. 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 amount required to be advanced with respect to a Mortgage Loan that has
been subject to an Appraisal Reduction Event will equal the amount that would be
required to be advanced by the Master
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Servicer without giving effect to the Appraisal Reduction less any Appraisal
Reduction Amount allocable with respect to such Mortgage Loan for such
Distribution Date.
The Master Servicer (or the Trustee) will be entitled to recover any
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 Workout Fees with respect to collections of
principal) as to which such 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 Advance that it determines in accordance with the servicing standards
described herein, would, if made, not be recoverable (with interest thereon) out
of Related Proceeds (a "Nonrecoverable Advance"), and the Master Servicer (or
the Trustee) will be entitled to recover, from general funds on deposit in the
Certificate Account, any Advance made that it later determines to be a
Nonrecoverable 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 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,
first, out of default interest and penalty charges for the related Mortgage
Loan, then 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
After an Appraisal Reduction Event has occurred, an Appraisal Reduction
will be calculated. As a result of calculating one or more Appraisal Reductions,
the amount of any required P&I Advance will be reduced by an amount equal to the
Appraisal Reduction Amount (defined below), which will have the effect of
reducing the amount of interest available to the most subordinate Class or
Classes of Certificates then outstanding (i.e., first to the Class K
Certificates, then Class J Certificates, then to the Class H Certificates, then
to the Class G Certificates, then to the Class F Certificates, then to the
Class E Certificates, then to the Class D Certificates, then to the Class C
Certificates and then to the Class B Certificates). See "--Advances" above.
An "Appraisal Reduction Event" will occur on the earliest of (i) the third
anniversary of the date on which an extension of the Stated Maturity Date of a
Mortgage Loan becomes effective as a result of a modification of such Mortgage
Loan by the Special Servicer, which extension does not change the amount of
Monthly Payments on the Mortgage Loan, (ii) 90 days after an uncured delinquency
occurs in respect of a Mortgage Loan, (iii) thirty days after the uncured
failure of the borrower with respect to any Balloon Loan to make the Balloon
Payment thereon, (iv) the date on which a reduction in the amount of Monthly
Payments on a Mortgage Loan, or a change in any other material economic term of
the Mortgage Loan (other than an extension that is the result of a modification
of such Mortgage Loan by the Special Servicer) occurs as a result of a
modification of the Mortgage Loan by the Special Servicer, (v) the date on which
a receiver has been appointed, (vi) the date on which a borrower declares
bankruptcy and (vii) immediately after a Mortgage Loan becomes an REO Loan;
provided, however, that an Appraisal Reduction Event shall not occur at any time
when the aggregate Certificate Balances of all Classes of Certificates (other
than the Class A-1 and Class A-2 Certificates) has been reduced to zero.
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The "Appraisal Reduction" for any Distribution Date and for any Mortgage
Loan as to which any Appraisal Reduction Event has occurred will be an amount
equal to the excess of (a) the outstanding Stated Principal Balance of such
Mortgage Loan over (b) the excess of (i) 90% of the appraised value of the
related Mortgaged Property as determined (A) by one or more independent
Appraisals with respect to any Mortgage Loan, with an outstanding principal
balance equal to or in excess of $2,000,000 (the costs of such appraisal shall
be paid by the Master Servicer as an Advance), and (B) by an internal valuation
performed by the Special Servicer with respect to any Mortgage Loan, with an
outstanding principal balance less than $2,000,000, over (ii) the sum as of the
Due Date occurring in the month of such Distribution Date of (A) to the extent
not previously advanced by the Master Servicer or the Trustee, as applicable,
all unpaid interest on such Mortgage Loan at a per annum rate equal to the
Mortgage Rate, (B) all unreimbursed Advances and interest thereon at the
Reimbursement Rate in respect of such Mortgage Loan, (C) all currently due and
unpaid real estate taxes and assessments, insurance premiums and ground rents
and all other amounts due and unpaid under the Mortgage Loan (which tax,
premiums, ground rents and other amounts have not been the subject of an Advance
by the Master Servicer or the Trustee and/or for which funds have not been
escrowed) and (D) all accrued and unpaid Special Servicing Fees.
The "Appraisal Reduction Amount" for any Distribution Date shall equal the
product of (i) the applicable per annum Pass-Through Rate (i.e., for any month,
one twelfth of the Pass-Through Rate) on each Class of Certificates to which the
Appraisal Reduction is allocated, and (ii) the sum of all Appraisal Reductions
with respect to such Distribution Date (or, in the case of Appraisal Reduction
Amounts determined on a Mortgage Loan-by-Mortgage Loan basis, the Appraisal
Reductions for each such Mortgage Loan for such Distribution Date).
The Special Servicer will be required to receive an MAI appraisal or
conduct an internal valuation, as applicable (an "Appraisal") within 60 days
after the Appraisal Reduction Event. The Appraisal shall be required to be
delivered by the Special Servicer to the Master Servicer and the Trustee, and
the Trustee shall deliver such Appraisal to the Paying Agent and each Holder of
a Class G, Class H, Class J and Class K Certificate within 15 days of receipt by
the Trustee of such Appraisal from the Special Servicer. On the first
Determination Date occurring on or after the delivery of such Appraisal, the
Special Servicer will be required to calculate and report to the Master
Servicer, and the Master Servicer will report to the Trustee, the Appraisal
Reduction to take into account such appraisal. In the event that the Special
Servicer has not received such Appraisal within the timeframe described above,
the amount of the Appraisal Reduction will be deemed to be an amount equal to
35% of the current Stated Principal Balance of the related Mortgage Loan until
such Appraisal is received.
With respect to each Mortgage Loan as to which an Appraisal Reduction has
occurred (unless such Mortgage Loan has become a Corrected Mortgage Loan and has
remained current for twelve consecutive Monthly Payments, and with respect to
which no other Appraisal Reduction Event has occurred with respect thereto
during the preceding twelve months), the Special Servicer is required, within 30
days of each anniversary of the related Appraisal Reduction Event or sooner if a
material event has occurred that the Special Servicer reasonably believes will
positively or negatively affect the valuation of the Mortgaged Property, to
order a new appraisal, the cost of which shall be a servicing advance. Based
upon such appraisal, the Special Servicer shall redetermine and report to the
Trustee, the Master Servicer and the Paying Agent, the amount of the Appraisal
Reduction with respect to such Mortgage Loan. Notwithstanding the foregoing, the
Special Servicer will not be required to obtain an appraisal with respect to a
Mortgage Loan which is the subject of an Appraisal Reduction Event to the extent
the Special Servicer has obtained an appraisal with respect to the related
Mortgaged Property within the 12-month period prior to the occurrence of such
Appraisal Reduction Event unless any event has occurred or circumstances have
arisen that could materially affect the market value of such Mortgaged Property.
Instead, the Special Servicer may use such prior appraisal in calculating any
Appraisal Reduction with respect to such Mortgage Loan.
With respect to each Mortgage Loan as to which an Appraisal Reduction has
occurred and which has become current and has remained current for twelve
consecutive Monthly Payments, and with respect to which no other Appraisal
Reduction Event has occurred and is continuing, the Special Servicer shall
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redetermine the amount of the Appraisal Reduction, and if appropriate under the
Pooling and Servicing Agreement in accordance with the Servicing Standards, the
Master Servicer, or the Trustee or Paying Agent shall be required to return to
making Advances, on the basis of a new Appraisal and the provisions of such
Mortgage Loan.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
On or prior to 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 in accordance with the Pooling and Servicing Agreement,
the Trustee will make available to any interested party via the Trustee's
internet website initially located at "www.ctslink.com/cmbs", (i) a statement in
the form of Annex C hereto (the "Distribution Date Statement") providing
information relating to distributions made on such Distribution Date with
respect to the Certificates, (ii) the CMSA Loan Periodic Update File, Loan Setup
File, Bond Level File, and Collateral Summary File, (iii) the Unrestricted
Servicer Reports, and (iv) as a convenience for interested parties (and not in
furtherance of the distribution thereof under the securities laws), this
Prospectus Supplement, the Prospectus and the Pooling and Servicing Agreement.
In addition, on or prior to 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 in accordance with the Pooling and
Servicing Agreement, the Trustee will make available each month, via its
internet website with the use of a password, (i) the Restricted Servicer
Reports, and (ii) the CMSA Property File. The password will be given out by the
Trustee, upon request, to each holder of a Certificate, each of the parties to
the Pooling and Servicing Agreement, each of the Rating Agencies, each of the
Underwriters, any person identified to the Trustee as a beneficial owner or
prospective purchaser of a Certificate upon receipt from such person of an
investor certification, the form of which is attached hereto as Annex B (the
"Investor Certification") and any other person upon the direction of the
Depositor.
The Trustee will make no representations or warranties as to the accuracy
or completeness of any report, document or other information made available on
its internet website and will assume no responsibility therefor. In addition,
the Trustee may disclaim responsibility for any information distributed by the
Trustee for which it is not the original source. For assistance with the
Trustee's internet website, investors may call (301) 815-6600.
In connection with providing access to the Trustee's internet website, the
Trustee, may require registration and the acceptance of a disclaimer. Neither
the Trustee nor the Master Servicer nor the Special Servicer shall be liable for
the dissemination of information in accordance herewith and with the Pooling and
Servicing Agreement.
The following reports are referred to herein as the "Servicer Reports",
forms of which are set forth in Annex D hereto. Servicer Reports identified in
clauses (a), (b), (c) and (d) are referenced to herein as the "Unrestricted
Servicer Reports" and Servicer Reports identified in clauses (e), (f), (g) and
(h) are referenced to herein as the "Restricted Servicer Reports".
(a) A "Delinquent Loan Status Report" setting forth, among other things,
those Mortgage Loans that were delinquent 30-59 days, delinquent 60-89 days,
delinquent 90 days or more, current but specially serviced, or subject to
foreclosure or other enforcement proceedings but not REO Property.
(b) An "Historical Loan Modification Report" setting forth, among other
things, those Mortgage Loans that have been modified pursuant to the Pooling and
Servicing Agreement (i) during the related Collection Period and (ii) since the
Cut-Off Date, showing the original and revised terms thereof.
(c) An "Historical Loss Estimate Report" setting forth, among other things,
(i) the aggregate amount of liquidation proceeds and expenses relating to each
Final Recovery Determination (as defined in the Pooling and Servicing
Agreement), both during the related Collection Period and historically, and
(ii) the amount of Realized Losses occurring during the related Collection
Period, set forth on a loan-by-loan basis.
(d) An "REO Status Report" setting forth, among other things, with respect
to each REO Property then currently included in the Trust Fund, (i) the
acquisition date of such REO Property, (ii) the amount of income
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collected with respect to such REO Property (net of related expenses) and other
amounts, if any, received on such REO Property during the related Collection
Period and (iii) the value of the REO Property based on the most recent
appraisal or other valuation thereof available to the Special Servicer as of
such Determination Date (including any prepared internally by the Special
Servicer).
(e) A "Watch List" identifying each Mortgage Loan that is not a Specially
Serviced Mortgage Loan (i) with a debt service coverage ratio of less than
1.05x, (ii) that has a stated maturity date occurring in the next sixty days,
(iii) that is delinquent in respect of its real estate taxes, (iv) for which any
outstanding Advances exist, (v) that has been a Specially Serviced Mortgage Loan
in the past 90 days, (vi) for which the debt service coverage ratio has
decreased by more than 10% in the prior 12 months, (vii) for which any lease
relating to more than 25% of the related Mortgaged Property has expired, been
terminated, is in default or will expire within the next three months,
(viii) that is late in making its Monthly Payment three or more times in the
preceding 12 months, (ix) with material deferred maintenance at the related
Mortgaged Property or (x) that is 30 or more days delinquent.
(f) An "Operating Statement Analysis Report" together with copies of the
operating statements and rent rolls (but only to the extent the related borrower
is required by the Mortgage to deliver, or otherwise agrees to provide, such
information).
(g) With respect to any Mortgaged Property or REO Property, an "NOI
Adjustment Worksheet" presenting the computations to "normalize" the full year
net operating income and debt service coverage numbers used by the Special
Servicer in the other reports referenced above.
(h) A "Comparative Financial Status Report" setting forth, among other
things, the occupancy, revenue, net operating income and DSCR for each Mortgaged
Loan or the related Mortgaged Property, as applicable, as of the end of the
calendar month immediately preceding the preparation of such report for (i) each
of the three immediately preceding monthly periods (to the extent such
information is in the Master Servicer's possession); (ii) the most current
available year-to-date, (iii) each of the previous two full fiscal years stated
separately; and (iv) the "base year" (representing the original analysis of
information used as of the Cut-Off Date).
The Pooling and Servicing Agreement requires that the Trustee make
available at its offices, during normal business hours, for review by any person
providing the Trustee with an Investor Certification, originals or copies of,
among other things, to the extent delivered to the Trustee or already in its
possession, the following items: (a) the Pooling and Servicing Agreement and any
amendments thereto, (b) all Distribution Date Statements delivered to holders of
the relevant Class of Offered Certificates since the Closing Date, (c) all
officer's certificates delivered to the Trustee since the Closing Date as
described under "DESCRIPTION OF THE POOLING AGREEMENTS--Evidence as to
Compliance" in the Prospectus, (d) all accountants' reports delivered to the
Trustee since the Closing Date as described under "DESCRIPTION OF THE POOLING
AGREEMENTS--Evidence as to Compliance" in the Prospectus, (e) the most recent
property inspection report prepared by or on behalf of the Master Servicer or
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;
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provided that the Trustee may require such requesting party to provide an
Investor Certification. 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.
Book-Entry Certificates. Until such time as Definitive Offered
Certificates are issued in respect of the Book-Entry Certificates, the foregoing
information will be available to the holders of the Book-Entry Certificates only
to the extent it is forwarded by or otherwise available through DTC and its
Participants. Any beneficial owner of a Book-Entry Certificate who does not
receive information through DTC or its Participants may request that the Trustee
reports be mailed directly to it by written request to the Trustee (accompanied
by evidence of such beneficial ownership) at the Corporate Trust Office of the
Trustee. The manner in which notices and other communications are conveyed by
DTC to its Participants, and by its Participants to the holders of the
Book-Entry Certificates, will be governed by arrangements among them, subject to
any statutory or regulatory requirements as may be in effect from time to time.
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement, 100%
of the voting rights for the Certificates (the "Voting Rights") will be
allocated among the respective Classes of Sequential Pay Certificates in
proportion to the Certificate Balances of those Classes. Voting Rights allocated
to a Class of Certificates will be allocated among the related
Certificateholders in proportion to the percentage interests in such Class
evidenced by their respective Certificates. The Class A-1 and Class A-2
Certificates will be treated as one Class for determining the Controlling Class
of Sequential Pay Certificates. See "DESCRIPTION OF THE CERTIFICATES--Voting
Rights" in the Prospectus.
TERMINATION
The obligations created by the Pooling and Servicing Agreement will
terminate upon the final distribution to the Certificateholders, which shall
follow the earlier of (i) the final payment (or advance in respect thereof) or
other liquidation of the last Mortgage Loan or REO Property subject thereto and
(ii) the purchase of all of the Mortgage Loans and all of the REO Properties
remaining in the Trust Fund, if any, by the 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 (1) the aggregate
Purchase Price of all the Mortgage Loans (other than REO Loans) then included in
the Trust Fund, plus (2) 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
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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 under
"--Distributions--Application of the Available Distribution Amount," except that
the distributions of principal on any Class of Sequential Pay Certificates
described thereunder will be made, subject to available funds and the
distribution priorities described thereunder, in an amount equal to the entire
Certificate Balance of such Class remaining outstanding.
THE TRUSTEE
Norwest Bank Minnesota, National Association ("Norwest Bank") will act as
Trustee pursuant to the Pooling and Servicing Agreement. Norwest Bank, a direct,
wholly owned subsidiary of Wells Fargo & Company, is a national banking
association originally chartered in 1872 and is engaged in a wide range of
activities typical of a national bank. Norwest Bank's principal office is
located, for purposes related to certificate transfer services, at Norwest
Center, Sixth and Marquette, Minneapolis, Minnesota 55479-0113, Attention:
Corporate Trust Services (CMBS) -MLMI Series 1999-C1, and for all other
purposes, at 11000 Broken Land Parkway, Columbia, Maryland 21044-3562,
Attention: Corporate Trust Services (CMBS)-MLMI Series 1999-C1. See "DESCRIPTION
OF THE POOLING AGREEMENTS--The Trustee," "--Duties of the Trustee," "--Certain
Matters Regarding the Trustee" and "--Resignation and Removal of the Trustee" in
the Prospectus. As compensation for its services, the Trustee will be entitled
to receive monthly, from general funds on deposit in the Certificate Account,
the Trustee Fee. The "Trustee Fee" for each Mortgage Loan and REO Loan for any
Distribution Date will be computed on an actual/360 basis and will accrue at the
trustee fee rate on the Stated Principal Balance of such Mortgage Loan or REO
Loan, as the case may be, outstanding immediately following the prior
Distribution Date (or, in the case of the initial Distribution Date, as of the
Closing Date). The trustee fee rate is a per annum rate set forth in the Pooling
and Servicing Agreement.
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 B Certificates, the Class C Certificates, the Class D Certificates,
the Class E Certificates and the Class F 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 and Class A-2
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 of the Mortgage Loans or payments in respect
of liquidation of the Mortgage Loan 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 or payments in respect of liquidation of the Mortgage Loan
could result in an actual yield to
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such investor that is lower than the anticipated yield and, in the case of a
Class IO Certificate or any other Offered Certificate purchased at a premium,
the risk that a faster than anticipated rate of principal payments could result
in an actual yield to such investor that is lower than the anticipated yield. In
general, the earlier a payment of principal on the Mortgage Loans is distributed
or otherwise results in reduction of the Certificate Balance (or the notional
amount of a Component) of an Offered Certificate purchased at a discount or
premium, the greater will be the effect on an investor's yield to maturity. As a
result, the effect on an investor's yield of principal payments on the Mortgage
Loans occurring at a rate higher (or lower) than the rate anticipated by the
investor during any particular period would not be fully offset by a subsequent
like reduction (or increase) in the rate of such principal payments. Investors
in the Class IO Certificates should fully consider the risk that a rapid rate of
principal payments on the Mortgage Loans could result in the failure of such
investors to recoup their initial investments. Because the rate of principal
payments on the Mortgage Loans will depend on future events and a variety of
factors (as described more fully below), no assurance can be given as to such
rate or the rate of principal prepayments in particular. The Depositor is not
aware of any relevant publicly available or authoritative statistics with
respect to the historical prepayment experience of a large group of mortgage
loans comparable to the Mortgage Loans.
Losses and Shortfalls. The yield to holders of the Offered Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans. Losses and other
shortfalls on the Mortgage Loans will, with the exception of any Net Aggregate
Prepayment Interest Shortfalls, generally be borne by the holders of the
respective Classes of Sequential Pay Certificates, to the extent of amounts
otherwise distributable in respect of their Certificates, in reverse
alphabetical order of their Class designations. Realized Losses and Additional
Trust Fund Expenses will be allocated, as and to the extent described herein, to
the respective Classes of Sequential Pay Certificates (in reduction of the
Certificate Balance of each such Class), in reverse alphabetical order of their
Class designations. Any Realized Loss or Additional Trust Fund Expense allocated
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 based on the amount of
interest accrued on each Class for such Distribution Date (without taking into
account any Prepayment Interest Shortfalls allocated to each Class).
Pass-Through Rates. Because (i) the Pass-Through Rates applicable to each
of the Components for each Distribution Date will equal the Weighted Average Net
Mortgage Rate for such Distribution Date minus the Pass-Through Rate applicable
to the corresponding Class of Sequential Pay Certificates for such Distribution
Date (but not less than zero), and (ii) the Pass-Through Rates for the Class B,
Class C, Class D, Class E, Class F, Class G, Class H, Class J and Class K
Certificates are equal to the lesser of the applicable per annum interest rate
set forth in the table at the beginning of the Summary and the Weighted Average
Net Mortgage Rate for such Distribution Date, (x) 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 for the Sequential
Pay Certificates, and (y) the Pass-Through Rates for the Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class J and Class K 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, Class E, Class F, Class G, Class H, Class J and
Class K 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,
Class E, Class F, Class G, Class H, Class J and Class K Certificates will be
adversely affected. Accordingly, the yield on each such Class of Certificates
will be sensitive to changes in
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the outstanding principal balances of the Mortgage Loans as a result of
scheduled amortization, voluntary prepayments, repurchases and liquidations of
Mortgage Loans.
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 healthcare 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, liquidations
and repurchases) 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
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Certificates is intended to reduce those risks; however, such allocation may be
insufficient to offset fully the adverse effects on the yields on such Class of
Certificates that the related prepayments may otherwise have.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the "Constant Prepayment
Rate" or "CPR" model. The CPR model represents an assumed constant annual rate
of prepayment each month, expressed as a per annum percentage of the then
scheduled principal balance of one or more mortgage loans.
WEIGHTED AVERAGE LIFE
The weighted average life of any Class A-1, Class A-2, Class B, Class C,
Class D, Class E or Class F 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 one or more Classes of Certificates. As described herein, the Principal
Distribution Amount for each Distribution Date will be distributable first in
respect of the Class A-1 Certificates until the Certificate Balance thereof is
reduced to zero, and will thereafter be distributable entirely in respect of the
Class A-2 Certificates, the Class B Certificates, the Class C Certificates, the
Class D Certificates, the Class E Certificates and the Class F 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 B, Class C, Class D, Class E and/or Class F 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) any prepayments on the Mortgage Loans are
assumed to be prepayments in full, (v) no party 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, (viii) the Mortgage Rate in effect
for each Mortgage Loan as of the Cut-Off Date will remain in effect through the
Stated Maturity Date of such Mortgage Loan, (ix) all ARD Loans in all scenarios
are assumed to prepay in full on their Anticipated Repayment Dates and
(x) distributions on the Certificates are made on the 15th day (each assumed to
be a business day) of each month, commencing in December 1999.
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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 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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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
November 15, 2000.................................. 95 95 94 94 94
November 15, 2001.................................. 89 89 88 88 87
November 15, 2002.................................. 83 82 81 81 79
November 15, 2003.................................. 76 75 74 73 72
November 15, 2004.................................. 69 68 67 66 64
November 15, 2005.................................. 46 46 46 46 46
November 15, 2006.................................. 37 37 37 37 37
November 15, 2007.................................. 17 17 17 17 17
November 15, 2008.................................. 0 0 0 0 0
Weighted Average Life (yrs)........................ 5.6 5.6 5.6 5.5 5.5
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-2 CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT OR YLD. MAINT.--OTHERWISE
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
November 15, 2000.................................. 100 100 100 100 100
November 15, 2001.................................. 100 100 100 100 100
November 15, 2002.................................. 100 100 100 100 100
November 15, 2003.................................. 100 100 100 100 100
November 15, 2004.................................. 100 100 100 100 100
November 15, 2005.................................. 100 100 100 100 100
November 15, 2006.................................. 100 100 100 100 100
November 15, 2007.................................. 100 100 100 100 100
November 15, 2008.................................. 92 92 92 92 92
November 15, 2009.................................. 0 0 0 0 0
Weighted Average Life (yrs)........................ 9.6 9.6 9.6 9.6 9.6
</TABLE>
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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
November 15, 2000.................................. 100 100 100 100 100
November 15, 2001.................................. 100 100 100 100 100
November 15, 2002.................................. 100 100 100 100 100
November 15, 2003.................................. 100 100 100 100 100
November 15, 2004.................................. 100 100 100 100 100
November 15, 2005.................................. 100 100 100 100 100
November 15, 2006.................................. 100 100 100 100 100
November 15, 2007.................................. 100 100 100 100 100
November 15, 2008.................................. 100 100 100 100 100
November 15, 2009.................................. 0 0 0 0 0
Weighted Average Life (in years)................... 9.9 9.9 9.9 9.9 9.9
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS C CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT OR YLD. MAINT.--OTHERWISE
AT INDICATED CPR
-----------------------------------------------
(0% CPR) (5% CPR) (10% CPR) (15% CPR) (25% CPR)
DISTRIBUTION DATE 1 2 3 4 5
- --------------------------------------------------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Closing Date....................................... 100 100 100 100 100
November 15, 2000.................................. 100 100 100 100 100
November 15, 2001.................................. 100 100 100 100 100
November 15, 2002.................................. 100 100 100 100 100
November 15, 2003.................................. 100 100 100 100 100
November 15, 2004.................................. 100 100 100 100 100
November 15, 2005.................................. 100 100 100 100 100
November 15, 2006.................................. 100 100 100 100 100
November 15, 2007.................................. 100 100 100 100 100
November 15, 2008.................................. 100 100 100 100 100
November 15, 2009.................................. 0 0 0 0 0
Weighted Average Life (in years)................... 9.9 9.9 9.9 9.9 9.9
</TABLE>
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<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS D CERTIFICATES UNDER EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT OR YLD. MAINT.--OTHERWISE
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
November 15, 2000.................................. 100 100 100 100 100
November 15, 2001.................................. 100 100 100 100 100
November 15, 2002.................................. 100 100 100 100 100
November 15, 2003.................................. 100 100 100 100 100
November 15, 2004.................................. 100 100 100 100 100
November 15, 2005.................................. 100 100 100 100 100
November 15, 2006.................................. 100 100 100 100 100
November 15, 2007.................................. 100 100 100 100 100
November 15, 2008.................................. 100 100 100 100 100
November 15, 2009.................................. 0 0 0 0 0
Weighted Average Life (in years)................... 9.9 9.9 9.9 9.9 9.9
</TABLE>
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
November 15, 2000.................................. 100 100 100 100 100
November 15, 2001.................................. 100 100 100 100 100
November 15, 2002.................................. 100 100 100 100 100
November 15, 2003.................................. 100 100 100 100 100
November 15, 2004.................................. 100 100 100 100 100
November 15, 2005.................................. 100 100 100 100 100
November 15, 2006.................................. 100 100 100 100 100
November 15, 2007.................................. 100 100 100 100 100
November 15, 2008.................................. 100 100 100 100 100
November 15, 2009.................................. 0 0 0 0 0
Weighted Average Life (in years)................... 9.9 9.9 9.9 9.9 9.9
</TABLE>
S-105
<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS F 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
November 15, 2000.................................. 100 100 100 100 100
November 15, 2001.................................. 100 100 100 100 100
November 15, 2002.................................. 100 100 100 100 100
November 15, 2003.................................. 100 100 100 100 100
November 15, 2004.................................. 100 100 100 100 100
November 15, 2005.................................. 100 100 100 100 100
November 15, 2006.................................. 100 100 100 100 100
November 15, 2007.................................. 100 100 100 100 100
November 15, 2008.................................. 100 100 100 100 100
November 15, 2009.................................. 0 0 0 0 0
Weighted Average Life (in years)................... 9.9 9.9 9.9 9.9 9.9
</TABLE>
S-106
<PAGE>
USE OF PROCEEDS
Substantially all of the proceeds from the sale of the Offered Certificates
will be used by the Depositor to purchase the Mortgage Loans and to pay certain
expenses in connection with the issuance of the Certificates.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the Offered Certificates, Willkie Farr & Gallagher,
counsel to the Depositor, will deliver and file with the Commission its opinion
generally to the effect that, assuming compliance with all provisions of the
Pooling and Servicing Agreement, for federal income tax purposes each portion of
the Trust Fund designated in the Pooling and Servicing Agreement as a REMIC will
qualify as a REMIC under the Code. The assets of one of such REMICs will
generally consist of the Mortgage Loans, any REO Properties acquired by the
Trust Fund on behalf of the Certificateholders and the Certificate Account. For
federal income tax purposes, the REMIC Regular Certificates (or, in the case of
the Class IO Certificates, each Component thereof) will represent the "regular
interests" in one of such REMICs and generally will be treated as debt
instruments of such REMIC. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--REMICs" in the Prospectus.
The Class A-1, Class A-2, Class B, Class C and Class D Certificates will
not, and the Class E, Class F, 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%, other than ARD Loans, which are assumed to prepay on their
Anticipated Repayment Dates. 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)(B) 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.
S-107
<PAGE>
Prepayment Premiums actually collected will be distributed to the holders
of the Offered Certificates as described herein. It is not entirely clear under
the Code when the amount of a Prepayment Premium should be taxed to the holder
of an Offered Certificate, but it is not expected, for federal income tax
reporting purposes, that Prepayment Premiums will be treated as giving rise to
any income to the holders of the Offered Certificates prior to the Master
Servicer's actual receipt of a Prepayment Premium. Despite an apparently
contrary position of the IRS, it appears that Prepayment Premiums, if any, may
be treated as capital gain rather than ordinary income. 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 and to
PaineWebber Incorporated, an individual prohibited transaction exemption,
Prohibited Transaction Exemption 90-36, in each case as amended by Prohibited
Transaction Exemption 97-34 (collectively, 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 and
PaineWebber, (b) any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with Merrill
Lynch or PaineWebber and (c) any member of the underwriting syndicate or selling
group of which a person described in (a) or (b) is a manager or co-manager with
respect to the Senior Certificates.
The Exemption sets forth six general conditions that must be satisfied for
a transaction involving the purchase, sale and holding of Class A-1, Class A-2
and Class IO Certificates to be eligible for exemptive relief thereunder. First,
the acquisition of the Certificates by a Plan must be on terms that are at least
as favorable to the Plan as they would be in an arm's-length transaction with an
unrelated party. Second, the rights and interests evidenced by such Certificates
must not be subordinated to the rights and interests evidenced by the other
certificates of the same trust. Third, such Certificates at the time of
acquisition by the Plan must be rated in one of the three highest generic rating
categories by S&P, DCR, Moody's Investors Service, Inc. or Fitch IBCA, Inc.
("Fitch"). Fourth, the Trustee cannot be an affiliate of any other member of the
"Restricted Group," which consists of the Underwriters, 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 Underwriters 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
S-108
<PAGE>
and retained by the Master Servicer, the Special Servicer or any sub-servicer
must represent not more than reasonable compensation for such person's services
under the Pooling and Servicing Agreement and reimbursement of such person's
reasonable expenses in connection therewith. Sixth, the investing Plan must be
an accredited investor as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act.
Because none of the Class A-1, Class A-2 and Class IO Certificates are
subordinated to any other Class of Certificates, the second general condition
set forth above is satisfied with respect to such Certificates. It is a
condition of the issuance of the Class A-1, Class A-2 and Class IO Certificates
that they be rated not lower than "AAA" by S&P and DCR; 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
S&P, 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
S-109
<PAGE>
the specific conditions of the Exemption required for this purpose will be
satisfied with respect to the Senior Certificates.
The Exemption also may provide an exemption from the restrictions imposed
by Sections 406(a) and 407(a) of ERISA, and the taxes imposed by
Sections 4975(a) and (b) of the Code by reason of
Sections 4975(c)(1)(A) through (D) of the Code if such restrictions are deemed
to otherwise apply merely because a person is deemed to be a Party in Interest
with respect to an investing Plan by virtue of providing services to the Plan
(or by virtue of having certain specified relationships to such a person) solely
as a result of the Plan's ownership of the Senior Certificates. A purchaser of
any such Certificate should be aware, however, that even if the conditions
specified in one or more Exemptions are satisfied, the scope of relief provided
by an Exemption may not cover all acts that may be considered prohibited
transactions.
Before purchasing any Senior Certificate, a fiduciary of a Plan should
itself confirm that the specific and general conditions of the Exemption and the
other requirements set forth in the Exemption would be satisfied. In addition to
making its own determination as to the availability of the exemptive relief
provided in the Exemption, the Plan fiduciary should consider the availability
of any other prohibited transaction exemptions. See "ERISA CONSIDERATIONS" in
the Prospectus.
The characteristics of the Class B, Class C, Class D, Class E and Class F
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 S&P, 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, Class E and Class F
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.
S-110
<PAGE>
The Depositor makes no representation as to the ability of particular
investors to purchase the Offered Certificates under applicable legal investment
or other restrictions. All institutions whose investment activities are subject
to legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the Offered Certificates constitute legal
investments for them or are subject to investment, capital or other
restrictions. See "LEGAL INVESTMENT" in the Prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting
agreement, dated as of the date hereof (the "Underwriting Agreement"), among
Merrill Lynch, Pierce, Fenner & Smith Incorporated and PaineWebber Incorporated
(collectively, the "Underwriters") and the Depositor, the Depositor has agreed
to sell to the Underwriters, and each Underwriter has severally but not jointly
agreed to purchase from the Depositor, the respective Certificate Balances or
Notional Amounts, as applicable, of each Class of the Offered Certificates as
set forth below, subject in each case to a variance of (plus or minus) 5%.
<TABLE>
<CAPTION>
MERRILL LYNCH, PIERCE, FENNER PAINEWEBBER
CLASS & SMITH INCORPORATED INCORPORATED
- ---------------------------------------------------------- ----------------------------- ------------
<S> <C> <C>
Class A-1................................................. $ 46,000,000 $ 51,600,000
Class A-2................................................. $ 160,000,000 $177,847,000
Class B................................................... $ 15,700,000 $ 16,884,000
Class C................................................... $ 13,660,000 $ 13,000,000
Class D................................................... $ 4,000,000 $ 4,887,000
Class E................................................... $ 10,735,000 $ 10,000,000
Class F................................................... $ 3,406,000 $ 4,000,000
Class IO.................................................. $ 280,000,000 $312,445,159
</TABLE>
In the Underwriting Agreement, the Underwriters have 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 $550,834,721 plus accrued
interest of $356,617.
Distribution of the Offered Certificates will be made by the Underwriters
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. The Underwriters may effect such transactions
by selling the Offered Certificates to or through dealers, and such dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from such Underwriter. In connection with the purchase and sale of
the Offered Certificates, the Underwriters may be deemed to have received
compensation from the Depositor in the form of underwriting discounts. Each
Underwriter and any dealers that participate with such Underwriter in the
distribution of the Offered Certificates may be deemed to be underwriters and
any profit on the resale of the Offered Certificates purchased by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Purchasers of the Offered Certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be "underwriters"
within the meaning of the Securities Act in connection with reoffers and sales
by them of Offered Certificates. Certificateholders should consult with their
legal advisors in this regard prior to any such reoffer or sale.
The Depositor also has been advised by the Underwriters that they, through
one or more of their respective affiliates, currently intend to make a market in
the Offered Certificates; however, the Underwriters have 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 each Underwriter and each person, if
any, who controls such Underwriter within the meaning of Section 15 of the
Securities Act against, or make contributions to such
S-111
<PAGE>
Underwriter and each such controlling person with respect to, certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Willkie Farr
& Gallagher, New York, New York and for the Underwriters by Shearman & Sterling,
New York, New York.
RATINGS
It is a condition of their issuance that the Class A-1 and Class A-2
Certificates be rated not lower than "AAA" by DCR and S&P, that the Class IO
Certificates be rated not lower than "AAA" by DCR and "AAAr" by S&P, that the
Class B Certificates be rated not lower than "AA" by DCR and S&P, that the Class
C Certificates be rated not lower than "A" by DCR and S&P, that the Class D
Certificates be rated not lower than "A-" by DCR and S&P, that the Class E
Certificates be rated not lower than "BBB" by DCR and S&P and that the Class F
Certificates be rated not lower than "BBB-" by DCR and S&P.
The ratings on the Offered Certificates address the likelihood of the
timely receipt by holders thereof of distributions of interest to which they are
entitled and, except in the case of the Class IO Certificates, distributions of
principal sufficient to reduce the Certificate Balance of each Class of Offered
Certificates to zero by the Rated Final Distribution Date, which is the first
Distribution Date that follows the second anniversary of the end of the
amortization term for the Mortgage Loan that, as of the Cut-Off Date, has the
longest remaining amortization term. 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.
S&P assigns the additional symbol of "r" to highlight classes of securities
that S&P 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.
S-112
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Accrued Certificate Interest......................S-87
actual/360 basis..................................S-42
Additional Interest...............................S-43
Additional Trust Fund Expenses....................S-91
Adjusted Mortgage Rate............................S-43
Administrative Cost Rate..........................S-50
Advance...........................................S-92
AERC..............................................S-45
ALTA..............................................S-63
Anticipated Repayment Date........................S-43
Appraisal.........................................S-93
Appraisal Reduction...............................S-93
Appraisal Reduction Amount........................S-93
Appraisal Reduction Event.........................S-92
ARD Loans.........................................S-43
Asset Status Report...............................S-71
Assumed Final Distribution Date....................S-9
Assumed Scheduled Payment.........................S-88
Available Distribution Amount.....................S-83
Balloon Loans.....................................S-43
Balloon Payment.............................S-34, S-43
Certificate Balance...............................S-81
Certificate Owner.................................S-81
Certificateholders................................S-83
Certificates......................................S-80
Chase.............................................S-58
Class.............................................S-80
Code..............................................S-64
Collection Period.................................S-82
College Square Loan...............................S-47
Compensating Interest Payment.....................S-73
Component...................................S-11, S-82
Constant Prepayment Rate.........................S-101
Controlling Class of Sequential
Pay Certificates................................S-72
Controlling Class Representative..................S-72
Corrected Mortgage Loan...........................S-71
CPR..............................................S-101
Custodian.........................................S-63
Cut-Off Date Balance..............................S-42
Cut-Off Date DSCR.................................S-48
Cut-Off Date LTV..................................S-49
DCR................................................S-7
Debt Service Coverage Ratio.......................S-48
Debt Service Coverage Ratios......................S-48
Defeasance Collateral.......................S-21, S-43
Definitive Offered Certificate....................S-81
Depositor..........................................S-3
Determination Date................................S-82
Discount Rate.....................................S-89
Distributable Certificate Interest..........S-11, S-87
<CAPTION>
PAGE
--
<S> <C>
Distribution Date.................................S-83
Distribution Date Statement.......................S-94
DSCR..............................................S-48
DTC...............................................S-80
DTC Services......................................S-80
Due Dates.........................................S-42
ERISA............................................S-108
Excluded Plan....................................S-109
Exemption........................................S-108
Fitch............................................S-108
Form 8-K.........................................S-69
HUD...............................................S-28
Industry..........................................S-80
Initial Pool Balance..............................S-42
Initial Reserves at Closing.......................S-50
Investor Certification............................S-94
IRS..............................................S-107
Liquidation Fee...................................S-74
Liquidation Fee Rate..............................S-74
Lockout Period..............................S-24, S-43
Majority Subordinate Certificateholder............S-72
Master Servicer...................................S-72
Master Servicing Fee..............................S-73
Mezzanine debt....................................S-37
MLMC..............................................S-58
Mortgage File.....................................S-63
Mortgage Loan.....................................S-42
Mortgage Loan Purchase Agreement..................S-58
Mortgage Loans....................................S-42
Mortgage Rate.....................................S-50
Mortgaged Properties..............................S-42
NAP...............................................S-50
Net Aggregate Prepayment
Interest Shortfall..............................S-87
Net Mortgage Rate...........................S-12, S-82
Nonrecoverable Advance............................S-92
Norwest Bank......................................S-97
Occupancy Percentage..............................S-50
Offered Certificates..............................S-80
OID Regulations..................................S-107
operating leverage................................S-27
ORECM.......................................S-61, S-72
P&I Advance.......................................S-91
Participants......................................S-81
Party in Interest................................S-109
Pass-Through Rate...........................S-11, S-82
Percentage Premium................................S-89
Periodic Payment..................................S-42
Plan.............................................S-108
Pooling and Servicing Agreement...................S-80
Prepayment Interest Excess........................S-73
</TABLE>
S-113
<PAGE>
<TABLE>
<CAPTION>
PAGE
--
Prepayment Interest Shortfall.....................S-73
<S> <C>
Prepayment Premium................................S-89
Principal Distribution Amount...............S-10, S-87
Private Certificates..............................S-80
PTE 95-60........................................S-110
Purchase Price....................................S-63
PWREI.............................................S-60
Qualified Substitute Mortgage Loan................S-64
Rated Final Distribution Date......................S-3
Rating Agencies...................................S-17
Realized Losses...................................S-91
Record Date.......................................S-83
Reimbursement Rate................................S-92
Regular Interest..................................S-16
Related Proceeds..................................S-92
Remain Amort. Term................................S-48
Remaining Cash Flow...............................S-43
REMIC.............................................S-16
REMIC Administrator...............................S-97
REMIC Regular Certificates........................S-80
REMIC Residual Certificates.................S-16, S-80
Rental Property...................................S-48
REO Extension.....................................S-77
REO Loan..........................................S-88
REO Property......................................S-71
REO Tax...........................................S-78
Repayment LTV.....................................S-49
Restricted Group.................................S-108
Restricted Servicer Report........................S-94
Retained Interest.................................S-58
S&P................................................S-7
Scenario.........................................S-101
Scheduled Payment.................................S-88
SEC...............................................S-96
<CAPTION>
PAGE
--
<S> <C>
Securities Act....................................S-80
Senior Certificates...............................S-90
Sequential Pay Certificates.................S-10, S-80
Servicing Fees....................................S-73
Servicing Standard................................S-70
Single-Tenant Mortgage Loan.......................S-31
Single-Tenant Mortgaged Property..................S-31
SMMEA............................................S-110
Special Servicer..................................S-72
Special Servicing Fee.............................S-74
Special Servicing Fee Rate........................S-74
Specially Serviced Mortgage Loan..................S-71
Staples Escrow....................................S-47
Stated Principal Balance....................S-12, S-82
Stated Remaining Term.............................S-50
Subordinate Certificates....................S-23, S-89
Substitution Shortfall Amount.....................S-64
Systems...........................................S-80
Trust Fund........................................S-80
Trustee Fee.......................................S-97
Underwriters.....................................S-111
Underwriting Agreement...........................S-111
Underwriting Reserves.............................S-50
Unrestricted Servicer Report......................S-94
Voting Rights.....................................S-96
Watch List........................................S-95
Weighted Average
Net Mortgage Rate.........................S-12, S-82
WMF...............................................S-58
Workout Fee.......................................S-74
Year 2000 problems................................S-80
Year Built........................................S-49
Yield Maintenance Charges.........................S-89
</TABLE>
S-114
<PAGE>
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
ANNEX A
<TABLE>
<CAPTION>
Control
No. Property Name Address
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ML-107 Potomac Heights Apts 1001 Palmer Road
PW-7905 Blue Cross Blue Shield Building Carotech Boulevard
ML-117 Pond View Corporate Center 74 & 76 Batterson Park Rd
ML-156 College Square SWC Alondra Blvd. & Studebaker Road
PW-8202 First American Building 8435 Stemmons Freeway
ML-126 Hampton Point 3340 Hampton Point Drive
ORIX-3325 Lakeside Plaza Office Center 5205, 5215, 5225 Wiley Post Way
PW-8703A Norport Apartments 9 Seminole Drive
PW-8703B Colonial Court 58 Colonial Court
PW-8703C Lee Hall 523 Summit Street
PW-8703D River Drive Apartments 209A 73rd Street
- --------------------------------------------------------------------------------------------------------
PW-8703 Virginia Apartment Portfolio
ORIX-2965 Frazier-King Building 100 East Royal Lane
ML-129 Tanglewood Apartments 2217 Tanglewood Drive
ML-124 Saw Mill 6900 Saw Mill Village Drive
ML-125 Spring Valley 37850 Spring Lane
ML-138 Sea Crest Oceanfront Resort & Conference Center 350 Quaker Road
ML-147 Quail Park IV 2810 & 2820 W. Charleston Blvd.
ORIX-3208 Putnam Plaza 1245 Dixwell Avenue
ML-111 Fairways Apartments 1450 N Highway 360
ML-143 Lambda Building 515 Broad Hollow Road
ORIX-3108 Centre East Shopping Center 10600 East Washington Street
ML-112 Hempstead Village Commons 300 Peninsula Boulevard
ML-103 Creekside Apartments 7501 Chesterfield
PW-7942 Bend River Mall 3188 N. Highway 97
ORIX-3257 Spectrum Club - Thousand Oaks 2400 Willow Lane
ML-101 1100 W. Ewing Street 1100 - 1120 W. Ewing St.
ML-116 Canyon Crest Village Apts 5200 Chicago Avenue
ORIX-3100 HKS Building 1919 McKinney Avenue
ML-109 RCA - Waterford Apartments 900 East Randol Mill Road
ML-114 247 and 251-253 West 34th St. 247 and 251-253 West 34th St.
ML-115 9033 Wilshire Medical Bldg 9033 Wilshire Blvd
PW-8028 Tops Appliance Building 1525-1535 Hart Place
PW-7562 401 N. Broad Street 401 N. Broad Street
ML-154 Woodgate Apartments 1468 Enfield St.
PW-6132 Arlington Apartments 2700 Whitney Avenue
PW-6376 Shadowbrook Apartments 2200 Westbend Parkway
PW-8763 Sunset Hills Apartments 2825 Bluegrass Lane
ML-134 2551 Tellabs Dr. Building 2551 Tellabs Dr.
ORIX-3266 Northpark Plaza 10343-10355 Federal Boulevard
ORIX-3115 The Financial Center 24022 Calle de la Plata
PW-6410 Gateway Plaza 544-750 N. Third Street
PW-7043 The Woods at Frenchman's Creek 3001 58th Avenue South
ORIX-2939 Beverly Hills Medical Tower 1125 South Beverly Drive
ML-128 Hampton Inn O'Hare 3939 N. Mannheim Road
ORIX-3151 Spring Cypress Village Shopping Center 22432-22560 State Highway 249
ORIX-1825 The Bayview Office Building 1040 Bayview Drive
PW-8064 Office Max 721 East Colorado Boulevard
ML-136 Breckenridge Farms Blue Lake Blvd. & Pole Line Road
PW-7141 Summercreek Apartments 11851 Belair Drive
ORIX-3256 Kingstown Plaza Shopping Center 6615-6669 Post Road
ML-152 Augusta Office Building 1502 Augusta
PW-7790 Smithtown Bypass 732 & 738 Smithtown Bypass
PW-8694 Eckerd's Building 301 South Trade Center Parkway
PW-8313 Crossings Apartments 3555 Highway 544 Overpass
ML-148 Torrey Hills Corporate Centre 11250 El Camino Real
ORIX-3438 Raymour & Flanigan - Southampton 427 Street Road
PW-6482A Ramsey Street Office Building 6200 Ramsey Street
PW-6482B Yadkin Road Building 6448 Yadkin Road
PW-6482C Cliffdale Road Office Building 6920 Cliffdale Road
PW-6482D Henderson Drive Office Building 3466 Henderson Drive
- --------------------------------------------------------------------------------------------------------
PW-6482 Fayetteville/Jacksonville Office Portfolio
ML-139 Dobson Guadalupe Plaza 2039 West Guadalupe Road
PW-7789 Lexus Training Center 205 Jefferson Road
ORIX-3356 Hardaway Office Building 615 Main Street
ML-131A Milford Chase 68 W. Main St.
ML-131B Milford Hunt 260 W. River Road
- --------------------------------------------------------------------------------------------------------
ML-131 Milford Chase/Milford Hunt
ORIX-3161 Woodland Park Plaza 1063-1131 Highway 24
ORIX-2187 Arsenal Street Shopping Center 160 Coleman Avenue
ML-110 Moulton Plaza 28083 Moulton Parkway
PW-7064 Oklahoma City Industrial 2500-2692 West Interstate 40
ML-137 Ocean Mist Resort 97 South Shore Drive
ORIX-2507 Garden Villa 106 Del Norte Drive
ML-151 57-13 49th Street (Maspeth) 57-13 49th Street
ML-135 Avis Rent-A-Car 68-70 East 11th Street
ORIX-2607 Loveland Tech Center 4007 & 4015 South Lincoln Ave.
PW-7395 Red Lion Apartments 4726 Narrow Lane Road
PW-8352 Helix Building 3078 East Sunset Road, Bldg. B
PW-7958 1399 Madison Building 1399 Madison Ave.
ML-140 Eldorado Village Phase I 5100 Eldorado Village Pkwy
PW-7146 Westbrook Towers 317 West Spring Street
ORIX-3238 Southeast Crossing 3320 Hwy 110
ML-145 Office Depot - Newport News 11971 Jefferson Avenue
ORIX-2508 Kingsland Hills Care Center 1229 Highway 1431 West
PW-6232 310 Merrick Road 310 Merrick Road
PW-7312A Plaza MHP 2145 N. Dixie Highway
PW-7312B Spring Valley MHP 769 State Route 42
PW-7312C Blair MHP 16 Pam Lane
- --------------------------------------------------------------------------------------------------------
PW-7312 Plaza Park MHPs
ML-144 MicroSemi Corp. Building 3101 W. Segerstrom Avenue
ORIX-2509 New Covenant Care Center of Dinuba 1730 South College Road
ORIX-3290 250 Beacham Street 250 Beacham Street (Units 5-15)
PW-7710 Peachtree Village Mobile Home Park 1475 Peachtree Industrial Blvd.
PW-6045 Redbud Plaza 210-282 Norman Center Court
ORIX-3434 Gateway 2000 - Newport News 12249 Jefferson Avenue
ML-132 Granada Self Storage 201 W. Stassney Lane West
ORIX-3432 Gateway 2000 - Jackson 5722 East I-55 Frontage Road
ORIX-3433 Gateway 2000 - Little Rock 12018 Chenal Parkway
PW-7130 Ben White Business Park 209 East Ben White Boulevard
ORIX-2104 Kingsgate Shopping Center 8422 Fondren Road
ORIX-3436 Gateway 2000 - Plano 1300 North Central Expressway
ORIX-3430 Gateway 2000 - Brentwood 1601 Westgate Circle
ORIX-2596 Seguin Nursing & Rehab Center 1637 N. King St.
ORIX-3435 Gateway 2000 - Oklahoma City 4001 Northwest Expressway
PW-7166 Cobblestone Apartments 2430-2444 Whitfield Road
PW-7119 Washingtonville Manor MHP East Avenue & Hallock Drive
ORIX-3431 Gateway 2000 - El Paso 820 Sunland Park Drive
ML-108 585-591-597 Prospect Place Apts. 585-591-597 Prospect Place
ML-104 Equivest Industrial Center 500 Washington Street
ORIX-3429 Gateway 2000 - Baton Rouge 9603 Cortana Place
ML-100 954-960 Chapel Street 954-960 Chapel Street
PW-7127 1485-1495 Davis Road 1485-1495 Davis Road
PW-8085 Pepperwood Apartments 13725 Christine Court
PW-7424 St. Pete Beach Apartments 9050-9060 Blind Pass Road
PW-6437 175-181 Broadway 175-181 Broadway
ML-106 Palm Terrace Estates 2711 Mar Vista Drive
PW-7170 O'Connor Place Apartments 316 West 5th Street
PW-7781 Sherwood Lane Apartments 4506 Sherwood Lane
</TABLE>
Control Zip
No. City State Code
- ------------------------------------------------------------
ML-107 Fort Washington MD 20744
PW-7905 Columbia SC 29203
ML-117 Farmington CT 06032
ML-156 Cerritos CA 90703
PW-8202 Dallas TX 75247
ML-126 Silver Spring MD 20904
ORIX-3325 Salt Lake City UT 84116
PW-8703A Portsmouth VA 23702
PW-8703B Colonial Heights VA 23834
PW-8703C Petersburgh VA 23803
PW-8703D Newport News VA 23607
- ------------------------------------------------------------
PW-8703
ORIX-2965 Irving TX 75039
ML-129 Hammond IN 46323
ML-124 Columbus OH 43235
ML-125 Farmington Hills MI 48331
ML-138 North Falmouth MA 02556
ML-147 Las Vegas NV 89107
ORIX-3208 Hamden CT 06514
ML-111 Grand Prairie TX 75050
ML-143 Melville NY 11747
ORIX-3108 Indianapolis IN 46229
ML-112 Hempstead NY 11550
ML-103 Dallas TX 75237
PW-7942 Bend OR 97741
ORIX-3257 Thousand Oaks CA 91361
ML-101 Seattle WA 98119
ML-116 Riverside CA 92507
ORIX-3100 Dallas TX 75201
ML-109 Arlington TX 76011
ML-114 New York NY 10001
ML-115 Beverly Hills CA 90211
PW-8028 Brooklyn NY 11224
PW-7562 Philadelphia PA 19108
ML-154 Enfield CT 06082
PW-6132 Harvey LA 70058
PW-6376 New Orleans LA 70114
PW-8763 Henderson NV 89104
ML-134 Round Rock TX 78664
ORIX-3266 Westminster CO 80221
ORIX-3115 Laguna Hills CA 92653
PW-6410 Laramie WY 82070
PW-7043 St. Petersburg FL 33712
ORIX-2939 Los Angeles CA 90035
ML-128 Schiller Park IL 60176
ORIX-3151 Houston TX 77070
ORIX-1825 Ft. Lauderdale FL 33304
PW-8064 Pasadena CA 91101
ML-136 Twin Falls ID 83301
PW-7141 San Antonio TX 78213
ORIX-3256 North Kingstown RI 02852
ML-152 Houston TX 77057
PW-7790 Smithtown NY 11787
PW-8694 Woodlands TX 77385
PW-8313 Conway SC 29526
ML-148 San Diego CA 92130
ORIX-3438 Southampton PA 18966
PW-6482A Fayetteville NC 28311
PW-6482B Fayetteville NC 28303
PW-6482C Fayetteville NC 28304
PW-6482D Jacksonville NC 28546
- ------------------------------------------------------------
PW-6482
ML-139 Mesa AZ 85202
PW-7789 Parsippany NJ 07054
ORIX-3356 Nashville TN 37206
ML-131A Milford CT 06460
ML-131B Milford CT 06460
- ------------------------------------------------------------
ML-131
ORIX-3161 Woodland Park CO 80866
ORIX-2187 Watertown NY 13601
ML-110 Laguna Niguel CA 92677
PW-7064 Oklahoma City OK 73108
ML-137 South Yarmouth MA 02664
ORIX-2507 El Campo TX 77437
ML-151 Maspeth NY 11378
ML-135 New York NY 10003
ORIX-2607 Loveland CO 80537
PW-7395 Montgomery AL 36116
PW-8352 Las Vegas NV 89120
PW-7958 Memphis TN 38103
ML-140 McKinney TX 75070
PW-7146 West Haven CT 06516
ORIX-3238 Tyler TX 75704
ML-145 Newport News VA 23606
ORIX-2508 Kingsland TX 78639
PW-6232 Rockville Center NY 11570
PW-7312A Lima OH 45802
PW-7312B London OH 43140
PW-7312C Chillicothe OH 43140
- ------------------------------------------------------------
PW-7312
ML-144 Santa Ana CA 92704
ORIX-2509 Dinuba CA 93618
ORIX-3290 Everett MA 02149
PW-7710 Buford GA 30518
PW-6045 Norman OK 73072
ORIX-3434 Newport News VA 23602
ML-132 Austin TX 78745
ORIX-3432 Jackson MS 39211
ORIX-3433 Little Rock AR 72211
PW-7130 Austin TX 77040
ORIX-2104 Houston TX 77074
ORIX-3436 Plano TX 75074
ORIX-3430 Brentwood TN 37027
ORIX-2596 Seguin TX 78155
ORIX-3435 Oklahoma City OK 73116
PW-7166 Clarksville TN 37040
PW-7119 Washingtonville NY 10922
ORIX-3431 El Paso TX 79912
ML-108 Brooklyn NY 11238
ML-104 Norristown PA 19401
ORIX-3429 Baton Rouge LA 70815
ML-100 New Haven CT 06510
PW-7127 Elgin IL 60123
PW-8085 Tampa FL 33613
PW-7424 St. Pete Beach FL 33706
PW-6437 Passaic NJ 07055
ML-106 Aptos CA 95003
PW-7170 Irving TX 75060
PW-7781 Houston TX 77092
(A) Includes, for each ORECM Mortgage Loan, the Master Servicing Rate which
is also the Retained Interest that will be retained by ORECM and will not be
available to compensate any successor Master Servicer in the event of a
resignation or termination of ORECM as Master Servicer. See "RISK FACTORS ---
Servicing Transfer Risk" in the Prospectus Supplement.
<TABLE>
<CAPTION>
Cumulative % of
Control Original Cut-Off Date % of Initial Initial Pool
No. Property Type Balance Balance Pool Balance Balance
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ML-107 Multifamily 26,432,000 26,086,864 4.40% 4.40%
PW-7905 Office 25,300,000 25,288,017 4.27% 8.67%
ML-117 Office 21,000,000 20,930,804 3.53% 12.20%
ML-156 Retail 18,850,000 18,825,623 3.18% 15.38%
PW-8202 Office 18,588,000 18,568,200 3.13% 18.52%
ML-126 Multifamily 18,500,000 18,442,154 3.11% 21.63%
ORIX-3325 Office 18,200,000 18,170,833 3.07% 24.70%
PW-8703A Multifamily 3,248,580 3,243,748
PW-8703B Multifamily 1,364,841 1,362,811
PW-8703C Multifamily 8,805,459 8,792,361
PW-8703D Multifamily 3,981,120 3,975,198
- ------------------------------------------------------------------------------------------------------------------
PW-8703 17,400,000 17,374,119 2.93% 27.63%
ORIX-2965 Office 16,500,000 16,439,315 2.77% 30.40%
ML-129 Multifamily 16,000,000 15,969,297 2.70% 33.10%
ML-124 Multifamily 12,500,000 12,460,915 2.10% 35.20%
ML-125 Multifamily 12,000,000 11,962,178 2.02% 37.22%
ML-138 Hospitality 11,800,000 11,777,780 1.99% 39.21%
ML-147 Office 11,025,000 11,004,848 1.86% 41.07%
ORIX-3208 Retail 9,550,000 9,540,721 1.61% 42.68%
ML-111 Multifamily 9,670,000 9,507,210 1.60% 44.28%
ML-143 Industrial 9,350,000 9,338,999 1.58% 45.86%
ORIX-3108 Retail 8,999,000 8,966,895 1.51% 47.37%
ML-112 Retail 8,930,000 8,907,379 1.50% 48.88%
ML-103 Multifamily 8,640,000 8,503,715 1.44% 50.31%
PW-7942 Retail 8,500,000 8,490,237 1.43% 51.74%
ORIX-3257 Health Club 8,400,000 8,394,533 1.42% 53.16%
ML-101 Industrial 8,300,000 8,269,850 1.40% 54.56%
ML-116 Multifamily 8,150,000 8,123,382 1.37% 55.93%
ORIX-3100 Office 8,000,000 7,983,038 1.35% 57.28%
ML-109 Multifamily 7,600,000 7,488,420 1.26% 58.54%
ML-114 Retail 7,000,000 6,982,314 1.18% 59.72%
ML-115 Mixed 6,892,000 6,879,600 1.16% 60.88%
PW-8028 Retail 6,800,000 6,789,386 1.15% 62.03%
PW-7562 Office 6,700,000 6,690,463 1.13% 63.15%
ML-154 Multifamily 6,500,000 6,491,404 1.10% 64.25%
PW-6132 Multifamily 6,400,000 6,390,042 1.08% 65.33%
PW-6376 Multifamily 6,400,000 6,388,722 1.08% 66.41%
PW-8763 Multifamily 6,350,000 6,343,510 1.07% 67.48%
ML-134 Industrial 6,260,000 6,252,260 1.06% 68.53%
ORIX-3266 Retail 6,256,000 6,243,842 1.05% 69.59%
ORIX-3115 Office 6,224,000 6,196,394 1.05% 70.63%
PW-6410 Retail 6,101,000 6,094,764 1.03% 71.66%
PW-7043 Multifamily 5,890,000 5,878,001 0.99% 72.65%
ORIX-2939 Office 5,700,000 5,654,146 0.95% 73.61%
ML-128 Hospitality 5,000,000 4,986,533 0.84% 74.45%
ORIX-3151 Retail 5,000,000 4,976,440 0.84% 75.29%
ORIX-1825 Office 4,900,000 4,843,129 0.82% 76.11%
PW-8064 Retail 4,800,000 4,792,697 0.81% 76.92%
ML-136 Retail 4,650,000 4,643,851 0.78% 77.70%
PW-7141 Multifamily 4,330,000 4,317,857 0.73% 78.43%
ORIX-3256 Retail 4,215,000 4,208,441 0.71% 79.14%
ML-152 Office 4,170,000 4,165,046 0.70% 79.84%
PW-7790 Office 3,900,000 3,898,646 0.66% 80.50%
PW-8694 Industrial 3,700,000 3,698,575 0.62% 81.13%
PW-8313 Multifamily 3,650,000 3,645,730 0.62% 81.74%
ML-148 Office 3,525,000 3,520,816 0.59% 82.33%
ORIX-3438 Retail 3,286,000 3,282,897 0.55% 82.89%
PW-6482A Office 920,448 918,191
PW-6482B Office 385,152 384,208
PW-6482C Office 1,024,896 1,022,383
PW-6482D Office 933,504 931,215
- ------------------------------------------------------------------------------------------------------------------
PW-6482 3,264,000 3,255,996 0.55% 83.44%
ML-139 Retail 3,220,000 3,216,174 0.54% 83.98%
PW-7789 Industrial 3,050,000 3,048,754 0.51% 84.50%
ORIX-3356 Office 3,000,000 2,994,997 0.51% 85.00%
ML-131A Multifamily 1,228,064 1,225,753
ML-131B Multifamily 1,699,936 1,696,737
- ------------------------------------------------------------------------------------------------------------------
ML-131 2,928,000 2,922,490 0.49% 85.49%
ORIX-3161 Retail 2,899,000 2,893,491 0.49% 85.98%
ORIX-2187 Retail 2,827,500 2,809,853 0.47% 86.46%
ML-110 Retail 2,544,000 2,538,293 0.43% 86.89%
PW-7064 Industrial 2,500,000 2,496,098 0.42% 87.31%
ML-137 Hospitality 2,500,000 2,495,292 0.42% 87.73%
ORIX-2507 Nursing Home 2,425,000 2,402,837 0.41% 88.13%
ML-151 Industrial 2,399,500 2,394,997 0.40% 88.54%
ML-135 Other 2,400,000 2,393,501 0.40% 88.94%
ORIX-2607 Industrial 2,400,000 2,385,021 0.40% 89.34%
PW-7395 Multifamily 2,250,000 2,247,636 0.38% 89.72%
PW-8352 Industrial 2,200,000 2,195,846 0.37% 90.09%
PW-7958 Office 2,100,000 2,099,240 0.35% 90.45%
ML-140 Retail 2,100,000 2,096,486 0.35% 90.80%
PW-7146 Multifamily 2,088,000 2,084,259 0.35% 91.15%
ORIX-3238 Retail 2,080,000 2,076,285 0.35% 91.51%
ML-145 Retail 2,056,000 2,056,000 0.35% 91.85%
ORIX-2508 Nursing Home 2,075,000 2,055,346 0.35% 92.20%
PW-6232 Retail 2,050,000 2,050,000 0.35% 92.55%
PW-7312A Mobile Home Park 1,179,622 1,177,067
PW-7312B Mobile Home Park 530,177 529,029
PW-7312C Mobile Home Park 340,201 339,464
- ------------------------------------------------------------------------------------------------------------------
PW-7312 2,050,000 2,045,561 0.35% 92.89%
ML-144 Industrial 2,023,000 2,022,041 0.34% 93.23%
ORIX-2509 Nursing Home 2,000,000 1,982,529 0.33% 93.57%
ORIX-3290 Industrial 1,950,000 1,943,862 0.33% 93.89%
PW-7710 Mobile Home Park 1,925,000 1,920,705 0.32% 94.22%
PW-6045 Retail 1,900,000 1,893,937 0.32% 94.54%
ORIX-3434 Retail 1,857,000 1,855,134 0.31% 94.85%
ML-132 Self Storage 1,850,000 1,844,916 0.31% 95.16%
ORIX-3432 Retail 1,738,000 1,736,253 0.29% 95.46%
ORIX-3433 Retail 1,712,000 1,709,613 0.29% 95.74%
PW-7130 Industrial 1,700,000 1,690,333 0.29% 96.03%
ORIX-2104 Retail 1,700,000 1,683,873 0.28% 96.31%
ORIX-3436 Retail 1,643,500 1,641,209 0.28% 96.59%
ORIX-3430 Retail 1,639,000 1,637,353 0.28% 96.87%
ORIX-2596 Nursing Home 1,575,000 1,563,742 0.26% 97.13%
ORIX-3435 Retail 1,551,500 1,549,337 0.26% 97.39%
PW-7166 Multifamily 1,550,000 1,544,811 0.26% 97.65%
PW-7119 Mobile Home Park 1,500,000 1,498,747 0.25% 97.91%
ORIX-3431 Retail 1,359,000 1,357,105 0.23% 98.14%
ML-108 Multifamily 1,325,000 1,317,109 0.22% 98.36%
ML-104 Industrial 1,275,000 1,270,192 0.21% 98.57%
ORIX-3429 Retail 1,138,000 1,136,856 0.19% 98.76%
ML-100 Mixed 1,100,000 1,096,789 0.19% 98.95%
PW-7127 Industrial 1,025,000 1,023,567 0.17% 99.12%
PW-8085 Multifamily 1,000,000 999,393 0.17% 99.29%
PW-7424 Multifamily 950,000 948,326 0.16% 99.45%
PW-6437 Multifamily 940,000 935,927 0.16% 99.61%
ML-106 Mobile Home Park 800,000 797,998 0.13% 99.74%
PW-7170 Multifamily 800,000 797,213 0.13% 99.88%
PW-7781 Multifamily 723,000 721,001 0.12% 100.00%
</TABLE>
<TABLE>
<CAPTION>
Control Affiliated
No. Borrower
- ---------------------------------------------------------------------------------------------
<S> <C>
ML-107
PW-7905
ML-117
ML-156
PW-8202
ML-126 ML-124, ML-125
ORIX-3325
PW-8703A
PW-8703B
PW-8703C
PW-8703D
- ---------------------------------------------------------------------------------------------
PW-8703
ORIX-2965
ML-129
ML-124 ML-125, ML-126
ML-125 ML-124, ML-126
ML-138 ML-137
ML-147
ORIX-3208
ML-111
ML-143
ORIX-3108
ML-112
ML-103
PW-7942
ORIX-3257
ML-101
ML-116
ORIX-3100
ML-109
ML-114
ML-115
PW-8028
PW-7562
ML-154
PW-6132
PW-6376
PW-8763
ML-134 ML-152
ORIX-3266 ORIX-3161
ORIX-3115
PW-6410
PW-7043
ORIX-2939
ML-128
ORIX-3151
ORIX-1825
PW-8064
ML-136
PW-7141
ORIX-3256
ML-152 ML-134
PW-7790
PW-8694
PW-8313
ML-148 ML-110
ORIX-3438 ORIX-2187
PW-6482A
PW-6482B
PW-6482C
PW-6482D
- ---------------------------------------------------------------------------------------------
PW-6482
ML-139
PW-7789
ORIX-3356
ML-131A
ML-131B
- ---------------------------------------------------------------------------------------------
ML-131
ORIX-3161 ORIX-3266
ORIX-2187 ORIX-3438
ML-110 ML-148
PW-7064
ML-137 ML-138
ORIX-2507 ORIX-2508, ORIX-2509, ORIX-2596
ML-151
ML-135
ORIX-2607
PW-7395
PW-8352
PW-7958
ML-140
PW-7146
ORIX-3238
ML-145
ORIX-2508 ORIX-2507, ORIX-2509, ORIX-2596
PW-6232
PW-7312A
PW-7312B
PW-7312C
- ---------------------------------------------------------------------------------------------
PW-7312
ML-144
ORIX-2509 ORIX-2507, ORIX-2508, ORIX-2596
ORIX-3290
PW-7710
PW-6045
ORIX-3434 ORIX-3429, ORIX-3430, ORIX-3431, ORIX-3432, ORIX-3433, ORIX-3435, ORIX-3436
ML-132
ORIX-3432 ORIX-3429, ORIX-3430, ORIX-3431, ORIX-3433, ORIX-3434, ORIX-3435, ORIX-3436
ORIX-3433 ORIX-3429, ORIX-3430, ORIX-3431, ORIX-3432, ORIX-3434, ORIX-3435, ORIX-3436
PW-7130
ORIX-2104
ORIX-3436 ORIX-3429, ORIX-3430, ORIX-3431, ORIX-3432, ORIX-3433, ORIX-3434, ORIX-3435
ORIX-3430 ORIX-3429, ORIX-3431, ORIX-3432, ORIX-3433, ORIX-3434, ORIX-3435, ORIX-3436
ORIX-2596 ORIX-2507, ORIX-2508, ORIX-2509
ORIX-3435 ORIX-3429, ORIX-3430, ORIX-3431, ORIX-3432, ORIX-3433, ORIX-3434, ORIX-3436
PW-7166
PW-7119
ORIX-3431 ORIX-3429, ORIX-3430, ORIX-3432, ORIX-3433, ORIX-3434, ORIX-3435, ORIX-3436
ML-108
ML-104
ORIX-3429 ORIX-3430, ORIX-3431, ORIX-3432, ORIX-3433, ORIX-3434, ORIX-3435, ORIX-3436
ML-100
PW-7127
PW-8085
PW-7424
PW-6437
ML-106
PW-7170
PW-7781
</TABLE>
<TABLE>
<CAPTION>
Remain
Orig Stated Remaining Amort Amort
Control Interest Accrual Mortgage Administrative Term Term Term Term
No. Method Rate Cost Rate (A) (Mos.) (Mos.) (Mos.) (Mos.)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ML-107 Actual/360 6.977 0.07285 120 103 360 343
PW-7905 Actual/360 7.850 0.07285 120 119 360 359
ML-117 Actual/360 7.790 0.07285 120 115 360 355
ML-156 Actual/360 7.980 0.07285 120 118 360 358
PW-8202 Actual/360 8.200 0.07285 120 118 360 358
ML-126 Actual/360 7.500 0.03285 120 115 360 355
ORIX-3325 Actual/360 7.950 0.02285 120 117 360 357
PW-8703A
PW-8703B
PW-8703C
PW-8703D
- ---------------------------------------------------------------------------------------------------------------------------
PW-8703 Actual/360 8.200 0.07285 120 117 360 357
ORIX-2965 Actual/360 7.500 0.02285 120 114 360 354
ML-129 Actual/360 7.790 0.07285 120 117 360 357
ML-124 Actual/360 7.500 0.03285 120 115 360 355
ML-125 Actual/360 7.470 0.03285 96 91 360 355
ML-138 Actual/360 8.480 0.07285 120 118 300 298
ML-147 Actual/360 8.000 0.07285 120 117 360 357
ORIX-3208 Actual/360 8.530 0.02285 120 118 360 358
ML-111 Actual/360 7.080 0.07285 84 63 360 339
ML-143 Actual/360 8.420 0.07285 120 118 360 358
ORIX-3108 Actual/360 7.610 0.02285 120 114 360 354
ML-112 Actual/360 7.730 0.07285 120 116 360 356
ML-103 Actual/360 7.350 0.07285 120 98 360 338
PW-7942 Actual/360 7.920 0.07285 120 118 360 358
ORIX-3257 Actual/360 8.950 0.02285 120 119 300 299
ML-101 Actual/360 8.375 0.07285 120 116 300 296
ML-116 Actual/360 7.830 0.07285 144 139 360 355
ORIX-3100 Actual/360 7.870 0.02285 120 116 360 356
ML-109 Actual/360 7.430 0.07285 84 65 360 341
ML-114 Actual/360 8.875 0.07285 120 117 300 297
ML-115 Actual/360 8.068 0.07285 120 117 360 357
PW-8028 Actual/360 8.800 0.07285 120 116 360 356
PW-7562 Actual/360 9.050 0.07285 120 116 360 356
ML-154 Actual/360 7.875 0.07285 120 118 360 358
PW-6132 Actual/360 8.050 0.07285 120 117 360 357
PW-6376 Actual/360 8.450 0.07285 120 116 360 356
PW-8763 Actual/360 8.350 0.07285 120 118 360 358
ML-134 Actual/360 8.190 0.07285 120 118 360 358
ORIX-3266 Actual/360 8.150 0.03535 120 116 360 356
ORIX-3115 Actual/360 7.940 0.03535 120 112 360 352
PW-6410 Actual/360 8.350 0.07285 120 118 360 358
PW-7043 Actual/360 8.000 0.07285 120 116 360 356
ORIX-2939 Actual/360 7.830 0.03535 120 113 281 274
ML-128 Actual/360 7.500 0.07285 120 117 324 321
ORIX-3151 Actual/360 7.750 0.03535 120 114 324 318
ORIX-1825 Actual/360 7.170 0.05285 120 104 360 344
PW-8064 Actual/360 8.125 0.07285 120 117 360 357
ML-136 Actual/360 7.875 0.07285 120 118 360 358
PW-7141 Actual/360 7.900 0.07285 120 115 360 355
ORIX-3256 Actual/360 8.050 0.04785 120 117 360 357
ML-152 Actual/360 8.375 0.07285 120 118 360 358
PW-7790 Actual/360 8.650 0.07285 120 119 360 359
PW-8694 Actual/360 8.400 0.07285 120 119 360 359
PW-8313 Actual/360 7.850 0.07285 120 118 360 358
ML-148 Actual/360 8.380 0.07285 120 118 360 358
ORIX-3438 Actual/360 8.630 0.07785 120 118 360 358
PW-6482A
PW-6482B
PW-6482C
PW-6482D
- ---------------------------------------------------------------------------------------------------------------------------
PW-6482 Actual/360 8.500 0.07285 120 117 300 297
ML-139 Actual/360 8.375 0.07285 120 118 360 358
PW-7789 Actual/360 8.250 0.07285 120 119 360 359
ORIX-3356 Actual/360 8.620 0.07785 120 118 300 298
ML-131A
ML-131B
- ---------------------------------------------------------------------------------------------------------------------------
ML-131 Actual/360 7.875 0.07285 120 117 360 357
ORIX-3161 Actual/360 8.220 0.10285 120 116 360 356
ORIX-2187 Actual/360 7.850 0.10285 120 110 360 350
ML-110 Actual/360 8.230 0.07285 120 116 360 356
PW-7064 Actual/360 8.800 0.07285 120 116 360 356
ML-137 Actual/360 8.480 0.07285 120 118 300 298
ORIX-2507 Actual/360 7.950 0.10285 120 111 300 291
ML-151 Actual/360 8.500 0.07285 120 118 300 298
ML-135 Actual/360 8.500 0.07285 120 117 300 297
ORIX-2607 Actual/360 7.850 0.10285 120 110 360 350
PW-7395 Actual/360 8.250 0.07285 120 118 360 358
PW-8352 Actual/360 8.000 0.07285 120 118 300 298
PW-7958 Actual/360 8.550 0.07285 120 119 360 359
ML-140 Actual/360 8.375 0.07285 120 117 360 357
PW-7146 Actual/360 8.400 0.07285 120 116 360 356
ORIX-3238 Actual/360 8.410 0.10285 120 116 360 356
ML-145 Actual/360 8.500 0.07285 120 120 360 360
ORIX-2508 Actual/360 7.750 0.10285 120 111 300 291
PW-6232 Actual/360 8.600 0.07285 120 120 360 360
PW-7312A
PW-7312B
PW-7312C
- ---------------------------------------------------------------------------------------------------------------------------
PW-7312 Actual/360 7.800 0.07285 120 116 360 356
ML-144 Actual/360 8.390 0.07285 120 119 360 359
ORIX-2509 Actual/360 8.200 0.10285 120 111 300 291
ORIX-3290 Actual/360 8.290 0.12785 120 115 336 331
PW-7710 Actual/360 7.700 0.07285 120 116 360 356
PW-6045 Actual/360 8.000 0.07285 120 114 360 354
ORIX-3434 Actual/360 8.410 0.12785 120 118 360 358
ML-132 Actual/360 8.420 0.07285 120 117 300 297
ORIX-3432 Actual/360 8.410 0.12785 120 118 360 358
ORIX-3433 Actual/360 8.410 0.12785 120 117 360 357
PW-7130 Actual/360 7.850 0.07285 120 114 300 294
ORIX-2104 Actual/360 8.250 0.12785 120 110 300 290
ORIX-3436 Actual/360 8.410 0.12785 120 117 360 357
ORIX-3430 Actual/360 8.410 0.12785 120 118 360 358
ORIX-2596 Actual/360 8.220 0.12785 120 112 300 292
ORIX-3435 Actual/360 8.410 0.12785 120 117 360 357
PW-7166 Actual/360 8.300 0.07285 120 116 300 296
PW-7119 Actual/360 7.970 0.07285 120 119 300 299
ORIX-3431 Actual/360 8.410 0.12785 120 117 360 357
ML-108 Actual/360 8.040 0.07285 120 114 300 294
ML-104 Actual/360 8.520 0.07285 120 115 324 319
ORIX-3429 Actual/360 8.410 0.12785 120 118 360 358
ML-100 Actual/360 9.500 0.07285 120 116 300 296
PW-7127 Actual/360 8.400 0.07285 120 117 360 357
PW-8085 Actual/360 9.200 0.07285 120 119 300 299
PW-7424 Actual/360 8.450 0.07285 120 116 360 356
PW-6437 Actual/360 8.350 0.07285 120 115 300 295
ML-106 Actual/360 7.780 0.07285 120 116 360 356
PW-7170 Actual/360 9.350 0.07285 120 115 300 295
PW-7781 Actual/360 9.125 0.07285 120 116 300 296
</TABLE>
<TABLE>
<CAPTION>
Control Origination First Payment Repayment
No. Date Date Date
- --------------------------------------------------------------
<S> <C> <C> <C>
ML-107 5/15/1998 7/1/1998 6/1/2008
PW-7905 9/30/1999 11/1/1999 10/1/2009
ML-117 5/26/1999 7/1/1999 6/1/2009
ML-156 8/3/1999 10/1/1999 9/1/2009
PW-8202 8/24/1999 10/1/1999 9/1/2009
ML-126 5/10/1999 7/1/1999 6/1/2009
ORIX-3325 7/14/1999 9/1/1999 8/1/2009
PW-8703A
PW-8703B
PW-8703C
PW-8703D
- --------------------------------------------------------------
PW-8703 7/21/1999 9/1/1999 8/1/2009
ORIX-2965 4/30/1999 6/1/1999 5/1/2009
ML-129 7/27/1999 9/1/1999 8/1/2009
ML-124 5/10/1999 7/1/1999 6/1/2009
ML-125 5/10/1999 7/1/1999 6/1/2007
ML-138 8/30/1999 10/1/1999 9/1/2009
ML-147 7/30/1999 9/1/1999 8/1/2009
ORIX-3208 8/31/1999 10/1/1999 9/1/2009
ML-111 1/28/1998 3/1/1998 2/1/2005
ML-143 8/26/1999 10/1/1999 9/1/2009
ORIX-3108 4/26/1999 6/1/1999 5/1/2009
ML-112 6/7/1999 8/1/1999 7/1/2009
ML-103 12/11/1997 2/1/1998 1/1/2008
PW-7942 9/1/1999 10/1/1999 9/1/2009
ORIX-3257 9/24/1999 11/1/1999 10/1/2009
ML-101 6/24/1999 8/1/1999 7/1/2009
ML-116 5/25/1999 7/1/1999 6/1/2011
ORIX-3100 6/18/1999 8/1/1999 7/1/2009
ML-109 3/25/1998 5/1/1998 4/1/2005
ML-114 7/13/1999 9/1/1999 8/1/2009
ML-115 7/9/1999 9/1/1999 8/1/2009
PW-8028 6/30/1999 8/1/1999 7/1/2009
PW-7562 6/17/1999 8/1/1999 7/1/2009
ML-154 8/17/1999 10/1/1999 9/1/2009
PW-6132 7/6/1999 9/1/1999 8/1/2009
PW-6376 6/11/1999 8/1/1999 7/1/2009
PW-8763 8/19/1999 10/1/1999 9/1/2009
ML-134 8/27/1999 10/1/1999 9/1/2009
ORIX-3266 6/11/1999 8/1/1999 7/1/2009
ORIX-3115 2/25/1999 4/1/1999 3/1/2009
PW-6410 8/19/1999 10/1/1999 9/1/2009
PW-7043 6/28/1999 8/1/1999 7/1/2009
ORIX-2939 3/30/1999 5/1/1999 4/1/2009
ML-128 7/21/1999 9/1/1999 8/1/2009
ORIX-3151 4/30/1999 6/1/1999 5/1/2009
ORIX-1825 6/25/1998 8/1/1998 7/1/2008
PW-8064 7/29/1999 9/1/1999 8/1/2009
ML-136 8/11/1999 10/1/1999 9/1/2009
PW-7141 5/17/1999 7/1/1999 6/1/2009
ORIX-3256 7/19/1999 9/1/1999 8/1/2009
ML-152 8/31/1999 10/1/1999 9/1/2009
PW-7790 9/30/1999 11/1/1999 10/1/2009
PW-8694 9/30/1999 11/1/1999 10/1/2009
PW-8313 8/2/1999 10/1/1999 9/1/2009
ML-148 8/12/1999 10/1/1999 9/1/2009
ORIX-3438 8/17/1999 10/1/1999 9/1/2009
PW-6482A
PW-6482B
PW-6482C
PW-6482D
- --------------------------------------------------------------
PW-6482 7/23/1999 9/1/1999 8/1/2009
ML-139 8/27/1999 10/1/1999 9/1/2009
PW-7789 9/27/1999 11/1/1999 10/1/2009
ORIX-3356 8/24/1999 10/1/1999 9/1/2009
ML-131A
ML-131B
- --------------------------------------------------------------
ML-131 7/20/1999 9/1/1999 8/1/2009
ORIX-3161 6/11/1999 8/1/1999 7/1/2009
ORIX-2187 12/23/1998 2/1/1999 1/1/2009
ML-110 6/7/1999 8/1/1999 7/1/2009
PW-7064 6/3/1999 8/1/1999 7/1/2009
ML-137 8/30/1999 10/1/1999 9/1/2009
ORIX-2507 1/29/1999 3/1/1999 2/1/2009
ML-151 8/27/1999 10/1/1999 9/1/2009
ML-135 7/22/1999 9/1/1999 8/1/2009
ORIX-2607 12/3/1998 2/1/1999 1/1/2009
PW-7395 8/24/1999 10/1/1999 9/1/2009
PW-8352 8/12/1999 10/1/1999 9/1/2009
PW-7958 9/1/1999 11/1/1999 10/1/2009
ML-140 7/30/1999 9/1/1999 8/1/2009
PW-7146 6/8/1999 8/1/1999 7/1/2009
ORIX-3238 6/16/1999 8/1/1999 7/1/2009
ML-145 10/6/1999 12/1/1999 11/1/2009
ORIX-2508 1/29/1999 3/1/1999 2/1/2009
PW-6232 10/5/1999 12/1/1999 11/1/2009
PW-7312A
PW-7312B
PW-7312C
- --------------------------------------------------------------
PW-7312 6/4/1999 8/1/1999 7/1/2009
ML-144 9/13/1999 11/1/1999 10/1/2009
ORIX-2509 1/29/1999 3/1/1999 2/1/2009
ORIX-3290 5/27/1999 7/1/1999 6/1/2009
PW-7710 6/25/1999 8/1/1999 7/1/2009
PW-6045 4/30/1999 6/1/1999 5/1/2009
ORIX-3434 8/2/1999 10/5/1999 9/5/2009
ML-132 7/26/1999 9/1/1999 8/1/2009
ORIX-3432 8/2/1999 10/5/1999 9/5/2009
ORIX-3433 7/30/1999 9/5/1999 8/5/2009
PW-7130 4/9/1999 6/1/1999 5/1/2009
ORIX-2104 12/8/1998 2/1/1999 1/1/2009
ORIX-3436 7/30/1999 9/5/1999 8/5/2009
ORIX-3430 8/2/1999 10/5/1999 9/5/2009
ORIX-2596 2/10/1999 4/1/1999 3/1/2009
ORIX-3435 7/30/1999 9/5/1999 8/5/2009
PW-7166 6/3/1999 8/1/1999 7/1/2009
PW-7119 9/29/1999 11/1/1999 10/1/2009
ORIX-3431 7/30/1999 9/5/1999 8/5/2009
ML-108 4/29/1999 6/1/1999 5/1/2009
ML-104 5/28/1999 7/1/1999 6/1/2009
ORIX-3429 8/2/1999 10/5/1999 9/5/2009
ML-100 6/11/1999 8/1/1999 7/1/2009
PW-7127 7/16/1999 9/1/1999 8/1/2009
PW-8085 9/3/1999 11/1/1999 10/1/2009
PW-7424 6/11/1999 8/1/1999 7/1/2009
PW-6437 5/20/1999 7/1/1999 6/1/2009
ML-106 6/1/1999 8/1/1999 7/1/2009
PW-7170 5/13/1999 7/1/1999 6/1/2009
PW-7781 6/30/1999 8/1/1999 7/1/2009
</TABLE>
<TABLE>
<CAPTION>
Annual
Control Balloon/Repayment Prepayment Debt 1997 1998
No. Balance Maturity Term Restrictions Service NCF NCF
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ML-107 23,079,013 Hyperam L(116),O(4) 2,105,336 2,639,436 2,910,536
PW-7905 22,586,102 Hyperam L(120),O(0) 2,196,045 -- --
ML-117 18,416,586 Balloon L(59),YM(57),O(4) 1,832,423 2,856,550 2,591,278
ML-156 16,596,202 Balloon L(116),O(4) 1,674,975 1,710,784 1,725,737
PW-8202 16,725,297 Hyperam L(120),O(0) 1,667,911 1,103,086 2,184,174
ML-126 16,372,352 Balloon L(116),O(4) 1,552,256 1,788,572 1,896,643
ORIX-3325 16,283,638 Balloon L(116),O(4) 1,594,936 2,379,574 841,926
PW-8703A 2,923,609 291,497 417,692 460,852
PW-8703B 1,228,310 122,468 186,067 167,250
PW-8703C 7,924,607 790,119 1,184,143 1,084,870
PW-8703D 3,582,870 357,228 482,953 564,491
- ----------------------------------------------------------------------------------------------------------------------------
PW-8703 15,659,395 Balloon L(120),O(0) 1,561,311 2,270,856 2,277,454
ORIX-2965 14,607,753 Balloon L(116),O(4) 1,384,445 690,333 1,362,913
ML-129 14,031,704 Balloon L(116),O(4) 1,396,097 1,673,955 1,757,302
ML-124 11,062,400 Balloon L(116),O(4) 1,048,822 1,643,420 1,272,417
ML-125 10,979,957 Balloon L(92),O(4) 1,003,912 1,364,671 1,377,802
ML-138 9,699,213 Balloon L(116),O(4) 1,150,094 1,702,774 1,945,726
ML-147 9,710,758 Balloon L(116),O(4) 981,660 1,282,434 1,372,000
ORIX-3208 8,657,594 Balloon L(116),O(4) 883,613 862,378 964,351
ML-111 8,860,083 Balloon L(47),YM(33),O(4) 786,961 912,159 --
ML-143 8,304,117 Balloon L(116),O(4) 866,113 -- --
ORIX-3108 7,988,782 Balloon L(116),O(4) 763,218 356,568 1,055,655
ML-112 7,823,232 Balloon L(116),O(4) 774,760 -- --
ML-103 7,518,703 Balloon L(59),YM(57),O(4) 723,214 754,861 973,703
PW-7942 7,598,190 Balloon L(120),O(0) 742,759 1,380,757 1,384,047
ORIX-3257 7,128,169 Balloon L(113),O(7) 842,461 -- --
ML-101 6,806,635 Balloon L(116),O(4) 802,010 -- --
ML-116 6,838,266 Balloon L(140),O(4) 713,915 869,709 903,366
ORIX-3100 7,146,820 Balloon L(116),O(4) 695,733 -- --
ML-109 6,992,210 Balloon L(24),5(12),4(12), 640,141 860,212 945,835
3(12),2(12),1(9),O(3)
ML-114 5,807,470 Balloon L(113),O(7) 705,266 612,191 890,026
ML-115 6,078,744 Balloon L(116),O(4) 617,630 816,667 837,273
PW-8028 6,205,574 Hyperam L(117),O(3) 644,864 -- --
PW-7562 6,147,334 Balloon L(120),O(0) 649,811 1,432,557 2,425,618
ML-154 5,710,484 Balloon L(116),O(4) 571,776 731,817 812,052
PW-6132 5,739,662 Balloon L(120),O(0) 566,210 524,030 793,022
PW-6376 5,795,301 Balloon L(120),O(0) 587,806 638,334 783,537
PW-8763 5,733,336 Balloon L(120),O(0) 577,831 -- --
ML-134 5,534,863 Balloon L(23),YM(93),O(4) 567,486 104,723 255,787
ORIX-3266 5,625,994 Balloon L(116),O(4) 558,722 (24,166) 478,580
ORIX-3115 5,572,384 Balloon L(116),O(4) 544,913 684,543 778,328
PW-6410 5,508,517 Balloon L(120),O(0) 555,173 -- 780,236
PW-7043 5,278,197 Balloon L(120),O(0) 518,625 605,093 --
ORIX-2939 4,514,808 Balloon L(116),O(4) 531,831 821,243 727,573
ML-128 4,169,414 Balloon L(116),O(4) 436,857 1,571,582 1,763,019
ORIX-3151 4,265,469 Balloon L(116),O(4) 442,458 510,066 669,206
ORIX-1825 4,301,343 Balloon L(116),O(4) 397,934 624,339 515,795
PW-8064 4,312,313 Hyperam L(120),O(0) 427,678 -- --
ML-136 4,085,192 Balloon L(116),O(4) 409,040 171,871 452,349
PW-7141 3,869,599 Balloon L(120),O(0) 377,648 492,610 485,557
ORIX-3256 3,780,106 Balloon L(116),O(4) 372,903 439,982 331,268
ML-152 3,700,338 Balloon L(23),YM(93),O(4) 384,657 442,255 467,958
PW-7790 3,546,434 Hyperam L(120),O(0) 364,838 530,781 545,294
PW-8694 3,345,789 Balloon L(120),O(0) 338,256 -- --
PW-8313 3,257,304 Balloon L(120),O(0) 316,821 368,944 99,260
ML-148 3,128,286 Balloon L(116),O(4) 325,312 -- --
ORIX-3438 2,985,555 Balloon L(116),O(4) 306,838 -- --
PW-6482A 771,520 88,940 (54,057) 94,068
PW-6482B 322,835 37,216 (39,441) (39,909)
PW-6482C 859,068 99,033 23,693 (1,353)
PW-6482D 782,463 90,202 141,401 139,940
- ----------------------------------------------------------------------------------------------------------------------------
PW-6482 2,735,886 Balloon L(120),O(0) 315,391 71,596 192,567
ML-139 2,857,336 Balloon L(116),O(4) 297,025 248,289 194,457
PW-7789 2,748,575 Hyperam L(117),O(3) 274,964 370,475 348,978
ORIX-3356 2,522,239 Balloon L(116),O(4) 292,799 410,571 410,571
ML-131A 1,078,899 108,041 -- 154,325
ML-131B 1,493,455 149,554 -- 250,967
- ----------------------------------------------------------------------------------------------------------------------------
ML-131 2,572,354 Balloon L(59),YM(57),O(4) 257,595 200,113 405,292
ORIX-3161 2,611,305 Balloon L(116),O(4) 260,617 -- 54,874
ORIX-2187 2,522,854 Balloon L(116),O(4) 245,427 -- 247,112
ML-110 2,251,604 Balloon L(116),O(4) 231,552 -- 203,392
PW-7064 2,281,461 Balloon L(120),O(0) 237,082 220,862 152,364
ML-137 2,054,918 Balloon L(116),O(4) 243,664 385,786 451,879
ORIX-2507 2,000,281 Balloon L(116),O(4) 223,635 622,538 633,028
ML-151 1,973,257 Balloon L(116),O(4) 234,264 -- --
ML-135 1,973,669 Balloon L(116),O(4) 234,344 411,627 435,438
ORIX-2607 2,141,413 Balloon L(116),O(4) 208,320 53,637 163,792
PW-7395 2,026,860 Balloon L(120),O(0) 202,842 185,132 257,369
PW-8352 1,818,037 Balloon L(120),O(0) 203,759 -- 142,851
PW-7958 1,905,382 Hyperam L(120),O(0) 194,660 125,841 293,410
ML-140 1,863,480 Balloon L(116),O(4) 193,737 -- --
PW-7146 1,888,574 Balloon L(120),O(0) 190,886 185,353 247,369
ORIX-3238 1,881,766 Balloon L(116),O(4) 190,331 347,369 276,434
ML-145 1,828,812 Balloon L(116),O(4) 191,870 -- --
ORIX-2508 1,701,773 Balloon L(116),O(4) 188,077 845,495 563,498
PW-6232 1,861,245 Hyperam L(120),O(0) 190,899 50,000 80,990
PW-7312A 1,052,041 101,901 180,238 181,657
PW-7312B 472,836 45,799 93,100 97,966
PW-7312C 303,407 29,388 52,569 62,263
- ----------------------------------------------------------------------------------------------------------------------------
PW-7312 1,828,283 Balloon L(120),O(0) 177,088 325,907 341,886
ML-144 1,796,091 Balloon L(116),O(4) 186,890 -- --
ORIX-2509 1,661,393 Balloon L(116),O(4) 188,427 54,437 450,714
ORIX-3290 1,713,179 Balloon L(116),O(4) 179,406 260,704 260,619
PW-7710 1,712,630 Balloon L(120),O(0) 164,694 350,504 342,461
PW-6045 1,702,705 Balloon L(120),O(0) 167,298 -- 193,906
ORIX-3434 1,678,942 Balloon L(116),O(4) 169,925 -- --
ML-132 1,518,444 Balloon L(113),O(7) 179,422 261,509 267,938
ORIX-3432 1,571,353 Balloon L(116),O(4) 159,036 -- --
ORIX-3433 1,548,163 Balloon L(116),O(4) 156,657 -- --
PW-7130 1,399,747 Balloon L(120),O(0) 155,429 210,570 240,920
ORIX-2104 1,414,477 Balloon L(116),O(4) 160,844 130,070 160,609
ORIX-3436 1,486,220 Balloon L(116),O(4) 150,389 -- --
ORIX-3430 1,481,846 Balloon L(116),O(4) 149,977 -- --
ORIX-2596 1,311,245 Balloon L(116),O(4) 148,638 411,212 406,815
ORIX-3435 1,403,024 Balloon L(116),O(4) 141,970 -- --
PW-7166 1,292,632 Balloon L(120),O(0) 147,274 122,666 263,277
PW-7119 1,238,988 Balloon L(120),O(0) 138,569 132,797 174,591
ORIX-3431 1,228,945 Balloon L(116),O(4) 124,356 -- --
ML-108 1,077,636 Balloon L(116),O(4) 124,412 205,406 206,692
ML-104 1,088,642 Balloon L(116),O(4) 122,169 130,562 197,011
ORIX-3429 1,028,884 Balloon L(116),O(4) 104,133 -- --
ML-100 925,642 Balloon L(116),O(4) 116,634 -- 95,439
PW-7127 926,699 Balloon L(120),O(0) 93,706 137,431 145,819
PW-8085 854,177 Balloon L(120),O(0) 102,352 96,761 107,418
PW-7424 860,240 Balloon L(120),O(0) 87,252 112,691 119,790
PW-6437 784,688 Balloon L(120),O(0) 89,692 134,865 141,874
ML-106 701,589 Balloon L(116),O(4) 69,746 44,418 55,282
PW-7170 685,897 Balloon L(120),O(0) 82,876 122,261 111,872
PW-7781 616,566 Balloon L(117),O(3) 73,553 48,851 77,338
</TABLE>
<TABLE>
<CAPTION>
Underwriting Underwriting
Control Total Total
No. Revenue Expense
- -------------------------------------------------------
<S> <C> <C>
ML-107 4,890,207 2,073,651
PW-7905 4,386,472 87,729
ML-117 3,965,519 1,455,634
ML-156 2,782,085 654,711
PW-8202 2,427,372 76,734
ML-126 3,259,328 1,351,723
ORIX-3325 3,636,148 1,350,837
PW-8703A 1,042,088 544,407
PW-8703B 291,303 89,622
PW-8703C 2,170,148 840,168
PW-8703D 1,151,683 566,294
- -------------------------------------------------------
PW-8703 4,655,225 2,040,492
ORIX-2965 3,368,714 1,364,576
ML-129 2,905,055 1,194,193
ML-124 2,803,584 1,426,036
ML-125 2,066,093 844,521
ML-138 9,197,752 6,918,878
ML-147 1,963,389 537,507
ORIX-3208 1,764,263 539,608
ML-111 2,132,851 1,144,811
ML-143 1,670,202 490,971
ORIX-3108 1,364,522 314,183
ML-112 1,574,719 602,046
ML-103 1,913,251 1,009,502
PW-7942 2,189,034 744,798
ORIX-3257 1,295,000 38,850
ML-101 1,460,039 262,637
ML-116 1,404,718 501,833
ORIX-3100 1,726,700 792,668
ML-109 1,978,317 1,111,960
ML-114 1,410,571 351,782
ML-115 1,217,299 383,963
PW-8028 947,009 28,410
PW-7562 10,759,047 6,808,344
ML-154 1,699,943 757,430
PW-6132 1,914,240 927,574
PW-6376 1,851,807 991,622
PW-8763 1,008,021 284,540
ML-134 937,301 188,066
ORIX-3266 1,056,819 277,858
ORIX-3115 1,355,455 545,774
PW-6410 942,562 150,052
PW-7043 1,366,782 683,873
ORIX-2939 1,471,498 673,682
ML-128 3,812,987 2,691,262
ORIX-3151 991,774 276,958
ORIX-1825 1,260,136 604,278
PW-8064 558,903 28,994
ML-136 758,438 160,170
PW-7141 1,077,535 504,199
ORIX-3256 719,305 170,633
ML-152 976,968 368,873
PW-7790 789,807 256,487
PW-8694 463,902 13,917
PW-8313 791,737 336,463
ML-148 543,632 123,386
ORIX-3438 617,259 178,707
PW-6482A 188,680 45,717
PW-6482B 102,722 39,210
PW-6482C 201,801 44,956
PW-6482D 191,651 48,062
- --------------------------------------------------------
PW-6482 684,852 177,942
ML-139 542,525 124,427
PW-7789 466,070 95,445
ORIX-3356 502,210 15,066
ML-131A 194,052 57,810
ML-131B 288,373 99,772
- --------------------------------------------------------
ML-131 482,425 157,582
ORIX-3161 483,283 127,353
ORIX-2187 589,969 196,329
ML-110 410,792 84,441
PW-7064 449,810 65,962
ML-137 1,536,231 933,146
ORIX-2507 3,425,688 2,879,521
ML-151 486,846 163,144
ML-135 400,070 71,916
ORIX-2607 382,822 85,926
PW-7395 759,915 415,595
PW-8352 426,325 65,370
PW-7958 375,258 92,707
ML-140 385,605 102,436
PW-7146 681,843 410,752
ORIX-3238 406,351 115,517
ML-145 362,517 93,871
ORIX-2508 3,421,721 2,941,082
PW-6232 403,193 133,503
PW-7312A 234,297 53,766
PW-7312B 102,110 20,962
PW-7312C 78,691 25,745
- --------------------------------------------------------
PW-7312 415,098 100,475
ML-144 309,795 66,388
ORIX-2509 3,239,113 2,626,099
ORIX-3290 313,646 73,912
PW-7710 425,676 149,692
PW-6045 318,367 73,794
ORIX-3434 228,598 6,858
ML-132 434,839 169,475
ORIX-3432 223,207 6,696
ORIX-3433 211,660 6,350
PW-7130 400,104 141,933
ORIX-2104 340,423 83,311
ORIX-3436 204,592 6,138
ORIX-3430 204,060 6,122
ORIX-2596 2,540,409 2,203,277
ORIX-3435 192,964 5,789
PW-7166 307,800 105,822
PW-7119 410,439 202,630
ORIX-3431 178,125 5,344
ML-108 326,607 166,355
ML-104 530,772 296,558
ORIX-3429 143,868 4,316
ML-100 284,282 125,862
PW-7127 171,386 39,748
PW-8085 356,128 195,403
PW-7424 164,336 48,625
PW-6437 248,411 108,128
ML-106 140,666 57,056
PW-7170 246,904 92,985
PW-7781 276,701 150,009
</TABLE>
<TABLE>
<CAPTION>
Control Underwriting Underwriting Appraised Appraisal Current Repayment Year
No. NCF DSCR Value Year LTV LTV Built
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ML-107 2,816,555 1.34 32,700,000 1999 79.78 70.58 1964
PW-7905 3,926,149 1.79 45,780,000 1999 55.24 49.34 1999
ML-117 2,298,790 1.25 29,000,000 1999 72.18 63.51 1986
ML-156 2,092,544 1.25 24,900,000 1999 75.60 66.65 1973
PW-8202 2,096,867 1.26 24,400,000 1999 76.10 68.55 1971
ML-126 1,907,604 1.23 26,400,000 1999 69.86 62.02 1986
ORIX-3325 2,030,179 1.27 25,000,000 1999 72.68 65.13 1982
PW-8703A 435,181 5,150,000 1945
PW-8703B 182,481 1,530,000 1946
PW-8703C 1,179,980 12,855,000 1951
PW-8703D 533,389 5,650,000 1945
- ------------------------------------------------------------------------------------------------------------------
PW-8703 2,331,033 1.49 25,185,000 1999 68.99 62.18
ORIX-2965 1,761,742 1.27 23,000,000 1999 71.48 63.51 1995
ML-129 1,710,861 1.23 20,000,000 1999 79.85 70.16 1970
ML-124 1,377,547 1.31 17,430,000 1999 71.49 63.47 1987
ML-125 1,221,573 1.22 15,720,000 1999 76.10 69.85 1987
ML-138 1,863,842 1.62 20,600,000 1999 57.17 47.08 1942
ML-147 1,239,955 1.26 15,650,000 1999 70.32 62.05 1983
ORIX-3208 1,138,500 1.29 13,100,000 1999 72.83 66.09 1966
ML-111 988,040 1.26 12,600,000 1998 75.45 70.32 1983
ML-143 1,082,839 1.25 13,400,000 1999 69.69 61.97 1961
ORIX-3108 992,229 1.30 12,500,000 1999 71.74 63.91 1995
ML-112 967,083 1.25 11,500,000 1999 77.46 68.03 1998
ML-103 903,749 1.25 10,800,000 1998 78.74 69.62 1985
PW-7942 1,282,309 1.73 16,000,000 1999 53.06 47.49 1980
ORIX-3257 1,180,324 1.40 13,000,000 1999 64.57 54.83 1984
ML-101 1,125,076 1.40 12,000,000 1999 68.92 56.72 1958
ML-116 902,885 1.26 10,600,000 1999 76.64 64.51 1985
ORIX-3100 884,023 1.27 12,000,000 1999 66.53 59.56 1925
ML-109 866,357 1.35 10,700,000 1999 69.99 65.35 1968
ML-114 1,030,449 1.46 11,600,000 1999 60.19 50.06 1885
ML-115 776,482 1.26 8,900,000 1999 77.30 68.30 1958
PW-8028 897,599 1.39 9,600,000 1999 70.72 64.64 1959
PW-7562 2,529,131 3.89 8,400,000 1999 79.65 73.18 1929
ML-154 942,513 1.65 10,800,000 1999 60.11 52.87 1973
PW-6132 882,916 1.56 9,200,000 1999 69.46 62.39 1974
PW-6376 776,186 1.32 8,550,000 1999 74.72 67.78 1980
PW-8763 693,481 1.20 8,000,000 1999 79.29 71.67 1988
ML-134 715,746 1.26 8,000,000 1999 78.15 69.19 1981
ORIX-3266 723,655 1.30 8,200,000 1999 76.14 68.61 1997
ORIX-3115 718,952 1.32 9,700,000 1999 63.88 57.45 1984
PW-6410 669,268 1.21 7,800,000 1999 78.14 70.62 1981
PW-7043 635,771 1.23 7,700,000 1999 76.34 68.55 1989
ORIX-2939 664,923 1.25 7,600,000 1999 74.40 59.41 1984
ML-128 1,121,725 2.57 12,300,000 1999 40.54 33.90 1989
ORIX-3151 612,666 1.38 7,500,000 1999 66.35 56.87 1982
ORIX-1825 591,885 1.49 6,600,000 1998 73.38 65.17 1958
PW-8064 526,241 1.23 6,070,000 1999 78.96 71.04 1999
ML-136 577,665 1.41 6,985,000 1999 66.48 58.49 1996
PW-7141 528,336 1.40 6,220,000 1999 69.42 62.21 1981
ORIX-3256 483,875 1.30 6,700,000 1999 62.81 56.42 1978
ML-152 519,229 1.35 5,600,000 1999 74.38 66.08 1980
PW-7790 464,864 1.27 5,700,000 1999 68.40 62.22 1984
PW-8694 406,413 1.20 4,700,000 1999 78.69 71.19 1998
PW-8313 427,275 1.35 4,608,000 1999 79.12 70.69 1984
ML-148 406,631 1.25 5,000,000 1999 70.42 62.57 1998
ORIX-3438 413,879 1.35 4,750,000 1999 69.11 62.85 1976
PW-6482A 125,491 1,410,000 1993
PW-6482B 52,753 700,000 1977
PW-6482C 139,650 1,300,000 1986
PW-6482D 127,427 1,400,000 1994
- ------------------------------------------------------------------------------------------------------------------
PW-6482 445,323 1.41 4,810,000 1999 67.69 56.88
ML-139 401,180 1.35 4,100,000 1999 78.44 69.69 1981
PW-7789 343,148 1.25 4,000,000 1999 76.22 68.71 1981
ORIX-3356 452,847 1.55 4,900,000 1999 61.12 51.47 1959
ML-131A 136,242 1,535,080 1998
ML-131B 188,601 2,124,920 1946
- ------------------------------------------------------------------------------------------------------------------
ML-131 324,843 1.26 3,660,000 1999 79.85 70.28
ORIX-3161 325,837 1.25 3,800,000 1999 76.14 68.72 1998
ORIX-2187 336,222 1.37 3,770,000 1998 74.53 66.92 1974
ML-110 314,006 1.36 3,475,000 1999 73.04 64.79 1997
PW-7064 335,146 1.41 3,650,000 1999 68.39 62.51 1977
ML-137 397,584 1.63 5,200,000 1999 47.99 39.52 1987
ORIX-2507 501,167 2.24 3,840,000 1998 62.57 52.09 1969
ML-151 299,941 1.28 3,500,000 1999 68.43 56.38 1970
ML-135 318,336 1.36 3,750,000 1999 63.83 52.63 1930
ORIX-2607 262,177 1.26 3,250,000 1998 73.39 65.89 1998
PW-7395 286,493 1.41 3,885,000 1999 57.85 52.17 1971
PW-8352 322,688 1.58 3,200,000 1999 68.62 56.81 1998
PW-7958 246,530 1.27 3,460,000 1999 60.67 55.07 1952
ML-140 269,483 1.39 2,900,000 1999 72.29 64.26 1999
PW-7146 246,842 1.29 3,100,000 1999 67.23 60.92 1970
ORIX-3238 251,426 1.32 3,100,000 1999 66.98 60.70 1981
ML-145 268,646 1.40 3,100,000 1999 66.32 58.99 1999
ORIX-2508 441,639 2.35 5,000,000 1998 41.11 34.04 1977
PW-6232 252,406 1.32 3,300,000 1999 62.12 56.40 1960
PW-7312A 174,630 1,750,000 1960
PW-7312B 78,428 600,000 1961
PW-7312C 50,344 500,000 1957
- ------------------------------------------------------------------------------------------------------------------
PW-7312 303,401 1.71 2,850,000 1999 71.77 64.15
ML-144 233,616 1.25 3,200,000 1999 63.19 56.13 1999
ORIX-2509 583,314 3.10 2,800,000 1998 70.80 59.34 1964
ORIX-3290 225,802 1.26 2,600,000 1999 74.76 65.89 1990
PW-7710 268,934 1.63 3,000,000 1999 64.02 57.09 1988
PW-6045 219,222 1.31 2,440,000 1999 77.62 69.78 1997
ORIX-3434 212,596 1.25 2,650,000 1999 70.01 63.36 1998
ML-132 265,364 1.48 2,650,000 1999 69.62 57.30 1983
ORIX-3432 199,005 1.25 2,475,000 1999 70.15 63.49 1990
ORIX-3433 195,828 1.25 2,250,000 1999 75.98 68.81 1998
PW-7130 227,567 1.46 3,150,000 1999 53.66 44.44 1979
ORIX-2104 213,671 1.33 2,600,000 1998 64.76 54.40 1970
ORIX-3436 188,159 1.25 2,275,000 1999 72.14 65.33 1998
ORIX-3430 187,658 1.25 2,250,000 1999 72.77 65.86 1998
ORIX-2596 303,232 2.04 2,900,000 1998 53.92 45.22 1961
ORIX-3435 177,491 1.25 2,070,000 1999 74.85 67.78 1998
PW-7166 183,978 1.25 2,000,000 1999 77.24 64.63 1997
PW-7119 203,709 1.47 2,500,000 1999 59.95 49.56 1985
ORIX-3431 155,583 1.25 1,975,000 1999 68.71 62.23 1991
ML-108 160,252 1.29 1,680,000 1999 78.40 64.15 1915
ML-104 209,922 1.72 2,250,000 1999 56.45 48.38 1872
ORIX-3429 130,319 1.25 1,550,000 1999 73.35 66.38 1998
ML-100 152,435 1.31 2,000,000 1999 54.84 46.28 1905
PW-7127 114,830 1.23 1,400,000 1999 73.11 66.19 1973
PW-8085 136,389 1.33 1,450,000 1999 68.92 58.91 1969
PW-7424 108,263 1.24 1,410,000 1999 67.26 61.01 1971
PW-6437 132,033 1.47 1,250,000 1999 74.87 62.78 1934
ML-106 83,610 1.20 1,140,000 1999 70.00 61.54 1968
PW-7170 141,919 1.71 1,060,000 1998 75.21 64.71 1957
PW-7781 111,692 1.52 1,100,000 1999 65.55 56.05 1973
</TABLE>
<TABLE>
<CAPTION>
Loan Per
Sq Ft, Units, Sq Ft, Unit,
Control Beds, Pads, Bed, Pad,
No. or Room or Room
- --------------------------------------------------------------------
<S> <C> <C>
ML-107 606 Units 43,048 Per Unit
PW-7905 348,410 Sq. Ft. 73 Per Sq. Ft.
ML-117 232,538 Sq. Ft. 90 Per Sq. Ft.
ML-156 180,523 Sq. Ft. 104 Per Sq. Ft.
PW-8202 230,700 Sq. Ft. 80 Per Sq. Ft.
ML-126 352 Units 52,392 Per Unit
ORIX-3325 213,613 Sq. Ft. 85 Per Sq. Ft.
PW-8703A 250 Units 12,975 Per Unit
PW-8703B 64 Units 21,294 Per Unit
PW-8703C 600 Units 14,654 Per Unit
PW-8703D 208 Units 19,112 Per Unit
- --------------------------------------------------------------------
PW-8703 1,122 Units 15,485 Per Unit
ORIX-2965 142,769 Sq. Ft. 115 Per Sq. Ft.
ML-129 408 Units 39,140 Per Unit
ML-124 340 Units 36,650 Per Unit
ML-125 224 Units 53,403 Per Unit
ML-138 266 Rooms 44,277 Per Room
ML-147 103,332 Sq. Ft. 106 Per Sq. Ft.
ORIX-3208 151,778 Sq. Ft. 63 Per Sq. Ft.
ML-111 348 Units 27,320 Per Unit
ML-143 194,000 Sq. Ft. 48 Per Sq. Ft.
ORIX-3108 119,982 Sq. Ft. 75 Per Sq. Ft.
ML-112 66,127 Sq. Ft. 135 Per Sq. Ft.
ML-103 296 Units 28,729 Per Unit
PW-7942 229,091 Sq. Ft. 37 Per Sq. Ft.
ORIX-3257 79,015 Sq. Ft. 106 Per Sq. Ft.
ML-101 155,763 Sq. Ft. 53 Per Sq. Ft.
ML-116 192 Units 42,309 Per Unit
ORIX-3100 114,174 Sq. Ft. 70 Per Sq. Ft.
ML-109 330 Units 22,692 Per Unit
ML-114 6,825 Sq. Ft. 1,023 Per Sq. Ft.
ML-115 44,450 Sq. Ft. 155 Per Sq. Ft.
PW-8028 40,000 Sq. Ft. 170 Per Sq. Ft.
PW-7562 1,293,000 Sq. Ft. 5 Per Sq. Ft.
ML-154 208 Units 31,209 Per Unit
PW-6132 415 Units 15,398 Per Unit
PW-6376 336 Units 19,014 Per Unit
PW-8763 120 Units 52,863 Per Unit
ML-134 145,800 Sq. Ft. 43 Per Sq. Ft.
ORIX-3266 45,653 Sq. Ft. 137 Per Sq. Ft.
ORIX-3115 57,046 Sq. Ft. 109 Per Sq. Ft.
PW-6410 143,686 Sq. Ft. 42 Per Sq. Ft.
PW-7043 182 Units 32,297 Per Unit
ORIX-2939 46,060 Sq. Ft. 123 Per Sq. Ft.
ML-128 150 Rooms 33,244 Per Room
ORIX-3151 100,793 Sq. Ft. 49 Per Sq. Ft.
ORIX-1825 83,905 Sq. Ft. 58 Per Sq. Ft.
PW-8064 24,454 Sq. Ft. 196 Per Sq. Ft.
ML-136 66,691 Sq. Ft. 70 Per Sq. Ft.
PW-7141 180 Units 23,988 Per Unit
ORIX-3256 87,440 Sq. Ft. 48 Per Sq. Ft.
ML-152 61,241 Sq. Ft. 68 Per Sq. Ft.
PW-7790 57,798 Sq. Ft. 67 Per Sq. Ft.
PW-8694 113,175 Sq. Ft. 33 Per Sq. Ft.
PW-8313 112 Units 32,551 Per Unit
ML-148 24,500 Sq. Ft. 144 Per Sq. Ft.
ORIX-3438 50,353 Sq. Ft. 65 Per Sq. Ft.
PW-6482A 14,136 Sq. Ft. 65 Per Sq. Ft.
PW-6482B 7,333 Sq. Ft. 52 Per Sq. Ft.
PW-6482C 13,760 Sq. Ft. 74 Per Sq. Ft.
PW-6482D 12,424 Sq. Ft. 75 Per Sq. Ft.
- --------------------------------------------------------------------
PW-6482 47,653 Sq. Ft. 68 Per Sq. Ft.
ML-139 35,249 Sq. Ft. 91 Per Sq. Ft.
PW-7789 38,000 Sq. Ft. 80 Per Sq. Ft.
ORIX-3356 76,760 Sq. Ft. 39 Per Sq. Ft.
ML-131A 20 Units 61,288 Per Unit
ML-131B 32 Units 53,023 Per Unit
- --------------------------------------------------------------------
ML-131 52 Units 56,202 Per Unit
ORIX-3161 23,868 Sq. Ft. 121 Per Sq. Ft.
ORIX-2187 99,074 Sq. Ft. 28 Per Sq. Ft.
ML-110 17,117 Sq. Ft. 148 Per Sq. Ft.
PW-7064 126,500 Sq. Ft. 20 Per Sq. Ft.
ML-137 63 Rooms 39,608 Per Room
ORIX-2507 150 Beds 16,019 Per Beds
ML-151 72,700 Sq. Ft. 33 Per Sq. Ft.
ML-135 22,293 Sq. Ft. 107 Per Sq. Ft.
ORIX-2607 40,000 Sq. Ft. 60 Per Sq. Ft.
PW-7395 158 Units 14,226 Per Unit
PW-8352 38,336 Sq. Ft. 57 Per Sq. Ft.
PW-7958 28,130 Sq. Ft. 75 Per Sq. Ft.
ML-140 19,094 Sq. Ft. 110 Per Sq. Ft.
PW-7146 97 Units 21,487 Per Unit
ORIX-3238 57,629 Sq. Ft. 36 Per Sq. Ft.
ML-145 30,122 Sq. Ft. 68 Per Sq. Ft.
ORIX-2508 130 Beds 15,810 Beds
PW-6232 26,580 Sq. Ft. 77 Per Sq. Ft.
PW-7312A 118 Units 9,975 Per Unit
PW-7312B 45 Units 11,756 Per Unit
PW-7312C 47 Units 7,223 Per Unit
- --------------------------------------------------------------------
PW-7312 210 Units 9,741 Per Unit
ML-144 33,334 Sq. Ft. 61 Per Sq. Ft.
ORIX-2509 99 Beds 20,026 Per Beds
ORIX-3290 27,532 Sq. Ft. 71 Per Sq. Ft.
PW-7710 141 Units 13,622 Per Unit
PW-6045 23,473 Sq. Ft. 81 Per Sq. Ft.
ORIX-3434 8,021 Sq. Ft. 231 Per Sq. Ft.
ML-132 38,735 Sq. Ft. 48 Per Sq. Ft.
ORIX-3432 15,237 Sq. Ft. 114 Per Sq. Ft.
ORIX-3433 8,000 Sq. Ft. 214 Per Sq. Ft.
PW-7130 66,607 Sq. Ft. 25 Per Sq. Ft.
ORIX-2104 43,540 Sq. Ft. 39 Per Sq. Ft.
ORIX-3436 8,000 Sq. Ft. 205 Per Sq. Ft.
ORIX-3430 8,000 Sq. Ft. 205 Per Sq. Ft.
ORIX-2596 113 Beds 13,838 Per Beds
ORIX-3435 8,000 Sq. Ft. 194 Per Sq. Ft.
PW-7166 72 Units 21,456 Per Unit
PW-7119 82 Units 18,277 Per Unit
ORIX-3431 15,000 Sq. Ft. 90 Per Sq. Ft.
ML-108 60 Units 21,952 Per Unit
ML-104 118,681 Sq. Ft. 11 Per Sq. Ft.
ORIX-3429 8,000 Sq. Ft. 142 Per Sq. Ft.
ML-100 25 Units 43,872 Per Unit
PW-7127 34,039 Sq. Ft. 30 Per Sq. Ft.
PW-8085 72 Units 13,880 Per Unit
PW-7424 28 Units 33,869 Per Unit
PW-6437 32 Units 29,248 Per Unit
ML-106 48 Pads 16,625 Per Pad
PW-7170 48 Units 16,609 Per Unit
PW-7781 60 Units 12,017 Per Unit
</TABLE>
<TABLE>
<CAPTION>
Initial
Control Occupancy Occupancy Reserves Underwriting Reserves
No. Percentage Date At Closing Reserves Collected
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ML-107 96% Jun-99 474,513 260 260 Per Unit
PW-7905 100% Sep-99 -- 0.15 0.15 Per Sq. Ft.
ML-117 98% Aug-99 -- 0.16 0.16 Per Sq. Ft.
ML-156 100% Jul-99 2,099,228 0.15 0.15 Per Sq. Ft.
PW-8202 100% Apr-99 2,810 0.15 0.20 Per Sq. Ft.
ML-126 96% May-99 246,776 250 195 Per Unit
ORIX-3325 100% Jul-99 272,952 0.20 0.20 Per Sq. Ft.
PW-8703A 89% Apr-99 -- 250 Per Unit
PW-8703B 94% May-99 -- 300 Per Unit
PW-8703C 91% May-99 -- 250 Per Unit
PW-8703D 95% Jun-99 -- 250 Per Unit
- ------------------------------------------------------------------------------------------------------------
PW-8703 91% Various 515,216 253 253 Per Unit
ORIX-2965 91% Apr-99 288,876 0.20 0.20 Per Sq. Ft.
ML-129 96% May-99 200,336 200 200 Per Unit
ML-124 94% Jun-99 31,607 250 173 Per Unit
ML-125 93% Jun-99 122,480 250 240 Per Unit
ML-138 51% NAP 970,590 5% 0% of gross revenue
ML-147 92% Jun-99 165,425 0.27 0.27 Per Sq. Ft.
ORIX-3208 78% Aug-99 192,412 0.15 0.15 Per Sq. Ft.
ML-111 95% Jun-99 393,782 225 225 Per Unit
ML-143 100% Sep-99 739,074 0.20 0.20 Per Sq. Ft.
ORIX-3108 90% Apr-99 41,312 0.15 0.15 Per Sq. Ft.
ML-112 100% Apr-99 4,067 0.15 0.00 Per Sq. Ft.
ML-103 97% Jul-99 356,686 250 225 Per Unit
PW-7942 94% Aug-99 103,697 0.15 0.00 Per Sq. Ft.
ORIX-3257 100% Sep-99 2,000,000 0.15 0.15 Per Sq. Ft.
ML-101 100% Jun-99 1,042,689 0.19 0.19 Per Sq. Ft.
ML-116 97% Apr-99 13,502 250 225 Per Unit
ORIX-3100 100% Jun-99 -- 0.20 0.00 Per Sq. Ft.
ML-109 94% Aug-99 160,647 200 200 Per Unit
ML-114 100% Apr-99 43,088 0.24 0.24 Per Sq. Ft.
ML-115 100% Aug-99 90,189 0.20 0.20 Per Sq. Ft.
PW-8028 100% Jun-99 103,563 0.15 0.15 Per Sq. Ft.
PW-7562 76% May-99 201,103 0.20 0.00 Per Sq. Ft.
ML-154 96% Jul-99 35,520 272 0.00 Per Unit
PW-6132 93% Jun-99 149,076 250 250 Per Unit
PW-6376 96% Mar-99 81,351 250 250 Per Unit
PW-8763 97% Jun-99 9,646 250 250 Per Unit
ML-134 100% Jul-99 476,027 0.16 0.16 Per Sq. Ft.
ORIX-3266 100% Jun-99 158,272 0.15 0.15 Per Sq. Ft.
ORIX-3115 100% Feb-99 22,804 0.21 0.21 Per Sq. Ft.
PW-6410 98% Jul-99 24,566 0.30 0.30 Per Sq. Ft.
PW-7043 92% Aug-99 130,529 259 259 Per Unit
ORIX-2939 97% Mar-99 38,049 0.20 0.20 Per Sq. Ft.
ML-128 87% NAP 131,128 5% 4% of gross revenue
ORIX-3151 90% Apr-99 62,882 0.31 0.31 Per Sq. Ft.
ORIX-1825 90% Jul-99 227,764 0.20 0.19 Per Sq. Ft.
PW-8064 100% May-99 -- 0.15 0.14 Per Sq. Ft.
ML-136 90% Jun-99 42,041 0.15 0.15 Per Sq. Ft.
PW-7141 95% May-99 115,590 250 225 Per Unit
ORIX-3256 80% Jul-99 35,009 0.27 0.27 Per Sq. Ft.
ML-152 96% Aug-99 187,972 0.22 0.22 Per Sq. Ft.
PW-7790 91% Sep-99 104,750 0.18 0.20 Per Sq. Ft.
PW-8694 100% Aug-99 -- 0.10 0.10 Per Sq. Ft.
PW-8313 93% Jun-99 37,027 250 250 Per Unit
ML-148 100% Jun-99 53,819 0.20 0.00 Per Sq. Ft.
ORIX-3438 100% Jul-99 62,396 0.15 0.15 Per Sq. Ft.
PW-6482A 87% Jul-99 --
PW-6482B 100% Jul-99 --
PW-6482C 100% Jul-99 --
PW-6482D 100% Jul-99 --
- ------------------------------------------------------------------------------------------------------------
PW-6482 96% 30,190 0.36 0.36 Per Sq. Ft.
ML-139 100% Jun-99 17,576 0.15 0.15 Per Sq. Ft.
PW-7789 100% Apr-99 28,515 0.12 0.20 Per Sq. Ft.
ORIX-3356 100% Aug-99 36,122 0.20 0.00 Per Sq. Ft.
ML-131A 100% Jun-99 --
ML-131B 97% Jun-99 --
- ------------------------------------------------------------------------------------------------------------
ML-131 98% Jun-99 5,135 200 0 Per Unit
ORIX-3161 100% Jun-99 63,787 0.16 0.16 Per Sq. Ft.
ORIX-2187 100% Dec-98 121,868 0.23 0.23 Per Sq. Ft.
ML-110 100% Apr-99 18,209 0.15 0.00 Per Sq. Ft.
PW-7064 97% Mar-99 14,034 0.10 0.18 Per Sq. Ft.
ML-137 55% NAP 173,949 5% 0% of gross revenue
ORIX-2507 84% Dec-98 29,362 300 225 Per Bed
ML-151 100% Jun-99 169,868 0.16 0.15 Per Sq. Ft.
ML-135 100% Jun-99 -- 0.15 0.15 Per Sq. Ft.
ORIX-2607 98% Nov-98 29,860 0.15 0.00 Per Sq. Ft.
PW-7395 94% Jun-99 86,843 366 390 Per Unit
PW-8352 90% May-99 11,670 0.10 0.20 Per Sq. Ft.
PW-7958 100% Jul-99 3,644 0.15 0.15 Per Sq. Ft.
ML-140 100% Jun-99 106,036 0.15 0.15 Per Sq. Ft.
PW-7146 98% May-99 46,722 250 250 Per Unit
ORIX-3238 94% Jun-99 285,668 0.15 0.15 Per Sq. Ft.
ML-145 100% NAP 6,699 0.15 0.15 Per Sq. Ft.
ORIX-2508 89% Dec-98 29,138 300 225 Per Bed
PW-6232 100% Apr-99 32,371 0.18 0.18 Per Sq. Ft.
PW-7312A 95% Mar-99 --
PW-7312B 96% Mar-99 --
PW-7312C 94% Mar-99 --
- ------------------------------------------------------------------------------------------------------------
PW-7312 95% Mar-99 28,894 53 50 Per Unit
ML-144 100% NAP 3,870 0.15 0.15 Per Sq. Ft.
ORIX-2509 82% Dec-98 14,257 300 254 Per Bed
ORIX-3290 100% May-99 15,732 0.13 0.13 Per Sq. Ft.
PW-7710 100% Mar-99 25,661 50 50 Per Unit
PW-6045 100% Mar-99 15,778 0.15 0.15 Per Sq. Ft.
ORIX-3434 100% Jul-99 5,936 0.15 0.13 Per Sq. Ft.
ML-132 95% May-99 21,525 0.15 0.15 Per Sq. Ft.
ORIX-3432 100% Jul-99 14,235 0.15 0.10 Per Sq. Ft.
ORIX-3433 100% Jul-99 8,576 0.15 0.10 Per Sq. Ft.
PW-7130 100% Jul-99 37,848 0.19 0.19 Per Sq. Ft.
ORIX-2104 99% Dec-98 12,029 0.20 0.20 Per Sq. Ft.
ORIX-3436 100% Jul-99 24,604 0.15 0.10 Per Sq. Ft.
ORIX-3430 100% Jul-99 13,749 0.15 0.10 Per Sq. Ft.
ORIX-2596 63% Dec-98 332,302 300 225 Per Bed
ORIX-3435 100% Jul-99 13,176 0.15 0.10 Per Sq. Ft.
PW-7166 100% Mar-99 21,324 250 250 Per Unit
PW-7119 96% Jun-99 15,552 50 50 Per Unit
ORIX-3431 100% Jul-99 26,415 0.15 0.10 Per Sq. Ft.
ML-108 100% Mar-99 16,940 228 228 Per Unit
ML-104 92% May-99 316,470 0.20 0.20 Per Sq. Ft.
ORIX-3429 100% Jul-99 5,297 0.15 0.10 Per Sq. Ft.
ML-100 96% May-99 -- 282 282 Per Unit
PW-7127 100% Mar-99 107,554 0.20 0.20 Per Sq. Ft.
PW-8085 99% Jul-99 51,592 338 338 Per Unit
PW-7424 100% Mar-99 15,406 266 266 Per Sq. Ft.
PW-6437 97% May-99 9,566 258 276 Per Unit
ML-106 100% May-99 11,786 50 50 Per Pad
PW-7170 94% Jul-99 17,218 250 250 Per Unit
PW-7781 100% Jul-99 23,916 250 250 Per Sq. Ft.
</TABLE>
<TABLE>
<CAPTION>
TWO LARGEST TENANTS
----------------------------------------------------------------------------------------------------------
Control Area Leased Lease
No. Tenant Name (1) (Sq. Ft.) Exp Date
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ML-107
PW-7905 Blue Cross Blue Shield of South Carolina 348,410 9/30/2009
ML-117 Kaiser 52,030 12/31/2005
ML-156 Home Depot 101,928 1/31/2007
PW-8202 First American Real Estate Information Services, Inc. 230,700 6/30/2012
ML-126
ORIX-3325 Providian Bancorp Services 109,904 6/30/2003
PW-8703A
PW-8703B
PW-8703C
PW-8703D
- ------------------------------------------------------------------------------------------------------------------------------
PW-8703
ORIX-2965 GTE Communications Corp. 50,966 9/30/2002
ML-129
ML-124
ML-125
ML-138
ML-147 State of Nevada 6,057 8/31/2003
ORIX-3208 Stop & Shop Company 60,270 2/28/2009
ML-111
ML-143 E & F Warehousing Inc. 122,000 7/31/2009
ORIX-3108 Hobby Lobby 48,822 12/31/2012
ML-112 Staples 24,000 2/28/2014
ML-103
PW-7942 Sears 63,236 4/8/2005
ORIX-3257 The Spectrum Club Company, Inc. 79,015 9/16/2017
ML-101 Ocean Beauty Seafood 155,763 11/16/2013
ML-116
ORIX-3100 HKS, Inc. 114,174 5/31/2013
ML-109
ML-114 Conway 6,825 6/30/2013
ML-115 Obagi Dermatology 4,107 1/31/2004
PW-8028 Tops Appliance City 40,000 5/31/2024
PW-7562 Sungard 351,314 12/31/2004
ML-154
PW-6132
PW-6376
PW-8763
ML-134 Ryder Intergrated Logistics 145,800 5/6/2004
ORIX-3266 Wood Burrus, LLC dba Showtime USA 6,350 11/3/2001
ORIX-3115 Saddleback Memorial Medical Center 12,300 6/30/2002
PW-6410 Kmart 79,072 10/26/2008
PW-7043
ORIX-2939 Beverly Hills Center for Special Surgery 3,200 6/15/2004
ML-128
ORIX-3151 Kroger Store 42,130 9/30/2002
ORIX-1825 Ft. Lauderdale College 34,500 8/15/2007
PW-8064 Office Max 24,454 5/31/2019
ML-136 Office Max, Inc. 23,520 10/31/2012
PW-7141
ORIX-3256 TJ Maxx 36,788 11/30/2001
ML-152 Sterling City Capitol 8,000 12/31/2000
PW-7790 Vadaro & Helwig 7,000 9/30/2001
PW-8694
PW-8313
ML-148 Cambell 12,250 8/31/2009
ORIX-3438 Raymour's Furniture Company, Inc. 50,353 6/30/2014
PW-6482A The Logistics Company 12,352 8/31/2001
PW-6482B John Koenig, Inc. 7,333 8/31/2010
PW-6482C John Koenig, Inc. 10,960 8/31/2010
PW-6482D John Koenig, Inc. 10,424 8/31/2010
- ------------------------------------------------------------------------------------------------------------------------------
PW-6482
ML-139 Capital Academic LLC 11,349 4/30/2014
PW-7789 Toyota Motor Sales, USA Inc. (Lexus) 38,000 2/29/2004
ORIX-3356 Hardaway Construction Corp. of TN. 76,760 7/31/2014
ML-131A
ML-131B
- ------------------------------------------------------------------------------------------------------------------------------
ML-131
ORIX-3161 Blockbuster Videos, Inc. 3,834 9/30/2003
ORIX-2187 Raymour Furniture Company, Inc. 43,530 5/31/2028
ML-110 Laguna Niguel Montessori 8,692 8/30/2007
PW-7064 Harbor Freight & Tool 18,720 11/30/2003
ML-137
ORIX-2507
ML-151 Display Systems, Inc 72,700 2/28/2012
ML-135 Avis Rent-A-Car System 22,293 12/31/2018
ORIX-2607 Technology Driven Product 10,000 7/31/2002
PW-7395
PW-8352 Helix Electric, Inc. 20,503 6/30/2008
PW-7958 UT Medical Group 28,130 7/31/2009
ML-140 Lady of America 4,500 5/31/2004
PW-7146
ORIX-3238 Tyler Entertainment 9,363 5/31/2002
ML-145 Office Depot (BBB Stable) 30,122 8/28/2014
ORIX-2508
PW-6232 Sky Club 19,800 6/30/2013
PW-7312A
PW-7312B
PW-7312C
- ------------------------------------------------------------------------------------------------------------------------------
PW-7312
ML-144 MicroSemi Corp. 33,334 6/20/2029
ORIX-2509
ORIX-3290 Clover Group 14,146 2/28/2002
PW-7710
PW-6045 The Oklahoma Publishing Company DBA The Norman Oklahoman 3,600 2/28/2001
ORIX-3434 Gateway 2000 Country Stores, Inc. 8,021 12/31/2003
ML-132
ORIX-3432 Gateway 2000 Country Stores, Inc. 15,237 11/30/2003
ORIX-3433 Gateway 2000 Country Stores, Inc. 8,000 11/30/2003
PW-7130 Capital Christian Center 5,735 10/31/2000
ORIX-2104 Cloth World 17,500 9/30/2002
ORIX-3436 Gateway 2000 Country Stores, Inc. 8,000 11/30/2003
ORIX-3430 Gateway 2000 Country Stores, Inc. 8,000 11/30/2003
ORIX-2596
ORIX-3435 Gateway 2000 Country Stores, Inc. 8,000 11/30/2003
PW-7166
PW-7119
ORIX-3431 Gateway 2000 Country Stores, Inc. 15,000 11/30/2003
ML-108
ML-104 Hilco 37,095 12/31/2001
ORIX-3429 Gateway 2000 Country Stores, Inc. 8,000 10/31/2003
ML-100 Blockbuster 3,500 5/31/2004
PW-7127 Association for Individual Development 34,039 2/29/2004
PW-8085
PW-7424
PW-6437
ML-106
PW-7170
PW-7781
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Control Area Leased Lease Control
No. Tenant Name (2) (Sq. Ft.) Exp Date No.
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ML-107 ML-107
PW-7905 PW-7905
ML-117 Allstate 41,359 10/31/2003 ML-117
ML-156 LA Fitness 38,000 3/31/2014 ML-156
PW-8202 PW-8202
ML-126 ML-126
ORIX-3325 United Healthcare Services 73,280 5/1/2001 ORIX-3325
PW-8703A PW-8703A
PW-8703B PW-8703B
PW-8703C PW-8703C
PW-8703D PW-8703D
- ------------------------------------------------------------------------------------------------------------
PW-8703 PW-8703
ORIX-2965 Fox Sports 25,350 7/31/2003 ORIX-2965
ML-129 ML-129
ML-124 ML-124
ML-125 ML-125
ML-138 ML-138
ML-147 Accubanc Mortgage Corp 5,401 7/31/2002 ML-147
ORIX-3208 A. J. Wright 27,430 4/30/2009 ORIX-3208
ML-111 ML-111
ML-143 Lambda Holdings 65,000 7/31/2009 ML-143
ORIX-3108 Fashion Bug 12,000 1/31/2006 ORIX-3108
ML-112 Pep Boys 19,000 3/31/2019 ML-112
ML-103 ML-103
PW-7942 The Bon Marche 59,742 8/20/2018 PW-7942
ORIX-3257 ORIX-3257
ML-101 ML-101
ML-116 ML-116
ORIX-3100 ORIX-3100
ML-109 ML-109
ML-114 ML-114
ML-115 Kessler 3,292 1/31/2004 ML-115
PW-8028 PW-8028
PW-7562 North American 113,114 9/30/2015 PW-7562
ML-154 ML-154
PW-6132 PW-6132
PW-6376 PW-6376
PW-8763 PW-8763
ML-134 ML-134
ORIX-3266 Evenson's Card Shops, Inc. (Hallmark) 5,600 11/13/2002 ORIX-3266
ORIX-3115 Salomon Smith Barney, Inc. 6,500 7/30/2005 ORIX-3115
PW-6410 Safeway 40,000 2/17/2001 PW-6410
PW-7043 PW-7043
ORIX-2939 Dr. Davidson & Dr. Torbati 3,000 6/30/2003 ORIX-2939
ML-128 ML-128
ORIX-3151 Walgreens (Dollar General) 10,998 10/31/2002 ORIX-3151
ORIX-1825 Barnett Bank 4,400 2/28/2002 ORIX-1825
PW-8064 PW-8064
ML-136 Honks 99 8,390 4/1/2002 ML-136
PW-7141 PW-7141
ORIX-3256 Homegood's 26,360 10/31/2008 ORIX-3256
ML-152 Insite Realty 7,592 7/30/2002 ML-152
PW-7790 Nesconset Excutive Office Corp. 3,825 9/30/2004 PW-7790
PW-8694 PW-8694
PW-8313 PW-8313
ML-148 International Trading 3,928 11/30/2003 ML-148
ORIX-3438 ORIX-3438
PW-6482A PW-6482A
PW-6482B PW-6482B
PW-6482C Carolina Mortgage 2,800 8/31/2010 PW-6482C
PW-6482D Atlantic First Mortgage 2,000 8/31/2010 PW-6482D
- ------------------------------------------------------------------------------------------------------------
PW-6482 PW-6482
ML-139 Aqua Swim and Patio 8,000 12/31/1999 ML-139
PW-7789 PW-7789
ORIX-3356 ORIX-3356
ML-131A ML-131a
ML-131B ML-131b
- ------------------------------------------------------------------------------------------------------------
ML-131 ML-131
ORIX-3161 Carlton Cards dba Ray's Cards 3,220 7/9/2005 ORIX-3161
ORIX-2187 Pharmhouse Corp. 33,399 5/31/2008 ORIX-2187
ML-110 New York Pizzeria 1,430 5/18/2003 ML-110
PW-7064 Thompson Boat 12,919 3/31/2002 PW-7064
ML-137 ML-137
ORIX-2507 ORIX-2507
ML-151 ML-151
ML-135 ML-135
ORIX-2607 First National Bank 7,500 7/31/2003 ORIX-2607
PW-7395 PW-7395
PW-8352 Medical Contouring 10,537 4/30/2003 PW-8352
PW-7958 PW-7958
ML-140 Apple Orthodontics 3,600 3/31/2006 ML-140
PW-7146 PW-7146
ORIX-3238 Unisource 8,442 8/14/2001 ORIX-3238
ML-145 ML-145
ORIX-2508 ORIX-2508
PW-6232 Home Care 5,280 4/30/2007 PW-6232
PW-7312A PW-7312A
PW-7312B PW-7312B
PW-7312C PW-7312C
- ------------------------------------------------------------------------------------------------------------
PW-7312 PW-7312
ML-144 ML-144
ORIX-2509 ORIX-2509
ORIX-3290 Yell-O-Glow 13,386 2/28/2002 ORIX-3290
PW-7710 PW-7710
PW-6045 CD Warehouse Inc. 2,927 1/14/2003 PW-6045
ORIX-3434 ORIX-3434
ML-132 ML-132
ORIX-3432 ORIX-3432
ORIX-3433 ORIX-3433
PW-7130 Mill Direct Carpet 4,045 4/30/2001 PW-7130
ORIX-2104 Promise Dollar Store 7,440 3/31/2004 ORIX-2104
ORIX-3436 ORIX-3436
ORIX-3430 ORIX-3430
ORIX-2596 ORIX-2596
ORIX-3435 ORIX-3435
PW-7166 PW-7166
PW-7119 PW-7119
ORIX-3431 ORIX-3431
ML-108 ML-108
ML-104 Suburban Delivery 22,107 2/28/2008 ML-104
ORIX-3429 ORIX-3429
ML-100 Home Basics 2,825 5/30/2001 ML-100
PW-7127 PW-7127
PW-8085 PW-8085
PW-7424 PW-7424
PW-6437 PW-6437
ML-106 ML-106
PW-7170 PW-7170
PW-7781 PW-7781
</TABLE>
<PAGE>
ANNEX B
INVESTOR CERTIFICATION
Norwest Bank Minnesota, National Association
7485 New Horizon Way
Fredrick, Maryland 21703
Facsimile: 301-815-6125
Attention: Corporate Trust Services (CMBS)
Merrill Lynch Mortgage Investors, Inc., Series 1999-C1
In accordance with Section 4.02 of the Pooling and Servicing
Agreement, dated as of November 1, 1999 (the "Agreement"), by and among Merrill
Lynch Mortgage Investors, Inc. as Depositor, ORIX Real Estate Capital Markets,
LLC as Master Servicer and Special Servicer, and Norwest Bank Minnesota,
National Association as Trustee (the "Trustee"), with respect to the Merrill
Lynch Mortgage Investors, Inc., Mortgage Pass-Through Certificates, Series
1999-C1 (the "Certificates"), the undersigned hereby certifies and agrees as
follows:
1. The undersigned is a beneficial owner or prospective purchaser of the
Class ___ Certificates.
2. The undersigned is requesting a password pursuant to Section 4.02 of the
Agreement for access to certain information (the "Information") located on
the Trustee's internet website and/or is requesting the information
identified on the schedule attached hereto (also, the "Information")
pursuant to Section 4.02 of the Agreement.
3. In consideration of the Trustee's disclosure to the undersigned of the
Information, or the password in connection therewith, the undersigned will
keep the Information (and the password) confidential (except from such
outside persons as are assisting it in making an evaluation in connection
with purchasing the related Certificates, from its accountants and
attorneys, and otherwise from such governmental or banking authorities or
agencies to which the undersigned is subject), and such Information will
not, without the prior written consent of the Trustee, be otherwise
disclosed by the undersigned or by its officers, directors, partners,
employees, agents or representatives (collectively, the "Representatives")
in any manner whatsoever, in whole or in part.
4. The undersigned will not use or disclose the Information in any manner
which could result in a violation of any provision of the Securities Act of
1933, as amended (the "Securities Act"), or the Securities Exchange Act of
1934, as amended, or would require registration of any Certificate pursuant
to Section 5 of the Securities Act.
5. The undersigned shall be fully liable for, and shall indemnify the
Depositor, the Trustee and the Trust Fund for any loss, liability or
expense incurred as a result of, any breach of the provisions hereof by
itself or any of its Representatives.
6. Capitalized terms used but not defined herein shall have the respective
meanings assigned thereto in the Agreement.
IN WITNESS WHEREOF, the undersigned has caused its name to be signed
hereto by its duly authorized officer, as of the day and year written above.
-------------------------------------------
Beneficial Owner or Prospective Purchaser
By:
Title:
Company:
Phone:
Date:
B-1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX C
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
DISTRIBUTION DATE STATEMENT
Table of Contents
================================================================================
STATEMENT SECTIONS PAGE(s)
- ------------------ -------
Certificate Distribution Detail 2
Certificate Factor Detail 3
Reconciliation Detail 4
Other Required Information 5
Ratings Detail 6
Current Mortgage Loan and Property Stratification Tables 7 - 9
Mortgage Loan Detail 10
Principal Prepayment Detail 11
Historical Detail 12
Delinquency Loan Detail 13
Specially Serviced Loan Detail 14 - 15
Modified Loan Detail 16
Liquidated Loan Detail 17
================================================================================
<TABLE>
<CAPTION>
Underwriter Underwriter Servicer Special Servicer
=================================== =========================== ============================ =====================================
<S> <C> <C> <C>
Merrill Lynch, Pierce, PaineWebber Incorporated ORIX Real Estate Capital ORIX Real Estate Capital Markets, LLC
Fenner & Smith Incorporated 1285 Avenue of the Americas Market, LLC 1717 Main Street, 12th Floor
World Financial Center, North Tower New York, NY 10019 1717 Main Street, 12th Floor Dallas, TX 75201
25 Vesey Street Dallas, TX 75201
New York, NY 10281 Contact: Paul G. Smyth Contact: Paul G. Smyth
Phone Number: (214) 237-2010 Phone Number: (214) 237-2010
=================================== =========================== ============================ =====================================
</TABLE>
This report has been compiled from information provided to Norwest by
various third parties, which may include the Servicer, Master Servicer,
Special Servicer and others. Norwest has not independently confirmed the
accuracy of information received from these third parties and assumes no
duty to do so. Norwest expressly disclaims any responsibility for the
accuracy or completeness of information furnished by third parties.
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 1 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Certificate Distribution Detail
<TABLE>
<CAPTION>
==================================================================================================================================
Realized
Loss/
Additional
Trust Total Current
Pass-Through Original Beginning Principal Interest Prepayment Fund Distri- Ending Subordination
Class CUSIP Rate Balance Balance Distribution Distribution Penalties Expenses bution Balance Level(1)
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
A-2 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
B 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
C 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
D 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
E 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
F 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
G 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
H 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
J 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
K 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
R 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
LR 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
==================================================================================================================================
Totals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=====================================================================================================
Original Beginning Ending
Pass-Through Notional Notional Interest Prepayment Total Notional
Class CUSIP Rate Amount Amount Distribution Penalties Distribution Amount
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IO 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
=====================================================================================================
</TABLE>
(1) Calculated by taking (A) the sum of the ending certificate balance of
all classes less (B) the sum of (i) the ending certificate balance of the
designated class and (ii) the ending certificate balance of all classes
which are not subordinate to the designated class and dividing the result by
(A).
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 2 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Certificate Factor Detail
<TABLE>
<CAPTION>
===============================================================================================================
Realized Loss/
Beginning Principal Interest Prepayment Additional Trust Ending
Class CUSIP Balance Distribution Distribution Penalties Fund Expenses Balance
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-2 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
C 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
D 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
E 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
F 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
G 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
H 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
J 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
K 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
LR 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
===============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
================================================================================
Beginning Ending
Notional Interest Prepayment Notional
Class CUSIP Amount Distribution Penalties Amount
================================================================================
<S> <C> <C> <C> <C> <C>
IO 0.00000000 0.00000000 0.00000000 0.00000000
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 3 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Reconciliation Detail
<TABLE>
<CAPTION>
Advance Summary Master Servicing Fee Summary
<S> <C> <C> <C>
P & I Advances Outstanding 0.00 Current Period Accrued Master Servicing Fees 0.00
Servicing Advances Outstanding 0.00 Less Master Servicing Fees on Delinquent Payments 0.00
Less Reductions to Master Servicing Fees 0.00
Reimbursement for Interest on P&I 0.00 Plus Master Servicing Fees for Delinquent Payments Received 0.00
Advance paid from general collections Plus Adjustments for Prior Master Servicing Calculation 0.00
Total Servicing Fees Collected 0.00
Reimbursements for Interest on Servicing 0.00
Advances paid from general collections
</TABLE>
Certificate Interest Reconciliation
<TABLE>
<CAPTION>
==============================================================================================================
Net
Aggregate Distributable Remaining Unpaid
Accrued Prepayment Distributable Certificate Additional Distributable
Certificate Interest Certificate Interest Trust Fund Interest Certificate
Class Interest Shortfall Interest Adjustment Expenses Distribution Interest
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-2 0.00 0.00 0.00 0.00 0.00 0.00 0.00
IO 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 0.00 0.00 0.00 0.00
C 0.00 0.00 0.00 0.00 0.00 0.00 0.00
D 0.00 0.00 0.00 0.00 0.00 0.00 0.00
E 0.00 0.00 0.00 0.00 0.00 0.00 0.00
F 0.00 0.00 0.00 0.00 0.00 0.00 0.00
G 0.00 0.00 0.00 0.00 0.00 0.00 0.00
H 0.00 0.00 0.00 0.00 0.00 0.00 0.00
J 0.00 0.00 0.00 0.00 0.00 0.00 0.00
K 0.00 0.00 0.00 0.00 0.00 0.00 0.00
==============================================================================================================
Total 0.00 0.00 0.00 0.00 0.00 0.00 0.00
==============================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 4 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Other Required Information
- --------------------------------------------------------------------------------
Available Distribution Amount 0.00
Aggregate Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance of Loans 0.00
Aggregate Stated Principal Balance of Loans 0.00
Aggregate Amount of Servicing Fee 0.00
Aggregate Amount of Special Servicing Fee 0.00
Aggregate Amount of Trustee Fee 0.00
Aggregate Stand-by Fee 0.00
Aggregate Trust Fund Expenses 0.00
Specially Serviced Loans not Delinquent
Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance 0.00
- --------------------------------------------------------------------------------
Appraisal Reduction Amount
================================================================================
Appraisal Date Appraisal
Loan Reduction Reduction
Number Effected Effected
================================================================================
None
================================================================================
Total
================================================================================
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 5 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Ratings Detail
<TABLE>
<CAPTION>
====================================================================================================
Original Ratings Current Ratings (1)
----------------------------------- -----------------------------------
Class CUSIP DCR FITCH MOODY'S S&P DCR FITCH MOODY'S S&P
----- ----- --- ----- ------- --- --- ----- -------- ---
====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A-1
A-2
IO
B
C
D
E
F
G
H
J
K
====================================================================================================
</TABLE>
NR - Designates that the class was not rated by the above agency at the
time of original issuance.
X - Designates that the above rating agency did not rate any classes in
this transaction at the time of original issuance.
N/A - Data not available this period.
1) For any class not rated at the time of original issuance by any
particular rating agency, no request has been made subsequent to issuance to
obtain rating information, if any, from such rating agency. The current
ratings were obtained directly from the applicable rating agency within 30
days of the payment date listed above. The ratings may have changed since
they were obtained. Because the ratings may have changed, you may want to
obtain current ratings directly from the rating agencies.
Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, Illinois 60603
(312) 368-3100
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
(212) 908-0500
Moody's Investors Service
99 Church Street
New York, New York 10007
(212) 553-0300
Standard & Poor's Rating Services
26 Broadway
New York, New York 10004
(212) 208-8000
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 6 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Current Mortgage Loan and Property Stratification Tables
Scheduled Balance
<TABLE>
<CAPTION>
========================================================================================
Scheduled # of Scheduled % of Weighted
Balance Loans Balance Agg. Bal. WAM(2) WAC Avg DSCR(1)
========================================================================================
<S> <C> <C> <C> <C> <C> <C>
========================================================================================
Totals
========================================================================================
</TABLE>
State (3)
<TABLE>
<CAPTION>
========================================================================================
# of Scheduled % of Weighted
State Props. Balance Agg. Bal. WAM(2) WAC Avg DSCR(1)
========================================================================================
<S> <C> <C> <C> <C> <C> <C>
========================================================================================
Totals
========================================================================================
</TABLE>
See footnotes on last page of this section.
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 7 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Current Mortgage Loan and Property Stratification Tables
Debt Service Coverage Ratio
<TABLE>
<CAPTION>
===============================================================================
Debt Servcice # of Scheduled % of Weighted
Coverage Ratio Loans Balance Agg. Bal. WAM(2) WAC Avg DSCR(1)
===============================================================================
<S> <C> <C> <C> <C> <C> <C>
===============================================================================
Totals
===============================================================================
</TABLE>
Property Type(3)
<TABLE>
<CAPTION>
===============================================================================
Property # of Scheduled % of Weighted
Type Props. Balance Agg. Bal. WAM(2) WAC Avg DSCR(1)
===============================================================================
<S> <C> <C> <C> <C> <C> <C>
===============================================================================
Totals
===============================================================================
</TABLE>
Note Rate
<TABLE>
<CAPTION>
===============================================================================
Note # of Scheduled % of Weighted
Rate Loans Balance Agg. Bal. WAM(2) WAC Avg DSCR(1)
===============================================================================
<S> <C> <C> <C> <C> <C> <C>
===============================================================================
Totals
===============================================================================
</TABLE>
Seasoning
<TABLE>
<CAPTION>
===============================================================================
# of Scheduled % of Weighted
Seasoning Loans Balance Agg. Bal. WAM(2) WAC Avg DSCR(1)
===============================================================================
<S> <C> <C> <C> <C> <C> <C>
===============================================================================
Totals
===============================================================================
</TABLE>
See footnotes on last page of this section.
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 8 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Current Mortgage Loan and Property Stratification Tables
Anticipated Remaining Term (ARD and Balloon Loans)
<TABLE>
<CAPTION>
===============================================================================
Anticipated # of Scheduled % of Weighted
Remaining Term(2) Loans Balance Agg. Bal. WAM(2) WAC Avg DSCR(1)
===============================================================================
<S> <C> <C> <C> <C> <C> <C>
===============================================================================
Totals
===============================================================================
</TABLE>
Remaining Stated Term (Fully Amortizing Loans)
<TABLE>
<CAPTION>
===============================================================================
Remaining Stated # of Scheduled % of Weighted
Term Loans Balance Agg. Bal. WAM(2) WAC Avg DSCR(1)
===============================================================================
<S> <C> <C> <C> <C> <C> <C>
===============================================================================
Totals
===============================================================================
</TABLE>
Remaining Amortization Term (ARD and Balloon Loans)
<TABLE>
<CAPTION>
===============================================================================
Remaining # of Scheduled % of Weighted
Amortization Term Loans Balance Agg. Bal. WAM(2) WAC Avg DSCR(1)
===============================================================================
<S> <C> <C> <C> <C> <C> <C>
===============================================================================
Totals
===============================================================================
</TABLE>
Age of Most Recent NOI
<TABLE>
<CAPTION>
===============================================================================
Age of Most # of Scheduled % of Weighted
Recent NOI Loans Balance Agg. Bal. WAM(2) WAC Avg DSCR(1)
===============================================================================
<S> <C> <C> <C> <C> <C> <C>
===============================================================================
Totals
===============================================================================
</TABLE>
(1) Debt Service Coverage Ratios are updated periodically as new NOI figures
become available from borrowers on an asset level. In all cases the most current
DSCR provided by the Servicer is used. To the extent that no DSCR is provided
by the Servicer, information from the offering document is used. The Trustee
makes no representations as to the accuracy of the data provided by the borrower
for this calculation.
(2) Anticipated Remaining Term and WAM are each calculated based upon the term
from the current month to the earlier of the Anticipated Repayment Date, if
applicable, and the maturity date.
(3) Data in this table was calculated by allocating pro-rata the current loan
information to the properties based upon the Cut-off Date Balance of the related
mortgage loan as disclosed in the offering document.
Note: (i) "Scheduled Balance" has the meaning assigned thereto in the CMSA
Standard Information Package.
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 9 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Mortgage Loan Detail
<TABLE>
<CAPTION>
===================================================================================================================================
Anticipated Neg.
Loan Property Interest Principal Gross Repayment Maturity Amort
Number ODCR Type (1) City State Payment Payment Coupon Date Date (Y/N)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
Totals
===================================================================================================================================
<CAPTION>
=====================================================================================================
Beginning Ending Paid Appraisal Appraisal Res. Mod.
Loan Scheduled Scheduled Thru Reduction Reduction Strat. Code
Number Balance Balance Date Date Amount (2) (3)
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
=====================================================================================================
Totals
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(1) Property Type Code (2) Resolution Strategy Code (3) Modification Code
---------------------- --------------------------- --------------------
<S> <C> <C> <C> <C>
MF - Multi-Family OF - Office 1 - Modification 8 - Resolved 1 - Maturity Date Extension
RT - Retail MU - Mixed Use 2 - Foreclosure 9 - Pending Return 2 - Amortization Change
HC - Health Care LO - Lodging 3 - Bankruptcy to Master Servicer 3 - Principal Write-Off
IN - Industrial SS - Self Storage 4 - Extension 10 - Deed in Lieu Of 4 - Combination
WH - Warehouse OT - Other 5 - Note Sale Foreclosure
MH - Mobile Home Park 6 - DPO 11 - Full Payoff
7 - REO 12 - Reps and Warranties
13 - Other or TBD
</TABLE>
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 10 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Principal Prepayment Detail
<TABLE>
<CAPTION>
=============================================================================================================================
Principal Prepayment Amount Prepayment Penalties
--------------------------- --------------------
Loan Number Offering Document
Cross-Reference Payoff Amount Curtailment Amount Prepayment Premium Yield Maintenance Premium
=============================================================================================================================
<S> <C> <C> <C> <C> <C>
=============================================================================================================================
Totals
=============================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 11 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Historical Detail
<TABLE>
<CAPTION>
====================================================================================================================================
Delinquencies Prepayments Rate and Maturities
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution 30-59 Days 60-89 Days 90 Days or More Foreclosure REO Modifications Curtailments Payoff Next Weighted Avg. WAM
Date # Balance # Balance # Balance # Balance # Balance # Balance # Amount # Amount Coupon Remit
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
Note: Foreclosure and REO Totals are excluded from the delinquencies aging
categories.
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 12 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Delinquency Loan Detail
<TABLE>
<CAPTION>
=================================================================================================================================
Offering # of Current Outstanding Status of Resolution
Document Months Paid Through P & I P & I Mortgage Strategy Servicing Foreclosure
Loan Number Cross-Reference Delinq. Date Advances Advances** Loan (1) Code (2) Transfer Date Date
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
=================================================================================================================================
Totals
=================================================================================================================================
<CAPTION>
=================================================================
Current Outstanding
Servicing Servicing REO
Loan Number Advances Advances Bankruptcy Date Date
=================================================================
<S> <C> <C> <C> <C>
=================================================================
Totals
=================================================================
</TABLE>
<TABLE>
<CAPTION>
(1) Status of Mortgage Loan (2) Resolution Strategy Code
--------------------------- ----------------------------
<S> <C> <C> <C> <C>
1 - Modification 6 - DPO 10 - Deed In Lieu Of 1 - Modification 7 - REO
2 - Foreclosure 7 - REO Foreclosure 2 - Foreclosure 8 - Resolved
3 - Bankruptcy 8 - Resolved 11 - Full Payoff 3 - Bankruptcy 9 - Pending Return
4 - Extension 9 - Pending Return 12 - Reps and Warranties 4 - Extension to Master Servicer
5 - Note Sale to Master Servicer 13 - Other or TBD 5 - Note Sale 10 - Deed in Lieu Of
6 - DPO Foreclosure
</TABLE>
** Outstanding P & I Advances include the current period advance
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 13 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Specially Serviced Loan Detail - Part 1
<TABLE>
<CAPTION>
=================================================================================================================================
Offering Servicing Resolution
Distribution Loan Document Transfer Strategy Scheduled Property Interest
Date Number Cross-Reference Date Code (1) Balance Type (2) State Rate
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
=================================================================================================================================
<CAPTION>
Net Remaining
Distribution Actual Operating NOI Note Maturity Amortization
Date Balance Income Date DSCR Date Date Term
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(1) Resolution Strategy Code (2) Property Type Code
---------------------------- ----------------------
<S> <C> <C> <C>
1 - Modification 7 - REO MF - Multi-Family OF - Office
2 - Foreclosure 8 - Resolved RT - Retail MU - Mixed Use
3 - Bankruptcy 9 - Pending Return HC - Health Care LO - Lodging
4 - Extension to Master Servicer IN - Industrial SS - Self Storage
5 - Note Sale 10 - Deed in Lieu Of WH - Warehouse OT - Other
6 - DPO Foreclosure MH - Mobile Home Park
</TABLE>
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 14 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Specially Serviced Loan Detail - Part 2
<TABLE>
<CAPTION>
===================================================================================================================================
Offering Resolution Site
Distribution Loan Document Strategy Inspection Appraisal Appraisal Other REO
Date Number Cross-Reference Code (1) Date Phase 1 Date Date Value Property Revenue Comment
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(1) Resolution Strategy Code
----------------------------
<S> <C>
1 - Modification 8 - Resolved
2 - Foreclosure 9 - Pending Return
3 - Bankruptcy to Master Servicer
4 - Extension 10 - Deed in Lieu Of
5 - Note Sale Foreclosure
6 - DPO 11 - Full Payoff
7 - REO 12 - Reps and Warranties
13 - Other or TBD
</TABLE>
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 15 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Modified Loan Detail
<TABLE>
<CAPTION>
=====================================================================================================
Offering
Loan Document Pre-Modification Modification Date Modification Description
Number Cross-Reference Balance
=====================================================================================================
<S> <C> <C> <C> <C>
=====================================================================================================
Total
=====================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 16 of 17
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------
[LOGO] Merrill Lynch Mortgage Investors, Inc. For Additional Information, please contact
Norwest Bank Minnesota, N.A. Mortgage Pass-Through Certificates CTSLink Customer Service
Corporate Trust Services Series 1999-C1 (301) 816-6600
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 12/16/1999
Record Date: 11/30/1999
</TABLE>
- --------------------------------------------------------------------------------
Liquidated Loan Detail
<TABLE>
<CAPTION>
=======================================================================================================================
Final Recovery Offering Gross Proceeds
Loan Determination Document Appraisal Appraisal Actual Gross as a % of
Number Date Cross-Reference Date Value Balance Proceeds Actual Balance
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
=======================================================================================================================
Current Total
=======================================================================================================================
Cumulative Total
=======================================================================================================================
<CAPTION>
=========================================================================================
Aggregate Net Net Proceeds Repurchased
Loan Liquidation Liquidation as a % of Realized by Seller
Number Expenses* Proceeds Actual Balance Loss (Y/N)
=========================================================================================
<S> <C> <C> <C> <C> <C>
=========================================================================================
Current Total
=========================================================================================
Cumulative Total
=========================================================================================
</TABLE>
* Aggregate liquidation expenses also include outstanding P & I advances and
unpaid fees (servicing, trustee, etc.).
- --------------------------------------------------------------------------------
Copyright 1997, Norwest Bank Minnesota, N.A. Page 17 of 17
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX D
EXHIBIT
Delinquent Loan Status Report
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Total Other
Ending 0/S Total Advances
Prospectus Property Property Sq Ft or Paid to Scheduled P&I O/S (Taxes &
ID Name Type City State Units Date Balance Advances Expenses Insurance)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
- ---------------------------------------------------------------------------------------
Current Current LTM Cap Rate
Prospectus Total Monthly Interest Mat. NOI LTM LTM Assigned
ID Exposure P&I Rate Date Date NOI DSCR ***
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
90 + Days Delinquent
60 Days Delinquent
30 Days Delinquent
Current & at Special Servicer
Foreclosure
*** How to determine cap rate is agreed upon by Underwriter and Servicers
- to be provided by a third party
D-1
<PAGE>
EXHIBIT
Delinquent Loan Status Report
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Value Appraisal, Loss Total
using NOI Valuation/ BPO, or Using 92% Estimated Appraisal
Prospectus Property Property & Cap Appraisal Internal Appraisal Recovery Reduction
ID Name Type City State Rate Date Value or BPO % Realised
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
- -----------------------------------------------------------------------------------
Prospectus Transfer Resolution FCL Start Expected FCL Workout
ID Date Date Date Sale Date Strategy Comments
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
90 + Days Delinquent
60 Days Delinquent
30 Days Delinquent
Current & at Special Servicer
Foreclosure
D-2
<PAGE>
EXHIBIT
HISTORICAL LOAN MODIFICATION REPORT
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Balance # Months
Modification Modification when sent to Balance at the For
Prospectus or Ext Effective Special Effective Date of Old New Rate Old New Old
ID City State Flag Date Servicer Modification Rate Rate Change P&I P&I Maturity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
Total for All Loans:
Total for Loans in Current Month
# of Loans $ Balance
Modifications
Maturity Date Extentions:
Total
D-3
<PAGE>
EXHIBIT
HISTORICAL LOAN MODIFICATION REPORT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Estimated
New Months for Mod Realized Loss Interest Loss to
Prospectus ID City Maturity Change to Trust Trust Comments
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
Total for All Loans:
Total for Loans in Current Month
# of Loans $ Balance
Modifications
Maturity Date Extensions:
Total
D-4
<PAGE>
EXHIBIT
HISTORICAL LOSS ESTIMATE REPORT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Latest
Appraisal or Net Amount
Prospectus Property % Rec from Brokers Effective Received from Scheduled
ID Property Name Type City State Sale Opinion Date of Sale Sales Price Sale Balance
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
- ---------------------------------------------------
Total P&I Servicing
Prospectus Advance Total Expenses Fees
ID Outstanding (Outstanding) Expense
- ---------------------------------------------------
<S> <C> <C> <C>
</TABLE>
Total all Loans:
Current Month Only:
D-5
<PAGE>
EXHIBIT
HISTORICAL LOSS ESTIMATE REPORT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date
Date Loss Minor Adj Loss % of
Prospectus Property Actual Losses Passed Minor Adj to Passed Total Loss with Scheduled
ID Property Name Type City Net Proceeds Passed Through Through Trust Through Adjustment Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
Total all Loans:
Current Month Only:
D-6
<PAGE>
EXHIBIT
REO STATUS REPORT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Other
Paid Ending Total P&I Total Advances
Prospectus Property Property Sq Ft or thru Scheduled Advances to Expenses to (Taxes & Total
ID Name Type City State Units Date Balance Date Date Insurance) Exposure
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
- ------------------------------------------------------------------------------------
LTM Cap Rate
Prospectus Current Maturity NOI LTM Assigned Valuation/
ID Monthly P&I Date Date LTM NOI DSCR *** Appraisal Date
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
*** How to determine the cap rate is agreed upon by Underwriter and Servicers -
to be provided by a third party
D-7
<PAGE>
EXHIBIT
REO STATUS REPORT
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Value Total Special
using Appraisal/ Loss Using 92% Appraisal Servicing REO
Prospectus Property Property NOI & BPO or Appraisal or Estimated Reduction Transfer Acquisition
ID Name Type City Cap Rate Internal Value BPO Recovery % Realized Date Date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
- --------------------------------------------------------
Pending
Prospectus Resolution
ID Date Comments
- --------------------------------------------------------
<S> <C> <C>
</TABLE>
D-8
<PAGE>
EXHIBIT
SERVICER WATCH LIST
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ending
Prospectus Property Property Scheduled Paid thru Maturity Comment/Reason on Watch
ID Name Type City State Balance Date Date LTM DSCR List
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
D-9
<PAGE>
AS OF MM/DD/YY EXHIBIT
OPERATING STATEMENT ANALYSIS REPORT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW:
------------
Prospectus Number
---------------------------
Sched Balance/Paid to Date
---------------------------
Property Name
------------
Property Type
------------
Property Address
---------------------------
City, State
------------
Net Rentable Square Feet
---------------------------
Year Built/Renovated
-----------------------------------------------------------------------
Year of Operations Underwriting 1996 1997 1998 1999 YTD
-----------------------------------------------------------------------
Occupancy Rate
-----------------------------------------------------------------------
Average Rental Rate
-----------------------------------------------------------------------
INCOME:
-----------
No. of Months # of months
------------------------------------------------------------------------------------------------
Period Ended Underwriting 1996 1997 1998 1999 YTD 1998-Base 1998-1997
Statement Classification Basis Normalized Normalized Normalized AA Variance Variance
------------------------------------------------------------------------------------------------
Rental Income - Category 1
------------------------------------------------------------------------------------------------
Rental Income - Category 2
------------------------------------------------------------------------------------------------
Rental Income - Category 3
------------------------------------------------------------------------------------------------
Pass Through/Escalations
------------------------------------------------------------------------------------------------
Other Income
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Effective Gross Income
------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
------------------------------------------------------------------------------------------------
Real Estate Taxes
------------------------------------------------------------------------------------------------
Property insurance
------------------------------------------------------------------------------------------------
Utilities
------------------------------------------------------------------------------------------------
General and Administration
------------------------------------------------------------------------------------------------
Repairs and Maintenance
------------------------------------------------------------------------------------------------
Management Fees
------------------------------------------------------------------------------------------------
Payroll and Benefits
------------------------------------------------------------------------------------------------
Advertising and Marketing
------------------------------------------------------------------------------------------------
Professional Fees
------------------------------------------------------------------------------------------------
Other Expenses
------------------------------------------------------------------------------------------------
Ground Rent
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Total Operating Expenses
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Operating Expense Ratio
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Net Operating Income
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Leasing Commissions
------------------------------------------------------------------------------------------------
Tenant Improvements
------------------------------------------------------------------------------------------------
Replacement Reserves
------------------------------------------------------------------------------------------------
Other Capital Expense
------------------------------------------------------------------------------------------------
Total Capital Items
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
NOI after Capital Items
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Debt Service (per servicer)
------------------------------------------------------------------------------------------------
Cash Flow after Debt Service
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
DSCR (NOI/Debt Service)
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
DSCR (after reserves\cap exp)
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Source of Financial Data:
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Income Comments:
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Expense Comments:
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Capital Items Comments:
------------------------------------------------------------------------------------------------
</TABLE>
D-10
<PAGE>
AS OF MM/DD/YY EXHIBIT
NOI ADJUSTMENT WORKSHEET
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW:
------------
Prospectus Number
---------------------------
Sched Balance/Paid to Date
---------------------------
Property Name
------------
Property Type
------------
Property Address
---------------------------
City, State
------------
Net Rentable Square Feet
---------------------------
Year Built/Renovated
----------------------------------------------- ---------------
Year of Operations Borrower Adjustment Normalized
------------ ------------- ---------------
Occupancy Rate
------------ ------------- ---------------
Average Rental Rate
------------ ------------- ---------------
INCOME:
---------------
No. of Months Annualized # of month
------------ ------------- ---------------
Period Ended Borrower Adjustment Normalized
Statement Classification
------------ ------------- ---------------
Rental Income - Category 1
------------ ------------- ---------------
Rental Income - Category 2
------------ ------------- ---------------
Rental Income - Category 3
------------ ------------- ---------------
Pass Through/Escalations
------------ ------------- ---------------
Other Income
------------ ------------- ---------------
------------ ------------- ---------------
Effective Gross Income
------------ ------------- ---------------
OPERATING EXPENSES:
------------ ------------- ---------------
Real Estate Taxes
------------ ------------- ---------------
Property insurance
------------ ------------- ---------------
Utilities
------------ ------------- ---------------
General and Administration
------------ ------------- ---------------
Repairs and Maintenance
------------ ------------- ---------------
Management Fees
------------ ------------- ---------------
Payroll and Benefits
------------ ------------- ---------------
Advertising and Marketing
------------ ------------- ---------------
Professional Fees
------------ ------------- ---------------
Other Expenses
------------ ------------- ---------------
Ground Rent
------------ ------------- ---------------
------------ ------------- ---------------
Total Operating Expenses
------------ ------------- ---------------
------------ ------------- ---------------
Operating Expense Ratio
------------ ------------- ---------------
------------ ------------- ---------------
Net Operating Income
------------ ------------- ---------------
------------ ------------- ---------------
Leasing Commissions
------------ ------------- ---------------
Tenant Improvements
------------ ------------- ---------------
Replacement Reserves
------------ ------------- ---------------
Other Capital Expense
------------ ------------- ---------------
Total Capital Items
------------ ------------- ---------------
------------ ------------- ---------------
NOI after Capital Items
------------ ------------- ---------------
------------ ------------- ---------------
Debt Service (per servicer)
------------ ------------- ---------------
Cash Flow after Debt Service
------------ ------------- ---------------
------------ ------------- ---------------
DSCR (NOI/Debt Service)
------------ ------------- ---------------
------------ ------------- ---------------
DSCR (after reserves\cap exp)
------------ ------------- ---------------
------------ ------------- ---------------
Source of Financial Data:
------------ ------------- ---------------
------------ ------------- ---------------
Income Comments:
------------ ------------- ---------------
------------ ------------- ---------------
Expense Comments:
------------ ------------- ---------------
------------ ------------- ---------------
Capital Items Comments:
------------ ------------- ---------------
</TABLE>
D-11
<PAGE>
EXHIBIT
Comparative Financial Status Report
<TABLE>
<CAPTION>
------------------------------------------------
------------------------------------------------
Original Underwriting Information
-----------------------------------------
-----------------------------------------
Last Ending
Property Scheduled Paid Annual Financial
Prospectus Inspection Principal Thru Debt Info % Total $
Number City State Date Balance Date Service as of Date Occ Revenue NOI DSCR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Grand Total Grand Total
<CAPTION>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Prior Full Year Operating Information ** ANNEX ECurrent Annual Operating Information
As of Y-E YYYY Normalized As of Y-E YYYY Normalized
Financial Financial
Prospectus Info as of % Total $ Info as of % Total $
Number Date Occ Revenue NOI DSCR Date Occ Revenue NOI DSCR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Normalized YTD Financial Information Net Change
Month Reported Current & [ ]
[FS] [FS] %
Prospectus Start End % Total $ % Total
Number Date Date Occ Revenue NOI DSCR Occ Rev DSCR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
- -----------------------------------------
Financial Information:
- -----------------------------------------
- -----------------------------------------
Current Full Year:
- -----------------------------------------
Current Full Yr. received with DSC < 1:
- -----------------------------------------
Prior Full Year:
- -----------------------------------------
Prior Full Yr. received with DSC < 1:
- -----------------------------------------
<TABLE>
<CAPTION>
Resolved Required
Loans Balance Balance
% $ % % $ %
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
count count/total count Balance balance/total balance
- -------------------------------------------------------------------------------------------------------------------------
count count/total count Balance balance/total balance
- -------------------------------------------------------------------------------------------------------------------------
count count/total count Balance balance/total balance
- -------------------------------------------------------------------------------------------------------------------------
count count/total count Balance balance/total balance
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 2nd Preceding Annual Operating Information
** Preceding Annual Operating
D-12
<PAGE>
MLMI 1999-C1 MULTIFAMILY SCHEDULE ANNEX E
<TABLE>
<CAPTION>
CONTROL CUT-OFF UTILITIES
NUMBER PROPERTY NAME STATE COUNTY DATE BALANCE ELEVATOR TENANT PAYS
- --------- ------------------------------------- ----- ------------------- ------------ -------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
ML-107 Potomac Heights Apts................. MD Prince George's 26,086,864 No Electricity
ML-126 Hampton Point........................ MD Montgomery 18,442,154 No Electricity
PW-8703A Norport Apartments................... VA Portsmouth 3,243,748 No Electricity
PW-8703B Colonial Court....................... VA Colonial Heights 1,362,811 No Electricity
PW-8703C Lee Hall............................. VA Petersburg 8,792,361 No Electricity/Water
PW-8703D River Drive Apartments............... VA Newport News 3,975,198 No Electricity
----------
17,374,119
ML-129 Tanglewood Apartments................ IN Lake County 15,969,297 No Water/Trash
ML-124 Saw Mill............................. OH Franklin 12,460,915 No Electricity/Gas
ML-125 Spring Valley........................ MI Oakland 11,962,178 No Electricity/Gas
ML-111 Fairways Apartments.................. TX Tarrant 9,507,210 No Electricity
ML-103 Creekside Apartments................. TX Dallas 8,503,715 No Electricity
ML-116 Canyon Crest Village Apts............ CA Riverside 8,123,382 No Electricity/Gas
ML-109 RCA--Waterford Apartments............ TX Tarrant 7,488,420 No Electricity
ML-154 Woodgate Apartments.................. CT Hartford 6,491,404 No Electricity/Gas
PW-6132 Arlington Apartments................. LA Jefferson Parish 6,390,042 No Electricity
PW-6376 Shadowbrook Apartments............... LA Orleans Parish 6,388,722 No Electricity
PW-8763 Sunset Hills Apartments.............. NV Henderson 6,343,510 No Electricity
PW-7043 The Woods at Frenchman's Creek....... FL Pinellas 5,878,001 No Electricity
PW-7141 Summercreek Apartments............... TX Bexar 4,317,857 No Electricity
PW-8313 Crossings Apartments................. SC Conway 3,645,730 No Electricity
ML-131A Milford Chase........................ CT New Haven 1,225,753 No Electricity/Sewer/Gas
ML-131B Milford Hunt......................... CT New Haven 1,696,737 No Electricity/Sewer/Gas
----------
2,922,490
PW-7395 Red Lion Apartments.................. AL Montgomery 2,247,636 No Electricity
PW-7146 Westbrook Towers..................... CT New Haven 2,084,259 Yes Electricity
PW-7166 Cobblestone Apartments............... TN Montgomery 1,544,811 No Electricity/Water
ML-108 585-591-597 Prospect Place Apts...... NY Kings 1,317,109 No Electricity/
Cooking Gas
ML-100 Chapel Street........................ CT New Haven 1,096,789 Yes Electricity/Gas
PW-8085 Pepperwood Apartments................ FL Hillsborough 999,393 No Electricity
PW-7424 St. Pete Beach Apartments............ FL Pinellas 948,326 No Electricity
PW-6437 175-181 Broadway..................... NJ Passaic 935,927 Yes Electricity/
Cooking Gas
PW-7170 O'Connor Place Apartments............ TX Irving 797,213 No Electricity
PW-7781 Sherwood Lane Apartments............. TX Harris 721,001 No Electricity
TOTALS / WTG. AVERAGES..............................................................................................
<CAPTION>
NO. STUDIOS NO. 1 BEDROOMS NO. 2 BEDROOMS NO. 3 BEDROOMS
-------------------- -------------------- -------------------- --------------------
CONTROL WTG. AVG WTG. AVG WTG. AVG WTG. AVG
NUMBER # UNITS RENT/MONTH # UNITS RENT/MONTH # UNITS RENT/MONTH # UNITS RENT/MONTH
- --------- ------- ---------- ------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ML-107 376 $660 122 $791 108 $861
ML-126 228 $767 124 $946
PW-8703A 170 $369 80 $417
PW-8703B 64 $393
PW-8703C 600 $322
PW-8703D 208 $474
ML-129 182 $559 226 $648
ML-124 112 $648 192 $748 36 $900
ML-125 136 $778 88 $887
ML-111 268 $504 80 $701
ML-103 108 $437 188 $588
ML-116 38 $556 134 $656 20 $810
ML-109 180 $475 104 $606 46 $691
ML-154 160 $685 48 $818
PW-6132 30 $290 144 $355 193 $425 48 $525
PW-6376 240 $444 96 $560
PW-8763 120 $730
PW-7043 36 $530 102 $651 44 $757
PW-7141 84 $442 96 $556
PW-8313 112 $608
ML-131A 20 $854
ML-131B 32 $796
PW-7395 70 $360 76 $431 12 $509
PW-7146 21 $493 48 $568 28 $692
PW-7166 72 $375
ML-108 3 $490 45 $460 12 $540
ML-100 15 $559 1 $550 4 $794 2 $1,150
PW-8085 36 $369 36 $476
PW-7424 8 $429 20 $527
PW-6437
2 $452 10 $583 14 $734 6 $832
PW-7170 48 $454
PW-7781 38 $371 21 $458
--- ---- ----- ---- ----- ---- --- ------
68 $417 2,800 $550 3,269 $565 334 $754
</TABLE>
E-1
<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 17 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.
OCTOBER 15, 1999
<PAGE>
PROSPECTUS SUPPLEMENT
As more particularly described herein, each Prospectus Supplement will,
among other things, set forth, as and to the extent appropriate: (i) a
description of the class or classes of Offered Certificates of the related
series, including the payment provisions with respect to each such class, the
aggregate principal amount of each such class (the "Certificate Balance"), the
rate at which interest will accrue from time to time, if at all, with respect to
each such class (the "Pass-Through Rate") or the method of determining such
rate; (ii) information with respect to any other classes of Certificates of the
same series; (iii) the respective dates on which distributions are to be made to
Certificateholders; (iv) information as to the assets constituting the related
Trust Fund, including the general characteristics of the assets included
therein, including the Mortgage Assets and any Credit Support and Cash Flow
Agreements (with respect to the Certificates of any series, the "Trust Assets");
(v) the circumstances, if any, under which the related Trust Fund may be subject
to early termination; (vi) additional information with respect to the method of
distribution of such Offered Certificates; (vii) whether one or more REMIC
elections will be made and the designation of the "regular interests" and
"residual interests" in each REMIC to be created; (viii) the initial percentage
ownership interest in the related Trust Fund to be evidenced by each class of
Certificates of such series; (ix) information concerning the trustee (as to any
series, the "Trustee") of the related Trust Fund; (x) information concerning the
master servicer (as to any series, the "Master Servicer") and any special
servicer (as to any series, the "Special Servicer") engaged to administer the
related Mortgage Assets; (xi) information as to the nature and extent of any
subordination in entitlement to distributions of any class of Certificates of
such series; and (xii) whether such Offered Certificates will be initially
issued in definitive or book-entry form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a part)
under the Securities Act of 1933, as amended, with respect to the Offered
Certificates. This Prospectus and the Prospectus Supplement relating to the
Offered Certificates of each series contain summaries of the material terms of
the documents referred to herein and therein, but do not contain all of the
information set forth in the Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its Regional
Offices located as follows: Chicago Regional Office, 500 West Madison, 14th
Floor, Chicago, Illinois 60661; and New York Regional Office, Seven World Trade
Center, New York, New York 10048. Publicly filed information, including
information regarding the Registrant, is available at the Commission's web site
at www.sec.gov.
No person has been authorized to give any information or to make any
representation not contained in this Prospectus and any related Prospectus
Supplement and, if given or made, such information or representation must not be
relied upon. This Prospectus and any related Prospectus Supplement do not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the Offered Certificates, or an offer of the Offered Certificates to
any person in any state or other jurisdiction in which such offer would be
unlawful. The delivery of this Prospectus at any time does not imply that
information herein is correct as of any time subsequent to its date; however, if
any material change occurs while this Prospectus is required by law to be
delivered, this Prospectus will be amended or supplemented accordingly.
The related Master Servicer or Trustee will be required to mail to holders
of the Offered Certificates of each series periodic unaudited reports concerning
the related Trust Fund. If beneficial interests in a class of Offered
Certificates are being held and transferred in book-entry format through the
facilities of The Depository Trust Company ("DTC") as described herein, then
unless otherwise provided in the related Prospectus Supplement, such reports
will be sent on behalf of the related Trust Fund to a nominee of DTC as the
registered holder of the Offered Certificates. The means by which notices and
other communications are conveyed by DTC to its participating organizations, and
directly or indirectly through such participating
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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.
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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............................................................................................... 17
Limited Liquidity for Offered Certificates............................................................... 17
Limited Assets to Support Payment on Certificates........................................................ 17
Prepayments on Mortgage Loans; Effects on Average Life of Certificates; Effects on Yields on
Certificates.......................................................................................... 18
Optional Early Termination............................................................................... 19
Limited Nature of Ratings on Certificates................................................................ 19
Effects of Pre-Funding and Acquisition of Additional Mortgage Assets..................................... 20
Risks to Lenders Associated With Certain Mortgage Loans and
Income Producing Properties........................................................................... 20
Risks Associated with Mortgage Loans Secured by Multifamily Properties................................ 20
Risks Associated with Mortgage Loans Secured by Retail Properties..................................... 21
Risks Associated with Mortgage Loans Secured by Hospitality Properties................................ 21
Risks Associated with Mortgage Loans Secured by Office Buildings...................................... 22
Risks Associated with Mortgage Loans Secured by Industrial & Mixed-Use Facilities..................... 22
Risks Associated with Mortgage Loans Secured by Residential Healthcare Facilities..................... 22
Risks Associated with Mortgage Loans Secured by Health Care-Related Properties........................ 23
Risks Associated with Mortgage Loans Secured by Warehouse and Storage Facilities...................... 25
Management Risks......................................................................................... 25
Balloon Payments on Mortgage Loans; Heightened Risk of Borrower Default.................................. 25
Leases and Rents Serving as Security for Mortgage Loans Pose Special Risks............................... 26
Delinquent Mortgage Loans................................................................................ 26
Environmental Liability May Affect Lien on Mortgaged Property
and Expose Lender to Costs............................................................................ 26
Credit Support Limitations--May Not Cover All Risks or Full Payment on Certificates...................... 26
Certain Federal Tax Considerations Regarding REMIC Residual Certificates................................. 27
ERISA Considerations--Covered Investors May Experience Liability......................................... 27
Book-Entry Registration of Certificates Affects Ownership of Certificates and Receipt of Payment......... 28
DESCRIPTION OF THE TRUST FUNDS............................................................................. 29
General.................................................................................................. 29
Mortgage Loans........................................................................................... 29
General............................................................................................... 29
Default and Loss Considerations with Respect to the Mortgage Loans.................................... 29
Payment Provisions of the Mortgage Loans.............................................................. 31
Mortgage Loan Information in Prospectus Supplements................................................... 31
MBS...................................................................................................... 32
Certificate Accounts..................................................................................... 32
Credit Support........................................................................................... 33
Cash Flow Agreements..................................................................................... 33
Pre-Funding.............................................................................................. 33
YIELD AND MATURITY CONSIDERATIONS.......................................................................... 34
General.................................................................................................. 34
Pass-Through Rate........................................................................................ 34
Payment Delays........................................................................................... 34
Certain Shortfalls in Collections of Interest............................................................ 34
Yield and Prepayment Considerations...................................................................... 35
Weighted Average Life and Maturity....................................................................... 36
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Controlled Amortization Classes and Companion Classes.................................................... 37
Other Factors Affecting Yield, Weighted Average Life and Maturity........................................ 37
Balloon Payments; Extensions of Maturity.............................................................. 37
Negative Amortization................................................................................. 38
Foreclosures and Payment Plans........................................................................ 38
Losses and Shortfalls on the Mortgage Assets.......................................................... 38
Additional Certificate Amortization................................................................... 39
THE DEPOSITOR.............................................................................................. 39
USE OF PROCEEDS............................................................................................ 39
DESCRIPTION OF THE CERTIFICATES............................................................................ 40
General.................................................................................................. 40
Distributions............................................................................................ 40
Distributions of Interest on the Certificates............................................................ 41
Distributions of Certificate Principal................................................................... 42
Distributions on the Certificates in Respect of Prepayment Premiums or in Respect of Equity
Participations........................................................................................ 42
Allocation of Losses and Shortfalls...................................................................... 42
Advances in Respect of Delinquencies..................................................................... 43
Reports to Certificateholders............................................................................ 43
Voting Rights............................................................................................ 45
Termination.............................................................................................. 45
Book-entry Registration and Definitive Certificates...................................................... 46
DESCRIPTION OF THE POOLING AGREEMENTS...................................................................... 48
General.................................................................................................. 48
Assignment of Mortgage Loans; Repurchases................................................................ 48
Representations and Warranties; Repurchases.............................................................. 49
Certificate Account...................................................................................... 49
General............................................................................................... 49
Deposits.............................................................................................. 50
Withdrawals........................................................................................... 51
Collection and Other Servicing Procedures................................................................ 52
Modifications, Waivers And Amendments of Mortgage Loans.................................................. 52
Sub-Servicers............................................................................................ 53
Special Servicers........................................................................................ 53
Realization Upon Defaulted Mortgage Loans................................................................ 53
Hazard Insurance Policies................................................................................ 55
Due-on-Sale and Due-on-Encumbrance Provisions............................................................ 55
Servicing Compensation and Payment of Expenses........................................................... 56
Evidence as to Compliance................................................................................ 56
Certain Matters Regarding the Master Servicer and the Depositor.......................................... 56
Events of Default........................................................................................ 57
Rights Upon Event of Default............................................................................. 58
Amendment................................................................................................ 58
List of Certificateholders............................................................................... 59
The Trustee.............................................................................................. 59
Duties of the Trustee.................................................................................... 59
Certain Matters Regarding the Trustee.................................................................... 59
Resignation and Removal of the Trustee................................................................... 60
DESCRIPTION OF CREDIT SUPPORT.............................................................................. 61
General.................................................................................................. 61
Subordinate Certificates................................................................................. 61
Cross-support Provisions................................................................................. 61
Insurance or Guarantees with Respect to Mortgage Loans................................................... 61
Letter of Credit......................................................................................... 62
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Certificate Insurance and Surety Bonds................................................................... 62
Reserve Funds............................................................................................ 62
Credit Support with Respect to MBS....................................................................... 62
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS.................................................................... 63
General.................................................................................................. 63
Types of Mortgage Instruments............................................................................ 63
Leases and Rents......................................................................................... 63
Personalty............................................................................................... 64
Junior Mortgages; Rights of Senior Lenders............................................................... 64
Foreclosure.............................................................................................. 65
General............................................................................................... 65
Foreclosure Procedures Vary From State to State....................................................... 65
Judicial Foreclosure.................................................................................. 65
Non-Judicial Foreclosure/Power of Sale................................................................ 65
Limitations on the Rights of Mortgage Lenders......................................................... 66
Rights of Redemption.................................................................................. 67
Anti-Deficiency Legislation........................................................................... 67
Leasehold Considerations.............................................................................. 68
Bankruptcy Laws.......................................................................................... 68
Environmental Considerations............................................................................. 69
General............................................................................................... 69
Superlien Laws........................................................................................ 69
CERCLA................................................................................................ 69
Certain State and Other Federal Laws.................................................................. 70
Additional Considerations............................................................................. 70
Due-on-Sale And Due-on-Encumbrance....................................................................... 70
Subordinate Financing.................................................................................... 71
Default Interest and Limitations on Prepayments.......................................................... 71
Applicability of Usury Laws.............................................................................. 71
Soldiers' and Sailors' Civil Relief Act of 1940.......................................................... 72
Americans with Disabilities Act.......................................................................... 72
MATERIAL FEDERAL INCOME TAX CONSEQUENCES................................................................... 73
General.................................................................................................. 73
REMICs................................................................................................... 74
Classification of REMICs.............................................................................. 74
Characterization of Investments in REMIC Certificates................................................. 74
Tiered REMIC Structures............................................................................... 74
Taxation of Owners of Remic Regular Certificates......................................................... 75
General............................................................................................... 75
Original Issue Discount............................................................................... 75
Market Discount....................................................................................... 77
Premium............................................................................................... 78
Realized Losses....................................................................................... 78
Taxation of Owners of Remic Residual Certificates........................................................ 79
General............................................................................................... 79
Taxable Income of the REMIC........................................................................... 80
Basis Rules, Net Losses and Distributions............................................................. 81
Excess Inclusions..................................................................................... 82
Noneconomic REMIC Residual Certificates............................................................... 82
Mark-to-Market Rules.................................................................................. 83
Possible Pass-Through of Miscellaneous Itemized Deductions............................................ 83
Sales of REMIC Certificates........................................................................... 84
Prohibited Transactions Tax and Other Taxes........................................................... 85
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain Organizations............. 85
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Termination........................................................................................... 86
Reporting and Other Administrative Matters............................................................ 86
Backup Withholding with Respect to REMIC Certificates................................................. 87
Foreign Investors in REMIC Certificates............................................................... 87
New Withholding Regulations........................................................................... 88
Grantor Trust Funds...................................................................................... 88
Classification of Grantor Trust Funds................................................................. 88
Characterization of Investments in Grantor Trust Certificates............................................ 88
Grantor Trust Fractional Interest Certificates........................................................ 88
Grantor Trust Strip Certificates...................................................................... 88
Taxation of Owners of Grantor Trust Fractional Interest Certificates..................................... 89
General............................................................................................... 89
If Stripped Bond Rules Apply.......................................................................... 89
If Stripped Bond Rules Do Not Apply................................................................... 91
Market Discount....................................................................................... 92
Premium............................................................................................... 94
Taxation of Owners of Grantor Trust Strip Certificates................................................ 94
Possible Application of Proposed Contingent Payment Rules............................................. 95
Sales of Grantor Trust Certificates................................................................... 95
Grantor Trust Reporting............................................................................... 96
Backup Withholding.................................................................................... 96
Foreign Investors..................................................................................... 96
New Withholding Regulations........................................................................... 96
STATE AND OTHER TAX CONSEQUENCES........................................................................... 97
ERISA CONSIDERATIONS....................................................................................... 97
General............................................................................................... 97
Plan Asset Regulations................................................................................ 97
Prohibited Transaction Exemptions..................................................................... 98
LEGAL INVESTMENT........................................................................................... 99
METHOD OF DISTRIBUTION..................................................................................... 101
LEGAL MATTERS.............................................................................................. 102
FINANCIAL INFORMATION...................................................................................... 102
RATING..................................................................................................... 102
INDEX OF DEFINITIONS....................................................................................... 103
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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.
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Title of Certificates..................... Mortgage Pass-Through Certificates, issuable in series (the
"Certificates").
Depositor................................. Merrill Lynch Mortgage Investors, Inc., a wholly-owned limited
purpose subsidiary of Merrill Lynch Mortgage Capital Inc. (the
"Depositor"). See "The Depositor."
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 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%
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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 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
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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 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
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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.
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.
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Each class of Certificates, other than certain classes of Stripped
Interest Certificates and certain REMIC Residual Certificates (as
defined below), will have a stated principal amount (a "Certificate
Balance"); and each class of Certificates, other than certain classes
of Stripped Principal Certificates and certain REMIC Residual
Certificates, will accrue interest on its Certificate Balance or, in
the case of certain classes of Stripped Interest Certificates, on a
notional amount ("Notional Amount"), based on a fixed, variable or
adjustable interest rate (a "Pass-Through Rate"). The related
Prospectus Supplement will specify the Certificate Balance, Notional
Amount and Pass-Through Rate for each class of Offered Certificates,
as applicable, or, in the case of a variable or adjustable Pass-
Through Rate, the method for determining the Pass-Through Rate.
The Certificates will not be guaranteed or insured by the Depositor
or any of its affiliates, by any governmental agency or
instrumentality or by any other person, unless otherwise provided in
the related Prospectus Supplement. See "Risk Factors--Limited Assets"
and "Description of the Certificates."
Distributions of Interest on the
Certificates............................ Interest on each class of Offered Certificates (other than certain
classes of Stripped Principal Certificates and Stripped Interest
Certificates and certain REMIC Residual Certificates) of each series
will accrue at the applicable Pass-Through Rate on the Certificate
Balance or, in the case of certain classes of Stripped Interest
Certificates, the Notional Amount thereof outstanding from time to
time and will be distributed to Certificateholders as provided in the
related Prospectus Supplement (each of the specified dates on which
distributions are to be made, a "Distribution Date"). Distributions
of interest with respect to one or more classes of Certificates
(collectively, "Accrual Certificates") may not commence until the
occurrence of certain events, such as the retirement of one or more
other classes of Certificates, and interest accrued with respect to a
class of Accrual Certificates prior to the occurrence of such an
event will either be added to the Certificate Balance thereof or
otherwise deferred. Distributions of interest with respect to one or
more classes of Certificates may be reduced to the extent of certain
delinquencies, losses and other contingencies described herein and in
the related Prospectus Supplement. See "Risk Factors--Prepayments;
Average Life of Certificates; Yields," "Yield and Maturity
Considerations," and "Description of the Certificates--Distributions
of Interest on the Certificates."
Distributions of Certificate Principal.... Each class of the Certificates of each series (other than certain
classes of Stripped Interest Certificates and/or REMIC Residual
Certificates) will have a Certificate Balance which, as of any date,
will represent the maximum amount that the holders thereof are then
entitled to receive in respect of principal from future cash flow on
the Mortgage Assets in the related Trust Fund. Unless otherwise
specified in the related Prospectus Supplement, the initial aggregate
Certificate Balance of all classes of a series
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of Certificates will not exceed the outstanding principal balance of
the related Mortgage Assets as of a specified date (the "Cut-off
Date"), after application of scheduled payments due on or before such
date, whether or not received. As and to the extent described in the
related Prospectus Supplement, distributions of principal with
respect to each series of Certificates will be made on each
Distribution Date to the holders of the class or classes of
Certificates of such series entitled thereto until the Certificate
Balances of such Certificates have been reduced to zero.
Distributions of principal with respect to one or more classes of
Certificates (i) may be made at a rate that is faster (and, in some
cases, substantially faster) than the rate at which payments or other
collections of principal are received on the Mortgage Assets in the
related Trust Fund; (ii) may not commence until the occurrence of
certain events, such as the retirement of one or more other classes
of Certificates of the same series, or may be made at a rate that is
slower (and, in some cases, substantially slower) than the rate at
which payments or other collections of principal are received on the
Mortgage Assets in the related Trust Fund; (iii) may be made, subject
to available funds, based on a specified principal payment schedule
(any such class, a "Controlled Amortization Class"); and (iv) may be
contingent on the specified principal payment schedule for a
Controlled Amortization Class of the same series and the rate at
which payments and other collections of principal on the Mortgage
Assets in the related Trust Fund are received (any such class, a
"Companion Class"). Unless otherwise specified in the related
Prospectus Supplement, distributions of principal of any class of
Certificates will be made on a pro rata basis among all of the
Certificates of such class. See "Description of the Certificates--
Distributions of Certificate Principal."
Advances.................................. If and to the extent provided in the related Prospectus Supplement,
the Master Servicer and/or other specified person will be obligated
to make, or have the option of making, certain advances with respect
to delinquent scheduled payments of principal and/or interest on the
Mortgage Loans in the related Trust Fund. Any such advances made with
respect to a particular Mortgage Loan will be reimbursable from
subsequent recoveries in respect of such Mortgage Loan and otherwise
to the extent described herein and in the related Prospectus
Supplement. If and to the extent provided in the Prospectus
Supplement for a series of Certificates, the Master Servicer or other
specified person will be entitled to receive interest on its advances
for the period that they are outstanding, payable from amounts in the
related Trust Fund. See "Description of the Certificates--Advances in
Respect of Delinquencies." If a Trust Fund includes MBS, any
comparable advancing obligation of a party to the related Pooling
Agreement, or of a party to the related MBS Agreement, will be
described in the related Prospectus Supplement.
Termination............................... If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination by means of
the repurchase of the Mortgage Assets in the related Trust Fund by
the party or parties specified therein, under the
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circumstances and in the manner set forth therein. If so provided in
the related Prospectus Supplement, upon the reduction of the
Certificate Balance of a specified class or classes of Certificates
by a specified percentage or amount, a party specified therein may be
authorized or required to solicit bids for the purchase of all of the
Mortgage Assets of the Trust Fund, or of a sufficient portion of such
Mortgage Assets to retire such class or classes, under the
circumstances and in the manner set forth therein. See "Description
of the Certificates--Termination."
Registration of Book-Entry
Certificates............................ If so provided in the related Prospectus Supplement, one or more
classes of the Offered Certificates of any series will be offered in
book-entry format (collectively, "Book-Entry Certificates") through
the facilities of The Depository Trust Company ("DTC"). Each class of
Book-Entry Certificates will be initially represented by one or more
Certificates registered in the name of a nominee of DTC. No person
acquiring an interest in a class of Book-Entry Certificates (a
"Certificate Owner") will be entitled to receive a Certificate of
such class in fully registered, definitive form (a "Definitive
Certificate"), except under the limited circumstances described
herein. See "Risk Factors--Book-Entry Registration" and "Description
of the Certificates--Book-Entry Registration and Definitive
Certificates."
Risk Factors.............................. There are material risks associated with an investment in
Certificates. See "Risk Factors" herein. Additional risks pertaining
to a particular series of Certificates may be disclosed in the
applicable Prospectus Supplement.
Tax Status of the Certificates............ The Certificates of each series will constitute either (i)"regular
interests" ("REMIC Regular Certificates") and "residual interests"
("REMIC Residual Certificates") in a Trust Fund, or a designated
portion 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
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qualify for the foregoing treatments in their entirety. However,
REMIC Regular Certificates owned by a thrift institution will
constitute assets described in Section 7701(a)(19)(C) of the Code
only if so specified in the related Prospectus Supplement. Holders of
REMIC Regular Certificates must report income with respect thereto on
the accrual method, regardless of their method of tax accounting
generally. Holders of any class of REMIC Regular Certificates issued
with original issue discount generally will be required to include
the original issue discount in income as it accrues, which will be
determined using an initial prepayment assumption and taking into
account, from time to time, actual prepayments occurring at a rate
different than the prepayment assumption. See "Material Federal
Income Tax Consequences--REMICs--Taxation of Owners of REMIC Regular
Certificates."
REMIC Residual Certificates generally will be treated as representing
an interest in qualifying assets and income to the same extent
described above for institutions subject to
Sections 856(c)(5)(A) and 856(c)(3)(B) of the Code, but not for
purposes of Section 7701(a)(19)(C) of the Code unless otherwise
stated in the related Prospectus Supplement. A portion (or, in
certain cases, all) of the income from REMIC Residual Certificates
(i) may not be offset by any losses from other activities of the
holder of such REMIC Residual Certificates, (ii) may be treated as
unrelated business taxable income for holders of REMIC Residual
Certificates that are subject to tax on unrelated business taxable
income (as defined in Section 511 of the Code), and (iii) may be
subject to foreign withholding rules. See "Material Federal Income
Tax Consequences--REMICs--Taxation of Owners of REMIC Residual
Certificates."
(b) Grantor Trust....................... If so provided in the related Prospectus Supplement, Grantor Trust
Certificates may be either Certificates that have a Certificate
Balance and a Pass-Through Rate or that are Stripped Principal
Certificates (collectively, "Grantor Trust Fractional Interest
Certificates"), or may be Stripped Interest Certificates.
Owners of Grantor Trust Fractional Interest Certificates will be
treated for federal income tax purposes as owners of an undivided pro
rata interest in the assets of the related Trust Fund, and generally
will be required to report their pro rata share of the entire gross
income (including amounts incurred as servicing or other fees and
expenses) from the Mortgage Assets and will be entitled, subject to
certain limitations, to deduct their pro rata shares of any servicing
or other fees and expenses incurred during the year. Holders of
Grantor Trust Fractional Interest Certificates generally will be
treated as owning an interest in qualifying assets and income under
Sections 856(c)(5)(A), 856(c)(3)(B) and 860G(a)(3) of the Code, but
will not be so treated for purposes of Section 7701(a)(19)(C) of the
Code unless otherwise stated in the related Prospectus Supplement.
It is unclear whether Stripped Interest Certificates will be treated
as representing an ownership interest in qualifying assets and income
under Sections 856(c)(5)(A) and 856(c)(3)(B) of the
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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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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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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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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 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."
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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.
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
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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.
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
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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 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
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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.
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.
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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
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
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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 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."
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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 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.
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A series of Certificates may include one or more classes of Subordinate
Certificates (which may include Offered Certificates), if so provided in the
related Prospectus Supplement. Although subordination is intended to reduce the
risk to holders of Senior Certificates of delinquent distributions or ultimate
losses, the amount of subordination will be limited and may decline under
certain circumstances. In addition, if principal payments on one or more classes
of Certificates of a series are made in a specified order of priority, any
limits with respect to the aggregate amount of claims under any related Credit
Support may be exhausted before the principal of the lower priority classes of
Certificates of such series has been fully repaid. As a result, the impact of
losses and shortfalls experienced with respect to the Mortgage Assets may fall
primarily upon those classes of Certificates having a lower priority of payment.
Moreover, if a form of Credit Support covers more than one series of
Certificates, holders of Certificates of one series will be subject to the risk
that such Credit Support will be exhausted by the claims of the holders of
Certificates of one or more other series.
The amount of any applicable Credit Support supporting one or more classes
of Offered Certificates, including the subordination of one or more classes of
Certificates, will be determined on the basis of criteria established by each
Rating Agency rating such classes of Certificates based on an assumed level of
defaults, delinquencies and losses on the underlying Mortgage Assets and other
factors. There can be, however, no assurance that the loss experience on the
related Mortgage Assets will not exceed such assumed levels. See "--Limited
Nature of Ratings," "Description of the Certificates" and "Description of Credit
Support."
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING REMIC RESIDUAL CERTIFICATES
Holders of REMIC Residual Certificates will be required to report on their
federal income tax returns as ordinary income their pro rata share of the
taxable income of the REMIC, regardless of the amount or timing of their receipt
of cash payments, as described under "Material Federal Income Tax
Consequences--REMICs." Accordingly, under certain circumstances, holders of
Offered Certificates that constitute REMIC Residual Certificates may have
taxable income and tax liabilities arising from such investment during a taxable
year in excess of the cash received during such period. The requirement that
holders of REMIC Residual Certificates report their pro rata share of the
taxable income and net loss of the REMIC will continue until the Certificate
Balances of all classes of Certificates of the related series have been reduced
to zero, even though holders of REMIC Residual Certificates have received full
payment of their stated interest and principal. A portion (or, in certain
circumstances, all) of such Certificateholder's share of the REMIC taxable
income may be treated as "excess inclusion" income to such holder, which (i)
generally will not be subject to offset by losses from other activities, (ii)
for a tax-exempt holder, will be treated as unrelated business taxable income
and (iii) for a foreign holder, will not qualify for exemption from withholding
tax. Individual holders of REMIC Residual Certificates may be limited in their
ability to deduct servicing fees and other expenses of the REMIC. In addition,
REMIC Residual Certificates are subject to certain restrictions on transfer.
Because of the special tax treatment of REMIC Residual Certificates, the taxable
income arising in a given year on a REMIC Residual Certificate will not be equal
to the taxable income associated with investment in a corporate bond or stripped
instrument having similar cash flow characteristics and pre-tax yield.
Therefore, the after-tax yield on a REMIC Residual Certificate may be
significantly less than that of a corporate bond or stripped instrument having
similar cash flow characteristics.
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."
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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.
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
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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 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
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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 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
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those Certificates at or before the initial issuance thereof and will be filed
as part of a Current Report on Form 8-K with the Commission within fifteen days
following such issuance.
MBS
MBS may include (i) private (that is, not guaranteed or insured by the
United States or any agency or instrumentality thereof) mortgage participations,
mortgage pass-through certificates or other mortgage-backed securities such as
mortgage-backed securities that are similar to a series of Certificates or (ii)
certificates insured or guaranteed by FHLMC, FNMA, GNMA or FAMC, provided that
each MBS will evidence an interest in, or will be secured by a pledge of,
mortgage loans that conform to the descriptions of the Mortgage Loans contained
herein.
Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, an indenture or similar agreement
(an "MBS Agreement"). The issuer (the "MBS Issuer") of the MBS and/or the
servicer (the "MBS Servicer") of the underlying mortgage loans will have entered
into the MBS Agreement, generally with a trustee (the "MBS Trustee") or, in the
alternative, with the original purchaser or purchasers of the MBS.
The MBS may have been issued in one or more classes with characteristics
similar to the classes of Certificates described herein. Distributions in
respect of the MBS will be made by the MBS Servicer or the MBS Trustee on the
dates specified in the related Prospectus Supplement. The MBS Issuer or the MBS
Servicer or another person specified in the related Prospectus Supplement may
have the right or obligation to repurchase or substitute assets underlying the
MBS after a certain date or under other circumstances specified in the related
Prospectus Supplement.
Reserve funds, subordination or other credit support similar to that
described for the Certificates under "Description of Credit Support" may have
been provided with respect to the MBS. The type, characteristics and amount of
such credit support, if any, will be a function of the characteristics of the
underlying mortgage loans and other factors and generally will have been
established on the basis of the requirements of any Rating Agency that may have
assigned a rating to the MBS, or by the initial purchasers of the MBS.
The Prospectus Supplement for a series of Certificates that evidence
interests in MBS will specify, to the extent available, (i) the aggregate
approximate initial and outstanding principal amount and type of the MBS to be
included in the Trust Fund, (ii) the original and remaining term to stated
maturity of the MBS, if applicable, (iii) the pass-through or bond rate of the
MBS or the formula for determining such rates, (iv) the payment characteristics
of the MBS, (v) the MBS Issuer, MBS Servicer and MBS Trustee, as applicable,
(vi) a description of the credit support, if any, (vii) the circumstances under
which the related underlying mortgage loans, or the MBS themselves, may be
purchased prior to their maturity, (viii) the terms on which mortgage loans may
be substituted for those originally underlying the MBS, (ix) the servicing fees
payable under the MBS Agreement, (x) to the extent available to the Depositor,
the type of information in respect of the underlying mortgage loans described
under "--Mortgage Loans--Mortgage Loan Information in Prospectus Supplements"
and (xi) the characteristics of any cash flow agreements that relate to the MBS.
To the extent required under the securities laws, MBS included among the
assets of a Trust Fund will (i) either have been registered under the Securities
Act of 1933, as amended, or be eligible for resale under
Rule 144(k) thereunder and (ii) have been acquired in a bona fide secondary
market transaction and not from the issuer or an affiliate.
CERTIFICATE ACCOUNTS
Each Trust Fund will include one or more accounts (collectively, the
"Certificate Account") established and maintained on behalf of the
Certificateholders into which the person or persons designated in the related
Prospectus Supplement will, to the extent described herein and in such
Prospectus Supplement, deposit all payments and collections received or advanced
with respect to the Mortgage Assets and other assets in the Trust Fund. A
Certificate Account may be maintained as an interest bearing or a non-interest
bearing account, and funds held therein may be held as cash or invested in
certain short-term, investment grade obligations, in each case as described in
the related Prospectus Supplement.
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CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Mortgage Assets in the
related Trust Fund may be provided to one or more classes of Certificates in the
related series in the form of subordination of one or more other classes of
Certificates in such series or by one or more other types of credit support,
such as a letter of credit, insurance policy, guarantee or reserve fund, 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
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
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the Mortgaged Properties, the servicing of the Mortgage Loans, possible changes
in tax laws and other opportunities for investment. In addition, the rate of
principal payments on the Mortgage Loans in any Trust Fund may be affected by
the existence of Lock-out Periods and requirements that principal prepayments be
accompanied by Prepayment Premiums, and by the extent to which such provisions
may be practicably enforced.
The rate of prepayment on a pool of mortgage loans is also affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
coupon, a borrower may have an increased incentive to refinance its mortgage
loan. In addition, as prevailing market interest rates decline, even borrowers
with ARM Loans that have experienced a corresponding interest rate decline may
have an increased incentive to refinance for purposes of either (i) converting
to a fixed rate loan and thereby "locking in" such rate or (ii) taking advantage
of the initial "teaser rate" (a mortgage interest rate below what it would
otherwise be if the applicable index and gross margin were applied) on another
adjustable rate mortgage loan.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell
Mortgaged Properties in order to realize their equity therein, to meet cash flow
needs or to make other investments. In addition, some borrowers may be motivated
by federal and state tax laws (which are subject to change) to sell Mortgaged
Properties prior to the exhaustion of tax depreciation benefits. The Depositor
will make no representation as to the particular factors that will affect the
prepayment of the Mortgage Loans in any Trust Fund, as to the relative
importance of such factors, as to the percentage of the principal balance of
such Mortgage Loans that will be paid as of any date or as to the overall rate
of prepayment on such Mortgage Loans.
WEIGHTED AVERAGE LIFE AND MATURITY
The rate at which principal payments are received on the Mortgage Loans in
any Trust Fund will affect the ultimate maturity and the weighted average life
of one or more classes of the Certificates of such series. Weighted average life
refers to the average amount of time that will elapse from the date of issuance
of an instrument until each dollar of the principal amount of such instrument is
repaid to the investor.
The weighted average life and maturity of a class of Certificates of any
series will be influenced by the rate at which principal on the related Mortgage
Loans, whether in the form of scheduled amortization or prepayments (for this
purpose, the term "prepayment" includes voluntary prepayments, liquidations due
to default and purchases of Mortgage Loans out of the related Trust Fund), is
paid to such class. Prepayment rates on loans are commonly measured relative to
a prepayment standard or model, such as the Constant Prepayment Rate ("CPR")
prepayment model or the Standard Prepayment Assumption ("SPA") prepayment model.
CPR represents an assumed constant rate of prepayment each month (expressed as
an annual percentage) relative to the then outstanding principal balance of a
pool of loans for the life of such loans. SPA represents an assumed variable
rate of prepayment each month (expressed as an annual percentage) relative to
the then outstanding principal balance of a pool of loans, with different
prepayment assumptions often expressed as percentages of SPA. For example, a
prepayment assumption of 100% of SPA assumes prepayment rates of 0.2% per annum
of the then outstanding principal balance of such loans in the first month of
the life of the loans and an additional 0.2% per annum in each month thereafter
until the thirtieth month. Beginning in the thirtieth month, and in each month
thereafter during the life of the loans, 100% of SPA assumes a constant
prepayment rate of 6% per annum each month.
Neither CPR nor SPA nor any other prepayment model or assumption purports
to be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any particular pool of loans. Moreover, the
CPR and SPA models were developed based upon historical prepayment experience
for single-family loans. Thus, it is unlikely that the prepayment experience of
the Mortgage Loans included in any Trust Fund will conform to any particular
level of CPR or SPA.
The Prospectus Supplement with respect to each series of Certificates will
contain tables, if applicable, setting forth the projected weighted average life
of each class of Offered Certificates of such series and the percentage of the
initial Certificate Balance of each such class that would be outstanding on
specified Distribution Dates based on the assumptions stated in such Prospectus
Supplement, including assumptions
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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 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.
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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 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
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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 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
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Certificate Balance of such class. See "Risk Factors--Prepayments; Average Life
of Certificates; Yields" and "Yield and Maturity Considerations."
DISTRIBUTIONS OF CERTIFICATE PRINCIPAL
Each class of Certificates of each series (other than certain classes of
Stripped Interest Certificates of REMIC Residual Certificates) will have a
"Certificate Balance" which, at any time, will equal the then maximum amount
that the holders of Certificates of such class will be entitled to receive in
respect of principal out of the future cash flow on the Mortgage Assets and
other assets included in the related Trust Fund. The outstanding Certificate
Balance of a class of Certificates will be reduced by distributions of principal
made thereon from time to time and, if so provided in the related Prospectus
Supplement, further by any losses incurred in respect of the related Mortgage
Assets allocated thereto from time to time. In turn, the outstanding Certificate
Balance of a class of Certificates may be increased as a result of any deferred
interest on or in respect of the related Mortgage Assets that is allocated
thereto from time to time, and will be increased, in the case of a class of
Accrual Certificates prior to the Distribution Date on which distributions of
interest thereon are required to commence, by the amount of any Accrued
Certificate Interest in respect thereof (reduced as described above). Unless
otherwise provided in the related Prospectus Supplement, the initial aggregate
Certificate Balance of all classes of a series of Certificates will not be
greater than the aggregate outstanding principal balance of the related Mortgage
Assets as of the applicable Cut-off Date, after application of scheduled
payments due on or before such date, whether or not received. As and to the
extent described in the related Prospectus Supplement, distributions of
principal with respect to a series of Certificates will be made on each
Distribution Date to the holders of the class or classes of Certificates of such
series entitled thereto until the Certificate Balances of such Certificates have
been reduced to zero. Distributions of principal with respect to one or more
classes of Certificates may be made at a rate that is faster (and, in some
cases, substantially faster) than the rate at which payments or other
collections of principal are received on the Mortgage Assets in the related
Trust Fund, may not commence until the occurrence of certain events, such as the
retirement of one or more other classes of Certificates of the same series, or
may be made at a rate that is slower (and, in some cases, substantially slower)
than the rate at which payments or other collections of principal are received
on such Mortgage Assets. In addition, distributions of principal with respect to
one or more classes of Certificates (each such class, a "Controlled Amortization
Class") may be made, subject to available funds, based on a specified principal
payment schedule and, with respect to one or more classes of Certificates (each
such class, a "Companion Class"), may be contingent on the specified principal
payment schedule for a Controlled Amortization Class of the same series and the
rate at which payments and other collections of principal on the Mortgage Assets
in the related Trust Fund are received. Unless otherwise specified in the
related Prospectus Supplement, distributions of principal of any class of
Certificates will be made on a pro rata basis among all of the Certificates of
such class.
DISTRIBUTIONS ON THE CERTIFICATES IN RESPECT OF PREPAYMENT PREMIUMS OR IN
RESPECT OF EQUITY PARTICIPATIONS
If so provided in the related Prospectus Supplement, Prepayment Premiums or
payments in respect of Equity Participations received on or in connection with
the Mortgage Assets in any Trust Fund will be distributed on each Distribution
Date to the holders of the class of Certificates of the related series entitled
thereto in accordance with the provisions described in such Prospectus
Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
The amount of any losses or shortfalls in collections on the Mortgage
Assets in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of Credit Support) will be allocated among
the respective classes of Certificates of the related series in the priority and
manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may result in reductions in the entitlements to interest and/or in the
Certificate Balances of one or more such classes of Certificates, or may be
effected simply by a prioritization of payments among such classes of
Certificates.
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ADVANCES IN RESPECT OF DELINQUENCIES
If and to the extent provided in the related Prospectus Supplement, the
related Master Servicer and/or other specified person (including a provider of
Credit Support) may be obligated to advance, or have the option of advancing, on
or before each Distribution Date, from its or their own funds or from excess
funds held in the related Certificate Account that are not part of the Available
Distribution Amount for the related series of Certificates for such Distribution
Date, an amount up to the aggregate of any payments of principal (other than any
balloon payments) and interest that were due on or in respect of such Mortgage
Loans during the related Due Period and were delinquent on the related
Determination Date. Unless otherwise provided in the related Prospectus
Supplement, a "Due Period" is the period between Distribution Dates, and
scheduled payments on the Mortgage Loans in any Trust Fund that became due
during a given Due Period will, to the extent received by the related
Determination Date or advanced by the related Master Servicer or other specified
person, be distributed on the Distribution Date next succeeding such
Determination Date.
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. Accordingly, all
advances made from the advancing person's own funds will be reimbursable out of
related recoveries on the Mortgage Loans (including amounts received under any
instrument of Credit Support) respecting which such advances were made (as to
any Mortgage Loan, "Related Proceeds") and such other specific sources as may be
identified in the related Prospectus Supplement, including in the case of a
series that includes one or more classes of Subordinate Certificates,
collections on other Mortgage Loans in the related Trust Fund that would
otherwise be distributable to the holders of one or more classes of such
Subordinate Certificates. No advance will be required to be made by the Master
Servicer or by any other person if, in the good faith judgment of the Master
Servicer or such other person, such advance would not be recoverable from
Related Proceeds or another specifically identified source (any such advance, a
"Nonrecoverable Advance"); and, if previously made by a Master Servicer or
another person, a Nonrecoverable Advance will be reimbursable from any amounts
in the related Certificate Account prior to any distributions being made to the
related series of Certificateholders.
If advances have been made from excess funds in a Certificate Account, the
Master Servicer or other person that advanced such funds will be required to
replace such funds in the Certificate Account on any future Distribution Date to
the extent that funds then in the Certificate Account are insufficient to permit
full distributions to Certificateholders on such date. If so specified in the
related Prospectus Supplement, the obligation of a Master Servicer or other
specified person to make advances may be secured by a cash advance reserve fund
or a surety bond. If applicable, information regarding the characteristics of,
and the identity of any obligor on, any such surety bond, will be set forth in
the related Prospectus Supplement.
If and to the extent so provided in the related Prospectus Supplement, any
entity making advances will be entitled to receive interest thereon for the
period that such advances are outstanding at the rate specified in such
Prospectus Supplement, and such entity will be entitled to payment of such
interest periodically from general collections on the Mortgage Loans in the
related Trust Fund prior to any payment to Certificateholders or as otherwise
provided in the related Pooling Agreement and described in such Prospectus
Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust Fund that includes MBS will describe any comparable
advancing obligation of a party to the related Pooling Agreement or of a party
to the related MBS Agreement.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, together with the distribution to the holders of
each class of the Offered Certificates of a series, a Master Servicer or
Trustee, as provided in the related Prospectus Supplement, will forward to each
such holder, a statement (a "Distribution Date Statement") that, unless
otherwise provided in the related Prospectus Supplement, will set forth, among
other things, in each case to the extent applicable:
(i) the amount of such distribution to holders of Certificates of such
class that was applied to reduce the Certificate Balance thereof;
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(ii) the amount of such distribution to holders of Certificates of
such class that is allocable to Accrued Certificate Interest;
(iii) the amount, if any, of such distribution to holders of
Certificates of such class that is allocable to (A) Prepayment Premiums and
(B) payments on account of Equity Participations;
(iv) the amount of servicing compensation received by the related
Master Servicer (and, if payable directly out of the related Trust Fund, by
any Special Servicer and any Sub-Servicer) and such other customary
information as such Master Servicer or the related Trustee, as the case may
be, deems necessary or desirable, or that a Certificateholder reasonably
requests, to enable Certificateholders to prepare their tax returns;
(v) the aggregate amount of advances included in such distribution,
and the aggregate amount of unreimbursed advances at the close of business
on such Distribution Date;
(vi) the aggregate principal balance of the related Mortgage Loans on,
or as of a specified date shortly prior to, such Distribution Date;
(vii) the number and aggregate principal balance of any Mortgage Loans
in respect of which (A) one scheduled payment is delinquent, (B) two
scheduled payments are delinquent, (C) three or more scheduled payments are
delinquent and (D) foreclosure proceedings have been commenced;
(viii) with respect to each Mortgage Loan that is delinquent in
respect of three or more scheduled payments, (A) the loan number thereof,
(B) the unpaid balance thereof, (C) whether the delinquency is in respect
of any balloon payment, (D) the aggregate amount of unreimbursed servicing
expenses and unreimbursed advances in respect thereof, (E) if applicable,
the aggregate amount of any interest accrued and payable to the related
Master Servicer, a Special Servicer and/or any other entity on related
servicing expenses and related advances, (F) whether a notice of
acceleration has been sent to the borrower and, if so, the date of such
notice and (G) a brief description of the status of any foreclosure
proceedings or negotiations with the borrower;
(ix) with respect to any Mortgage Loan liquidated during the related
Prepayment Period (that is, the specified period, generally equal in length
to the time period between Distribution Dates, during which prepayments and
other unscheduled collections on the Mortgage Loans in the related Trust
Fund must be received in order to be distributed on a particular
Distribution Date) in connection with a default thereon or by reason of
being purchased out of the related Trust Fund, (A) the loan number thereof,
(B) the manner in which it was liquidated, (C) the aggregate amount of
Liquidation Proceeds received, (D) the portion of such Liquidation Proceeds
payable or reimbursable to the related Master Servicer or a Special
Servicer in respect of such Mortgage Loan and (E) the amount of any loss to
Certificateholders;
(x) with respect to each Mortgaged Property acquired through
foreclosure, deed-in-lieu of foreclosure or otherwise (an "REO Property")
and included in the related Trust Fund as of the end of the related Due
Period or Prepayment Period, as applicable, (A) the loan number of the
related Mortgage Loan, (B) the date of acquisition, (C) the principal
balance of the related Mortgage Loan (calculated as if such Mortgage Loan
were still outstanding taking into account certain limited modifications to
the terms thereof specified in the related Pooling Agreement), (D) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof and (E) if applicable, the aggregate amount of
interest accrued and payable to the related Master Servicer, a Special
Servicer and/or any other entity on related servicing expenses and related
advances;
(xi) with respect to any REO Property sold during the related
Prepayment Period, (A) the loan number of the related Mortgage Loan,
(B) the aggregate amount of sales proceeds, (C) the portion of such sales
proceeds payable or reimbursable to the related Master Servicer or a
Special Servicer in respect of such REO Property or the related Mortgage
Loan and (D) the amount of any loss to Certificateholders in respect of the
related Mortgage Loan;
(xii) the Certificate Balance or Notional Amount, as the case may be,
of each class of Certificates (including any class of Certificates not
offered hereby) at the close of business on such Distribution Date,
separately identifying any reduction in such Certificate Balance due to the
allocation of any
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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 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
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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 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
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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 maintained either as an
interest-bearing or a non-interest-bearing account, and the funds held therein
may be held as cash or
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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;
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(x) all payments required to be deposited in the Certificate Account
with respect to any deductible clause in any blanket insurance policy
described under "--Hazard Insurance Policies";
(xi) any amount required to be deposited by the Master Servicer or the
Trustee in connection with losses realized on investments for the benefit
of the Master Servicer or the Trustee, as the case may be, of funds held in
the Certificate Account; and
(xii) any other amounts required to be deposited in the Certificate
Account as provided in the related Pooling Agreement and described in the
related Prospectus Supplement.
Withdrawals
Unless otherwise provided in the related Pooling Agreement and described in
the related Prospectus Supplement, a Master Servicer, Trustee or Special
Servicer may make withdrawals from the Certificate Account for each Trust Fund
for any of the following purposes:
(i) to make distributions to the Certificateholders on each
Distribution Date;
(ii) to reimburse the Master Servicer or any other specified person
for unreimbursed amounts advanced by it as described under "Description of
the Certificates--Advances in Respect of Delinquencies," such reimbursement
to be made out of amounts received which were identified and applied by the
Master Servicer as late collections of interest (net of related servicing
fees) on and principal of the particular Mortgage Loans with respect to
which the advances were made or out of amounts drawn under any form of
Credit Support with respect to such Mortgage Loans;
(iii) to reimburse the Master Servicer or a Special Servicer for
unpaid servicing fees earned by it and certain unreimbursed servicing
expenses incurred by it with respect to Mortgage Loans in the Trust Fund
and properties acquired in respect thereof, such reimbursement to be made
out of amounts that represent Liquidation Proceeds and Insurance Proceeds
collected on the particular Mortgage Loans and properties, and net income
collected on the particular properties, with respect to which such fees
were earned or such expenses were incurred or out of amounts drawn under
any form of Credit Support with respect to such Mortgage Loans and
properties;
(iv) to reimburse the Master Servicer or any other specified person
for any advances described in clause (ii) above made by it and any
servicing expenses referred to in clause (iii) above incurred by it which,
in the good faith judgment of the Master Servicer or such other person,
will not be recoverable from the amounts described in clauses (ii) and
(iii), respectively, such reimbursement to be made from amounts collected
on other Mortgage Loans in the related Trust Fund or, if and to the extent
so provided by the related Pooling Agreement and described in the related
Prospectus Supplement, only from that portion of amounts collected on such
other Mortgage Loans that is otherwise distributable on one or more classes
of Subordinate Certificates of the related series;
(v) if and to the extent described in the related Prospectus
Supplement, to pay the Master Servicer, a Special Servicer or another
specified entity (including a provider of Credit Support) interest accrued
on the advances described in clause (ii) above made by it and the servicing
expenses described in clause (iii) above incurred by it while such remain
outstanding and unreimbursed;
(vi) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments performed with respect to Mortgaged
Properties that constitute security for defaulted Mortgage Loans, and for
any containment, clean-up or remediation of hazardous wastes and materials
present on such Mortgaged Properties, as described under "--Realization
Upon Defaulted Mortgage Loans";
(vii) to reimburse the Master Servicer, the Depositor, or any of their
respective directors, officers, employees and agents, as the case may be,
for certain expenses, costs and liabilities incurred thereby, as and to the
extent described under "--Certain Matters Regarding the Master Servicer and
the Depositor";
(viii) if and to the extent described in the related Prospectus
Supplement, to pay the fees of the Trustee;
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(ix) to reimburse the Trustee or any of its directors, officers,
employees and agents, as the case may be, for certain expenses, costs and
liabilities incurred thereby, as and to the extent described under
"--Certain Matters Regarding the Trustee";
(x) to pay the Master Servicer or the Trustee, as additional
compensation, interest and investment income earned in respect of amounts
held in the Certificate Account;
(xi) to pay (generally from related income) for costs incurred in
connection with the operation, management and maintenance of any Mortgaged
Property acquired by the Trust Fund by foreclosure or otherwise;
(xii) if one or more elections have been made to treat the Trust Fund
or designated portions thereof as a REMIC, to pay any federal, state or
local taxes imposed on the Trust Fund or its assets or transactions, as and
to the extent described under "Material Federal Income Tax Consequences--
REMICS--Prohibited Transactions Tax and Other Taxes";
(xiii) to pay for the cost of an independent appraiser or other expert
in real estate matters retained to determine a fair sale price for a
defaulted Mortgage Loan or a property acquired in respect thereof in
connection with the liquidation of such Mortgage Loan or property;
(xiv) to pay for the cost of various opinions of counsel obtained
pursuant to the related Pooling Agreement for the benefit of
Certificateholders;
(xv) to make any other withdrawals permitted by the related Pooling
Agreement and described in the related Prospectus Supplement; and
(xvi) to clear and terminate the Certificate Account upon the
termination of the Trust Fund.
COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer for any mortgage pool, directly or through
Sub-Servicers, will be required to make reasonable efforts to collect all
scheduled Mortgage Loan payments and will be required to follow such collection
procedures as it would follow with respect to mortgage loans that are comparable
to such Mortgage Loans and held for its own account, provided such procedures
are consistent with (i) the terms of the related Pooling Agreement and any
related instrument of Credit Support included in the related Trust Fund, (ii)
applicable law and (iii) the servicing standard specified in the Pooling
Agreement and in the related Prospectus Supplement (the "Servicing Standard").
The Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining escrow or
impound accounts for payment of taxes, insurance premiums and similar items, or
otherwise monitoring the timely payment of those items; attempting to collect
delinquent payments; supervising foreclosures; conducting property inspections
on a periodic or other basis; managing Mortgaged Properties acquired through or
in lieu of foreclosure (each, an "REO Property"); and maintaining servicing
records relating to the Mortgage Loans. Generally, the Master Servicer will be
responsible for filing and settling claims in respect of particular Mortgage
Loans under any applicable instrument of Credit Support. See "Description of
Credit Support."
MODIFICATIONS, WAIVERS AND AMENDMENTS OF MORTGAGE LOANS
A Master Servicer may agree to modify, waive or amend any term of any
Mortgage Loan serviced by it in a manner consistent with the Servicing Standard;
provided that, the modification, waiver or amendment will not (i) affect the
amount or timing of any scheduled payments of principal or interest on the
Mortgage Loan or (ii) in the judgment of the Master Servicer, materially impair
the security for the Mortgage Loan or reduce the likelihood of timely payment of
amounts due thereon. A Master Servicer also may agree to any other modification,
waiver or amendment if, in its judgment (i) a material default on the Mortgage
Loan has occurred or a payment default is imminent and (ii) such modification,
waiver or amendment is reasonably likely to produce a greater recovery with
respect to the Mortgage Loan on a present value basis than would liquidation.
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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 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,
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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 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.
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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.
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
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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 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
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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, 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
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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 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,
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that, no such amendment may (i) reduce in any manner the amount of, or delay the
timing of, payments received or advanced on Mortgage Loans that are required to
be distributed in respect of any Certificate without the consent of the holder
of such Certificate, (ii) adversely affect in any material respect the interests
of the holders of any class of Certificates, in a manner other than as described
in clause (i), without the consent of the holders of all Certificates of such
class or (iii) modify the provisions of the Pooling Agreement described in this
paragraph without the consent of the holders of all Certificates of the related
series. However, unless otherwise specified in the related Pooling Agreement,
the Trustee will be prohibited from consenting to any amendment of a Pooling
Agreement pursuant to which a REMIC election is to be or has been made unless
the Trustee shall first have received an opinion of counsel to the effect that
such amendment will not result in the imposition of a tax on the related Trust
Fund or cause the related Trust Fund to fail to qualify as a REMIC at any time
that the related Certificates are outstanding.
LIST OF CERTIFICATEHOLDERS
Upon written request of any Certificateholder of record made for purposes
of communicating with other holders of Certificates of the same series with
respect to their rights under the related Pooling Agreement, the Trustee or
other specified person will afford such Certificateholder access, during normal
business hours, to the most recent list of Certificateholders of that series
then maintained by such person.
THE TRUSTEE
The Trustee under each Pooling Agreement will be named in the related
Prospectus Supplement. The commercial bank, national banking association,
banking corporation or trust company that serves as Trustee may have typical
banking relationships with the Depositor and its affiliates and with any Master
Servicer and its affiliates.
DUTIES OF THE TRUSTEE
The Trustee for a series of Certificates will make no representation as to
the validity or sufficiency of the related Pooling Agreement, the Certificates
or any Mortgage Loan or related document and will not be accountable for the use
or application by or on behalf of any Master Servicer of any funds paid to the
Master Servicer or any Special Servicer in respect of the Certificates or the
Mortgage Loans, or any funds deposited into or withdrawn from the Certificate
Account or any other account by or on behalf of the Master Servicer or any
Special Servicer. If no Event of Default has occurred and is continuing, the
Trustee will be required to perform only those duties specifically required
under the related Pooling Agreement. However, upon receipt of any of the various
certificates, reports or other 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.
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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.
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.
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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 reinvestment income or other
gain from such investments will be credited to the related reserve fund for such
series, and any loss resulting from such investments will be charged to such
reserve fund. However, such income may be payable to any related Master Servicer
or another service provider as additional compensation for its services. The
reserve fund, if any, for a series will not be a part of the Trust Fund unless
otherwise specified in the related Prospectus Supplement.
CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the Prospectus Supplement for a series of Certificates,
any MBS included in the related Trust Fund and/or the related underlying
mortgage loans may be covered by one or more of the types of Credit Support
described herein. The related Prospectus Supplement will specify, as to each
such form of Credit Support, the information indicated above with respect
thereto, to the extent such information is material and available.
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CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties.
Because such legal aspects are governed by applicable state law (which laws may
differ substantially), the summaries do not purport to be complete, to reflect
the laws of any particular state, or to encompass the laws of all states in
which the security for the Mortgage Loans (or mortgage loans underlying any MBS)
is situated. Accordingly, the summaries are qualified in their entirety by
reference to the applicable laws of those states. See "Description of the Trust
Funds--Mortgage Loans." For purposes of the following discussion, "Mortgage
Loan" includes a mortgage loan underlying an MBS.
GENERAL
Each Mortgage Loan will be evidenced by a note or bond and secured by an
instrument granting a security interest in real property, which may be a
mortgage, deed of trust or a deed to secure debt, depending upon the prevailing
practice and law in the state in which the related Mortgaged Property is
located. Mortgages, deeds of trust and deeds to secure debt are herein
collectively referred to as "mortgage instruments." A mortgage instrument
creates a lien upon, or grants a title interest in, the real property covered
thereby, and represents the security for the repayment of the indebtedness
customarily evidenced by a promissory note. The priority of the lien created or
interest granted will depend on the terms of the mortgage instrument and, in
some cases, on the terms of separate subordination agreements or intercreditor
agreements with others that hold interests in the real property, the knowledge
of the parties to the mortgage instrument as to the existence of prior liens
and, generally, the order of recordation of the mortgage instrument in the
appropriate public recording office. However, the lien of a recorded mortgage
instrument will generally be subordinate to later-arising liens for real estate
taxes and assessments and other charges imposed under governmental police
powers.
TYPES OF MORTGAGE INSTRUMENTS
There are two parties to a mortgage: a mortgagor (the borrower and usually
the owner of the subject property) and a mortgagee (the lender). In a mortgage,
the mortgagor grants a lien on the subject property in favor of the mortgagee. A
deed of trust is a three-party instrument, among a trustor (the equivalent of a
borrower), a trustee to whom the real property is conveyed, and a beneficiary
(the lender) for whose benefit the conveyance is made. Under a deed of trust,
the trustor grants the property to the trustee, in trust, irrevocably until the
debt is paid, and generally with a power of sale. A deed to secure debt
typically has two parties. The borrower, or grantor, conveys title to the real
property to the grantee, or lender, generally with a power of sale, until such
time as the debt is repaid. In a case where the borrower is a land trust, there
would be an additional party to a mortgage instrument because legal title to the
property is held by a land trustee under a land trust agreement for the benefit
of the borrower. At origination of a mortgage loan involving a land trust, the
borrower generally executes a separate undertaking to make payments on the
mortgage note. The mortgagee's authority under a mortgage, the trustee's
authority under a deed of trust and the grantee's authority under a deed to
secure debt are governed by the express provisions of the related instrument,
the law of the state in which the real property is located, certain federal laws
and, in some deed of trust transactions, the directions of the beneficiary.
LEASES AND RENTS
Mortgage instruments that encumber income-producing property often contain
or are accompanied by an assignment of rents and leases, pursuant to which the
borrower assigns to the lender the borrower's right, title and interest as
landlord under each lease and the income derived therefrom, while (unless rents
are to be paid directly to the lender) retaining a revocable license to collect
the rents for so long as there is no default. If the borrower defaults, the
license terminates and the lender is entitled to collect the rents. Local law
may require that the lender take possession of the property and/or obtain a
court-appointed receiver before becoming entitled to collect the rents.
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In most states, hotel and motel room rates are considered accounts
receivable under the Uniform Commercial Code ("UCC"); in cases where hotels or
motels constitute loan security, the rates are generally pledged by the borrower
as additional security for the loan. In general, the lender must file financing
statements in order to perfect its security interest in the rates and must file
continuation statements, generally every five years, to maintain perfection of
such security interest. Even if the lender's security interest in room rates is
perfected under the UCC, it will generally be required to commence a foreclosure
action or otherwise take possession of the property in order to collect the room
rates following a default.
PERSONALTY
In the case of certain types of mortgaged properties, such as hotels,
motels and nursing homes, personal property (to the extent owned by the borrower
and not previously pledged) may constitute a significant portion of the
property's value as security. The creation and enforcement of liens on personal
property are governed by the UCC. Accordingly, if a borrower pledges personal
property as security for a mortgage loan, the lender generally must file UCC
financing statements in order to perfect its security interest therein, and must
file continuation statements, generally every five years, to maintain that
perfection.
JUNIOR MORTGAGES; RIGHTS OF SENIOR LENDERS
Some of the Mortgage Loans included in a Trust Fund may be secured by
mortgage instruments that are subordinate to mortgage instruments held by other
lenders. The rights of the Trust Fund (and therefore the Certificateholders), as
holder of a junior mortgage instrument, are subordinate to those of the senior
lender, including the prior rights of the senior lender to receive rents, hazard
insurance and condemnation proceeds and to cause the Mortgaged Property to be
sold upon borrower's default and thereby extinguish the Trust Fund's junior lien
unless the Master Servicer or Special Servicer asserts its subordinate interest
in a property in a foreclosure litigation or satisfies the defaulted senior
loan. As discussed more fully below, in many states a junior lender may satisfy
a defaulted senior loan in full, adding the amounts expended to the balance due
on the junior loan. Absent a provision in the senior mortgage instrument 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 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
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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 of trust and applicable
state law. In some states, prior to
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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 lease of the property. Depending
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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.
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Leasehold Considerations
Mortgage loans may be secured by a lien on the borrower's leasehold
interest in a ground lease. Leasehold mortgage loans are subject to certain
risks not associated with mortgage loans secured by a lien on the fee estate of
the borrower. The most significant of these risks is that if the borrower's
leasehold were to be terminated (for example, as a result of a lease default or
the bankruptcy of the ground lessor or the borrower/ground lessee), the
leasehold mortgagee would be left without its security. This risk may be
substantially lessened if the ground lease contains provisions protective of the
leasehold mortgagee, such as a provision that requires the ground lessor to give
the leasehold mortgagee notices of lessee defaults and an opportunity to cure
them, a provision that permits the leasehold estate to be assigned to and by the
leasehold mortgagee or the purchaser at a foreclosure sale, a provision that
gives the leasehold mortgagee the right to enter into a new ground lease with
the 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.
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If a borrower's ability to make payment on a mortgage loan is dependent on
its receipt of rent payments under a lease of the related property, that ability
may be impaired by the commencement of a bankruptcy proceeding relating to a
lessee under such lease. Under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a lessee results in a stay in bankruptcy against
the commencement or continuation of any state court proceeding for past due
rent, for accelerated rent, for damages or for a summary eviction order with
respect to a default under the lease that occurred prior to the filing of the
lessee's petition. In addition, the Bankruptcy Code generally provides that a
trustee or debtor-in-possession may, subject to approval of the court,
(i) assume the lease and retain it or assign it to a third party or (ii) reject
the lease. If the lease is assumed, the trustee or debtor-in-possession (or
assignee, if applicable) must cure any defaults under the lease, compensate the
lessor for its losses and provide the lessor with "adequate assurance" of future
performance. Such remedies may be insufficient, and any assurances provided to
the lessor may, in fact, be inadequate. If the lease is rejected, the lessor
will be treated as an unsecured creditor with respect to its claim for damages
for termination of the lease. The Bankruptcy Code also limits a lessor's damages
for lease rejection to the 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.
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The federal Asset Conservation, Lender Liability and Deposit Insurance
Protection Act of 1996 (the "Act") seeks to clarify the actions a lender may
take without incurring liability as an "owner" or "operator" of contaminated
property or underground petroleum storage tanks. The Act amends CERCLA and RCRA
to provide guidance on actions that do or do not constitute "participation in
management."
Importantly, the Act does not, among other things: (1) completely eliminate
potential liability to lenders under CERCLA or RCRA; (2) reduce credit risks
associated with lending to borrowers having significant environmental
liabilities or potential liabilities, (3) eliminate environmental risks
associated with taking possession of contaminated property or underground
storage tanks or assuming control of the operations thereof, or (4) affect
liabilities or potential liabilities under state environmental laws.
Certain State and Other Federal Laws
Many states have statutes similar to CERCLA and RCRA, and not all of those
statutes provide for a secured creditor exemption.
In a few states, transfers of some types of properties are conditioned upon
cleanup of contamination. In these cases, a lender that becomes the owner of a
property through foreclosure, deed in lieu of foreclosure or otherwise, may be
required to clean up the contamination in order to sell or otherwise transfer
the property.
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
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restrictions on the right of lenders to enforce such clauses in many states. By
virtue, however, of the Garn-St Germain Depository Institutions Act of 1982 (the
"Garn Act"), effective October 15, 1982 (which purports to preempt state laws
that prohibit the enforcement of due-on-sale clauses by providing, among other
matters, that "due-on-sale" clauses in certain loans made after the effective
date of the Garn Act are enforceable, within certain limitations as set forth in
the Garn Act and the regulations promulgated thereunder), a Master Servicer may
nevertheless have the right to accelerate the maturity of a Mortgage Loan that
contains a "due-on-sale" provision upon transfer of an interest in the property,
regardless of the Master Servicer's ability to demonstrate that a sale threatens
its legitimate security interest.
SUBORDINATE FINANCING
Certain of the Mortgage Loans may not restrict the ability of the borrower
to use the Mortgaged Property as security for one or more additional loans.
Where a borrower encumbers a mortgaged property with one or more junior liens,
the senior lender is subjected to additional risk. First, the borrower may have
difficulty servicing and repaying multiple loans. Moreover, if the subordinate
financing permits recourse to the borrower (as is frequently the case) and the
senior loan does not, a borrower may have more incentive to repay sums due on
the subordinate loan. Second, acts of the senior lender that prejudice the
junior lender or impair the junior lender's security may create a superior
equity in favor of the junior lender. For example, if the borrower and the
senior lender agree to an increase in the principal amount of or the interest
rate payable on the senior loan, the senior lender may lose its priority to the
extent any existing junior lender is harmed or the borrower is additionally
burdened. Third, if the borrower defaults on the senior loan and/or any junior
loan or loans, the existence of junior loans and actions taken by junior lenders
can impair the security available to the senior lender and can interfere with or
delay the taking of action by the senior lender. Moreover, the bankruptcy of a
junior lender may operate to stay foreclosure or similar proceedings by the
senior lender.
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.
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SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a borrower who enters military service after the
origination of such borrower's mortgage loan (including a borrower who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
individuals who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to
individuals who enter military service (including reservists who are called to
active duty) after origination of the related mortgage loan, no information can
be provided as to the number of loans with individuals as borrowers that may be
affected by the Relief Act. Application of the Relief Act would adversely
affect, for an indeterminate period of time, the ability of any servicer to
collect full amounts of interest on certain of the Mortgage Loans. Any
shortfalls in interest collections resulting from the application of the Relief
Act would result in a reduction of the amounts distributable to the holders of
the related series of Certificates, and would not be covered by advances or,
unless otherwise specified in the related Prospectus Supplement, any form of
Credit Support provided in connection with such Certificates. In addition, the
Relief Act imposes limitations that would impair the ability of the servicer to
foreclose on an affected Mortgage Loan during the borrower's period of active
duty status, and, under certain circumstances, during an additional three-month
period thereafter.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers that are
structural in nature from existing places of public accommodation to the extent
"readily achievable." In addition, under the ADA, alterations to a place of
public accommodation or a commercial facility are to be made so that, to the
maximum extent feasible, such altered portions are readily accessible to and
usable by disabled individuals. The "readily achievable" standard takes into
account, among other factors, the 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.
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REMICS
Classification of REMICs. Upon the issuance of each series of REMIC
Certificates, counsel to the Depositor will deliver its opinion generally to the
effect that, assuming compliance with all provisions of the related Pooling
Agreement, the related Trust Fund (or each applicable portion thereof) will
qualify as a REMIC and the REMIC Certificates offered with respect thereto will
be considered to evidence ownership of "regular interests" ("REMIC Regular
Certificates") or "residual interests" ("REMIC Residual Certificates") in that
REMIC within the meaning of the REMIC Provisions.
If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for such status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In that event, such entity may be taxable as a corporation
under Treasury regulations, and the related REMIC Certificates may not be
accorded the status or given the tax treatment described below. Although the
Code authorizes the Treasury Department to issue regulations providing relief in
the event of an inadvertent termination of REMIC status, no such regulations
have been issued. Any such relief, moreover, may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the Trust
Fund's income for the period in which the requirements for such status are not
satisfied. The Pooling Agreement with respect to each REMIC will include
provisions designed to maintain the Trust Fund's status as a REMIC under the
REMIC Provisions. It is not anticipated that the status of any Trust Fund as a
REMIC will be terminated.
Characterization of Investments in REMIC Certificates. In general, the
REMIC Certificates will be "real estate assets" within the meaning of Section
856(c)(5)(B) 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)(B) 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)(B) 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
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Certificates or REMIC Residual Certificates in the related REMIC within the
meaning of the REMIC Provisions.
Solely for purposes of determining whether the REMIC Certificates will be
"real estate assets" within the meaning of Section 856(c)(5)(B) 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.
It is not entirely clear under the Code that interest paid on debt
instruments (such as REMIC Regular Certificates) that are subject to early
termination through prepayments and that have limited enforcement rights should
be considered "qualified stated interest". However, unless disclosed otherwise
in the Prospectus Supplement, the Trust Fund intends to treat stated interest as
"qualified stated interest" for purposes of determining if, and to what extent,
the REMIC Regular Certificates have been issued with original issue discount for
United States federal income tax purposes. Nevertheless, holders of the REMIC
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Regular Certificates should consult their own tax advisors with respect to
whether interest in the REMIC Regular Certificates qualifies as "qualified
stated interest" under the Code.
In the case of REMIC Regular Certificates bearing adjustable interest
rates, the determination of the total amount of original issue discount and the
timing of the inclusion thereof will vary according to the characteristics of
such REMIC Regular Certificates. If the original issue discount rules apply to
such Certificates, the related Prospectus Supplement will describe the manner in
which such rules will be applied with respect to those Certificates in preparing
information returns to the Certificateholders and the Internal Revenue Service
(the "IRS").
In addition, if the accrued interest to be paid on the first Distribution
Date is computed with respect to a period that begins prior to the Closing Date,
a portion of the purchase price paid for a REMIC Regular Certificate will
reflect such accrued interest. In such cases, information returns provided to
the Certificateholders and the IRS will be based on the position that the
portion of the purchase price paid for the interest accrued with respect to
periods prior to the Closing Date is treated as part of the overall cost of such
REMIC Regular Certificate (and not as a separate asset the cost of which is
recovered entirely out of interest received on the next Distribution Date) and
that portion of the interest paid on the first Distribution Date in excess of
interest accrued for a number of days corresponding to the number of days from
the Closing Date to the first Distribution Date should be included in the stated
redemption price of such REMIC Regular Certificate. However, the OID Regulations
state that all or some portion of such accrued interest may be treated as a
separate asset the cost of which is recovered entirely out of interest paid on
the first Distribution Date. It is unclear how an election to do so would be
made under the OID Regulations and whether such an election could be made
unilaterally by a Certificateholder.
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
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referred to in the preceding sentence will be calculated (i) assuming that
distributions on the REMIC Regular Certificate will be received in future
periods based on the Mortgage Loans being prepaid at a rate equal to the
Prepayment Assumption and (ii) using a discount rate equal to the original yield
to maturity of the Certificate. For these purposes, the original yield to
maturity of the Certificate will be calculated based on its issue price and
assuming that distributions on the Certificate will be made in all accrual
periods based on the Mortgage Loans being prepaid at a rate equal to the
Prepayment Assumption. The adjusted issue price of a REMIC Regular Certificate
at the beginning of any accrual period will equal the issue price of such
Certificate, increased by the aggregate amount of original issue discount that
accrued with respect to such Certificate in prior accrual periods, and reduced
by the amount of any distributions made on such REMIC Regular Certificate in
prior accrual periods of amounts included in the stated redemption price. The
original issue discount accruing during any accrual period, computed as
described above, will be allocated ratably to each day during the accrual period
to determine the daily portion of original issue discount for such day.
A subsequent purchaser of a REMIC Regular Certificate that purchases such
Certificate at a cost (excluding any portion of such cost attributable to
accrued qualified stated interest) less than its remaining stated redemption
price will also be required to include in gross income the daily portions of any
original issue discount with respect to such Certificate. However, each such
daily portion will be reduced, if such cost is in excess of its "adjusted issue
price," in proportion to the ratio such excess bears to the aggregate original
issue discount remaining to be accrued on such REMIC Regular Certificate. The
adjusted issue price of a REMIC Regular Certificate on any given day equals the
sum of (i) the adjusted issue price (or, in the case of the first accrual
period, the issue price) of such Certificate at the beginning of the accrual
period which includes such day and (ii) the daily portions of original issue
discount for all days during such accrual period prior to such day.
Market Discount. A Certificateholder that purchases a REMIC Regular
Certificate at a market discount, that is, in the case of a REMIC Regular
Certificate issued without original issue discount, at a purchase price less
than its 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
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original issue discount of a de minimis amount. See "--Taxation of Owners of
REMIC Regular Certificates--Original Issue Discount." Such treatment would
result in discount being included in income at a slower rate than discount would
be required to be included in income using the method described above.
Section 1276(b)(3) of the Code specifically authorizes the Treasury
Department to issue regulations providing for the method for accruing market
discount on debt instruments, the principal of which is payable in more than one
installment. Until regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. The Committee Report indicates
that in each accrual period market discount on REMIC Regular Certificates should
accrue, at the Certificateholder's option: (i) on the basis of a constant yield
method, (ii) in the case of a REMIC Regular Certificate issued without original
issue discount, in an amount that bears the same ratio to the total remaining
market discount as the stated interest paid in the accrual period bears to the
total amount of stated interest remaining to be paid on the REMIC Regular
Certificate as of the beginning of the accrual period, or (iii) in the case of a
REMIC Regular Certificate issued with original issue discount, in an amount that
bears the same ratio to the total remaining market discount as the original
issue discount accrued in the accrual period bears to the total original issue
discount remaining on the REMIC Regular Certificate at the beginning of the
accrual period. Moreover, the Prepayment Assumption used in calculating the
accrual of original issue discount is also used in calculating the accrual of
market discount. Because the regulations referred to in this paragraph have not
been issued, it is not possible to predict what effect such regulations might
have on the tax treatment of a REMIC Regular Certificate purchased at a discount
in the secondary market.
To the extent that REMIC Regular Certificates provide for monthly or other
periodic distributions throughout their term, the effect of these rules may be
to require market discount to be includible in income at a rate that is not
significantly slower than the rate at which such discount would accrue if it
were original issue discount. Moreover, in any event a holder of a REMIC Regular
Certificate generally will be required to treat a portion of any gain on the
sale or exchange of such Certificate as ordinary income to the extent of the
market discount accrued to the date of disposition under one of the foregoing
methods, less any accrued market discount previously reported as ordinary
income.
Further, under Section 1277 of the Code a holder of a REMIC Regular
Certificate may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry a REMIC Regular Certificate purchased with market discount.
For these purposes, the de minimis rule referred to above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during such taxable year and is, in general, allowed as a deduction not later
than the year in which such market discount is includible in income. If such
holder elects to include market discount in income currently as it accrues on
all market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Premium. A REMIC Regular Certificate purchased at a cost (excluding any
portion of such cost attributable to accrued qualified stated interest) greater
than its remaining stated redemption price will be considered to be purchased at
a premium. The holder of such a REMIC Regular Certificate may elect under
Section 171 of the Code to amortize such premium under the constant yield method
over the life of the Certificate. If 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. If made, such an election will apply to all
debt instruments having amortizable bond premium that the holder owns or
subsequently acquires. Amortizable premium will be treated as an offset to
interest income on the related debt instrument, rather than as a separate
interest deduction. The OID Regulations also permit Certificateholders to elect
to include all interest, discount and premium in income based on a constant
yield method, further treating the Certificateholder as having made the election
to amortize premium generally. See "--Taxation of Owners of REMIC Regular
Certificates--Market Discount." The Committee Report states that the same rules
that apply to accrual of market discount (which rules will require use of a
Prepayment Assumption in accruing market discount with respect to REMIC Regular
Certificates without regard to whether such Certificates have original issue
discount) will also apply in amortizing bond premium under Section 171 of the
Code.
Realized Losses. Under Section 166 of the Code, both corporate holders of
the REMIC Regular Certificates and noncorporate holders of the REMIC Regular
Certificates that acquire such Certificates in
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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 Mortgage 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 Mortgage 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 any such payment could be includible in income immediately
upon its receipt, the IRS could also 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.
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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. 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
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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 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
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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.
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.
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Accordingly, all transfers of REMIC Residual Certificates that may constitute
noneconomic residual interests will be subject to certain restrictions under the
terms of the related Pooling Agreement that are intended to reduce the
possibility of any such transfer being disregarded. Such restrictions will
require each party to a transfer to provide an affidavit that no purpose of such
transfer is to impede the assessment or collection of tax, including certain
representations as to the financial condition of the prospective transferee, as
to which the transferor is also required to make a reasonable investigation to
determine such transferee's historic payment of its debts and ability to
continue to pay its debts as they come due in the future. Prior to purchasing a
REMIC Residual Certificate, prospective purchasers should consider the
possibility that a purported transfer of such REMIC Residual Certificate by such
a purchaser to another purchaser at some future date may be disregarded in
accordance with the above-described rules which would result in the retention of
tax liability by such purchaser.
The related Prospectus Supplement will disclose whether offered REMIC
Residual Certificates may be considered "noneconomic" residual interests under
the REMIC Regulations; provided, however, that any disclosure that a REMIC
Residual Certificate will not be considered "noneconomic" will be based upon
certain assumptions, and the Depositor will make no representation that a REMIC
Residual Certificate will not be considered "noneconomic" for purposes of the
above-described rules. See "--Foreign Investors in REMIC Certificates--REMIC
Residual Certificates" below for additional restrictions applicable to transfers
of certain REMIC Residual Certificates to foreign persons.
Mark-to-Market Rules. On December 24, 1996, the IRS released final
regulations (the "Mark-to-Market Regulations") relating to the requirement that
a securities dealer mark to market securities held for sale to customers. 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
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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.
Gain from the sale of a REMIC Regular Certificate that might otherwise be
capital gain will be treated as ordinary income to the extent such gain does not
exceed the excess, if any, of (i) the amount that would have been includible in
the seller's income with respect to such REMIC Regular Certificate assuming that
income had accrued thereon at a rate equal to 110% of the "applicable Federal
rate" (generally, a rate based on an average of current yields on Treasury
securities having a maturity comparable to that of the Certificate based on the
application of the Prepayment Assumption to such Certificate, which rate is
computed and published monthly by the IRS), determined as of the date of
purchase of such REMIC Regular Certificate, over (ii) the amount of ordinary
income actually includible in the seller's income prior to such sale. In
addition, gain recognized on the sale of a REMIC Regular Certificate by a seller
who purchased such REMIC Regular Certificate at a market discount will be
taxable as ordinary income in an amount not exceeding the portion of such
discount that accrued during the period such REMIC Certificate was held by such
holder, reduced by any market discount included in income under the rules
described above under "--Taxation of Owners of REMIC Regular
Certificates--Market Discount" and "--Premium."
REMIC Certificates will be "evidences of indebtedness" within the meaning
of Section 582(c)(1) of the Code, so that gain or loss recognized from the sale
of a REMIC Certificate by a bank or thrift institution to which such section
applies will be ordinary income or loss.
A portion of any gain from the sale of a REMIC Regular Certificate that
might otherwise be capital gain may be treated as ordinary income to the extent
that such Certificate is held as part of a "conversion transaction" within the
meaning of Section 1258 of the Code. A conversion transaction generally is one
in which the taxpayer has taken two or more positions in the same or similar
property that reduce or eliminate market risk, if substantially all of the
taxpayer's return is attributable to the time value of the taxpayer's net
investment in such transaction. The amount of gain so realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate "applicable Federal rate" (which rate is computed and
published monthly by the IRS) at the time the taxpayer enters into the
conversion transaction, subject to appropriate reduction for prior inclusion of
interest and other ordinary income items from the transaction.
Finally, a taxpayer may elect to have net capital gain taxed at ordinary
income rates rather than capital gains rates in order to include such net
capital gain in total net investment income for the taxable year, for purposes
of the rule that limits the deduction of interest on indebtedness incurred to
purchase or carry property held for investment to a taxpayer's net investment
income.
Except as may be provided in Treasury regulations yet to be issued, if the
seller of a REMIC Residual Certificate reacquires a REMIC Residual Certificate,
or acquires any other residual interest in a REMIC or any similar interest in a
"taxable mortgage pool" (as defined in Section 7701(i) of the Code) during the
period beginning six months before, and ending six months after, the date of
such sale, such sale will be subject to the "wash sale" rules of Section 1091 of
the Code. In that event, any loss realized by the REMIC Residual
Certificateholder on the sale will not be deductible, but instead will be added
to such REMIC Residual Certificateholder's adjusted basis in the newly-acquired
asset.
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Prohibited Transactions Tax and Other Taxes. The Code imposes a tax on
REMICs equal to 100% of the net income derived from "prohibited transactions" (a
"Prohibited Transactions Tax"). In general, subject to certain specified
exceptions a prohibited transaction means the disposition of a Mortgage Loan,
the receipt of income from a source other than a Mortgage Loan or certain other
permitted investments, the receipt of compensation for services, or gain from
the disposition of an asset purchased with the payments on the Mortgage Loans
for temporary investment pending distribution on the REMIC Certificates. It is
not anticipated that the REMIC will engage in any prohibited transactions in
which it would recognize a material amount of net income.
In addition, certain contributions to a REMIC made after the day on which
the REMIC issues all of its interests could result in the imposition of a tax on
the REMIC equal to 100% of the value of the contributed property (a
"Contributions Tax"). Each Pooling Agreement will include provisions designed to
prevent the acceptance of any contributions that would be subject to such tax.
REMICs also are subject to federal income tax at the highest corporate rate
on "net income from foreclosure property," determined by reference to the rules
applicable to real estate investment trusts. "Net income from foreclosure
property" generally means gain from the sale of a foreclosure property that is
inventory property and gross income from foreclosure property other than
qualifying rents and other qualifying income for a real estate investment trust.
Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any REMIC will recognize "net income from foreclosure property"
subject to federal income tax.
Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any material state or local income or franchise tax will be
imposed on any REMIC.
Unless otherwise stated in the related Prospectus Supplement, and to the
extent permitted by then applicable laws, any Prohibited Transactions Tax,
Contributions Tax, tax on "net income from foreclosure property" or state or
local income or franchise tax that may be imposed on the REMIC will be borne by
the related Master Servicer, Special Servicer or Trustee in any case out of its
own funds, provided that such person has sufficient assets to do so, and
provided further that such tax arises out of a breach of such person's
obligations under the related Pooling Agreement and in respect of compliance
with applicable laws and regulations. Any such tax not borne by a Master
Servicer, Special Servicer or Trustee will be charged against the related Trust
Fund resulting in a reduction in amounts payable to holders of the related REMIC
Certificates.
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain
Organizations. If a REMIC Residual Certificate is transferred to a
"disqualified organization" (as defined below), a tax would be imposed in an
amount (determined under the REMIC Regulations) equal to the product of (i) the
present value (discounted using the "applicable Federal rate" for obligations
whose term ends on the close of the last quarter in which excess inclusions are
expected to accrue with respect to the REMIC Residual Certificate, which rate is
computed and published monthly by the IRS) of the total anticipated excess
inclusions with respect to such REMIC Residual Certificate for periods after the
transfer and (ii) the highest marginal federal income tax rate applicable to
corporations. The anticipated excess inclusions must be determined as of the
date that the REMIC Residual Certificate is transferred and must be based on
events that have occurred up to the time of such transfer, the Prepayment
Assumption and any required or permitted clean up calls or required liquidation
provided for in the REMIC's organizational documents. Such a tax generally would
be imposed on the transferor of the REMIC Residual Certificate, except that
where such transfer is through an agent for a disqualified organization, the tax
would instead be imposed on such agent. However, a transferor of a REMIC
Residual Certificate would in no event be liable for such tax with respect to a
transfer if the transferee furnishes to the transferor an affidavit that the
transferee is not a disqualified organization and, as of the time of the
transfer, the transferor does not have actual knowledge that such affidavit is
false. Moreover, an entity will not qualify as a REMIC unless there are
reasonable arrangements designed to ensure that (i) residual interests in such
entity are not held by disqualified organizations and (ii) information necessary
for the application of the tax described herein will be made available.
Restrictions on the transfer of REMIC Residual Certificates and certain other
provisions that are intended to meet this requirement will be included in the
Pooling Agreement, and will be discussed more fully in any Prospectus Supplement
relating to the offering of any REMIC Residual Certificate.
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In addition, if a "pass-through entity" (as defined below) includes in
income excess inclusions with respect to a REMIC Residual Certificate, and a
disqualified organization is the record holder of an interest in such entity,
then a tax will be imposed on such entity equal to the product of (i) the amount
of excess inclusions on the REMIC Residual Certificate that are allocable to the
interest in the pass-through entity held by such disqualified organization and
(ii) the highest marginal federal income tax rate imposed on corporations. A
pass-through entity will not be subject to this tax for any period, however, if
each record holder of an interest in such pass-through entity furnishes to such
pass-through entity (i) such holder's social security number and a statement
under penalty of perjury that such social security number is that of the record
holder or (ii) a statement under penalty of perjury that such record holder is
not a disqualified organization.
For these purposes, a "disqualified organization" means (i) the United
States, any State or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of the foregoing
(but would not include instrumentalities described in Section 168(h)(2)(D) of
the Code or the Federal Home Loan Mortgage Corporation), (ii) any organization
(other than a cooperative described in Section 521 of the Code) that is exempt
from federal income tax, unless it is subject to the tax imposed by Section 511
of the Code or (iii) any organization described in Section 1381(a)(2)(C) of the
Code. For these purposes, a "pass-through entity" means any regulated investment
company, real estate investment trust, trust, partnership or certain other
entities described in Section 860E(e)(6) of the Code. In addition, a person
holding an interest in a pass-through entity as a nominee for another person
will, with respect to such interest, be treated as a pass-through entity.
Termination. A REMIC will terminate immediately after the Distribution
Date following receipt by the REMIC of the final payment in respect of the
Mortgage Loans or upon a sale of the REMIC's assets following the adoption by
the REMIC of a plan of complete liquidation. The last distribution on a REMIC
Regular Certificate will be treated as a payment in retirement of a debt
instrument. In the case of a REMIC Residual Certificate, if the last
distribution on such REMIC Residual Certificate is less than the REMIC Residual
Certificateholder's adjusted basis in such REMIC Residual Certificate, such
REMIC Residual Certificateholder should (but may not) be treated as realizing a
loss equal to the amount of such difference. Such loss may be treated as a
capital loss and may be subject to the "wash sale" rules of Section 1091 of the
Code.
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
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information reports generally are required to be sent to individual holders of
REMIC Regular Interests and the IRS; holders of REMIC Regular Certificates that
are corporations, trusts, securities dealers and certain other non-individuals
will be provided interest and original issue discount income information and the
information set forth in the following paragraph upon request in accordance with
the requirements of the applicable regulations. The information must be provided
by the later of 30 days after the end of the quarter for which the information
was requested, or two weeks after the receipt of the request. The REMIC must
also comply with rules requiring a REMIC Regular Certificate issued with
original issue discount to disclose on its face the amount of original issue
discount and the issue date, and requiring such information to be reported to
the IRS. Reporting with respect to the REMIC Residual Certificates, including
income, excess inclusions, investment expenses and relevant information
regarding qualification of the REMIC's assets will be made as required under the
Treasury regulations, generally on a quarterly basis.
As applicable, the REMIC Regular Certificate information reports will
include a statement of the adjusted issue price of the REMIC Regular Certificate
at the beginning of each accrual period. In addition, the reports will include
information required by regulations with respect to computing the accrual of any
market discount. Because exact computation of the accrual of market discount on
a constant yield method would require information relating to the holder's
purchase price that the REMIC may not have, such regulations only require that
information pertaining to the appropriate proportionate method of accruing
market discount be provided. See "--Taxation of Owners of REMIC Regular
Certificates--Market Discount."
The responsibility for complying with the foregoing reporting rules will be
borne by either the Trustee or the Master Servicer, unless otherwise stated in
the related Prospectus Supplement.
Backup Withholding with Respect to REMIC Certificates. Payments of
interest and principal, as well as payments of proceeds from the sale of REMIC
Certificates, may be subject to the "backup withholding tax" under Section 3406
of the Code at a rate of 31% if recipients of such payments fail to furnish to
the payor certain information, including their taxpayer identification numbers,
or otherwise fail to establish an exemption from such tax. Any amounts deducted
and withheld from a distribution to a recipient would be allowed as a credit
against such recipient's federal income tax. Furthermore, certain penalties may
be imposed by the IRS on a recipient of payments that is required to supply
information but that does not do so in the proper manner.
Foreign Investors in REMIC Certificates. A REMIC Regular Certificateholder
that is not a "United States person" (as defined below) and is not subject to
federal income tax as a result of any direct or indirect connection to the
United States in addition to its ownership of a REMIC Regular Certificate will
not, unless otherwise disclosed in 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 the District of Columbia (unless, in the case of a
partnership, Treasury regulations are promulgated that provide otherwise), 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 United States 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
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interest, including distributions in respect of accrued original issue discount,
to such holder may be subject to a tax rate of 30%, subject to reduction under
any applicable tax treaty.
In addition, the foregoing rules will not apply to exempt a United States
shareholder of a controlled foreign corporation from taxation on such United
States shareholder's allocable portion of the interest income received by such
controlled foreign corporation.
Further, it appears that a REMIC Regular Certificate would not be included
in the estate of a non-resident alien individual and would not be subject to
United States estate taxes. However, Certificateholders who are non-resident
alien individuals should consult their tax advisors concerning this question.
Transfers of REMIC Residual Certificates to investors that are not United
States persons will be prohibited under the related Pooling Agreement.
New Withholding Regulations. On October 6, 1997, the Treasury Department
issued new regulations (the "New Regulations") which make certain modifications
to the withholding, backup withholding and information reporting rules described
above. The New Regulations attempt to unify certification requirements and
modify reliance standards. The IRS recently issued Notice 99-25 which generally
makes the New Regulations effective for payments made after December 31, 2000,
subject to certain transition rules. Prospective investors are urged to consult
their own tax advisors regarding the New Regulations.
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
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that such characterization is appropriate. Counsel to the Depositor will not
deliver any opinion on these questions. Prospective purchasers to which such
characterization of an investment in Grantor Trust Strip Certificates is
material should consult their tax advisors regarding whether the Grantor Trust
Strip Certificates, and the income therefrom, will be so characterized.
The Grantor Trust Strip Certificates will be "obligation[s](including any
participation or certificate of beneficial ownership therein) which . . . [are]
principally secured by an interest in real property" within the meaning of
Section 860G(a)(3)(A) of the Code.
TAXATION OF OWNERS OF GRANTOR TRUST FRACTIONAL INTEREST CERTIFICATES
General. Holders of a particular series of Grantor Trust Fractional
Interest Certificates generally will be required to report on their federal
income tax returns their shares of the entire income from the Mortgage Loans
(including amounts used to pay reasonable servicing fees and other expenses) and
will be entitled to deduct their shares of any such reasonable servicing fees
and other expenses. Because of stripped interests, market or original issue
discount, or premium, the amount includible in income on account of a Grantor
Trust Fractional Interest Certificate may differ significantly from the amount
distributable thereon representing interest on the Mortgage Loans. Under Section
67 of the Code, an individual, estate or trust holding a Grantor Trust
Fractional Interest Certificate directly or through certain pass-through
entities will be allowed a deduction for such reasonable servicing fees and
expenses only to the extent that the aggregate of such holder's miscellaneous
itemized deductions exceeds two percent of such holder's adjusted gross income.
In addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be reduced by the lesser of (i) 3% of the excess
of the individual's adjusted gross income over such amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for the taxable year. The
amount of additional taxable income reportable by holders of Grantor Trust
Fractional Interest Certificates who are subject to the limitations of either
Section 67 or Section 68 of the Code may be substantial. Further,
Certificateholders (other than corporations) subject to the alternative minimum
tax may not deduct miscellaneous itemized deductions in determining such
holder's alternative minimum taxable income. Although it is not entirely clear,
it appears that in transactions in which multiple classes of Grantor Trust
Certificates (including Grantor Trust Strip Certificates) are issued, such fees
and expenses should be allocated among the classes of Grantor Trust Certificates
using a method that recognizes that each such class benefits from the related
services. In the absence of statutory or administrative clarification as to the
method to be used, it currently is intended to base information returns or
reports to the IRS and Certificateholders on a method that allocates such
expenses among classes of Grantor Trust Certificates with respect to each period
based on the distributions made to each such class during that period.
The federal income tax treatment of Grantor Trust Fractional Interest
Certificates of any series will depend on whether they are subject to the
"stripped bond" rules of Section 1286 of the Code. Grantor Trust Fractional
Interest Certificates may be subject to those rules if (i) a class of Grantor
Trust Strip Certificates is issued as part of the same series of Certificates or
(ii) the Depositor or any of its affiliates retains (for its own account or for
purposes of resale) a right to receive a specified portion of the interest
payable on a Mortgage Asset. Further, the IRS has ruled that an unreasonably
high servicing fee retained by a seller or servicer will be treated as a
retained ownership interest in mortgages that constitutes a stripped coupon. For
purposes of determining what constitutes reasonable servicing fees for various
types of mortgages the IRS has established certain "safe harbors." The servicing
fees paid with respect to the Mortgage Loans for certain series of Grantor Trust
Certificates may be higher than the "safe harbors" and, accordingly, may not
constitute reasonable servicing compensation. The related Prospectus Supplement
will include information regarding servicing fees paid to a Master Servicer, a
Special Servicer, any Sub-Servicer or their respective affiliates necessary to
determine whether the preceding "safe harbor" rules apply.
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
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taxpayer) will be required to report interest income from its Grantor Trust
Fractional Interest Certificate for each month in an amount equal to the income
that accrues on such Certificate in that month calculated under a constant yield
method, in accordance with the rules of the Code relating to original issue
discount.
The original issue discount on a Grantor Trust Fractional Interest
Certificate will be the excess of such Certificate's stated redemption price
over its issue price. The issue price of a Grantor Trust Fractional Interest
Certificate as to any purchaser will be equal to the price paid by such
purchaser for the Grantor Trust Fractional Interest Certificate. The stated
redemption price of a Grantor Trust Fractional Interest Certificate will be the
sum of all payments to be made on such Certificate, other than "qualified stated
interest," if any, as well as such Certificate's share of reasonable servicing
fees and other expenses. See "--Taxation of Grantor Trust Fractional Interest
Certificates--If Stripped Bond Rules Do Not Apply" for a definition of
"qualified stated interest." In general, the amount of such income that accrues
in any month would equal the product of such holder's adjusted basis in such
Grantor Trust Fractional Interest Certificate at the beginning of such month
(see "--Sales of Grantor Trust Certificates") and the yield of such Grantor
Trust Fractional Interest Certificate to such holder. Such yield would be
computed at the rate (compounded based on the regular interval between payment
dates) that, if used to discount the holder's share of future payments on the
Mortgage Loans, would cause the present value of those future payments to equal
the price at which the holder purchased such Certificate. In computing yield
under the stripped bond rules, a Certificateholder's share of future payments on
the Mortgage Loans will not include any payments made in respect of any spread
or any other ownership interest in the Mortgage Loans retained by the Depositor,
a Master Servicer, a Special Servicer, any Sub-Servicer or their respective
affiliates, but will include such Certificateholder's share of any reasonable
servicing fees and other expenses.
Section 1272(a)(6) of the Code requires (i) the use of a reasonable
prepayment assumption in accruing original issue discount and (ii) adjustments
in the accrual of original issue discount when prepayments do not conform to the
prepayment assumption, with respect to certain categories of debt instruments,
and regulations could be adopted applying those provisions to the Grantor Trust
Fractional Interest Certificates. It is unclear whether those provisions would
be applicable to the Grantor Trust Fractional Interest Certificates or whether
use of a reasonable prepayment assumption may be required or permitted without
reliance on these rules. It is also uncertain, if a prepayment assumption is
used, whether the assumed prepayment rate would be determined based on
conditions at the time of the first sale of the Grantor Trust Fractional
Interest Certificate or, with respect to any holder, at the time of purchase of
the Grantor Trust Fractional Interest Certificate by that holder.
Certificateholders are advised to consult their own tax advisors concerning
reporting original issue discount in general and, in particular, whether a
prepayment assumption should be used in reporting original issue discount with
respect to Grantor Trust Fractional Interest Certificates.
In the case of a Grantor Trust Fractional Interest Certificate acquired at
a price equal to the principal amount of the Mortgage Loans allocable to such
Certificate, the use of a prepayment assumption generally would not have any
significant effect on the yield used in calculating accruals of interest income.
In the case, however, of a Grantor Trust Fractional Interest Certificate
acquired at a discount or premium (that is, at a price less than or greater than
such principal amount, respectively), the use of a reasonable prepayment
assumption would increase or decrease such yield, and thus accelerate or
decelerate, respectively, the reporting of income.
If a prepayment assumption is not used, then when a Mortgage Loan prepays
in full, the holder of a Grantor Trust Fractional Interest Certificate acquired
at a discount or a premium generally will recognize ordinary income or loss
equal to the difference between the portion of the prepaid principal amount of
the Mortgage Loan that is allocable to such Certificate and the portion of the
adjusted basis of such Certificate that is allocable to such Certificateholder's
interest in the Mortgage Loan. If a prepayment assumption is used, it appears
that no separate item of income or loss should be recognized upon a prepayment.
Instead, a prepayment should be treated as a partial payment of the stated
redemption price of the Grantor Trust Fractional Interest Certificate and
accounted for under a method similar to that described for taking account of
original issue discount on REMIC Regular Certificates. See "--REMICs--Taxation
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 1.1286-1, certain stripped bonds are to
be treated as market discount bonds and, accordingly, any purchaser of such a
bond is to account for any discount on the bond as market discount rather than
original issue discount. This treatment only applies, however, if immediately
after the most recent disposition of the bond by a person stripping one or more
coupons from the bond and disposing of the bond or coupon (i) there is no
original issue discount (or only a de minimis amount of original issue discount)
or (ii) the annual stated rate of interest payable on the original bond is no
more than one percentage point lower than the gross interest rate payable on the
original mortgage loan (before subtracting any servicing fee or any stripped
coupon). If interest payable on a Grantor Trust Fractional Interest Certificate
is more than one percentage point lower than the gross interest rate payable on
the Mortgage Loans, the related Prospectus Supplement will disclose that fact.
If the original issue discount or market discount on a Grantor Trust Fractional
Interest Certificate determined under the stripped bond rules is less than 0.25%
of the stated redemption price multiplied by the weighted average maturity of
the Mortgage Loans, then such original issue discount or market discount will be
considered to be de minimis. Original issue discount or market discount of only
a de minimis amount will be included in income in the same manner as de minimis
original issue and market discount described in "--Taxation of Owners of Grantor
Trust Fractional Interest Certificates--If Stripped Bond Rules Do Not Apply" and
"--Market Discount."
If Stripped Bond Rules Do Not Apply. Subject to the discussion below on
original issue discount, if the stripped bond rules do not apply to a Grantor
Trust Fractional Interest Certificate, the Certificateholder will be required to
report its share of the interest income on the Mortgage Loans in accordance with
such Certificateholder's normal method of accounting. The original issue
discount rules will apply to a Grantor Trust Fractional Interest Certificate to
the extent it evidences an interest in Mortgage Loans issued with original issue
discount.
The original issue discount, if any, on the Mortgage Loans will equal the
difference between the stated redemption price of such Mortgage Loans and their
issue price. Under the OID Regulations, the stated redemption price is equal to
the total of all payments to be made on such Mortgage Loan other than "qualified
stated interest." "Qualified stated interest" includes interest that is
unconditionally payable at least annually at a single fixed rate, at a
"qualified floating rate," or at an "objective rate," a combination of a single
fixed rate and one or more "qualified floating rates" or one "qualified inverse
floating rate," or a combination of "qualified floating rates" that does not
operate in a manner that accelerates or defers interest payments on such
Mortgage Loan. In general, the issue price of a Mortgage Loan will be the amount
received by the borrower from the lender under the terms of the Mortgage Loan,
less any "points" paid by the borrower, and the stated redemption price of a
Mortgage Loan will equal its principal amount, unless the Mortgage Loan provides
for an initial below-market rate of interest or the acceleration or the deferral
of interest payments.
In the case of Mortgage Loans bearing adjustable or variable interest
rates, the related Prospectus Supplement will describe the manner in which such
rules will be applied with respect to those Mortgage Loans in preparing
information returns to the Certificateholders and the IRS.
Notwithstanding the general definition of original issue discount, original
issue discount will be considered to be de minimis if such original issue
discount is less than 0.25% of the stated redemption price multiplied by the
weighted average maturity of the Mortgage Loan. For this purpose, the weighted
average maturity of the Mortgage Loan will be computed as the sum of the amounts
determined, as to each payment included in the stated redemption price of such
Mortgage Loan, by multiplying (i) the number of complete
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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 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
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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 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.
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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 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
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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.
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
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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. However, to the extent the
Grantor Trust Certificate represents an interest in real property (e.g. because
of foreclosures), it would be treated as representing a United States real
property interest for United States federal income tax purposes. This could
result in withholding consequences to non-U.S. Certificateholders and potential
U.S. taxation.
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.
New Withholding Regulations. On October 6, 1997, the Treasury Department
issued new regulations (the "New Regulations") which make certain modifications
to the withholding, backup withholding and information reporting rules described
above. The New Regulations attempt to unify certification requirements and
modify reliance standards. The IRS recently issued Notice 99-25 which generally
makes the New Regulations effective for payments made after December 31, 2000,
subject to certain transition rules. Prospective investors are urged to consult
their own tax advisors regarding the New Regulations.
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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 Code. In addition, if the Trust Assets constitute Plan assets, the
purchase of Certificates by a Plan, as well as
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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 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
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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.
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
99
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residential and commercial structure, such as certain Multifamily Loans, and
originated by types of Originators specified in SMMEA, will be "mortgage related
securities" for purposes of SMMEA. "Mortgage related securities" are legal
investments to the same extent that, under applicable law, obligations issued by
or guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof constitute legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business entities
(including depository institutions, insurance companies and pension funds
created pursuant to or existing under the laws of the United States or of any
state, the authorized investments of which are subject to state regulation).
Under SMMEA, if a state enacted legislation prior to October 3, 1991 that
specifically limits the legal investment authority of any such entities with
respect to "mortgage related securities," Offered Certificates would constitute
legal investments for entities subject to such legislation only to the extent
provided in such legislation.
SMMEA also amended the legal investment authority of federally chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal with "mortgage
related securities" without limitation as to the percentage of their assets
represented thereby, federal credit unions may invest in such securities, and
national banks may purchase such securities for their own account without regard
to the limitations generally applicable to investment securities set forth in 12
U.S.C. 24 (Seventh), subject in each case to such regulations as the applicable
federal regulatory authority may prescribe. In this connection, effective
December 31, 1996, the Office of the Comptroller of the Currency (the "OCC")
amended 12 C.F.R. Part 1 to authorize national banks to purchase and sell for
their own account, without limitation as to a percentage of the bank's capital
and surplus (but subject to compliance with certain general standards concerning
"safety and soundness" and retention of credit information in 12 C.F.R.
Section 1.5), certain "Type IV securities", defined in 12 C.F.R.
Section 1.2(1) to include certain "commercial mortgage-related securities" and
"residential mortgage-related securities". As so defined, "commercial
mortgage-related security" and "residential mortgage-related security" mean, in
relevant part, "mortgage related security" within the meaning of SMMEA, provided
that, in the case of a "commercial mortgage-related security," it "represents
ownership of a promissory note or certificate of interest or participation that
is directly secured by a first lien on one or more parcels of real estate upon
which one or more commercial structures are located and that is fully secured by
interests in a pool of loans to numerous obligors." In the absence of any rule
or administrative interpretation by the OCC defining the term "numerous
obligors," no representation is made as to whether any class of Offered
Certificates will qualify as "commercial mortgage-related securities", and thus
as "Type IV securities", for investment by national banks. Federal credit unions
should review NCUA Letter to Credit Unions No. 96, as modified by Letter to
Credit Unions No. 108, which includes guidelines to assist federal credit unions
in making investment decisions for mortgage related securities. The NCUA has
adopted rules, codified as 12 C.F.R. Section 703.5(f)-(k), which prohibit
federal credit unions from investing in certain mortgage related securities
(including securities such as certain classes of Offered Certificates), except
under limited circumstances.
Upon the issuance of final implementing regulations under the Riegle
Community Development and Regulatory Improvement Act of 1994 and subject to any
limitations those regulations may impose, a modification of the definition of
"mortgage related securities" will become effective to include among the types
of loans to which such securities may relate loans secured by "one or more
parcels of real estate upon which is located one or more commercial structures."
In addition, the related legislative history states that this expanded
definition includes multifamily loans secured by more than one parcel of real
estate upon which is located more than one structure. Until September 23, 2001
any state may enact legislation limiting the extent to which "mortgage related
securities" under this expanded definition would constitute legal investments
under that state's laws.
All depository institutions considering an investment in the Offered
Certificates of any series should review the Federal Financial Institutions
Examination Council's Supervisory Policy Statement on the Selection of
Securities Dealers and Unsuitable Investment Practices (to the extent adopted by
their respective regulatory authorities), setting forth, in relevant part,
certain investment practices deemed to be unsuitable for an institution's
investment portfolio, as well as guidelines for investing in certain types of
mortgage related securities.
100
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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.
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
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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>
<CAPTION>
PAGE
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<S> <C>
Accrual Certificates............................12, 41
Accrued Certificate Interest........................41
Act.................................................70
Acute Care Facilities...............................23
ADA.................................................72
ARM Loans...........................................31
Assisted Living Facilities..........................23
Available Distribution Amount.......................40
Bankruptcy Code.....................................66
Book-Entry Certificates.........................14, 40
call risk.......................................18, 37
Capitalized Interest Account....................11, 33
Cash Flow Agreement.............................10, 33
Cash Flow Agreements.............................Cover
CERCLA..........................................26, 69
Certificate Account..........................9, 32, 49
Certificate Balance..........................2, 12, 42
Certificate Owner...............................14, 46
Certificateholders...............................Cover
Certificates..................................Cover, 8
Closing Date........................................75
Code............................................14, 73
Commercial Properties............................8, 29
Commission...........................................2
Committee Report....................................75
Companion Class.................................13, 42
CON.................................................24
Contributions Tax...................................85
Controlled Amortization Class...................13, 42
Cooperatives........................................29
CPR.................................................36
Credit Support...........................Cover, 10, 33
Cut-off Date........................................13
Debt Service Coverage Ratio.........................30
Definitive Certificate..............................14
Definitive Certificates.........................40, 47
Depositor........................................8, 29
Determination Date..................................40
Direct Participants.............................46, 47
Distribution Date...................................12
Distribution Date Statement.........................43
DOL.................................................97
DTC......................................2, 14, 40, 46
Due Dates...........................................31
Due Period..........................................43
Duff & Phelps.......................................98
Equity Participation................................31
ERISA...........................................16, 97
Excess Funds........................................39
Exchange Act.........................................3
Excluded Plan.......................................99
<CAPTION>
PAGE
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<S> <C>
Exemption...........................................98
FAMC.................................................9
FHLMC................................................9
Fitch...............................................98
FNMA.................................................9
Garn Act............................................71
GNMA.................................................9
Grantor Trust Fractional Interest Certificates......15
Grantor Trust Fund..................................73
Grantor Trust Strip Certificate.....................88
Health Care-Related Facilities......................23
holder..............................................73
Indirect Participants...............................46
Insurance Proceeds..................................50
IRS.................................................76
Issue Premium.......................................81
L/C Bank............................................62
Liquidation Proceeds................................50
Loan-to-Value Ratio.................................30
Lock-out Expiration Date............................31
Lock-out Period.....................................31
Mark-to-Market Regulations..........................83
Master Servicer...................................2, 8
MBS Agreement.......................................32
MBS Issuer..........................................32
MBS Servicer........................................32
MBS Trustee.........................................32
Merrill Lynch......................................101
Moody's.............................................98
mortgage instruments................................63
Mortgage Loan.......................................63
Mortgage Loans............................Cover, 8, 29
Mortgage Notes......................................29
Mortgage Rate....................................9, 31
Mortgaged Properties................................29
Mortgages...........................................29
Net Leases..........................................30
Net Operating Income................................30
Nonrecoverable Advance..............................43
OCC................................................100
Offered Certificates.............................Cover
OID Regulations.....................................73
Originator..........................................29
PAC.................................................37
Participants....................................28, 46
Parties in Interest.................................97
Pass-Through Rate................................2, 12
Permitted Investments...............................50
Plans...............................................97
prepayment..........................................36
Prepayment Interest Shortfall.......................34
</TABLE>
103
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prepayment Premium..................................31
Prohibited Transactions Tax.........................85
Prospectus Supplement............................Cover
Rating Agency.......................................16
RCRA................................................69
Record Date.........................................40
Related Proceeds....................................43
Relief Act..........................................72
REMIC Certificates..................................73
REMIC Provisions....................................73
REMIC Regular Certificates......................14, 74
REMIC Regulations...................................73
REMIC Residual Certificates.....................14, 74
REO Property....................................44, 52
Restricted Group....................................98
Senior Certificates.............................11, 40
Senior Housing......................................23
Servicing Standard..................................52
Skilled Nursing Facilities..........................23
<CAPTION>
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<S> <C>
SMMEA...............................................99
SPA.................................................36
Special Servicer..............................2, 8, 53
Standard & Poor's...................................98
Sub-Servicer........................................53
Sub-Servicing Agreement.............................53
Subordinate Certificates........................11, 40
TAC.................................................37
Tiered REMICs.......................................74
Title V.............................................71
Trust Assets.........................................2
Trust Fund.......................................Cover
UCC.................................................64
Underwriter.........................................98
United States person................................87
Value...............................................30
Voting Rights.......................................45
Warranting Party....................................49
</TABLE>
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This diskette contains 2 files: The files, "MLMI1999C1.XLS" and
"MULTISCHED1999C1.XLS", are Microsoft Excel1 Version 5.0 spreadsheets that
provide, in electronic format, the information shown in Annex A and Annex E,
respectively, 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 the Prospectus Supplement. Prospective
investors are strongly urged to read the paper portion of the 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.
1 Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE>
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
ANNEX A
<TABLE>
<CAPTION>
Control
No. Property Name Address
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ML-107 Potomac Heights Apts 1001 Palmer Road
PW-7905 Blue Cross Blue Shield Building Carotech Boulevard
ML-117 Pond View Corporate Center 74 & 76 Batterson Park Rd
ML-156 College Square SWC Alondra Blvd. & Studebaker Road
PW-8202 First American Building 8435 Stemmons Freeway
ML-126 Hampton Point 3340 Hampton Point Drive
ORIX-3325 Lakeside Plaza Office Center 5205, 5215, 5225 Wiley Post Way
PW-8703A Norport Apartments 9 Seminole Drive
PW-8703B Colonial Court 58 Colonial Court
PW-8703C Lee Hall 523 Summit Street
PW-8703D River Drive Apartments 209A 73rd Street
- --------------------------------------------------------------------------------------------------------
PW-8703 Virginia Apartment Portfolio
ORIX-2965 Frazier-King Building 100 East Royal Lane
ML-129 Tanglewood Apartments 2217 Tanglewood Drive
ML-124 Saw Mill 6900 Saw Mill Village Drive
ML-125 Spring Valley 37850 Spring Lane
ML-138 Sea Crest Oceanfront Resort & Conference Center 350 Quaker Road
ML-147 Quail Park IV 2810 & 2820 W. Charleston Blvd.
ORIX-3208 Putnam Plaza 1245 Dixwell Avenue
ML-111 Fairways Apartments 1450 N Highway 360
ML-143 Lambda Building 515 Broad Hollow Road
ORIX-3108 Centre East Shopping Center 10600 East Washington Street
ML-112 Hempstead Village Commons 300 Peninsula Boulevard
ML-103 Creekside Apartments 7501 Chesterfield
PW-7942 Bend River Mall 3188 N. Highway 97
ORIX-3257 Spectrum Club - Thousand Oaks 2400 Willow Lane
ML-101 1100 W. Ewing Street 1100 - 1120 W. Ewing St.
ML-116 Canyon Crest Village Apts 5200 Chicago Avenue
ORIX-3100 HKS Building 1919 McKinney Avenue
ML-109 RCA - Waterford Apartments 900 East Randol Mill Road
ML-114 247 and 251-253 West 34th St. 247 and 251-253 West 34th St.
ML-115 9033 Wilshire Medical Bldg 9033 Wilshire Blvd
PW-8028 Tops Appliance Building 1525-1535 Hart Place
PW-7562 401 N. Broad Street 401 N. Broad Street
ML-154 Woodgate Apartments 1468 Enfield St.
PW-6132 Arlington Apartments 2700 Whitney Avenue
PW-6376 Shadowbrook Apartments 2200 Westbend Parkway
PW-8763 Sunset Hills Apartments 2825 Bluegrass Lane
ML-134 2551 Tellabs Dr. Building 2551 Tellabs Dr.
ORIX-3266 Northpark Plaza 10343-10355 Federal Boulevard
ORIX-3115 The Financial Center 24022 Calle de la Plata
PW-6410 Gateway Plaza 544-750 N. Third Street
PW-7043 The Woods at Frenchman's Creek 3001 58th Avenue South
ORIX-2939 Beverly Hills Medical Tower 1125 South Beverly Drive
ML-128 Hampton Inn O'Hare 3939 N. Mannheim Road
ORIX-3151 Spring Cypress Village Shopping Center 22432-22560 State Highway 249
ORIX-1825 The Bayview Office Building 1040 Bayview Drive
PW-8064 Office Max 721 East Colorado Boulevard
ML-136 Breckenridge Farms Blue Lake Blvd. & Pole Line Road
PW-7141 Summercreek Apartments 11851 Belair Drive
ORIX-3256 Kingstown Plaza Shopping Center 6615-6669 Post Road
ML-152 Augusta Office Building 1502 Augusta
PW-7790 Smithtown Bypass 732 & 738 Smithtown Bypass
PW-8694 Eckerd's Building 301 South Trade Center Parkway
PW-8313 Crossings Apartments 3555 Highway 544 Overpass
ML-148 Torrey Hills Corporate Centre 11250 El Camino Real
ORIX-3438 Raymour & Flanigan - Southampton 427 Street Road
PW-6482A Ramsey Street Office Building 6200 Ramsey Street
PW-6482B Yadkin Road Building 6448 Yadkin Road
PW-6482C Cliffdale Road Office Building 6920 Cliffdale Road
PW-6482D Henderson Drive Office Building 3466 Henderson Drive
- --------------------------------------------------------------------------------------------------------
PW-6482 Fayetteville/Jacksonville Office Portfolio
ML-139 Dobson Guadalupe Plaza 2039 West Guadalupe Road
PW-7789 Lexus Training Center 205 Jefferson Road
ORIX-3356 Hardaway Office Building 615 Main Street
ML-131A Milford Chase 68 W. Main St.
ML-131B Milford Hunt 260 W. River Road
- --------------------------------------------------------------------------------------------------------
ML-131 Milford Chase/Milford Hunt
ORIX-3161 Woodland Park Plaza 1063-1131 Highway 24
ORIX-2187 Arsenal Street Shopping Center 160 Coleman Avenue
ML-110 Moulton Plaza 28083 Moulton Parkway
PW-7064 Oklahoma City Industrial 2500-2692 West Interstate 40
ML-137 Ocean Mist Resort 97 South Shore Drive
ORIX-2507 Garden Villa 106 Del Norte Drive
ML-151 57-13 49th Street (Maspeth) 57-13 49th Street
ML-135 Avis Rent-A-Car 68-70 East 11th Street
ORIX-2607 Loveland Tech Center 4007 & 4015 South Lincoln Ave.
PW-7395 Red Lion Apartments 4726 Narrow Lane Road
PW-8352 Helix Building 3078 East Sunset Road, Bldg. B
PW-7958 1399 Madison Building 1399 Madison Ave.
ML-140 Eldorado Village Phase I 5100 Eldorado Village Pkwy
PW-7146 Westbrook Towers 317 West Spring Street
ORIX-3238 Southeast Crossing 3320 Hwy 110
ML-145 Office Depot - Newport News 11971 Jefferson Avenue
ORIX-2508 Kingsland Hills Care Center 1229 Highway 1431 West
PW-6232 310 Merrick Road 310 Merrick Road
PW-7312A Plaza MHP 2145 N. Dixie Highway
PW-7312B Spring Valley MHP 769 State Route 42
PW-7312C Blair MHP 16 Pam Lane
- --------------------------------------------------------------------------------------------------------
PW-7312 Plaza Park MHPs
ML-144 MicroSemi Corp. Building 3101 W. Segerstrom Avenue
ORIX-2509 New Covenant Care Center of Dinuba 1730 South College Road
ORIX-3290 250 Beacham Street 250 Beacham Street (Units 5-15)
PW-7710 Peachtree Village Mobile Home Park 1475 Peachtree Industrial Blvd.
PW-6045 Redbud Plaza 210-282 Norman Center Court
ORIX-3434 Gateway 2000 - Newport News 12249 Jefferson Avenue
ML-132 Granada Self Storage 201 W. Stassney Lane West
ORIX-3432 Gateway 2000 - Jackson 5722 East I-55 Frontage Road
ORIX-3433 Gateway 2000 - Little Rock 12018 Chenal Parkway
PW-7130 Ben White Business Park 209 East Ben White Boulevard
ORIX-2104 Kingsgate Shopping Center 8422 Fondren Road
ORIX-3436 Gateway 2000 - Plano 1300 North Central Expressway
ORIX-3430 Gateway 2000 - Brentwood 1601 Westgate Circle
ORIX-2596 Seguin Nursing & Rehab Center 1637 N. King St.
ORIX-3435 Gateway 2000 - Oklahoma City 4001 Northwest Expressway
PW-7166 Cobblestone Apartments 2430-2444 Whitfield Road
PW-7119 Washingtonville Manor MHP East Avenue & Hallock Drive
ORIX-3431 Gateway 2000 - El Paso 820 Sunland Park Drive
ML-108 585-591-597 Prospect Place Apts. 585-591-597 Prospect Place
ML-104 Equivest Industrial Center 500 Washington Street
ORIX-3429 Gateway 2000 - Baton Rouge 9603 Cortana Place
ML-100 954-960 Chapel Street 954-960 Chapel Street
PW-7127 1485-1495 Davis Road 1485-1495 Davis Road
PW-8085 Pepperwood Apartments 13725 Christine Court
PW-7424 St. Pete Beach Apartments 9050-9060 Blind Pass Road
PW-6437 175-181 Broadway 175-181 Broadway
ML-106 Palm Terrace Estates 2711 Mar Vista Drive
PW-7170 O'Connor Place Apartments 316 West 5th Street
PW-7781 Sherwood Lane Apartments 4506 Sherwood Lane
</TABLE>
Control Zip
No. City State Code
- ------------------------------------------------------------
ML-107 Fort Washington MD 20744
PW-7905 Columbia SC 29203
ML-117 Farmington CT 06032
ML-156 Cerritos CA 90703
PW-8202 Dallas TX 75247
ML-126 Silver Spring MD 20904
ORIX-3325 Salt Lake City UT 84116
PW-8703A Portsmouth VA 23702
PW-8703B Colonial Heights VA 23834
PW-8703C Petersburgh VA 23803
PW-8703D Newport News VA 23607
- ------------------------------------------------------------
PW-8703
ORIX-2965 Irving TX 75039
ML-129 Hammond IN 46323
ML-124 Columbus OH 43235
ML-125 Farmington Hills MI 48331
ML-138 North Falmouth MA 02556
ML-147 Las Vegas NV 89107
ORIX-3208 Hamden CT 06514
ML-111 Grand Prairie TX 75050
ML-143 Melville NY 11747
ORIX-3108 Indianapolis IN 46229
ML-112 Hempstead NY 11550
ML-103 Dallas TX 75237
PW-7942 Bend OR 97741
ORIX-3257 Thousand Oaks CA 91361
ML-101 Seattle WA 98119
ML-116 Riverside CA 92507
ORIX-3100 Dallas TX 75201
ML-109 Arlington TX 76011
ML-114 New York NY 10001
ML-115 Beverly Hills CA 90211
PW-8028 Brooklyn NY 11224
PW-7562 Philadelphia PA 19108
ML-154 Enfield CT 06082
PW-6132 Harvey LA 70058
PW-6376 New Orleans LA 70114
PW-8763 Henderson NV 89104
ML-134 Round Rock TX 78664
ORIX-3266 Westminster CO 80221
ORIX-3115 Laguna Hills CA 92653
PW-6410 Laramie WY 82070
PW-7043 St. Petersburg FL 33712
ORIX-2939 Los Angeles CA 90035
ML-128 Schiller Park IL 60176
ORIX-3151 Houston TX 77070
ORIX-1825 Ft. Lauderdale FL 33304
PW-8064 Pasadena CA 91101
ML-136 Twin Falls ID 83301
PW-7141 San Antonio TX 78213
ORIX-3256 North Kingstown RI 02852
ML-152 Houston TX 77057
PW-7790 Smithtown NY 11787
PW-8694 Woodlands TX 77385
PW-8313 Conway SC 29526
ML-148 San Diego CA 92130
ORIX-3438 Southampton PA 18966
PW-6482A Fayetteville NC 28311
PW-6482B Fayetteville NC 28303
PW-6482C Fayetteville NC 28304
PW-6482D Jacksonville NC 28546
- ------------------------------------------------------------
PW-6482
ML-139 Mesa AZ 85202
PW-7789 Parsippany NJ 07054
ORIX-3356 Nashville TN 37206
ML-131A Milford CT 06460
ML-131B Milford CT 06460
- ------------------------------------------------------------
ML-131
ORIX-3161 Woodland Park CO 80866
ORIX-2187 Watertown NY 13601
ML-110 Laguna Niguel CA 92677
PW-7064 Oklahoma City OK 73108
ML-137 South Yarmouth MA 02664
ORIX-2507 El Campo TX 77437
ML-151 Maspeth NY 11378
ML-135 New York NY 10003
ORIX-2607 Loveland CO 80537
PW-7395 Montgomery AL 36116
PW-8352 Las Vegas NV 89120
PW-7958 Memphis TN 38103
ML-140 McKinney TX 75070
PW-7146 West Haven CT 06516
ORIX-3238 Tyler TX 75704
ML-145 Newport News VA 23606
ORIX-2508 Kingsland TX 78639
PW-6232 Rockville Center NY 11570
PW-7312A Lima OH 45802
PW-7312B London OH 43140
PW-7312C Chillicothe OH 43140
- ------------------------------------------------------------
PW-7312
ML-144 Santa Ana CA 92704
ORIX-2509 Dinuba CA 93618
ORIX-3290 Everett MA 02149
PW-7710 Buford GA 30518
PW-6045 Norman OK 73072
ORIX-3434 Newport News VA 23602
ML-132 Austin TX 78745
ORIX-3432 Jackson MS 39211
ORIX-3433 Little Rock AR 72211
PW-7130 Austin TX 77040
ORIX-2104 Houston TX 77074
ORIX-3436 Plano TX 75074
ORIX-3430 Brentwood TN 37027
ORIX-2596 Seguin TX 78155
ORIX-3435 Oklahoma City OK 73116
PW-7166 Clarksville TN 37040
PW-7119 Washingtonville NY 10922
ORIX-3431 El Paso TX 79912
ML-108 Brooklyn NY 11238
ML-104 Norristown PA 19401
ORIX-3429 Baton Rouge LA 70815
ML-100 New Haven CT 06510
PW-7127 Elgin IL 60123
PW-8085 Tampa FL 33613
PW-7424 St. Pete Beach FL 33706
PW-6437 Passaic NJ 07055
ML-106 Aptos CA 95003
PW-7170 Irving TX 75060
PW-7781 Houston TX 77092
(A) Includes, for each ORECM Mortgage Loan, the Master Servicing Rate which
is also the Retained Interest that will be retained by ORECM and will not be
available to compensate any successor Master Servicer in the event of a
resignation or termination of ORECM as Master Servicer. See "RISK FACTORS ---
Servicing Transfer Risk" in the Prospectus Supplement.
<TABLE>
<CAPTION>
Cumulative % of
Control Original Cut-Off Date % of Initial Initial Pool
No. Property Type Balance Balance Pool Balance Balance
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ML-107 Multifamily 26,432,000 26,086,864 4.40% 4.40%
PW-7905 Office 25,300,000 25,288,017 4.27% 8.67%
ML-117 Office 21,000,000 20,930,804 3.53% 12.20%
ML-156 Retail 18,850,000 18,825,623 3.18% 15.38%
PW-8202 Office 18,588,000 18,568,200 3.13% 18.52%
ML-126 Multifamily 18,500,000 18,442,154 3.11% 21.63%
ORIX-3325 Office 18,200,000 18,170,833 3.07% 24.70%
PW-8703A Multifamily 3,248,580 3,243,748
PW-8703B Multifamily 1,364,841 1,362,811
PW-8703C Multifamily 8,805,459 8,792,361
PW-8703D Multifamily 3,981,120 3,975,198
- ------------------------------------------------------------------------------------------------------------------
PW-8703 17,400,000 17,374,119 2.93% 27.63%
ORIX-2965 Office 16,500,000 16,439,315 2.77% 30.40%
ML-129 Multifamily 16,000,000 15,969,297 2.70% 33.10%
ML-124 Multifamily 12,500,000 12,460,915 2.10% 35.20%
ML-125 Multifamily 12,000,000 11,962,178 2.02% 37.22%
ML-138 Hospitality 11,800,000 11,777,780 1.99% 39.21%
ML-147 Office 11,025,000 11,004,848 1.86% 41.07%
ORIX-3208 Retail 9,550,000 9,540,721 1.61% 42.68%
ML-111 Multifamily 9,670,000 9,507,210 1.60% 44.28%
ML-143 Industrial 9,350,000 9,338,999 1.58% 45.86%
ORIX-3108 Retail 8,999,000 8,966,895 1.51% 47.37%
ML-112 Retail 8,930,000 8,907,379 1.50% 48.88%
ML-103 Multifamily 8,640,000 8,503,715 1.44% 50.31%
PW-7942 Retail 8,500,000 8,490,237 1.43% 51.74%
ORIX-3257 Health Club 8,400,000 8,394,533 1.42% 53.16%
ML-101 Industrial 8,300,000 8,269,850 1.40% 54.56%
ML-116 Multifamily 8,150,000 8,123,382 1.37% 55.93%
ORIX-3100 Office 8,000,000 7,983,038 1.35% 57.28%
ML-109 Multifamily 7,600,000 7,488,420 1.26% 58.54%
ML-114 Retail 7,000,000 6,982,314 1.18% 59.72%
ML-115 Mixed 6,892,000 6,879,600 1.16% 60.88%
PW-8028 Retail 6,800,000 6,789,386 1.15% 62.03%
PW-7562 Office 6,700,000 6,690,463 1.13% 63.15%
ML-154 Multifamily 6,500,000 6,491,404 1.10% 64.25%
PW-6132 Multifamily 6,400,000 6,390,042 1.08% 65.33%
PW-6376 Multifamily 6,400,000 6,388,722 1.08% 66.41%
PW-8763 Multifamily 6,350,000 6,343,510 1.07% 67.48%
ML-134 Industrial 6,260,000 6,252,260 1.06% 68.53%
ORIX-3266 Retail 6,256,000 6,243,842 1.05% 69.59%
ORIX-3115 Office 6,224,000 6,196,394 1.05% 70.63%
PW-6410 Retail 6,101,000 6,094,764 1.03% 71.66%
PW-7043 Multifamily 5,890,000 5,878,001 0.99% 72.65%
ORIX-2939 Office 5,700,000 5,654,146 0.95% 73.61%
ML-128 Hospitality 5,000,000 4,986,533 0.84% 74.45%
ORIX-3151 Retail 5,000,000 4,976,440 0.84% 75.29%
ORIX-1825 Office 4,900,000 4,843,129 0.82% 76.11%
PW-8064 Retail 4,800,000 4,792,697 0.81% 76.92%
ML-136 Retail 4,650,000 4,643,851 0.78% 77.70%
PW-7141 Multifamily 4,330,000 4,317,857 0.73% 78.43%
ORIX-3256 Retail 4,215,000 4,208,441 0.71% 79.14%
ML-152 Office 4,170,000 4,165,046 0.70% 79.84%
PW-7790 Office 3,900,000 3,898,646 0.66% 80.50%
PW-8694 Industrial 3,700,000 3,698,575 0.62% 81.13%
PW-8313 Multifamily 3,650,000 3,645,730 0.62% 81.74%
ML-148 Office 3,525,000 3,520,816 0.59% 82.33%
ORIX-3438 Retail 3,286,000 3,282,897 0.55% 82.89%
PW-6482A Office 920,448 918,191
PW-6482B Office 385,152 384,208
PW-6482C Office 1,024,896 1,022,383
PW-6482D Office 933,504 931,215
- ------------------------------------------------------------------------------------------------------------------
PW-6482 3,264,000 3,255,996 0.55% 83.44%
ML-139 Retail 3,220,000 3,216,174 0.54% 83.98%
PW-7789 Industrial 3,050,000 3,048,754 0.51% 84.50%
ORIX-3356 Office 3,000,000 2,994,997 0.51% 85.00%
ML-131A Multifamily 1,228,064 1,225,753
ML-131B Multifamily 1,699,936 1,696,737
- ------------------------------------------------------------------------------------------------------------------
ML-131 2,928,000 2,922,490 0.49% 85.49%
ORIX-3161 Retail 2,899,000 2,893,491 0.49% 85.98%
ORIX-2187 Retail 2,827,500 2,809,853 0.47% 86.46%
ML-110 Retail 2,544,000 2,538,293 0.43% 86.89%
PW-7064 Industrial 2,500,000 2,496,098 0.42% 87.31%
ML-137 Hospitality 2,500,000 2,495,292 0.42% 87.73%
ORIX-2507 Nursing Home 2,425,000 2,402,837 0.41% 88.13%
ML-151 Industrial 2,399,500 2,394,997 0.40% 88.54%
ML-135 Other 2,400,000 2,393,501 0.40% 88.94%
ORIX-2607 Industrial 2,400,000 2,385,021 0.40% 89.34%
PW-7395 Multifamily 2,250,000 2,247,636 0.38% 89.72%
PW-8352 Industrial 2,200,000 2,195,846 0.37% 90.09%
PW-7958 Office 2,100,000 2,099,240 0.35% 90.45%
ML-140 Retail 2,100,000 2,096,486 0.35% 90.80%
PW-7146 Multifamily 2,088,000 2,084,259 0.35% 91.15%
ORIX-3238 Retail 2,080,000 2,076,285 0.35% 91.51%
ML-145 Retail 2,056,000 2,056,000 0.35% 91.85%
ORIX-2508 Nursing Home 2,075,000 2,055,346 0.35% 92.20%
PW-6232 Retail 2,050,000 2,050,000 0.35% 92.55%
PW-7312A Mobile Home Park 1,179,622 1,177,067
PW-7312B Mobile Home Park 530,177 529,029
PW-7312C Mobile Home Park 340,201 339,464
- ------------------------------------------------------------------------------------------------------------------
PW-7312 2,050,000 2,045,561 0.35% 92.89%
ML-144 Industrial 2,023,000 2,022,041 0.34% 93.23%
ORIX-2509 Nursing Home 2,000,000 1,982,529 0.33% 93.57%
ORIX-3290 Industrial 1,950,000 1,943,862 0.33% 93.89%
PW-7710 Mobile Home Park 1,925,000 1,920,705 0.32% 94.22%
PW-6045 Retail 1,900,000 1,893,937 0.32% 94.54%
ORIX-3434 Retail 1,857,000 1,855,134 0.31% 94.85%
ML-132 Self Storage 1,850,000 1,844,916 0.31% 95.16%
ORIX-3432 Retail 1,738,000 1,736,253 0.29% 95.46%
ORIX-3433 Retail 1,712,000 1,709,613 0.29% 95.74%
PW-7130 Industrial 1,700,000 1,690,333 0.29% 96.03%
ORIX-2104 Retail 1,700,000 1,683,873 0.28% 96.31%
ORIX-3436 Retail 1,643,500 1,641,209 0.28% 96.59%
ORIX-3430 Retail 1,639,000 1,637,353 0.28% 96.87%
ORIX-2596 Nursing Home 1,575,000 1,563,742 0.26% 97.13%
ORIX-3435 Retail 1,551,500 1,549,337 0.26% 97.39%
PW-7166 Multifamily 1,550,000 1,544,811 0.26% 97.65%
PW-7119 Mobile Home Park 1,500,000 1,498,747 0.25% 97.91%
ORIX-3431 Retail 1,359,000 1,357,105 0.23% 98.14%
ML-108 Multifamily 1,325,000 1,317,109 0.22% 98.36%
ML-104 Industrial 1,275,000 1,270,192 0.21% 98.57%
ORIX-3429 Retail 1,138,000 1,136,856 0.19% 98.76%
ML-100 Mixed 1,100,000 1,096,789 0.19% 98.95%
PW-7127 Industrial 1,025,000 1,023,567 0.17% 99.12%
PW-8085 Multifamily 1,000,000 999,393 0.17% 99.29%
PW-7424 Multifamily 950,000 948,326 0.16% 99.45%
PW-6437 Multifamily 940,000 935,927 0.16% 99.61%
ML-106 Mobile Home Park 800,000 797,998 0.13% 99.74%
PW-7170 Multifamily 800,000 797,213 0.13% 99.88%
PW-7781 Multifamily 723,000 721,001 0.12% 100.00%
</TABLE>
<TABLE>
<CAPTION>
Control Affiliated
No. Borrower
- ---------------------------------------------------------------------------------------------
<S> <C>
ML-107
PW-7905
ML-117
ML-156
PW-8202
ML-126 ML-124, ML-125
ORIX-3325
PW-8703A
PW-8703B
PW-8703C
PW-8703D
- ---------------------------------------------------------------------------------------------
PW-8703
ORIX-2965
ML-129
ML-124 ML-125, ML-126
ML-125 ML-124, ML-126
ML-138 ML-137
ML-147
ORIX-3208
ML-111
ML-143
ORIX-3108
ML-112
ML-103
PW-7942
ORIX-3257
ML-101
ML-116
ORIX-3100
ML-109
ML-114
ML-115
PW-8028
PW-7562
ML-154
PW-6132
PW-6376
PW-8763
ML-134 ML-152
ORIX-3266 ORIX-3161
ORIX-3115
PW-6410
PW-7043
ORIX-2939
ML-128
ORIX-3151
ORIX-1825
PW-8064
ML-136
PW-7141
ORIX-3256
ML-152 ML-134
PW-7790
PW-8694
PW-8313
ML-148 ML-110
ORIX-3438 ORIX-2187
PW-6482A
PW-6482B
PW-6482C
PW-6482D
- ---------------------------------------------------------------------------------------------
PW-6482
ML-139
PW-7789
ORIX-3356
ML-131A
ML-131B
- ---------------------------------------------------------------------------------------------
ML-131
ORIX-3161 ORIX-3266
ORIX-2187 ORIX-3438
ML-110 ML-148
PW-7064
ML-137 ML-138
ORIX-2507 ORIX-2508, ORIX-2509, ORIX-2596
ML-151
ML-135
ORIX-2607
PW-7395
PW-8352
PW-7958
ML-140
PW-7146
ORIX-3238
ML-145
ORIX-2508 ORIX-2507, ORIX-2509, ORIX-2596
PW-6232
PW-7312A
PW-7312B
PW-7312C
- ---------------------------------------------------------------------------------------------
PW-7312
ML-144
ORIX-2509 ORIX-2507, ORIX-2508, ORIX-2596
ORIX-3290
PW-7710
PW-6045
ORIX-3434 ORIX-3429, ORIX-3430, ORIX-3431, ORIX-3432, ORIX-3433, ORIX-3435, ORIX-3436
ML-132
ORIX-3432 ORIX-3429, ORIX-3430, ORIX-3431, ORIX-3433, ORIX-3434, ORIX-3435, ORIX-3436
ORIX-3433 ORIX-3429, ORIX-3430, ORIX-3431, ORIX-3432, ORIX-3434, ORIX-3435, ORIX-3436
PW-7130
ORIX-2104
ORIX-3436 ORIX-3429, ORIX-3430, ORIX-3431, ORIX-3432, ORIX-3433, ORIX-3434, ORIX-3435
ORIX-3430 ORIX-3429, ORIX-3431, ORIX-3432, ORIX-3433, ORIX-3434, ORIX-3435, ORIX-3436
ORIX-2596 ORIX-2507, ORIX-2508, ORIX-2509
ORIX-3435 ORIX-3429, ORIX-3430, ORIX-3431, ORIX-3432, ORIX-3433, ORIX-3434, ORIX-3436
PW-7166
PW-7119
ORIX-3431 ORIX-3429, ORIX-3430, ORIX-3432, ORIX-3433, ORIX-3434, ORIX-3435, ORIX-3436
ML-108
ML-104
ORIX-3429 ORIX-3430, ORIX-3431, ORIX-3432, ORIX-3433, ORIX-3434, ORIX-3435, ORIX-3436
ML-100
PW-7127
PW-8085
PW-7424
PW-6437
ML-106
PW-7170
PW-7781
</TABLE>
<TABLE>
<CAPTION>
Remain
Orig Stated Remaining Amort Amort
Control Interest Accrual Mortgage Administrative Term Term Term Term
No. Method Rate Cost Rate (A) (Mos.) (Mos.) (Mos.) (Mos.)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ML-107 Actual/360 6.977 0.07285 120 103 360 343
PW-7905 Actual/360 7.850 0.07285 120 119 360 359
ML-117 Actual/360 7.790 0.07285 120 115 360 355
ML-156 Actual/360 7.980 0.07285 120 118 360 358
PW-8202 Actual/360 8.200 0.07285 120 118 360 358
ML-126 Actual/360 7.500 0.03285 120 115 360 355
ORIX-3325 Actual/360 7.950 0.02285 120 117 360 357
PW-8703A
PW-8703B
PW-8703C
PW-8703D
- ---------------------------------------------------------------------------------------------------------------------------
PW-8703 Actual/360 8.200 0.07285 120 117 360 357
ORIX-2965 Actual/360 7.500 0.02285 120 114 360 354
ML-129 Actual/360 7.790 0.07285 120 117 360 357
ML-124 Actual/360 7.500 0.03285 120 115 360 355
ML-125 Actual/360 7.470 0.03285 96 91 360 355
ML-138 Actual/360 8.480 0.07285 120 118 300 298
ML-147 Actual/360 8.000 0.07285 120 117 360 357
ORIX-3208 Actual/360 8.530 0.02285 120 118 360 358
ML-111 Actual/360 7.080 0.07285 84 63 360 339
ML-143 Actual/360 8.420 0.07285 120 118 360 358
ORIX-3108 Actual/360 7.610 0.02285 120 114 360 354
ML-112 Actual/360 7.730 0.07285 120 116 360 356
ML-103 Actual/360 7.350 0.07285 120 98 360 338
PW-7942 Actual/360 7.920 0.07285 120 118 360 358
ORIX-3257 Actual/360 8.950 0.02285 120 119 300 299
ML-101 Actual/360 8.375 0.07285 120 116 300 296
ML-116 Actual/360 7.830 0.07285 144 139 360 355
ORIX-3100 Actual/360 7.870 0.02285 120 116 360 356
ML-109 Actual/360 7.430 0.07285 84 65 360 341
ML-114 Actual/360 8.875 0.07285 120 117 300 297
ML-115 Actual/360 8.068 0.07285 120 117 360 357
PW-8028 Actual/360 8.800 0.07285 120 116 360 356
PW-7562 Actual/360 9.050 0.07285 120 116 360 356
ML-154 Actual/360 7.875 0.07285 120 118 360 358
PW-6132 Actual/360 8.050 0.07285 120 117 360 357
PW-6376 Actual/360 8.450 0.07285 120 116 360 356
PW-8763 Actual/360 8.350 0.07285 120 118 360 358
ML-134 Actual/360 8.190 0.07285 120 118 360 358
ORIX-3266 Actual/360 8.150 0.03535 120 116 360 356
ORIX-3115 Actual/360 7.940 0.03535 120 112 360 352
PW-6410 Actual/360 8.350 0.07285 120 118 360 358
PW-7043 Actual/360 8.000 0.07285 120 116 360 356
ORIX-2939 Actual/360 7.830 0.03535 120 113 281 274
ML-128 Actual/360 7.500 0.07285 120 117 324 321
ORIX-3151 Actual/360 7.750 0.03535 120 114 324 318
ORIX-1825 Actual/360 7.170 0.05285 120 104 360 344
PW-8064 Actual/360 8.125 0.07285 120 117 360 357
ML-136 Actual/360 7.875 0.07285 120 118 360 358
PW-7141 Actual/360 7.900 0.07285 120 115 360 355
ORIX-3256 Actual/360 8.050 0.04785 120 117 360 357
ML-152 Actual/360 8.375 0.07285 120 118 360 358
PW-7790 Actual/360 8.650 0.07285 120 119 360 359
PW-8694 Actual/360 8.400 0.07285 120 119 360 359
PW-8313 Actual/360 7.850 0.07285 120 118 360 358
ML-148 Actual/360 8.380 0.07285 120 118 360 358
ORIX-3438 Actual/360 8.630 0.07785 120 118 360 358
PW-6482A
PW-6482B
PW-6482C
PW-6482D
- ---------------------------------------------------------------------------------------------------------------------------
PW-6482 Actual/360 8.500 0.07285 120 117 300 297
ML-139 Actual/360 8.375 0.07285 120 118 360 358
PW-7789 Actual/360 8.250 0.07285 120 119 360 359
ORIX-3356 Actual/360 8.620 0.07785 120 118 300 298
ML-131A
ML-131B
- ---------------------------------------------------------------------------------------------------------------------------
ML-131 Actual/360 7.875 0.07285 120 117 360 357
ORIX-3161 Actual/360 8.220 0.10285 120 116 360 356
ORIX-2187 Actual/360 7.850 0.10285 120 110 360 350
ML-110 Actual/360 8.230 0.07285 120 116 360 356
PW-7064 Actual/360 8.800 0.07285 120 116 360 356
ML-137 Actual/360 8.480 0.07285 120 118 300 298
ORIX-2507 Actual/360 7.950 0.10285 120 111 300 291
ML-151 Actual/360 8.500 0.07285 120 118 300 298
ML-135 Actual/360 8.500 0.07285 120 117 300 297
ORIX-2607 Actual/360 7.850 0.10285 120 110 360 350
PW-7395 Actual/360 8.250 0.07285 120 118 360 358
PW-8352 Actual/360 8.000 0.07285 120 118 300 298
PW-7958 Actual/360 8.550 0.07285 120 119 360 359
ML-140 Actual/360 8.375 0.07285 120 117 360 357
PW-7146 Actual/360 8.400 0.07285 120 116 360 356
ORIX-3238 Actual/360 8.410 0.10285 120 116 360 356
ML-145 Actual/360 8.500 0.07285 120 120 360 360
ORIX-2508 Actual/360 7.750 0.10285 120 111 300 291
PW-6232 Actual/360 8.600 0.07285 120 120 360 360
PW-7312A
PW-7312B
PW-7312C
- ---------------------------------------------------------------------------------------------------------------------------
PW-7312 Actual/360 7.800 0.07285 120 116 360 356
ML-144 Actual/360 8.390 0.07285 120 119 360 359
ORIX-2509 Actual/360 8.200 0.10285 120 111 300 291
ORIX-3290 Actual/360 8.290 0.12785 120 115 336 331
PW-7710 Actual/360 7.700 0.07285 120 116 360 356
PW-6045 Actual/360 8.000 0.07285 120 114 360 354
ORIX-3434 Actual/360 8.410 0.12785 120 118 360 358
ML-132 Actual/360 8.420 0.07285 120 117 300 297
ORIX-3432 Actual/360 8.410 0.12785 120 118 360 358
ORIX-3433 Actual/360 8.410 0.12785 120 117 360 357
PW-7130 Actual/360 7.850 0.07285 120 114 300 294
ORIX-2104 Actual/360 8.250 0.12785 120 110 300 290
ORIX-3436 Actual/360 8.410 0.12785 120 117 360 357
ORIX-3430 Actual/360 8.410 0.12785 120 118 360 358
ORIX-2596 Actual/360 8.220 0.12785 120 112 300 292
ORIX-3435 Actual/360 8.410 0.12785 120 117 360 357
PW-7166 Actual/360 8.300 0.07285 120 116 300 296
PW-7119 Actual/360 7.970 0.07285 120 119 300 299
ORIX-3431 Actual/360 8.410 0.12785 120 117 360 357
ML-108 Actual/360 8.040 0.07285 120 114 300 294
ML-104 Actual/360 8.520 0.07285 120 115 324 319
ORIX-3429 Actual/360 8.410 0.12785 120 118 360 358
ML-100 Actual/360 9.500 0.07285 120 116 300 296
PW-7127 Actual/360 8.400 0.07285 120 117 360 357
PW-8085 Actual/360 9.200 0.07285 120 119 300 299
PW-7424 Actual/360 8.450 0.07285 120 116 360 356
PW-6437 Actual/360 8.350 0.07285 120 115 300 295
ML-106 Actual/360 7.780 0.07285 120 116 360 356
PW-7170 Actual/360 9.350 0.07285 120 115 300 295
PW-7781 Actual/360 9.125 0.07285 120 116 300 296
</TABLE>
<TABLE>
<CAPTION>
Control Origination First Payment Repayment
No. Date Date Date
- --------------------------------------------------------------
<S> <C> <C> <C>
ML-107 5/15/1998 7/1/1998 6/1/2008
PW-7905 9/30/1999 11/1/1999 10/1/2009
ML-117 5/26/1999 7/1/1999 6/1/2009
ML-156 8/3/1999 10/1/1999 9/1/2009
PW-8202 8/24/1999 10/1/1999 9/1/2009
ML-126 5/10/1999 7/1/1999 6/1/2009
ORIX-3325 7/14/1999 9/1/1999 8/1/2009
PW-8703A
PW-8703B
PW-8703C
PW-8703D
- --------------------------------------------------------------
PW-8703 7/21/1999 9/1/1999 8/1/2009
ORIX-2965 4/30/1999 6/1/1999 5/1/2009
ML-129 7/27/1999 9/1/1999 8/1/2009
ML-124 5/10/1999 7/1/1999 6/1/2009
ML-125 5/10/1999 7/1/1999 6/1/2007
ML-138 8/30/1999 10/1/1999 9/1/2009
ML-147 7/30/1999 9/1/1999 8/1/2009
ORIX-3208 8/31/1999 10/1/1999 9/1/2009
ML-111 1/28/1998 3/1/1998 2/1/2005
ML-143 8/26/1999 10/1/1999 9/1/2009
ORIX-3108 4/26/1999 6/1/1999 5/1/2009
ML-112 6/7/1999 8/1/1999 7/1/2009
ML-103 12/11/1997 2/1/1998 1/1/2008
PW-7942 9/1/1999 10/1/1999 9/1/2009
ORIX-3257 9/24/1999 11/1/1999 10/1/2009
ML-101 6/24/1999 8/1/1999 7/1/2009
ML-116 5/25/1999 7/1/1999 6/1/2011
ORIX-3100 6/18/1999 8/1/1999 7/1/2009
ML-109 3/25/1998 5/1/1998 4/1/2005
ML-114 7/13/1999 9/1/1999 8/1/2009
ML-115 7/9/1999 9/1/1999 8/1/2009
PW-8028 6/30/1999 8/1/1999 7/1/2009
PW-7562 6/17/1999 8/1/1999 7/1/2009
ML-154 8/17/1999 10/1/1999 9/1/2009
PW-6132 7/6/1999 9/1/1999 8/1/2009
PW-6376 6/11/1999 8/1/1999 7/1/2009
PW-8763 8/19/1999 10/1/1999 9/1/2009
ML-134 8/27/1999 10/1/1999 9/1/2009
ORIX-3266 6/11/1999 8/1/1999 7/1/2009
ORIX-3115 2/25/1999 4/1/1999 3/1/2009
PW-6410 8/19/1999 10/1/1999 9/1/2009
PW-7043 6/28/1999 8/1/1999 7/1/2009
ORIX-2939 3/30/1999 5/1/1999 4/1/2009
ML-128 7/21/1999 9/1/1999 8/1/2009
ORIX-3151 4/30/1999 6/1/1999 5/1/2009
ORIX-1825 6/25/1998 8/1/1998 7/1/2008
PW-8064 7/29/1999 9/1/1999 8/1/2009
ML-136 8/11/1999 10/1/1999 9/1/2009
PW-7141 5/17/1999 7/1/1999 6/1/2009
ORIX-3256 7/19/1999 9/1/1999 8/1/2009
ML-152 8/31/1999 10/1/1999 9/1/2009
PW-7790 9/30/1999 11/1/1999 10/1/2009
PW-8694 9/30/1999 11/1/1999 10/1/2009
PW-8313 8/2/1999 10/1/1999 9/1/2009
ML-148 8/12/1999 10/1/1999 9/1/2009
ORIX-3438 8/17/1999 10/1/1999 9/1/2009
PW-6482A
PW-6482B
PW-6482C
PW-6482D
- --------------------------------------------------------------
PW-6482 7/23/1999 9/1/1999 8/1/2009
ML-139 8/27/1999 10/1/1999 9/1/2009
PW-7789 9/27/1999 11/1/1999 10/1/2009
ORIX-3356 8/24/1999 10/1/1999 9/1/2009
ML-131A
ML-131B
- --------------------------------------------------------------
ML-131 7/20/1999 9/1/1999 8/1/2009
ORIX-3161 6/11/1999 8/1/1999 7/1/2009
ORIX-2187 12/23/1998 2/1/1999 1/1/2009
ML-110 6/7/1999 8/1/1999 7/1/2009
PW-7064 6/3/1999 8/1/1999 7/1/2009
ML-137 8/30/1999 10/1/1999 9/1/2009
ORIX-2507 1/29/1999 3/1/1999 2/1/2009
ML-151 8/27/1999 10/1/1999 9/1/2009
ML-135 7/22/1999 9/1/1999 8/1/2009
ORIX-2607 12/3/1998 2/1/1999 1/1/2009
PW-7395 8/24/1999 10/1/1999 9/1/2009
PW-8352 8/12/1999 10/1/1999 9/1/2009
PW-7958 9/1/1999 11/1/1999 10/1/2009
ML-140 7/30/1999 9/1/1999 8/1/2009
PW-7146 6/8/1999 8/1/1999 7/1/2009
ORIX-3238 6/16/1999 8/1/1999 7/1/2009
ML-145 10/6/1999 12/1/1999 11/1/2009
ORIX-2508 1/29/1999 3/1/1999 2/1/2009
PW-6232 10/5/1999 12/1/1999 11/1/2009
PW-7312A
PW-7312B
PW-7312C
- --------------------------------------------------------------
PW-7312 6/4/1999 8/1/1999 7/1/2009
ML-144 9/13/1999 11/1/1999 10/1/2009
ORIX-2509 1/29/1999 3/1/1999 2/1/2009
ORIX-3290 5/27/1999 7/1/1999 6/1/2009
PW-7710 6/25/1999 8/1/1999 7/1/2009
PW-6045 4/30/1999 6/1/1999 5/1/2009
ORIX-3434 8/2/1999 10/5/1999 9/5/2009
ML-132 7/26/1999 9/1/1999 8/1/2009
ORIX-3432 8/2/1999 10/5/1999 9/5/2009
ORIX-3433 7/30/1999 9/5/1999 8/5/2009
PW-7130 4/9/1999 6/1/1999 5/1/2009
ORIX-2104 12/8/1998 2/1/1999 1/1/2009
ORIX-3436 7/30/1999 9/5/1999 8/5/2009
ORIX-3430 8/2/1999 10/5/1999 9/5/2009
ORIX-2596 2/10/1999 4/1/1999 3/1/2009
ORIX-3435 7/30/1999 9/5/1999 8/5/2009
PW-7166 6/3/1999 8/1/1999 7/1/2009
PW-7119 9/29/1999 11/1/1999 10/1/2009
ORIX-3431 7/30/1999 9/5/1999 8/5/2009
ML-108 4/29/1999 6/1/1999 5/1/2009
ML-104 5/28/1999 7/1/1999 6/1/2009
ORIX-3429 8/2/1999 10/5/1999 9/5/2009
ML-100 6/11/1999 8/1/1999 7/1/2009
PW-7127 7/16/1999 9/1/1999 8/1/2009
PW-8085 9/3/1999 11/1/1999 10/1/2009
PW-7424 6/11/1999 8/1/1999 7/1/2009
PW-6437 5/20/1999 7/1/1999 6/1/2009
ML-106 6/1/1999 8/1/1999 7/1/2009
PW-7170 5/13/1999 7/1/1999 6/1/2009
PW-7781 6/30/1999 8/1/1999 7/1/2009
</TABLE>
<TABLE>
<CAPTION>
Annual
Control Balloon/Repayment Prepayment Debt 1997 1998
No. Balance Maturity Term Restrictions Service NCF NCF
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ML-107 23,079,013 Hyperam L(116),O(4) 2,105,336 2,639,436 2,910,536
PW-7905 22,586,102 Hyperam L(120),O(0) 2,196,045 -- --
ML-117 18,416,586 Balloon L(59),YM(57),O(4) 1,832,423 2,856,550 2,591,278
ML-156 16,596,202 Balloon L(116),O(4) 1,674,975 1,710,784 1,725,737
PW-8202 16,725,297 Hyperam L(120),O(0) 1,667,911 1,103,086 2,184,174
ML-126 16,372,352 Balloon L(116),O(4) 1,552,256 1,788,572 1,896,643
ORIX-3325 16,283,638 Balloon L(116),O(4) 1,594,936 2,379,574 841,926
PW-8703A 2,923,609 291,497 417,692 460,852
PW-8703B 1,228,310 122,468 186,067 167,250
PW-8703C 7,924,607 790,119 1,184,143 1,084,870
PW-8703D 3,582,870 357,228 482,953 564,491
- ----------------------------------------------------------------------------------------------------------------------------
PW-8703 15,659,395 Balloon L(120),O(0) 1,561,311 2,270,856 2,277,454
ORIX-2965 14,607,753 Balloon L(116),O(4) 1,384,445 690,333 1,362,913
ML-129 14,031,704 Balloon L(116),O(4) 1,396,097 1,673,955 1,757,302
ML-124 11,062,400 Balloon L(116),O(4) 1,048,822 1,643,420 1,272,417
ML-125 10,979,957 Balloon L(92),O(4) 1,003,912 1,364,671 1,377,802
ML-138 9,699,213 Balloon L(116),O(4) 1,150,094 1,702,774 1,945,726
ML-147 9,710,758 Balloon L(116),O(4) 981,660 1,282,434 1,372,000
ORIX-3208 8,657,594 Balloon L(116),O(4) 883,613 862,378 964,351
ML-111 8,860,083 Balloon L(47),YM(33),O(4) 786,961 912,159 --
ML-143 8,304,117 Balloon L(116),O(4) 866,113 -- --
ORIX-3108 7,988,782 Balloon L(116),O(4) 763,218 356,568 1,055,655
ML-112 7,823,232 Balloon L(116),O(4) 774,760 -- --
ML-103 7,518,703 Balloon L(59),YM(57),O(4) 723,214 754,861 973,703
PW-7942 7,598,190 Balloon L(120),O(0) 742,759 1,380,757 1,384,047
ORIX-3257 7,128,169 Balloon L(113),O(7) 842,461 -- --
ML-101 6,806,635 Balloon L(116),O(4) 802,010 -- --
ML-116 6,838,266 Balloon L(140),O(4) 713,915 869,709 903,366
ORIX-3100 7,146,820 Balloon L(116),O(4) 695,733 -- --
ML-109 6,992,210 Balloon L(24),5(12),4(12), 640,141 860,212 945,835
3(12),2(12),1(9),O(3)
ML-114 5,807,470 Balloon L(113),O(7) 705,266 612,191 890,026
ML-115 6,078,744 Balloon L(116),O(4) 617,630 816,667 837,273
PW-8028 6,205,574 Hyperam L(117),O(3) 644,864 -- --
PW-7562 6,147,334 Balloon L(120),O(0) 649,811 1,432,557 2,425,618
ML-154 5,710,484 Balloon L(116),O(4) 571,776 731,817 812,052
PW-6132 5,739,662 Balloon L(120),O(0) 566,210 524,030 793,022
PW-6376 5,795,301 Balloon L(120),O(0) 587,806 638,334 783,537
PW-8763 5,733,336 Balloon L(120),O(0) 577,831 -- --
ML-134 5,534,863 Balloon L(23),YM(93),O(4) 567,486 104,723 255,787
ORIX-3266 5,625,994 Balloon L(116),O(4) 558,722 (24,166) 478,580
ORIX-3115 5,572,384 Balloon L(116),O(4) 544,913 684,543 778,328
PW-6410 5,508,517 Balloon L(120),O(0) 555,173 -- 780,236
PW-7043 5,278,197 Balloon L(120),O(0) 518,625 605,093 --
ORIX-2939 4,514,808 Balloon L(116),O(4) 531,831 821,243 727,573
ML-128 4,169,414 Balloon L(116),O(4) 436,857 1,571,582 1,763,019
ORIX-3151 4,265,469 Balloon L(116),O(4) 442,458 510,066 669,206
ORIX-1825 4,301,343 Balloon L(116),O(4) 397,934 624,339 515,795
PW-8064 4,312,313 Hyperam L(120),O(0) 427,678 -- --
ML-136 4,085,192 Balloon L(116),O(4) 409,040 171,871 452,349
PW-7141 3,869,599 Balloon L(120),O(0) 377,648 492,610 485,557
ORIX-3256 3,780,106 Balloon L(116),O(4) 372,903 439,982 331,268
ML-152 3,700,338 Balloon L(23),YM(93),O(4) 384,657 442,255 467,958
PW-7790 3,546,434 Hyperam L(120),O(0) 364,838 530,781 545,294
PW-8694 3,345,789 Balloon L(120),O(0) 338,256 -- --
PW-8313 3,257,304 Balloon L(120),O(0) 316,821 368,944 99,260
ML-148 3,128,286 Balloon L(116),O(4) 325,312 -- --
ORIX-3438 2,985,555 Balloon L(116),O(4) 306,838 -- --
PW-6482A 771,520 88,940 (54,057) 94,068
PW-6482B 322,835 37,216 (39,441) (39,909)
PW-6482C 859,068 99,033 23,693 (1,353)
PW-6482D 782,463 90,202 141,401 139,940
- ----------------------------------------------------------------------------------------------------------------------------
PW-6482 2,735,886 Balloon L(120),O(0) 315,391 71,596 192,567
ML-139 2,857,336 Balloon L(116),O(4) 297,025 248,289 194,457
PW-7789 2,748,575 Hyperam L(117),O(3) 274,964 370,475 348,978
ORIX-3356 2,522,239 Balloon L(116),O(4) 292,799 410,571 410,571
ML-131A 1,078,899 108,041 -- 154,325
ML-131B 1,493,455 149,554 -- 250,967
- ----------------------------------------------------------------------------------------------------------------------------
ML-131 2,572,354 Balloon L(59),YM(57),O(4) 257,595 200,113 405,292
ORIX-3161 2,611,305 Balloon L(116),O(4) 260,617 -- 54,874
ORIX-2187 2,522,854 Balloon L(116),O(4) 245,427 -- 247,112
ML-110 2,251,604 Balloon L(116),O(4) 231,552 -- 203,392
PW-7064 2,281,461 Balloon L(120),O(0) 237,082 220,862 152,364
ML-137 2,054,918 Balloon L(116),O(4) 243,664 385,786 451,879
ORIX-2507 2,000,281 Balloon L(116),O(4) 223,635 622,538 633,028
ML-151 1,973,257 Balloon L(116),O(4) 234,264 -- --
ML-135 1,973,669 Balloon L(116),O(4) 234,344 411,627 435,438
ORIX-2607 2,141,413 Balloon L(116),O(4) 208,320 53,637 163,792
PW-7395 2,026,860 Balloon L(120),O(0) 202,842 185,132 257,369
PW-8352 1,818,037 Balloon L(120),O(0) 203,759 -- 142,851
PW-7958 1,905,382 Hyperam L(120),O(0) 194,660 125,841 293,410
ML-140 1,863,480 Balloon L(116),O(4) 193,737 -- --
PW-7146 1,888,574 Balloon L(120),O(0) 190,886 185,353 247,369
ORIX-3238 1,881,766 Balloon L(116),O(4) 190,331 347,369 276,434
ML-145 1,828,812 Balloon L(116),O(4) 191,870 -- --
ORIX-2508 1,701,773 Balloon L(116),O(4) 188,077 845,495 563,498
PW-6232 1,861,245 Hyperam L(120),O(0) 190,899 50,000 80,990
PW-7312A 1,052,041 101,901 180,238 181,657
PW-7312B 472,836 45,799 93,100 97,966
PW-7312C 303,407 29,388 52,569 62,263
- ----------------------------------------------------------------------------------------------------------------------------
PW-7312 1,828,283 Balloon L(120),O(0) 177,088 325,907 341,886
ML-144 1,796,091 Balloon L(116),O(4) 186,890 -- --
ORIX-2509 1,661,393 Balloon L(116),O(4) 188,427 54,437 450,714
ORIX-3290 1,713,179 Balloon L(116),O(4) 179,406 260,704 260,619
PW-7710 1,712,630 Balloon L(120),O(0) 164,694 350,504 342,461
PW-6045 1,702,705 Balloon L(120),O(0) 167,298 -- 193,906
ORIX-3434 1,678,942 Balloon L(116),O(4) 169,925 -- --
ML-132 1,518,444 Balloon L(113),O(7) 179,422 261,509 267,938
ORIX-3432 1,571,353 Balloon L(116),O(4) 159,036 -- --
ORIX-3433 1,548,163 Balloon L(116),O(4) 156,657 -- --
PW-7130 1,399,747 Balloon L(120),O(0) 155,429 210,570 240,920
ORIX-2104 1,414,477 Balloon L(116),O(4) 160,844 130,070 160,609
ORIX-3436 1,486,220 Balloon L(116),O(4) 150,389 -- --
ORIX-3430 1,481,846 Balloon L(116),O(4) 149,977 -- --
ORIX-2596 1,311,245 Balloon L(116),O(4) 148,638 411,212 406,815
ORIX-3435 1,403,024 Balloon L(116),O(4) 141,970 -- --
PW-7166 1,292,632 Balloon L(120),O(0) 147,274 122,666 263,277
PW-7119 1,238,988 Balloon L(120),O(0) 138,569 132,797 174,591
ORIX-3431 1,228,945 Balloon L(116),O(4) 124,356 -- --
ML-108 1,077,636 Balloon L(116),O(4) 124,412 205,406 206,692
ML-104 1,088,642 Balloon L(116),O(4) 122,169 130,562 197,011
ORIX-3429 1,028,884 Balloon L(116),O(4) 104,133 -- --
ML-100 925,642 Balloon L(116),O(4) 116,634 -- 95,439
PW-7127 926,699 Balloon L(120),O(0) 93,706 137,431 145,819
PW-8085 854,177 Balloon L(120),O(0) 102,352 96,761 107,418
PW-7424 860,240 Balloon L(120),O(0) 87,252 112,691 119,790
PW-6437 784,688 Balloon L(120),O(0) 89,692 134,865 141,874
ML-106 701,589 Balloon L(116),O(4) 69,746 44,418 55,282
PW-7170 685,897 Balloon L(120),O(0) 82,876 122,261 111,872
PW-7781 616,566 Balloon L(117),O(3) 73,553 48,851 77,338
</TABLE>
<TABLE>
<CAPTION>
Underwriting Underwriting
Control Total Total
No. Revenue Expense
- -------------------------------------------------------
<S> <C> <C>
ML-107 4,890,207 2,073,651
PW-7905 4,386,472 87,729
ML-117 3,965,519 1,455,634
ML-156 2,782,085 654,711
PW-8202 2,427,372 76,734
ML-126 3,259,328 1,351,723
ORIX-3325 3,636,148 1,350,837
PW-8703A 1,042,088 544,407
PW-8703B 291,303 89,622
PW-8703C 2,170,148 840,168
PW-8703D 1,151,683 566,294
- -------------------------------------------------------
PW-8703 4,655,225 2,040,492
ORIX-2965 3,368,714 1,364,576
ML-129 2,905,055 1,194,193
ML-124 2,803,584 1,426,036
ML-125 2,066,093 844,521
ML-138 9,197,752 6,918,878
ML-147 1,963,389 537,507
ORIX-3208 1,764,263 539,608
ML-111 2,132,851 1,144,811
ML-143 1,670,202 490,971
ORIX-3108 1,364,522 314,183
ML-112 1,574,719 602,046
ML-103 1,913,251 1,009,502
PW-7942 2,189,034 744,798
ORIX-3257 1,295,000 38,850
ML-101 1,460,039 262,637
ML-116 1,404,718 501,833
ORIX-3100 1,726,700 792,668
ML-109 1,978,317 1,111,960
ML-114 1,410,571 351,782
ML-115 1,217,299 383,963
PW-8028 947,009 28,410
PW-7562 10,759,047 6,808,344
ML-154 1,699,943 757,430
PW-6132 1,914,240 927,574
PW-6376 1,851,807 991,622
PW-8763 1,008,021 284,540
ML-134 937,301 188,066
ORIX-3266 1,056,819 277,858
ORIX-3115 1,355,455 545,774
PW-6410 942,562 150,052
PW-7043 1,366,782 683,873
ORIX-2939 1,471,498 673,682
ML-128 3,812,987 2,691,262
ORIX-3151 991,774 276,958
ORIX-1825 1,260,136 604,278
PW-8064 558,903 28,994
ML-136 758,438 160,170
PW-7141 1,077,535 504,199
ORIX-3256 719,305 170,633
ML-152 976,968 368,873
PW-7790 789,807 256,487
PW-8694 463,902 13,917
PW-8313 791,737 336,463
ML-148 543,632 123,386
ORIX-3438 617,259 178,707
PW-6482A 188,680 45,717
PW-6482B 102,722 39,210
PW-6482C 201,801 44,956
PW-6482D 191,651 48,062
- --------------------------------------------------------
PW-6482 684,852 177,942
ML-139 542,525 124,427
PW-7789 466,070 95,445
ORIX-3356 502,210 15,066
ML-131A 194,052 57,810
ML-131B 288,373 99,772
- --------------------------------------------------------
ML-131 482,425 157,582
ORIX-3161 483,283 127,353
ORIX-2187 589,969 196,329
ML-110 410,792 84,441
PW-7064 449,810 65,962
ML-137 1,536,231 933,146
ORIX-2507 3,425,688 2,879,521
ML-151 486,846 163,144
ML-135 400,070 71,916
ORIX-2607 382,822 85,926
PW-7395 759,915 415,595
PW-8352 426,325 65,370
PW-7958 375,258 92,707
ML-140 385,605 102,436
PW-7146 681,843 410,752
ORIX-3238 406,351 115,517
ML-145 362,517 93,871
ORIX-2508 3,421,721 2,941,082
PW-6232 403,193 133,503
PW-7312A 234,297 53,766
PW-7312B 102,110 20,962
PW-7312C 78,691 25,745
- --------------------------------------------------------
PW-7312 415,098 100,475
ML-144 309,795 66,388
ORIX-2509 3,239,113 2,626,099
ORIX-3290 313,646 73,912
PW-7710 425,676 149,692
PW-6045 318,367 73,794
ORIX-3434 228,598 6,858
ML-132 434,839 169,475
ORIX-3432 223,207 6,696
ORIX-3433 211,660 6,350
PW-7130 400,104 141,933
ORIX-2104 340,423 83,311
ORIX-3436 204,592 6,138
ORIX-3430 204,060 6,122
ORIX-2596 2,540,409 2,203,277
ORIX-3435 192,964 5,789
PW-7166 307,800 105,822
PW-7119 410,439 202,630
ORIX-3431 178,125 5,344
ML-108 326,607 166,355
ML-104 530,772 296,558
ORIX-3429 143,868 4,316
ML-100 284,282 125,862
PW-7127 171,386 39,748
PW-8085 356,128 195,403
PW-7424 164,336 48,625
PW-6437 248,411 108,128
ML-106 140,666 57,056
PW-7170 246,904 92,985
PW-7781 276,701 150,009
</TABLE>
<TABLE>
<CAPTION>
Control Underwriting Underwriting Appraised Appraisal Current Repayment Year
No. NCF DSCR Value Year LTV LTV Built
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ML-107 2,816,555 1.34 32,700,000 1999 79.78 70.58 1964
PW-7905 3,926,149 1.79 45,780,000 1999 55.24 49.34 1999
ML-117 2,298,790 1.25 29,000,000 1999 72.18 63.51 1986
ML-156 2,092,544 1.25 24,900,000 1999 75.60 66.65 1973
PW-8202 2,096,867 1.26 24,400,000 1999 76.10 68.55 1971
ML-126 1,907,604 1.23 26,400,000 1999 69.86 62.02 1986
ORIX-3325 2,030,179 1.27 25,000,000 1999 72.68 65.13 1982
PW-8703A 435,181 5,150,000 1945
PW-8703B 182,481 1,530,000 1946
PW-8703C 1,179,980 12,855,000 1951
PW-8703D 533,389 5,650,000 1945
- ------------------------------------------------------------------------------------------------------------------
PW-8703 2,331,033 1.49 25,185,000 1999 68.99 62.18
ORIX-2965 1,761,742 1.27 23,000,000 1999 71.48 63.51 1995
ML-129 1,710,861 1.23 20,000,000 1999 79.85 70.16 1970
ML-124 1,377,547 1.31 17,430,000 1999 71.49 63.47 1987
ML-125 1,221,573 1.22 15,720,000 1999 76.10 69.85 1987
ML-138 1,863,842 1.62 20,600,000 1999 57.17 47.08 1942
ML-147 1,239,955 1.26 15,650,000 1999 70.32 62.05 1983
ORIX-3208 1,138,500 1.29 13,100,000 1999 72.83 66.09 1966
ML-111 988,040 1.26 12,600,000 1998 75.45 70.32 1983
ML-143 1,082,839 1.25 13,400,000 1999 69.69 61.97 1961
ORIX-3108 992,229 1.30 12,500,000 1999 71.74 63.91 1995
ML-112 967,083 1.25 11,500,000 1999 77.46 68.03 1998
ML-103 903,749 1.25 10,800,000 1998 78.74 69.62 1985
PW-7942 1,282,309 1.73 16,000,000 1999 53.06 47.49 1980
ORIX-3257 1,180,324 1.40 13,000,000 1999 64.57 54.83 1984
ML-101 1,125,076 1.40 12,000,000 1999 68.92 56.72 1958
ML-116 902,885 1.26 10,600,000 1999 76.64 64.51 1985
ORIX-3100 884,023 1.27 12,000,000 1999 66.53 59.56 1925
ML-109 866,357 1.35 10,700,000 1999 69.99 65.35 1968
ML-114 1,030,449 1.46 11,600,000 1999 60.19 50.06 1885
ML-115 776,482 1.26 8,900,000 1999 77.30 68.30 1958
PW-8028 897,599 1.39 9,600,000 1999 70.72 64.64 1959
PW-7562 2,529,131 3.89 8,400,000 1999 79.65 73.18 1929
ML-154 942,513 1.65 10,800,000 1999 60.11 52.87 1973
PW-6132 882,916 1.56 9,200,000 1999 69.46 62.39 1974
PW-6376 776,186 1.32 8,550,000 1999 74.72 67.78 1980
PW-8763 693,481 1.20 8,000,000 1999 79.29 71.67 1988
ML-134 715,746 1.26 8,000,000 1999 78.15 69.19 1981
ORIX-3266 723,655 1.30 8,200,000 1999 76.14 68.61 1997
ORIX-3115 718,952 1.32 9,700,000 1999 63.88 57.45 1984
PW-6410 669,268 1.21 7,800,000 1999 78.14 70.62 1981
PW-7043 635,771 1.23 7,700,000 1999 76.34 68.55 1989
ORIX-2939 664,923 1.25 7,600,000 1999 74.40 59.41 1984
ML-128 1,121,725 2.57 12,300,000 1999 40.54 33.90 1989
ORIX-3151 612,666 1.38 7,500,000 1999 66.35 56.87 1982
ORIX-1825 591,885 1.49 6,600,000 1998 73.38 65.17 1958
PW-8064 526,241 1.23 6,070,000 1999 78.96 71.04 1999
ML-136 577,665 1.41 6,985,000 1999 66.48 58.49 1996
PW-7141 528,336 1.40 6,220,000 1999 69.42 62.21 1981
ORIX-3256 483,875 1.30 6,700,000 1999 62.81 56.42 1978
ML-152 519,229 1.35 5,600,000 1999 74.38 66.08 1980
PW-7790 464,864 1.27 5,700,000 1999 68.40 62.22 1984
PW-8694 406,413 1.20 4,700,000 1999 78.69 71.19 1998
PW-8313 427,275 1.35 4,608,000 1999 79.12 70.69 1984
ML-148 406,631 1.25 5,000,000 1999 70.42 62.57 1998
ORIX-3438 413,879 1.35 4,750,000 1999 69.11 62.85 1976
PW-6482A 125,491 1,410,000 1993
PW-6482B 52,753 700,000 1977
PW-6482C 139,650 1,300,000 1986
PW-6482D 127,427 1,400,000 1994
- ------------------------------------------------------------------------------------------------------------------
PW-6482 445,323 1.41 4,810,000 1999 67.69 56.88
ML-139 401,180 1.35 4,100,000 1999 78.44 69.69 1981
PW-7789 343,148 1.25 4,000,000 1999 76.22 68.71 1981
ORIX-3356 452,847 1.55 4,900,000 1999 61.12 51.47 1959
ML-131A 136,242 1,535,080 1998
ML-131B 188,601 2,124,920 1946
- ------------------------------------------------------------------------------------------------------------------
ML-131 324,843 1.26 3,660,000 1999 79.85 70.28
ORIX-3161 325,837 1.25 3,800,000 1999 76.14 68.72 1998
ORIX-2187 336,222 1.37 3,770,000 1998 74.53 66.92 1974
ML-110 314,006 1.36 3,475,000 1999 73.04 64.79 1997
PW-7064 335,146 1.41 3,650,000 1999 68.39 62.51 1977
ML-137 397,584 1.63 5,200,000 1999 47.99 39.52 1987
ORIX-2507 501,167 2.24 3,840,000 1998 62.57 52.09 1969
ML-151 299,941 1.28 3,500,000 1999 68.43 56.38 1970
ML-135 318,336 1.36 3,750,000 1999 63.83 52.63 1930
ORIX-2607 262,177 1.26 3,250,000 1998 73.39 65.89 1998
PW-7395 286,493 1.41 3,885,000 1999 57.85 52.17 1971
PW-8352 322,688 1.58 3,200,000 1999 68.62 56.81 1998
PW-7958 246,530 1.27 3,460,000 1999 60.67 55.07 1952
ML-140 269,483 1.39 2,900,000 1999 72.29 64.26 1999
PW-7146 246,842 1.29 3,100,000 1999 67.23 60.92 1970
ORIX-3238 251,426 1.32 3,100,000 1999 66.98 60.70 1981
ML-145 268,646 1.40 3,100,000 1999 66.32 58.99 1999
ORIX-2508 441,639 2.35 5,000,000 1998 41.11 34.04 1977
PW-6232 252,406 1.32 3,300,000 1999 62.12 56.40 1960
PW-7312A 174,630 1,750,000 1960
PW-7312B 78,428 600,000 1961
PW-7312C 50,344 500,000 1957
- ------------------------------------------------------------------------------------------------------------------
PW-7312 303,401 1.71 2,850,000 1999 71.77 64.15
ML-144 233,616 1.25 3,200,000 1999 63.19 56.13 1999
ORIX-2509 583,314 3.10 2,800,000 1998 70.80 59.34 1964
ORIX-3290 225,802 1.26 2,600,000 1999 74.76 65.89 1990
PW-7710 268,934 1.63 3,000,000 1999 64.02 57.09 1988
PW-6045 219,222 1.31 2,440,000 1999 77.62 69.78 1997
ORIX-3434 212,596 1.25 2,650,000 1999 70.01 63.36 1998
ML-132 265,364 1.48 2,650,000 1999 69.62 57.30 1983
ORIX-3432 199,005 1.25 2,475,000 1999 70.15 63.49 1990
ORIX-3433 195,828 1.25 2,250,000 1999 75.98 68.81 1998
PW-7130 227,567 1.46 3,150,000 1999 53.66 44.44 1979
ORIX-2104 213,671 1.33 2,600,000 1998 64.76 54.40 1970
ORIX-3436 188,159 1.25 2,275,000 1999 72.14 65.33 1998
ORIX-3430 187,658 1.25 2,250,000 1999 72.77 65.86 1998
ORIX-2596 303,232 2.04 2,900,000 1998 53.92 45.22 1961
ORIX-3435 177,491 1.25 2,070,000 1999 74.85 67.78 1998
PW-7166 183,978 1.25 2,000,000 1999 77.24 64.63 1997
PW-7119 203,709 1.47 2,500,000 1999 59.95 49.56 1985
ORIX-3431 155,583 1.25 1,975,000 1999 68.71 62.23 1991
ML-108 160,252 1.29 1,680,000 1999 78.40 64.15 1915
ML-104 209,922 1.72 2,250,000 1999 56.45 48.38 1872
ORIX-3429 130,319 1.25 1,550,000 1999 73.35 66.38 1998
ML-100 152,435 1.31 2,000,000 1999 54.84 46.28 1905
PW-7127 114,830 1.23 1,400,000 1999 73.11 66.19 1973
PW-8085 136,389 1.33 1,450,000 1999 68.92 58.91 1969
PW-7424 108,263 1.24 1,410,000 1999 67.26 61.01 1971
PW-6437 132,033 1.47 1,250,000 1999 74.87 62.78 1934
ML-106 83,610 1.20 1,140,000 1999 70.00 61.54 1968
PW-7170 141,919 1.71 1,060,000 1998 75.21 64.71 1957
PW-7781 111,692 1.52 1,100,000 1999 65.55 56.05 1973
</TABLE>
<TABLE>
<CAPTION>
Loan Per
Sq Ft, Units, Sq Ft, Unit,
Control Beds, Pads, Bed, Pad,
No. or Room or Room
- --------------------------------------------------------------------
<S> <C> <C>
ML-107 606 Units 43,048 Per Unit
PW-7905 348,410 Sq. Ft. 73 Per Sq. Ft.
ML-117 232,538 Sq. Ft. 90 Per Sq. Ft.
ML-156 180,523 Sq. Ft. 104 Per Sq. Ft.
PW-8202 230,700 Sq. Ft. 80 Per Sq. Ft.
ML-126 352 Units 52,392 Per Unit
ORIX-3325 213,613 Sq. Ft. 85 Per Sq. Ft.
PW-8703A 250 Units 12,975 Per Unit
PW-8703B 64 Units 21,294 Per Unit
PW-8703C 600 Units 14,654 Per Unit
PW-8703D 208 Units 19,112 Per Unit
- --------------------------------------------------------------------
PW-8703 1,122 Units 15,485 Per Unit
ORIX-2965 142,769 Sq. Ft. 115 Per Sq. Ft.
ML-129 408 Units 39,140 Per Unit
ML-124 340 Units 36,650 Per Unit
ML-125 224 Units 53,403 Per Unit
ML-138 266 Rooms 44,277 Per Room
ML-147 103,332 Sq. Ft. 106 Per Sq. Ft.
ORIX-3208 151,778 Sq. Ft. 63 Per Sq. Ft.
ML-111 348 Units 27,320 Per Unit
ML-143 194,000 Sq. Ft. 48 Per Sq. Ft.
ORIX-3108 119,982 Sq. Ft. 75 Per Sq. Ft.
ML-112 66,127 Sq. Ft. 135 Per Sq. Ft.
ML-103 296 Units 28,729 Per Unit
PW-7942 229,091 Sq. Ft. 37 Per Sq. Ft.
ORIX-3257 79,015 Sq. Ft. 106 Per Sq. Ft.
ML-101 155,763 Sq. Ft. 53 Per Sq. Ft.
ML-116 192 Units 42,309 Per Unit
ORIX-3100 114,174 Sq. Ft. 70 Per Sq. Ft.
ML-109 330 Units 22,692 Per Unit
ML-114 6,825 Sq. Ft. 1,023 Per Sq. Ft.
ML-115 44,450 Sq. Ft. 155 Per Sq. Ft.
PW-8028 40,000 Sq. Ft. 170 Per Sq. Ft.
PW-7562 1,293,000 Sq. Ft. 5 Per Sq. Ft.
ML-154 208 Units 31,209 Per Unit
PW-6132 415 Units 15,398 Per Unit
PW-6376 336 Units 19,014 Per Unit
PW-8763 120 Units 52,863 Per Unit
ML-134 145,800 Sq. Ft. 43 Per Sq. Ft.
ORIX-3266 45,653 Sq. Ft. 137 Per Sq. Ft.
ORIX-3115 57,046 Sq. Ft. 109 Per Sq. Ft.
PW-6410 143,686 Sq. Ft. 42 Per Sq. Ft.
PW-7043 182 Units 32,297 Per Unit
ORIX-2939 46,060 Sq. Ft. 123 Per Sq. Ft.
ML-128 150 Rooms 33,244 Per Room
ORIX-3151 100,793 Sq. Ft. 49 Per Sq. Ft.
ORIX-1825 83,905 Sq. Ft. 58 Per Sq. Ft.
PW-8064 24,454 Sq. Ft. 196 Per Sq. Ft.
ML-136 66,691 Sq. Ft. 70 Per Sq. Ft.
PW-7141 180 Units 23,988 Per Unit
ORIX-3256 87,440 Sq. Ft. 48 Per Sq. Ft.
ML-152 61,241 Sq. Ft. 68 Per Sq. Ft.
PW-7790 57,798 Sq. Ft. 67 Per Sq. Ft.
PW-8694 113,175 Sq. Ft. 33 Per Sq. Ft.
PW-8313 112 Units 32,551 Per Unit
ML-148 24,500 Sq. Ft. 144 Per Sq. Ft.
ORIX-3438 50,353 Sq. Ft. 65 Per Sq. Ft.
PW-6482A 14,136 Sq. Ft. 65 Per Sq. Ft.
PW-6482B 7,333 Sq. Ft. 52 Per Sq. Ft.
PW-6482C 13,760 Sq. Ft. 74 Per Sq. Ft.
PW-6482D 12,424 Sq. Ft. 75 Per Sq. Ft.
- --------------------------------------------------------------------
PW-6482 47,653 Sq. Ft. 68 Per Sq. Ft.
ML-139 35,249 Sq. Ft. 91 Per Sq. Ft.
PW-7789 38,000 Sq. Ft. 80 Per Sq. Ft.
ORIX-3356 76,760 Sq. Ft. 39 Per Sq. Ft.
ML-131A 20 Units 61,288 Per Unit
ML-131B 32 Units 53,023 Per Unit
- --------------------------------------------------------------------
ML-131 52 Units 56,202 Per Unit
ORIX-3161 23,868 Sq. Ft. 121 Per Sq. Ft.
ORIX-2187 99,074 Sq. Ft. 28 Per Sq. Ft.
ML-110 17,117 Sq. Ft. 148 Per Sq. Ft.
PW-7064 126,500 Sq. Ft. 20 Per Sq. Ft.
ML-137 63 Rooms 39,608 Per Room
ORIX-2507 150 Beds 16,019 Per Beds
ML-151 72,700 Sq. Ft. 33 Per Sq. Ft.
ML-135 22,293 Sq. Ft. 107 Per Sq. Ft.
ORIX-2607 40,000 Sq. Ft. 60 Per Sq. Ft.
PW-7395 158 Units 14,226 Per Unit
PW-8352 38,336 Sq. Ft. 57 Per Sq. Ft.
PW-7958 28,130 Sq. Ft. 75 Per Sq. Ft.
ML-140 19,094 Sq. Ft. 110 Per Sq. Ft.
PW-7146 97 Units 21,487 Per Unit
ORIX-3238 57,629 Sq. Ft. 36 Per Sq. Ft.
ML-145 30,122 Sq. Ft. 68 Per Sq. Ft.
ORIX-2508 130 Beds 15,810 Beds
PW-6232 26,580 Sq. Ft. 77 Per Sq. Ft.
PW-7312A 118 Units 9,975 Per Unit
PW-7312B 45 Units 11,756 Per Unit
PW-7312C 47 Units 7,223 Per Unit
- --------------------------------------------------------------------
PW-7312 210 Units 9,741 Per Unit
ML-144 33,334 Sq. Ft. 61 Per Sq. Ft.
ORIX-2509 99 Beds 20,026 Per Beds
ORIX-3290 27,532 Sq. Ft. 71 Per Sq. Ft.
PW-7710 141 Units 13,622 Per Unit
PW-6045 23,473 Sq. Ft. 81 Per Sq. Ft.
ORIX-3434 8,021 Sq. Ft. 231 Per Sq. Ft.
ML-132 38,735 Sq. Ft. 48 Per Sq. Ft.
ORIX-3432 15,237 Sq. Ft. 114 Per Sq. Ft.
ORIX-3433 8,000 Sq. Ft. 214 Per Sq. Ft.
PW-7130 66,607 Sq. Ft. 25 Per Sq. Ft.
ORIX-2104 43,540 Sq. Ft. 39 Per Sq. Ft.
ORIX-3436 8,000 Sq. Ft. 205 Per Sq. Ft.
ORIX-3430 8,000 Sq. Ft. 205 Per Sq. Ft.
ORIX-2596 113 Beds 13,838 Per Beds
ORIX-3435 8,000 Sq. Ft. 194 Per Sq. Ft.
PW-7166 72 Units 21,456 Per Unit
PW-7119 82 Units 18,277 Per Unit
ORIX-3431 15,000 Sq. Ft. 90 Per Sq. Ft.
ML-108 60 Units 21,952 Per Unit
ML-104 118,681 Sq. Ft. 11 Per Sq. Ft.
ORIX-3429 8,000 Sq. Ft. 142 Per Sq. Ft.
ML-100 25 Units 43,872 Per Unit
PW-7127 34,039 Sq. Ft. 30 Per Sq. Ft.
PW-8085 72 Units 13,880 Per Unit
PW-7424 28 Units 33,869 Per Unit
PW-6437 32 Units 29,248 Per Unit
ML-106 48 Pads 16,625 Per Pad
PW-7170 48 Units 16,609 Per Unit
PW-7781 60 Units 12,017 Per Unit
</TABLE>
<TABLE>
<CAPTION>
Initial
Control Occupancy Occupancy Reserves Underwriting Reserves
No. Percentage Date At Closing Reserves Collected
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ML-107 96% Jun-99 474,513 260 260 Per Unit
PW-7905 100% Sep-99 -- 0.15 0.15 Per Sq. Ft.
ML-117 98% Aug-99 -- 0.16 0.16 Per Sq. Ft.
ML-156 100% Jul-99 2,099,228 0.15 0.15 Per Sq. Ft.
PW-8202 100% Apr-99 2,810 0.15 0.20 Per Sq. Ft.
ML-126 96% May-99 246,776 250 195 Per Unit
ORIX-3325 100% Jul-99 272,952 0.20 0.20 Per Sq. Ft.
PW-8703A 89% Apr-99 -- 250 Per Unit
PW-8703B 94% May-99 -- 300 Per Unit
PW-8703C 91% May-99 -- 250 Per Unit
PW-8703D 95% Jun-99 -- 250 Per Unit
- ------------------------------------------------------------------------------------------------------------
PW-8703 91% Various 515,216 253 253 Per Unit
ORIX-2965 91% Apr-99 288,876 0.20 0.20 Per Sq. Ft.
ML-129 96% May-99 200,336 200 200 Per Unit
ML-124 94% Jun-99 31,607 250 173 Per Unit
ML-125 93% Jun-99 122,480 250 240 Per Unit
ML-138 51% NAP 970,590 5% 0% of gross revenue
ML-147 92% Jun-99 165,425 0.27 0.27 Per Sq. Ft.
ORIX-3208 78% Aug-99 192,412 0.15 0.15 Per Sq. Ft.
ML-111 95% Jun-99 393,782 225 225 Per Unit
ML-143 100% Sep-99 739,074 0.20 0.20 Per Sq. Ft.
ORIX-3108 90% Apr-99 41,312 0.15 0.15 Per Sq. Ft.
ML-112 100% Apr-99 4,067 0.15 0.00 Per Sq. Ft.
ML-103 97% Jul-99 356,686 250 225 Per Unit
PW-7942 94% Aug-99 103,697 0.15 0.00 Per Sq. Ft.
ORIX-3257 100% Sep-99 2,000,000 0.15 0.15 Per Sq. Ft.
ML-101 100% Jun-99 1,042,689 0.19 0.19 Per Sq. Ft.
ML-116 97% Apr-99 13,502 250 225 Per Unit
ORIX-3100 100% Jun-99 -- 0.20 0.00 Per Sq. Ft.
ML-109 94% Aug-99 160,647 200 200 Per Unit
ML-114 100% Apr-99 43,088 0.24 0.24 Per Sq. Ft.
ML-115 100% Aug-99 90,189 0.20 0.20 Per Sq. Ft.
PW-8028 100% Jun-99 103,563 0.15 0.15 Per Sq. Ft.
PW-7562 76% May-99 201,103 0.20 0.00 Per Sq. Ft.
ML-154 96% Jul-99 35,520 272 0.00 Per Unit
PW-6132 93% Jun-99 149,076 250 250 Per Unit
PW-6376 96% Mar-99 81,351 250 250 Per Unit
PW-8763 97% Jun-99 9,646 250 250 Per Unit
ML-134 100% Jul-99 476,027 0.16 0.16 Per Sq. Ft.
ORIX-3266 100% Jun-99 158,272 0.15 0.15 Per Sq. Ft.
ORIX-3115 100% Feb-99 22,804 0.21 0.21 Per Sq. Ft.
PW-6410 98% Jul-99 24,566 0.30 0.30 Per Sq. Ft.
PW-7043 92% Aug-99 130,529 259 259 Per Unit
ORIX-2939 97% Mar-99 38,049 0.20 0.20 Per Sq. Ft.
ML-128 87% NAP 131,128 5% 4% of gross revenue
ORIX-3151 90% Apr-99 62,882 0.31 0.31 Per Sq. Ft.
ORIX-1825 90% Jul-99 227,764 0.20 0.19 Per Sq. Ft.
PW-8064 100% May-99 -- 0.15 0.14 Per Sq. Ft.
ML-136 90% Jun-99 42,041 0.15 0.15 Per Sq. Ft.
PW-7141 95% May-99 115,590 250 225 Per Unit
ORIX-3256 80% Jul-99 35,009 0.27 0.27 Per Sq. Ft.
ML-152 96% Aug-99 187,972 0.22 0.22 Per Sq. Ft.
PW-7790 91% Sep-99 104,750 0.18 0.20 Per Sq. Ft.
PW-8694 100% Aug-99 -- 0.10 0.10 Per Sq. Ft.
PW-8313 93% Jun-99 37,027 250 250 Per Unit
ML-148 100% Jun-99 53,819 0.20 0.00 Per Sq. Ft.
ORIX-3438 100% Jul-99 62,396 0.15 0.15 Per Sq. Ft.
PW-6482A 87% Jul-99 --
PW-6482B 100% Jul-99 --
PW-6482C 100% Jul-99 --
PW-6482D 100% Jul-99 --
- ------------------------------------------------------------------------------------------------------------
PW-6482 96% 30,190 0.36 0.36 Per Sq. Ft.
ML-139 100% Jun-99 17,576 0.15 0.15 Per Sq. Ft.
PW-7789 100% Apr-99 28,515 0.12 0.20 Per Sq. Ft.
ORIX-3356 100% Aug-99 36,122 0.20 0.00 Per Sq. Ft.
ML-131A 100% Jun-99 --
ML-131B 97% Jun-99 --
- ------------------------------------------------------------------------------------------------------------
ML-131 98% Jun-99 5,135 200 0 Per Unit
ORIX-3161 100% Jun-99 63,787 0.16 0.16 Per Sq. Ft.
ORIX-2187 100% Dec-98 121,868 0.23 0.23 Per Sq. Ft.
ML-110 100% Apr-99 18,209 0.15 0.00 Per Sq. Ft.
PW-7064 97% Mar-99 14,034 0.10 0.18 Per Sq. Ft.
ML-137 55% NAP 173,949 5% 0% of gross revenue
ORIX-2507 84% Dec-98 29,362 300 225 Per Bed
ML-151 100% Jun-99 169,868 0.16 0.15 Per Sq. Ft.
ML-135 100% Jun-99 -- 0.15 0.15 Per Sq. Ft.
ORIX-2607 98% Nov-98 29,860 0.15 0.00 Per Sq. Ft.
PW-7395 94% Jun-99 86,843 366 390 Per Unit
PW-8352 90% May-99 11,670 0.10 0.20 Per Sq. Ft.
PW-7958 100% Jul-99 3,644 0.15 0.15 Per Sq. Ft.
ML-140 100% Jun-99 106,036 0.15 0.15 Per Sq. Ft.
PW-7146 98% May-99 46,722 250 250 Per Unit
ORIX-3238 94% Jun-99 285,668 0.15 0.15 Per Sq. Ft.
ML-145 100% NAP 6,699 0.15 0.15 Per Sq. Ft.
ORIX-2508 89% Dec-98 29,138 300 225 Per Bed
PW-6232 100% Apr-99 32,371 0.18 0.18 Per Sq. Ft.
PW-7312A 95% Mar-99 --
PW-7312B 96% Mar-99 --
PW-7312C 94% Mar-99 --
- ------------------------------------------------------------------------------------------------------------
PW-7312 95% Mar-99 28,894 53 50 Per Unit
ML-144 100% NAP 3,870 0.15 0.15 Per Sq. Ft.
ORIX-2509 82% Dec-98 14,257 300 254 Per Bed
ORIX-3290 100% May-99 15,732 0.13 0.13 Per Sq. Ft.
PW-7710 100% Mar-99 25,661 50 50 Per Unit
PW-6045 100% Mar-99 15,778 0.15 0.15 Per Sq. Ft.
ORIX-3434 100% Jul-99 5,936 0.15 0.13 Per Sq. Ft.
ML-132 95% May-99 21,525 0.15 0.15 Per Sq. Ft.
ORIX-3432 100% Jul-99 14,235 0.15 0.10 Per Sq. Ft.
ORIX-3433 100% Jul-99 8,576 0.15 0.10 Per Sq. Ft.
PW-7130 100% Jul-99 37,848 0.19 0.19 Per Sq. Ft.
ORIX-2104 99% Dec-98 12,029 0.20 0.20 Per Sq. Ft.
ORIX-3436 100% Jul-99 24,604 0.15 0.10 Per Sq. Ft.
ORIX-3430 100% Jul-99 13,749 0.15 0.10 Per Sq. Ft.
ORIX-2596 63% Dec-98 332,302 300 225 Per Bed
ORIX-3435 100% Jul-99 13,176 0.15 0.10 Per Sq. Ft.
PW-7166 100% Mar-99 21,324 250 250 Per Unit
PW-7119 96% Jun-99 15,552 50 50 Per Unit
ORIX-3431 100% Jul-99 26,415 0.15 0.10 Per Sq. Ft.
ML-108 100% Mar-99 16,940 228 228 Per Unit
ML-104 92% May-99 316,470 0.20 0.20 Per Sq. Ft.
ORIX-3429 100% Jul-99 5,297 0.15 0.10 Per Sq. Ft.
ML-100 96% May-99 -- 282 282 Per Unit
PW-7127 100% Mar-99 107,554 0.20 0.20 Per Sq. Ft.
PW-8085 99% Jul-99 51,592 338 338 Per Unit
PW-7424 100% Mar-99 15,406 266 266 Per Sq. Ft.
PW-6437 97% May-99 9,566 258 276 Per Unit
ML-106 100% May-99 11,786 50 50 Per Pad
PW-7170 94% Jul-99 17,218 250 250 Per Unit
PW-7781 100% Jul-99 23,916 250 250 Per Sq. Ft.
</TABLE>
<TABLE>
<CAPTION>
TWO LARGEST TENANTS
----------------------------------------------------------------------------------------------------------
Control Area Leased Lease
No. Tenant Name (1) (Sq. Ft.) Exp Date
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ML-107
PW-7905 Blue Cross Blue Shield of South Carolina 348,410 9/30/2009
ML-117 Kaiser 52,030 12/31/2005
ML-156 Home Depot 101,928 1/31/2007
PW-8202 First American Real Estate Information Services, Inc. 230,700 6/30/2012
ML-126
ORIX-3325 Providian Bancorp Services 109,904 6/30/2003
PW-8703A
PW-8703B
PW-8703C
PW-8703D
- ------------------------------------------------------------------------------------------------------------------------------
PW-8703
ORIX-2965 GTE Communications Corp. 50,966 9/30/2002
ML-129
ML-124
ML-125
ML-138
ML-147 State of Nevada 6,057 8/31/2003
ORIX-3208 Stop & Shop Company 60,270 2/28/2009
ML-111
ML-143 E & F Warehousing Inc. 122,000 7/31/2009
ORIX-3108 Hobby Lobby 48,822 12/31/2012
ML-112 Staples 24,000 2/28/2014
ML-103
PW-7942 Sears 63,236 4/8/2005
ORIX-3257 The Spectrum Club Company, Inc. 79,015 9/16/2017
ML-101 Ocean Beauty Seafood 155,763 11/16/2013
ML-116
ORIX-3100 HKS, Inc. 114,174 5/31/2013
ML-109
ML-114 Conway 6,825 6/30/2013
ML-115 Obagi Dermatology 4,107 1/31/2004
PW-8028 Tops Appliance City 40,000 5/31/2024
PW-7562 Sungard 351,314 12/31/2004
ML-154
PW-6132
PW-6376
PW-8763
ML-134 Ryder Intergrated Logistics 145,800 5/6/2004
ORIX-3266 Wood Burrus, LLC dba Showtime USA 6,350 11/3/2001
ORIX-3115 Saddleback Memorial Medical Center 12,300 6/30/2002
PW-6410 Kmart 79,072 10/26/2008
PW-7043
ORIX-2939 Beverly Hills Center for Special Surgery 3,200 6/15/2004
ML-128
ORIX-3151 Kroger Store 42,130 9/30/2002
ORIX-1825 Ft. Lauderdale College 34,500 8/15/2007
PW-8064 Office Max 24,454 5/31/2019
ML-136 Office Max, Inc. 23,520 10/31/2012
PW-7141
ORIX-3256 TJ Maxx 36,788 11/30/2001
ML-152 Sterling City Capitol 8,000 12/31/2000
PW-7790 Vadaro & Helwig 7,000 9/30/2001
PW-8694
PW-8313
ML-148 Cambell 12,250 8/31/2009
ORIX-3438 Raymour's Furniture Company, Inc. 50,353 6/30/2014
PW-6482A The Logistics Company 12,352 8/31/2001
PW-6482B John Koenig, Inc. 7,333 8/31/2010
PW-6482C John Koenig, Inc. 10,960 8/31/2010
PW-6482D John Koenig, Inc. 10,424 8/31/2010
- ------------------------------------------------------------------------------------------------------------------------------
PW-6482
ML-139 Capital Academic LLC 11,349 4/30/2014
PW-7789 Toyota Motor Sales, USA Inc. (Lexus) 38,000 2/29/2004
ORIX-3356 Hardaway Construction Corp. of TN. 76,760 7/31/2014
ML-131A
ML-131B
- ------------------------------------------------------------------------------------------------------------------------------
ML-131
ORIX-3161 Blockbuster Videos, Inc. 3,834 9/30/2003
ORIX-2187 Raymour Furniture Company, Inc. 43,530 5/31/2028
ML-110 Laguna Niguel Montessori 8,692 8/30/2007
PW-7064 Harbor Freight & Tool 18,720 11/30/2003
ML-137
ORIX-2507
ML-151 Display Systems, Inc 72,700 2/28/2012
ML-135 Avis Rent-A-Car System 22,293 12/31/2018
ORIX-2607 Technology Driven Product 10,000 7/31/2002
PW-7395
PW-8352 Helix Electric, Inc. 20,503 6/30/2008
PW-7958 UT Medical Group 28,130 7/31/2009
ML-140 Lady of America 4,500 5/31/2004
PW-7146
ORIX-3238 Tyler Entertainment 9,363 5/31/2002
ML-145 Office Depot (BBB Stable) 30,122 8/28/2014
ORIX-2508
PW-6232 Sky Club 19,800 6/30/2013
PW-7312A
PW-7312B
PW-7312C
- ------------------------------------------------------------------------------------------------------------------------------
PW-7312
ML-144 MicroSemi Corp. 33,334 6/20/2029
ORIX-2509
ORIX-3290 Clover Group 14,146 2/28/2002
PW-7710
PW-6045 The Oklahoma Publishing Company DBA The Norman Oklahoman 3,600 2/28/2001
ORIX-3434 Gateway 2000 Country Stores, Inc. 8,021 12/31/2003
ML-132
ORIX-3432 Gateway 2000 Country Stores, Inc. 15,237 11/30/2003
ORIX-3433 Gateway 2000 Country Stores, Inc. 8,000 11/30/2003
PW-7130 Capital Christian Center 5,735 10/31/2000
ORIX-2104 Cloth World 17,500 9/30/2002
ORIX-3436 Gateway 2000 Country Stores, Inc. 8,000 11/30/2003
ORIX-3430 Gateway 2000 Country Stores, Inc. 8,000 11/30/2003
ORIX-2596
ORIX-3435 Gateway 2000 Country Stores, Inc. 8,000 11/30/2003
PW-7166
PW-7119
ORIX-3431 Gateway 2000 Country Stores, Inc. 15,000 11/30/2003
ML-108
ML-104 Hilco 37,095 12/31/2001
ORIX-3429 Gateway 2000 Country Stores, Inc. 8,000 10/31/2003
ML-100 Blockbuster 3,500 5/31/2004
PW-7127 Association for Individual Development 34,039 2/29/2004
PW-8085
PW-7424
PW-6437
ML-106
PW-7170
PW-7781
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Control Area Leased Lease Control
No. Tenant Name (2) (Sq. Ft.) Exp Date No.
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ML-107 ML-107
PW-7905 PW-7905
ML-117 Allstate 41,359 10/31/2003 ML-117
ML-156 LA Fitness 38,000 3/31/2014 ML-156
PW-8202 PW-8202
ML-126 ML-126
ORIX-3325 United Healthcare Services 73,280 5/1/2001 ORIX-3325
PW-8703A PW-8703A
PW-8703B PW-8703B
PW-8703C PW-8703C
PW-8703D PW-8703D
- ------------------------------------------------------------------------------------------------------------
PW-8703 PW-8703
ORIX-2965 Fox Sports 25,350 7/31/2003 ORIX-2965
ML-129 ML-129
ML-124 ML-124
ML-125 ML-125
ML-138 ML-138
ML-147 Accubanc Mortgage Corp 5,401 7/31/2002 ML-147
ORIX-3208 A. J. Wright 27,430 4/30/2009 ORIX-3208
ML-111 ML-111
ML-143 Lambda Holdings 65,000 7/31/2009 ML-143
ORIX-3108 Fashion Bug 12,000 1/31/2006 ORIX-3108
ML-112 Pep Boys 19,000 3/31/2019 ML-112
ML-103 ML-103
PW-7942 The Bon Marche 59,742 8/20/2018 PW-7942
ORIX-3257 ORIX-3257
ML-101 ML-101
ML-116 ML-116
ORIX-3100 ORIX-3100
ML-109 ML-109
ML-114 ML-114
ML-115 Kessler 3,292 1/31/2004 ML-115
PW-8028 PW-8028
PW-7562 North American 113,114 9/30/2015 PW-7562
ML-154 ML-154
PW-6132 PW-6132
PW-6376 PW-6376
PW-8763 PW-8763
ML-134 ML-134
ORIX-3266 Evenson's Card Shops, Inc. (Hallmark) 5,600 11/13/2002 ORIX-3266
ORIX-3115 Salomon Smith Barney, Inc. 6,500 7/30/2005 ORIX-3115
PW-6410 Safeway 40,000 2/17/2001 PW-6410
PW-7043 PW-7043
ORIX-2939 Dr. Davidson & Dr. Torbati 3,000 6/30/2003 ORIX-2939
ML-128 ML-128
ORIX-3151 Walgreens (Dollar General) 10,998 10/31/2002 ORIX-3151
ORIX-1825 Barnett Bank 4,400 2/28/2002 ORIX-1825
PW-8064 PW-8064
ML-136 Honks 99 8,390 4/1/2002 ML-136
PW-7141 PW-7141
ORIX-3256 Homegood's 26,360 10/31/2008 ORIX-3256
ML-152 Insite Realty 7,592 7/30/2002 ML-152
PW-7790 Nesconset Excutive Office Corp. 3,825 9/30/2004 PW-7790
PW-8694 PW-8694
PW-8313 PW-8313
ML-148 International Trading 3,928 11/30/2003 ML-148
ORIX-3438 ORIX-3438
PW-6482A PW-6482A
PW-6482B PW-6482B
PW-6482C Carolina Mortgage 2,800 8/31/2010 PW-6482C
PW-6482D Atlantic First Mortgage 2,000 8/31/2010 PW-6482D
- ------------------------------------------------------------------------------------------------------------
PW-6482 PW-6482
ML-139 Aqua Swim and Patio 8,000 12/31/1999 ML-139
PW-7789 PW-7789
ORIX-3356 ORIX-3356
ML-131A ML-131a
ML-131B ML-131b
- ------------------------------------------------------------------------------------------------------------
ML-131 ML-131
ORIX-3161 Carlton Cards dba Ray's Cards 3,220 7/9/2005 ORIX-3161
ORIX-2187 Pharmhouse Corp. 33,399 5/31/2008 ORIX-2187
ML-110 New York Pizzeria 1,430 5/18/2003 ML-110
PW-7064 Thompson Boat 12,919 3/31/2002 PW-7064
ML-137 ML-137
ORIX-2507 ORIX-2507
ML-151 ML-151
ML-135 ML-135
ORIX-2607 First National Bank 7,500 7/31/2003 ORIX-2607
PW-7395 PW-7395
PW-8352 Medical Contouring 10,537 4/30/2003 PW-8352
PW-7958 PW-7958
ML-140 Apple Orthodontics 3,600 3/31/2006 ML-140
PW-7146 PW-7146
ORIX-3238 Unisource 8,442 8/14/2001 ORIX-3238
ML-145 ML-145
ORIX-2508 ORIX-2508
PW-6232 Home Care 5,280 4/30/2007 PW-6232
PW-7312A PW-7312A
PW-7312B PW-7312B
PW-7312C PW-7312C
- ------------------------------------------------------------------------------------------------------------
PW-7312 PW-7312
ML-144 ML-144
ORIX-2509 ORIX-2509
ORIX-3290 Yell-O-Glow 13,386 2/28/2002 ORIX-3290
PW-7710 PW-7710
PW-6045 CD Warehouse Inc. 2,927 1/14/2003 PW-6045
ORIX-3434 ORIX-3434
ML-132 ML-132
ORIX-3432 ORIX-3432
ORIX-3433 ORIX-3433
PW-7130 Mill Direct Carpet 4,045 4/30/2001 PW-7130
ORIX-2104 Promise Dollar Store 7,440 3/31/2004 ORIX-2104
ORIX-3436 ORIX-3436
ORIX-3430 ORIX-3430
ORIX-2596 ORIX-2596
ORIX-3435 ORIX-3435
PW-7166 PW-7166
PW-7119 PW-7119
ORIX-3431 ORIX-3431
ML-108 ML-108
ML-104 Suburban Delivery 22,107 2/28/2008 ML-104
ORIX-3429 ORIX-3429
ML-100 Home Basics 2,825 5/30/2001 ML-100
PW-7127 PW-7127
PW-8085 PW-8085
PW-7424 PW-7424
PW-6437 PW-6437
ML-106 ML-106
PW-7170 PW-7170
PW-7781 PW-7781
</TABLE>
<PAGE>
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Until January 27, 2000, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a Prospectus Supplement and the Prospectus. This delivery requirement is
in addition to the dealers' obligation to deliver a Prospectus Supplement and
the Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary....................................... S-7
Risk Factors.................................. S-22
Description of the Mortgage Pool.............. S-42
Servicing of the Mortgage Loans............... S-70
Description of the Certificates............... S-80
Yield and Maturity Considerations............. S-98
Use of Proceeds............................... S-107
Material Federal Income Tax Consequences...... S-107
ERISA Considerations.......................... S-108
Legal Investment.............................. S-110
Method of Distribution........................ S-111
Legal Matters................................. S-112
Ratings....................................... S-112
Index of Principal Definitions................ S-113
Annex A....................................... A-1
Annex B....................................... B-1
Annex C....................................... C-1
Annex D....................................... D-1
Annex E....................................... E-1
PROSPECTUS
Prospectus Supplement......................... 2
Available Information......................... 2
Incorporation of Certain Information by
Reference................................... 3
Summary of Prospectus......................... 8
Risk Factors.................................. 17
Description of Trust Funds.................... 29
Yield and Maturity Considerations............. 34
The Depositor................................. 39
Use of Proceeds............................... 39
Description of the Certificates............... 40
Description of the Pooling Agreements......... 48
Description of Credit Support................. 61
Certain Legal Aspects of Mortgage Loans....... 63
Material Federal Income Tax Consequences...... 73
State and Other Tax Considerations............ 97
ERISA Considerations.......................... 97
Legal Investment.............................. 99
Method of Distribution........................ 101
Legal Matters................................. 102
Financial Information......................... 102
Rating........................................ 102
Index of Definitions.......................... 103
</TABLE>
MERRILL LYNCH MORTGAGE
INVESTORS, INC.
(DEPOSITOR)
$531,719,000
(APPROXIMATE)
MORTGAGE PASS-THROUGH
CERTIFICATES
SERIES 1999-C1
------------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------------
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
OCTOBER 29, 1999
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